Foreign Corrupt Practices Act:The Essentials
With more biofuel companies doing business overseas, understanding the risks and dangers of violating the U.S. Foreign Corrupt Practices Act is critical. The FCPA makes it a felony for a U.S. citizen (or a foreigner acting on his behalf) to offer or make a corrupt payment to a foreign official or political party for purposes of obtaining or retaining business.
The FCPA prohibits U.S. individuals or companies from paying, authorizing or promising payment of money or anything of value to any foreign official, political party or candidate for foreign political office, for the purpose of influencing any official act or decision, including omission to act, to induce such official to use his influence with a foreign government or instrumentality thereof to affect or influence any act or decision of such government or instrumentality to assist the U.S. individual or company in obtaining or retaining business for or with, or directing business to, any person. The prohibitions of the FCPA apply to all U.S. individuals and companies. FCPA regulations also apply to foreign firms and persons who take any act in furtherance of such a corrupt payment on behalf of a U.S. individual or company.
“Corrupt behavior” is established when the payment made to a foreign official was intended to induce the recipient to misuse his or her official position or to influence someone else to do so. The payment must have been made voluntarily and intentionally, and with the purpose of accomplishing an unlawful end or result by some unlawful means. To establish corrupt behavior, the U.S. government must establish corrupt intent and knowledge that the action was corrupt. The U.S. government is required to establish that the individual making the payment satisfies the “knowing standard” where “such person is aware that such person is engaging in such conduct that such circumstances exists, or that such result is substantially certain to occur; or such person has a firm belief that such circumstance exists or that such result is substantially certain to occur.” Congress intended this to apply to “a conscious disregard or deliberate ignorance of known circumstances that should reasonably alert one to the high probability of violations of the FCPA.” Simple negligence or mere foolishness is not a basis for liability.
While the FCPA prohibits direct payments to any foreign official, foreign party official or candidate for political office, it also forbids payments to “[a]ny person, while knowing that all or a portion of such money or thing of value will be offered, given or promised, directly or indirectly, to any foreign official to any foreign political party or official thereof, or to any candidate for foreign political office.” This covers the payment of money when the U.S. individual or company knows that the payment will ultimately be made to the foreign official to accomplish the intended act that is in violation of the FCPA.
The U.S. government must establish that the payment was made directly or through a third party to a foreign official. A foreign official has been defined to include “any officer or employee of a foreign government or any department, agency, or instrumentality thereof, or any person acting in an official capacity for or on behalf of any such government or department, agency, or instrumentatlity.”
The FCPA prohibits payments made in order to assist the firm in obtaining or retaining business for or with or directing business to any person. The U.S. Department of Justice interprets “obtaining or retaining business” broadly, such that the term encompasses more than the mere award or renewal of a contract. It should be noted that the business to be obtained or retained does not need to be with a foreign government or foreign government instrumentality.
The FCPA includes an exception for payments made to a foreign official, political party or party official for the purpose of facilitating or expediting or securing the performance of a “routine governmental action” by the official or party. “Routine governmental action” is defined as an action ordinarily and commonly performed by a foreign official in connection with obtaining permits, licenses, or other official documents to enable another person to do business in a foreign country; processing governmental papers such as visas and work orders; providing police protection, mail pick-up and delivery, or scheduling inspections associated with contract performance or inspections related to the transit of goods across country; providing phone service, power, and water supply, loading and unloading cargo, or protecting perishable products or commodities from deterioration; or actions of a similar nature. A “routine governmental action” does not include any decision or action by an official involved in the decision-making process concerning whether, or on what terms, to award new business to, or to continue to do business with, a particular party.
Criminally, a U.S. company can be fined up to $2 million. Officers, directors or shareholders acting on behalf of the company who willfully violate the FCPA’s provisions can be fined not more than $100,000 and imprisoned for not more than five years or both. Any employee, agent or representative of the U.S. company who is a U.S. citizen, national or resident, or who is otherwise subject to the jurisdiction of the U.S. and who willfully violates the FCPA can be fined not more than $100,000 or imprisoned not more than five years or both. The penalties listed above cannot be paid by the U.S. company on behalf of the sanctioned individual. Civilly, a U.S. company that violates the FCPA can be subject to a civil penalty of not more than $10,000 in an action brought by the SEC or the U.S. Attorney General. Officers, directors, employees, agents or shareholders acting on behalf of the U.S. company who violate the FCPA’s provisions can be subject to a civil penalty of not more than $10,000 in an action brought by the SEC or the U.S. Attorney General.
Author: Richard Weiner
Vice President, Fredrikson & Byron