Transcript Sample Power Point

THE FOREIGN CORRUPT
PRACTICES ACT
Presented to
UPMC Legal Staff
February 22, 2006
Dale Hershey
FCPA Basics
 Prohibits making improper payments to
foreign officials, parties or candidates, in
order to assist a company in obtaining or
retaining business for, or directing business
to, any person
 Imposes record keeping and internal control
requirements on companies subject to SEC
jurisdiction
Who Is Bound?
“Issuers” – companies whose securities are
registered or are required to file periodic
reports with the SEC
 “Domestic concerns” – US citizens and
business entities having their principal place
of business in the United States
 Other persons who act in furtherance of a
corrupt payment while in a territory of the
United States
 Note liability for acts of non-US citizens

Enforcers
 US
Department of Justice: criminal and
civil prosecutions of companies having
their principal places of business in the
US
 Securities and Exchange Commission:
civil enforcement actions against
registered issuers (SEC v Diagnostic
Products)
Targets of Enforcement
 US
companies and their subsidiaries
 Officers, directors, employees,
conspirators (US v. King, 8th Cir., 2003)
 Shareholders
 Agents
 Foreign corporations and foreign
nationals in a US territory
Five Elements
“Corrupt” payment (or offer to pay) money
or anything of value, directly or indirectly
 To a foreign official, a foreign political party
or party official, a candidate for foreign
political office, an official of a public
international organization, or any other
person while “knowing” that the payment or

promise will be passed to one of these.
Five Elements
 Using
an instrumentality of interstate
commerce (telephone, etc.) by any
person (US or foreign) or an act outside
the US by a domestic concern or US
person, or an act in the US by a foreign
person in furtherance of the offer or
promise to pay
Five Elements
 To
influence an official act or decision of
the bribed person or to get that person
to use influence
 In order to assist the company in
obtaining or retaining business or to
direct business to any person, or to
secure an improper advantage.
Examples – “Anything of Value”
 Cash
or cash equivalents
 Tangible and intangible property
 Useful information
 Promise of future employment
 College scholarship
 Sports equipment
Corrupt Intent
 Payment
must be intended to influence
the recipient to “misuse his official
position” in order to wrongfully direct,
obtain, or retain business
 Done voluntarily and intentionally and
with the bad purpose of accomplishing
an unlawful end or an action by
unlawful means. US v. Liebo, 8th Cir,
1991.
“Knowing” Conduct
 Knowing
that a violation will occur or is
substantially certain to occur
 Firmly believing that a circumstance
exists or that a result is substantially
likely to occur
 No “willful blindness,” “deliberate
ignorance,” or “head in the sand.”
Liability for Acts of Third Parties
 Company
authorized payment or
“knew” it would be made
 Company consciously disregarded a
high probability that the payment would
be made
Some Red Flags
Agent refuses to agree in writing to FCPA
compliance
 Unusual payment arrangements or large
sums
 Country or official reputed to be corrupt
 Official or agent with poor books or records
 Involvement of undisclosed or unnecessary
third parties
 Agent is also an official or closely related to
one

Exception for Facilitating Payments
 Statutory
exception for facilitating
(“grease”) payments to low-level
foreign officials who perform “routine
governmental actions”
 Examples: permit processing, licenses,
visas, police protection, power supply,
cargo handling, inspection scheduling
 Reflect payments in accounts
Two Affirmative Defenses
Payment permitted by written laws of the
foreign country (But what country has
written laws permitting bribery?)
 Reasonable and bona fide expenditures

Travel for promotion or demonstration of
products
 Travel for execution or performance of a contract
 (But not a large, unaccountable expense
account)

“Necessity” Is Not a Defense
It is not a defense to argue that
business cannot be done in the
foreign country without bribing
officials, or that competitors from
other countries are engaging in
bribery.
Record Keeping

Maintain accounts and controls so that
All transactions have management’s general or
specific authorization
 Transactions are recorded in conformity with
GAAP and assets are accounted for (even petty
cash)
 Access to assets is only in accordance with
management’s authorization
 Recorded assets are found periodically to
conform to existing assets

Penalities

Criminal penalities






$2 million for companies
$100,000 per violation for individuals (not reimbursed by
company), plus up to 5 years in prison
Alternative Fines Act: twice the gain or loss from the
offense
Civil penalty: $10,000 per violation for companies
and individuals
SEC action: gain to defendant or fine of $5-100,000
for individuals and $50-500,000 for businesses
Debarment for companies
Recent Fines
 Titan
Corporation - $28.4 million
 Monsanto - $1.5 million
 ABB - $10.5 million penalty and $5.9
million disgorgement
 InVision - $800,000 penalty and
$600,000 disgorgement
 Fines
are highest for companies without
effective compliance programs.
Best Practices - 1
FCPA compliance program and training
 Contracts requiring FCPA compliance, with
periodic certification
 Payments by check or wire transfer, not cash
or bearer instruments
 No use of unnumbered or offshore bank
accounts
 Detailed, accurate books, records, and
accounts, which are periodically audited

Best Practices - 2
Prior approval for travel, meals, and
entertainment
 Screening applicants for jobs in foreign
offices to exclude those who are public
officials or are closely associated with a
foreign government
 Due diligence in mergers and acquisitions
 Country research (through Transparency
International, etc.)
 Avoidance of grease payments (none to get
business; proper accounting)

Formal Opinion Procedure
 Written
request for DOJ Formal Opinion
under 28 CFR 80.1 – 80.16
 Only for future transactions (for past
transactions rely on leniency
procedures)
 No hypotheticals
Anti-Corruption Measures
OECD Convention (36 signatories)
 Inter-American Convention (46 signatories)
 Council of Europe Criminal Law Convention
(46 signatories)
 Council of Europe Civil Law Convention
(2003)
 UN Convention Against Corruption (118
signatories)

Transparency International 2005 Index
1
12
14
17
28
41
78
112
128
159
Iceland
United Kingdom
Canada
United States
Israel
Italy
China
Palestine
Russia
Nigeria
9.7
8.6
8.4
7.6
6.3
5.0
3.2
2.6
2.4
1.9