U.S. Lays out Guidelines on What Constitutes Bribery of Foreign Officials

Article excerpt

The government issued clarifications as a recent surge in enforcement has unnerved big businesses that are worried about breaking the rules and paying big fines.

With billions of dollars in potential fines and foreign investment in the balance, the U.S. Justice Department and the Securities and Exchange Commission on Wednesday released long- awaited guidance for how prosecutors may interpret and enforce an anti-corruption law that bans American businesses from bribing officials overseas.

The 120-page "resource guide" to the Foreign Corrupt Practices Act lays out the government's understanding of and standard practices for the 1977 law. The statute sat largely dormant for decades, but a recent surge in enforcement has unnerved corporate boardrooms, leading to large fees for compliance lawyers and enormous fines and settlements paid to the government.

The detailed guidance, including numerous case studies illustrating what would and would not be considered a violation of the law, is particularly important because foreign corrupt practices cases rarely get adjudicated. Companies are generally inclined to settle cases because even being indicted can cripple their businesses.

Judges rarely weigh in on whether prosecutors' interpretation of the statute in ambiguous situations is accurate, as when an employee of a state-owned enterprise, like a utility, counts as a "foreign official" and is covered by the law.

The guide, signed by Lanny A. Breuer, the assistant attorney general for the Justice Department's criminal division, and Robert S. Khuzami, the director of enforcement for the S.E.C., lays out a series of factors in considering who counts as a foreign official, including whether a foreign government controls an entity like a utility or has only a minority stake in it.

It also discusses gift-giving at length, including when gifts to an overseas charity or gifts, travel and entertainment provided to foreign officials who may be considering issuing a contract to a business amount to a bribe, and when it is acceptable.

For example, the guidance says that it would not violate the statute if a company provided foreign officials -- like employees of a state-owned electricity commission -- promotional T-shirts at a trade show, picked up a bar tab, bought "a moderately priced crystal vase" as a wedding gift, or paid for their travel to a city in the United States where the company has facilities, including taking them to a baseball game or the theater.

It says that it would violate the law to pay for foreign officials and their spouses to travel to a city like Las Vegas or Paris if the company has no significant facilities there. That would display a "corrupt intent" to curry favor with the officials because "the trip does not appear to be designed for any legitimate business purpose" and "is extravagant. …