Foreign Corrupt Practices Act Guide Issued By Justice Department, Securities Commission

Assistant Attorney General Lanny Breuer, center, flanked by Health and Human Services Secretary Kathleen Sebelius, left, and
Assistant Attorney General Lanny Breuer, center, flanked by Health and Human Services Secretary Kathleen Sebelius, left, and Attorney General Eric Holder, speaks during a news conference at the Justice Department in Washington, Wednesday, May 2, 2012, to announce Medicare Fraud Strike Force law enforcement actions. Federal authorities charged 107 doctors, nurses and social workers in seven cities with Medicare fraud Tuesday in a nationwide crackdown on unrelated scams that allegedly bilked the taxpayer-funded program of $452 million _ the highest dollar amount in a single Medicare bust in U.S. history. (AP Photo/Haraz N. Ghanbari)

WASHINGTON -- Federal prosecutors and financial regulators on Wednesday reasserted their intention to enforce the law that bans the bribery of foreign officials by U.S. companies, despite a clamorous campaign by the U.S. Chamber of Commerce and other business groups to relax the rules.

The chamber had argued that Congress should rewrite the Foreign Corrupt Practices Act, a law passed more than three decades ago that has been used as a model for recent legislation in a number of other countries. One main argument of the chamber was that the law, as enforced, lacks clarity as to whom exactly U.S. companies are allowed to bribe, and whom they aren't.

The Justice Department and Securities and Exchange Commission responded on Wednesday with a 120-page guide to the FCPA that spells out what can get a company in trouble -- and dispels the misrepresentations perpetuated by the chamber's lobbying campaign.

For instance, while explaining that the FCPA "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," the guide explicitly states that companies will not get in trouble just for dispensing "[i]tems of nominal value, such as cab fare, reasonable meals and entertainment expenses, or company promotional items."

What sorts of cases will DOJ or the SEC pursue? "The most obvious form of corrupt payment is large amounts of cash," the guide explains.

In one instance, it notes, "a four-company joint venture used its agent to pay $5 million in bribes to a Nigerian political party. 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."

That fits the FCPA's definition of a bribe.

"A small gift or token of esteem or gratitude" -- especially one "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" -- would not qualify as a bribe.

The guide addresses many of the chamber's other complaints as well, defining "willfulness" more explicitly, explaining how companies can avoid liability for bribery by companies they acquire -- i.e., "Practical Tips to Reduce FCPA Risk in Mergers and Acquisitions" -- and so on.

In all of these cases, of course, if the companies weren't bribing anybody at all, there wouldn't be a problem.

Graphic by Chris Spurlock

One of the chamber's chief complaints was about the lack of specificity regarding who actually qualified as a "foreign official," especially in cases when the recipient of a potential bribe works for a state-owned or state-run company, rather than for the government directly.

The guide explains in some detail who qualifies and who doesn't, but adds: "Companies and individuals should also remember that, whether an entity is an instrumentality of a foreign government or a private entity, commercial (i.e., private-to-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."

Assistant Attorney General Lanny A. Breuer of the Justice Department's Criminal Division hailed the new guide in a statement. "Our FCPA enforcement is critical to protecting the integrity of markets for American companies doing business abroad, and we will continue to make clear that bribing foreign officials is not an acceptable shortcut," he said. "The Guide is an important illustration of our transparency and a useful reference for companies and individuals who wish to act responsibly and in compliance with the law.”

Advocates for strict enforcement of the FCPA celebrated guidance they said didn't water down the rules, merely explained them, and thereby cleared up any legitimate concerns the chamber had about the lack of specificity.

"I think that there is absolutely no doubt that this guidance allays many of the concerns that the chamber had put forward," said Sarah Pray, a senior policy analyst at the Open Society Foundation.

"A lot of the U.S. Chamber of Commerce's arguments were red herrings," she said. Having dealt with them, through what Pray described as a very consultative process, DOJ has made it clear that further legislation "is absolutely not necessary."

Those who are looking for changes to the law are unlikely to be satisfied, however. Mike Koehler, who teaches as the Southern Illinois University School of Law and runs the FCPA Professor blog, noted that "the most important words" are in a note that declares that the guidance is non-binding and "does not in any way limit the enforcement intentions or litigating positions" of the DOJ or SEC.

"What FCPA enforcement needs at this critical juncture is not non-binding guidance, but limited structural reforms," Koehler said.

The Chamber of Commerce had no immediate comment.

CORRECTION: A previous version of this article misidentified the Open Society Foundation as the "Open Society Institute."



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