Investigating and Prosecuting Transnational Corruption and Bribery

November 16, 2016

Kevin Feldis U.S. Department of Justice Resident Legal Advisor U.S. Embassy, Jakarta

FCPA Overview

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Foreign Bribery Was Made Illegal

in the United States in 1977

Foreign Corrupt

Practices Act

(“FCPA”)

FCPA Overview

Anti-bribery provisions:

• Prohibit payment, offer of payment, or authorization of payment of

bribes, directly or indirectly, to foreign officials, foreign parties,

foreign party officials, and foreign candidates for public office

Accounting provisions:

• Books and Records: make and keep books, records, and accounts,

which, in reasonable detail, accurately and fairly reflect the

transactions and dispositions of the assets of the issuer; and

• Internal Controls: devise and maintain a system of internal

accounting controls

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FCPA Overview

Criminal and Civil Enforcement

Justice Department - Criminal and civil enforcement authority

• Criminal enforcement authority over issuers, domestic

concerns, and foreign persons and entities (acting within the

territory of the U.S.)

• Civil (anti-bribery) enforcement authority over persons and

non-issuers subject to the FCPA

Securities and Exchange Commission - Civil enforcement authority

• Civil enforcement authority over issuers (and their officers,

employees, etc.) only

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FCPA Overview

“Put simply corruption undermines the promise of democracy.

It imperils development, stability, and faith in our markets.

And it weakens the rule of law.”

− U.S. Attorney General Eric Holder, May 2010

• No matter where or how it happens or what it is

called, bribery has the same corrosive effect:

− Weakened economic development

− Lost confidence in the marketplace

− Imperils political stability

− Unfair and distorted competition

− Undermines U.S. interests abroad

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FCPA Overview

The Foreign Corrupt Practices Act (FCPA)

• Prohibits U.S. and certain foreign persons and companies from:

• Paying or promising to pay anything of value;

• To foreign officials, foreign political parties (or officers

thereof) or candidates for foreign office;

• For the purposes of:

• Influencing any act or decision of the official in his/her

official capacity;

• Inducing the official to take any action or refrain from

taking any action in violation of his/her lawful duty;

• Obtaining any improper advantage; or

• Inducing the official to use his/her influence to affect or

influence any act of a government;

• In order to assist the company in obtaining or retaining

business or directing business to any person.

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FCPA Overview

Anything of Value…

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FCPA Overview

Directly and Indirectly…

• Third party agents or consultants

• Intermediaries

• Hiring a company “owned” by a relative of the officials

• You do not need to know what actually happens to the

money to violate the FCPA

• It makes no difference if the third party agent does not pass a single

penny on to the official

• The FCPA does not require that a corrupt act succeed in its purpose

• “Willful blindness”

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FCPA Overview

To Obtain or Retain Business…

• Payments made for specific contracts

• To secure a successful bid

• To extend an existing contract

• Payments that may indirectly relate to obtaining business

• Payments that “provide an unfair advantage over competitors” –

U.S. v. Kay, 359 F.3d 738, 749 (5th Cir. 2004)

• Examples: Tax benefits, customs clearance

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FCPA Overview

Exceptions and Defenses…

• Exception for Routine Government Action (facilitation payments):

• Small payments to secure, facilitate or expedite routine government action;

• Applies only to government action to which a company is already entitled

without the exercise of discretion by a foreign official;

• Does not apply to small payments to avoid otherwise applicable requirements.

• Affirmative Defenses:

• Reasonable and bona fide expenditures that are directly related to:

• Promotion, demonstration or explanation of products;

• Execution or performance of a contract;

• Testing equipment; training; visiting the plant where product is

manufactured for a demonstration

• Payments, gifts and offers that are legal under the written laws and regulations

of the official’s country 10

The Foreign Corrupt Practices Act

Accounting Provisions

• Public companies must “make and keep books,

records and accounts” which “accurately and fairly

reflect the transactions and dispositions of the assets of

the issuer”

• Public companies must “devise and maintain a system

of internal accounting controls” that provide reasonable

assurances that the transactions are properly

authorized

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FCPA Overview

FCPA Enforcement

• Origins of FCPA Investigations:

• Corporate voluntary self disclosures

• Mergers and acquisitions

• Undercover investigations

• Whistleblowers

• Foreign law enforcement partners

• Tips from U.S. embassies / Anonymous tips

• Pro-active investigations on other matters

• Data analysis (bank records / SARs)

• Media reports

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FCPA Enforcement: Investigative Tools

• Subpoenas

• Search warrants

• MLATs

• Interviews

• Confidential informants

• Cooperating defendants

• Wire taps

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FCPA Enforcement: Cooperation

• Increasing Methods of International Cooperation

• Formal evidence requests by treaty

• Multilateral Organizations (OECD, UNCAC, Eurojust)

• Informal Intelligence Sharing

• Parallel Investigations and Prosecutions

• Division of wrongful conduct / defendants

• Referrals of Investigations

• US referral of entire investigation

• US referral of foreign public officials

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FCPA Voluntary Disclosure Program

• DOJ Pilot Program for Voluntary Disclosures:

• Company must voluntarily self-disclose

• Must provide full cooperation

• Must remediate the harm done

If Voluntary Disclosure requirements are all satisfied:

• Up to 50% penalty fine/reduction

• No post conviction monitoring will be required

• Potential for non-prosecution agreement

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