May 29, 2009
Criminal prosecutions by the Department of Justice ("DOJ") and civil actions by the U.S. Securities and Exchange Commission ("SEC") against U.S. businesses and individuals for violations of the Foreign Corrupt Practices Act ("FCPA") have increased steadily since the FCPA was enacted in 1977. U.S. companies and citizens increasingly seek to do business in foreign countries or with foreign entities, and it is imperative that you become familiar with the FCPA and have an FCPA compliance plan in place.
For example, the anti-bribery provisions of the FCPA prohibit any U.S. company (public or private), any agent or employee of any U.S. company, as well as any U.S. citizen from making "corrupt" payments to foreign officials for the purpose of obtaining or maintaining business. Additionally, the FCPA places affirmative accounting and bookkeeping obligations upon publicly-traded companies to prevent the creation of "slush funds" which may conceal illicit payments to foreign officials.
Entering into joint ventures with foreign companies or acquiring foreign companies also raises FCPA compliance concerns. Conducting due diligence in this area, as well as drafting language ensuring FCPA compliance into new contracts, are important steps to avoid ending up with responsibility for the actions of a foreign partner, joint venturer or subsidiary.
Businesses and individuals who violate the FCPA are subject to significant penalties. Corporations may be required to pay large fines. They may also be prohibited from contracting with the federal government in the future, resulting in a loss of business revenue in excess of any fines or other civil penalties which may be levied. Individuals may also be required to pay fines and face the possibility of federal prison sentences. You should also be aware that the FCPA not only punishes knowing conduct in violation of the act, but also punishes conduct which a company or individual should have known was occurring.
Therefore, any company or individual doing business in a foreign country needs to develop an effective FCPA compliance plan with the assistance of legal counsel. This is especially true if you are doing business in certain "red flag" areas of the world (such as the Middle East, Africa, or parts of Asia) where bribery can be commonplace, if not expected. A thorough and effective internal compliance program is the best way to avoid liability under the FCPA.
BHGR's experienced criminal practice group can help you understand the FCPA and develop a compliance plan. If you have questions about this and how it may impact you and your company, contact our Business Transactions and Criminal Law Practice Groups.
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