January 22, 2013
In November 2012 the Department of Justice and the Securities and Exchange Commission issued a 120-page “resource guide” to the U.S. Foreign Corrupt Practices Act. The guide is important and useful for companies doing business outside the U.S. because it clarifies how the government determines when to hold an employer responsible for FCPA violations.
The FCPA, enacted in 1977, prohibits private as well as public companies and their employees and agents from offering or giving “anything of value” to any foreign official or public sector employee “corruptly” to obtain or retain business.
FCPA violations can result in significant civil and criminal liability—multiple years of jail time for individuals and fines of multiple millions of dollars for individuals and companies.
And the Dodd-Frank Act passed in 2010 provides that any public company whistleblower who reports an FCPA violation that leads to sanctions of over $1 million is entitled to 10-30 percent of the amount of the sanctions.
Given the high stakes, compliance is essential for any employer doing business overseas.
The new resource guide gives examples of violations the government may investigate and suggestions for steps companies can take to help avoid liability. It discusses gift-giving at length, addressing when charitable contributions, as well as travel and entertainment provided to foreign officials, amount to a bribe.
It also discusses when an employee of a state-owned or state-controlled enterprise (many foreign banks and companies in the energy, telecommunications, and transportation sectors, among others, are often state-owned or state-controlled) is considered a “foreign official” for purposes of the law, listing a series of factors to be considered. In addition, the guide discusses what the government expects to see in written FCPA corporate compliance programs—it even lists and explains what it calls the “Hallmarks of Effective Compliance Programs.”
In sum, the resource guide is an essential tool for reviewing and improving FCPA compliance programs.