Federal Foreign Corrupt Practices Act – 15 U.S.C. 78dd-1
The federal Foreign Corrupt Practices Act, codified in 15 U.S.C. 78dd-1 is an anti-bribery and anti-kickback law that provides criminal penalties for individuals and business entities who engage in foreign corruption.
At its most basic level, the Foreign Corrupt Practices Act, or FCPA, is designed to punish those who bribe foreign officials to obtain favorable governmental actions from foreign governments. This federal statute is defined under 15 U.S.C. 78dd-1.
In the paradigmatic example, an executive from an American company might bribe a foreign cabinet minister to encourage the minister to have their government provide the American company with a favorable government contract.
To support this primary purpose, the FCPA also contains accounting practices requirements which are intended to prevent mischaracterization or covering-up of bribe payments.
Foreign Corrupt Practices Act penalties can be harsh. This statute was passed in 1977 mainly to prevent U.S. corporations from bribing foreign officials. The FCPA makes it illegal for any individual or business to give money or something of value to a foreign government official for the purpose of obtaining or retaining business for directing business to the individual or business.
The FCPA also sets requirements for record-keeping and internal accounting controls at corporations that are publicly traded on U.S. securities exchanges.
To give readers a better understanding of the Foreign Corrupt Practices Act, our federal criminal defense attorneys are providing an overview below.
Who Applies for FCPA Prosecution?
Aggressive enforcement of the Foreign Corrupt Practices Act (FCPA) has become a priority for both the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC).
Civil and criminal penalties for FCPA violations has continue to grow over the past few years. Also, the DOJ has demonstrated an increasing willingness to criminally prosecute individuals for an FCPA violation.
The FCPA applies to U.S. citizens and business entities owned by U.S. citizens as well as to foreign-owned businesses who act in furtherance of a scheme to make corrupt bribe payments within the territory of the United States.
It also applies to foreign issuers of securities or other financial instruments which are required to register with the United States Securities and Exchange Commission, or SEC. It is also important to note that the FCPA applies to corrupt conduct which occurs anywhere in the world, not just in the territory of the United States.
The FCPA additionally provides for both entity liability and personal liability, meaning the officers, managers, directors, stockholders, employees, agents, and anyone else working as part of a business entity engaged in illegal bribe practices can be personally charged, even if working at the direction of higher-ups in the company.
What is a Bribe Under the Foreign Corrupt Practices Act?
In general, a bribe is a payment made to a government official to secure some form of favorable government treatment. However, the FCPA does recognize that the realities of doing business in certain foreign countries requires habitual low-level payments to low-ranking government officials.
The paradigmatic example is a small monetary bribe that must be paid to a file clerk in a certain government department before the clerk will agree to do their job and stamp a properly filed application or other document.
These “routine” payments are specifically exempted from the FCPA’s criminal provisions; despite being fairly characterized as bribes.
This exemption is narrowly drawn, however. It applies only to routine, low-level payments, made to facilitate non-discretionary governmental activities.
If the bribe is intended to induce any discretionary benefit or decision from a government official, it will still be covered by the Foreign Corrupt Practices Act.
What are the Penalties for an FCPA Violation?
FCPA violations are serious federal crimes. The maximum penalty per violation of the FCPA’s anti-bribery provisions is five years in federal prison, a $250,000 fine or twice the gross financial gain or loss resulting from the bribe payment, a $10,000 civil assessment, or all of those punishments.
Violation of the FCPA’s anti-corrupt bookkeeping provisions carry even harsher penalties, potentially resulting in a 20-year sentence in federal prison if found guilty.
Criminal charges are more likely to be pursued against an individual. FCPA investigations don’t typically result in criminal charges being pursued against a corporation. Rather, the corporation and government will normally reach a settlement agreement before any court action is taken.
This is known as a non-prosecution or deferred prosecution where a corporation will admit to FCPA violations and make an agreement to change its policies.
Fighting Foreign Corrupt Practices Act Cases
Several defenses are common in FCPA cases. First, as discussed above, there is a limited exception for routine “facilitating” payments to low-ranking foreign officials.
The defendant may argue that what the government has characterized as a bribe was in fact a minimum facilitating payment required to secure non-discretionary government action such as approval of an otherwise legitimate application within the foreign country. Again, this is a narrow exception.
Second, an individual or entity charged under the FCPA may argue that the payments in question were bona fide business expenses.
In some cases, paying for lodging, meals, etc. for foreign government officials is a legitimate way to market a business or seek to make a contract with the foreign state rather than an out-and-out bribe of the official him or herself.
Whether or not this defense will be successful depends on the particular facts of the case and on the adequacy of internal controls within the defendant entity to ensure that payments are being made for legitimate business reasons and not simply as bribes to secure favorable government action.
If you or a family member has been charged under the FCPA’s anti-bribery or accounting provisions under 15 U.S.C. 78dd-1, contact our experienced federal criminal defense attorneys for an initial consultation.
Even pre-indictment, our attorneys can work to protect your rights and begin negotiating with the government to potentially avoid the harsh consequences of an FCPA conviction.
Through a prefiling intervention, a much more favorable resolution may be reached with the government which may not be available if the defendant waits to take action until after they have been indicted or arrested.
Eisner Gorin LLP is a nationally recognized criminal defense law firm that represents clients nationwide against any type of federal offense. We are located at 1875 Century Park E #705, Los Angeles, CA 90067. We also have an office located in the San Fernando Valley area of Los Angeles County located at 14401 Sylvan St #112 Van Nuys, CA 91401. Contact us for a consultation at 877-781-1570.