Foreign Corrupt Practices Act

The Foreign Corrupt Practices Act of 1977 (15 U.S.C. §§ 78dd-1, et seq.) is a United States federal law known primarily for two of its main provisions, one that addresses accounting transparency requirements under the Securities Exchange Act of 1934 and another concerning bribery of foreign officials.

Provisions and scope

The antibribery provisions of the FCPA prohibits:

Issuers, domestic concerns, and any person from making use of interstate commerce corruptly, in furtherance of an offer or payment of anything of value to a foreign official, foreign political party, or candidate for political office, for the purpose of influencing any act of that foreign official in violation of the duty of that official or to secure any improper advantage in order to obtain or retain business.

Persons subject to the FCPA

Issuers - Includes any U.S. or foreign corporation that has a class of securities registered, or that is required to file reports, under the Securities and Exchange Act of 1934

Domestic concerns - Refers to any individual who is a citizen, national, or resident of the United States and any corporation and other business entity organized under the laws of the United States or having its principal place of business in the United States

Any person - Covers both enterprises and individuals

History

As a result of U.S. Securities and Exchange Commission investigations in the mid-1970s, over 400 U.S. companies admitted making questionable or illegal payments in excess of $300 million to foreign government officials, politicians, and political parties. The abuses ran the gamut from bribery of high foreign officials to secure some type of favorable action by a foreign government to so-called facilitating payments that were made to ensure that government functionaries discharged certain ministerial or clerical duties. One major example was the Lockheed bribery scandals, in which officials of aerospace company Lockheed paid foreign officials to favor their company's products. [Rich, Ben R. and Janos, Leo. "Skunk Works: A Personal Memoir of My Years at Lockheed". New York: Little Brown & Co., 1994, p. 10. ISBN 0-75151-503-5.] Congress enacted the FCPA to bring a halt to the bribery of foreign officials and to restore public confidence in the integrity of the American business system. [http://usinfo.state.gov/journals/ites/1198/ijee/factfcpa.htm "FCPA Antibribery Provisions"] , an excerpt from an USDoC brochure]

The Act was signed into law by President Jimmy Carter on December 19, 1977, and amended in 1998 by the International Anti-Bribery Act of 1998 which was designed to implement the antibribery conventions of the Organisation for Economic Co-operation and Development.

The antibribery provisions of the FCPA make it unlawful for a U.S. person, and certain foreign issuers of securities, to make a payment to a foreign official for the purpose of obtaining or retaining business for or with, or directing business to, any person. Since 1998, they also apply to foreign firms and persons who take any act in furtherance of such a corrupt payment while in the United States. The meaning of foreign official is broad. For example, an owner of a bank who is also the minister of finance would count as a foreign official according to the U.S. government. Doctors at government-owned or managed hospitals are also considered to be foreign officials under the FCPA, as is anyone working for a government-owned or managed institution or enterprise. Employees of international organizations such as the United Nations are also considered to be foreign officials under the FCPA. There is no materiality to this act, making it illegal to offer anything of value as a bribe, including cash or non-cash items. The government focuses on the intent of the bribery rather than on the amount.

The FCPA also requires companies whose securities are listed in the United States to meet its accounting provisions. See 15 U.S.C. § 78m. These accounting provisions, which were designed to operate in tandem with the antibribery provisions of the FCPA, require corporations covered by the provisions to make and keep books and records that accurately and fairly reflect the transactions of the corporation and to devise and maintain an adequate system of internal accounting controls.

Regarding payments to foreign officials, the act draws a distinction between bribery and facilitation or "grease payments", which may be permissible under the FCPA but may still violate local laws. The primary distinction is that grease payments are made to an official to expedite his performance of the duties he is already bound to perform. Payments to foreign officials may be legal under the FCPA if the payments are permitted under the written laws of the host country. Certain payments or reimbursements relating to product promotion may also be permitted under the FCPA.

Notable cases of the application of FCPA are with Lucent Technologies and Invision Technologies.

ee also

*Convention against Corruption
*Politically exposed person

References

External links

* [http://www.usdoj.gov/criminal/fraud/fcpa/ US Department of Justice page on the FCPA] , including a [http://www.usdoj.gov/criminal/fraud/docs/dojdocb.html lay person's guide]
* [http://www.asiaing.com/sec-v.-lucent-technologies-inc.-for-bribery-in-china.html SEC v. Lucent Technologies Inc., For Bribery in China]
* [http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2003/04/07/MN278797.DTL Indictments allege bribes were paid for Kazakstan oil 2 Americans accused -- but not U.S. firms, by Marlena Telvick, April 2003]
* [http://www.cfo.com/article.cfm/3013085?f=related Lucent fires four executives in China over allegations of bribery]
* [http://www.bribeline.org Report requests for bribes on BRIBEline]
* [http://www.fas.org/irp/crs/Crsfcpa.htm Foreign Corrupt Practices Act] , a CRS Report to U.S. Congress