Foreign Corrupt Practices Act Update

The Department of Justice (“DOJ” or “Department”) and the Securities and Exchange Commission (“SEC”) have dramatically stepped up their enforcement of the Foreign Corrupt Practices Act (“FCPA”). Perhaps the most noteworthy development this year was the first ever FCPA sting in which Federal Bureau of Investigations (“FBI”) agents posed as agents representing foreign government officials and solicited bribes from executives in the defense and law enforcement products industry. However, less sensational enforcement efforts—including investigations arising out of industry-wide probes and self-reporting—continue to be a focus for the DOJ and reports of more investigations surface seemingly every week. Most recently it has come to light that Australian natural resources firm, BHP Billiton, is under investigation by the SEC for possible violations of the FCPA, as well as by officials from the United Kingdom for possible corruption stemming from their operations in Cambodia and elsewhere.
The FCPA is a federal law that prohibits offering, promising, or giving anything of value, as well as authorizing such an offer, promise, or gift, to a foreign official for the purpose of obtaining, retaining, or directing business to a person or entity. This prohibition is contained in the FCPA’s anti-bribery provisions, which are enforced by the DOJ. The FCPA’s anti-bribery provisions have a much broader reach than many other U.S. laws. U.S. corporations can be liable for conduct that occurs entirely outside the United States and multinational corporations can be liable for conduct that bears only a tenuous connection to the United States, such as where a corrupt payment is routed through a U.S. bank account or an employee in the United States receives an email regarding a corrupt transaction.

The FCPA also contains accounting provisions, which are enforced by the SEC. The FCPA’s accounting provisions require publicly held companies (under the Securities and Exchange Act) to (1) keep records that “accurately and fairly” reflect transactions, including any bribes; (2) devise a system that maintains accountability and control over assets with suitable and adequate internal controls; and (3) devise and maintain a system of accounting controls sufficient to provide reasonable assurance that all transactions are authorized and consistent with Generally Accepted Accounting Principles.