The 1988 Trade Act directed the Attorney General to provide guidance concerning the Department of Justice's enforcement policy with respect to the Foreign Corrupt Practices Act of 1977 ("FCPA"), to potential exporters and small businesses that are unable to obtain specialized counsel on issues related to the FCPA. The guidance is limited to responses to requests under the Department of Justice's Foreign Corrupt Practices Act Opinion Procedure (described below at p. 8) and to general explanations of compliance responsibilities and potential liabilities under the FCPA.


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Excepted from U.S. Commerce Dept. material dated May 10, 1994.

Introduction

The 1988 Trade Act directed the Attorney General to provide guidance concerning the Department of Justice's enforcement policy with respect to the Foreign Corrupt Practices Act of 1977 ("FCPA"), to potential exporters and small businesses that are unable to obtain specialized counsel on issues related to the FCPA. The guidance is limited to responses to requests under the Department of Justice's Foreign Corrupt Practices Act Opinion Procedure (described below at p. 8) and to general explanations of compliance responsibilities and potential liabilities under the FCPA. This brochure constitutes the Department of Justice's general explanation of the FCPA.

U.S. firms seeking to do business in foreign markets must be familiar with the FCPA. In general, the FCPA prohibits American companies from making corrupt payments to foreign officials for the purpose of obtaining or keeping business. The Department of Justice is the chief enforcement agency, with a coordinate role played by the Securities and Exchange Commission (SEC). The Office of General Counsel of the Department of Commerce also answers general questions of U.S. exporters concerning the FCPA's basic requirements and constraints. This brochure is intended to provide a general description of the FCPA, and is not intended to substitute for the advice of private counsel on specific issues related to the FCPA. Moreover, material in this brochure is not intended to set forth the present enforcement intentions of the Department of Justice or the SEC with respect to particular fact situations.

Background

Investigations by the SEC in the mid-1970's revealed that over 400 U.S. companies admitted making questionable or illegal payments in excess of $300 million to foreign government officials, politicians, and political parties. The abuses ran the gamut from bribery of high foreign officials in order to secure some type of favorable action by a foreign government to so-called facilitating payments that allegedly were made to ensure that government functionaries discharged certain ministerial or clerical duties. Congress enacted the FCPA to bring a halt to the bribery of foreign officials and to restore public confidence in the integrity of the American business system. The antibribery provisions of the FCPA make it unlawful for a U.S. person to make a corrupt payment to a foreign official for the purpose of obtaining or retaining business for or with, or directing business to, any person.

The FCPA also requires issuers of securities to meet its accounting standards. These accounting standards, which were designed to operate in tandem with the antibribery provisions of the FCPA, require corporations covered by the provisions to maintain books and records that accurately and fairly reflect the transactions of the corporation and to design an adequate system of internal accounting controls. This brochure discusses only the antibribery provisions.

Basic Provisions Prohibiting Foreign Corrupt Payments

Antibribery Provisions

The FCPA makes it unlawful to bribe foreign government officials to obtain or retain business. The antibribery provisions apply both to certain issuers of registered securities and issuers required to file periodic reports with the SEC (referred to as "issuers") and to others (referred to as "domestic concerns".) A "domestic concern" is defined to mean 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 which has its principal place of business in the United States, or which is organized under the laws of a State of the United States, or a territory, possession, or commonwealth of the United States.

The FCPA's antibribery provisions extend to two types of behavior. The basic prohibition is against making bribes directly; a second prohibition covers the responsibility of a domestic concern and its officials for bribes paid by intermediaries.

The FCPA's basic antibribery prohibition makes it unlawful for a firm (as well as any officer, director, employee, or agent of a firm or any stockholder acting on behalf of the firm) to offer, pay, promise to pay (or even to authorize the payment of money, or anything of value, or to authorize any such promise) to any foreign official for the purpose of obtaining or retaining business for or with, or directing business to, any person. (A similar prohibition applies with respect to payments to a foreign political party or official thereof or candidate for foreign political office.)

Payments by Intermediaries

It is also unlawful to make a payment to any person, while knowing that all or a portion of the payment will be offered, given, or promised, directly or indirectly, to any foreign official (or foreign political party, candidate, or official) for the purposes of assisting the firm in obtaining or retaining business. "Knowing" includes the concepts of "conscious disregard" or "willful blindness."

Enforcement

The Department of Justice is responsible for all criminal enforcement and for civil enforcement of the antibribery provisions with respect to domestic concerns. The SEC is responsible for civil enforcement of the antibribery provisions with respect to issuers.

Antibribery Provisions: Elements of an Offense

Basic Prohibition

With respect to the basic prohibition, there are five elements which must be met to constitute a violation of the Act:

A. Who -- The FCPA applies to any individual firm, officer, director, employee, or agent of the firm and any stockholder acting on behalf of the firm. Individuals and firms may also be penalized if they order, authorize, or assist someone else to violate the antibribery provisions or if they conspire to violate those provisions. A foreign-incorporated subsidiary of a U.S. firm will not be subject to the FCPA, but its U.S. parent may be liable if it authorizes, directs, or participates in the activity in question. Individuals employed by or acting on behalf of such foreign-incorporated subsidiaries may, however, be subject to the antibribery provisions if they are persons within the definition of "domestic concern." In addition, U.S. nationals employed by foreign- incorporated subsidiaries are subject to the antibribery provisions of the FCPA.

B. Corrupt intent -- The person making or authorizing the payment must have a corrupt intent, and the payment must be intended to induce the recipient to misuse his official position in order wrongfully to direct business to the payor. You should note that the FCPA does not require that a corrupt act succeed in its purpose. The offer or promise of a corrupt payment can constitute a violation of the statute. The FCPA prohibits the corrupt use of the mails or of interstate commerce in further- ance of a payment to influence any act or decision of a foreign official in his or her official capacity or to induce the official to do or omit to do any act in violation of his or her lawful duty, or to induce a foreign official to use his or her influence im- properly to affect or influence any act or decision.

C. Payment -- The FCPA prohibits paying, offering, promising to pay (or authorizing to pay or offer) money or anything of value.

D. Recipient -- The prohibition extends only to corrupt payments to a foreign official, a foreign political party or party official, or any candidate for foreign political office. A "foreign official" means any officer or employee of a foreign government or any department or agency, or any person acting in an official capacity. You should consider utilizing the Department of Justice's Foreign Corrupt Practices Act Opinion Procedure for particular questions as to the definition of a "foreign official", such as whether a member of a royal family, a member of a legislative body, or an official of a state-owned business enterprise would be considered a "foreign official."

Prior to the amendment of the FCPA in 1988, the term "foreign official" did not include any employee of a foreign government or agency whose duties were essentially ministerial or clerical. Determining whether a given employee's duties were "essentially ministerial or clerical" was a source of ambiguity, and it was not clear whether the Act prohibited certain "grease" payments, such as those for expediting shipments through customs or placing a transatlantic telephone call, securing required permits, or obtaining adequate police protection. Accordingly, recent changes in the FCPA focus on the purpose of the payment, instead of the particular duties of the official receiving the payment, offer, or promise of payment, and there are exceptions to the antibribery provision for "facilitating payments for routine governmental action" (see below).

E. Business Purpose Test -- The FCPA prohibits payments made in order to assist the firm in obtaining, or retaining business for or with, or directing business to, any person. It should be noted that the business to be obtained or retained does not need to be with a foreign government or foreign government instrumentality.

Third Party Payments

Generally -- The FCPA prohibits corrupt payments through intermediaries. It is unlawful to make corrupt use of the mails or of interstate commerce in furtherance of a payment to a third party, while knowing that all or a portion of the payment will go directly or indirectly to a foreign official. The term "knowing" includes conscious disregard and deliberate ignorance. The elements of an offense are essentially the same as described above, except that in this case the "recipient" is the intermediary who is making the payment to the requisite "foreign official." You should seek the advice of counsel and consider utilizing the Department of Justice's Foreign Corrupt Practices Act Opinion Procedure for particular questions relating to third party payments.

Permissible Payments and Affirmative Defenses

As amended in 1988, the FCPA now provides an explicit exception to the bribery prohibition for "facilitating payments" for "routine governmental action" and provides affirmative defenses which can be used to defend against alleged violations of the FCPA.

Exception for Facilitating Payments for Routine Governmental Actions

There is an exception to the antibribery prohibition for facilitating or expediting performance of "routine governmental action." The statute lists the following examples: obtaining permits, licenses, or other official documents; processing gove- rnmental papers, such as visas and work orders; providing police protection, mail pick-up and delivery; providing phone service, power and water supply, loading and unloading cargo, or protecting perishable products; and scheduling inspections associated with contract performance or transit of goods across country.

Actions "similar" to these are also covered by this exception. If you have a question about whether a payment falls within the exception, you should consult with counsel. You should also consider whether to utilize the Justice Department's Fore- ign Corrupt Practices Opinion Procedure, described below on p. 8.

"Routine governmental action" does not include any decision by a foreign official to award new business or to continue business with a particular party.

Affirmative Defenses

A person charged with a violation of the FCPA's antibribery provisions may assert as a defense that the payment was lawful under the written laws of the foreign country or that the money was spent as part of demonstrating a product or performing a contractual obligation.

Whether a payment was lawful under the written laws of the foreign country may be difficult to determine. You should consider seeking the advice of counsel or utilizing the Department of Justice's Foreign Corrupt Practices Act Opinion Procedure review procedure for such issues as (a) the issuance of an advisory opinion by a foreign government agency; (b) the issuance of regulations by a unit of local government; and (c) a course of conduct of a foreign government or government agency indicating that the payment is legal.

Moreover, because these defenses are "affirmative defenses," the defendant would be required to show in the first instance that the payment met these requirements. The prosecution would not bear the burden of demonstrating in the first instance that the payments did not constitute this type of payment.

Sanctions Against Bribery

The following criminal penalties may be imposed for violations of the FCPA's antibribery provisions: firms are subject to a fine of up to $2 million; officers, directors, and stockholders are subject to a fine of up to $100,000 and imprisonment for up to five years; employees and agents are subject to a fine of up to $100,000 and imprisonment for up to five years. You should also be aware that fines imposed on individuals may not be paid by the firm.

There can be civil penalties as well. The Attorney General or the SEC, as appropriate, may bring a civil action for a fine of up to $10,000 against any firm as well as any officer, director, employee, or agent of a firm, or stockholder acting on behalf of the firm, who violates the antibribery provisions. In addition, in an SEC enforcement action, the court may impose an additional fine not to exceed the greater of (i) the gross amount of the pecuniary gain to the defendant as a result of the violation, or (ii) a specified dollar limitation. The specified dollar limitations are based on the egregiousness of the violation, ranging from $5,000 for a natural person and $50,000 for any other person, to $100,000 for a natural person and $500,000 for any other person.

The Attorney General or the SEC, as appropriate, may also bring a civil action to enjoin any act or practice of a firm whenever it appears that the firm (or an officer, director, employee, agent, or stockholder acting on behalf of the firm) is in violation (or about to be) of the antibribery provisions. The SEC may also enter a cease-and-desist order against a person who violates, or is about to violate, the antibribery provisions.

Alternative Fines

Under federal criminal laws other than the FCPA, individuals may be fined up to $250,000 or up to twice the amount of the gross gain or gross loss if the defendant derives pecuniary gain from the offense or causes a pecuniary loss to another person. The FCPA's penalty provisions do not override the provisions in these other statutes providing for alternative fines.

Other Governmental Action

Under guidelines issued by the Office of Management and Budget, a person or firm found in violation of the FCPA may be barred from doing business with the Federal government. Indictment alone can lead to suspension of the right to do business with the government. The President has directed that no executive agency shall allow any party to participate in any procurement or nonprocurement activity if any agency has debarred, suspended, or otherwise excluded that party from participation in a procurement or nonprocurement activity. No executive party or agency will allow any party to participate in any procurement or nonprocurement activity if any agency has excluded that party.

In addition, a person or firm found guilty of violating the FCPA may be ruled ineligible to receive export licenses; the SEC may suspend or bar persons from the securities business and impose civil penalties on persons in the securities business for violations of the FCPA; the Commodity Futures Trading Commission and the Overseas Private Investment Corporation both provide for possible suspension or debarment from agency programs for violation of the FCPA; and a payment made to a foreign government official that is unlawful under the FCPA cannot be deducted under the tax laws as a business expense.

Private Cause of Action

Conduct that violates the antibribery provisions of the FCPA may also give rise to a private cause of action for treble damages under the Racketeer Influenced and Corrupt Organizations Act (RICO), or to actions under other federal or state laws. For example, an action might be brought under RICO by a competitor who alleges that the bribery caused the defendant to win a foreign contract.

Guidance from the Government

The Department of Justice is establishing a revised Foreign Corrupt Practices Act Opinion Procedure by which any party will be able to request a statement of the Justice Department's present enforcement intentions under the antibribery provisions of the FCPA regarding any proposed business conduct. The details of the opinion procedure will be found at 28 CFR Part 80. (The current procedure is found at 28 CFR Part 50.) Under the new procedure, the Attorney General will be required to issue an opinion in response to a specific inquiry from a person or firm within thirty days of the request. (The thirty day period does not run until the Department of Justice has received all the information it requires to issue the opinion.) Conduct for which the Department of Justice has issued an opinion stating that the conduct conforms with current enforcement policy will be entitled to a presumption, in any subsequent enforcement action, of conformity with the FCPA.

For further information from the Department of Justice about the FCPA and the Foreign Corrupt Practices Act Opinion Procedure, contact Peter B. Clark, Deputy Chief, Fraud Section, Criminal Division, U.S. Department of Justice, Room 2424, Bond Building, 1400 New York Avenue, N.W., Washington, D.C. 20530, (202) 514-0651 (FTS) 368-0651.

Although the Department of Commerce has no enforcement role with respect to the FCPA, it supplies general guidance to U.S. exporters who have questions about the FCPA and about international developments concerning the FCPA. For further information from the Department of Commerce about the FCPA contact Eleanor Roberts Lewis, Chief Counsel for International Commerce, or Arthur Aronoff, Senior Counsel, Office of the Chief Counsel for International Commerce, U.S. Department of Commerce, Room 5882, 14th Street and Constitution Avenue, N.W., Washington, D.C. 20230, (202) 482- 0937.

ANTIBRIBERY PROVISIONS OF THE FOREIGN CORRUPT PRACTICES ACT

Arthur Aronoff, Senior Counsel Office of the Chief Counsel for International Commerce United States Department of Commerce

The views expressed herein are solely those of the author. June 26, 1992

I. Introduction U.S. firms seeking to do business in foreign markets should be familiar with the Foreign Corrupt Practices Act of 1977, 15 U.S.C. 78m, 78dd-1, 78dd-2, 78ff (1988) (hereinafter FCPA). The FCPA prohibits American companies from making corrupt payments to foreign officials for the purpose of obtaining or keeping business. This paper does not represent the views of the Department of Justice or the Securities and Exchange Commission, and is not intended to substitute for the advice of private counsel.

II. Background Investigations by the Securities and Exchange Commission (SEC) in the mid-1970's revealed that over 400 U.S. companies admitted making questionable or illegal payments in excess of $300 million to foreign government officials, politicians, and political parties. The FCPA's legislative history notes that the abuses disclosed ran the "gamut from bribery of high foreign officials in order to secure some type of favorable action by a foreign government to so-called facilitating payments that allegedly were made to ensure that government functionaries discharged certain ministerial or clerical duties." H. R. Rep. No. 640, 95th Cong., 1st Sess. 4 (1977).

Congress enacted the FCPA to bring a halt to the bribery of foreign officials and to restore public confidence in the integrity of the American business system. S. Rep. No. 114, 95th Cong., 1st Sess. (1977), reprinted in 1977 U.S. Code Cong. & Admin. News 4098, 4101.

The FCPA also requires issuers of securities to meet its accounting standards (set forth at 15 U.S.C. 78m(b)(2)). This outline discusses only the antibribery provisions.

III. Basic Provisions Prohibiting Foreign Corrupt Payments. The FCPA makes it unlawful to bribe foreign government officials to obtain or retain business. The antibribery provisions apply both to certain issuers of registered securities and to other businesses referred to as "domestic concerns". A "domestic concern" is defined to mean 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 which has its principal place of business in the United States, or which is organized under the laws of a State of the United States, or a territory, possession, or commonwealth of the United States.

The FCPA's antibribery provisions extend to two types of behavior. The basic prohibition is against making bribes directly; a second prohibition covers the responsibility of a domestic concern and its officials for bribes paid by intermediaries.

A. Basic Prohibition. It is unlawful for an issuer or a domestic concern (henceforth, collectively referred to as a "firm") and any officer, director, employee, or agent of a firm or any stockholder of a firm acting on behalf of the firm, to make use of the mails or any means or instrumentality of interstate commerce corruptly in furtherance of an 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 any foreign official for the purposes of influencing any act or decision in order to assist the firm in obtaining or retaining business for or with, or directing business to, any person. A similar prohibition applies with respect to payments to a foreign political party or official thereof or candidate for foreign political office.

B. Payments by Intermediaries. It is also unlawful to make a payment to any person, while knowing that all or a portion of the payment will be offered, given, or promised, directly or indirectly, to any foreign official (or any foreign political party or official thereof, or to any candidate) for the purposes of influencing any act or decision in order to assist the firm in obtaining or retaining business for or with, or directing business to, any person. As discussed below, "knowing" encompasses "conscious disregard" and "willful blindness."

C. Enforcement. The SEC is responsible for civil enforcement of the accounting provisions and the antibribery provisions with respect to issuers. The Department of Justice is responsible for all criminal enforcement and for civil enforcement of the antibribery provisions with respect to domestic concerns.

D. Basic Prohibition. With respect to the basic prohibition, there are five elements which must be met to constitute a violation of the Act:

1. Who -- The FCPA applies to any firm, officer, director, employee, or agent of the firm, and any stockholder acting on behalf of the firm making use of the mails or any means or instrumentality of interstate commerce. Individuals and firms may also be liable if they aid, abet, counsel, command, induce, procure, or willfully cause another to violate the antibribery provisions (18 U.S.C. 2 (1988)), or if they conspire to violate those provisions (18 U.S.C. 371 (1988)). A court has held that foreign officials may not be charged with conspiracy to violate the FCPA. United States v. Blondek, 741 F.Supp. 116 (N.D. Tex. 1990), aff'd, United States v. Castle, 925 F.2d 831 (5th Cir. 1991).
2. Corrupt intent -- The legislative history, expressly referring to domestic bribery law, states that "corruptly" was used in order to make clear that the payment must be intended to induce the recipient to misuse his official position in order wrongfully to direct business to the payor. The word "corruptly" "connotes an evil motive or purpose, an intent to wrongfully influence the recipient". The legislative history also notes that the FCPA "does not require that the act be fully consummated or succeed in producing the desired outcome." S. Rep. No. 114, 95th Cong., 1st Sess. 10 (1977), reprinted in 1977 U.S. Code Cong. & Admin. News 4108; H. R. Rep. No. 640, 95th Cong., 1st Sess. 7, 8 (1977). The FCPA prohibits the corrupt use of the mails or means or instrumentality of interstate commerce, in furtherance of a payment to influence any act or decision of a foreign official in his official capacity or to induce such official to do or omit to do any act in violation of the lawful duty of such official, or to induce a foreign official to use his influence with a foreign government or instrumentality thereof to affect or influence any act or decision of such government or instrumentality. Prior to the passage of the 1988 Trade Act, the FCPA had prohibited corrupt payments to any foreign official for the purposes of "influencing any act or decision of such foreign official in his official capacity, including a decision to fail to perform his official functions." The Conference Report states that the phrase "in violation of the lawful duty of such official" was substituted for failure to perform "official functions" to comport with the domestic bribery standard found at 18 U.S.C. 201. H. R. Rep. No. 576, 100th Cong., 2d Sess. 918 (1988), reprinted in 1988 U.S. Code Cong. & Admin. News 1547, 1951.
3. Payment. The FCPA prohibits paying, offering, promising to pay (or authorizing to pay or offer) money or anything of value.
4. Recipient. The prohibition extends only to corrupt payments to a foreign official, a foreign political party or party official, or any candidate for political office. The FCPA defines "foreign official" to mean any officer or employee of a foreign government or any department, agency, or instrumentality thereof, or any person acting in an official capacity for or on behalf of such government or department, agency, or instrumentality. Prior to the amendment of the FCPA in 1988, the term "foreign official" did not include any employee of a foreign government or agency whose duties were essentially ministerial or clerical. Determining whether a given employee's duties were "essentially ministerial or clerical" was a source of ambiguity, and it was not clear whether the Act prohibited certain "grease" payments, such as those for expediting shipments through customs or placing a transatlantic telephone call, securing required permits, or obtaining adequate police protection. Accordingly, recent changes in the FCPA focus on the purpose of the payment, instead of the particular duties of the official receiving the payment, offer, or promise of payment, and there are exceptions to the antibribery provision for "facilitating payments for routine governmental action" (see below).
5. Business Purpose Test. The FCPA prohibits payments made in order to assist the firm in obtaining, or retaining business for or with, or directing business to, any person. It should be noted that the business to be obtained or retained does not need to be with a foreign government or foreign government instrumentality.

E. Third Party Payments.
1. Generally -- The FCPA prohibits the firm and its officers, directors, employees, agents, and stockholders from making corrupt payments through intermediaries. It is unlawful to make corrupt use of the mails or means of interstate commerce in furtherance of a payment to a third party, while knowing that all or a portion of the payment will go directly or indirectly to a foreign official. The elements of an offense are essentially the same as described above, except that in this case the "recipient" is the intermediary who is making the payment to the "foreign official."
2. 1988 Amendments -- The 1988 amendments to the FCPA replaced the "reason to know" standard which governed the liability of a firm for corrupt payments made by third parties. The new standard is based on the reasoning of federal courts in a number of criminal cases which concluded that the term "knowingly" already encompasses the concept of deliberate ignorance.
3. The 1988 amendments also added a new paragraph to the FCPA to provide guidance on the "knowledge" standard. Under the new standard, a person's state of mind is "knowing" with respect to conduct, a circumstance, or a result if: a. the person is aware that such person is engaging in such conduct, that such circumstance exists, or that such result is substantially likely to occur; or b. the person has a firm belief that such circumstance exists or that such result is substantially certain to occur.
4. "Knowledge" of a circumstance is established if a person is aware of a high probability of the existence of such circumstance, unless the person actually believes that such circumstance does not exist. 5. The "knowledge standard" encompasses the concepts of "conscious disregard" or "willful blindness." The requisite state of mind for this category of offense includes a conscious purpose to avoid learning the truth. The knowledge standard, consequently, covers "both prohibited actions that are taken with 'actual knowledge' of intended results as well as other actions that, while falling short of what the law terms 'positive knowledge,' nevertheless evidence a conscious disregard or deliberate ignorance of known circumstances that should reasonably alert one to the high probability of violations of the Act." H. R. Rep. No. 576, 100th Cong., 2d Sess. 920 (1988) reprinted in 1988 U.S. Code Cong. & Admin. News 1547, 1951.
6. Despite the Trade Act's addition of language to the FCPA describing the concept of "knowing", it is questionable whether the "knowledge" standard for third party payments under the FCPA is at all different from the interpretation of the word "knowingly" in other criminal law contexts. The Conference Report's citation of specific criminal cases (id.) suggests that the amendments were intended to codify the concept of "knowing" in those cases, and indicates that no different meaning is intended in the FCPA.

F. Exception for Facilitating Payments for Routine Governmental Actions. As amended by the 1988 Trade Act, the FCPA now provides an explicit exception to the bribery prohibition for "any facilitating or expediting payment to a foreign official, political party, or party official the purpose of which is to expedite or to secure the performance of a routine governmental action by a foreign official, political party, or party official." "Routine governmental action" is defined to mean only an action which is ordinarily and commonly performed by a foreign official in --
1. obtaining permits, licenses, or other official documents to qualify a person to do business in a foreign country;
2. processing governmental papers, such as visas and work orders;
3. providing police protection, mail pick-up and delivery, or scheduling inspections associated with contract performance or inspections related to transit of goods across country;
4. providing phone service, power and water supply, loading and unloading cargo, or protecting perishable products or commodities from deterioration; or
5. actions of a similar nature.

"Routine governmental action" does not include any decision by a foreign official whether, or on what terms, to award new business or to continue business with a particular party, or any action taken by a foreign official involved in the decision-making process to encourage a decision to award new business to or continue business with a particular party. 1988 Trade Act, 5003(a) and (c) (amending Section 30A of the SEA (15 U.S.C. 78dd-1), and Section 104 of the FCPA (15 U.S.C. 78dd-2), respectively).

G. Affirmative Defenses. The 1988 Trade Act also revised the FCPA to establish new affirmative defenses to actions under the FCPA's bribery provisions. These defenses are provided for:
1. Payments lawful under local law -- any payment which was lawful under the written laws and regulations of the foreign official's country; or
2. Expenditures associated with product demonstration or contract performance - any payment which was a reasonable and bona fide expenditure, such as travel and lodging expenses, incurred by or on behalf of a foreign official, party, party official, or candidate and was directly related to either the promotion, demonstration, or explanation of products or services, or to the execution or performance of a contract with a foreign government or agency thereof. The Conference Report notes that a payment cannot be a "bona fide, good faith payment" if "corruptly made, in return for an official act or omission." H. R. Rep. No. 576, 100th Cong., 2d Sess. 922 (1988) reprinted in 1988 U.S. Code Cong. & Admin. News, 1547, 1955.
Because these defenses are "affirmative defenses," the defendant in the action would be required to show in the first instance that the payment met these requirements. The prosecution would not bear the burden of demonstrating that in the first instance the payments did not constitute this type of payment.

IV. Sanctions Against Bribery.

The following penalties may be imposed for violations of the FCPA's antibribery provisions:

A. Criminal Penalties.
1. Firms are subject to a fine of up to $2 million. 15 U.S.C. 78dd(2)(g).
2. Company officials. Officers, directors, and stockholders acting on behalf of the firm who willfully violate the antibribery provisions are subject to a fine of up to $100,000 and imprisonment for up to five years. 15 U.S.C. 78dd(2)(g).
3. Employees and Agents. Any employee and agent of the firm who is a U.S. citizen, national, or resident, or who is otherwise subject to the jurisdiction of the United States (other than an officer, director, or stockholder acting on behalf of the firm), and who willfully violates the antibribery provisions, is subject to a fine of up to $100,000 and imprisonment for up to five years. 78dd(2)(g).
4. Fines imposed on individuals may not be paid by the firm. 78dd(2)(g).
5. The 1988 Trade Act increased the maximum amount of the fines on firms from $1 million to $2 million and the maximum fines on individuals from $10,000 to $100,000.
6. The 1988 Trade Act deleted the "Eckhardt Amendment." This provision in the original FCPA required the prosecution to move first against the firm for violating the Act. An employee or agent could not be held liable until the firm itself was found to have violated the antibribery provisions. The proviso was construed by a court in U.S. v. McLean, 738 F.2d 655 (5th Cir. 1984) as preventing the Government from prosecuting an individual where the firm had only been convicted for conspiracy to violate the FCPA, not for a substantive violation of the FCPA itself.

B. Civil Sanctions.
1. Civil Fines. The 1988 Trade Act created new civil fines which allow the Attorney General or the SEC, as appropriate, to bring a civil action for imposition of a fine of up to $10,000 against any firm that violates the antibribery provisions, and against any officer, director, employee, or agent of a firm, or stockholder acting on behalf of the firm, who willfully violates the antibribery provisions. 15 U.S.C. 78dd- 2 ( 104(g)(1)(B) and 104(g)(2)(C) of the FCPA), 15 U.S.C. 78ff ( 32(c)(1)(B) and 32(c)(2)(C) of the SEA).
2. Injunctive Relief. The FCPA allows the Attorney General (or the SEC where it has jurisdiction) to bring a civil action in an appropriate district court to enjoin any act or practice of a domestic concern whenever it appears to the Attorney General that the domestic concern or an officer, director, employee, agent, or stockholder acting on behalf of the domestic concern is engaged, or about to engage, in any act or practice constituting a violation of the antibribery provisions. 1988 Trade Act, 5003(c); H. R. Rep. No. 576, 100th Cong., 2d Sess. 923 (1988), reprinted in 1988 U.S. Code Cong. & Admin. News 4098, 1956. The SEC may also enter a cease-and-desist order against a person who violates, or is about to violate, the antibribery provisions.

C. Alternative Fines. The amount of the fines can also be more than the amount specified in the FCPA because of the alternative fines which may be imposed under 18 U.S.C. 3571 (1988). Under this statute individuals may be fined up to $250,000 or up to twice the amount of the gross gain or gross loss if the defendant derives pecuniary gain from the offense or causes a pecuniary loss to another person. The Conference Report to the 1988 Trade Act states that the FCPA's penalty provisions do not override the provisions in other statutes providing for alternative fines. H. R. Rep. No. 576, 100th Cong., 2d Sess. 924 (1988) reprinted in 1988 U.S. Code Cong. & Admin. News 4098, 1951.

D. Other Governmental Action By Executive Order 12549 of February 18, 1986 (51 Fed. Reg. 6370, February 21, 1986), the President directed that the Office of Management and Budget (OMB) issue guidelines to agencies concerning nonprocurement debarment and suspension. By Executive Order 12689 of August 16, 1989 (54 Fed. Reg. 34131, August 18, 1989), the President directed that no executive party or agency shall allow any party to participate in any procurement or nonprocurement activity if any agency has debarred, suspended, or otherwise excluded that party from participation in a procurement or nonprocurement activity.
1. Nonprocurement Activities. On May 26, 1988 (Non-procurement Debarment and Suspension, 53 Fed. Reg. 19,161), 27 agencies published a final common rule dealing with nonprocurement debarment and suspension. OMB, in a notice published the same day, adopted the final common rule as its guidelines. (Memorandum to the Heads of Executive Departments and Agencies: Government-wide Non-procurement Suspension and Debarment, 53 Fed. Reg. 19,160). Six additional agencies adopted the final common rule in a Federal Register notice dated January 30, 1989 (Non-procurement Debarment and Suspension Final Rule, 54 Fed. Reg. 4722). The final common rule was effective October 1, 1988, and provides that no executive party or agency shall allow any party to participate in any nonprocurement activity if any agency has debarred, suspended, or otherwise excluded that party from participation in a nonprocurement activity.
2. Each of the 33 agencies named in the nonprocurement final common rule may suspend or debar a party for violation of the FCPA pursuant to Subpart C, Section____.305 of the common rule which provides:

Debarment may be imposed...for:
(a) Conviction of or civil judgement for
(1) Commission of fraud or a criminal offense in connection with obtaining, attempting to obtain, or performing a public or private agreement or transaction;
(3) Commission of...bribery...or
(4) Commission of any other offense indicating a lack of business integrity or business honesty...
53 Fed. Reg. 19,165, 19,207. Such suspension or debarment would lead to government-wide suspension or debarment under the final common rule.

3. The final common rule does not cover export licenses issued under the Export Administration Act of 1979 or licenses issued under the Arms Export Control Act. However, the Preamble to the final common rule states, [T]he Department of Commerce and State, which administer these licensing programs, currently have procedures for excluding persons from these programs. Persons so excluded would be considered "ineligible" under this rule, and would be so listed on the List of Persons Excluded from Federal Procurement or Nonprocurement Programs. 53 Fed. Reg. 19,165. The State Department's Office of Munitions Control (22 C.F.R. 120.1(b) and 120.24(f) (1989)) specifically lists the FCPA as a statute the violation of which could lead to suspension or debarment.
4. The Commodities Futures Trading Commission (17 C.F.R. 3.20 (1988)) and the Overseas Private Investment Corporation (22 C.F.R. Part 709.1 (1988)) both provide for possible suspension or disbarment from agency programs for violation of the FCPA. Neither agency is one of the 33 agencies participating in the nonprocurement final common rule, so that such suspension or debarment would not have government-wide effect.
5. Procurement Activities Procurement debarment and suspension is provided for by the Federal Acquisition Regulations System, under which a contractor may be debarred or suspended throughout the executive branch of the Government for violation of the FCPA pursuant to 48 C.F.R. 9.406-2 (1989). Twenty-seven agencies have implemented the debarment and suspension procedures of the Federal Acquisition Regulations System. 48 C.F.R. chs. 2 - 59 (1989). A contractor is subject to debarment from procurement activities for conviction of, or civil judgement for, the same offenses as in the nonprocurement final common rule referred to above, except that instead of Section ___.305(a)(1) of the nonprocurement final common rule, a contractor is subject to debarment from procurement activities for Commission of fraud or a criminal offense in (i) obtaining, (ii) attempting to obtain, or (iii) performing a public contract or subcontract.

E. Tax deduction. Section 288(a) of the Tax Equity and Financial Responsibility Act of 1982, (Pub. L. 97-248), 96 Stat. 324, provided that no deduction will be allowed under Section 162 of the Internal Revenue Code (relating to trade or business expenses) for a payment made to foreign government officials if the payment is unlawful under the FCPA.

V. Private Litigation

A. A number of cases have held that there is no private cause of action for violation of the FCPA's accounting provisions, e.g., Eisenberger v. Spectex Industries, Inc., 644 F. Supp. 48 (E.D.N.Y. 1986), Lewis v. Sporck, 612 F. Supp. 1332 (N.D. Cal. 1985). The cases involving the accounting provisions have held that under the Supreme Court's analysis in Cort v. Ash, 422 U.S. 66 (1975), no private cause of action should be inferred. This reasoning was applied to the antibribery provisions in Lamb v. Phillip Morris, Inc., 915 F.2d 1024 (6th Cir. 1990), cert. denied, No. 90-923 (February 19, 1991) which held that no private cause of action exists under the antibribery provisions of the FCPA. See also Citicorp International Trading Company, Inc. v. Western Oil & Refining Company, 771 F. Supp. 600 (S.D.N.Y. 1991).

B. Violation of the antibribery provisions of the FCPA may give rise to a private cause of action under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. 1962- 1968 (RICO), by a competitor who alleges that the bribery caused the defendant to win a foreign contract. In a criminal RICO case, a court held that although a violation of the antibribery provisions of the FCPA is not a predicate act under RICO, a violation of the antibribery provisions of the FCPA can be used to allege a violation of the Travel Act (18 U.S.C. 1952(a)(3) (1988), which is a predicate act under RICO. United States v. Young & Rubicam, Inc., 741 F.Supp. 334 (D.Conn. 1990) But see Environmental Tectonics v. W.S. Kirkpatrick Inc., 847 F.2d 1052 (3rd Cir. 1988)(violations of the FCPA accepted as predicate act under RICO), aff'd on other grounds, 110 S.Ct 701 (1990). The reasoning in Young and Rubicam, Inc. should apply equally to a private cause of action under RICO.

C. Clayco Petroleum v. Occidental Petroleum, 712 F.2d 404 (9th Cir. 1984), cert. denied 464 U.S. 1040 (1984), held that an antitrust suit by a competitor alleging that a bribe caused the defendant to win a foreign contract is barred by the act of state doctrine. The court rejected the contention that the FCPA created an exception to the act of state doctrine. However, in W.S. Kirkpatrick v. Environmental Tectonics, 110 S.Ct. 701 (1990), the Supreme Court held that the act of state doctrine does not bar a suit alleging that a bribe caused the defendant to win a foreign contract. The Court held that act of state doctrine was inapplicable because the charge was based upon the foreign official's unlawful motivation in awarding the contract, not an invalid act of the foreign sovereign.

D. Williams v. Hall, 683 F. Supp. 639 (E.D. Ky. 1988), held that an employee allegedly discharged by reason of reporting or refusing to participate in conduct which includes predicate acts under RICO has standing to bring a civil RICO suit if the employee can show that the discharge was in furtherance of a conspiracy to violate RICO. In Williams, violations of the antibribery provisions of the FCPA, which are not predicate acts under RICO, were used to allege mail and wire fraud, mail fraud, and violations of the Travel Act, which are predicate acts under RICO; But cf. Nodine v. Textron, Inc., 819 F.2d 347 (1st Cir. 1987)(no standing to bring a civil RICO action where the discharged employee failed to allege that the RICO violation caused the discharge).

VI. Guidance from the Government

A. Department of Justice Review Procedure.
1. The Department of Justice published a Final Rule on March 31, 1980 (Establishing the Foreign Corrupt Practices Act Review Procedure, 45 Fed. Reg. 20,800) establishing a review procedure by which any party may request a statement of the Justice Department's present enforcement intentions under the FCPA regarding any proposed business conduct. The details of the review procedure are set forth in 28 C.F.R 50.18 (1988), "Criminal division review under the Foreign Corrupt Practices Act of 1977."
2. The Department of Justice is establishing a revised Foreign Corrupt Practices Act Opinion Procedure. The details of the opinion procedure will be found at 28 CFR Part 80. Under the new procedure, the Attorney General will be required to issue an opinion in response to a specific inquiry from a person or firm within thirty days of the request. (The thirty day period does not run until the Department of Justice has received all the information it requires to issue the opinion.) Conduct for which the Department of Justice has issued an opinion stating that the conduct conforms with current enforcement policy will be entitled to a presumption, in any subsequent enforcement action, of conformity with the FCPA. 15 U.S.C. 78dd-1(e) (1988 Trade Act, Section 5003(a)).

B. Department of Justice Guidelines. Section 5003(a) of the 1988 Trade Act directed the Attorney General, within one after the passage of the 1988 Trade Act, to --
1. consult with the SEC, the Secretary of Commerce, the United States Trade Representative, the Secretary of State, and the Secretary of the Treasury,
2. obtain the views of the public through notice and comment procedures, and
3. determine whether compliance with the FCPA would be enhanced and the business community assisted by the issuance of
a. "guidelines describing specific types of conduct, associated with common types of export sales arrangements and business contracts, which for purposes of the Department of Justice's present enforcement policy, the Attorney General determines would be in conformance with the preceding provisions of this section;" and
b. "general precautionary procedures which issuers may use on a voluntary basis to conform their conduct to Department of Justice's present enforcement policy regarding the previous provisions of this section."

The Attorney General published a notice in the Federal Register on October 4, 1989 (54 Fed. Reg. 40918), asking interested persons to submit written views on the issue of guidelines concerning the FCPA. After reviewing the comments from the public, the Department of Justice decided that it was not necessary to publish FCPA guidelines (Anti-bribery Provisions, 55 Fed. Reg 28694 (July 12, 1990)). However, the Department of Justice, in cooperation with the Department of Commerce, prepared a brochure containing general explanations of compliance responsibilities and potential liabilities under the FCPA. The brochure is available from the Office of the Chief Counsel for International Commerce, U.S. Department of Commerce, Room 5882, 14th Street and Constitution Avenue, N.W., Washington, D.C. 20230, 202-377-0937 (FAX 202-377-4076).

C. Information from the Department of Commerce. Although the Department of Commerce has no enforcement role with respect to the FCPA, it supplies general guidance to U.S. exporters who have questions about the FCPA. Because the Secretary of Commerce is represented in the interagency group to which the President has delegated his functions under the 1988 Trade Act (see Section VI below), the Department of Commerce also supplies information to U.S. exporters about international developments concerning the FCPA.

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