Overseas Corruption Guidelines Released ; U.S. Defines Its Terms amid Rising Anxiety on Foreign Bribery Cases

Article excerpt

The government issued clarifications, as a recent surge in enforcement has unnerved big businesses 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 have released long-awaited guidelines on how prosecutors 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 rush of enforcement has brought anxiety to 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 violation of the law -- is particularly important because cases of foreign corrupt practices rarely get adjudicated. Corporations are generally inclined to settle potential cases without trial, because being indicted can cripple a business.

As a result, judges rarely weigh in on whether prosecutors' interpretations of the statute in ambiguous situations -- for instance, when an employee of a state-owned enterprise, like a utility, should be considered a "foreign official," and therefore covered by the law -- is accurate.

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

It also discusses gift-giving at length, and addresses the question of when gifts to an overseas charity -- or travel and entertainment provided to foreign officials who may be considering issuing a contract to a business -- amount to bribes.

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 bill or bought "a moderately priced crystal vase" as a wedding gift. There would also be no violation if the company paid for the foreign visitors' travel to a city in the United States where it has facilities, including taking them to a baseball game or the theater.

However, the guide says, paying for foreign officials and their spouses to travel to a city like Las Vegas or Paris, if the company has no significant facilities there, would violate the law. 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."

"The fight against corruption is a law enforcement priority of the United States," Mr. Breuer said in a statement. Enforcement of the statute "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. …