WHAT IS THE FCPA? 1. A Federal Law that: • Prohibits the offer or payment of anything of value to “foreign officials” to “obtain or retain business” • Imposes certain recordkeeping requirements on issuers and subsidiaries: • Books and records must, in reasonable detail, accurately reflect the transaction • Internal controls must provide reasonable assurances that transactions are authorized, and assets are kept track of and protected 2. These components are referred to as the bribery and accounting provisions
WHO IS COVERED? • Issuers • Domestic concerns • Foreign firms and nationals that directly or indirectly cause an act in furtherance of the bribe to take place in the U.S. • Anyone acting as an intermediary for a covered person • Accounting provisions apply only to issuers and entities they control
“DOMESTIC CONCERN” U.S. citizens, nationals and residents, any U.S. corporation, or any other legal entity having its principal place of business in the U.S.
“FOREIGN OFFICIALS” • Government officials • Agencies and state owned or state controlled entities and their employees, e.g., hospitals, communications firms, steel firms • Public international organizations, e.g., UN, IMF, Red Cross • Relatives/advisors/consultants/candidates/ political parties • Joint ventures in which “foreign officials” participate
BUSINESS NEXUS(“obtaining or retaining business”) • Broadly interpreted • Can include a reduction of taxes, custom duties, sales taxes • Lower costs of doing business enough to have a sufficient nexus to garner business • “American Rice” case, United States v. Kay, 359 F.3d 738 (5th Cir. 2004)
EXAMPLES • Schering-Plough – Its Polish subsidiary made payments to a Polish charitable organization whose head was the director of a Polish governmental body that provided funds to, and influenced the purchase of drugs by, Polish hospitals. • EDS – Two firms partially owned by the Indian Government retained a second-level Indian subsidiary of EDS for management consulting services. The subsidiary paid bribes to employees of the partially owned Indian companies to retain the business.
EXCEPTIONS / DEFENSES • “Grease Payments” – for routine government actions – licenses, permits • Payment is legal under written law of foreign country – statutes, regulations, written decisional law • Reasonable and bona fide expenditure relating to promotion of products or services or the execution or performance of contract
CONSEQUENCES • Incarceration – up to 5 years • Fines • Disgorgement of benefits • Debarment • Independent Monitors – Compliance Programs • Employees, officers and directors may not be indemnified • Successor liability • SEC / IRS issues • SOX Issues – 302 and 404
RISK AREAS • Foreign business • High risk countries • Business contacts with entities in which relatives or political associates of Government officials are employed or have an ownership interest • Negative background information • High commissions / consulting payments • Cash payments • Convoluted payments
DOJ EXPECTATIONS • Covered firms should have compliance programs • Training • Audits of risk areas • Clearly announced policy including disciplinary measures • Due diligence re consultants, agents, business partners acting outside U.S. • Self-reporting
AVAILABLE RESOURCES • DOJ Opinions – advisory opinions from DOJ within 30 days of request • Transparency.org – web site offers information re current FCPA issues and risk regions and industries • OECD – multinational organization that prompted the 1998 amendments to the FCPA and publishes information concerning FCPA topics • Trace International – offers FCPA-related training, audit and compliance programs • Compliance Programs