5 Common Violations of the Foreign Corrupt Practices Act

The Foreign Corrupt Practices Act (FCPA) was enacted in 1977 to prevent companies from bribing foreign officials for business-related purposes. The Act’s provisions can apply to United States companies operating anywhere in the world, and it is primarily enforced by the U.S. Securities and Exchange Commission (SEC). Here’s what you need to know about the FCPA—and what you can expect if you’re ever charged with a violation.

The most important elements of the FCPA are its anti-bribery provisions. The document itself is organized into three categories: issuers of securities, domestic concerns, and other persons. In layman’s terms, the FCPA covers publicly traded companies and their officers, directors, employees, stockholders, and agents.

What does an FCPA violation actually look like? It generally takes the form of a bribe, either directly or indirectly, sent from a U.S. business to a foreign official in order to influence an award of business or a continuation of business, or to gain an unfair advantage. Take a look at these scenarios to get an idea of how these violations are actually committed.

1) Using bribes to gain business.

In one recent FCPA case, a U.S.-based wire and cable manufacturer made “improper payments” or bribes in order to win business in six different foreign countries. The company agreed to pay $75 million to resolve the case. As a blatant case of bribery, this violation is pretty cut and dried: you can’t use illegal financial incentives to win over potential foreign clients.

2) Using bribes to approve a project.

This violation involves gifting money to officials in exchange for government or other official approval on a business venture or project. For example, this year the foreign subsidiary of a global snack company made illicit payments in exchange for government licenses and approvals for a chocolate factory in that country. They paid a penalty of $13 million.

3) Using bribes to induce a doctor’s endorsement.

Another violation can occur when a company uses financial incentives to get a doctor to endorse or use their products. To use an example, the foreign subsidiary of a medical device company recently used high discounts and bribes to convince government-employed doctors to use their products. They eventually agreed to pay over $6 million to settle the charges.

4) Using bribes to gain business from political figures.

The FCPA prohibits bribes issued to foreign government officials, as well as foreign political parties, in order to gain business through their political influence. This year a foreign chemical and mining company resolved a case of improper payments to political figures in their country, paying over $30 million to settle its civil and criminal cases.

5) Failing to keep proper books and records.

Aside from bribes, the FCPA’s second main provision deals with accounting, including “books and records and internal control.” It essentially means you need to make sure your recordkeeping practices are up to scratch, and to take reasonable precautions when you execute transactions, access your assets, and account for your finances according to your management’s authorization.

As you can see, the financial penalty for an FCPA violation can be incredibly expensive. While the Act outlines the fines and penalties, they don’t tend to look the same in reality, because different pieces of legislation are used to come up with the amounts. The final amount is often based on the benefit the violating company hoped to get as a result of the bribe, as well as the number of employees in the company, the involvement of high-level personnel, prior criminal history, cooperation, and other factors.

If your company is being investigated for, or has already been accused of an FCPA violation, there is too much at stake to go forward without the assistance of an experienced attorney. Contact the Law Offices of Barry M. Wax to gain the help of a highly-skilled legal representative who will advocate aggressively for your legal rights.

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Written by Law Offices of Barry M. Wax

Law Offices of Barry M. Wax

For 32 years, I have provided both State- and Federal-Level representation for those facing charges ranging from wire fraud, mortgage fraud, and healthcare fraud to identity theft, drug trafficking, money laundering, murder, DUI, domestic violence and numerous other criminal charges. In every case, it is my commitment to one-on-one service and support that has separated the Law Offices of Barry M. Wax from other criminal defense firms. When it comes to your future, you need a strong defense and the ability to make the right choices and regain control of your life.