Foreign Corrupt Practices Act (FCPA) Terms and Definitions
If you are under investigation for violation of the FCPA, or if you have been criminally charged, you may be confused by certain concepts, definitions, and legal terminology. Even if you are familiar with some aspects of the law, understanding the complexities involved in the anti-bribery and accounting provisions make legal consultation and representation essential. To help with some basic terminology, we have compiled a summary some common concepts and definitions associated with the FCPA.
Understanding the FCPA
Corrupt business practices have occurred throughout history. Through dishonest financial strategies, businesses strive to acquire an unfair advantage over the competition. In 1977, the United States passed a law to regulate business interactions at home and abroad to prohibit the use of bribery of foreign officials and improper accounting practices. Known as the Foreign Corrupt Practices Act, this law allows for heavy civil and criminal penalties against those guilty of such unethical business practices.
The FCPA prohibits the bribery of foreign officials for business gain or a specified political outcome. Such foreign officials may include a number of people working at various ranks within the government or even entities controlled by the government.
- Government agency representative
- International organization representative
- Political party representative
- Political office candidate
- Members of a royal family
- State-owned enterprise employees
- Official of a government-controlled entity
Penalties may also be imposed upon those guilty of bribing private individuals and non-government personnel or entities under the FCPA accounting provisions. Abstaining from unethical business practices is the best way to ensure that your or your business incurs no legal action.
According to FCPA Section 30A(a), it is prohibited for an issuer to make a corrupt “offer, payment, promise to pay, or authorization of the payment of any money, or offer, gift, promise to give, or authorization of the giving of anything of value” to a foreign official.
Foreign officials have a certain level of influence over other people, businesses, and entities. When payments are made to such officials in wrongful exchange for gaining, obtaining, or retaining business, such payments are considered in violation of the FCPA. Unethical exchanges for the purpose of gaining other business advantages, preferential benefits, or privileges are also deemed as violations of the act under the anti-bribery provision.
Anti-bribery provisions under the FCPA account for the fact that bribery may come in many forms and sizes, therefore a violation may include anything of value. While the most obvious form of bribery is the direct exchange of cash, it may also come by various means:
- Superfluous travel expenses
- Expensive gifts (cars, furs, etc.)
- A pattern/recurrence of many “smaller” gifts
- Payment for personal bills and fees unrelated to business
- Contributions to organizations or charities favored by government officials
The FCPA does not specify a minimum value of what constitutes a bribe. The classification of a bribe is based on the corrupt and willful intent behind the gift, not the value of the gift itself.
In order for a business, individual, or other issuer to fall under violation of the FCPA anti-bribery provision, the payment or authorization or promise of payment to a government official must be deemed as corrupt. This means that the intention behind the gift is to persuade the beneficiary to misuse his or her authority, giving unfair business advantage to the issuer.
As the FCPA was accepted by U.S. Congress, a House Report made clarification on this subject (A Resource Guide to the US FCPA, citing the House Report on page 14):
The word “corruptly” is used in order to make clear that the offer, payment, promise, or gift, must be intended to induce the recipient to misuse his official position; for example, wrongfully to direct business to the payor or his client, to obtain preferential legislation or regulations, or to induce a foreign official to fail to perform an official function. The word “corruptly” connotes an evil motive or purpose such as that required under 18 U.S.C. 201(b) which prohibits domestic bribery. As in 18 U.S.C. 201(b), the word “corruptly” indicates an intent or desire wrongfully to influence the recipient. It does not require that the act [be] fully consummated or succeed in producing the desired outcome.
Although not specified under the FCPA, it has become practice in the courts that in order for anindividual defendant (as opposed to a corporate defendant) to be held liable for an anti-bribery violation, he or she must have acted willfully. This means that the issuer had corrupt intentions and that he or she knew that his or her actions were in violation of the law. According to the Second and Fifth Circuit Courts of Appeals, the defendant does not have to be familiar with the FCPA and know what specific violation he or she has committed, but faces applicable civil and criminal penalties if he or she knows of the general unlawfulness of his or her actions.
Proper and Improper Gifts
Not every gift or payment to a government official is in violation of the FCPA. There are many instances in which business parties show gratitude or respect for another by means of a small gift. What is proper and improper in terms of giving is often based not only on motive, but also in the transparency of the gift-giving itself. When a gift is properly recorded in the business’s books and records and is given merely as a token of esteem with no ulterior motives, the gift is proper and permissible by law.
When giving a gift to a government official, one must adhere to basic guidelines for gifts. According to Opinion Releases 81-01, 81-02, and 82-01, following these suggestions will help to ensure compliance with the FCPA:
- The gift should be provided as a token of esteem, courtesy or in return for hospitality.
- The gift should be of nominal value but in no case greater than $250.
- No gifts in cash.
- The gift shall be permitted under both local law and the guidelines of the employer/governmental agency.
- The gift should be a value which is customary for country involved and appropriate for the occasion.
- The gift should be for official use rather than personal use.
- The gift should showcase the company’s products or contain the company logo.
- The gift should be presented openly with complete transparency.
- The expense for the gift should be correctly recorded on the company’s books and records.
Maintaining appropriate and lawful intentions and adhering to the accounting provisions of the FCPA will help to ensure that the giving of gifts to a government official does not cross the line into a violation of the FCPA anti-bribery provisions.
The FCPA applies to 3 classes of persons or entities:
- “Issuers” and officers, directors, employees, agents, and shareholders thereof;
- “Domestic concerns” and officers, directors, employees, agents, and shareholders thereof
- Individuals or entities not considered issuers or domestic concerns who act while in United States territory
An “issuer” primarily refers to any company that is listed on a U.S. national securities exchange (including stock or American Deposit Receipts), whose stock trades on the New York Stock Exchange, or that is required to file reports with the Securities Exchange Commission (SEC).
FCPA Legal Representation
This summary by no means explains all the facets of FCPA law, however it is designed to guide you through some of the basic concepts and terms. If you have questions, need further clarification, or require personalized legal counseling, please contact a white collar criminal defense attorney who possesses the knowledge and experience to help you with any FCPA questions or concerns.
Whether you suspect you may have conducted an illegal business transaction, you are under investigation for FCPA violation, or you face civil sanctions or criminal charges, Ms. Patel is prepared to answer your questions and provide experienced counsel and skillful representation.