Foreign Corrupt Practices Act

Foreign Corrupt Practices Act is a federal law that prohibits United States companies and individuals from bribing foreign officials to gain a business advantage, as enforced by the Securities and Exchange Commission and the Department of Justice. The law applies to companies listed on New York Stock Exchange, NASDAQ, and other United States stock exchanges, as well as to Citigroup, JPMorgan Chase, and other Fortune 500 companies. It also applies to individuals, including CEOs like Jeffrey Skilling of Enron and Bernard Ebbers of WorldCom, who have been prosecuted under the law. The law is closely related to other anti-bribery laws, such as the OECD Anti-Bribery Convention and the United Nations Convention against Corruption, which have been signed by countries like Canada, United Kingdom, and Australia.

Introduction

The Foreign Corrupt Practices Act is a key piece of legislation in the fight against corruption and bribery in international business, as recognized by organizations like Transparency International and the World Bank. The law has been used to prosecute companies like Siemens, Daimler AG, and BAE Systems, which have paid large fines for violating the law. It has also been used to prosecute individuals, including James Giffen, a former Mobil Oil executive, and Victor Kozeny, a former Harvard University student. The law is enforced by agencies like the Federal Bureau of Investigation and the Internal Revenue Service, which work closely with international organizations like Interpol and the International Chamber of Commerce.

History

The Foreign Corrupt Practices Act was passed in 1977, in response to revelations of widespread bribery by United States companies, including Lockheed Corporation and Northrop Grumman, in countries like Japan and Saudi Arabia. The law was signed by President Jimmy Carter and has since been amended several times, including in 1988 and 1998, to clarify its provisions and increase its penalties. The law has been influenced by international agreements like the United Nations Convention against Corruption and the OECD Anti-Bribery Convention, which have been signed by countries like Germany, France, and Italy. The law has also been shaped by the work of organizations like the World Economic Forum and the International Organization for Standardization.

Provisions

The Foreign Corrupt Practices Act prohibits companies and individuals from making payments to foreign officials to influence their decisions or to gain a business advantage, as defined by the Securities and Exchange Commission and the Department of Justice. The law applies to payments made directly or indirectly, including through third-party agents like consultants and law firms. It also applies to payments made to foreign government officials, including politicians, bureaucrats, and judges, in countries like China, India, and Brazil. The law requires companies to maintain accurate records and to implement internal controls to prevent bribery, as recommended by organizations like the Institute of Internal Auditors and the American Institute of Certified Public Accountants.

Enforcement

The Foreign Corrupt Practices Act is enforced by the Securities and Exchange Commission and the Department of Justice, which have the power to impose fines and penalties on companies and individuals that violate the law. The law has been used to prosecute companies like Halliburton and KBR, which have paid large fines for violating the law. It has also been used to prosecute individuals, including Albert Jack Stanley, a former KBR executive, and Richard Bistrong, a former Pride International executive. The law is also enforced by international organizations like the World Bank and the International Monetary Fund, which have imposed sanctions on companies and individuals that have violated the law.

Notable Cases

There have been several notable cases under the Foreign Corrupt Practices Act, including the prosecution of Siemens, which paid a fine of $1.6 billion for violating the law. Other notable cases include the prosecution of Daimler AG, which paid a fine of $185 million, and BAE Systems, which paid a fine of $79 million. The law has also been used to prosecute individuals, including James Giffen, who was sentenced to prison for violating the law, and Victor Kozeny, who is currently facing charges under the law. These cases have been investigated by agencies like the Federal Bureau of Investigation and the Internal Revenue Service, which have worked closely with international organizations like Interpol and the International Chamber of Commerce.

Impact and Criticisms

The Foreign Corrupt Practices Act has had a significant impact on international business, as recognized by organizations like Transparency International and the World Bank. The law has helped to reduce corruption and bribery in countries like Mexico and South Africa, and has encouraged companies to implement internal controls to prevent bribery. However, the law has also been criticized for its complexity and its potential to harm United States businesses, as argued by organizations like the Chamber of Commerce of the United States and the National Association of Manufacturers. The law has also been criticized for its lack of clarity and its potential to lead to over-enforcement, as argued by law firms like Skadden, Arps, Slate, Meagher & Flom and Jones Day. Despite these criticisms, the law remains an important tool in the fight against corruption and bribery, as recognized by international organizations like the United Nations and the European Union.