Foreign Corrupt Practices Act, 1977, prohibits

1
Foreign Corrupt Practices Act, 1977, prohibits

• Any individual, firm, officer, director,
  employee, agent of firm, stockholder acting on
  behalf of firm, from
• acting with corrupt intent, to make payment to a
  foreign official (regardless of rank), foreign
  political party or official, candidate for
  foreign political office,
• To induce the recipient to misuse his official
  position or wrongfully direct business.

2
Sanctions

• Criminal
• Up to 5 years in prison and up to 2 million
  fine.
• Civil
• AG or SEC or Competitor may bring action to
  enjoin or punish.
• Those in violation may be barred from doing
  business with the Federal govt.

3
Foreign Corrupt Practices Act of 1977

• Causes of Bribery (Group Misconduct)
• A few bad apples
• Banality of evil
• Narrow Focus on insiders and on short term
• Failure of leadership
• Dilution of personal responsibility in groups
• Organizational process, structure and culture
• Lack of Oversight
• Political Environment
• Prisoners dilemma

4
FCPA as a response

• Bad apples/ banality of evil/ Dilution of
  personal responsibility in groups
• Individuals can be fined up to 100,000 and
  imprisoned for up to 5 years.
• Narrow Focus, Failure of leadership,
  Organizational process, structure and culture
• Organizations can be fined up to 2 million,
  individuals can be fined up to 100,000 and
  imprisoned for up to 5 years.
• Prisoners dilemma
• International Agreements
• Political Environment
• Ongoing struggle

5
History of FCPA

• 1977 President Carter signs in response to SEC
  investigation
• 400 American companies had spent hundreds of
  millions of dollars bribing everyone from prime
  ministers to police overseas.
• 1978-1998 Organization for Economic Cooperation
  and Development adopts ban on bribery. 38
  countries sign on.

6
Recent DOJ Enforcement

• In 2004, two individuals charged and 11 million
  in criminal fines.
• In 2005, 5 charged and 16½ million in fines.
• 2009-10, 50 individuals charged and nearly 2
  billion in fines.
• Today 35 defendants awaiting trial on FCPA
  charges in the United States in Houston, Miami,
  Los Angeles, and Washington, D.C.
• http//www.justice.gov/criminal/pr/speeches/2010/c
  rm-speech-101116.html

7
Objections to FCPA

• Bad for business
• DOJ response FCPA enforcement is not bad for
  business it is, instead, vital to ensuring the
  integrity of our markets. Our FCPA enforcement
  program serves not only to hold accountable those
  who corrupt foreign officials, but in doing so it
  also serves to make the international business
  climate more transparent and fair for everyone.
  http//www.justice.gov/criminal/pr/speeches/2010/c
  rm-speech-101116.html

8
Objections to FCPA

• Puts American business at a competitive
  disadvantage.
• DOJ response
• First, we do not only prosecute U.S. companies
  and individuals under the FCPA. Indeed, over the
  last five years, more than half of our corporate
  FCPA resolutions have involved foreign companies
  or U.S. subsidiaries of foreign companies.
• Second, the United States, through its FCPA
  enforcement efforts, leads by example and other
  countries are following.