The United States Department of Justice and Securities and Exchange Commission have dramatically increased their efforts to prosecute companies under The Foreign Corrupt Practices Act (“FCPA”). If your company conducts business outside of the United States, it is imperative that you understand the FCPA. Criminal and civil penalties may result for those that violate the FCPA. Further, officers and directors can be prosecuted even if they were not directly involved in the act that constitutes a violation of the FCPA. Recent trends have also shown that no industry is immune; even companies in traditionally “low-risk” industries are subject to prosecution.

2.  The Foreign Corrupt Practices Act was
enacted in 1977 in response to a growing
number of companies that admitted to
making “questionable payments” to both
foreign and domestic entities.
 The Foreign Corrupt Practices Act has two
primary components:
 the anti-bribery provisions; and
 books and records provisions.
 includes internal controls

3.  The Foreign Corrupt Practices Act prohibits:
 Any person or entity from using jurisdictional means
to corruptly make a payment or give anything of
value to a foreign governmental official for the
purpose of obtaining or retaining business. See 15
U.S.C. §§ 78dd-1(a) & 78dd-2(a).

4. ‣ The FCPA applies to:
‣ Any publicly traded company that is registered with the SEC. See 15
U.S.C. § 78dd-1.
‣ All officers, directors, agents, employees, and shareholders of publicly
traded companies. See 15 U.S.C. § 78dd-1(a).
‣ Any individual who is a citizen, national or resident of the United States.
See 15 U.S.C. § 78dd-2(h)(1)(A).
‣ 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. See 15 U.S.C. § 78dd-2(h)(1)(B).
• This includes all officers, directors, employees, agents, stockholders or
representatives of an entity. See 15 U.S.C. § 78dd-2(a).
‣ The 1998 amendments expanded the FCPA to allow for the prosecution
of any person who takes any act in furtherance of a corrupt payment
while in the territory of the United States. See 15 U.S.C. § 78dd-3(a).

5.  Using “jurisdictional means” is making use of
the mails or any means or instrumentality of
interstate commerce in furtherance of a
corrupt act. See 15 U.S.C. §§ 78dd-1(a) &
78dd-2(a).
 There is no requirement the corrupt act make use of
the U.S. mails or other means or instrumentalities of
interstate commerce.

6.  The person or entity making or authorizing
the payment must have a corrupt intent.
• The payment must be intended to induce the
recipient to misuse his or her official position to
direct business wrongfully to the payer or to any
other person. See H.R. Rep. No 95-640, at 8 (1977); S.
Rep. No. 95-114, at 10-11 (1977), as reprinted in 1977
U.S.C.C.A.N. 4098, 4108; see also United States v. Kay, 513
F.3d 461, 463 (5th Cir. 2008).

7.  The offer, promise or authorization of a
corrupt payment constitutes a violation of the
statute. See 15 U.S.C. §§ 78dd-1(a) & 78dd-
2(a).
• If the payment is intended to influence any act or decision
of a foreign official in his or her official capacity, to obtain
an improper advantage or to induce a foreign official to use
his or her influence improperly to affect or influence any act
or decision, it is a violation and can be prosecuted.

8.  The FCPA prohibits paying, offering,
promising to pay (or authorizing to pay or
offer) money or anything of value. See 15
U.S.C. §§ 78dd-1(a) & 78dd-2(a).
• The DOJ and SEC continue to expand this definition
to include more items that are prohibited. A few
examples of “items of value” that were determined
to constitute violations of the FCPA:
 charitable donations;
 loans with favorable terms;
 transportation of household goods; and
 college scholarships.

9.  “Facilitating payments” are currently
permitted under the FCPA.
 Any facilitating or expediting payment to a foreign
official, political party or party official for the purpose
of expediting or securing the performance of routine
governmental action is permitted. See 15 U.S.C. §§
78dd-1(b) & 78dd-2(b).

10. ‣ The following actions are permissible under the
FCPA. See 15 U.S.C. §§ 78dd-1(f)(3) & 78dd-2(h)(4).
 Obtaining permits, licenses or other official documents to
qualify a person to do business in a country.
• Processing governmental papers, such as visas and work
orders.
• Providing police protection, mail pick-up and delivery,
scheduling inspections associated with contract
performance or inspections related to the transport of
goods across the country.
• Providing phone service, power and water supply,
loading/unloading cargo or protecting perishable
products or commodities from deterioration.

11.  A "foreign official" is defined as any officer or
employee of a foreign government, a public
international organization, or any department
or agency thereof, or any person acting in an
official capacity, including public officials. See
15 U.S.C. §§ 78dd-1(f)(1)(A) & 78dd-
2(h)(2)(A).
• The definition of foreign official is very broad and
encompasses political parties, party officials, and
even candidates for foreign political office.

12.  The FCPA prohibits payments made in order
to assist the company in obtaining or
retaining business for or with or directing
business to any person. See 15 U.S.C. §§
78dd-1(a) & 78dd-2(a).
• The term "obtaining or retaining business" is
interpreted very broadly, and encompasses more
than the mere award or renewal of a contract.
• Please note the business to be obtained or retained
does not need to be with a foreign government or
foreign government instrumentality.

13. ‣ Examples of violations include:
• Actions taken by a company to reduce its tax burden
was a violation as the company saved valuable
resources which permitted it to submit more
competitive bids, thereby creating an unfair advantage.
United States v. Kay, 359 F.3d 738, 739 (5th Cir.
2004).
• Money paid to influence the repeal of a government
decree was a violation as a potential future advantage
could be gained. See SEC v. Monsanto Company, Case
No. 1:05CV00014, (U.S.D.C., D.D.C) (filed January 6,
2005).

14.  The FCPA prohibits corrupt payments through
intermediaries. It is unlawful to make a
payment to a third party knowing that all or a
portion of the payment will go directly or
indirectly to a foreign official. See 15 U.S.C.
§§ 78dd-1(a)(3) & 78dd-2(a)(3).
 Intermediaries may include joint venture partners,
agents or representatives.

15.  The term “knowing” includes conscious
disregard, willful blindness, and deliberate
ignorance. See 15 U.S.C. §§ 78dd-1(f)(2) &
78dd-2(h)(3).

16.  Due diligence
 Be cautious when forming business relationships; and
 Investigate potential foreign representatives and joint
venture partners. Potential inquires may include:
 Does the person have personal or professional ties to the
government;
 Who are their clients;
 What is their reputation with their clients; and
 What is their reputation with the U.S. Embassy or
Consulate, local bankers and other business associates.

17.  A country with a history of violations;
 An industry with a history of violations;
 A refusal by an agent or representative to
certify compliance;
 An agent that has family or business ties to a
governmental official;
 The agent or representative insists his or her
identity not be disclosed; and
 The potential foreign governmental official
recommends the agent.

18.  The agent lacks the staff to perform his or
her services;
 The agent claims a particular amount of
money is needed to get the business or make
the arrangements;
 The size of the payment or commission is
substantially above the going rate; and
 The payment is made through indirect
means.

19. ‣ Corporations can be fined up to $2,000,000 for a single
violation of the FCPA. See 15 U.S.C. §§ 78dd-2(g)(1) &
78ff(c)(1).
 Under the Alternative Fines Act, the actual fine may be up to
twice the benefit that the defendant sought to obtain by making
the corrupt payment.
‣ Officers, directors, employees or agents acting on behalf of
companies who willfully violate the bribery provisions can be
fined up to $100,000, imprisoned for up to five years or
both. See 15 U.S.C. §§ 78dd-2(g)(2) & 78ff(c)(2).
 Whenever a fine is imposed upon an officer, director,
employee, agent or stockholder of a company, the fine may
not be paid, directly or indirectly, by the company. See 15
U.S.C. §§ 78dd-2(g)(3) & 78ff(c)(3).

20. ‣ The Attorney General may bring a civil action against any
company or any officer, director, employee, or agent of a
company, or stockholder acting on behalf of the company,
who violates the anti-bribery provisions. A penalty of up
to $10,000 may be imposed for a single violation. See 15
U.S.C. § 78dd-2(g).
‣ The Attorney General can also seek injunctive relief. See
15 U.S.C. § 78dd-2(d).
‣ Prohibition from doing business with the Federal
Government.
‣ Actions by foreign and/or state governments.
‣ Private actions by competitors.

21.  The general federal five-year statute of limitations applies to FCPA
prosecutions. See 18 U.S.C. §3282.
 ***However, the government routinely charges companies and
individuals with conspiracy to violate the FCPA in place of or in
addition to substantive FCPA charges, which the government can use
to stretch the statute of limitations period. For conspiracy offenses,
the government would need to prove that an act in furtherance of
the conspiracy occurred during the limitations period. See, e.g.,
United States v. Milstein, 401 F.3d 53, 71 (2d Cir. 2005).
 Tolling Agreements

22. ‣ The payment, gift, offer or promise of anything of
value was lawful under the written laws of the
foreign official’s country; or
‣ The payment, gift, offer or promise of value that was
made was reasonable and a bone fide expenditure,
such as travel and lodging expenses, incurred by a
foreign official and was directly related to:
 the promotion, demonstration or explanation of
products or services; or
 the execution of a contract with a foreign government
or agency. See 15 U.S.C. §§ 78dd-1(c) & 78dd-2(c).

23. ‣ The Department of Justice and Securities and Exchange Commission
prosecuted more cases between 2005-2010 than it did from 1977-2005.
 In December of 2008, Siemens AG resolved an FCPA dispute by agreeing
to pay $1.6 billion to the Department of Justice, SEC, and the Munich
Public Prosecutor’s Office (approximately $800 million was paid to U.S.
authorities).
 In February of 2009, Kellogg Brown & Root, Inc. (“KBR”) agreed to pay
$579 million to regulators.
 In June of 2010, Technip settled with the SEC and DOJ for a total of
$338 million.
 In July of 2010, Snamprogetti Netherlands B.V. and its parent company
Saipem agreed to pay $365 million to resolve FCPA-related charges.
Snamprogetti, KBR, Technip, and JGC of Japan were part of a four-
company joint venture called TSKJ. The combined settlement, $1.28
billion, is the largest paid to date to the United States from an FCPA
violation.

24. Prosecutions Against Companies
35
30
25 Department of
20 Justice
15 SEC
10
5
0
2004 2005 2006 2007 2008 2009 2010 2011

25. Individual Criminal Prosecutions
60
50
40
Department of
30
Justice
20
10
0
2004 2005 2006 2007 2008 2009 2010 2011

26. “The prospect of significant
prison sentences for
individuals should make it
clear to every corporate
executive, every board
member, and every sales
agent that we will seek to
hold you accountable for
FCPA violations.”

27.  The U.S. government assessed approximately $1.7 billion dollars in fines
during 2010.
 In January of 2010, the U.S. government charged 22 individuals with FCPA
violations, which is the largest single investigation and prosecution against
individuals in the 34-plus year history of the FCPA.
 In March of 2010, NEXUS Technologies became the first company to cease
operations in the United States as a result of FCPA prosecution.
 In April of 2010, Charles Jumet was sentenced to 87 months in prison for
bribing Panamanian officials to secure maritime contracts for Ports
Engineering Consultants Corporation, and making a false statement to
federal officials. In addition to his prison sentence, Mr. Jumet was ordered to
pay a $15,000 fine and will serve three years of supervised release following
his prison term. This is the longest prison term imposed to date against an
individual for violating the FCPA.

28.  Settlements:
 Johnson & Johnson;
 Tyson Foods;
 Maxwell Technologies;
 IBM;
 Ball Corporation; and
 Rockwell Automation.
 Jeffrey Tesler agreed to forfeit $148 million for his role in
the TSKJ consortium.
 Albert Jack Stanley sentenced to 84 months in prison and
will pay $10.8 million in restitution.

29. • Avery Dennison Corp. (adhesives and consumer products)
• Nature’s Sunshine Products, Inc. (nutritional supplements)
• Gerald and Patricia Green (entertainment executives)
• Control Components Inc. (valves)
• Smith & Wesson (firearms)
• Avon (cosmetics)
• Johnson & Johnson (pharmaceutical products)
• Tyson Foods (food industry)

30. Is the U.S. company liable under
the FCPA?
Books and records of
U.S. Entity Subsidiary B are incorporated
into books and records of U.S.
Entity for purposes of
financial reporting.
Subsidiary A
Subsidiary B engages an agent
who makes improper
payments partially facilitated
by Subsidiary B's inflated
commission payments.
Subsidiary B

31.  Comverse Technology Inc.
(telecommunications)
 Total settlement amount was $2.8 million
(A criminal fine of $1.2 million was paid in
connection with a DOJ non-prosecution
agreement; $1.6 million in disgorgement
and prejudgment interest was paid to settle
the SEC complaint).

32. DOJ Prosecutions
Self-reporting
Government Initiated

33.  The Department of Justice recommends self-
reporting.
 Credit can be given to companies that report violations
and cooperate fully with the DOJ.
 Siemens
 Helmerich & Payne
 DOJ can offer guidance on the issues that it wishes to
investigate.
 Creates an open dialogue with the DOJ regarding
investigation and remediation.

34.  The Dodd-Frank Wall Street Reform and Consumer Protection Act
rewards whistleblowers who assist the SEC in investigating securities
violations, including violations of the FCPA.
• The whistleblower incentive program allows a whistleblower, who
contributes "original information" that leads to recoveries of monetary
sanctions of more than $1 million in any criminal or civil enforcement
action under the securities laws by the SEC, the US Justice Department,
another federal agency, a self-regulatory organization, or a state
attorney general, a bounty of between 10 and 30 percent of the
recovery.
• For example, a whistleblower in the KBR matter could have received between
$57.9 and $173.7 million based on the combined DOJ and SEC settlement
amounts paid by the company.

35.  Prosecutions will continue to increase.
 The DOJ reportedly has over 160 open FCPA
investigations.
 The DOJ is devoting additional resources as
well as utilizing specialized task forces to
deter individuals and companies from
violating the FCPA.

36. ‣ Educate and communicate with all employees,
agents, and representatives the importance of
following the guidelines set forth in the FCPA;
‣ Implement an FCPA Compliance Program into your
business; and
‣ Use due diligence when forming partnerships or
relationships.

37.  A compliance program that punishes violations but
rewards ethical behavior;
 A strong whistle-blower program (and protection)
through a hotline or other mechanism;
 Significant and direct reporting by the FCPA
Compliance Officer to the Board of Directors;
 A compliance program that evolves with change; and
 A compliance program that’s open and visible.

38. • The Federal Sentencing Guidelines Manual states: “… the prior
diligence of an organization in seeking to prevent and detect
criminal conduct has a direct bearing on the appropriate penalties
and probation terms for the organization if it is convicted and
sentenced for a criminal offense.”
• The U.S. Attorney’s Manual lists "the existence and effectiveness
of the corporation’s pre-existing compliance program," and "the
corporation’s remedial actions, including any efforts to implement
an effective corporate compliance program or to improve an
existing one," among the factors relevant to whether an
organization should be charged.

39.  Looper Reed & McGraw, P.C.
 Joshua R. Walker
 (713) 986-7138
 jwalker@lrmlaw.com
 The Department of Justice
 Foreign Corrupt Practices Act Opinion Procedure
 http://www.usdoj.gov/criminal/fraud/fcpa/