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 official. 

      Q:       Who is a foreign official?

A:        A 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 FCPA?

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 FCPA violation?

            A:        Make 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 payments.

·       Make 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.

·       Check 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.

·       Make 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.

Q:       What is insurer bad faith?

A:        Every insurer owes its policyholder a duty to act in good faith in the handling and payment of claims. This duty is inherent in every insurance contract and is based upon the relationship between an insurer and its policyholder. “Bad faith” occurs when the insurer violates its duty to handle and pay its policyholder’s claims in good faith. In Ohio, bad faith claims are independent tort claims that can give rise to damages beyond those available for breach of contract.
           

Q:       My insurance company denied my claim, so is it liable for bad faith?

A:        Maybe, but maybe not. Failure to pay a claim alone does not amount to bad faith. Rather, an insurer acts in bad faith if it refuses to pay your claim without reasonable justification. If the facts and law at the time of the denial are fairly debatable, the insurer’s denial may be reasonably justified. But if the insurer’s assessment of your right to coverage was arbitrary and capricious, its denial may not be reasonably justified.

Q:       My insurance company ignored my claim for months. Is it liable for bad faith?

A:        Possibly. Your insurer must promptly and reasonably investigate and respond to your claim. An insurer that performs inadequate or no investigation, or that delays investigation, can be liable for bad faith. Prolonged or duplicative investigation (for example, if an insurer delays by repeatedly asking for the same information or otherwise delays the investigative process) can also be bad faith conduct. Also, an insurer that engages in harassing, oppressive or exploitative conduct can be held liable for bad faith.

Q:       My insurance company eventually paid my claim, but only after a long delay, repetitive requests for information, and several misrepresentations about my rights. Do I have a bad faith claim?

A:        Yes, you may. In Ohio, unlike many other states, an insurer can be liable for bad faith claims handling even if it ultimately pays the claim.
 

Q:       I was in an auto accident and the responsible party’s insurance company will not pay the claim, even though it is clearly covered. Can I assert a bad faith claim against that insurance company?

A:        No. The duty of good faith arises from the contractual relationship between an insurer and its policyholder. Because you do not have a contractual relationship with the responsible party’s insurer, generally you cannot assert a bad faith claim against that company.
 

Q:       Can an insurance company make a claim for bad faith against me?

A:        No.  An insurer may deny your claim, but it cannot sue you for bad faith.
 

Q:       What do I get if I successfully assert a bad faith claim?

A:        A policyholder with a successful bad faith claim may recover compensatory damages (all damages flowing from the bad faith conduct, including attorneys’ fees), prejudgment interest if the statutory procedures are followed, punitive damages if the insurer acted with malice (ill will, hatred, or conscious disregard for your rights), as well as litigation costs and damages for emotional distress. 

This “Law You Can Use” column was provided by the Ohio State Bar Association. It was prepared by attorney Jodi Spencer Johnson of the Cleveland firm, Thacker Martinsek LPA. The column offers general information about the law. Seek an attorney’s advice before applying this information to a legal problem.

Q:       What is an Ohio Legacy Trust (OLT)?

A:        The Ohio Legacy Trust (OLT), also known as a “domestic asset protection trust” (DAPT), is an estate-planning tool used to protect assets from future creditors. Ohio is one of 14 states in the United States that allow DAPT trusts. A person (the “trustmaker”) can create an OLT, fund the trust with his or her own assets, and be a beneficiary of the trust. Future creditors cannot access the trustmaker’s OLT assets if the trust was properly formed.

Q:       How do I create an Ohio Legacy Trust?

A:        To be valid, an Ohio Legacy Trust must: 1) be in writing; 2) appoint an Ohio trustee; 3) be irrevocable; 4) have a “spendthrift” clause (making the trustee responsible for distributions so that trust beneficiaries cannot assign trust assets and creditors cannot access trust assets); and 5) be subject to Ohio law. At the time your assets are contributed to the OLT, a “solvency affidavit” is also signed; it states that you are and will still be solvent after contributing your assets to the OLT.   

Q:        How might I use an Ohio Legacy Trust?

A:        An OLT is an estate planning and/or business planning tool. Normally an OLT includes estate planning distribution provisions for your heirs and beneficiaries similar to those of a will or revocable trust. An OLT does not replace a will, heath care power of attorney, living will, financial power of attorney or revocable trust, and you must coordinate the OLT’s terms and provisions with your other estate and business planning tools. Typically, OLT beneficiaries will include you (the trustmaker), your spouse and your children, but you can also name a charity, grandparent, parent or friends as beneficiaries. 

Q:       How does an Ohio Legacy Trust differ from a revocable trust?

A:        Unlike a revocable trust, the Ohio Legacy Trust is irrevocable (cannot be changed). Also, because you give up control of your OLT assets to an independent trustee, you should put only a small percentage of your assets or your excess assets, in the OLT.  The assets should not be encumbered by personal guarantees, liens, claims or lawsuits.

Q:       Who can form an Ohio Legacy Trust (OLT)?

A:         Any adult, business, corporation, out of state resident or out of state business can form an OLT.

Q:       What kinds of assets can I place in an OLT?

A:        Investment or financial accounts, mutual funds, investment real estate, shares of stock, LLC membership interests, artwork or personal property can be put into an OLT. IRAs and retirement accounts cannot be put into an OLT. Also, make sure the assets are titled in the name of the OLT.

Q:       How are OLT trust asset distributions made?

A:        You ask the independent trustee, in writing, for a distribution. Normally there is no limit to amount or the number of times you can request a distribution, but you can request a distribution only if: 1) proper steps were taken to form and fund the OLT; 2) the independent trustee has custody and control of the OLT assets; and 3) 18 months have passed without any threatened, existing or filed claims against you or the trustee.

Q:       Must the OLT’s independent trustee grant my distribution request?

A:        No. The trustee can refuse to distribute your OLT assets. This can be frustrating, but it helps to protect your  OLT assets from creditor claims.  

Q:       Can any creditors access OLT assets?

A:        If properly formed, and the required time period has passed (18 months) with no claims, future unknown creditors cannot access funds in the OLT. Ohio law does provide exceptions to this rule for child and spousal support (alimony). 

Q:       How much can I put into an OLT?

A:        Generally, you can fund your  OLT with assets not needed for monthly bills, loan payments, expenses or longer-term debts. Because OLT distributions are made by an independent trustee, you may not be able to get your money out, so don’t put in more than you can afford to lose.

Q:       Who can be an OLT trustee?

A:        An independent trustee should not be related to or under the control of the trustmaker or any of the beneficiaries. Independent trustees may include, for example, corporate bank trustees, institutional trustees, professional trustees, accountants, attorneys or financial planners.

Q:       Does a trustmaker need an attorney to form an OLT?

A:        Yes. Because the formation of  OLTs involve, giving up rights to assets, creditors’ rights, beneficiary rights and tax and estate planning issues, it is wise to engage an attorney experienced in OLT matters.  

This "Law You Can Use" consumer legal information column was provided by the Ohio State Bar Association. It was prepared by D. Bowen (“Bo”) Loeffler, Esq. of Port Clinton/Sandusky. 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.

Q:       Weren’t estate taxes eliminated in Ohio?

A:        While the Ohio estate tax was repealed effective January 1, 2013, a decedent’s estate may have to pay a federal estate tax if the gross estate is more than $5.34 million dollars (“the exempt amount”).

Q:       What is the tax rate for estates that exceed the exempt amount?

A:        The tax rate is 40 percent.  This rate also applies to generation-skipping transfer tax (when, for example, a distribution is made from a grandparent to a grandchild).

Q:       Can any tax deductions be taken from the decedent’s gross estate?

A:        Yes. Typical deductions include expenses associated with the decedent’s funeral and burial, debts and obligations, gifts to charities and most transfers to the surviving spouse.

Q:       Should an estate file a federal estate tax return if all assets are transferred to the surviving spouse?

A:        Maybe. When the decedent’s gross estate exceeds the exempt amount, a return (Form 706) must be filed even if the taxable estate is zero. Also, the estate may elect to file a return when the gross estate is less than the exempt amount. Doing so may allow the surviving spouse to leave combined net assets of $10.68 million dollars in the estate, but the family would not have to pay federal estate taxes. 

            For example, let’s say a man dies and leaves $4 million dollars to his wife. His wife does not have to file a federal estate tax return.  If the wife has $4 million dollars of her own assets plus the $4 million dollars she inherited from her husband, her gross estate would be $8 million. Approximately $3 million dollars of this $8 million would be subject to federal estate taxes. However, if she files a federal tax return at the time of her husband’s death, she can claim the unused exempt amount of $4 million dollars for her husband as well as her own exempt amount. This will leave her with a combined $8 million dollar exempt amount, which will eliminate the federal estate tax.

Q:       Will accounts held as “transfer on death” or “payable on death” avoid federal estate tax?

A:        No. The transfer of property can be accomplished quickly after a person’s death through the titling of assets as “transfer on death” or “payable on death,” but most of these assets will not escape estate tax liability.

Q:       Can I give all of my property away during my life to avoid estate taxes?

A:        No. The federal tax structure is considered a “unified” estate and gift tax system. This means that transfers made while you are alive are added together with those that are distributed when you die to determine if your total assets exceed the exempt amount. This is called a lifetime computation.

Q:       How does the federal gift tax work?

A:        Under the current law, an individual can give $14,000 (“the annual exclusion”) to another person (the “donee”) without filing a federal gift tax return. The annual exclusion is based on the amount of the gift made to each donee and not on the total amount given by the donor. For example, one parent can give $14,000 to each of his or her four children (a combined gift of $56,000) without filing a gift tax return. If the donor is married, the annual exclusion can double (called “gift splitting”). Thus, this couple could give $28,000 to each child without filing a gift tax return even though only one spouse made the gift. When the aggregate amount exceeds $14,000 per donee, a gift tax return (Form 709) must be filed by April 15 following the calendar year. The excess amount over the $14,000 reduces the future exemption amount available when the donor dies.

Q:       I received a gift of property from my parents. Do I have to pay taxes on its value?

A:        No. You do not have to report the gifted asset as income. However, if you sell the property at a later time, then you will have to pay income taxes based on your parents’ basis. “Basis” is the amount a person pays to purchase a property plus whatever the person spent to improve the property. For example, let’s say a couple paid $15,000 for their home in 1950.  When they deeded the house to their only son in 2014, its value was $100,000. When their son sells the home, he will have a capital gain of $85,000. The son will have to pay taxes on this capital gain amount. 

This “Law You Can Use” column was provided by the Ohio State Bar Association. It was prepared by attorney James B. Curtin of the Columbus firm, Hrabcak & Company, L.P.A. 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.