The Foreign Corrupt Practices Act (FCPA), passed
in 1977, makes it unlawful for U.S. citizens, residents or companies, and
certain foreign companies, to corruptly provide anything of value to a foreign
government official to obtain or retain business. The FCPA also requires
publicly traded companies to maintain accurate books and records, and to implement
adequate accounting controls.
Q: What does it mean to “corruptly provide a thing of
value to obtain or retain business”?
A: “Obtaining or retaining business” has been
interpreted broadly to cover nearly any business purpose. Bribes paid to win or
to keep a contract are obviously “obtaining or retaining business.” But the
FCPA also considers other actions to be “obtaining or retaining business,” such
as paying bribes so that a permit will be issued, goods will be cleared through
customs, or taxes will be reduced.
Payments made for the
purpose of obtaining or retaining business must be made “corruptly” (with
intent to wrongfully influence) to fall under the FCPA’s authority. In other
words, the person providing the “thing of value” to the foreign official must do
so with the intention of receiving a benefit from the foreign official’s misuse
of his or her position.
Q: What does “anything of value” mean?
A: A cash payment,
although sufficient, is not necessary to trigger the FCPA. The statute covers
any benefit that is corruptly provided to a foreign official, including travel
perks (such as upgraded airfare or hotels, or side trips provided in connection
with a legitimate business purpose), gifts, or even charitable contributions. Cash payments are often disguised as “consulting fees” or
“commissions,” but regardless of how they are characterized, such payments are
unlawful if they are made with the intention of influencing the foreign
Q: Who is a foreign
foreign official may include an employee of a foreign government, political
candidate or political party. An employee of a state-owned company may also be considered
a “foreign official,” even if the company operates like a privately owned
company. In many foreign countries, companies may appear to be privately owned,
but are in fact owned by the government. Common examples are public
infrastructure companies, such as telephone companies, oil and gas companies, or
banks. Employees of these or similar companies could be considered foreign
officials. Determination of who is a foreign official often depends on the
facts of each case.
Q: What are the potential penalties for violating the
A: For individuals, the maximum criminal
fine is $250,000 or twice the amount of the benefit obtained, whichever is
higher. Individuals may also be sentenced to a maximum five years’ imprisonment
per violation. Higher criminal penalties exist for corporations that have
violated the statute, and civil penalties may be levied against both
individuals and corporations. Individuals are often prosecuted for FCPA
violations, even if they committed the violations in their roles as employees
for a large corporation.
Q: I conduct business overseas. What can I do to avoid an
sure your expenditures are reasonable and bona fide. While you may make many of
these determinations on a case-by-case basis, the following tips may help.
· Pay travel
vendors directly, and do not advance or reimburse foreign officials with cash
sure any travel expenses for a foreign official are directly related to the
need for travel and do not include unnecessary expenses, such as sightseeing or
rest and relaxation time.
out (by conducting appropriate “due diligence”) any agents or distributors
retained to assist you in a foreign country, particularly if an agent is
operating in high-risk area such as the Middle East, Africa, or Asia.
· Refuse to
make cash payments to foreign officials.
sure any payments made to or on behalf of a foreign official are accurately
recorded in your company’s books.
Remember, merely “doing your job” is not a defense
to an FCPA violation.
This “Law You Can Use” column was provided by the
Ohio State Bar Association. It was prepared by Matthew
Ridings, an attorney in the Cleveland office of Thompson Hine LLP. Articles appearing
in this column are intended to provide broad, general information about the
law. Before applying this information to a specific legal problem, readers are
urged to seek advice from an attorney.
Labels: business, corruption, FCPA, foreign companies