Anti-Bribery and Accounting Under the Federal Corrupt Practices Act
The Foreign Corrupt Practices Act ("FCPA") prescribes how U.S. individuals, U.S. entities, and certain foreign companies who do business with the U.S. must keep their books and records and deal with foreign government officials and agents.
The FCPA is a complicated law that can subject individuals and companies to stiff civil fines and criminal penalties (including prison) for violations.
To help you better understand the FCPA and its penalties, our Las Vegas, Nevada-based FCPA defense lawyers discuss the following, below:
- 1. What is the Foreign Corrupt Practices Act?
- 2. Who does the FCPA apply to?
- 3. How is the FCPA enforced in Nevada?
- 4. Exception to the FCPA's anti-bribery provisions
- 5. Defenses under the FCPA
- 6. Penalties under the Foreign Corrupt Practices Act
The Foreign Corrupt Practices Act -- known as the "FCPA" for short -- is set forth in 15 U.S.C. 78dd-1 and subsequent sections.
The two main provisions of the FCPA consist of:
- Anti-bribery laws, and
- Accounting practices.
The anti-bribery section of the FCPA makes it unlawful to offer, pay, promise, or authorize payment of money or anything of value to any foreign official, foreign political party, or candidate for public office, if such payment is intended to influence any act or decision in order to assist in obtaining or retaining business.
The FCPA's accounting provisions (also known as the “books and records” provision) require those who do business in other countries to maintain accurate books and records and have a system of internal controls to provide reasonable assurances that transactions are conducted with the authorization of management. They are intended to prevent mischaracterization or falsification of bribes in official accounting records.
The Foreign Corrupt Practices Act applies to:
- All U.S. citizens and entities,
- Foreign firms and persons who act in furtherance of a corrupt payment made within any territory of the United States, and
- Foreign issuers of securities that are registered with, or required to file reports with, the United States Securities and Exchange Commission (“SEC”).
The FCPA applies to prohibited conduct anywhere in the world and extends to publicly traded companies and their officers, directors, employees, stockholders, and agents. Agents can include third party agents, consultants, distributors, joint-venture partners, and others.
Thus any individual residing or working in Nevada or any company doing business in, or facilitating corrupt payments within, the state of Nevada can be charged with a violation of the FCPA.
If you are charged with a
The SEC and the U.S. Department of Justice (“DOJ”) are jointly responsible for enforcing the FCPA.
The SEC brings civil enforcement actions against securities issuers and their officers, directors, employees, and agents.
The DOJ criminally prosecutes issuers and their officers, directors, employees, agents, and domestic concerns, as well as foreign persons and entities acting within the U.S. It also has civil anti-bribery enforcement authority over people and entities subject to the FCPA's anti-bribery provisions.
Other law enforcement divisions may also become involved if actions violate other federal securities and criminal laws in addition to the FCPA. Crimes commonly charged in Nevada along with Foreign Corrupt Practices Act violations include money laundering and wire fraud.
The United States District Courts in Nevada have jurisdiction over Foreign Corrupt Practices Act cases in Nevada. In Las Vegas, FCPA cases are heard at the Lloyd D. George U.S. Courthouse. In Reno they are heard at the Bruce R. Thompson Federal Building and Courthouse. However, FCPA cases in Nevada are often settled out-of-court by means of a plea bargain with the SEC and/or DOJ.
The FCPA contains a narrow exception that allows for payments to low-level officials who otherwise refuse to do their non-discretionary jobs (such as stamping a properly issued document).
Specifically, it allows for “payments made to secure the performance of a routine governmental action by a foreign official, political party, or party official.”
A “routine governmental action” is one which is ordinarily and commonly performed by a foreign official in:
(i) obtaining permits, licenses, or other official documents to qualify a person to do business in a foreign country;
(ii) processing governmental papers, such as visas and work orders;
(iii) providing police protection, mail pick-up and delivery, or scheduling inspections associated with contract performance or inspections related to transit of goods across country;
(iv) providing phone service, power and water supply, loading and unloading cargo, or protecting perishable products or commodities from deterioration; or
(v) actions of a similar nature.
The term “routine governmental action” does not include any decision by a foreign official whether, or on what terms, to award new business to or to continue business with a particular party. It also does not apply to any action taken by a foreign official to encourage a decision to award new business to or continue business with a particular party.
Per the 2012 Resource Guide issued jointly by DOJ and SEC, a "facilitating payment" is one that can result only in a non-discretionary action – that is, a truly “routine” government action, such as stamping a visa.
If the official has the discretion not to perform the action, it does not fall within the exception.
Example: Arthur is the location manager for a Las Vegas-based production company shooting a project in a country that does not prohibit payments to low-level government officials. In order to shoot at a particular location, the crew needs a permit approved by the government.
After obtaining permission to film at the location, the clerk whose job it is to stamp the papers refuses to do it in a timely fashion unless Arthur pays the equivalent of $50 in local currency. This payment most likely falls within the exception, because it is not within the clerk's discretion to refuse to stamp the papers.
But... if the clerk had the discretion to refuse to stamp the papers because the crew had not complied with local regulations, and the clerk had offered to overlook the lack of compliance if he were paid, the payment would run afoul of the FCPA's anti-bribery provisions.
Note that even if a payment is otherwise legal, if it is not properly recorded in the production company's books, it may run afoul of the accounting provisions of the FCPA. Yet recording such a payment can prove problematic when it is made in cash and no receipt is given.
Additionally, if the other country's anti-corruption laws prohibit such a payment, proper recording can create the risk of its discovery. Such contractions can make it difficult to do business in countries in which the greasing of palms of low-level government employees has long been customary.
The Department of Justice has a procedure for submitting questions regarding whether hypothetical practices comply with the FCPA. You can learn more about it by reading the DOJ's Foreign Corrupt Practices Act Opinion Procedure.
You may also wish to consult first with an FCPA attorney in Nevada.
It is an affirmative defense under the Foreign Corrupt Practices Act that:
- The payment, gift, offer, or promise of anything of value was lawful under the written laws and regulations of the foreign official's, political party's, party official's, or candidate's country; or
- The payment, gift, offer, or promise of anything of value was a reasonable and bona fide expenditure -- such as travel and lodging expenses -- directly related to the promotion, demonstration, or explanation of products or services, or the execution or performance of a contract with a foreign government or agency thereof.
To make use of the first defense, the law or regulation being relied upon must have been in writing at the time of the conduct. Local practice, custom, or other unwritten policies are not sufficient for this affirmative defense.
To make use of the second affirmative defense, you must usually show that your business had internal controls and compliance procedures in place to ensure that such expenses were “reasonable” and “bona fide” and were properly approved and documented in the business' books and records.
In addition to these very specific affirmative defenses, you may have one or more of these common defenses to federal white collar crimes:
- There was no probable cause to issue an arrest warrant;
- The evidence was discovered as the result of an illegal search and seizure in violation of your Fourth Amendment rights;
- There was law enforcement misconduct, such as entrapment or a coerced confession.
Individuals who violate the anti-bribery provisions of the FCPA face penalties of:
- A civil fine of up to $10,000; and
- Criminal penalties of:
- Up to 5 years in federal prison and,
- A fine of up to $250,000 or twice the gross financial gain or loss resulting from the corrupt payment.
Individuals who violate the FCPA's accounting provisions face consequences that can include:
- Up to $100,000 in civil penalties plus prejudgment interest for bribes; and
- Criminal penalties of:
- Up to 20 years in federal prison, and
- A fine of up to $5 million or twice the gain or loss caused by the violation. Such fines must be paid by the individual and may not be paid (either directly or indirectly) by the company on whose behalf the person acted.
Companies that have violated the FCPA face consequences of:
- Up to $500,000 in civil penalties plus prejudgment interest; and
- Criminal fines of up to $25 million or twice the gain or loss caused by the violation.
Companies that violate the FCPA may also be subject to oversight by an independent compliance monitor. For criminal violations they may be subject to suspension and debarment actions, which can limit their opportunities to do business with the U.S. government.
Call us for help…
If you or your company has been accused of violating the criminal provisions of the Federal Corrupt Practices Act in Nevada, we invite you to contact us for help.
Our Las Vegas, Nevada criminal defense lawyers defend clients throughout the state of Nevada who are charged with FCPA violations, fraud, bribery, money laundering and other federal and state white collar crimes.
We can help you plan the best defense to your FCPA charges and fight to get you the best plea deal possible or even a dismissal of your case. And if your case goes to trial, we will fight aggressively to argue your side of the story to the judge and jury.
For a free consultation with one of our Reno or Las Vegas, Nevada white collar crime lawyers, call us at 702-DEFENSE (702-333-3673) or complete the form on this page.
We will get back to you promptly to set up a time for you to discuss your case with one of our experienced federal criminal lawyers either in-person or over the phone.
To learn how to fight charges under the Federal Corrupt Practices Act in California, please visit our page on federal crimes in California.