FCPA Guide

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chapter

Introductio

A Resource Guide to the U.S. Foreign Corrupt PracticesBy the Criminal Division o the U.S. Department o Ju

the En orcement Division o the U.S. Securities and Exchange C


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Tis guide is intended to provide in ormation or businesses and individuals regarding the U.S. Foreign Corrupt PracticAct (FCPA). Te guide has been prepared by the staff o the Criminal Division o the U.S. Department o Justice and tEn orcement Division o the U.S. Securities and Exchange Commission. It is non-binding, in ormal, and summary in naturethe in ormation contained herein does not constitute rules or regulations. As such, it is not intended to, does not, and may nbe relied upon to create any rights, substantive or procedural, that are en orceable at law by any party, in any criminal, civiadministrative matter. It is not intended to substitute or the advice o legal counsel on specic issues related to the FCPA. It not in any way limit the en orcement intentions or litigating positions o the U.S. Department o Justice, the U.S. SecuritiesExchange Commission, or any other U.S. government agency.

Companies or individuals seeking an opinion concerning specic prospective conduct are encouraged to use the U.Department o Justices opinion procedure discussed in Chapter 9 o this guide.

Tis guide isUnited States Government property. It is available to the public ree o charge online at www.justice.gov/criminal/ raud/ cpa and www.sec.gov/spotlight/ cpa.shtml.
http://www.justice.gov/criminal/fraud/fcpahttp://www.sec.gov/spotlight/fcpa.shtmlhttp://www.justice.gov/criminal/fraud/fcpahttp://www.justice.gov/criminal/fraud/fcpahttp://www.sec.gov/spotlight/fcpa.shtmlhttp://www.sec.gov/spotlight/fcpa.shtmlhttp://www.justice.gov/criminal/fraud/fcpahttp://www.justice.gov/criminal/fraud/fcpa


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A RESOURCE GUIDE TO THEU.S. FOREIGN CORRUPT PRACTICES ACT

By the Criminal Division o the U.S. Department o Justice andthe En orcement Division o the U.S. Securities and Exchange Commission


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FOREWORD We are pleased to announce the publication o A Resource Guide to the U.S. Foreign Corrupt Practices Act . Te Foreign

Corrupt Practices Act (FCPA) is a critically important statute or combating corruption around the globe. Corrupcorrosive effects on democratic institutions, undermining public accountability and diverting public resources ro

tant priorities such as health, education, and in rastructure. When business is won or lost based on how much a c willing to pay in bribes rather than on the quality o its products and services, law-abiding companies are place petitive disadvantageand consumers lose. For these and other reasons, en orcing the FCPA is a continuing prioDepartment o Justice (DOJ) and the Securities and Exchange Commission (SEC).

Te Guide is the product o extensive efforts by experts at DOJ and SEC, and has beneted rom valuable inthe Departments o Commerce and State. It endeavors to provide help ul in ormation to enterprises o all shapes

rom small businesses doing their rst transactions abroad to multi-national corporations with subsidiaries around Te Guide addresses a wide variety o topics, including who and what is covered by the FCPAs anti-bribery and ac provisions; the denition o a oreign official; what constitute proper and improper gifs, travel and entertainmenthe nature o acilitating payments; how successor liability applies in the mergers and acquisitions context; the han effective corporate compliance program; and the different types o civil and criminal resolutions available incontext. On these and other topics, theGuide takes a multi- aceted approach, setting orth in detail the statutory requments while also providing insight into DOJ and SEC en orcement practices through hypotheticals, examples oment actions and anonymized declinations, and summaries o applicable case law and DOJ opinion releases.

Te Guide is an unprecedented undertaking by DOJ and SEC to provide the public with detailed in ormationour FCPA en orcement approach and priorities. We are proud o the many lawyers and staff who worked on thand hope that it will be a use ul re erence or companies, individuals, and others interested in our en orcemen

November 14, 2012

Lanny A. BreuerAssistant Attorney GeneralCriminal DivisionDepartment of Justice

Robert S. KhuzamiDirector of EnforcementSecurities and Exchange Commission


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CONTENTS

Chapter 1: INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2The Costs of Corruption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Historical Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

National Landscape: Interagency Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4Department of Justice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Securities and Exchange Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Law Enforcement Partners. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Departments of Commerce and State. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

International Landscape: Global Anti-Corruption Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7OECD Working Group on Bribery and the Anti-Bribery Convention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

U.N. Convention Against Corruption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Other Anti-Corruption Conventions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Chapter 2: THE FCPA: ANTI-BRIBERY PROVISIONS . . . . . . . . . . . . . . . . . . . . 10

Who Is Covered by the Anti-Bribery Provisions? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10Issuers15 U.S.C. 78dd-1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Domestic Concerns15 U.S.C. 78dd-2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Territorial Jurisdiction15 U.S.C. 78dd-3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

What Jurisdictional Conduct Triggers the Anti-Bribery Provisions? . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

What Is Covered?The Business Purpose Test . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

What Does Corruptly Mean?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

What Does Willfully Mean and When Does It Apply? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

What Does Anything of Value Mean? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Gifts, Travel, Entertainment, and Other Things of Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Charitable Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Who Is a Foreign Ofcial? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19Department, Agency, or Instrumentality of a Foreign Government. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Public International Organizations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

How Are Payments to Third Parties Treated? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

What Afrmative Defenses Are Available? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23The Local Law Defense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Reasonable and Bona Fide Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

What Are Facilitating or Expediting Payments? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Does the FCPA Apply to Cases of Extortion or Duress? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Principles of Corporate Liability for Anti-Bribery Violations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27Parent-Subsidiary Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Successor Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Additional Principles of Criminal Liability for Anti-Bribery Violations: Aiding and Abetting and Conspiracy . . . . 34


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Condential Reporting and Internal Investigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

Continuous Improvement: Periodic Testing and Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

Mergers and Acquisitions: Pre-Acquisition Due Diligence and Post-Acquisition Integration. . . . . . . . . . . . . . . . 62

Other Guidance on Compliance and International Best Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

Chapter 6: FCPA PENALTIES, SANCTIONS, AND REMEDIES . . . . . . . . . . . . . . . 68

What Are the Potential Consequences for Violations of the FCPA? . . . . . . . . . . . . . . . . . . . . . . . . . . . 68

Criminal Penalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68

U.S. Sentencing Guidelines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68

Civil Penalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69

Collateral Consequences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69Debarment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70

Cross-Debarment by Multilateral Development Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70

Loss of Export Privileges. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71

When Is a Compliance Monitor or Independent Consultant Appropriate? . . . . . . . . . . . . . . . . . . . . . . . 71

Chapter 7: RESOLUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74

What Are the Different Types of Resolutions with DOJ? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74Criminal Complaints, Informations, and Indictments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74

Plea Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74

Deferred Prosecution Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74

Non-Prosecution Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75

Declinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75

What Are the Different Types of Resolutions with SEC? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76

Civil Injunctive Actions and Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76Civil Administrative Actions and Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76

Deferred Prosecution Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76

Non-Prosecution Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77

Termination Letters and Declinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77

What Are Some Examples of Past Declinations by DOJ and SEC? . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77

Chapter 8: WHISTLEBLOWER PROVISIONS AND PROTECTIONS . . . . . . . . . . . . . 82

Chapter 9: DOJ OPINION PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . . . 86

Chapter 10: CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90

APPENDIX:THE FOREIGN CORRUPT PRACTICES ACT . . . . . . . . . . . . . . . . . . 92

APPENDIX:ENDNOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .104


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Corporate bribery is bad business. In our free market system it is basic that the

sale of products should take place on the basis of price, quality, and service.

Corporate bribery is fundamentally destructive of this basic tenet. Corporatebribery of foreign ofcials takes place primarily to assist corporations in gaining

business. Thus foreign corporate bribery affects the very stability of overseas

business. Foreign corporate bribes also affect our domestic competitive climate

when domestic rms engage in such practices as a substitute for healthy com-

petition for foreign business. 1United States Senate, 1977


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INTRODUCTION

Congress enacted the U.S. Foreign Corrupt Practices Act (FCPA or the Act) in1977 in response to revelations of widespread bribery of foreign ofcials by U.S.

companies. The Act was intended to halt those corrupt practices, create a level

playing eld for honest businesses, and restore public condence in the integ-

rity of the marketplace. 2

Te FCPA contains both anti-bribery and accounting provisions. Te anti-bribery provisions prohibit U.S. per-sons and businesses (domestic concerns), U.S. and oreign public companies listed on stock exchanges in the UnitedStates or which are required to le periodic reports withthe Securities and Exchange Commission (issuers), andcertain oreign persons and businesses acting while in theterritory o the United States (territorial jurisdiction) rommaking corrupt payments to oreign officials to obtain orretain business. Te accounting provisions require issuersto make and keep accurate books and records and to deviseand maintain an adequate system o internal accountingcontrols. Te accounting provisions also prohibit individu-als and businesses rom knowingly alsi ying books andrecords or knowingly circumventing or ailing to imple-ment a system o internal controls.

Te Department o Justice (DOJ) and theSecurities and Exchange Commission (SEC) share FCPA

en orcement authority and are committed to ghting oeign bribery through robust en orcement. An importantcomponent o this effort is education, and this resourcguide, prepared by DOJ and SEC staff, aims to providbusinesses and individuals with in ormation to help themabide by the law, detect and prevent FCPA violations, andimplement effective compliance programs.

The Costs of CorruptionCorruption is a global problem. In the three decades

since Congress enacted the FCPA, the extent o corporatbribery has become clearer and its ramications in a trannational economy starker. Corruption impedes economicgrowth by diverting public resources rom important prorities such as health, education, and in rastructure. Iundermines democratic values and public accountabilityand weakens the rule o law.3 And it threatens stability andsecurity by acilitating criminal activity within and acro


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In 1998, the FCPA was amended to con orm tothe requirements o the Anti-Bribery Convention. Teseamendments expanded the FCPAs scope to: (1) include payments made to secure any improper advantage; (2)reach certain oreign persons who commit an act in ur-therance o a oreign bribe while in the United States; (3)cover public international organizations in the denitiono oreign official; (4) add an alternative basis or juris-diction based on nationality; and (5) apply criminal pen-

alties to oreign nationals employed by or acting as agentso U.S. companies.20 Te Anti-Bribery Convention cameinto orce on February 15, 1999, with the United Statesas a ounding party.

National Landscape: InteragencyEfforts

DOJ and SEC share en orcement authority or theFCPAs anti-bribery and accounting provisions.21 Tey also work with many other ederal agencies and law en orce-ment partners to investigate and prosecute FCPA viola-tions, reduce bribery demands through good governance programs and other measures, and promote a air playingeld or U.S. companies doing business abroad.

Department of Justice

DOJ has criminal FCPA en orcement authorityover issuers (i.e., public companies) and their officers,

directors, employees, agents, or stockholders acting on thissuers behal . DOJ also has both criminal and civil en oment responsibility or the FCPAs anti-bribery provisionover domestic concernswhich include (a) U.S. citizennationals, and residents and (b) U.S. businesses and theiofficers, directors, employees, agents, or stockholders aing on the domestic concerns behal and certain orei persons and businesses that act in urtherance o an FCP violation while in the territory o the United States. WithiDOJ, the Fraud Section o the Criminal Division has primary responsibility or all FCPA matters.22 FCPA mattersare handled primarily by the FCPA Unit within the FraudSection, regularly working jointly with U.S. AttorneysOffices around the country.

DOJ maintains a website dedicated to the FCPA andits en orcement at http://www.justice.gov/criminal/ raud/

cpa/. Te website provides translations o the FCPA in

numerous languages, relevant legislative history, and selectdocuments rom FCPA-related prosecutions and resolutionsince 1977, including charging documents, plea agreementde erred prosecution agreements, non-prosecution agrements, press releases, and other relevant pleadings and coudecisions. Te website also provides copies o opinions issuin response to requests by companies and individuals undeDOJs FCPA opinion procedure. Te procedures or submit-ting a request or an opinion can be ound at http://www. justice.gov/criminal/ raud/ cpa/docs/ rgncrpt.pd and arediscussed urther in Chapter 9. Individuals and companie wishing to disclose in ormation about potential FCPA violtions are encouraged to contact the FCPA Unit at the telephone number or email address above.

Securities and Exchange Commission

SEC is responsible or civil en orcement o the FCover issuers and their officers, directors, employees, agen

DOJ Contact Information

Deputy Chief (FCPA Unit)

Fraud Section, Criminal DivisionBond Building

1400 New York Ave, N.W.Washington, DC 20005

Telephone: (202) 514-7023Facsimile: (202) 514-7021

Email: [email protected]
http://www.justice.gov/criminal/fraud/fcpa/http://www.justice.gov/criminal/fraud/fcpa/http://www.justice.gov/criminal/fraud/fcpa/docs/frgncrpt.pdfhttp://www.justice.gov/criminal/fraud/fcpa/docs/frgncrpt.pdfmailto:[email protected]:[email protected]://www.justice.gov/criminal/fraud/fcpa/docs/frgncrpt.pdfhttp://www.justice.gov/criminal/fraud/fcpa/docs/frgncrpt.pdfhttp://www.justice.gov/criminal/fraud/fcpa/http://www.justice.gov/criminal/fraud/fcpa/


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or stockholders acting on the issuers behal . SECs Divisiono En orcement has responsibility or investigating and prosecuting FCPA violations. In 2010, SECs En orcementDivision created a specialized FCPA Unit, with attorneys

in Washington, D.C. and in regional offices around thecountry, to ocus specically on FCPA en orcement. TeUnit investigates potential FCPA violations; acilitatescoordination with DOJs FCPA program and with other

ederal and international law en orcement partners; uses itsexpert knowledge o the law to promote consistent en orce-ment o the FCPA; analyzes tips, complaints, and re erralsregarding allegations o oreign bribery; and conducts pub-lic outreach to raise awareness o anti-corruption effortsand good corporate governance programs.

Te FCPA Unit maintains a Spotlight on FCPAsection on SECs website athttp://www.sec.gov/spotlight/

cpa.shtml. Te website, which is updated regularly, provides general in ormation about the Act, links to all SECen orcement actions involving the FCPA, including both

ederal court actions and administrative proceedings, andcontains other use ul in ormation.

Individuals and companies with in ormation about possible FCPA violations by issuers may report them to theEn orcement Division via SECs online ips, Complaintsand Re erral system,http://www.sec.gov/complaint/tip-

scomplaint.shtml. Tey may also submit in ormation toSECs Office o the Whistleblower through the same onlinesystem or by contacting the Office o the Whistleblowerat (202) 551-4790. Additionally, investors with questionsabout the FCPA can call the Office o Investor Educationand Advocacy at (800) SEC-0330.

For more in ormation about SECs WhistleblowerProgram, under which certain eligible whistleblowers maybe entitled to a monetary award i their in ormation leads tocertain SEC actions, see Chapter 8.

Law Enforcement Partners

DOJs FCPA Unit regularly works with the FederalBureau o Investigation (FBI) to investigate potential FCPA violations. Te FBIs International Corruption Unit has pri-mary responsibility or international corruption and raudinvestigations and coordinates the FBIs national FCPAen orcement program. Te FBI also has a dedicated FCPAsquad o FBI special agents (located in the Washington

Field Office) that is responsible or investigating many, and providing support or all, o the FBIs FCPA investigations.In addition, the Department o Homeland Security and theInternal Revenue Service-Criminal Investigation regularlyinvestigate potential FCPA violations. A number o otheragencies are also involved in the ght against internationalcorruption, including the Department o reasurys Officeo Foreign Assets Control, which has helped lead a numbero FCPA investigations.

Departments of Commerce and State

Besides en orcement efforts by DOJ and SEC,the U.S. government is also working to address corrup-tion abroad and level the playing eld or U.S. businessesthrough the efforts o the Departments o Commerce andState. Both Commerce and State advance anti-corruptionand good governance initiatives globally and regularlyassist U.S. companies doing business overseas in several

SEC Contact Information

FCPA Unit ChiefDivision of Enforcement

U.S. Securities and Exchange Commission100 F Street, N.E.

Washington, DC 20549

Online: Tips, Complaints, andReferrals website

http://www.sec.gov/complaint/tipscomplaint.shtml

Ofce of Investor Education and Advocacy:

(800) SEC-0330
http://www.sec.gov/spotlight/fcpa.shtmlhttp://www.sec.gov/spotlight/fcpa.shtmlhttp://www.sec.gov/complaint/tipscomplaint.shtmlhttp://www.sec.gov/complaint/tipscomplaint.shtmlhttp://www.sec.gov/complaint/info_tipscomplaint.shtmlhttp://www.sec.gov/complaint/info_tipscomplaint.shtmlhttp://www.sec.gov/complaint/select.shtmlhttp://www.sec.gov/complaint/select.shtmlhttp://www.sec.gov/complaint/info_tipscomplaint.shtmlhttp://www.sec.gov/complaint/info_tipscomplaint.shtmlhttp://www.sec.gov/complaint/tipscomplaint.shtmlhttp://www.sec.gov/complaint/tipscomplaint.shtmlhttp://www.sec.gov/spotlight/fcpa.shtmlhttp://www.sec.gov/spotlight/fcpa.shtml


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important ways. Both agencies encourage U.S. businessesto seek the assistance o U.S embassies when they are con-

ronted with bribe solicitations or other corruption-relatedissues overseas.23

Te Department o Commerce offers a num-ber o important resources or businesses, including theInternational rade Administrations United States andForeign Commercial Service (Commercial Service). TeCommercial Service has export and industry specialistslocated in over 100 U.S. cities and 70 countries who areavailable to provide counseling and other assistance to U.S.businesses, particularly small and medium-sized companies,regarding exporting their products and services. Amongother things, these specialists can help a U.S. company con-duct due diligence when choosing business partners or agentsoverseas. Te International Company Prole Program, orinstance, can be part o a U.S. business evaluation o poten-tial overseas business partners.24 Businesses may contact theCommercial Service through its website,http://export.gov/eac/, or directly at its domestic and oreign offices.25

Additionally, the Department o Commerces Officeo the General Counsel maintains a website,http://www.commerce.gov/os/ogc/transparency-and-anti-bribery-

initiatives, that contains recent articles and speeches, linksto translations o the FCPA, a catalogue o anti-corruptionresources, and a list o international conventions and ini-tiatives. Te rade Compliance Center in the Departmento Commerces International rade Administration hostsa website with anti-bribery resources,http://tcc.export.gov/Bribery . Tis website contains an online orm through which U.S. companies can report allegations o oreignbribery by oreign competitors in international businesstransactions.26 Te Department o Commerce also provides in ormation to companies through a number o U.S.and international publications designed to assist rms incomplying with anti-corruption laws. For example, theDepartment o Commerce has included a new anti-corrup-tion section in its Country Commercial Guides, preparedby market experts at U.S. embassies worldwide, that containsin ormation on market conditions or more than 100 coun-tries, including in ormation on the FCPA or exporters.27

Te Department o Commerce has also published a guide Business Ethics: A Manual or Managing a Responsible Business Enterprise in Emerging Market Economies, whichcontains in ormation about corporate compliance pro-grams or businesses involved in international trade.28

Te Departments o Commerce and State also provide advocacy support, when determined to be in thenational interest, or U.S. companies bidding or oreigovernment contracts. Te Department o CommercesAdvocacy Center, or example, supports U.S. businesscompeting against oreign companies or international cotracts, such as by arranging or the delivery o an advocmessage by U.S. government officials or assisting with unaticipated problems such as suspected bribery by a competor.29 Te Department o States Bureau o Economic andBusiness Affairs (specically, its Office o Commercial Business Affairs) similarly assists U.S. rms doing busin

overseas by providing advocacy on behal o U.S. busineand identi ying risk areas or U.S. businesses; more inmation is available on its website,http://www.state.gov/e/eb/cba/. Also, the Department o States economic officerserving overseas provide commercial advocacy and supp

or U.S. companies at the many overseas diplomatic pos where the Commercial Service is not represented.

Te Department o State promotes U.S. governmentinterests in addressing corruption internationally throughcountry-to-country diplomatic engagement; developmento and ollow-through on international commitments relaing to corruption; promotion o high-level political engagment (e.g., the G20 Anticorruption Action Plan); publicoutreach in oreign countries; and support or buildinthe capacity o oreign partners to combat corruption. Iscal year 2009, the U.S. government provided more tha$1 billion or anti-corruption and related good governancassistance abroad.
http://export.gov/eac/http://export.gov/eac/http://www.commerce.gov/os/ogc/transparency-and-anti-bribery-initiativeshttp://www.commerce.gov/os/ogc/transparency-and-anti-bribery-initiativeshttp://www.commerce.gov/os/ogc/transparency-and-anti-bribery-initiativeshttp://tcc.export.gov/Briberyhttp://tcc.export.gov/Briberyhttp://www.state.gov/e/eb/cba/http://www.state.gov/e/eb/cba/http://www.state.gov/e/eb/cba/http://www.state.gov/e/eb/cba/http://tcc.export.gov/Briberyhttp://tcc.export.gov/Briberyhttp://www.commerce.gov/os/ogc/transparency-and-anti-bribery-initiativeshttp://www.commerce.gov/os/ogc/transparency-and-anti-bribery-initiativeshttp://www.commerce.gov/os/ogc/transparency-and-anti-bribery-initiativeshttp://export.gov/eac/http://export.gov/eac/


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Te Department o States Bureau o InternationalNarcotics and Law En orcement Affairs (INL) managesU.S. participation in many multilateral anti-corruption political and legal initiatives at the global and regional level.INL also unds and coordinates signicant efforts to assistcountries with combating corruption through legal re orm,training, and other capacity-building efforts. Inquiries aboutthe U.S. governments general anti-corruption efforts andimplementation o global and regional anti-corruption ini-tiatives may be directed to INL on its website,http://www.state.gov/j/inl/c/crime/corr/index.htm, or by email to:[email protected] . In addition, the U.S. Agency orInternational Development (USAID) has developed several

anti-corruption programs and publications, in ormationabout which can be ound athttp://www.usaid.gov/what- we-do/democracy-human-rights-and-governance/promot-ing-accountability-transparency . Finally, the Department oStates brochure Fighting Global Corruption: Business RiskManagement, available athttp://www.ogc.doc.gov/pd s/Fighting_Global_Corruption.pd , provides guidance aboutcorporate compliance programs as well as international anti-corruption initiatives.

International Landscape: Global Anti-Corruption Efforts

In recent years, there has been a growing interna-tional consensus that corruption must be combated, and theUnited States and other countries are parties to a numbero international anti-corruption conventions. Under theseconventions, countries that are parties undertake commit-ments to adopt a range o preventive and criminal law mea-sures to combat corruption. Te conventions incorporate

review processes that allow the United States to monitorother countries to ensure that they are meeting their inter-national obligations. Likewise, these processes in turn permitother parties to monitor the United States anti-corruptionlaws and en orcement to ensure that such en orcement andlegal rameworks are consistent with the United States treatyobligations.30 U.S. officials regularly address the subject ocorruption with our oreign counterparts to raise awareness

o the importance o ghting corruption and urge strongeren orcement o anti-corruption laws and policies.

OECD Working Group on Bribery and the Anti-

Bribery Convention

Te OECD was ounded in 1961 to stimulate eco-nomic progress and world trade. As noted, the Anti-BriberyConvention requires its parties to criminalize the briberyo oreign public officials in international business transac-tions.31 As o November 1, 2012, there were 39 parties tothe Anti-Bribery Convention: 34 OECD member coun-tries (including the United States) and ve non-OECDmember countries (Argentina, Brazil, Bulgaria, the Russian

Federation, and South A rica). All o these parties arealso members o the OECD Working Group on Bribery(Working Group).32

Te Working Group is responsible or monitoring theimplementation o the Anti-Bribery Convention, the 2009Recommendation o the Council or Further CombatingBribery o Foreign Public Officials in InternationalBusiness ransactions, and related instruments. Its mem-bers meet quarterly to review and monitor implementationo the Anti-Bribery Convention by member states around

the world. Each party undergoes periodic peer review.33 Tis peer-review monitoring system is conducted in three phases. Te Phase 1 review includes an in-depth assess-ment o each countrys domestic laws implementing theConvention. Te Phase 2 review examines the effectivenesso each countrys laws and anti-bribery efforts. Te nal phase is a permanent cycle o peer review (the rst cycle o which is re erred to as the Phase 3 review) that evaluatesa countrys en orcement actions and results, as well as the

countrys efforts to address weaknesses identied during thePhase 2 review.34 All o the monitoring reports or the par-ties to the Convention can be ound on the OECD websiteand can be a use ul resource about the oreign bribery lawso the OECD Working Group member countries.35

Te United States was one o the rst countries toundergo all three phases o review. Te reports and appen-dices can be ound on DOJs and SECs websites.36 In its
http://www.state.gov/j/inl/c/crime/corr/index.htmhttp://www.state.gov/j/inl/c/crime/corr/index.htmmailto:[email protected]://www.usaid.gov/what-we-do/democracy-human-rights-and-governance/promoting-accountability-transparencyhttp://www.usaid.gov/what-we-do/democracy-human-rights-and-governance/promoting-accountability-transparencyhttp://www.usaid.gov/what-we-do/democracy-human-rights-and-governance/promoting-accountability-transparencyhttp://www.ogc.doc.gov/pdfs/Fighting_Global_Corruption.pdfhttp://www.ogc.doc.gov/pdfs/Fighting_Global_Corruption.pdfhttp://www.ogc.doc.gov/pdfs/Fighting_Global_Corruption.pdfhttp://www.ogc.doc.gov/pdfs/Fighting_Global_Corruption.pdfhttp://www.usaid.gov/what-we-do/democracy-human-rights-and-governance/promoting-accountability-transparencyhttp://www.usaid.gov/what-we-do/democracy-human-rights-and-governance/promoting-accountability-transparencyhttp://www.usaid.gov/what-we-do/democracy-human-rights-and-governance/promoting-accountability-transparencymailto:[email protected]://www.state.gov/j/inl/c/crime/corr/index.htmhttp://www.state.gov/j/inl/c/crime/corr/index.htm


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Introductio

Phase 3 review o the United States, which was completedin October 2010, the Working Group commended U.S.efforts to ght transnational bribery and highlighted anumber o best practices developed by the United States.

Te report also noted areas where the United States anti-bribery efforts could be improved, including consolidat-ing publicly available in ormation on the application othe FCPA and enhancing awareness among small- andmedium-sized companies about the prevention and detec-tion o oreign bribery. Tis guide is, in part, a response tothese Phase 3 recommendations and is intended to helpbusinesses and individuals better understand the FCPA.37

U.N. Convention Against Corruption

Te United States is a state party to the UnitedNations Convention Against Corruption (UNCAC), which was adopted by the U.N. General Assembly onOctober 31, 2003, and entered into orce on December14, 2005.38 Te United States ratied the UNCAC onOctober 30, 2006. Te UNCAC requires parties to crimi-nalize a wide range o corrupt acts, including domestic and

oreign bribery and related offenses such as money launder-ing and obstruction o justice. Te UNCAC also estab-

lishes guidelines or the creation o anti-corruption bodies,codes o conduct or public officials, transparent and objec-tive systems o procurement, and enhanced accounting andauditing standards or the private sector. A peer reviewmechanism assesses the implementation o the UNCACby parties to the Convention, with a ocus in the rst roundon criminalization and law en orcement as well as inter-national legal cooperation.39 Te United States has beenreviewed under the Pilot Review Programme, the reporto which is available on DOJs website. As o November 1,2012, 163 countries were parties to the UNCAC.40

Other Anti-Corruption Conventions

Te Inter-American Convention Against Corruption(IACAC) was the rst international anti-corruption convention, adopted in March 1996 in Caracas, Venezuela,by members o the Organization o American States.41

Te IACAC requires parties (o which the United Statesis one) to criminalize both oreign and domestic bribery. A body known as the Mechanism or Follow-Up othe Implementation o the Inter-American ConventionAgainst Corruption (MESICIC) monitors parties compli-ance with the IACAC. As o November 1, 2012, 31 countries were parties to MESICIC.

Te Council o Europe established the Group oStates Against Corruption (GRECO) in 1999 to monitorcountries compliance with the Council o Europes antcorruption standards, including the Council o EuropeCriminal Law Convention on Corruption.42 Tese stan-dards include prohibitions on the solicitation and receipt obribes, as well as oreign bribery. As o November 1, 20GRECO member states, which need not be members othe Council o Europe, include more than 45 Europeancountries and the United States.43

Te United States has been reviewed under bothMESICIC and GRECO, and the reports generated bythose reviews are available on DOJs website.


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How Can I Tell If My Company Is an Issuer?

It is listed on a national securities exchange in theUnited States (either stock or American Depository

Receipts); orThe companys stock trades in the over-the-counter market in the United States and thecompany is required to le SEC reports.

To see if your company les SEC reports, go toSECs website at http://www.sec.gov/edgar/searchedgar/webusers.htm .

issuers.45 A company is an issuer under the FCPA i ithas a class o securities registered under Section 12 o theExchange Act46 or is required to le periodic and otherreports with SEC under Section 15(d) o the ExchangeAct.47 In practice, this means that any company with aclass o securities listed on a national securities exchange inthe United States, or any company with a class o securi-ties quoted in the over-the-counter market in the UnitedStates and required to le periodic reports with SEC, is anissuer. A company thus need not be a U.S. company to be

an issuer. Foreign companies with American DepositoryReceipts that are listed on a U.S. exchange are also issuers.48 As o December 31, 2011, 965 oreign companies were reg-istered with SEC.49 Officers, directors, employees, agents,or stockholders acting on behal o an issuer (whether U.S.or oreign nationals), and any co-conspirators, also can be prosecuted under the FCPA.50

Domestic Concerns15 U.S.C. 78dd-2

Te FCPA also applies to domestic concerns. 51 Adomestic concern is any individual who is a citizen, national,or resident o the United States, or any corporation, part-nership, association, joint-stock company, business trust,unincorporated organization, or sole proprietorship that isorganized under the laws o the United States or its states,territories, possessions, or commonwealths or that has its principal place o business in the United States.52 Officers,

directors, employees, agents, or stockholders acting onbehal o a domestic concern, including oreign nationals orcompanies, are also covered.53

Territorial Jurisdiction15 U.S.C. 78dd-3Te FCPA also applies to certain oreign nationals or

entities that are not issuers or domestic concerns.54 Since1998, the FCPAs anti-bribery provisions have applied to

oreign persons and oreign non-issuer entities that, eitherdirectly or through an agent, engage in any act in urther-ance o a corrupt payment (or an offer, promise, or authori-zation to pay) while in the territory o the United States.55 Also, officers, directors, employees, agents, or stockholdersacting on behal o such persons or entities may be subjectto the FCPAs anti-bribery prohibitions.56

What Jurisdictional Conduct Triggers the Anti-

Bribery Provisions?

Te FCPAs anti-bribery provisions can apply toconduct both inside and outside the United States. Issuersand domestic concernsas well as their officers, directors,employees, agents, or stockholdersmay be prosecuted

or using the U.S. mails or any means or instrumentality o

interstate commerce in urtherance o a corrupt paymentto a oreign official. Te Act denes interstate commerceas trade, commerce, transportation, or communicationamong the several States, or between any oreign countryand any State or between any State and any place or shipoutside thereo .57 Te term also includes theintrastate use o any interstate means o communication, or any otherinterstate instrumentality.58 Tus, placing a telephone call orsending an e-mail, text message, or ax rom, to, or throughthe United States involves interstate commerceas doessending a wire trans er rom or to a U.S. bank or otherwiseusing the U.S. banking system, or traveling across state bor-ders or internationally to or rom the United States.

Tose who are not issuers or domestic concerns maybe prosecuted under the FCPA i they directly, or throughan agent, engage in any act in urtherance o a corrupt pay-ment while in the territory o the United States, regardless o
http://www.sec.gov/edgar/searchedgar/webusers.htmhttp://www.sec.gov/edgar/searchedgar/webusers.htmhttp://www.sec.gov/edgar/searchedgar/webusers.htmhttp://www.sec.gov/edgar/searchedgar/webusers.htm


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to gain a business advantage.67 For example, bribe paymentsmade to secure avorable tax treatment, to reduce or elimi-nate customs duties, to obtain government action to prevent competitors rom entering a market, or to circumventa licensing or permit requirement, all satis y the business

purpose test.68 In 2004, the U.S. Court o Appeals or the Fifh Circuit

addressed the business purpose test inUnited States v. Kay and held that bribes paid to obtain avorable tax treatment which reduced a companys customs duties and sales taxeson importscould constitute payments made to obtainor retain business within the meaning o the FCPA.69 Tecourt explained that in enacting the FCPA, Congress meantto prohibit a range o payments wider than only those thatdirectly inuence the acquisition or retention o govern-ment contracts or similar commercial or industrial arrange-ments.70 Te Kay court ound that [t]he congressionaltarget was bribery paid to engender assistance in improvingthe business opportunities o the payor or his beneciary,irrespective o whether that assistance be direct or indirect,and irrespective o whether it be related to administeringthe law, awarding, extending, or renewing a contract, orexecuting or preserving an agreement.71 Accordingly, Kay

held that payments to obtain avorable tax treatment can,under appropriate circumstances, violate the FCPA:

Avoiding or lowering taxes reduces operating costsand thus increases prot margins, thereby reeing up

unds that the business is otherwise legally obligatedto expend. And this, in turn, enables it to take anynumber o actions to the disadvantage o competi-tors. Bribing oreign officials to lower taxes and cus-toms duties certainlycan provide an un air advantageover competitors and thereby be o assistance to the payor in obtaining or retaining business.

* * *[W]e hold that Congress intended or the FCPAto apply broadly to payments intended to assist the payor, either directly or indirectly, in obtaining or

retaining business or some person, and that bribes paid to oreign tax officials to secure illegally reducedcustoms and tax liability constitute a type o paymentthat can all within this broad coverage.72

Paying Bribes to Customs Ofcials

In 2010, a global freight forwarding company andsix of its corporate customers in the oil and gas industryresolved charges that they paid bribes to customs

ofcials. The companies bribed customs ofcials in morethan ten countries in exchange for such benets as:

evading customs duties on imported goods

improperly expediting the importation of goodsand equipment

extending drilling contracts and lowering taxassessments

obtaining false documentation related totemporary import permits for drilling rigs

enabling the release of drilling rigs and otherequipment from customs ofcials

In many instances, the improper payments at issueallowed the company to carry out its existing business,which fell within the FCPAs prohibition on corruptpayments made for the purpose of retaining business.The seven companies paid a total of more than $235million in civil and criminal sanctions and disgorgement.

Examples of Actions Takento Obtain or Retain Business

Winning a contract

Inuencing the procurement process

Circumventing the rules for importation ofproducts

Gaining access to non-public bid tenderinformation

Evading taxes or penalties

Inuencing the adjudication of lawsuits orenforcement actions

Obtaining exceptions to regulationsAvoiding contract termination


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The FCPAnti-Bribery Provision

In short, while the FCPA does not cover every typeo bribe paid around the world or every purpose, it doesapply broadly to bribes paid to help obtain or retain busi-ness, which can include payments made to secure a wide

variety o un air business advantages.73

What Does Corruptly Mean?o violate the FCPA, an offer, promise, or authori-

zation o a payment, or a payment, to a government offi-cial must be made corruptly.74 As Congress noted whenadopting the FCPA, the word corruptly means an intentor desire to wrong ully inuence the recipient:

Te word corruptly is used in order to make clear

that the offer, payment, promise, or gif, must be in-tended to induce the recipient to misuse his official position; or example, wrong ully to direct businessto the payor or his client, to obtain pre erential legis-lation or regulations, or to induce a oreign official to

ail to per orm an official unction.75

Where corrupt intent is present, the FCPA prohibits paying, offering, or promising to pay money or anythingo value (or authorizing the payment or offer).76 By ocus-ing on intent, the FCPA does not require that a corrupt

act succeed in its purpose.77 Nor must the oreign officialactually solicit, accept, or receive the corrupt payment orthe bribe payor to be liable.78 For example, in one case, aspecialty chemical company promised Iraqi governmentofficials approximately $850,000 in bribes or an upcomingcontract. Although the company did not, in the end, makethe payment (the scheme was thwarted by the U.S. govern-ments investigation), the company still violated the FCPAand was held accountable.79

Also, as long as the offer, promise, authorization, or payment is made corruptly, the actor need not know theidentity o the recipient; the attempt is sufficient.80 Tus, anexecutive who authorizes others to pay whoever you needto in a oreign government to obtain a contract has violatedthe FCPAeven i no bribe is ultimately offered or paid.

What Does Willfully Mean and WhenDoes It Apply?

In order or an individual de endant to be criminallliable under the FCPA, he or she must act will ully.81 Prooo will ulness is not required to establish corporate crimior civil liability,82 though proo o corrupt intent is.

Te term will ully is not dened in the FCPA, butit has generally been construed by courts to connote anact committed voluntarily and purpose ully, and with bad purpose, i.e., with knowledge that [a de endant] wdoing a bad act under the general rules o law.83 As theSupreme Court explained in Bryan v. United States, [a]s ageneral matter, when used in the criminal context, a wil

ul act is one undertaken with a bad purpose. In oth words, in order to establish a will ul violation o a statthe Government must prove that the de endant acted withknowledge that his conduct was unlaw ul.84

Notably, as both the Second Circuit and Fifh CircuitCourts o Appeals have ound, the FCPA does not requithe government to prove that a de endant was specicalaware o the FCPA or knew that his conduct violated thFCPA.85 o be guilty, a de endant must act with a bad pur pose, i.e., know generally that his conduct is unlaw ul.

What Does Anything of Value Mean?In enacting the FCPA, Congress recognized that bribes

can come in many shapes and sizesa broad range o unbenets86and so the statute prohibits the corrupt offer, payment, promise to pay, or authorization o the payment any money, or offer, gif, promise to give, or authorization othe giving o anything o value to a oreign official.87

An improper benet can take many orms. Whilecases ofen involve payments o cash (sometimes in thguise o consulting ees or commissions given throintermediaries), others have involved travel expenses an


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expensive gifs. Like the domestic bribery statute, the FCPAdoes not contain a minimum threshold amount or corruptgifs or payments.88 Indeed, what might be considered amodest payment in the United States could be a larger and

much more signicant amount in a oreign country.Regardless o size, or a gif or other payment to vio-

late the statute, the payor must have corrupt intentthat is,the intent to improperly inuence the government official.Te corrupt intent requirement protects companies thatengage in the ordinary and legitimate promotion o theirbusinesses while targeting conduct that seeks to improp-erly induce officials into misusing their positions. Tus, itis difficult to envision any scenario in which the provisiono cups o coffee, taxi are, or company promotional itemso nominal value would ever evidence corrupt intent, andneither DOJ nor SEC has ever pursued an investigationon the basis o such conduct. Moreover, as in all areas o

ederal law en orcement, DOJ and SEC exercise discre-tion in deciding which cases promote law en orcement pri-orities and justi y investigation. Certain patterns, however,have emerged: DOJs and SECs anti-bribery en orcementactions have ocused on small payments and gifs only whenthey comprise part o a systemic or long-standing course o

conduct that evidences a scheme to corruptly pay oreignofficials to obtain or retain business. Tese assessments arenecessarily act specic.

Cash

Te most obvious orm o corrupt payment is largeamounts o cash. In some instances, companies have main-tained cash unds specically earmarked or use as bribes.One U.S. issuer headquartered in Germany disbursed cor-rupt payments rom a corporate cash desk and used off-shore bank accounts to bribe government officials to wincontracts.89 In another instance, a our-company joint ven-ture used its agent to pay $5 million in bribes to a Nigerian political party.90 Te payments were made to the agent insuitcases o cash (typically in $1 million installments), and,in one instance, the trunk o a car when the cash did not tinto a suitcase.91

Gifts, Travel, Entertainment, and Other Things

of Value

A small gif or token o esteem or gratitude is ofenan appropriate way or business people to display respect

or each other. Some hallmarks o appropriate gif-givingare when the gif is given openly and transparently, properlyrecorded in the givers books and records, provided only toreect esteem or gratitude, and permitted under local law.

Items o nominal value, such as cab are, reasonablemeals and entertainment expenses, or company promo-tional items, are unlikely to improperly inuence an offi-cial, and, as a result, are not, without more, items that haveresulted in en orcement action by DOJ or SEC. Te largeror more extravagant the gif, however, the more likely it wasgiven with an improper purpose. DOJ and SEC en orce-ment cases thus have involved single instances o large,extravagant gif-giving (such as sports cars, ur coats, andother luxury items) as well as widespread gifs o smalleritems as part o a pattern o bribes.92 For example, in onecase brought by DOJ and SEC, a de endant gave a govern-ment official a country club membership ee and a genera-tor, as well as household maintenance expenses, paymento cell phone bills, an automobile worth $20,000, and lim-

ousine services. Te same official also received $250,000through a third-party agent.93

In addition, a number o FCPA en orcement actionshave involved the corrupt payment o travel and entertain-ment expenses. Both DOJ and SEC have brought cases where these types o expenditures occurred in conjunction with other conduct reecting systemic bribery or otherclear indicia o corrupt intent.

A case involving a Cali ornia-based telecommuni-cations company illustrates the types o improper traveland entertainment expenses that may violate the FCPA.94 Between 2002 and 2007, the company spent nearly $7 mil-lion on approximately 225 trips or its customers in order toobtain systems contracts in China, including or employeeso Chinese state-owned companies to travel to popular tour-ist destinations in the United States.95 Although the trips were purportedly or the individuals to conduct training at


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the companys acilities, in reality, no training occurred onmany o these trips and the company had no acilities at thoselocations. Approximately $670,000 o the $7 million was

alsely recorded as training expenses.96 Likewise, a New Jersey-based telecommunications

company spent millions o dollars on approximately 315

trips or Chinese government officials, ostensibly to inspectactories and train the officials in using the companys

equipment.97 In reality, during many o these trips, the offi-cials spent little or no time visiting the companys acilities,but instead visited tourist destinations such as Hawaii, LasVegas, the Grand Canyon, Niagara Falls, Disney World,Universal Studios, and New York City.98 Some o the trips were characterized as actory inspections or training with government customers but consisted primarily orentirely o sightseeing to locations chosen by the officials,typically lasting two weeks and costing between $25,000and $55,000 per trip. In some instances, the company gavethe government officials $500 to $1,000 per day in spend-ing money and paid all lodging, transportation, ood,and entertainment expenses. Te company either ailedto record these expenses or improperly recorded them asconsulting ees in its corporate books and records. Te

Examples of ImproperTravel and Entertainment

a $12,000 birthday trip for a government decision-

maker from Mexico that included visits to wineriesand dinners

$10,000 spent on dinners, drinks, andentertainment for a government ofcial

a trip to Italy for eight Iraqi government ofcialsthat consisted primarily of sightseeing andincluded $1,000 in pocket money for eachofcial

a trip to Paris for a government ofcial and his wifethat consisted primarily of touring activities via achauffeur-driven vehicle

company also ailed to implement appropriate internal controls to monitor the provision o travel and other things o value to Chinese government officials.99

Companies also may violate the FCPA i they giv payments or gifs to third parties, like an officials ammembers, as an indirect way o corruptly inuencing a eign official. For example, one de endant paid personal band provided airline tickets to a cousin and close riend the oreign official whose inuence the de endant soughobtaining contracts.100 Te de endant was convicted at trialand received a prison sentence.101

As part o an e ective compliance program, a co pany should have clear and easily accessible guidelinand processes in place or gi t-giving by the compandirectors, o icers, employees, and agents. hough nnecessarily appropriate or every business, many largcompanies have automated gi t-giving clearance pr

cesses and have set clear monetary thresholds or gialong with annual limitations, with limited exceptions

or gi ts approved by appropriate management. Cleguidelines and processes can be an e ective and e imeans or controlling gi t-giving, deterring impropgi ts, and protecting corporate assets.

Te FCPA does not prohibit gif-giving. Rather, justlike its domestic bribery counterparts, the FCPA prohibitsthe payments o bribes, including those disguised as gifs

Charitable Contributions

Companies ofen engage in charitable giving as parto legitimate local outreach. Te FCPA does not prohibitcharitable contributions or prevent corporations rom acting as good corporate citizens. Companies, however, cannot use the pretense o charitable contributions as a way

unnel bribes to government officials.


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For example, a pharmaceutical company used chari-table donations to a small local castle restoration charityheaded by a oreign government official to induce the offi-cial to direct business to the company. Although the charity was a bona de charitable organization, internal documentsat the pharmaceutical companys subsidiary established that

the payments were not viewed as charitable contributionsbut rather as dues the subsidiary was required to pay orassistance rom the government official. Te payments con-stituted a signicant portion o the subsidiarys total pro-motional donations budget and were structured to allowthe subsidiary to exceed its authorized limits. Te payments

Hypothetical: Gifts, Travel, and EntertainmentCompany A is a large U.S. engineering company with global operations in more than 50 countries, including a

number that have a high risk of corruption, such as Foreign Country. Company As stock is listed on a national U.S. stockexchange. In conducting its business internationally, Company As ofcers and employees come into regular contact withforeign ofcials, including ofcials in various ministries and state-owned entities. At a trade show, Company A has a boothat which it offers free pens, hats, t-shirts, and other similar promotional items with Company As logo. Company A alsoserves free coffee, other beverages, and snacks at the booth. Some of the visitors to the booth are foreign ofcials.

Is Company A in violation of the FCPA?

No. These are legitimate, bona de expenditures made in connection with the promotion, demonstration, orexplanation of Company As products or services. There is nothing to suggest corrupt intent here. The FCPA does notprevent companies from promoting their businesses in this way or providing legitimate hospitality, including to foreignofcials. Providing promotional items with company logos or free snacks as set forth above is an appropriate means ofproviding hospitality and promoting business. Such conduct has never formed the basis for an FCPA enforcement action.

At the trade show, Company A invites a dozen current and prospective customers out for drinks, and paysthe moderate bar tab. Some of the current and prospective customers are foreign ofcials under the FCPA. IsCompany A in violation of the FCPA?

No. Again, the FCPA was not designed to prohibit all forms of hospitality to foreign ofcials. While the cost here maybe more substantial than the beverages, snacks, and promotional items provided at the booth, and the invitees specicallyselected, there is still nothing to suggest corrupt intent.

Two years ago, Company A won a long-term contract to supply goods and services to the state-owned ElectricityCommission in Foreign Country. The Electricity Commission is 100% owned, controlled, and operated by thegovernment of Foreign Country, and employees of the Electricity Commission are subject to Foreign Countrysdomestic bribery laws. Some Company A executives are in Foreign Country for meetings with ofcials of theElectricity Commission. The General Manager of the Electricity Commission was recently married, and during thetrip Company A executives present a moderately priced crystal vase to the General Manager as a wedding giftand token of esteem. Is Company A in violation of the FCPA?

No. It is appropriate to provide reasonable gifts to foreign ofcials as tokens of esteem or gratitude. It is important thatsuch gifts be made openly and transparently, properly recorded in a companys books and records, and given only whereappropriate under local law, customary where given, and reasonable for the occasion.

During the course of the contract described above, Company A periodically provides training to ElectricityCommission employees at its facilities in Michigan. The training is paid for by the Electricity Commission as part of the contract. Senior ofcials of the Electricity Commission inform Company A that they want to inspect the facilitiand ensure that the training is working well. Company A pays for the airfare, hotel, and transportation for the

es

(contd)


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Electricity Commission senior ofcials to travel to Michigan to inspect Company As facilities. Because it is a lengthyinternational ight, Company A agrees to pay for business class airfare, to which its own employees are entitledfor lengthy ights. The foreign ofcials visit Michigan for several days, during which the senior ofcials perform anappropriate inspection. Company A executives take the ofcials to a moderately priced dinner, a baseball game,and a play. Do any of these actions violate the FCPA?

No. Neither the costs associated with training the employees nor the trip for the senior ofcials to the Companysfacilities in order to inspect them violates the FCPA. Reasonable and bona de promotional expenditures do not violatethe FCPA. Here, Company A is providing training to the Electricity Commissions employees and is hosting the ElectricityCommission senior ofcials. Their review of the execution and performance of the contract is a legitimate business purpose.Even the provision of business class airfare is reasonable under the circumstances, as are the meals and entertainment,which are only a small component of the business trip.

Would this analysis be different if Company A instead paid for the senior ofcials to travel rst-class with theirspouses for an all-expenses-paid, week-long trip to Las Vegas, where Company A has no facilities?

Yes. This conduct almost certainly violates the FCPA because it evinces a corrupt intent. Here, the trip does not appear

to be designed for any legitimate business purpose, is extravagant, includes expenses for the ofcials spouses, and thereforeappears to be designed to corruptly curry favor with the foreign government ofcials. Moreover, if the trip were booked as alegitimate business expensesuch as the provision of training at its facilitiesCompany A would also be in violation of theFCPAs accounting provisions. Furthermore, this conduct suggests deciencies in Company As internal controls.

Company As contract with the Electricity Commission is going to expire, and the Electricity Commission isoffering the next contract through its tender process. An employee of the Electricity Commission contactsCompany A and offers to provide Company A with condential, non-public bid information from Company Ascompetitors if Company A will pay for a vacation to Paris for him and his girlfriend. Employees of Company Aaccede to the ofcials request, pay for the vacation, receive the condential bid information, and yet still do notwin the contract. Has Company A violated the FCPA?

Yes. Company A has provided things of value to a foreign ofcial for the purpose of inducing the ofcial to misuse

his ofce and to gain an improper advantage. It does not matter that it was the foreign ofcial who rst suggested theillegal conduct or that Company A ultimately was not successful in winning the contract. This conduct would also violatethe FCPAs accounting provisions if the trip were booked as a legitimate business expense and suggests deciencies inCompany As internal controls.


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also were not in compliance with the companys internal policies, which provided that charitable donations gener-ally should be made to healthcare institutions and relate tothe practice o medicine.102

Proper due diligence and controls are critical orcharitable giving. In general, the adequacy o measurestaken to prevent misuse o charitable donations will dependon a risk-based analysis and the specic acts at hand. InOpinion Procedure Release No. 10-02, DOJ described thedue diligence and controls that can minimize the likelihoodo an FCPA violation. In that matter, a Eurasian-based sub-sidiary o a U.S. non-governmental organization was askedby an agency o a oreign government to make a grant toa local micronance institution (MFI) as a prerequisite tothe subsidiarys trans ormation to bank status. Te subsid-iary proposed contributing $1.42 million to a local MFI tosatis y the request. Te subsidiary undertook an extensive,three-stage due diligence process to select the proposedgrantee and imposed signicant controls on the proposedgrant, including ongoing monitoring and auditing, ear-marking unds or capacity building, prohibiting compen-sation o board members, and implementing anti-corrup-tion compliance provisions. DOJ explained that it would

not take any en orcement action because the companys duediligence and the controls it planned to put in place sufficedto prevent an FCPA violation.

Other opinion releases also address charitable-typegrants or donations. Under the acts presented in thosereleases, DOJ approved the proposed grant or donation,103 based on due diligence measures and controls such as:

certications by the recipient regarding compliance with the FCPA;104

due diligence to conrm that none o the recipientsofficers were affiliated with the oreign governmentat issue;105

a requirement that the recipient provide auditednancial statements;106

a written agreement with the recipient restrictingthe use o unds;107

steps to ensure that the unds were trans erred to a valid bank account;108

Five Questions to Consider When MakingCharitable Payments in a Foreign Country:

1. What is the purpose of the payment?

2. Is the payment consistent with the companysinternal guidelines on charitable giving?

3. Is the payment at the request of a foreign ofcial?

4. Is a foreign ofcial associated with the charityand, if so, can the foreign ofcial make decisionsregarding your business in that country?

5. Is the payment conditioned upon receivingbusiness or other benets?

conrmation that the charitys commitments weremet be ore unds were disbursed;109 and

on-going monitoring o the efficacy o the program.110

Legitimate charitable giving does not violate theFCPA. Compliance with the FCPA merely requires thatcharitable giving not be used as a vehicle to conceal pay-ments made to corruptly inuence oreign officials.

Who Is a Foreign Ofcial?Te FCPAs anti-bribery provisions apply to corrupt

payments made to (1) any oreign official; (2) any oreign political party or official thereo ; (3) any candidate or

oreign political office; or (4) any person, while knowingthat all or a portion o the payment will be offered, given, or promised to an individual alling within one o these threecategories.111 Although the statute distinguishes between a oreign official, oreign political party or official thereo ,and candidate or oreign political office, the term or-eign official in this guide generally re ers to an individual

alling within any o these three categories.Te FCPA denes oreign official to include:

any officer or employee o a oreign government orany department, agency, or instrumentality thereo ,


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or o a public international organization, or any per-son acting in an official capacity or or on behal oany such government or department, agency, or in-strumentality, or or or on behal o any such publicinternational organization.112

As this language makes clear, the FCPA broadlyapplies to corrupt payments to any officer or employeeo a oreign government and to those acting on the or-eign governments behal .113 Te FCPA thus covers cor-rupt payments to low-ranking employees and high-levelofficials alike.114

Te FCPA prohibits payments to oreignofficials, notto oreign go ernments.115 Tat said, companies contem- plating contributions or donations to oreign governmentsshould take steps to ensure that no monies are used or cor-rupt purposes, such as the personal benet o individual

oreign officials.

Department, Agency, or Instrumentality of a

Foreign Government

Foreign officials under the FCPA include officersor employees o a department, agency, or instrumental-ity o a oreign government. When a oreign government

is organized in a ashion similar to the U.S. system, whatconstitutes a government department or agency is typicallyclear (e.g., a ministry o energy, national security agency, ortransportation authority).116 However, governments can beorganized in very different ways.117 Many operate throughstate-owned and state-controlled entities, particularly insuch areas as aerospace and de ense manu acturing, bank-ing and nance, healthcare and li e sciences, energy andextractive industries, telecommunications, and transporta-tion.118 By including officers or employees o agencies andinstrumentalities within the denition o oreign official,the FCPA accounts or this variability.

Te term instrumentality is broad and can includestate-owned or state-controlled entities. Whether a particu-lar entity constitutes an instrumentality under the FCPArequires a act-specic analysis o an entitys ownership,control, status, and unction.119 A number o courts haveapproved nal jury instructions providing a non-exclusive

list o actors to be considered: the oreign states extent o ownership o the entit the oreign states degree o control over the entity

(including whether key officers and directors othe entity are, or are appointed by, governmentofficials);

the oreign states characterization o the entity andits employees;

the circumstances surrounding the entitys creation; the purpose o the entitys activities; the entitys obligations and privileges under the

oreign states law; the exclusive or controlling power vested in the

entity to administer its designated unctions; the level o nancial support by the oreign

state (including subsidies, special tax treatment,government-mandated ees, and loans);

the entitys provision o services to the jurisdictionresidents;

whether the governmental end or purpose soughtto be achieved is expressed in the policies o the

oreign government; and the general perception that the entity is per orming

official or governmental unctions.120

Companies should consider these actors when evauating the risk o FCPA violations and designing complance programs.

DOJ and SEC have pursued cases involving instrumentalities since the time o the FCPAs enactment andhave long used an analysis o ownership, control, statuand unction to determine whether a particular entity ian agency or instrumentality o a oreign governmenFor example, the second-ever FCPA case charged by DOinvolved a Cali ornia company that paid bribes throughMexican corporation to two executives o a state-owne


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companies should be aware o the risks involved in engag-ing third-party agents or intermediaries. Te act that abribe is paid by a third party does not eliminate the poten-tial or criminal or civil FCPA liability.131

For instance, a our-company joint venture usedtwo agentsa British lawyer and a Japanese tradingcompanyto bribe Nigerian government o icials inorder to win a series o lique ied natural gas construc-tion projects.132 ogether, the our multi-national corporations and the Japanese trading company paid acombined $1.7 billion in civil and criminal sanctions

or their decade-long bribery scheme. In addition, thesubsidiary o one o the companies pleaded guilty and anumber o individuals, including the British lawyer andthe ormer CEO o one o the companies subsidiaries,received signi icant prison terms.

Similarly, a medical device manu acturer entered intoa de erred prosecution agreement as the result o corrupt payments it authorized its local Chinese distributor to payto Chinese officials.133 Another company, a manu acturero specialty chemicals, committed multiple FCPA viola-tions through its agents in Iraq: a Canadian national andthe Canadians companies. Among other acts, the Canadian

national paid and promised to pay more than $1.5 millionin bribes to officials o the Iraqi Ministry o Oil to securesales o a uel additive. Both the company and the Canadiannational pleaded guilty to criminal charges and resolvedcivil en orcement actions by SEC. 134

In another case, the U.S. subsidiary o a Swiss reightorwarding company was charged with paying bribes on

behal o its customers in several countries.135 Although theU.S. subsidiary was not an issuer under the FCPA, it was anagent o several U.S. issuers and was thus charged directly with violating the FCPA. Charges against the reight or- warding company and seven o its customers resulted inover $236.5 million in sanctions.136

Because Congress anticipated the use o third-partyagents in bribery schemes or example, to avoid actualknowledge o a bribeit dened the term knowing in a way that prevents individuals and businesses rom avoidingliability by putting any person between themselves and

the oreign officials.137 Under the FCPA, a persons state omind is knowing with respect to conduct, a circumstancor a result i the person:

is aware that [he] is engaging in such conduct,that such circumstance exists, or that such result issubstantially certain to occur; or

has a rm belie that such circumstance exists orthat such result is substantially certain to occur.138

Tus, a person has the requisite knowledge when he isaware o a high probability o the existence o such circstance, unless the person actually believes that such circumstance does not exist.139 As Congress made clear, it meant toimpose liability not only on those with actual knowledgo wrongdoing, but also on those who purpose ully avoactual knowledge:

[ ]he so-called head-in-the-sand problemvari-ously described in the pertinent authorities as con-scious disregard, will ul blindness or deliberateignoranceshould be covered so that managementofficials could not take re uge rom the Acts prohi-bitions by their unwarranted obliviousness to anyaction (or inaction), language or other signaling device that should reasonably alert them o the high probability o an FCPA violation.140

Common red ags associated with third parties include excessive commissions to third-party agents or

consultants; unreasonably large discounts to third-party

distributors; third-party consulting agreements that include

only vaguely described services; the third-party consultant is in a different line o

business than that or which it has been engaged; the third party is related to or closely associated

with the oreign official;


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whether a particular expenditure is appropriate or may ris violating the FCPA:

Do not select the particular officials who will par-ticipate in the partys proposed trip or program147 or else select them based on pre-determined, merit-based criteria.148

Pay all costs directly to travel and lodging vendorsand/or reimburse costs only upon presentation o areceipt.149

Do not advance unds or pay or reimbursementsin cash.150

Ensure that any stipends are reasonable approxima-tions o costs likely to be incurred151 and/or thatexpenses are limited to those that are necessary andreasonable.152

Ensure the expenditures are transparent,both within the company and to the oreign

government.153 Do not condition payment o expenses on any

action by the oreign official.154

Obtain written conrmation that payment o theexpenses is not contrary to local law.155

Provide no additional compensation, stipends, orspending money beyond what is necessary to pay

or actual expenses incurred.156 Ensure that costs and expenses on behal o the

oreign officials will be accurately recorded in thecompanys books and records.157

In sum, while certain expenditures are more likely toraise red ags, they will not give rise to prosecution i thare (1) reasonable, (2) bona de, and (3) directly relateto (4) the promotion, demonstration, or explanation o products or services or the execution or per ormance a contract.158

disclose bribe payments to the authorities o criminal liabil-ity did not make the bribes legal.143

Reasonable and Bona Fide Expenditures

Te FCPA allows companies to provide reasonableand bona de travel and lodging expenses to a oreignofficial, and it is an affirmative de ense where expensesare directly related to the promotion, demonstration, orexplanation o a companys products or services, or arerelated to a companys execution or per ormance o a con-tract with a oreign government or agency.144 rips thatare primarily or personal entertainment purposes, how-ever, are not bona de business expenses and may violatethe FCPAs anti-bribery provisions.145 Moreover, whenexpenditures, bona de or not, are mischaracterized in acompanys books and records, or where unauthorized orimproper expenditures occur due to a ailure to imple-ment adequate internal controls, they may also violatethe FCPAs accounting provisions. Purpose ul mischarac-terization o expenditures may also, o course, indicate acorrupt intent.

DOJ and SEC have consistently recognized that busi-nesses, both oreign and domestic, are permitted to pay or

reasonable expenses associated with the promotion o their products and services or the execution o existing contracts.In addition, DOJ has requently provided guidance aboutlegitimate promotional and contract-related expensesaddressing travel and lodging expenses in particularthrough several opinion procedure releases. Under the cir-cumstances presented in those releases,146 DOJ opined thatthe ollowing types o expenditures on behal o oreignofficials did not warrant FCPA en orcement action:

travel and expenses to visit company acilities oroperations;

travel and expenses or training; and product demonstration or promotional activities,

including travel and expenses or meetings. Whether any particular payment is a bona de expen-

diture necessarily requires a act-specic analysis. But theollowing non-exhaustive list o sa eguards, compiled rom

several releases, may be help ul to businesses in evaluating


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What Are Facilitating or ExpeditingPayments?

Te FCPAs bribery prohibition contains a narrowexception or acilitating or expediting payments made in

urtherance o routine governmental action.159 Te acili-tating payments exception applies only when a payment ismade to urther routine governmental action that involvesnon-discretionary acts.160 Examples o routine governmen-tal action include processing visas, providing police pro-tection or mail service, and supplying utilities like phoneservice, power, and water. Routine government action doesnot include a decision to award new business or to continuebusiness with a particular party.161 Nor does it include acts

that are within an officials discretion or that would consti-tute misuse o an officials office.162 Tus, paying an official asmall amount to have the power turned on at a actory mightbe a acilitating payment; paying an inspector to ignore the

act that the company does not have a valid permit to operatethe actory would not be a acilitating payment.

Whether a payment alls within the exception is notdependent on the size o the payment, though size can betelling, as a large payment is more suggestive o corruptintent to inuence a non-routine governmental action. But,

like the FCPAs anti-bribery provisions more generally, theacilitating payments exception ocuses on the purpose o the

payment rather than its value. For instance, an Oklahoma-based corporation violated the FCPA when its subsidiary paid Argentine customs officials approximately $166,000to secure customs clearance or equipment and materialsthat lacked required certications or could not be importedunder local law and to pay a lower-than-applicable dutyrate. Te companys Venezuelan subsidiary had also paidVenezuelan customs officials approximately $7,000 to permitthe importation and exportation o equipment and materialsnot in compliance with local regulations and to avoid a ullinspection o the imported goods.163 In another case, threesubsidiaries o a global supplier o oil drilling products andservices were criminally charged with authorizing an agent tomake at least 378 corrupt payments (totaling approximately$2.1 million) to Nigerian Customs Service officials or pre -erential treatment during the customs process, including thereduction or elimination o customs duties.164

Labeling a bribe as a acilitating payment in a companys books and records does not make it one. A Swissoffshore drilling company, or example, recorded pay-ments to its customs agent in the subsidiarys acilitat-ing payment account, even though company personnelbelieved the payments were, in act, bribes. Te company was charged with violating both the FCPAs anti-briberyand accounting provisions.165

Although true acilitating payments are not ille-gal under the FCPA, they may still violate local law in thecountries where the company is operating, and the OECDs Working Group on Bribery recommends that all countriesencourage companies to prohibit or discourage acilitating payments, which the United States has done regularly.166 In addition, other countries oreign bribery laws, such asthe United Kingdoms, may not contain an exception or

acilitating payments.167 Individuals and companies shouldthere ore be aware that although true acilitating payments

Examples of Routine Governmental Action

An action which is ordinarily and commonlyperformed by a foreign ofcial in

obtaining permits, licenses, or other ofcialdocuments to qualify a person to do business in aforeign country;

processing governmental papers, such as visas andwork orders;

providing police protection, mail pickup anddelivery, or scheduling inspections associated withcontract performance or inspections related totransit of goods across country;

providing phone service, power and water supply,loading and unloading cargo, or protectingperishable products or commodities fromdeterioration; or

actions of a similar nature.


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the president as a member o its senior management in itsannual ling with SEC and in annual reports. Additionally,the parents legal department approved the retention o thethird-party agent through whom the bribes were arranged

despite a lack o documented due diligence and an agencyagreement that violated corporate policy; also, an official othe parent approved one o the payments to the third-partyagent.181 Under these circumstances, the parent companyhad sufficient knowledge and control o its subsidiarysactions to be liable under the FCPA.

Successor Liability

Companies acquire a host o liabilities when theymerge with or acquire another company, including those aris-ing out o contracts, torts, regulations, and statutes. As a gen-eral legal matter, when a company merges with or acquiresanother company, the successor company assumes the prede-cessor companys liabilities.182 Successor liability is an integralcomponent o corporate law and, among other things, prevents companies rom avoiding liability by reorganizing.183 Successor liability applies to all kinds o civil and criminalliabilities,184 and FCPA violations are no exception. Whethersuccessor liability applies to a particular corporate transac-

tion depends on the acts and the applicable state, ederal,and oreign law. Successor liability does not, however, createliability where none existed be ore. For example, i an issuer were to acquire a oreign company that was not previouslysubject to the FCPAs jurisdiction, the mere acquisition othat oreign company would not retroactively create FCPAliability or the acquiring issuer.

DOJ and SEC encourage companies to conduct pre-acquisition due diligence and improve compliance pro-grams and internal controls afer acquisition or a varietyo reasons. First, due diligence helps an acquiring companyto accurately value the target company. Contracts obtainedthrough bribes may be legally unen orceable, businessobtained illegally may be lost when bribe payments arestopped, there may be liability or prior illegal conduct, andthe prior corrupt acts may harm the acquiring companysreputation and uture business prospects. Identi ying theseissues be ore an acquisition allows companies to better

evaluate any potential post-acquisition liability and thu properly assess the targets value.185 Second, due diligencereduces the risk that the acquired company will continue to pay bribes. Proper pre-acquisition due diligence can identi y business and regional risks and can also lay the ountion or a swif and success ul post-acquisition integratiointo the acquiring companys corporate control and com pliance environment. Tird, the consequences o potential violations uncovered through due diligence can be handleby the parties in an orderly and efficient manner throughnegotiation o the costs and responsibilities or the invetigation and remediation. Finally, comprehensive due diligence demonstrates a genuine commitment to uncoveringand preventing FCPA violations.

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