chapter 1
Introduction
FCPA
A Resource Guide to the U.S. Foreign Corrupt Practices Act
By the Criminal Division of the U.S. Department of Justice and
the Enforcement Division of the U.S. Securities and Exchange Commission
This guide is intended to provide information for businesses and individuals regarding the U.S. Foreign Corrupt Practices
Act (FCPA). The guide has been prepared by the staff of the Criminal Division of the U.S. Department of Justice and the
Enforcement Division of the U.S. Securities and Exchange Commission. It is non-binding, informal, and summary in nature, and
the information contained herein does not constitute rules or regulations. As such, it is not intended to, does not, and may not
be relied upon to create any rights, substantive or procedural, that are enforceable at law by any party, in any criminal, civil, or
administrative matter. It is not intended to substitute for the advice of legal counsel on specific issues related to the FCPA. It does
not in any way limit the enforcement intentions or litigating positions of the U.S. Department of Justice, the U.S. Securities and
Exchange Commission, or any other U.S. government agency.
Companies or individuals seeking an opinion concerning specific prospective conduct are encouraged to use the U.S.
Department of Justice’s opinion procedure discussed in Chapter 9 of this guide.
This guide is United States Government property. It is available to the public free of charge online at www.justice.gov/
criminal/fraud/fcpa and www.sec.gov/spotlight/fcpa.shtml.
A RESOURCE GUIDE TO THE
U.S. FOREIGN CORRUPT PRACTICES ACT
By the Criminal Division of the U.S. Department of Justice and
the Enforcement Division of the U.S. Securities and Exchange Commission
FOREWORD
We are pleased to announce the publication of A Resource Guide to the U.S. Foreign Corrupt Practices Act. The Foreign
Corrupt Practices Act (FCPA) is a critically important statute for combating corruption around the globe. Corruption has
corrosive effects on democratic institutions, undermining public accountability and diverting public resources from important
priorities such as health, education, and infrastructure. When business is won or lost based on how much a company is
willing to pay in bribes rather than on the quality of its products and services, law-abiding companies are placed at a competitive
disadvantage—and consumers lose. For these and other reasons, enforcing the FCPA is a continuing priority at the
Department of Justice (DOJ) and the Securities and Exchange Commission (SEC).
The Guide is the product of extensive efforts by experts at DOJ and SEC, and has benefited from valuable input from
the Departments of Commerce and State. It endeavors to provide helpful information to enterprises of all shapes and sizes—
from small businesses doing their first transactions abroad to multi-national corporations with subsidiaries around the world.
The Guide addresses a wide variety of topics, including who and what is covered by the FCPA’s anti-bribery and accounting
provisions; the definition of a “foreign official”; what constitute proper and improper gifts, travel and entertainment expenses;
the nature of facilitating payments; how successor liability applies in the mergers and acquisitions context; the hallmarks of
an effective corporate compliance program; and the different types of civil and criminal resolutions available in the FCPA
context. On these and other topics, the Guide takes a multi-faceted approach, setting forth in detail the statutory requirements
while also providing insight into DOJ and SEC enforcement practices through hypotheticals, examples of enforcement
actions and anonymized declinations, and summaries of applicable case law and DOJ opinion releases.
The Guide is an unprecedented undertaking by DOJ and SEC to provide the public with detailed information about
our FCPA enforcement approach and priorities. We are proud of the many lawyers and staff who worked on this project,
and hope that it will be a useful reference for companies, individuals, and others interested in our enforcement of the Act.
Lanny A. Breuer
Assistant Attorney General
Criminal Division
Department of Justice
Robert S. Khuzami
Director of Enforcement
Securities and Exchange Commission
November 14, 2012

CONTENTS
Chapter 1: INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
The Costs of Corruption 2
Historical Background 3
National Landscape: Interagency Efforts 4
Department of Justice 4
Securities and Exchange Commission 4
Law Enforcement Partners 5
Departments of Commerce and State 5
International Landscape: Global Anti-Corruption Efforts 7
OECD Working Group on Bribery and the Anti-Bribery Convention 7
U.N. Convention Against Corruption 8
Other Anti-Corruption Conventions 8
Chapter 2: THE FCPA: ANTI-BRIBERY PROVISIONS . . . . . . . . . . . . . . . . . . . . 10
Who Is Covered by the Anti-Bribery Provisions? 10
Issuers—15 U.S.C. § 78dd-1 10
Domestic Concerns—15 U.S.C. § 78dd-2 11
Territorial Jurisdiction—15 U.S.C. § 78dd-3 11
What Jurisdictional Conduct Triggers the Anti-Bribery Provisions? 11
What Is Covered?—The Business Purpose Test 12
What Does “Corruptly” Mean? 14
What Does “Willfully” Mean and When Does It Apply? 14
What Does “Anything of Value” Mean? 14
Cash 15
Gifts, Travel, Entertainment, and Other Things of Value 15
Charitable Contributions 16
Who Is a Foreign Official? 19
Department, Agency, or Instrumentality of a Foreign Government 20
Public International Organizations 21
How Are Payments to Third Parties Treated? 21
What Affirmative Defenses Are Available? 23
The Local Law Defense 23
Reasonable and Bona Fide Expenditures 24
What Are Facilitating or Expediting Payments? 25
Does the FCPA Apply to Cases of Extortion or Duress? 27
Principles of Corporate Liability for Anti-Bribery Violations 27
Parent-Subsidiary Liability 27
Successor Liability 28
Additional Principles of Criminal Liability for Anti-Bribery Violations: Aiding and Abetting and Conspiracy 34
Additional Principles of Civil Liability for Anti-Bribery Violations: Aiding and Abetting and Causing 34
What Is the Applicable Statute of Limitations? 34
Statute of Limitations in Criminal Cases 34
Statute of Limitations in Civil Actions 35
Chapter 3: THE FCPA: ACCOUNTING PROVISIONS . . . . . . . . . . . . . . . . . . . . 38
What Is Covered by the Accounting Provisions? 39
Books and Records Provision 39
Internal Controls Provision 40
Potential Reporting and Anti-Fraud Violations 41
What Are Management’s Other Obligations? 42
Who Is Covered by the Accounting Provisions? 42
Civil Liability for Issuers, Subsidiaries, and Affiliates 42
Civil Liability for Individuals and Other Entities 43
Criminal Liability for Accounting Violations 44
Conspiracy and Aiding and Abetting Liability 45
Auditor Obligations 45
Chapter 4: OTHER RELATED U.S. LAWS . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Travel Act 48
Money Laundering 48
Mail and Wire Fraud 49
Certification and Reporting Violations 49
Tax Violations 49
Chapter 5: GUIDING PRINCIPLES OF ENFORCEMENT . . . . . . . . . . . . . . . . . . 52
What Does DOJ Consider When Deciding Whether to Open an Investigation or Bring Charges? 52
DOJ Principles of Federal Prosecution 52
DOJ Principles of Federal Prosecution of Business Organizations 52
What Does SEC Consider When Deciding Whether to Open an Investigation or Bring Charges? 53
Self-Reporting, Cooperation, and Remedial Efforts 54
Criminal Cases 54
Civil Cases 55
Corporate Compliance Program 56
Hallmarks of Effective Compliance Programs 57
Commitment from Senior Management and a Clearly Articulated Policy Against Corruption 57
Code of Conduct and Compliance Policies and Procedures 57
Oversight, Autonomy, and Resources 58
Risk Assessment 58
Training and Continuing Advice 59
Incentives and Disciplinary Measures 59
Third-Party Due Diligence and Payments 60
Confidential Reporting and Internal Investigation 61
Continuous Improvement: Periodic Testing and Review 61
Mergers and Acquisitions: Pre-Acquisition Due Diligence and Post-Acquisition Integration 62
Other Guidance on Compliance and International Best Practices 63
Chapter 6: FCPA PENALTIES, SANCTIONS, AND REMEDIES . . . . . . . . . . . . . . . 68
What Are the Potential Consequences for Violations of the FCPA? 68
Criminal Penalties 68
U.S. Sentencing Guidelines 68
Civil Penalties 69
Collateral Consequences 69
Debarment 70
Cross-Debarment by Multilateral Development Banks 70
Loss of Export Privileges 71
When Is a Compliance Monitor or Independent Consultant Appropriate? 71
Chapter 7: RESOLUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
What Are the Different Types of Resolutions with DOJ? 74
Criminal Complaints, Informations, and Indictments 74
Plea Agreements 74
Deferred Prosecution Agreements 74
Non-Prosecution Agreements 75
Declinations 75
What Are the Different Types of Resolutions with SEC? 76
Civil Injunctive Actions and Remedies 76
Civil Administrative Actions and Remedies 76
Deferred Prosecution Agreements 76
Non-Prosecution Agreements 77
Termination Letters and Declinations 77
What Are Some Examples of Past Declinations by DOJ and SEC? 77
Chapter 8: WHISTLEBLOWER PROVISIONS AND PROTECTIONS . . . . . . . . . . . . . 82
Chapter 9: DOJ OPINION PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Chapter 10: CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
APPENDIX: THE FOREIGN CORRUPT PRACTICES ACT . . . . . . . . . . . . . . . . . . 92
APPENDIX: ENDNOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
Corporate bribery is bad business. In our free market system it is basic that the
sale of products should take place on the basis of price, quality, and service.
Corporate bribery is fundamentally destructive of this basic tenet. Corporate
bribery of foreign officials takes place primarily to assist corporations in gaining
business. Thus foreign corporate bribery affects the very stability of overseas
business. Foreign corporate bribes also affect our domestic competitive climate
when domestic firms engage in such practices as a substitute for healthy competition
for foreign business. 1 —United States Senate, 1977

chapter 1
Introduction
INTRODUCTION
Congress enacted the U.S. Foreign Corrupt Practices Act (FCPA or the Act) in
1977 in response to revelations of widespread bribery of foreign officials by U.S.
companies. The Act was intended to halt those corrupt practices, create a level
playing field for honest businesses, and restore public confidence in the integrity
of the marketplace. 2
The FCPA contains both anti-bribery and accounting
provisions. The anti-bribery provisions prohibit U.S. persons
and businesses (domestic concerns), U.S. and foreign
public companies listed on stock exchanges in the United
States or which are required to file periodic reports with
the Securities and Exchange Commission (issuers), and
certain foreign persons and businesses acting while in the
territory of the United States (territorial jurisdiction) from
making corrupt payments to foreign officials to obtain or
retain business. The accounting provisions require issuers
to make and keep accurate books and records and to devise
and maintain an adequate system of internal accounting
controls. The accounting provisions also prohibit individuals
and businesses from knowingly falsifying books and
records or knowingly circumventing or failing to implement
a system of internal controls.
The Department of Justice (DOJ) and the
Securities and Exchange Commission (SEC) share FCPA
enforcement authority and are committed to fighting foreign
bribery through robust enforcement. An important
component of this effort is education, and this resource
guide, prepared by DOJ and SEC staff, aims to provide
businesses and individuals with information to help them
abide by the law, detect and prevent FCPA violations, and
implement effective compliance programs.
The Costs of Corruption
Corruption is a global problem. In the three decades
since Congress enacted the FCPA, the extent of corporate
bribery has become clearer and its ramifications in a transnational
economy starker. Corruption impedes economic
growth by diverting public resources from important priorities
such as health, education, and infrastructure. It
undermines democratic values and public accountability
and weakens the rule of law. 3 And it threatens stability and
security by facilitating criminal activity within and across
2
borders, such as the illegal trafficking of people, weapons,
and drugs. 4 International corruption also undercuts good
governance and impedes U.S. efforts to promote freedom
and democracy, end poverty, and combat crime and terrorism
across the globe. 5
Corruption is also bad for business. Corruption is
anti-competitive, leading to distorted prices and disadvantaging
honest businesses that do not pay bribes. It increases
the cost of doing business globally and inflates the cost of
government contracts in developing countries. 6 Corruption
also introduces significant uncertainty into business transactions:
Contracts secured through bribery may be legally
unenforceable, and paying bribes on one contract often
results in corrupt officials making ever-increasing demands. 7
Bribery has destructive effects within a business as well,
undermining employee confidence in a company’s management
and fostering a permissive atmosphere for other kinds
of corporate misconduct, such as employee self-dealing,
embezzlement, 8 financial fraud, 9 and anti-competitive
behavior. 10 Bribery thus raises the risks of doing business,
putting a company’s bottom line and reputation in jeopardy.
Companies that pay bribes to win business ultimately
undermine their own long-term interests and the best interests
of their investors.
Historical Background
Congress enacted the FCPA in 1977 after revelations
of widespread global corruption in the wake of the
Watergate political scandal. SEC discovered that more than
400 U.S. companies had paid hundreds of millions of dollars
in bribes to foreign government officials to secure business
overseas. 11 SEC reported that companies were using
secret “slush funds” to make illegal campaign contributions
in the United States and corrupt payments to foreign officials
abroad and were falsifying their corporate financial
records to conceal the payments. 12
Congress viewed passage of the FCPA as critical
to stopping corporate bribery, which had tarnished the
image of U.S. businesses, impaired public confidence in
the financial integrity of U.S. companies, and hampered
the efficient functioning of the markets. 13 As Congress
No problem does more to alienate citizens
from their political leaders and institutions,
and to undermine political stability and
economic development, than endemic
corruption among the government, political
party leaders, judges, and bureaucrats.
— USAID Anti-Corruption Strategy
recognized when it passed the FCPA, corruption imposes
enormous costs both at home and abroad, leading to market
inefficiencies and instability, sub-standard products,
and an unfair playing field for honest businesses. 14 By
enacting a strong foreign bribery statute, Congress sought
to minimize these destructive effects and help companies
resist corrupt demands, while addressing the destructive
foreign policy ramifications of transnational bribery.
15 The Act also prohibited off-the-books accounting
through provisions designed to “strengthen the accuracy
of the corporate books and records and the reliability of
the audit process which constitute the foundations of our
system of corporate disclosure.” 16
In 1988, Congress amended the FCPA to add two
affirmative defenses: (1) the local law defense; and (2) the
reasonable and bona fide promotional expense defense. 17
Congress also requested that the President negotiate an
international treaty with members of the Organisation
for Economic Co-operation and Development (OECD)
to prohibit bribery in international business transactions
by many of the United States’ major trading partners. 18
Subsequent negotiations at the OECD culminated in the
Convention on Combating Bribery of Foreign Officials
in International Business Transactions (Anti-Bribery
Convention), which, among other things, required parties
to make it a crime to bribe foreign officials. 19
3
DOJ Contact Information
Deputy Chief (FCPA Unit)
Fraud Section, Criminal Division
Bond Building
1400 New York Ave, N.W.
Washington, DC 20005
Telephone: (202) 514-7023
Facsimile: (202) 514-7021
Email: FCPA.Fraud@usdoj.gov
In 1998, the FCPA was amended to conform to
the requirements of the Anti-Bribery Convention. These
amendments expanded the FCPA’s scope to: (1) include
payments made to secure “any improper advantage”; (2)
reach certain foreign persons who commit an act in furtherance
of a foreign bribe while in the United States; (3)
cover public international organizations in the definition
of “foreign official”; (4) add an alternative basis for jurisdiction
based on nationality; and (5) apply criminal penalties
to foreign nationals employed by or acting as agents
of U.S. companies. 20 The Anti-Bribery Convention came
into force on February 15, 1999, with the United States
as a founding party.
National Landscape: Interagency
Efforts
DOJ and SEC share enforcement authority for the
FCPA’s anti-bribery and accounting provisions. 21 They also
work with many other federal agencies and law enforcement
partners to investigate and prosecute FCPA violations,
reduce bribery demands through good governance
programs and other measures, and promote a fair playing
field for U.S. companies doing business abroad.
chapter 1
Introduction
directors, employees, agents, or stockholders acting on the
issuer’s behalf. DOJ also has both criminal and civil enforcement
responsibility for the FCPA’s anti-bribery provisions
over “domestic concerns”—which include (a) U.S. citizens,
nationals, and residents and (b) U.S. businesses and their
officers, directors, employees, agents, or stockholders acting
on the domestic concern’s behalf—and certain foreign
persons and businesses that act in furtherance of an FCPA
violation while in the territory of the United States. Within
DOJ, the Fraud Section of the Criminal Division has primary
responsibility for all FCPA matters. 22 FCPA matters
are handled primarily by the FCPA Unit within the Fraud
Section, regularly working jointly with U.S. Attorneys’
Offices around the country.
DOJ maintains a website dedicated to the FCPA and
its enforcement at http://www.justice.gov/criminal/fraud/
fcpa/. The website provides translations of the FCPA in
numerous languages, relevant legislative history, and selected
documents from FCPA-related prosecutions and resolutions
since 1977, including charging documents, plea agreements,
deferred prosecution agreements, non-prosecution agreements,
press releases, and other relevant pleadings and court
decisions. The website also provides copies of opinions issued
in response to requests by companies and individuals under
DOJ’s FCPA opinion procedure. The procedures for submitting
a request for an opinion can be found at http://www.
justice.gov/criminal/fraud/fcpa/docs/frgncrpt.pdf and are
discussed further in Chapter 9. Individuals and companies
wishing to disclose information about potential FCPA violations
are encouraged to contact the FCPA Unit at the telephone
number or email address above.
Department of Justice
DOJ has criminal FCPA enforcement authority
over “issuers” (i.e., public companies) and their officers,
Securities and Exchange Commission
SEC is responsible for civil enforcement of the FCPA
over issuers and their officers, directors, employees, agents,
4
SEC Contact Information
FCPA Unit Chief
Division of Enforcement
U.S. Securities and Exchange Commission
100 F Street, N.E.
Washington, DC 20549
Online: Tips, Complaints, and
Referrals website
http://www.sec.gov/complaint/tipscomplaint.shtml
Office of Investor Education and Advocacy:
(800) SEC-0330
or stockholders acting on the issuer’s behalf. SEC’s Division
of Enforcement has responsibility for investigating and
prosecuting FCPA violations. In 2010, SEC’s Enforcement
Division created a specialized FCPA Unit, with attorneys
in Washington, D.C. and in regional offices around the
country, to focus specifically on FCPA enforcement. The
Unit investigates potential FCPA violations; facilitates
coordination with DOJ’s FCPA program and with other
federal and international law enforcement partners; uses its
expert knowledge of the law to promote consistent enforcement
of the FCPA; analyzes tips, complaints, and referrals
regarding allegations of foreign bribery; and conducts public
outreach to raise awareness of anti-corruption efforts
and good corporate governance programs.
The FCPA Unit maintains a “Spotlight on FCPA”
section on SEC’s website at http://www.sec.gov/spotlight/
fcpa.shtml. The website, which is updated regularly, provides
general information about the Act, links to all SEC
enforcement actions involving the FCPA, including both
federal court actions and administrative proceedings, and
contains other useful information.
Individuals and companies with information about
possible FCPA violations by issuers may report them to the
Enforcement Division via SEC’s online Tips, Complaints
and Referral system, http://www.sec.gov/complaint/tipscomplaint.shtml.
They may also submit information to
SEC’s Office of the Whistleblower through the same online
system or by contacting the Office of the Whistleblower
at (202) 551-4790. Additionally, investors with questions
about the FCPA can call the Office of Investor Education
and Advocacy at (800) SEC-0330.
For more information about SEC’s Whistleblower
Program, under which certain eligible whistleblowers may
be entitled to a monetary award if their information leads to
certain SEC actions, see Chapter 8.
Law Enforcement Partners
DOJ’s FCPA Unit regularly works with the Federal
Bureau of Investigation (FBI) to investigate potential FCPA
violations. The FBI’s International Corruption Unit has primary
responsibility for international corruption and fraud
investigations and coordinates the FBI’s national FCPA
enforcement program. The FBI also has a dedicated FCPA
squad of FBI special agents (located in the Washington
Field Office) that is responsible for investigating many, and
providing support for all, of the FBI’s FCPA investigations.
In addition, the Department of Homeland Security and the
Internal Revenue Service-Criminal Investigation regularly
investigate potential FCPA violations. A number of other
agencies are also involved in the fight against international
corruption, including the Department of Treasury’s Office
of Foreign Assets Control, which has helped lead a number
of FCPA investigations.
Departments of Commerce and State
Besides enforcement efforts by DOJ and SEC,
the U.S. government is also working to address corruption
abroad and level the playing field for U.S. businesses
through the efforts of the Departments of Commerce and
State. Both Commerce and State advance anti-corruption
and good governance initiatives globally and regularly
assist U.S. companies doing business overseas in several
5
important ways. Both agencies encourage U.S. businesses
to seek the assistance of U.S embassies when they are confronted
with bribe solicitations or other corruption-related
issues overseas. 23
The Department of Commerce offers a number
of important resources for businesses, including the
International Trade Administration’s United States and
Foreign Commercial Service (Commercial Service). The
Commercial Service has export and industry specialists
located in over 100 U.S. cities and 70 countries who are
available to provide counseling and other assistance to U.S.
businesses, particularly small and medium-sized companies,
regarding exporting their products and services. Among
other things, these specialists can help a U.S. company conduct
due diligence when choosing business partners or agents
overseas. The International Company Profile Program, for
instance, can be part of a U.S. business’ evaluation of potential
overseas business partners. 24 Businesses may contact the
Commercial Service through its website, http://export.gov/
eac/, or directly at its domestic and foreign offices. 25
Additionally, the Department of Commerce’s Office
of the General Counsel maintains a website, http://www.
commerce.gov/os/ogc/transparency-and-anti-briberyinitiatives,
that contains recent articles and speeches, links
to translations of the FCPA, a catalogue of anti-corruption
resources, and a list of international conventions and initiatives.
The Trade Compliance Center in the Department
of Commerce’s International Trade Administration hosts
a website with anti-bribery resources, http://tcc.export.
gov/Bribery. This website contains an online form through
which U.S. companies can report allegations of foreign
bribery by foreign competitors in international business
transactions. 26 The Department of Commerce also provides
information to companies through a number of U.S.
and international publications designed to assist firms in
complying with anti-corruption laws. For example, the
Department of Commerce has included a new anti-corruption
section in its Country Commercial Guides, prepared
by market experts at U.S. embassies worldwide, that contains
information on market conditions for more than 100 countries,
including information on the FCPA for exporters. 27
chapter 1
Introduction
The Department of Commerce has also published a guide,
Business Ethics: A Manual for Managing a Responsible
Business Enterprise in Emerging Market Economies, which
contains information about corporate compliance programs
for businesses involved in international trade. 28
The Departments of Commerce and State also provide
advocacy support, when determined to be in the
national interest, for U.S. companies bidding for foreign
government contracts. The Department of Commerce’s
Advocacy Center, for example, supports U.S. businesses
competing against foreign companies for international contracts,
such as by arranging for the delivery of an advocacy
message by U.S. government officials or assisting with unanticipated
problems such as suspected bribery by a competitor.
29 The Department of State’s Bureau of Economic and
Business Affairs (specifically, its Office of Commercial and
Business Affairs) similarly assists U.S. firms doing business
overseas by providing advocacy on behalf of U.S. businesses
and identifying risk areas for U.S. businesses; more information
is available on its website, http://www.state.gov/e/
eb/cba/. Also, the Department of State’s economic officers
serving overseas provide commercial advocacy and support
for U.S. companies at the many overseas diplomatic posts
where the Commercial Service is not represented.
The Department of State promotes U.S. government
interests in addressing corruption internationally through
country-to-country diplomatic engagement; development
of and follow-through on international commitments relating
to corruption; promotion of high-level political engagement
(e.g., the G20 Anticorruption Action Plan); public
outreach in foreign countries; and support for building
the capacity of foreign partners to combat corruption. In
fiscal year 2009, the U.S. government provided more than
$1 billion for anti-corruption and related good governance
assistance abroad.
6
The Department of State’s Bureau of International
Narcotics and Law Enforcement Affairs (INL) manages
U.S. participation in many multilateral anti-corruption
political and legal initiatives at the global and regional level.
INL also funds and coordinates significant efforts to assist
countries with combating corruption through legal reform,
training, and other capacity-building efforts. Inquiries about
the U.S. government’s general anti-corruption efforts and
implementation of global and regional anti-corruption initiatives
may be directed to INL on its website, http://www.
state.gov/j/inl/c/crime/corr/index.htm, or by email to:
anticorruption@state.gov. In addition, the U.S. Agency for
International Development (USAID) has developed several
anti-corruption programs and publications, information
about which can be found at http://www.usaid.gov/whatwe-do/democracy-human-rights-and-governance/promoting-accountability-transparency.
Finally, the Department of
State’s brochure “Fighting Global Corruption: Business Risk
Management,” available at http://www.ogc.doc.gov/pdfs/
Fighting_Global_Corruption.pdf, provides guidance about
corporate compliance programs as well as international anticorruption
initiatives.
International Landscape: Global Anti-
Corruption Efforts
In recent years, there has been a growing international
consensus that corruption must be combated, and the
United States and other countries are parties to a number
of international anti-corruption conventions. Under these
conventions, countries that are parties undertake commitments
to adopt a range of preventive and criminal law measures
to combat corruption. The conventions incorporate
review processes that allow the United States to monitor
other countries to ensure that they are meeting their international
obligations. Likewise, these processes in turn permit
other parties to monitor the United States’ anti-corruption
laws and enforcement to ensure that such enforcement and
legal frameworks are consistent with the United States’ treaty
obligations. 30 U.S. officials regularly address the subject of
corruption with our foreign counterparts to raise awareness
of the importance of fighting corruption and urge stronger
enforcement of anti-corruption laws and policies.
OECD Working Group on Bribery and the Anti-
Bribery Convention
The OECD was founded in 1961 to stimulate economic
progress and world trade. As noted, the Anti-Bribery
Convention requires its parties to criminalize the bribery
of foreign public officials in international business transactions.
31 As of November 1, 2012, there were 39 parties to
the Anti-Bribery Convention: 34 OECD member countries
(including the United States) and five non-OECD
member countries (Argentina, Brazil, Bulgaria, the Russian
Federation, and South Africa). All of these parties are
also members of the OECD Working Group on Bribery
(Working Group). 32
The Working Group is responsible for monitoring the
implementation of the Anti-Bribery Convention, the 2009
Recommendation of the Council for Further Combating
Bribery of Foreign Public Officials in International
Business Transactions, and related instruments. Its members
meet quarterly to review and monitor implementation
of the Anti-Bribery Convention by member states around
the world. Each party undergoes periodic peer review. 33
This peer-review monitoring system is conducted in three
phases. The Phase 1 review includes an in-depth assessment
of each country’s domestic laws implementing the
Convention. The Phase 2 review examines the effectiveness
of each country’s laws and anti-bribery efforts. The final
phase is a permanent cycle of peer review (the first cycle of
which is referred to as the Phase 3 review) that evaluates
a country’s enforcement actions and results, as well as the
country’s efforts to address weaknesses identified during the
Phase 2 review. 34 All of the monitoring reports for the parties
to the Convention can be found on the OECD website
and can be a useful resource about the foreign bribery laws
of the OECD Working Group member countries. 35
The United States was one of the first countries to
undergo all three phases of review. The reports and appendices
can be found on DOJ’s and SEC’s websites. 36 In its
7
Phase 3 review of the United States, which was completed
in October 2010, the Working Group commended U.S.
efforts to fight transnational bribery and highlighted a
number of best practices developed by the United States.
The report also noted areas where the United States’ antibribery
efforts could be improved, including consolidating
publicly available information on the application of
the FCPA and enhancing awareness among small- and
medium-sized companies about the prevention and detection
of foreign bribery. This guide is, in part, a response to
these Phase 3 recommendations and is intended to help
businesses and individuals better understand the FCPA. 37
U.N. Convention Against Corruption
The United States is a state party to the United
Nations Convention Against Corruption (UNCAC),
which was adopted by the U.N. General Assembly on
October 31, 2003, and entered into force on December
14, 2005. 38 The United States ratified the UNCAC on
October 30, 2006. The UNCAC requires parties to criminalize
a wide range of corrupt acts, including domestic and
foreign bribery and related offenses such as money laundering
and obstruction of justice. The UNCAC also establishes
guidelines for the creation of anti-corruption bodies,
codes of conduct for public officials, transparent and objective
systems of procurement, and enhanced accounting and
auditing standards for the private sector. A peer review
mechanism assesses the implementation of the UNCAC
by parties to the Convention, with a focus in the first round
on criminalization and law enforcement as well as international
legal cooperation. 39 The United States has been
reviewed under the Pilot Review Programme, the report
of which is available on DOJ’s website. As of November 1,
2012, 163 countries were parties to the UNCAC. 40
chapter 1
Introduction
The IACAC requires parties (of which the United States
is one) to criminalize both foreign and domestic bribery.
A body known as the Mechanism for Follow-Up on
the Implementation of the Inter-American Convention
Against Corruption (MESICIC) monitors parties’ compliance
with the IACAC. As of November 1, 2012, 31 countries
were parties to MESICIC.
The Council of Europe established the Group of
States Against Corruption (GRECO) in 1999 to monitor
countries’ compliance with the Council of Europe’s anticorruption
standards, including the Council of Europe’s
Criminal Law Convention on Corruption. 42 These standards
include prohibitions on the solicitation and receipt of
bribes, as well as foreign bribery. As of November 1, 2012,
GRECO member states, which need not be members of
the Council of Europe, include more than 45 European
countries and the United States. 43
The United States has been reviewed under both
MESICIC and GRECO, and the reports generated by
those reviews are available on DOJ’s website.
Other Anti-Corruption Conventions
The Inter-American Convention Against Corruption
(IACAC) was the first international anti-corruption convention,
adopted in March 1996 in Caracas, Venezuela,
by members of the Organization of American States. 41
8

chapter 2
The FCPA:
Anti-Bribery Provisions
THE FCPA: ANTI-BRIBERY
PROVISIONS
The FCPA addresses the problem of international corruption in two ways: (1)
the anti-bribery provisions, which are discussed below, prohibit individuals
and businesses from bribing foreign government officials in order to obtain
or retain business and (2) the accounting provisions, which are discussed in
Chapter 3, impose certain record keeping and internal control requirements
on issuers, and prohibit individuals and companies from knowingly falsifying
an issuer’s books and records or circumventing or failing to implement an issuer’s
system of internal controls. Violations of the FCPA can lead to civil and
criminal penalties, sanctions, and remedies, including fines, disgorgement,
and/or imprisonment.
In general, the FCPA prohibits offering to pay, paying,
promising to pay, or authorizing the payment of money
or anything of value to a foreign official in order to influence
any act or decision of the foreign official in his or her
official capacity or to secure any other improper advantage
in order to obtain or retain business. 44
Who Is Covered by the Anti-Bribery Provisions?
The FCPA’s anti-bribery provisions apply broadly to
three categories of persons and entities: (1) “issuers” and
their officers, directors, employees, agents, and shareholders;
(2) “domestic concerns” and their officers, directors,
employees, agents, and shareholders; and (3) certain persons
and entities, other than issuers and domestic concerns,
acting while in the territory of the United States.
Issuers—15 U.S.C. § 78dd-1
Section 30A of the Securities Exchange Act of 1934
(the Exchange Act), which can be found at 15 U.S.C.
§ 78dd-1, contains the anti-bribery provision governing
10
How Can I Tell If My Company Is an “Issuer”?
• It is listed on a national securities exchange in the
United States (either stock or American Depository
Receipts); or
• The company’s stock trades in the over-thecounter
market in the United States and the
company is required to file SEC reports.
• To see if your company files SEC reports, go to
SEC’s website at http://www.sec.gov/edgar/
searchedgar/webusers.htm.
issuers. 45 A company is an “issuer” under the FCPA if it
has a class of securities registered under Section 12 of the
Exchange Act 46 or is required to file periodic and other
reports with SEC under Section 15(d) of the Exchange
Act. 47 In practice, this means that any company with a
class of securities listed on a national securities exchange in
the United States, or any company with a class of securities
quoted in the over-the-counter market in the United
States and required to file periodic reports with SEC, is an
issuer. A company thus need not be a U.S. company to be
an issuer. Foreign companies with American Depository
Receipts that are listed on a U.S. exchange are also issuers. 48
As of December 31, 2011, 965 foreign companies were registered
with SEC. 49 Officers, directors, employees, agents,
or stockholders acting on behalf of an issuer (whether U.S.
or foreign nationals), and any co-conspirators, also can be
prosecuted under the FCPA. 50
Domestic Concerns—15 U.S.C. § 78dd-2
The FCPA also applies to “domestic concerns.” 51 A
domestic concern is any individual who is a citizen, national,
or resident of the United States, or any corporation, partnership,
association, joint-stock company, business trust,
unincorporated organization, or sole proprietorship that is
organized under the laws of the United States or its states,
territories, possessions, or commonwealths or that has its
principal place of business in the United States. 52 Officers,
directors, employees, agents, or stockholders acting on
behalf of a domestic concern, including foreign nationals or
companies, are also covered. 53
Territorial Jurisdiction—15 U.S.C. § 78dd-3
The FCPA also applies to certain foreign nationals or
entities that are not issuers or domestic concerns. 54 Since
1998, the FCPA’s anti-bribery provisions have applied to
foreign persons and foreign non-issuer entities that, either
directly or through an agent, engage in any act in furtherance
of a corrupt payment (or an offer, promise, or authorization
to pay) while in the territory of the United States. 55
Also, officers, directors, employees, agents, or stockholders
acting on behalf of such persons or entities may be subject
to the FCPA’s anti-bribery prohibitions. 56
What Jurisdictional Conduct Triggers the Anti-
Bribery Provisions?
The FCPA’s anti-bribery provisions can apply to
conduct both inside and outside the United States. Issuers
and domestic concerns—as well as their officers, directors,
employees, agents, or stockholders—may be prosecuted
for using the U.S. mails or any means or instrumentality of
interstate commerce in furtherance of a corrupt payment
to a foreign official. The Act defines “interstate commerce”
as “trade, commerce, transportation, or communication
among the several States, or between any foreign country
and any State or between any State and any place or ship
outside thereof ….” 57 The term also includes the intrastate
use of any interstate means of communication, or any other
interstate instrumentality. 58 Thus, placing a telephone call or
sending an e-mail, text message, or fax from, to, or through
the United States involves interstate commerce—as does
sending a wire transfer from or to a U.S. bank or otherwise
using the U.S. banking system, or traveling across state borders
or internationally to or from the United States.
Those who are not issuers or domestic concerns may
be prosecuted under the FCPA if they directly, or through
an agent, engage in any act in furtherance of a corrupt payment
while in the territory of the United States, regardless of
11
whether they utilize the U.S. mails or a means or instrumentality
of interstate commerce. 59 Thus, for example, a foreign
national who attends a meeting in the United States that furthers
a foreign bribery scheme may be subject to prosecution,
as may any co-conspirators, even if they did not themselves
attend the meeting. A foreign national or company may also
be liable under the FCPA if it aids and abets, conspires with,
or acts as an agent of an issuer or domestic concern, regardless
of whether the foreign national or company itself takes any
action in the United States. 60
In addition, under the “alternative jurisdiction” provision
of the FCPA enacted in 1998, U.S. companies or
persons may be subject to the anti-bribery provisions even
if they act outside the United States. 61 The 1998 amendments
to the FCPA expanded the jurisdictional coverage of
the Act by establishing an alternative basis for jurisdiction,
that is, jurisdiction based on the nationality principle. 62 In
particular, the 1998 amendments removed the requirement
that there be a use of interstate commerce (e.g., wire, email,
telephone call) for acts in furtherance of a corrupt payment
chapter 2
The FCPA:
Anti-Bribery Provisions
to a foreign official by U.S. companies and persons occurring
wholly outside of the United States. 63
What Is Covered?—The Business
Purpose Test
The FCPA applies only to payments intended to
induce or influence a foreign official to use his or her position
“in order to assist … in obtaining or retaining business
for or with, or directing business to, any person.” 64 This
requirement is known as the “business purpose test” and is
broadly interpreted. 65
Not surprisingly, many enforcement actions involve
bribes to obtain or retain government contracts. 66 The
FCPA also prohibits bribes in the conduct of business or
Hypothetical: FCPA Jurisdiction
Company A, a Delaware company with its principal place of business in New York, is a large energy company that
operates globally, including in a number of countries that have a high risk of corruption, such as Foreign Country. Company
A’s shares are listed on a national U.S. stock exchange. Company A enters into an agreement with a European company
(EuroCo) to submit a joint bid to the Oil Ministry to build a refinery in Foreign Country. EuroCo is not an issuer.
Executives of Company A and EuroCo meet in New York to discuss how to win the bid and decide to hire a purported
third-party consultant (Intermediary) and have him use part of his “commission” to bribe high-ranking officials within the
Oil Ministry. Intermediary meets with executives at Company A and EuroCo in New York to finalize the scheme. Eventually,
millions of dollars in bribes are funneled from the United States and Europe through Intermediary to high-ranking officials
at the Oil Ministry, and Company A and EuroCo win the contract. A few years later, a front page article alleging that the
contract was procured through bribery appears in Foreign Country, and DOJ and SEC begin investigating whether the
FCPA was violated.
Based on these facts, which entities fall within the FCPA’s jurisdiction?
All of the entities easily fall within the FCPA’s jurisdiction. Company A is both an “issuer” and a “domestic concern”
under the FCPA, and Intermediary is an “agent” of Company A. EuroCo and Intermediary are also subject to the FCPA’s
territorial jurisdiction provision based on their conduct while in the United States. Moreover, even if EuroCo and Intermediary
had never taken any actions in the territory of the United States, they can still be subject to jurisdiction under a traditional
application of conspiracy law and may be subject to substantive FCPA charges under Pinkerton liability, namely, being liable
for the reasonably foreseeable substantive FCPA crimes committed by a co-conspirator in furtherance of the conspiracy.
12
Examples of Actions Taken
to Obtain or Retain Business
• Winning a contract
• Influencing the procurement process
• Circumventing the rules for importation of
products
• Gaining access to non-public bid tender
information
• Evading taxes or penalties
• Influencing the adjudication of lawsuits or
enforcement actions
• Obtaining exceptions to regulations
• Avoiding contract termination
held that payments to obtain favorable tax treatment can,
under appropriate circumstances, violate the FCPA:
Avoiding or lowering taxes reduces operating costs
and thus increases profit margins, thereby freeing up
funds that the business is otherwise legally obligated
to expend. And this, in turn, enables it to take any
number of actions to the disadvantage of competitors.
Bribing foreign officials to lower taxes and customs
duties certainly can provide an unfair advantage
over competitors and thereby be of assistance to the
payor in obtaining or retaining business.
* * *
[W]e hold that Congress intended for the FCPA
to apply broadly to payments intended to assist the
payor, either directly or indirectly, in obtaining or
retaining business for some person, and that bribes
paid to foreign tax officials to secure illegally reduced
customs and tax liability constitute a type of payment
that can fall within this broad coverage. 72
to gain a business advantage. 67 For example, bribe payments
made to secure favorable tax treatment, to reduce or eliminate
customs duties, to obtain government action to prevent
competitors from entering a market, or to circumvent
a licensing or permit requirement, all satisfy the business
purpose test. 68
In 2004, the U.S. Court of Appeals for the Fifth Circuit
addressed the business purpose test in United States v. Kay
and held that bribes paid to obtain favorable tax treatment—
which reduced a company’s customs duties and sales taxes
on imports—could constitute payments made to “obtain
or retain” business within the meaning of the FCPA. 69 The
court explained that in enacting the FCPA, “Congress meant
to prohibit a range of payments wider than only those that
directly influence the acquisition or retention of government
contracts or similar commercial or industrial arrangements.”
70 The Kay court found that “[t]he congressional
target was bribery paid to engender assistance in improving
the business opportunities of the payor or his beneficiary,
irrespective of whether that assistance be direct or indirect,
and irrespective of whether it be related to administering
the law, awarding, extending, or renewing a contract, or
executing or preserving an agreement.” 71 Accordingly, Kay
Paying Bribes to Customs Officials
In 2010, a global freight forwarding company and
six of its corporate customers in the oil and gas industry
resolved charges that they paid bribes to customs
officials. The companies bribed customs officials in more
than ten countries in exchange for such benefits as:
• evading customs duties on imported goods
• improperly expediting the importation of goods
and equipment
• extending drilling contracts and lowering tax
assessments
• obtaining false documentation related to
temporary import permits for drilling rigs
• enabling the release of drilling rigs and other
equipment from customs officials
In many instances, the improper payments at issue
allowed the company to carry out its existing business,
which fell within the FCPA’s prohibition on corrupt
payments made for the purpose of “retaining” business.
The seven companies paid a total of more than $235
million in civil and criminal sanctions and disgorgement.
13
In short, while the FCPA does not cover every type
of bribe paid around the world for every purpose, it does
apply broadly to bribes paid to help obtain or retain business,
which can include payments made to secure a wide
variety of unfair business advantages. 73
chapter 2
The FCPA:
Anti-Bribery Provisions
What Does “Corruptly” Mean?
To violate the FCPA, an offer, promise, or authorization
of a payment, or a payment, to a government official
must be made “corruptly.” 74 As Congress noted when
adopting the FCPA, the word “corruptly” means an intent
or desire to wrongfully influence the recipient:
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. 75
Where corrupt intent is present, the FCPA prohibits
paying, offering, or promising to pay money or anything
of value (or authorizing the payment or offer). 76 By focusing
on intent, the FCPA does not require that a corrupt
act succeed in its purpose. 77 Nor must the foreign official
actually solicit, accept, or receive the corrupt payment for
the bribe payor to be liable. 78 For example, in one case, a
specialty chemical company promised Iraqi government
officials approximately $850,000 in bribes for an upcoming
contract. Although the company did not, in the end, make
the payment (the scheme was thwarted by the U.S. government’s
investigation), the company still violated the FCPA
and was held accountable. 79
Also, as long as the offer, promise, authorization, or
payment is made corruptly, the actor need not know the
identity of the recipient; the attempt is sufficient. 80 Thus, an
executive who authorizes others to pay “whoever you need
to” in a foreign government to obtain a contract has violated
the FCPA—even if no bribe is ultimately offered or paid.
What Does “Willfully” Mean and When
Does It Apply?
In order for an individual defendant to be criminally
liable under the FCPA, he or she must act “willfully.” 81 Proof
of willfulness is not required to establish corporate criminal
or civil liability, 82 though proof of corrupt intent is.
The term “willfully” is not defined in the FCPA, but
it has generally been construed by courts to connote an
act committed voluntarily and purposefully, and with a
bad purpose, i.e., with “knowledge that [a defendant] was
doing a ‘bad’ act under the general rules of law.” 83 As the
Supreme Court explained in Bryan v. United States, “[a]s a
general matter, when used in the criminal context, a ‘willful’
act is one undertaken with a ‘bad purpose.’ In other
words, in order to establish a ‘willful’ violation of a statute,
‘the Government must prove that the defendant acted with
knowledge that his conduct was unlawful.’” 84
Notably, as both the Second Circuit and Fifth Circuit
Courts of Appeals have found, the FCPA does not require
the government to prove that a defendant was specifically
aware of the FCPA or knew that his conduct violated the
FCPA. 85 To be guilty, a defendant must act with a bad purpose,
i.e., know generally that his conduct is unlawful.
What Does “Anything of Value” Mean?
In enacting the FCPA, Congress recognized that bribes
can come in many shapes and sizes—a broad range of unfair
benefits 86 —and so the statute prohibits the 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. 87
An improper benefit can take many forms. While
cases often involve payments of cash (sometimes in the
guise of “consulting fees” or “commissions” given through
intermediaries), others have involved travel expenses and
14
expensive gifts. Like the domestic bribery statute, the FCPA
does not contain a minimum threshold amount for corrupt
gifts or payments. 88 Indeed, what might be considered a
modest payment in the United States could be a larger and
much more significant amount in a foreign country.
Regardless of size, for a gift or other payment to violate
the statute, the payor must have corrupt intent—that is,
the intent to improperly influence the government official.
The corrupt intent requirement protects companies that
engage in the ordinary and legitimate promotion of their
businesses while targeting conduct that seeks to improperly
induce officials into misusing their positions. Thus, it
is difficult to envision any scenario in which the provision
of cups of coffee, taxi fare, or company promotional items
of nominal value would ever evidence corrupt intent, and
neither DOJ nor SEC has ever pursued an investigation
on the basis of such conduct. Moreover, as in all areas of
federal law enforcement, DOJ and SEC exercise discretion
in deciding which cases promote law enforcement priorities
and justify investigation. Certain patterns, however,
have emerged: DOJ’s and SEC’s anti-bribery enforcement
actions have focused on small payments and gifts only when
they comprise part of a systemic or long-standing course of
conduct that evidences a scheme to corruptly pay foreign
officials to obtain or retain business. These assessments are
necessarily fact specific.
Cash
The most obvious form of corrupt payment is large
amounts of cash. In some instances, companies have maintained
cash funds specifically earmarked for use as bribes.
One U.S. issuer headquartered in Germany disbursed corrupt
payments from a corporate “cash desk” and used offshore
bank accounts to bribe government officials to win
contracts. 89 In another instance, a four-company joint venture
used its agent to pay $5 million in bribes to a Nigerian
political party. 90 The payments were made to the agent in
suitcases of cash (typically in $1 million installments), and,
in one instance, the trunk of a car when the cash did not fit
into a suitcase. 91
Gifts, Travel, Entertainment, and Other Things
of Value
A small gift or token of esteem or gratitude is often
an appropriate way for business people to display respect
for each other. Some hallmarks of appropriate gift-giving
are when the gift is given openly and transparently, properly
recorded in the giver’s books and records, provided only to
reflect esteem or gratitude, and permitted under local law.
Items of nominal value, such as cab fare, reasonable
meals and entertainment expenses, or company promotional
items, are unlikely to improperly influence an official,
and, as a result, are not, without more, items that have
resulted in enforcement action by DOJ or SEC. The larger
or more extravagant the gift, however, the more likely it was
given with an improper purpose. DOJ and SEC enforcement
cases thus have involved single instances of large,
extravagant gift-giving (such as sports cars, fur coats, and
other luxury items) as well as widespread gifts of smaller
items as part of a pattern of bribes. 92 For example, in one
case brought by DOJ and SEC, a defendant gave a government
official a country club membership fee and a generator,
as well as household maintenance expenses, payment
of cell phone bills, an automobile worth $20,000, and limousine
services. The same official also received $250,000
through a third-party agent. 93
In addition, a number of FCPA enforcement actions
have involved the corrupt payment of travel and entertainment
expenses. Both DOJ and SEC have brought cases
where these types of expenditures occurred in conjunction
with other conduct reflecting systemic bribery or other
clear indicia of corrupt intent.
A case involving a California-based telecommunications
company illustrates the types of improper travel
and entertainment expenses that may violate the FCPA. 94
Between 2002 and 2007, the company spent nearly $7 million
on approximately 225 trips for its customers in order to
obtain systems contracts in China, including for employees
of Chinese state-owned companies to travel to popular tourist
destinations in the United States. 95 Although the trips
were purportedly for the individuals to conduct training at
15
Examples of Improper
Travel and Entertainment
• a $12,000 birthday trip for a government decisionmaker
from Mexico that included visits to wineries
and dinners
• $10,000 spent on dinners, drinks, and
entertainment for a government official
• a trip to Italy for eight Iraqi government officials
that consisted primarily of sightseeing and
included $1,000 in “pocket money” for each
official
• a trip to Paris for a government official and his wife
that consisted primarily of touring activities via a
chauffeur-driven vehicle
the company’s facilities, in reality, no training occurred on
many of these trips and the company had no facilities at those
locations. Approximately $670,000 of the $7 million was
falsely recorded as “training” expenses. 96
Likewise, a New Jersey-based telecommunications
company spent millions of dollars on approximately 315
trips for Chinese government officials, ostensibly to inspect
factories and train the officials in using the company’s
equipment. 97 In reality, during many of these trips, the officials
spent little or no time visiting the company’s facilities,
but instead visited tourist destinations such as Hawaii, Las
Vegas, the Grand Canyon, Niagara Falls, Disney World,
Universal Studios, and New York City. 98 Some of the trips
were characterized as “factory inspections” or “training”
with government customers but consisted primarily or
entirely of sightseeing to locations chosen by the officials,
typically lasting two weeks and costing between $25,000
and $55,000 per trip. In some instances, the company gave
the government officials $500 to $1,000 per day in spending
money and paid all lodging, transportation, food,
and entertainment expenses. The company either failed
to record these expenses or improperly recorded them as
“consulting fees” in its corporate books and records. The
chapter 2
The FCPA:
Anti-Bribery Provisions
company also failed to implement appropriate internal controls
to monitor the provision of travel and other things of
value to Chinese government officials. 99
Companies also may violate the FCPA if they give
payments or gifts to third parties, like an official’s family
members, as an indirect way of corruptly influencing a foreign
official. For example, one defendant paid personal bills
and provided airline tickets to a cousin and close friend of
the foreign official whose influence the defendant sought in
obtaining contracts. 100 The defendant was convicted at trial
and received a prison sentence. 101
As part of an effective compliance program, a company
should have clear and easily accessible guidelines
and processes in place for gift-giving by the company’s
directors, officers, employees, and agents. Though not
necessarily appropriate for every business, many larger
companies have automated gift-giving clearance processes
and have set clear monetary thresholds for gifts
along with annual limitations, with limited exceptions
for gifts approved by appropriate management. Clear
guidelines and processes can be an effective and efficient
means for controlling gift-giving, deterring improper
gifts, and protecting corporate assets.
The FCPA does not prohibit gift-giving. Rather, just
like its domestic bribery counterparts, the FCPA prohibits
the payments of bribes, including those disguised as gifts.
Charitable Contributions
Companies often engage in charitable giving as part
of legitimate local outreach. The FCPA does not prohibit
charitable contributions or prevent corporations from acting
as good corporate citizens. Companies, however, cannot
use the pretense of charitable contributions as a way to
funnel bribes to government officials.
16
For example, a pharmaceutical company used charitable
donations to a small local castle restoration charity
headed by a foreign government official to induce the official
to direct business to the company. Although the charity
was a bona fide charitable organization, internal documents
at the pharmaceutical company’s subsidiary established that
the payments were not viewed as charitable contributions
but rather as “dues” the subsidiary was required to pay for
assistance from the government official. The payments constituted
a significant portion of the subsidiary’s total promotional
donations budget and were structured to allow
the subsidiary to exceed its authorized limits. The payments
Hypothetical: Gifts, Travel, and Entertainment
Company A is a large U.S. engineering company with global operations in more than 50 countries, including a
number that have a high risk of corruption, such as Foreign Country. Company A’s stock is listed on a national U.S. stock
exchange. In conducting its business internationally, Company A’s officers and employees come into regular contact with
foreign officials, including officials in various ministries and state-owned entities. At a trade show, Company A has a booth
at which it offers free pens, hats, t-shirts, and other similar promotional items with Company A’s logo. Company A also
serves free coffee, other beverages, and snacks at the booth. Some of the visitors to the booth are foreign officials.
Is Company A in violation of the FCPA?
No. These are legitimate, bona fide expenditures made in connection with the promotion, demonstration, or
explanation of Company A’s products or services There is nothing to suggest corrupt intent here The FCPA does not
prevent companies from promoting their businesses in this way or providing legitimate hospitality, including to foreign
officials Providing promotional items with company logos or free snacks as set forth above is an appropriate means of
providing hospitality and promoting business Such conduct has never formed the basis for an FCPA enforcement action
At the trade show, Company A invites a dozen current and prospective customers out for drinks, and pays
the moderate bar tab. Some of the current and prospective customers are foreign officials under the FCPA. Is
Company A in violation of the FCPA?
No. Again, the FCPA was not designed to prohibit all forms of hospitality to foreign officials. While the cost here may
be more substantial than the beverages, snacks, and promotional items provided at the booth, and the invitees specifically
selected, there is still nothing to suggest corrupt intent.
Two years ago, Company A won a long-term contract to supply goods and services to the state-owned Electricity
Commission in Foreign Country. The Electricity Commission is 100% owned, controlled, and operated by the
government of Foreign Country, and employees of the Electricity Commission are subject to Foreign Country’s
domestic bribery laws. Some Company A executives are in Foreign Country for meetings with officials of the
Electricity Commission. The General Manager of the Electricity Commission was recently married, and during the
trip Company A executives present a moderately priced crystal vase to the General Manager as a wedding gift
and token of esteem. Is Company A in violation of the FCPA?
No. It is appropriate to provide reasonable gifts to foreign officials as tokens of esteem or gratitude. It is important that
such gifts be made openly and transparently, properly recorded in a company’s books and records, and given only where
appropriate under local law, customary where given, and reasonable for the occasion.
During the course of the contract described above, Company A periodically provides training to Electricity
Commission employees at its facilities in Michigan. The training is paid for by the Electricity Commission as part of
the contract. Senior officials of the Electricity Commission inform Company A that they want to inspect the facilities
and ensure that the training is working well. Company A pays for the airfare, hotel, and transportation for the
(cont’d)
17
chapter 2
The FCPA:
Anti-Bribery Provisions
Electricity Commission senior officials to travel to Michigan to inspect Company A’s facilities. Because it is a lengthy
international flight, Company A agrees to pay for business class airfare, to which its own employees are entitled
for lengthy flights. The foreign officials visit Michigan for several days, during which the senior officials perform an
appropriate inspection. Company A executives take the officials to a moderately priced dinner, a baseball game,
and a play. Do any of these actions violate the FCPA?
No Neither the costs associated with training the employees nor the trip for the senior officials to the Company’s
facilities in order to inspect them violates the FCPA Reasonable and bona fide promotional expenditures do not violate
the FCPA Here, Company A is providing training to the Electricity Commission’s employees and is hosting the Electricity
Commission senior officials Their review of the execution and performance of the contract is a legitimate business purpose
Even the provision of business class airfare is reasonable under the circumstances, as are the meals and entertainment,
which are only a small component of the business trip
Would this analysis be different if Company A instead paid for the senior officials to travel first-class with their
spouses for an all-expenses-paid, week-long trip to Las Vegas, where Company A has no facilities?
Yes. This conduct almost certainly violates the FCPA because it evinces a corrupt intent. Here, the trip does not appear
to be designed for any legitimate business purpose, is extravagant, includes expenses for the officials’ spouses, and therefore
appears to be designed to corruptly curry favor with the foreign government officials. Moreover, if the trip were booked as a
legitimate business expense—such as the provision of training at its facilities—Company A would also be in violation of the
FCPA’s accounting provisions. Furthermore, this conduct suggests deficiencies in Company A’s internal controls.
Company A’s contract with the Electricity Commission is going to expire, and the Electricity Commission is
offering the next contract through its tender process. An employee of the Electricity Commission contacts
Company A and offers to provide Company A with confidential, non-public bid information from Company A’s
competitors if Company A will pay for a vacation to Paris for him and his girlfriend. Employees of Company A
accede to the official’s request, pay for the vacation, receive the confidential bid information, and yet still do not
win the contract. Has Company A violated the FCPA?
Yes Company A has provided things of value to a foreign official for the purpose of inducing the official to misuse
his office and to gain an improper advantage It does not matter that it was the foreign official who first suggested the
illegal conduct or that Company A ultimately was not successful in winning the contract This conduct would also violate
the FCPA’s accounting provisions if the trip were booked as a legitimate business expense and suggests deficiencies in
Company A’s internal controls
18
also were not in compliance with the company’s internal
policies, which provided that charitable donations generally
should be made to healthcare institutions and relate to
the practice of medicine. 102
Proper due diligence and controls are critical for
charitable giving. In general, the adequacy of measures
taken to prevent misuse of charitable donations will depend
on a risk-based analysis and the specific facts at hand. In
Opinion Procedure Release No. 10-02, DOJ described the
due diligence and controls that can minimize the likelihood
of an FCPA violation. In that matter, a Eurasian-based subsidiary
of a U.S. non-governmental organization was asked
by an agency of a foreign government to make a grant to
a local microfinance institution (MFI) as a prerequisite to
the subsidiary’s transformation to bank status. The subsidiary
proposed contributing $1.42 million to a local MFI to
satisfy the request. The subsidiary undertook an extensive,
three-stage due diligence process to select the proposed
grantee and imposed significant controls on the proposed
grant, including ongoing monitoring and auditing, earmarking
funds for capacity building, prohibiting compensation
of board members, and implementing anti-corruption
compliance provisions. DOJ explained that it would
not take any enforcement action because the company’s due
diligence and the controls it planned to put in place sufficed
to prevent an FCPA violation.
Other opinion releases also address charitable-type
grants or donations. Under the facts presented in those
releases, DOJ approved the proposed grant or donation, 103
based on due diligence measures and controls such as:
• certifications by the recipient regarding compliance
with the FCPA; 104
• due diligence to confirm that none of the recipient’s
officers were affiliated with the foreign government
at issue; 105
• a requirement that the recipient provide audited
financial statements; 106
• a written agreement with the recipient restricting
the use of funds; 107
• steps to ensure that the funds were transferred to a
valid bank account; 108
• confirmation that the charity’s commitments were
met before funds were disbursed; 109 and
• on-going monitoring of the efficacy of the
program. 110
Legitimate charitable giving does not violate the
FCPA. Compliance with the FCPA merely requires that
charitable giving not be used as a vehicle to conceal payments
made to corruptly influence foreign officials.
Five Questions to Consider When Making
Charitable Payments in a Foreign Country:
1 What is the purpose of the payment?
2 Is the payment consistent with the company’s
internal guidelines on charitable giving?
3 Is the payment at the request of a foreign official?
4 Is a foreign official associated with the charity
and, if so, can the foreign official make decisions
regarding your business in that country?
5 Is the payment conditioned upon receiving
business or other benefits?
Who Is a Foreign Official?
The FCPA’s anti-bribery provisions apply to corrupt
payments made to (1) “any foreign official”; (2) “any foreign
political party or official thereof ”; (3) “any candidate for
foreign political office”; or (4) any person, while knowing
that all or a portion of the payment will be offered, given, or
promised to an individual falling within one of these three
categories. 111 Although the statute distinguishes between a
“foreign official,” “foreign political party or official thereof,”
and “candidate for foreign political office,” the term “foreign
official” in this guide generally refers to an individual
falling within any of these three categories.
The FCPA defines “foreign official” to include:
any officer or employee of a foreign government or
any department, agency, or instrumentality thereof,
19
or of a public international organization, or any person
acting in an official capacity for or on behalf of
any such government or department, agency, or instrumentality,
or for or on behalf of any such public
international organization. 112
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As this language makes clear, the FCPA broadly
applies to corrupt payments to “any” officer or employee
of a foreign government and to those acting on the foreign
government’s behalf. 113 The FCPA thus covers corrupt
payments to low-ranking employees and high-level
officials alike. 114
The FCPA prohibits payments to foreign officials, not
to foreign governments. 115 That said, companies contemplating
contributions or donations to foreign governments
should take steps to ensure that no monies are used for corrupt
purposes, such as the personal benefit of individual
foreign officials.
Department, Agency, or Instrumentality of a
Foreign Government
Foreign officials under the FCPA include officers
or employees of a department, agency, or instrumentality
of a foreign government. When a foreign government
is organized in a fashion similar to the U.S. system, what
constitutes a government department or agency is typically
clear (e.g., a ministry of energy, national security agency, or
transportation authority). 116 However, governments can be
organized in very different ways. 117 Many operate through
state-owned and state-controlled entities, particularly in
such areas as aerospace and defense manufacturing, banking
and finance, healthcare and life sciences, energy and
extractive industries, telecommunications, and transportation.
118 By including officers or employees of agencies and
instrumentalities within the definition of “foreign official,”
the FCPA accounts for this variability.
The term “instrumentality” is broad and can include
state-owned or state-controlled entities. Whether a particular
entity constitutes an “instrumentality” under the FCPA
requires a fact-specific analysis of an entity’s ownership,
control, status, and function. 119 A number of courts have
approved final jury instructions providing a non-exclusive
list of factors to be considered:
• the foreign state’s extent of ownership of the entity;
• the foreign state’s degree of control over the entity
(including whether key officers and directors of
the entity are, or are appointed by, government
officials);
• the foreign state’s characterization of the entity and
its employees;
• the circumstances surrounding the entity’s creation;
• the purpose of the entity’s activities;
• the entity’s obligations and privileges under the
foreign state’s law;
• the exclusive or controlling power vested in the
entity to administer its designated functions;
• the level of financial support by the foreign
state (including subsidies, special tax treatment,
government-mandated fees, and loans);
• the entity’s provision of services to the jurisdiction’s
residents;
• whether the governmental end or purpose sought
to be achieved is expressed in the policies of the
foreign government; and
• the general perception that the entity is performing
official or governmental functions. 120
Companies should consider these factors when evaluating
the risk of FCPA violations and designing compliance
programs.
DOJ and SEC have pursued cases involving instrumentalities
since the time of the FCPA’s enactment and
have long used an analysis of ownership, control, status,
and function to determine whether a particular entity is
an agency or instrumentality of a foreign government.
For example, the second-ever FCPA case charged by DOJ
involved a California company that paid bribes through a
Mexican corporation to two executives of a state-owned
20
Mexican national oil company. 121 And in the early 1980s,
DOJ and SEC brought cases involving a $1 million bribe to
the chairman of Trinidad and Tobago’s racing authority. 122
DOJ and SEC continue to regularly bring FCPA
cases involving bribes paid to employees of agencies and
instrumentalities of foreign governments. In one such
case, the subsidiary of a Swiss engineering company paid
bribes to officials of a state-owned and controlled electricity
commission. The commission was created by, owned
by, and controlled by the Mexican government, and it had
a monopoly on the transmission and distribution of electricity
in Mexico. Many of the commission’s board members
were cabinet-level government officials, and the director
was appointed by Mexico’s president. 123 Similarly, in
another recent case, Miami telecommunications executives
were charged with paying bribes to employees of Haiti’s
state-owned and controlled telecommunications company.
The telecommunications company was 97% owned and
100% controlled by the Haitian government, and its director
was appointed by Haiti’s president. 124
While no one factor is dispositive or necessarily more
important than another, as a practical matter, an entity is
unlikely to qualify as an instrumentality if a government
does not own or control a majority of its shares. However,
there are circumstances in which an entity would qualify
as an instrumentality absent 50% or greater foreign government
ownership, which is reflected in the limited number
of DOJ or SEC enforcement actions brought in such
situations. For example, in addition to being convicted of
funneling millions of dollars in bribes to two sitting presidents
in two different countries, a French issuer’s three
subsidiaries were convicted of paying bribes to employees
of a Malaysian telecommunications company that was 43%
owned by Malaysia’s Ministry of Finance. There, notwithstanding
its minority ownership stake in the company, the
Ministry held the status of a “special shareholder,” had veto
power over all major expenditures, and controlled important
operational decisions. 125 In addition, most senior
company officers were political appointees, including the
Chairman and Director, the Chairman of the Board of the
Tender Committee, and the Executive Director. 126 Thus,
despite the Malaysian government having a minority shareholder
position, the company was an instrumentality of the
Malaysian government as the government nevertheless had
substantial control over the company.
Companies and individuals should also remember
that, whether an entity is an instrumentality of a foreign
government or a private entity, commercial (i.e., privateto-private)
bribery may still violate the FCPA’s accounting
provisions, the Travel Act, anti-money laundering laws, and
other federal or foreign laws. Any type of corrupt payment
thus carries a risk of prosecution.
Public International Organizations
In 1998, the FCPA was amended to expand the definition
of “foreign official” to include employees and representatives
of public international organizations. 127 A “public international
organization” is any organization designated as such
by Executive Order under the International Organizations
Immunities Act, 22 U.S.C. § 288, or any other organization
that the President so designates. 128 Currently, public international
organizations include entities such as the World Bank,
the International Monetary Fund, the World Intellectual
Property Organization, the World Trade Organization, the
OECD, the Organization of American States, and numerous
others. A comprehensive list of organizations designated
as “public international organizations” is contained in 22
U.S.C. § 288 and can also be found on the U.S. Government
Printing Office website at http://www.gpo.gov/fdsys/.
How Are Payments to Third Parties
Treated?
The FCPA expressly prohibits corrupt payments
made through third parties or intermediaries. 129 Specifically,
it covers payments made to “any person, while knowing
that all or a portion of such money or thing of value will
be offered, given, or promised, directly or indirectly,” 130 to a
foreign official. Many companies doing business in a foreign
country retain a local individual or company to help them
conduct business. Although these foreign agents may provide
entirely legitimate advice regarding local customs and
procedures and may help facilitate business transactions,
21
companies should be aware of the risks involved in engaging
third-party agents or intermediaries. The fact that a
bribe is paid by a third party does not eliminate the potential
for criminal or civil FCPA liability. 131
For instance, a four-company joint venture used
two agents—a British lawyer and a Japanese trading
company—to bribe Nigerian government officials in
order to win a series of liquefied natural gas construction
projects. 132 Together, the four multi-national corporations
and the Japanese trading company paid a
combined $1.7 billion in civil and criminal sanctions
for their decade-long bribery scheme. In addition, the
subsidiary of one of the companies pleaded guilty and a
number of individuals, including the British lawyer and
the former CEO of one of the companies’ subsidiaries,
received significant prison terms.
Similarly, a medical device manufacturer entered into
a deferred prosecution agreement as the result of corrupt
payments it authorized its local Chinese distributor to pay
to Chinese officials. 133 Another company, a manufacturer
of specialty chemicals, committed multiple FCPA violations
through its agents in Iraq: a Canadian national and
the Canadian’s companies. Among other acts, the Canadian
national paid and promised to pay more than $1.5 million
in bribes to officials of the Iraqi Ministry of Oil to secure
sales of a fuel additive. Both the company and the Canadian
national pleaded guilty to criminal charges and resolved
civil enforcement actions by SEC. 134
In another case, the U.S. subsidiary of a Swiss freight
forwarding company was charged with paying bribes on
behalf of its customers in several countries. 135 Although the
U.S. subsidiary was not an issuer under the FCPA, it was an
“agent” of several U.S. issuers and was thus charged directly
with violating the FCPA. Charges against the freight forwarding
company and seven of its customers resulted in
over $236.5 million in sanctions. 136
Because Congress anticipated the use of third-party
agents in bribery schemes—for example, to avoid actual
knowledge of a bribe—it defined the term “knowing” in a
way that prevents individuals and businesses from avoiding
liability by putting “any person” between themselves and
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the foreign officials. 137 Under the FCPA, a person’s state of
mind is “knowing” with respect to conduct, a circumstance,
or a result if the person:
• is aware that [he] is engaging in such conduct,
that such circumstance exists, or that such result is
substantially certain to occur; or
• has a firm belief that such circumstance exists or
that such result is substantially certain to occur. 138
Thus, a person has the requisite knowledge when he is
aware of a high probability of the existence of such circumstance,
unless the person actually believes that such circumstance
does not exist. 139 As Congress made clear, it meant to
impose liability not only on those with actual knowledge
of wrongdoing, but also on those who purposefully avoid
actual knowledge:
[T]he so-called “head-in-the-sand” problem—variously
described in the pertinent authorities as “conscious
disregard,” “willful blindness” or “deliberate
ignorance”—should be covered so that management
officials could not take refuge from the Act’s prohibitions
by their unwarranted obliviousness to any
action (or inaction), language or other “signaling device”
that should reasonably alert them of the “high
probability” of an FCPA violation. 140
Common red flags associated with third parties include:
• excessive commissions to third-party agents or
consultants;
• unreasonably large discounts to third-party
distributors;
• third-party “consulting agreements” that include
only vaguely described services;
• the third-party consultant is in a different line of
business than that for which it has been engaged;
• the third party is related to or closely associated
with the foreign official;
22
• the third party became part of the transaction at
the express request or insistence of the foreign
official;
• the third party is merely a shell company incorporated
in an offshore jurisdiction; and
• the third party requests payment to offshore
bank accounts.
Businesses may reduce the FCPA risks associated
with third-party agents by implementing an effective compliance
program, which includes due diligence of any prospective
foreign agents.
United States v. Kozeny, et al.
In December 2011, the U.S. Court of Appeals
for the Second Circuit upheld a conscious avoidance
instruction given during the 2009 trial of a businessman
who was convicted of conspiring to violate the FCPA’s
anti-bribery provisions by agreeing to make payments to
Azeri officials in a scheme to encourage the privatization
of the Azerbaijan Republic’s state oil company. The
court of appeals found that the instruction did not lack
a factual predicate, citing evidence and testimony at
trial demonstrating that the defendant knew corruption
was pervasive in Azerbaijan; that he was aware of his
business partner’s reputation for misconduct; that he
had created two U.S. companies in order to shield
himself and other investors from potential liability for
payments made in violation of the FCPA; and that the
defendant expressed concerns during a conference call
about whether his business partner and company were
bribing officials.
The court of appeals also rejected the defendant’s
contention that the conscious avoidance charge had
improperly permitted the jury to convict him based on
negligence, explaining that ample evidence in the record
showed that the defendant had “serious concerns”
about the legality of his partner’s business practices
“and worked to avoid learning exactly what [he] was
doing,” and noting that the district court had specifically
instructed the jury not to convict based on negligence.
What Affirmative Defenses Are
Available?
The FCPA’s anti-bribery provisions contain two affirmative
defenses: (1) that the payment was lawful under the
written laws of the foreign country (the “local law” defense),
and (2) that the money was spent as part of demonstrating a
product or performing a contractual obligation (the “reasonable
and bona fide business expenditure” defense). Because
these are affirmative defenses, the defendant bears the burden
of proving them.
The Local Law Defense
For the local law defense to apply, a defendant must
establish that “the payment, gift, offer, or promise of anything
of value that was made, was lawful under the written
laws and regulations of the foreign official’s, political
party’s, party official’s, or candidate’s country.” 141 The defendant
must establish that the payment was lawful under the
foreign country’s written laws and regulations at the time
of the offense. In creating the local law defense in 1988,
Congress sought “to make clear that the absence of written
laws in a foreign official’s country would not by itself be sufficient
to satisfy this defense.” 142 Thus, the fact that bribes
may not be prosecuted under local law is insufficient to
establish the defense. In practice, the local law defense arises
infrequently, as the written laws and regulations of countries
rarely, if ever, permit corrupt payments. Nevertheless,
if a defendant can establish that conduct that otherwise
falls within the scope of the FCPA’s anti-bribery provisions
was lawful under written, local law, he or she would have a
defense to prosecution.
In United States v. Kozeny, the defendant unsuccessfully
sought to assert the local law defense regarding the law
of Azerbaijan. The parties disputed the contents and applicability
of Azeri law, and each presented expert reports and
testimony on behalf of their conflicting interpretations. The
court ruled that the defendant could not invoke the FCPA’s
affirmative defense because Azeri law did not actually legalize
the bribe payment. The court concluded that an exception
under Azeri law relieving bribe payors who voluntarily
23
disclose bribe payments to the authorities of criminal liability
did not make the bribes legal. 143
Reasonable and Bona Fide Expenditures
The FCPA allows companies to provide reasonable
and bona fide travel and lodging expenses to a foreign
official, and it is an affirmative defense where expenses
are directly related to the promotion, demonstration, or
explanation of a company’s products or services, or are
related to a company’s execution or performance of a contract
with a foreign government or agency. 144 Trips that
are primarily for personal entertainment purposes, however,
are not bona fide business expenses and may violate
the FCPA’s anti-bribery provisions. 145 Moreover, when
expenditures, bona fide or not, are mischaracterized in a
company’s books and records, or where unauthorized or
improper expenditures occur due to a failure to implement
adequate internal controls, they may also violate
the FCPA’s accounting provisions. Purposeful mischaracterization
of expenditures may also, of course, indicate a
corrupt intent.
DOJ and SEC have consistently recognized that businesses,
both foreign and domestic, are permitted to pay for
reasonable expenses associated with the promotion of their
products and services or the execution of existing contracts.
In addition, DOJ has frequently provided guidance about
legitimate promotional and contract-related expenses—
addressing travel and lodging expenses in particular—
through several opinion procedure releases. Under the circumstances
presented in those releases, 146 DOJ opined that
the following types of expenditures on behalf of foreign
officials did not warrant FCPA enforcement action:
• travel and expenses to visit company facilities or
operations;
• travel and expenses for training; and
• product demonstration or promotional activities,
including travel and expenses for meetings.
Whether any particular payment is a bona fide expenditure
necessarily requires a fact-specific analysis. But the
following non-exhaustive list of safeguards, compiled from
several releases, may be helpful to businesses in evaluating
chapter 2
The FCPA:
Anti-Bribery Provisions
whether a particular expenditure is appropriate or may risk
violating the FCPA:
• Do not select the particular officials who will participate
in the party’s proposed trip or program 147
or else select them based on pre-determined, meritbased
criteria. 148
• Pay all costs directly to travel and lodging vendors
and/or reimburse costs only upon presentation of a
receipt. 149
• Do not advance funds or pay for reimbursements
in cash. 150
• Ensure that any stipends are reasonable approximations
of costs likely to be incurred 151 and/or that
expenses are limited to those that are necessary and
reasonable. 152
• Ensure the expenditures are transparent,
both within the company and to the foreign
government. 153
• Do not condition payment of expenses on any
action by the foreign official. 154
• Obtain written confirmation that payment of the
expenses is not contrary to local law. 155
• Provide no additional compensation, stipends, or
spending money beyond what is necessary to pay
for actual expenses incurred. 156
• Ensure that costs and expenses on behalf of the
foreign officials will be accurately recorded in the
company’s books and records. 157
In sum, while certain expenditures are more likely to
raise red flags, they will not give rise to prosecution if they
are (1) reasonable, (2) bona fide, and (3) directly related
to (4) the promotion, demonstration, or explanation of
products or services or the execution or performance of
a contract. 158
24
What Are Facilitating or Expediting
Payments?
The FCPA’s bribery prohibition contains a narrow
exception for “facilitating or expediting payments” made in
furtherance of routine governmental action. 159 The facilitating
payments exception applies only when a payment is
made to further “routine governmental action” that involves
non-discretionary acts. 160 Examples of “routine governmental
action” include processing visas, providing police protection
or mail service, and supplying utilities like phone
service, power, and water. Routine government action does
not include a decision to award new business or to continue
business with a particular party. 161 Nor does it include acts
that are within an official’s discretion or that would constitute
misuse of an official’s office. 162 Thus, paying an official a
small amount to have the power turned on at a factory might
be a facilitating payment; paying an inspector to ignore the
fact that the company does not have a valid permit to operate
the factory would not be a facilitating payment.
Examples of “Routine Governmental Action”
An action which is ordinarily and commonly
performed by a foreign official in—
• obtaining permits, licenses, or other official
documents to qualify a person to do business in a
foreign country;
• processing governmental papers, such as visas and
work orders;
• providing police protection, mail pickup and
delivery, or scheduling inspections associated with
contract performance or inspections related to
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.
Whether a payment falls within the exception is not
dependent on the size of the payment, though size can be
telling, as a large payment is more suggestive of corrupt
intent to influence a non-routine governmental action. But,
like the FCPA’s anti-bribery provisions more generally, the
facilitating payments exception focuses on the purpose of the
payment rather than its value. For instance, an Oklahomabased
corporation violated the FCPA when its subsidiary
paid Argentine customs officials approximately $166,000
to secure customs clearance for equipment and materials
that lacked required certifications or could not be imported
under local law and to pay a lower-than-applicable duty
rate. The company’s Venezuelan subsidiary had also paid
Venezuelan customs officials approximately $7,000 to permit
the importation and exportation of equipment and materials
not in compliance with local regulations and to avoid a full
inspection of the imported goods. 163 In another case, three
subsidiaries of a global supplier of oil drilling products and
services were criminally charged with authorizing an agent to
make at least 378 corrupt payments (totaling approximately
$2.1 million) to Nigerian Customs Service officials for preferential
treatment during the customs process, including the
reduction or elimination of customs duties. 164
Labeling a bribe as a “facilitating payment” in a company’s
books and records does not make it one. A Swiss
offshore drilling company, for example, recorded payments
to its customs agent in the subsidiary’s “facilitating
payment” account, even though company personnel
believed the payments were, in fact, bribes. The company
was charged with violating both the FCPA’s anti-bribery
and accounting provisions. 165
Although true facilitating payments are not illegal
under the FCPA, they may still violate local law in the
countries where the company is operating, and the OECD’s
Working Group on Bribery recommends that all countries
encourage companies to prohibit or discourage facilitating
payments, which the United States has done regularly. 166
In addition, other countries’ foreign bribery laws, such as
the United Kingdom’s, may not contain an exception for
facilitating payments. 167 Individuals and companies should
therefore be aware that although true facilitating payments
25
are permissible under the FCPA, they may still subject a
company or individual to sanctions. As with any expenditure,
facilitating payments may still violate the FCPA if they are
not properly recorded in an issuer’s books and records. 168
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Anti-Bribery Provisions
Hypothetical: Facilitating Payments
Company A is a large multi-national mining company with operations in Foreign Country, where it recently identified
a significant new ore deposit It has ready buyers for the new ore but has limited capacity to get it to market In order to
increase the size and speed of its ore export, Company A will need to build a new road from its facility to the port that can
accommodate larger trucks Company A retains an agent in Foreign Country to assist it in obtaining the required permits,
including an environmental permit, to build the road The agent informs Company A’s vice president for international
operations that he plans to make a one-time small cash payment to a clerk in the relevant government office to ensure
that the clerk files and stamps the permit applications expeditiously, as the agent has experienced delays of three months
when he has not made this “grease” payment The clerk has no discretion about whether to file and stamp the permit
applications once the requisite filing fee has been paid The vice president authorizes the payment
A few months later, the agent tells the vice president that he has run into a problem obtaining a necessary environmental
permit. It turns out that the planned road construction would adversely impact an environmentally sensitive and protected
local wetland. While the problem could be overcome by rerouting the road, such rerouting would cost Company A $1
million more and would slow down construction by six months. It would also increase the transit time for the ore and
reduce the number of monthly shipments. The agent tells the vice president that he is good friends with the director of
Foreign Country’s Department of Natural Resources and that it would only take a modest cash payment to the director
and the “problem would go away.” The vice president authorizes the payment, and the agent makes it. After receiving the
payment, the director issues the permit, and Company A constructs its new road through the wetlands.
Was the payment to the clerk a violation of the FCPA?
No. Under these circumstances, the payment to the clerk would qualify as a facilitating payment, since it is a one-time,
small payment to obtain a routine, non-discretionary governmental service that Company A is entitled to receive (i.e., the
stamping and filing of the permit application). However, while the payment may qualify as an exception to the FCPA’s
anti-bribery provisions, it may violate other laws, both in Foreign Country and elsewhere. In addition, if the payment is not
accurately recorded, it could violate the FCPA’s books and records provision.
Was the payment to the director a violation of the FCPA?
Yes. The payment to the director of the Department of Natural Resources was in clear violation of the FCPA, since it
was designed to corruptly influence a foreign official into improperly approving a permit. The issuance of the environmental
permit was a discretionary act, and indeed, Company A should not have received it. Company A, its vice president, and the
local agent may all be prosecuted for authorizing and paying the bribe.
26
Does the FCPA Apply to Cases of
Extortion or Duress?
Situations involving extortion or duress will not give
rise to FCPA liability because a payment made in response to
true extortionate demands under imminent threat of physical
harm cannot be said to have been made with corrupt intent
or for the purpose of obtaining or retaining business. 169 In
enacting the FCPA, Congress recognized that real-world
situations might arise in which a business is compelled to pay
an official in order to avoid threats to health and safety. As
Congress explained, “a payment to an official to keep an oil
rig from being dynamited should not be held to be made with
the requisite corrupt purpose.” 170
Mere economic coercion, however, does not amount to
extortion. As Congress noted when it enacted the FCPA:
“The defense that the payment was demanded on the part of
a government official as a price for gaining entry into a market
or to obtain a contract would not suffice since at some
point the U.S. company would make a conscious decision
whether or not to pay a bribe.” 171 The fact that the payment
was “first proposed by the recipient … does not alter the corrupt
purpose on the part of the person paying the bribe.” 172
This distinction between extortion and economic coercion
was recognized by the court in United States v. Kozeny.
There, the court concluded that although an individual who
makes a payment under duress (i.e., upon threat of physical
harm) will not be criminally liable under the FCPA, 173 a
bribe payor who claims payment was demanded as a price for
gaining market entry or obtaining a contract “cannot argue
that he lacked the intent to bribe the official because he made
the ‘conscious decision’ to pay the official.” 174 While the