Foreign Corrupt Practices Act

By Sperber, Melysa | American Criminal Law Review, Spring 2002 | Go to article overview

Foreign Corrupt Practices Act


Sperber, Melysa, American Criminal Law Review


I. INTRODUCTION

Congress enacted the Foreign Corrupt Practices Act ("FCPA" or "Act") (1) in 1977 to criminalize illicit payments to foreign public officials by United States ("United States" or "U.S.") businesses and individuals. (2) Consequently, U.S. businesses had to compete in international markets against foreign businesses that were unconstrained by laws proscribing bribery. (3) To promote international parity with regard to business corruption, Congress amended the FCPA in 1988 and directed the Executive Branch to urge America's global trading partners to pass anti-corruption laws. (4) International anti-corruption efforts resulted in the Organization of Economic Cooperation and Development ("OECD") Convention on Combating Bribery of Foreign Public Officials in International Business Transactions ("OECD Convention"), signed in December 1997. (5) The following year, Congress ratified the OECD Convention and enacted implementing legislation. (6) The FCPA amendments broadened the reach of potential FCPA violations by expanding of the scope of persons covered by the Act. (7) Moreover the 1998 amendments extended the FCPA's jurisdiction beyond the borders of the U.S. to allow greater enforcement efforts by U.S. prosecutors. (8) Along with increasing Securities Exchange Commission ("SEC") and Department of Justice ("DOJ") enforcement of the FCPA, (9) the 1998 amendments indicate a step forward in the battle against corruption in foreign business practices. (10) Despite this, the impact of corruption remains a potent and debilitating force (11) affecting numerous industries in the international economic arena. (12)

The Act seeks to enhance corporate anti-bribery efforts by focusing on the accounting procedures of issuers and domestic concerns. (13) Section II of this Article reviews the accounting provisions of the FCPA. Section III examines the FCPA's anti-bribery provisions, Section IV summarizes the range of penalties for violations of these provisions. Section V outlines guidelines and resources for creating an effective FCPA compliance program. Finally, Section VI discusses anticipated developments in the crusade against business corruption.

II. ACCOUNTING PROVISIONS

The FCPA amended the Securities Exchange Act of 1934 (14) ("Exchange Act") by adding record-keeping and disclosure requirements for certain entities already subject to the Exchange Act's provisions. (15)

A. Covered Parties

The accounting provisions require companies whose securities are listed in the United States to keep accurate books and records in order to fairly report the transactions of the corporation. (16) The "books and records" provisions apply only to "issuers" under the Exchange Act. (17) Issuers are those companies that have either issued securities registered with the SEC under [section] 12 (18) or that are required to file reports under [section] 15(d) of the Exchange Act. (19) The accounting provisions are broad and apply to all business undertaken by the issuer, whether domestic or foreign, legitimate or corrupt. (20) An issuer that controls more than fifty percent of a stock of a foreign subsidiary must also ensure that the subsidiary adheres to the books and records provisions. (21)

B. Elements of the Accounting Provisions

1. Record-keeping

The first substantial requirement of the accounting provisions is that all issuers must "make and keep books, records, and accounts, which, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the issuer." (22) "Reasonable detail" requires a "level of detail and degree of assurance as would satisfy prudent officials in the conduct of their own affairs." (23)

The record-keeping provisions are designed to prevent three types of improprieties: (1) the failure to record illegal transactions; (2) the falsification of records to conceal illegal transactions; and (3) the creation of records that are quantitatively accurate, but may mislead by failing to specify the qualitative aspects of the transaction. …

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