Key Elements of the Foreign Corrupt Practices Act
- Anti-Bribery Provisions: The anti-bribery provisions of the FCPA prohibit offering, paying, or authorizing bribes to foreign officials in order to obtain or retain business.
This includes any form of inducement that may influence a foreign official’s actions.
- Accounting Provisions: The FCPA also requires companies to maintain accurate records and implement strong internal controls.
These provisions are designed to prevent the use of falsified financial statements to conceal bribery or other forms of corruption.
Common Examples of Foreign Corrupt Practices
Foreign corrupt practices can take many forms, and companies must remain vigilant to avoid these behaviors:
- Bribing Government Officials: Offering payments or benefits to foreign government officials in exchange for favorable treatment, such as securing contracts or favorable regulatory outcomes.
- Using Intermediaries for Bribes: Companies may use agents, consultants, or other intermediaries to make illicit payments on their behalf, attempting to obscure the true nature of the transactions.
- Falsifying Records: Companies may falsify records or use fraudulent accounting entries to hide improper payments, making it difficult to trace the illicit activity.
Regulatory Framework and Enforcement
The enforcement of the FCPA is overseen by the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC).
These agencies have the authority to investigate and prosecute violations of the FCPA, including both individuals and corporations.
Penalties for violating the FCPA can include substantial financial fines, imprisonment, and significant reputational damage for the companies involved.
Recent Cases of Foreign Corrupt Practices
Recent notable cases have addressed various aspects of the FCPA, including its application to different types of entities and individuals, the interpretation of its provisions, and the interplay with other laws.
- In United States v. Chi Ping Patrick Ho, the 2nd Circuit Court of Appeals upheld the defendant’s conviction under the FCPA, finding sufficient evidence that he acted on behalf of a U.S. organization to obtain business for a foreign company. The court also upheld his money laundering conviction, noting that a violation of the FCPA could serve as specified unlawful activity under the money laundering statute United States v. Chi Ping Patrick Ho, 984 F.3d 191.
- In Wadler v. Bio-Rad Labs., Inc., the 9th Circuit Court of Appeals found that the district court erred in instructing the jury that the FCPA provisions were rules or regulations of the SEC under the Sarbanes-Oxley Act. This error was not harmless regarding the SOX claim but was harmless concerning the Tameny claim, which did not depend on SOX Wadler v. Bio-Rad Labs., Inc., 916 F.3d 1176.
- In United States v. Esquenazi, the 11th Circuit Court of Appeals affirmed the convictions of the defendants for conspiracy, violating the FCPA, and money laundering. The court found that the district court’s instructions on the definition of “instrumentality” under the FCPA were correct and that the evidence supported the finding that the defendants engaged in criminal acts distinct from the FCPA counts United States v. Esquenazi, 752 F.3d 912.
- In United States v. Hoskins, the 2nd Circuit Court of Appeals held that the presumption against extraterritoriality barred the government from using conspiracy and complicity statutes to charge the defendant with an offense not punishable under the FCPA due to its territorial limitations. However, the court found that the government’s intention to prove the defendant was an agent of a domestic concern placed him within the terms of the statute United States v. Hoskins, 902 F.3d 69.
- In United States v. Kozeny, the Southern District of New York court held that a payment to an Azeri official made under threat to the payer’s legal interests was still illegal, though the payer could not be prosecuted for it. The court concluded that the defendant could argue he lacked the requisite corrupt intent to make a bribe United States v. Kozeny, 582 F. Supp. 2d 535.
- In S.A. v. Aguilar, the Central District of California court held that officers of a state-owned corporation could be considered foreign officials under the FCPA. The court found that a state-owned corporation could be an instrumentality of a foreign government within the meaning of the FCPA U.S.A. v. Aguilar, 783 F. Supp. 2d 1108.
- In United States v. Castle, the 5th Circuit Court of Appeals held that foreign officials could not be prosecuted under the FCPA or the general conspiracy statute for conspiring to violate the FCPA, based on the language and legislative history of the FCPA United States v. Castle, 925 F.2d 831.
- In SEC v. Dresser Industries, Inc., the D.C. Circuit Court of Appeals addressed the issue of parallel investigations by the SEC and the U.S. government, affirming the lower court’s ruling that the grand jury proceeding neither added nor detracted from the appellant’s rights and that any challenge to production of discovery could only occur after subpoena enforcement SEC v. Dresser Industries, Inc., 628 F.2d 1368.
- In In re Grand Jury Subpoena dated August 9, 2000, the Southern District of New York court found that the act of state doctrine did not prevent the court from inquiring into a foreign country’s assertion of privilege in connection with an American grand jury proceeding. The court held that the foreign country’s interest in protecting governmental confidentiality was outweighed by the United States’ interest in investigating suspected international bribery In re Grand Jury Subpoena dated August 9, 2000, 218 F. Supp. 2d 544.
Whistleblower Role in Exposing Foreign Corrupt Practices
Whistleblowers play a crucial role in uncovering foreign corrupt practices, often providing information that would otherwise remain hidden.
Under the Dodd-Frank Act, whistleblowers who report FCPA violations to the SEC are eligible for protections against retaliation and may receive financial incentives for their assistance.
These measures help ensure that whistleblowers feel safe and supported when coming forward with valuable information.
Whistleblower Awards
Whistleblowers may be eligible for an award when they voluntarily provide the SEC with original, timely, and credible information that leads to a successful enforcement action.
Whistleblower awards can range from 10% to 30% of the money collected when the monetary sanctions exceed $1 million.
We work with whistleblowers to bring their matters to the SEC, collaborating with a former prosecutor and securities enforcement attorney.
Identifying Foreign Corrupt Practices
Identifying foreign corrupt practices involves recognizing certain warning signs and establishing compliance programs to prevent misconduct:
- Warning Signs: Red flags such as unusual payments, offshore accounts, excessive gift-giving, or opaque dealings with government officials may indicate corrupt practices.
- Compliance Programs: Companies must implement robust compliance programs, including employee training, internal audits, and risk assessments, to detect and prevent corrupt activities before they occur.
Legal Support for Whistleblowers and Victims
Dilendorf Law provides comprehensive legal support for both whistleblowers and victims of foreign corrupt practices.
Our experienced attorneys assist victims in recovering financial losses resulting from corrupt activities, while also guiding whistleblowers through the reporting process.
We prioritize confidentiality and protection for whistleblowers, ensuring their rights are safeguarded throughout the process.
At Dilendorf Law, we also assist corporate insiders in addressing situations where they are asked to engage in unethical, unlawful, or questionable practices, or when they have concerns that their employer may be violating securities or other laws.
If we accept your case, our services are offered on a contingency basis, meaning you pay only if we succeed.
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For assistance with issues related to foreign corrupt practices, please reach out to Dilendorf Law Firm at (212) 457-9797 or via email at info@dilendorf.com.
Our team is ready to guide you through the complexities of FCPA cases and protect your interests.
