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A Resource Guide to the U.S. Foreign Corrupt Practices Act By the Criminal Division o f the U.S. Department ofJustice and the Enforcement Division o f the U.S. Securities and Exchange Commission This guide is intended to provide information for businesses and individuals regarding the U.S. Foreign Corrupt Practices Act (FCPA). The guide has been prepared by the staff of the Criminal Division of the U.S. Department of Justice and the Enforcement Division o f the U.S. Securities and Exchange Commission. It is non-binding, informal, and summary in nature, and the information contained herein does not constitute rules or regulations. As such, it is not intended to, does not, and may not be relied upon to create any rights, substantive or procedural, that are enforceable at law by any party, in any criminal, civil, or administrative matter. It is not intended to substitute for the advice of legal counsel on specific issues related to the FCPA. It does not in any way limit the enforcement intentions or litigating positions o f the U.S. Department ofJustice, the U.S. Securities and Exchange Commission, or any other U.S. government agency. Companies or individuals seeking an opinion concerning specific prospective conduct are encouraged to use the U.S. Department ofJustice's opinion procedure discussed in Chapter 9 of this guide. This guide is United States Government property. It is available to the public free o f charge online at www.justice.gov/ criminal/fraud/fcpa and www.sec.gov/spotlight/fcpa.shtml. A RESOURCE GUIDE TO THE U.S. FOREIGN CORRUPT PRACTICES ACT By the Criminal Division of the U.S. Department ofJustice and the Enforcement Division o f the U.S. Securities and Exchange Commission FOREWORD We are pleased to announce the publication o fA Resource Guide to the U.S. Foreign Corrupt Practices Act. The Foreign Corrupt Practices Act (FCPA) is a critically important statute for combating corruption around the globe. Corruption has corrosive effects on democratic institutions, undermining public accountability and diverting public resources from impor tant priorities such as health, education, and infrastructure. When business is won or lost based on how much a company is willing to pay in bribes rather than on the quality o f its products and services, law-abiding companies are placed at a com petitive disadvantage-- and consumers lose. For these and other reasons, enforcing the FCPA is a continuing priority at the Department ofJustice (D O J) and the Securities and Exchange Commission (SEC). The Guide is the product o f extensive efforts by experts at D O J and SEC, and has benefited from valuable input from the Departments o f Commerce and State. It endeavors to provide helpful information to enterprises o f all shapes and sizes-- from small businesses doing their first transactions abroad to multi-national corporations with subsidiaries around the world. The Guide addresses a wide variety o f topics, including who and what is covered by the FCPA's anti-bribery and accounting provisions; the definition o f a "foreign official" ; what constitute proper and improper gifts, travel and entertainment expenses; the nature o f facilitating payments; how successor liability applies in the mergers and acquisitions context; the hallmarks of an effective corporate compliance program; and the different types o f civil and criminal resolutions available in the FCPA context. O n these and other topics, the Guide takes a multi-faceted approach, setting forth in detail the statutory require ments while also providing insight into D O J and SEC enforcement practices through hypotheticals, examples o f enforce ment actions and anonymized declinations, and summaries o f applicable case law and D O J opinion releases. The Guide is an unprecedented undertaking by D O J and SEC to provide the public with detailed information about our FCPA enforcement approach and priorities. We are proud o f the many lawyers and staff who worked on this project, and hope that it will be a useful reference for companies, individuals, and others interested in our enforcement o f the Act. 'J- tty,,' Lanny A. Breuer Assistant Attorney General Criminal Division Department of Justice Robert S. Khuzami Director of Enforcement Securities and Exchange Commission November 14, 2012 CONTENTS Chapter 1: INTR O D U C TIO N ................................................................................................................ 2 The Costs of C orruption........................................................................................................................................................2 Historical Background.......................................................................................................................................................... 3 National Landscape: Interagency E ffo rts ........................................................................................................................... 4 Department of Justice.....................................................................................................................................................4 Securities and Exchange Commission.............................................................................................................................. 4 Law Enforcement Partners............................................................................................................................................... 5 Departments of Commerce and State.............................................................................................................................. 5 International Landscape: Global Anti-Corruption Efforts..................................................................................................7 OECD Working Group on Bribery and the Anti-Bribery Convention.................................................................................7 U.N. Convention Against Corruption.............................................................................................................................. 8 Other Anti-Corruption Conventions................................................................................................................................. 8 Chapter 2: THE FCPA: ANTI-BRIBERY PROVISIONS 10 Who Is Covered by the Anti-Bribery Provisions?............................................................................................................10 Issuers--15 U.S.C. 78dd-1........................................................................................................................................ 10 Domestic Concerns--15 U.S.C. 78dd-2.................................................................................................................... 11 Territorial Jurisdiction--15 U.S.C. 78dd-3................................................................................................................. 11 What Jurisdictional Conduct Triggers the Anti-Bribery Provisions?.............................................................................11 What Is Covered?--The Business Purpose T e s t............................................................................................................12 What Does "C orruptly" Mean?........................................................................................................................................ 14 What Does "W illfully" Mean and When Does It A p p ly ? ..............................................................................................14 What Does "Anything of Value" Mean?.......................................................................................................................... 14 Cash 15 Gifts, Travel, Entertainment, and Other Things of V alue..............................................................................................15 Charitable Contributions............................................................................................................................................. 16 Who Is a Foreign Official?................................................................................................................................................... 19 Department, Agency, or Instrumentality of a Foreign Government............................................................................... 20 Public International Organizations.................................................................................................................................. 21 How Are Payments to Third Parties T re a te d ? .................................................................................................................21 What Affirmative Defenses Are Available?...................................................................................................................... 23 The Local Law Defense................................................................................................................................................ 23 Reasonable and Bona Fide Expenditures...................................................................................................................... 24 What Are Facilitating or Expediting Payments?.............................................................................................................. 25 Does the FCPA Apply to Cases of Extortion or D uress?................................................................................................27 Principles of Corporate Liability for Anti-Bribery V io la tio n s ........................................................................................27 Parent-Subsidiary Liability 27 Successor Liability 28 Additional Principles of Criminal Liability for Anti-Bribery Violations: Aiding and Abetting and Conspiracy . . . . 34 Additional Principles of Civil Liability for Anti-Bribery Violations: Aiding and Abetting and C au sing ....................34 What Is the Applicable Statute of L im ita tio n s ? ............................................................................................................34 Statute of Limitations in Criminal Cases....................................................................................................................... 34 Statute of Limitations in Civil Actions.......................................................................................................................... 35 Chapter 3: THE FCPA: ACCOUNTING PRO VISIO NS............................................................... 38 What Is Covered by the Accounting Provisions?............................................................................................................39 Books and Records Provision....................................................................................................................................... 39 Internal Controls Provision............................................................................................................................................. 40 Potential Reporting and Anti-Fraud Violations..............................................................................................................41 What Are Management's Other Obligations?.................................................................................................................42 Who Is Covered by the Accounting Provisions?............................................................................................................42 Civil Liability for Issuers, Subsidiaries, and Affiliates...................................................................................................... 42 Civil Liability for Individuals and Other Entities..............................................................................................................43 Criminal Liability for Accounting Violations....................................................................................................................44 Conspiracy and Aiding and Abetting Liability.................................................................................................................45 Auditor O b lig a tio n s ........................................................................................................................................................... 45 Chapter 4: OTHER RELATED U. S. L A W S ................................................................................... 48 Travel A c t ............................................................................................................................................................................ 48 Money Laundering.............................................................................................................................................................. 48 Mail and Wire F raud........................................................................................................................................................... 49 Certification and Reporting V io la tio n s ............................................................................................................................ 49 Tax Violations 49 Chapter 5: GUIDING PRINCIPLES OF E N F O R C E M E N T ............................................................ 52 What Does DOJ Consider When Deciding Whether to Open an Investigation or Bring Charges? 52 DOJ Principles o f Federal P rosecution......................................................................................................................... 52 DOJ Principles o f Federal Prosecution o f Business Organizations................................................................................. 52 What Does SEC Consider When Deciding Whether to Open an Investigation or Bring Charges? 53 Self-Reporting, Cooperation, and Remedial Efforts Criminal Cases Civil Cases 54 54 55 Corporate Compliance Program ....................................................................................................................................... 56 Hallmarks of Effective Compliance P ro g ra m s.................................................................................................................57 Commitment from Senior Management and a Clearly Articulated Policy Against Corruption..........................................57 Code of Conduct and Compliance Policies and Procedures.......................................................................................... 57 Oversight, Autonomy, and Resources 58 Risk Assessment 58 Training and Continuing Advice 59 Incentives and Disciplinary Measures 59 Third-Party Due Diligence and Payments 60 Confidential Reporting and Internal Investigation........................................................................................................ 61 Continuous Improvement: Periodic Testing and Review................................................................................................61 Mergers and Acquisitions: Pre-Acquisition Due Diligence and Post-Acquisition Integration...........................................62 Other Guidance on Compliance and International Best P ra c tic e s .............................................................................63 Chapter 6: FCPA PENALTIES, SANCTIONS, AN D R E M E D IE S ...............................................68 What Are the Potential Consequences for Violations of the F C P A ? ..........................................................................68 Criminal P e n a ltie s.............................................................................................................................................................. 68 U.S. Sentencing Guidelines.......................................................................................................................................... 68 Civil Penalties.......................................................................................................................................................................69 Collateral Consequences...................................................................................................................................................69 Debarment.................................................................................................................................................................... 70 Cross-Debarment by Multilateral Development Banks...................................................................................................70 Loss of Export Privileges................................................................................................................................................ 71 When Is a Compliance M onitor or Independent Consultant Appropriate? 71 Chapter 7: RESOLUTIONS................................................................................................................. 74 What Are the Different Types of Resolutions with D O J? ................................................................................................74 Criminal Complaints, Informations, and Indictments......................................................................................................74 Plea Agreements 74 Deferred Prosecution Agreements 74 Non-Prosecution Agreements........................................................................................................................................75 Declinations................................................................................................................................................................. 75 What Are the Different Types of Resolutions with S E C ? ................................................................................................76 Civil Injunctive Actions and Remedies............................................................................................................................ 76 Civil Administrative Actions and Remedies....................................................................................................................76 Deferred Prosecution Agreements 76 Non-Prosecution Agreements 77 Termination Letters and Declinations 77 What Are Some Examples of Past Declinations by DOJ and SEC? 77 Chapter 8: WHISTLEBLOWER PROVISIONS AN D PROTECTIONS........................................... 82 Chapter 9: DOJ OPINION P R O C E D U R E .......................................................................................86 Chapter 10: C O N C L U S IO N .............................................................................................................. 90 APPENDIX: THE FOREIGN CORRUPT PRACTICES A C T ............................................................ 92 APPENDIX: ENDNOTES 104 C o r p o r a t e b r i b e r y is b a d b u s i n e s s . In o u r f r e e m a r k e t s y s t e m it is b a s i c t h a t t h e s a le o f p ro d u c ts sh o u ld ta k e p la c e o n th e b a sis o f p ric e , q u ality , a n d se rv ic e . C o r p o r a t e b r ib e r y is fu n d a m e n ta lly d e s tr u c tiv e o f th is b a s ic te n e t . C o r p o r a t e b r i b e r y o f f o r e i g n o f f i c ia l s t a k e s p l a c e p r im a r ily t o a s s i s t c o r p o r a t i o n s in g a i n i n g b u sin e ss. T h u s fo re ig n c o rp o ra te b rib e ry a ffe c ts th e v ery stab ility o f o v e r se a s b u sin e ss. F o reig n c o rp o ra te b rib e s a lso affe c t o u r d o m e stic c o m p e titiv e clim a te w h e n d o m e s t i c f ir m s e n g a g e in s u c h p r a c t i c e s a s a s u b s t i t u t e f o r h e a l t h y c o m p e titio n fo r fo re ig n b u sin e ss.1 -- United States Senate, 1977 chapter 1 Introduction L. INTRODUCTION C o n g r e s s e n a c t e d t h e U .S . F o r e i g n C o r r u p t P r a c t i c e s A c t ( F C P A o r t h e A c t ) in 1 9 7 7 in r e s p o n s e t o r e v e l a t io n s o f w i d e s p r e a d b r i b e r y o f f o r e i g n o f f i c ia ls b y U .S . c o m p a n ie s. T h e A c t w a s in te n d e d to h alt th o s e c o rru p t p ra c tic e s, c r e a te a level p la y in g f ie ld f o r h o n e s t b u s i n e s s e s , a n d r e s t o r e p u b l i c c o n f i d e n c e in t h e i n t e g rity o f th e m a r k e t p la c e .2 The FCPA contains both anti-bribery and accounting provisions. The anti-bribery provisions prohibit U.S. per sons and businesses (domestic concerns), U.S. and foreign public companies listed on stock exchanges in the United States or which are required to file periodic reports with the Securities and Exchange Commission (issuers), and certain foreign persons and businesses acting while in the territory of the United States (territorial jurisdiction) from making corrupt payments to foreign officials to obtain or retain business. The accounting provisions require issuers to make and keep accurate books and records and to devise and maintain an adequate system o f internal accounting controls. The accounting provisions also prohibit individu als and businesses from knowingly falsifying books and records or knowingly circumventing or failing to imple ment a system o f internal controls. The Department o f Justice (D O J) and the Securities and Exchange Commission (SEC) share FCPA enforcement authority and are committed to fighting for eign bribery through robust enforcement. An important component o f this effort is education, and this resource guide, prepared by D O J and S E C staff, aims to provide businesses and individuals with information to help them abide by the law, detect and prevent FCPA violations, and implement effective compliance programs. The Costs of Corruption Corruption is a global problem. In the three decades since Congress enacted the FCPA, the extent o f corporate bribery has become clearer and its ramifications in a trans national economy starker. Corruption impedes economic growth by diverting public resources from important pri orities such as health, education, and infrastructure. It undermines democratic values and public accountability and weakens the rule o f law.3And it threatens stability and security by facilitating criminal activity within and across 2 borders, such as the illegal trafficking o f people, weapons, and drugs.4 International corruption also undercuts good governance and impedes U.S. efforts to promote freedom and democracy, end poverty, and combat crime and terror ism across the globe.5 Corruption is also bad for business. Corruption is anti-competitive, leading to distorted prices and disadvan taging honest businesses that do not pay bribes. It increases the cost o f doing business globally and inflates the cost of government contracts in developing countries.6Corruption also introduces significant uncertainty into business trans actions: Contracts secured through bribery may be legally unenforceable, and paying bribes on one contract often results in corrupt officials making ever-increasing demands.7 Bribery has destructive effects within a business as well, undermining employee confidence in a company's manage ment and fostering a permissive atmosphere for other kinds o f corporate misconduct, such as employee self-dealing, embezzlement,8 financial fraud,9 and anti-competitive behavior.10 Bribery thus raises the risks o f doing business, putting a company's bottom line and reputation in jeop ardy. Companies that pay bribes to win business ultimately undermine their own long-term interests and the best inter ests o f their investors. Historical Background Congress enacted the FCPA in 1977 after revela tions o f widespread global corruption in the wake o f the Watergate political scandal. SEC discovered that more than 400 U.S. companies had paid hundreds o f millions o f dol lars in bribes to foreign government officials to secure busi ness overseas.11 SEC reported that companies were using secret "slush funds" to make illegal campaign contributions in the United States and corrupt payments to foreign offi cials abroad and were falsifying their corporate financial records to conceal the payments.12 Congress viewed passage o f the FCPA as critical to stopping corporate bribery, which had tarnished the image o f U.S. businesses, impaired public confidence in the financial integrity o f U.S. companies, and hampered the efficient functioning o f the markets.13 As Congress No problem does more to alienate citizens from their political leaders and institutions, and to undermine political stability and economic development, than endemic corruption among the government, political party leaders, judges, and bureaucrats . -- U SA ID A nti-Corruption Strategy recognized when it passed the FCPA, corruption imposes enormous costs both at home and abroad, leading to mar ket inefficiencies and instability, sub-standard products, and an unfair playing field for honest businesses.14 By enacting a strong foreign bribery statute, Congress sought to minimize these destructive effects and help companies resist corrupt demands, while addressing the destruc tive foreign policy ramifications o f transnational bribery.15 The Act also prohibited off-the-books accounting through provisions designed to "strengthen the accuracy o f the corporate books and records and the reliability o f the audit process which constitute the foundations o f our system o f corporate disclosure."16 In 1988, Congress amended the FCPA to add two affirmative defenses: (1) the local law defense; and (2) the reasonable and bona fide promotional expense defense.17 Congress also requested that the President negotiate an international treaty with members o f the Organisation for Economic Co-operation and Development (O ECD ) to prohibit bribery in international business transactions by many o f the United States' major trading partners.18 Subsequent negotiations at the O E C D culminated in the Convention on Combating Bribery o f Foreign Officials in International Business Transactions (Anti-Bribery Convention), which, among other things, required parties to make it a crime to bribe foreign officials.19 3 DOJ Contact Information Deputy Chief (FCPA Unit) Fraud Section, Criminal Division Bond Building 1400 New York Ave, N.W Washington, DC 20005 Telephone: (202) 514-7023 Facsimile: (202) 514-7021 Email: FCPA.Fraud@usdoj.gov In 1998, the FCPA was amended to conform to the requirements o f the Anti-Bribery Convention. These amendments expanded the FCPA's scope to: (1) include payments made to secure "any improper advantage"; (2) reach certain foreign persons who commit an act in fur therance o f a foreign bribe while in the United States; (3) cover public international organizations in the definition o f "foreign official"; (4) add an alternative basis for juris diction based on nationality; and (5) apply criminal pen alties to foreign nationals employed by or acting as agents o f U.S. companies.20 The Anti-Bribery Convention came into force on February 15, 1999, with the United States as a founding party. National Landscape: Interagency Efforts D O J and SEC share enforcement authority for the FCPA's anti-bribery and accounting provisions.21 They also work with many other federal agencies and law enforce ment partners to investigate and prosecute FCPA viola tions, reduce bribery demands through good governance programs and other measures, and promote a fair playing field for U.S. companies doing business abroad. chapter 1 Introduction directors, employees, agents, or stockholders acting on the issuer's behalf. D O J also has both criminal and civil enforce ment responsibility for the FCPA's anti-bribery provisions over "domestic concerns"--which include (a) U.S. citizens, nationals, and residents and (b) U.S. businesses and their officers, directors, employees, agents, or stockholders act ing on the domestic concern's behalf-- and certain foreign persons and businesses that act in furtherance o f an FCPA violation while in the territory o f the United States. Within D O J, the Fraud Section o f the Criminal Division has pri mary responsibility for all FCPA matters.22 FCPA matters are handled primarily by the FCPA Unit within the Fraud Section, regularly working jointly with U.S. Attorneys' Offices around the country. D O J maintains a website dedicated to the FCPA and its enforcement at http://www.justice.gov/criminal/fraud/ fcpa/. The website provides translations of the FCPA in numerous languages, relevant legislative history, and selected documents from FCPA-related prosecutions and resolutions since 1977, including charging documents, plea agreements, deferred prosecution agreements, non-prosecution agree ments, press releases, and other relevant pleadings and court decisions. The website also provides copies o f opinions issued in response to requests by companies and individuals under D O J's FCPA opinion procedure. The procedures for submit ting a request for an opinion can be found at http://www. justice.gov/criminal/fraud/fcpa/docs/frgncrpt.pdf and are discussed further in Chapter 9. Individuals and companies wishing to disclose information about potential FCPA viola tions are encouraged to contact the FCPA Unit at the tele phone number or email address above. D epartm ent o f Justice D O J has criminal FCPA enforcement authority over "issuers" (i.e., public companies) and their officers, Securities and Exchange Commission SEC is responsible for civil enforcement o f the FCPA over issuers and their officers, directors, employees, agents, 4 SEC Contact Information FCPA Unit Chief Division of Enforcement U.S. Securities and Exchange Commission 100 F Street, N.E. Washington, DC 20549 Online: Tips, Complaints, and Referrals website http://w w w .sec.gov/complaint/tipscom plaint .shtml Office of Investor Education and Advocacy: (800) SEC-0330 or stockholders acting on the issuer's behalf. S E C 's Division o f Enforcement has responsibility for investigating and prosecuting FCPA violations. In 2010, S E C 's Enforcement Division created a specialized FCPA Unit, with attorneys in Washington, D.C. and in regional offices around the country, to focus specifically on FCPA enforcement. The Unit investigates potential FCPA violations; facilitates coordination with D O J's FCPA program and with other federal and international law enforcement partners; uses its expert knowledge o f the law to promote consistent enforce ment o f the FCPA; analyzes tips, complaints, and referrals regarding allegations o f foreign bribery; and conducts pub lic outreach to raise awareness o f anti-corruption efforts and good corporate governance programs. The FCPA Unit maintains a "Spotlight on FCPA" section on S E C 's website at http://www.sec.gov/spotlight/ fcpa.shtml. The website, which is updated regularly, pro vides general information about the Act, links to all SEC enforcement actions involving the FCPA, including both federal court actions and administrative proceedings, and contains other useful information. Individuals and companies with information about possible FCPA violations by issuers may report them to the Enforcement Division via S E C 's online Tips, Complaints and Referral system, http://www.sec.gov/complaint/tipscomplaint.shtml. They may also submit information to S E C 's Office o f the Whistleblower through the same online system or by contacting the Office o f the Whistleblower at (202) 551-4790. Additionally, investors with questions about the FCPA can call the Office o f Investor Education and Advocacy at (800) SEC-0330. For more information about S E C 's Whistleblower Program, under which certain eligible whistleblowers may be entitled to a monetary award if their information leads to certain SEC actions, see Chapter 8. Law Enforcement Partners D O J's FCPA Unit regularly works with the Federal Bureau o f Investigation (FBI) to investigate potential FCPA violations. The F B I's International Corruption Unit has pri mary responsibility for international corruption and fraud investigations and coordinates the F B I's national FCPA enforcement program. The FBI also has a dedicated FCPA squad o f FBI special agents (located in the Washington Field Office) that is responsible for investigating many, and providing support for all, o f the FB I's FCPA investigations. In addition, the Department o f Homeland Security and the Internal Revenue Service-Criminal Investigation regularly investigate potential FCPA violations. A number o f other agencies are also involved in the fight against international corruption, including the Department o f Treasury's Office o f Foreign Assets Control, which has helped lead a number o f FCPA investigations. Departments of Commerce and State Besides enforcement efforts by D O J and SEC, the U.S. government is also working to address corrup tion abroad and level the playing field for U.S. businesses through the efforts o f the Departments o f Commerce and State. Both Commerce and State advance anti-corruption and good governance initiatives globally and regularly assist U.S. companies doing business overseas in several 5 important ways. Both agencies encourage U.S. businesses to seek the assistance o f U.S embassies when they are con fronted with bribe solicitations or other corruption-related issues overseas.23 The Department o f Commerce offers a num ber o f important resources for businesses, including the International Trade Administrations United States and Foreign Commercial Service (Commercial Service). The Commercial Service has export and industry specialists located in over 100 U.S. cities and 70 countries who are available to provide counseling and other assistance to U.S. businesses, particularly small and medium-sized companies, regarding exporting their products and services. Among other things, these specialists can help a U.S. company con duct due diligence when choosing business partners or agents overseas. The International Company Profile Program, for instance, can be part of a U.S. business' evaluation of poten tial overseas business partners.24 Businesses may contact the Commercial Service through its website, http://export.gov/ eac/, or directly at its domestic and foreign offices.25 Additionally, the Department o f Commerce's Office o f the General Counsel maintains a website, http://www. com m erce.gov/os/ogc/transparency-an d-anti-briberyinitiatives, that contains recent articles and speeches, links to translations o f the FCPA, a catalogue o f anti-corruption resources, and a list o f international conventions and ini tiatives. The Trade Compliance Center in the Department o f Commerce's International Trade Administration hosts a website with anti-bribery resources, http://tcc.export. gov/Bribery. This website contains an online form through which U.S. companies can report allegations o f foreign bribery by foreign competitors in international business transactions.26 The Department o f Commerce also pro vides information to companies through a number o f U.S. and international publications designed to assist firms in complying with anti-corruption laws. For example, the Department o f Commerce has included a new anti-corrup tion section in its Country Commercial Guides, prepared by market experts at U.S. embassies worldwide, that contains information on market conditions for more than 100 coun tries, including information on the FCPA for exporters.27 chapter 1 Introduction The Department o f Commerce has also published a guide, Business Ethics: A M anual fo r M anaging a Responsible Business Enterprise in Em erging M arket Economies, which contains information about corporate compliance pro grams for businesses involved in international trade.28 The Departments o f Commerce and State also pro vide advocacy support, when determined to be in the national interest, for U.S. companies bidding for foreign government contracts. The Department o f Commerce's Advocacy Center, for example, supports U.S. businesses competing against foreign companies for international con tracts, such as by arranging for the delivery o f an advocacy message by U.S. government officials or assisting with unan ticipated problems such as suspected bribery by a competitor.29 The Department o f State's Bureau o f Economic and Business Affairs (specifically, its Office o f Commercial and Business Affairs) similarly assists U.S. firms doing business overseas by providing advocacy on behalf o f U.S. businesses and identifying risk areas for U.S. businesses; more infor mation is available on its website, http://www.state.gov/e/ eb/cba/. Also, the Department o f State's economic officers serving overseas provide commercial advocacy and support for U.S. companies at the many overseas diplomatic posts where the Commercial Service is not represented. The Department o f State promotes U.S. government interests in addressing corruption internationally through country-to-country diplomatic engagement; development o f and follow-through on international commitments relat ing to corruption; promotion o f high-level political engage ment (e.g., the G20 Anticorruption Action Plan); public outreach in foreign countries; and support for building the capacity o f foreign partners to combat corruption. In fiscal year 2009, the U.S. government provided more than $1 billion for anti-corruption and related good governance assistance abroad. 6 The Department o f State's Bureau of International Narcotics and Law Enforcement Affairs (INL) manages U.S. participation in many multilateral anti-corruption political and legal initiatives at the global and regional level. IN L also funds and coordinates significant efforts to assist countries with combating corruption through legal reform, training, and other capacity-building efforts. Inquiries about the U.S. government's general anti-corruption efforts and implementation o f global and regional anti-corruption ini tiatives may be directed to IN L on its website, http://www. state.gov/j/inl/c/crime/corr/index.htm, or by email to: anticorruption@state.gov. In addition, the U.S. Agency for International Development (USA ID) has developed several anti-corruption programs and publications, information about which can be found at http://www.usaid.gov/whatwe-do/democracy-human-rights-and-governance/promoting-accountability-transparency. Finally, the Department of State's brochure "Fighting Global Corruption: Business Risk Management," available at http://www.ogc.doc.gov/pdfs/ Fighting_Global_Corruption.pdf, provides guidance about corporate compliance programs as well as international anti corruption initiatives. International Landscape: Global Anti Corruption Efforts In recent years, there has been a growing interna tional consensus that corruption must be combated, and the United States and other countries are parties to a number o f international anti-corruption conventions. Under these conventions, countries that are parties undertake commit ments to adopt a range o f preventive and criminal law mea sures to combat corruption. The conventions incorporate review processes that allow the United States to monitor other countries to ensure that they are meeting their inter national obligations. Likewise, these processes in turn permit other parties to monitor the United States' anti-corruption laws and enforcement to ensure that such enforcement and legal frameworks are consistent with the United States' treaty obligations.30 U.S. officials regularly address the subject of corruption with our foreign counterparts to raise awareness o f the importance o f fighting corruption and urge stronger enforcement of anti-corruption laws and policies. OECD Working Group on Bribery and the A nti Bribery Convention The O E C D was founded in 1961 to stimulate eco nomic progress and world trade. As noted, the Anti-Bribery Convention requires its parties to criminalize the bribery o f foreign public officials in international business transac tions.31 As o f November 1, 2012, there were 39 parties to the Anti-Bribery Convention: 34 O E C D member coun tries (including the United States) and five non-O ECD member countries (Argentina, Brazil, Bulgaria, the Russian Federation, and South Africa). All o f these parties are also members o f the O E C D Working Group on Bribery (Working Group).32 The Working Group is responsible for monitoring the implementation o f the Anti-Bribery Convention, the 2009 Recommendation o f the Council for Further Combating Bribery o f Foreign Public Officials in International Business Transactions, and related instruments. Its mem bers meet quarterly to review and monitor implementation o f the Anti-Bribery Convention by member states around the world. Each party undergoes periodic peer review.33 This peer-review monitoring system is conducted in three phases. The Phase 1 review includes an in-depth assess ment o f each country's domestic laws implementing the Convention. The Phase 2 review examines the effectiveness o f each country's laws and anti-bribery efforts. The final phase is a permanent cycle o f peer review (the first cycle of which is referred to as the Phase 3 review) that evaluates a country's enforcement actions and results, as well as the country's efforts to address weaknesses identified during the Phase 2 review.34All o f the monitoring reports for the par ties to the Convention can be found on the O E C D website and can be a useful resource about the foreign bribery laws o f the O E C D Working Group member countries.35 The United States was one o f the first countries to undergo all three phases o f review. The reports and appen dices can be found on D O J's and S E C 's websites.36 In its 7 Phase 3 review o f the United States, which was completed in October 2010, the Working Group commended U.S. efforts to fight transnational bribery and highlighted a number o f best practices developed by the United States. The report also noted areas where the United States' anti bribery efforts could be improved, including consolidat ing publicly available information on the application o f the FCPA and enhancing awareness among small- and medium-sized companies about the prevention and detec tion o f foreign bribery. This guide is, in part, a response to these Phase 3 recommendations and is intended to help businesses and individuals better understand the FCPA.37 U.N. Convention Against Corruption The United States is a state party to the United Nations Convention Against Corruption (U N C A C ), which was adopted by the U.N. General Assembly on October 31, 2003, and entered into force on December 14, 2005.38 The United States ratified the U N C A C on October 30, 2006. The U N C A C requires parties to crimi nalize a wide range o f corrupt acts, including domestic and foreign bribery and related offenses such as money launder ing and obstruction o f justice. The U N C A C also estab lishes guidelines for the creation o f anti-corruption bodies, codes o f conduct for public officials, transparent and objec tive systems o f procurement, and enhanced accounting and auditing standards for the private sector. A peer review mechanism assesses the implementation o f the U N C A C by parties to the Convention, with a focus in the first round on criminalization and law enforcement as well as inter national legal cooperation.39 The United States has been reviewed under the Pilot Review Programme, the report o f which is available on D O J's website. As o f November 1, 2012, 163 countries were parties to the U N C A C .40 chapter 1 Introduction The IA C A C requires parties (of which the United States is one) to criminalize both foreign and domestic brib ery. A body known as the Mechanism for Follow-Up on the Implementation o f the Inter-American Convention Against Corruption (M ESICIC) monitors parties' compli ance with the IA C A C . As o f November 1, 2012, 31 coun tries were parties to M E SIC IC . The Council o f Europe established the Group of States Against Corruption (G R EC O ) in 1999 to monitor countries' compliance with the Council o f Europe's anti corruption standards, including the Council o f Europe's Criminal Law Convention on Corruption.42 These stan dards include prohibitions on the solicitation and receipt of bribes, as well as foreign bribery. As o f November 1, 2012, G R E C O member states, which need not be members of the Council o f Europe, include more than 45 European countries and the United States.43 The United States has been reviewed under both M E S IC IC and G R E C O , and the reports generated by those reviews are available on D O J's website. O ther Anti-Corruption Conventions The Inter-American Convention Against Corruption (IA C A C ) was the first international anti-corruption con vention, adopted in March 1996 in Caracas, Venezuela, by members o f the Organization o f American States.41 8 chapter 2 The FCPA: Anti-Bribery Provisions L. THE FCPA: ANTI-BRIBERY PROVISIONS The FCPA addresses the problem of international corruption in two ways: (1) the anti-bribery provisions, which are discussed below, prohibit individuals and businesses from bribing foreign government officials in order to obtain or retain business and (2) the accounting provisions, which are discussed in Chapter 3, impose certain record keeping and internal control requirements on issuers, and prohibit individuals and companies from knowingly falsifying an issuer's books and records or circumventing or failing to implement an is suer's system of internal controls. Violations of the FCPA can lead to civil and criminal penalties, sanctions, and remedies, including fines, disgorgement, and/or imprisonment. In general, the FCPA prohibits offering to pay, pay ing, promising to pay, or authorizing the payment o f money or anything o f value to a foreign official in order to influ ence any act or decision o f the foreign official in his or her official capacity or to secure any other improper advantage in order to obtain or retain business.44 W ho Is Covered by th e Anti-Bribery Provisions? The FCPA's anti-bribery provisions apply broadly to three categories o f persons and entities: (1) "issuers" and their officers, directors, employees, agents, and sharehold ers; (2) "domestic concerns" and their officers, directors, employees, agents, and shareholders; and (3) certain per sons and entities, other than issuers and domestic concerns, acting while in the territory o f the United States. Issuers-- 15 U.S.C. 78dd-1 Section 30A o f the Securities Exchange Act o f 1934 (the Exchange Act), which can be found at 15 U.S.C. 78dd-1, contains the anti-bribery provision governing 10 How Can I Tell If My Company Is an "Issuer"? It is listed on a national securities exchange in the United States (either stock or American Depository Receipts); or The company's stock trades in the over-thecounter market in the United States and the company is required to file SEC reports . To see if your company files SEC reports, go to SEC's website at http://www.sec. gov/edgar/ searchedgar/webusers .htm . issuers.45 A company is an "issuer" under the FCPA if it has a class o f securities registered under Section 12 o f the Exchange Act46 or is required to file periodic and other reports with SEC under Section 15(d) o f the Exchange Act.47 In practice, this means that any company with a class o f securities listed on a national securities exchange in the United States, or any company with a class o f securi ties quoted in the over-the-counter market in the United States and required to file periodic reports with SEC, is an issuer. A company thus need not be a U.S. company to be an issuer. Foreign companies with American Depository Receipts that are listed on a U.S. exchange are also issuers.48 As o f December 31, 2011, 965 foreign companies were reg istered with SEC.49 Officers, directors, employees, agents, or stockholders acting on behalf o f an issuer (whether U.S. or foreign nationals), and any co-conspirators, also can be prosecuted under the FCPA.50 Domestic Concerns-- 15 U.S.C. 78dd-2 The FCPA also applies to "domestic concerns." 51 A domestic concern is any individual who is a citizen, national, or resident o f the United States, or any corporation, part nership, association, joint-stock company, business trust, unincorporated organization, or sole proprietorship that is organized under the laws o f the United States or its states, territories, possessions, or commonwealths or that has its principal place o f business in the United States.52 Officers, directors, employees, agents, or stockholders acting on behalf o f a domestic concern, including foreign nationals or companies, are also covered.53 Territorial Jurisdiction-- 15 U.S.C. 78dd-3 The FCPA also applies to certain foreign nationals or entities that are not issuers or domestic concerns.54 Since 1998, the FCPA's anti-bribery provisions have applied to foreign persons and foreign non-issuer entities that, either directly or through an agent, engage in any act in further ance o f a corrupt payment (or an offer, promise, or authori zation to pay) while in the territory o f the United States.55 Also, officers, directors, employees, agents, or stockholders acting on behalf o f such persons or entities may be subject to the FCPA's anti-bribery prohibitions.56 W hat Jurisdictional Conduct Triggers the A nti Bribery Provisions? The FCPA's anti-bribery provisions can apply to conduct both inside and outside the United States. Issuers and domestic concerns-- as well as their officers, directors, employees, agents, or stockholders--may be prosecuted for using the U.S. mails or any means or instrumentality of interstate commerce in furtherance o f a corrupt payment to a foreign official. The Act defines "interstate commerce" as "trade, commerce, transportation, or communication among the several States, or between any foreign country and any State or between any State and any place or ship outside thereof ...."57 The term also includes the intrastate use o f any interstate means o f communication, or any other interstate instrumentality.58Thus, placing a telephone call or sending an e-mail, text message, or fax from, to, or through the United States involves interstate commerce-- as does sending a wire transfer from or to a U.S. bank or otherwise using the U.S. banking system, or traveling across state bor ders or internationally to or from the United States. Those who are not issuers or domestic concerns may be prosecuted under the FCPA if they directly, or through an agent, engage in any act in furtherance of a corrupt pay ment while in the territory of the United States, regardless of 11 whether they utilize the U.S. mails or a means or instrumen tality of interstate commerce.59 Thus, for example, a foreign national who attends a meeting in the United States that fur thers a foreign bribery scheme may be subject to prosecution, as may any co-conspirators, even if they did not themselves attend the meeting. A foreign national or company may also be liable under the FCPA if it aids and abets, conspires with, or acts as an agent ofan issuer or domestic concern, regardless o f whether the foreign national or company itself takes any action in the United States.60 In addition, under the "alternative jurisdiction" pro vision o f the FCPA enacted in 1998, U.S. companies or persons may be subject to the anti-bribery provisions even if they act outside the United States.61 The 1998 amend ments to the FCPA expanded the jurisdictional coverage of the Act by establishing an alternative basis for jurisdiction, that is, jurisdiction based on the nationality principle.62 In particular, the 1998 amendments removed the requirement that there be a use o f interstate commerce (e.g., wire, email, telephone call) for acts in furtherance o f a corrupt payment chapter 2 The FCPA: Anti-Bribery Provisions to a foreign official by U.S. companies and persons occur ring wholly outside o f the United States.63 What Is Covered?-- The Business Purpose Test The FCPA applies only to payments intended to induce or influence a foreign official to use his or her posi tion "in order to assist ... in obtaining or retaining business for or with, or directing business to, any person."64 This requirement is known as the "business purpose test" and is broadly interpreted.65 Not surprisingly, many enforcement actions involve bribes to obtain or retain government contracts.66 The FCPA also prohibits bribes in the conduct o f business or Hypothetical: FCPA Jurisdiction Company A, a Delaware company with its principal place of business in New York, is a large energy company that operates globally, including in a number of countries that have a high risk of corruption, such as Foreign Country. Company A's shares are listed on a national U.S. stock exchange. Company A enters into an agreement with a European company (EuroCo) to submit a joint bid to the Oil Ministry to build a refinery in Foreign Country. EuroCo is not an issuer. Executives of Company A and EuroCo meet in New York to discuss how to win the bid and decide to hire a purported third-party consultant (Intermediary) and have him use part of his "commission" to bribe high-ranking officials within the Oil Ministry. Intermediary meets with executives at Company A and EuroCo in New York to finalize the scheme . Eventually, millions of dollars in bribes are funneled from the United States and Europe through Intermediary to high-ranking officials at the Oil Ministry, and Company A and EuroCo win the contract. A few years later, a front page article alleging that the contract was procured through bribery appears in Foreign Country, and DOJ and SEC begin investigating whether the FCPA was violated . Based on these facts, which entities fall w ithin the FCPA's jurisdiction? All of the entities easily fall within the FCPA's jurisdiction . Company A is both an "issuer" and a "domestic concern" under the FCPA, and Intermediary is an "agent" of Company A. EuroCo and Intermediary are also subject to the FCPA's territorial jurisdiction provision based on their conduct while in the United States. Moreover, even if EuroCo and Intermediary had never taken any actions in the territory of the United States, they can still be subject to jurisdiction under a traditional application of conspiracy law and may be subject to substantive FCPA charges under Pinkerton liability, namely, being liable for the reasonably foreseeable substantive FCPA crimes committed by a co-conspirator in furtherance of the conspiracy. 12 Examples of Actions Taken to Obtain or Retain Business Winning a contract Influencing the procurement process Circumventing the rules for importation of products Gaining access to non-public bid tender information Evading taxes or penalties Influencing the adjudication of lawsuits or enforcement actions Obtaining exceptions to regulations Avoiding contract termination held that payments to obtain favorable tax treatment can, under appropriate circumstances, violate the FCPA: Avoiding or lowering taxes reduces operating costs and thus increases profit margins, thereby freeing up funds that the business is otherwise legally obligated to expend. And this, in turn, enables it to take any number o f actions to the disadvantage of competi tors. Bribing foreign officials to lower taxes and cus toms duties certainly can provide an unfair advantage over competitors and thereby be o f assistance to the payor in obtaining or retaining business. *** [W]e hold that Congress intended for the FCPA to apply broadly to payments intended to assist the payor, either directly or indirectly, in obtaining or retaining business for some person, and that bribes paid to foreign tax officials to secure illegally reduced customs and tax liability constitute a type of payment that can fall within this broad coverage.72 to gain a business advantage.67 For example, bribe payments made to secure favorable tax treatment, to reduce or elimi nate customs duties, to obtain government action to pre vent competitors from entering a market, or to circumvent a licensing or permit requirement, all satisfy the business purpose test.68 In 2004, the U.S. Court o fAppeals for the Fifth Circuit addressed the business purpose test in United States v. Kay and held that bribes paid to obtain favorable tax treatment-- which reduced a company's customs duties and sales taxes on imports--could constitute payments made to "obtain or retain" business within the meaning of the FCPA.69 The court explained that in enacting the FCPA, "Congress meant to prohibit a range o f payments wider than only those that directly influence the acquisition or retention o f govern ment contracts or similar commercial or industrial arrangements."70 The Kay court found that " [t]he congressional target was bribery paid to engender assistance in improving the business opportunities o f the payor or his beneficiary, irrespective o f whether that assistance be direct or indirect, and irrespective o f whether it be related to administering the law, awarding, extending, or renewing a contract, or executing or preserving an agreement."71 Accordingly, Kay Paying Bribes to Customs Officials In 2010, a global freight forwarding company and six of its corporate customers in the oil and gas industry resolved charges that they paid bribes to customs officials. The companies bribed customs officials in more than ten countries in exchange for such benefits as: evading customs duties on imported goods improperly expediting the importation of goods and equipment extending drilling contracts and lowering tax assessments obtaining false documentation related to temporary import permits for drilling rigs enabling the release of drilling rigs and other equipment from customs officials In many instances, the improper payments at issue allowed the company to carry out its existing business, which fell within the FCPA's prohibition on corrupt payments made for the purpose of "retaining" business. The seven companies paid a total of more than $235 million in civil and criminal sanctions and disgorgement 13 In short, while the FCPA does not cover every type o f bribe paid around the world for every purpose, it does apply broadly to bribes paid to help obtain or retain busi ness, which can include payments made to secure a wide variety o f unfair business advantages.73 chapter 2 The FCPA: Anti-Bribery Provisions What Does "Corruptly" Mean? To violate the FCPA, an offer, promise, or authori zation o f a payment, or a payment, to a government offi cial must be made "corruptly."74 As Congress noted when adopting the FCPA, the word "corruptly" means an intent or desire to wrongfully influence the recipient: The word "corruptly" is used in order to make clear that the offer, payment, promise, or gift, must be in tended to induce the recipient to misuse his official position; for example, wrongfully to direct business to the payor or his client, to obtain preferential legis lation or regulations, or to induce a foreign official to fail to perform an official function.75 Where corrupt intent is present, the FCPA prohibits paying, offering, or promising to pay money or anything o f value (or authorizing the payment or offer).76 By focus ing on intent, the FCPA does not require that a corrupt act succeed in its purpose.77 Nor must the foreign official actually solicit, accept, or receive the corrupt payment for the bribe payor to be liable.78 For example, in one case, a specialty chemical company promised Iraqi government officials approximately $850,000 in bribes for an upcoming contract. Although the company did not, in the end, make the payment (the scheme was thwarted by the U.S. govern ment's investigation), the company still violated the FCPA and was held accountable.79 Also, as long as the offer, promise, authorization, or payment is made corruptly, the actor need not know the identity o f the recipient; the attempt is sufficient.80 Thus, an executive who authorizes others to pay "whoever you need to" in a foreign government to obtain a contract has violated the FCPA-- even if no bribe is ultimately offered or paid. What Does "Willfully" Mean and When Does It Apply? In order for an individual defendant to be criminally liable under the FCPA, he or she must act "willfully."81 Proof o f willfulness is not required to establish corporate criminal or civil liability,82though proof o f corrupt intent is. The term "willfully" is not defined in the FCPA, but it has generally been construed by courts to connote an act committed voluntarily and purposefully, and with a bad purpose, i.e., with "knowledge that [a defendant] was doing a `bad' act under the general rules o f law."83 As the Supreme Court explained in Bryan v. United States, " [a]s a general matter, when used in the criminal context, a `will ful' act is one undertaken with a `bad purpose.' In other words, in order to establish a `willful' violation o f a statute, `the Government must prove that the defendant acted with knowledge that his conduct was unlawful.'"84 Notably, as both the Second Circuit and Fifth Circuit Courts o f Appeals have found, the FCPA does not require the government to prove that a defendant was specifically aware o f the FCPA or knew that his conduct violated the FCPA.85 To be guilty, a defendant must act with a bad pur pose, i.e., know generally that his conduct is unlawful. What Does "Anything of Value" Mean? In enacting the FCPA, Congress recognized that bribes can come in many shapes and sizes-- a broad range o f unfair benefits86-- and so the statute prohibits the corrupt "offer, payment, promise to pay, or authorization of the payment of any money, or offer, gift, promise to give, or authorization of the giving o f anything o fvalue to" a foreign official.87 An improper benefit can take many forms. While cases often involve payments o f cash (sometimes in the guise o f "consulting fees" or "commissions" given through intermediaries), others have involved travel expenses and 14 expensive gifts. Like the domestic bribery statute, the FCPA does not contain a minimum threshold amount for corrupt gifts or payments.88 Indeed, what might be considered a modest payment in the United States could be a larger and much more significant amount in a foreign country. Regardless o f size, for a gift or other payment to vio late the statute, the payor must have corrupt intent--that is, the intent to improperly influence the government official. The corrupt intent requirement protects companies that engage in the ordinary and legitimate promotion o f their businesses while targeting conduct that seeks to improp erly induce officials into misusing their positions. Thus, it is difficult to envision any scenario in which the provision o f cups o f coffee, taxi fare, or company promotional items o f nominal value would ever evidence corrupt intent, and neither D O J nor SEC has ever pursued an investigation on the basis o f such conduct. Moreover, as in all areas of federal law enforcement, D O J and SEC exercise discre tion in deciding which cases promote law enforcement pri orities and justify investigation. Certain patterns, however, have emerged: D O J's and S E C 's anti-bribery enforcement actions have focused on small payments and gifts only when they comprise part o f a systemic or long-standing course of conduct that evidences a scheme to corruptly pay foreign officials to obtain or retain business. These assessments are necessarily fact specific. Cash The most obvious form o f corrupt payment is large amounts o f cash. In some instances, companies have main tained cash funds specifically earmarked for use as bribes. One U.S. issuer headquartered in Germany disbursed cor rupt payments from a corporate "cash desk" and used off shore bank accounts to bribe government officials to win contracts.89 In another instance, a four-company joint ven ture used its agent to pay $5 million in bribes to a Nigerian political party.90 The payments were made to the agent in suitcases o f cash (typically in $1 million installments), and, in one instance, the trunk o f a car when the cash did not fit into a suitcase.91 Gifts, Travel, Entertainment, and O ther Things o f Value A small gift or token o f esteem or gratitude is often an appropriate way for business people to display respect for each other. Some hallmarks o f appropriate gift-giving are when the gift is given openly and transparently, properly recorded in the giver's books and records, provided only to reflect esteem or gratitude, and permitted under local law. Items o f nominal value, such as cab fare, reasonable meals and entertainment expenses, or company promo tional items, are unlikely to improperly influence an offi cial, and, as a result, are not, without more, items that have resulted in enforcement action by D O J or SEC. The larger or more extravagant the gift, however, the more likely it was given with an improper purpose. D O J and SEC enforce ment cases thus have involved single instances o f large, extravagant gift-giving (such as sports cars, fur coats, and other luxury items) as well as widespread gifts o f smaller items as part o f a pattern o f bribes.92 For example, in one case brought by D O J and SEC, a defendant gave a govern ment official a country club membership fee and a genera tor, as well as household maintenance expenses, payment o f cell phone bills, an automobile worth $20,000, and lim ousine services. The same official also received $250,000 through a third-party agent.93 In addition, a number o f FCPA enforcement actions have involved the corrupt payment o f travel and entertain ment expenses. Both D O J and SEC have brought cases where these types o f expenditures occurred in conjunction with other conduct reflecting systemic bribery or other clear indicia o f corrupt intent. A case involving a California-based telecommuni cations company illustrates the types of improper travel and entertainment expenses that may violate the FCPA.94 Between 2002 and 2007, the company spent nearly $7 mil lion on approximately 225 trips for its customers in order to obtain systems contracts in China, including for employees o f Chinese state-owned companies to travel to popular tour ist destinations in the United States.95 Although the trips were purportedly for the individuals to conduct training at 15 Examples of Improper Travel and Entertainment a $12,000 birthday trip for a government decision maker from Mexico that included visits to wineries and dinners $10,000 spent on dinners, drinks, and entertainment for a government official a trip to Italy for eight Iraqi government officials that consisted primarily of sightseeing and included $1,000 in "pocket money" fo r each official a trip to Paris for a government official and his wife that consisted primarily of touring activities via a chauffeur-driven vehicle the company's facilities, in reality, no training occurred on many ofthese trips and the company had no facilities at those locations. Approximately $670,000 o f the $7 million was falsely recorded as "training" expenses.96 Likewise, a New Jersey-based telecommunications company spent millions o f dollars on approximately 315 trips for Chinese government officials, ostensibly to inspect factories and train the officials in using the company's equipment.97 In reality, during many o f these trips, the offi cials spent little or no time visiting the company's facilities, but instead visited tourist destinations such as Hawaii, Las Vegas, the Grand Canyon, Niagara Falls, Disney World, Universal Studios, and New York City.98 Some o f the trips were characterized as "factory inspections" or "training" with government customers but consisted primarily or entirely o f sightseeing to locations chosen by the officials, typically lasting two weeks and costing between $25,000 and $55,000 per trip. In some instances, the company gave the government officials $500 to $1,000 per day in spend ing money and paid all lodging, transportation, food, and entertainment expenses. The company either failed to record these expenses or improperly recorded them as "consulting fees" in its corporate books and records. The chapter 2 The FCPA: Anti-Bribery Provisions company also failed to implement appropriate internal con trols to monitor the provision o f travel and other things of value to Chinese government officials.99 Companies also may violate the FCPA if they give payments or gifts to third parties, like an official's family members, as an indirect way o f corruptly influencing a for eign official. For example, one defendant paid personal bills and provided airline tickets to a cousin and close friend of the foreign official whose influence the defendant sought in obtaining contracts.100The defendant was convicted at trial and received a prison sentence.101 As part o f an effective compliance program, a com pany should have clear and easily accessible guidelines and processes in place for gift-giving by the company's directors, officers, employees, and agents. Though not necessarily appropriate for every business, many larger companies have automated gift-giving clearance p ro cesses and have set clear monetary thresholds for gifts along with annual limitations, with limited exceptions for gifts approved by appropriate management. Clear guidelines and processes can be an effective and efficient means for controlling gift-giving, deterring improper gifts, and protecting corporate assets. The FCPA does not prohibit gift-giving. Rather, just like its domestic bribery counterparts, the FCPA prohibits the payments o f bribes, including those disguised as gifts. Charitable Contributions Companies often engage in charitable giving as part o f legitimate local outreach. The FCPA does not prohibit charitable contributions or prevent corporations from act ing as good corporate citizens. Companies, however, can not use the pretense o f charitable contributions as a way to funnel bribes to government officials. 16 For example, a pharmaceutical company used chari table donations to a small local castle restoration charity headed by a foreign government official to induce the offi cial to direct business to the company. Although the charity was a bona fide charitable organization, internal documents at the pharmaceutical company's subsidiary established that the payments were not viewed as charitable contributions but rather as "dues" the subsidiary was required to pay for assistance from the government official. The payments con stituted a significant portion o f the subsidiary's total pro motional donations budget and were structured to allow the subsidiary to exceed its authorized limits. The payments Hypothetical: Gifts, Travel, and Entertainment Company A is a large U.S. engineering company with global operations in more than 50 countries, including a number that have a high risk of corruption, such as Foreign Country. Company A's stock is listed on a national U.S. stock exchange. In conducting its business internationally, Company A's officers and employees come into regular contact with foreign officials, including officials in various ministries and state-owned entities. At a trade show, Company A has a booth at which it offers free pens, hats, t-shirts, and other similar promotional items with Company A's logo . Company A also serves free coffee, other beverages, and snacks at the booth . Some of the visitors to the booth are foreign officials. Is Company A in violation of the FCPA? No. These are legitimate, bona fide expenditures made in connection with the promotion, demonstration, or explanation of Company A's products or services. There is nothing to suggest corrupt intent here. The FCPA does not prevent companies from promoting their businesses in this way or providing legitimate hospitality, including to foreign officials. Providing promotional items with company logos or free snacks as set forth above is an appropriate means of providing hospitality and promoting business. Such conduct has never formed the basis for an FCPA enforcement action . A t the trade show, Company A invites a dozen current and prospective customers out fo r drinks, and pays the m oderate bar tab. Some of the current and prospective customers are foreign officials under the FCPA. Is Company A in violation of the FCPA? No. Again, the FCPA was not designed to prohibit all forms of hospitality to foreign officials. While the cost here may be more substantial than the beverages, snacks, and promotional items provided at the booth, and the invitees specifically selected, there is still nothing to suggest corrupt intent. Two years ago, Company A won a long-term contract to supply goods and services to the state-ow ned Electricity Commission in Foreign Country. The Electricity Commission is 100% owned, controlled, and operated by the governm ent of Foreign Country, and employees of the Electricity Commission are subject to Foreign Country's dom estic bribery laws. Some Company A executives are in Foreign Country fo r meetings w ith officials of the Electricity Commission. The General M anager of the Electricity Commission was recently married, and during the trip Company A executives present a m oderately priced crystal vase to the General M anager as a w edding gift and token of esteem. Is Company A in violation of the FCPA? No. It is appropriate to provide reasonable gifts to foreign officials as tokens of esteem or gratitude . It is important that such gifts be made openly and transparently, properly recorded in a company's books and records, and given only where appropriate under local law, customary where given, and reasonable for the occasion . During the course of the contract described above, Company A periodically provides training to Electricity Commission employees at its facilities in Michigan. The training is paid for by the Electricity Commission as part of the contract. Senior officials of the Electricity Commission inform Company A that they w ant to inspect the facilities and ensure that the training is working w ell. Company A pays for the airfare, hotel, and transportation for the (c o n t'd ) 17 chapter 2 The FCPA: Anti-Bribery Provisions L. Electricity Commission senior officials to travel to Michigan to inspect Company A's facilities. Because it is a lengthy international flight, Company A agrees to pay for business class airfare, to which its own em ployees are entitled for lengthy flights. The foreign officials visit Michigan for several days, during which the senior officials perform an appropriate inspection. Company A executives take the officials to a m oderately priced dinner, a baseball game, and a play. Do any of these actions violate the FCPA? No . Neither the costs associated with training the employees nor the trip for the senior officials to the Company's facilities in order to inspect them violates the FCPA. Reasonable and bona fide promotional expenditures do not violate the FCPA. Here, Company A is providing training to the Electricity Commission's employees and is hosting the Electricity Commission senior officials. Their review of the execution and performance of the contract is a legitimate business purpose . Even the provision of business class airfare is reasonable under the circumstances, as are the meals and entertainment, which are only a small component of the business trip . W ould this analysis be d ifferen t if Company A instead paid fo r the senior officials to travel first-class w ith their spouses fo r an all-expenses-paid, w eek-long trip to Las Vegas, w here Company A has no facilities? Yes. This conduct almost certainly violates the FCPA because it evinces a corrupt intent. Here, the trip does not appear to be designed for any legitimate business purpose, is extravagant, includes expenses for the officials' spouses, and therefore appears to be designed to corruptly curry favor with the foreign government officials. Moreover, if the trip were booked as a legitimate business expense--such as the provision of training at its facilities--Company A would also be in violation of the FCPA's accounting provisions. Furthermore, this conduct suggests deficiencies in Company A's internal controls. Company A's contract w ith the Electricity Commission is going to expire, and the Electricity Commission is offering the next contract through its ten d er process. An em ployee of the Electricity Commission contacts Company A and offers to provide Company A w ith confidential, non-public bid inform ation from Company A's com petitors if Company A will pay fo r a vacation to Paris fo r him and his girlfriend. Employees of Company A accede to the official's request, pay for the vacation, receive the confidential bid inform ation, and yet still do not win the contract. Has Company A violated the FCPA? Yes. Company A has provided things of value to a foreign official for the purpose of inducing the official to misuse his office and to gain an improper advantage. It does not matter that it was the foreign official who first suggested the illegal conduct or that Company A ultimately was not successful in winning the contract. This conduct would also violate the FCPA's accounting provisions if the trip were booked as a legitimate business expense and suggests deficiencies in Company A's internal controls . 18 also were not in compliance with the company's internal policies, which provided that charitable donations gener ally should be made to healthcare institutions and relate to the practice o f medicine.102 Proper due diligence and controls are critical for charitable giving. In general, the adequacy o f measures taken to prevent misuse o f charitable donations will depend on a risk-based analysis and the specific facts at hand. In Opinion Procedure Release No. 10-02, D O J described the due diligence and controls that can minimize the likelihood o f an FCPA violation. In that matter, a Eurasian-based sub sidiary o f a U.S. non-governmental organization was asked by an agency o f a foreign government to make a grant to a local microfinance institution (MFI) as a prerequisite to the subsidiary's transformation to bank status. The subsid iary proposed contributing $1.42 million to a local M FI to satisfy the request. The subsidiary undertook an extensive, three-stage due diligence process to select the proposed grantee and imposed significant controls on the proposed grant, including ongoing monitoring and auditing, ear marking funds for capacity building, prohibiting compen sation o f board members, and implementing anti-corrup tion compliance provisions. D O J explained that it would not take any enforcement action because the company's due diligence and the controls it planned to put in place sufficed to prevent an FCPA violation. Other opinion releases also address charitable-type grants or donations. Under the facts presented in those releases, D O J approved the proposed grant or donation,103 based on due diligence measures and controls such as: certifications by the recipient regarding compliance with the FC P A ;104 due diligence to confirm that none o f the recipient's officers were affiliated with the foreign government at issue;105 a requirement that the recipient provide audited financial statements;106 a written agreement with the recipient restricting the use o f funds;107 steps to ensure that the funds were transferred to a valid bank account;108 confirmation that the charity's commitments were met before funds were disbursed;109and on-going monitoring o f the efficacy o f the p ro g ram .110 Legitimate charitable giving does not violate the FCPA. Compliance with the FCPA merely requires that charitable giving not be used as a vehicle to conceal pay ments made to corruptly influence foreign officials. Five Questions to Consider When Making Charitable Payments in a Foreign Country: 1. What is the purpose of the payment? 2. Is the payment consistent with the company's internal guidelines on charitable giving? 3. Is the payment at the request of a foreign official? 4. Is a foreign official associated with the charity and, if so, can the foreign official make decisions regarding your business in that country? 5. Is the payment conditioned upon receiving business or other benefits? Who Is a Foreign Official? The FCPA's anti-bribery provisions apply to corrupt payments made to (1) "any foreign official"; (2) "any foreign political party or official thereof"; (3) "any candidate for foreign political office"; or (4) any person, while knowing that all or a portion o f the payment will be offered, given, or promised to an individual falling within one o f these three categories.111 Although the statute distinguishes between a "foreign official," "foreign political party or official thereof," and "candidate for foreign political office," the term "for eign official" in this guide generally refers to an individual falling within any o f these three categories. The FCPA defines "foreign official" to include: any officer or employee of a foreign government or any department, agency, or instrumentality thereof, 19 or o f a public international organization, or any per son acting in an official capacity for or on behalf of any such government or department, agency, or in strumentality, or for or on behalf o f any such public international organization.112 chapter 2 The FCPA: Anti-Bribery Provisions As this language makes clear, the FCPA broadly applies to corrupt payments to "any" officer or employee o f a foreign government and to those acting on the for eign government's behalf.113 The FCPA thus covers cor rupt payments to low-ranking employees and high-level officials alike.114 The FCPA prohibits payments to foreign officials, not to foreign governments.115 That said, companies contem plating contributions or donations to foreign governments should take steps to ensure that no monies are used for cor rupt purposes, such as the personal benefit o f individual foreign officials. Departm ent, Agency, or Instrumentality of a Foreign Government Foreign officials under the FCPA include officers or employees o f a department, agency, or instrumental ity o f a foreign government. When a foreign government is organized in a fashion similar to the U.S. system, what constitutes a government department or agency is typically clear (e.g., a ministry o f energy, national security agency, or transportation authority).116However, governments can be organized in very different ways.117 Many operate through state-owned and state-controlled entities, particularly in such areas as aerospace and defense manufacturing, bank ing and finance, healthcare and life sciences, energy and extractive industries, telecommunications, and transporta tion.118 By including officers or employees o f agencies and instrumentalities within the definition o f "foreign official," the FCPA accounts for this variability. The term "instrumentality" is broad and can include state-owned or state-controlled entities. Whether a particu lar entity constitutes an "instrumentality" under the FCPA requires a fact-specific analysis o f an entity's ownership, control, status, and function.119 A number o f courts have approved final jury instructions providing a non-exclusive list o f factors to be considered: the foreign state's extent o f ownership o f the entity; the foreign state's degree o f control over the entity (including whether key officers and directors of the entity are, or are appointed by, government officials); the foreign state's characterization o f the entity and its employees; the circumstances surrounding the entity's creation; the purpose o f the entity's activities; the entity's obligations and privileges under the foreign state's law; the exclusive or controlling power vested in the entity to administer its designated functions; the level o f financial support by the foreign state (including subsidies, special tax treatment, government-mandated fees, and loans); the entity's provision o f services to the jurisdiction's residents; whether the governmental end or purpose sought to be achieved is expressed in the policies o f the foreign government; and the general perception that the entity is performing official or governmental functions.120 Companies should consider these factors when eval uating the risk o f FCPA violations and designing compli ance programs. D O J and SEC have pursued cases involving instru mentalities since the time o f the FCPA's enactment and have long used an analysis o f ownership, control, status, and function to determine whether a particular entity is an agency or instrumentality o f a foreign government. For example, the second-ever FCPA case charged by D O J involved a California company that paid bribes through a Mexican corporation to two executives o f a state-owned 20 Mexican national oil company. 121 And in the early 1980s, D O J and SEC brought cases involving a $1 million bribe to the chairman o f Trinidad and Tobago's racing authority.122 D O J and SEC continue to regularly bring FCPA cases involving bribes paid to employees o f agencies and instrumentalities o f foreign governments. In one such case, the subsidiary o f a Swiss engineering company paid bribes to officials o f a state-owned and controlled electric ity commission. The commission was created by, owned by, and controlled by the Mexican government, and it had a monopoly on the transmission and distribution o f elec tricity in Mexico. Many o f the commission's board mem bers were cabinet-level government officials, and the direc tor was appointed by Mexico's president.123 Similarly, in another recent case, Miami telecommunications executives were charged with paying bribes to employees o f Haiti's state-owned and controlled telecommunications company. The telecommunications company was 97% owned and 100% controlled by the Haitian government, and its direc tor was appointed by Haiti's president.124 While no one factor is dispositive or necessarily more important than another, as a practical matter, an entity is unlikely to qualify as an instrumentality if a government does not own or control a majority o f its shares. However, there are circumstances in which an entity would qualify as an instrumentality absent 50% or greater foreign gov ernment ownership, which is reflected in the limited num ber o f D O J or SEC enforcement actions brought in such situations. For example, in addition to being convicted of funneling millions o f dollars in bribes to two sitting presi dents in two different countries, a French issuer's three subsidiaries were convicted o f paying bribes to employees o f a Malaysian telecommunications company that was 43% owned by Malaysia's Ministry o f Finance. There, notwith standing its minority ownership stake in the company, the Ministry held the status o f a "special shareholder," had veto power over all major expenditures, and controlled impor tant operational decisions.125 In addition, most senior company officers were political appointees, including the Chairman and Director, the Chairman o f the Board o f the Tender Committee, and the Executive Director.126 Thus, despite the Malaysian government having a minority share holder position, the company was an instrumentality o f the Malaysian government as the government nevertheless had substantial control over the company. Companies and individuals should also remember that, whether an entity is an instrumentality o f a foreign government or a private entity, commercial (i.e., privateto-private) bribery may still violate the FCPA's accounting provisions, the Travel Act, anti-money laundering laws, and other federal or foreign laws. Any type o f corrupt payment thus carries a risk o f prosecution. Public International Organizations In 1998, the FCPA was amended to expand the defini tion o f "foreign official" to include employees and representa tives ofpublic international organizations.127A "public inter national organization" is any organization designated as such by Executive Order under the International Organizations Immunities Act, 22 U.S.C. 288, or any other organization that the President so designates.128 Currently, public interna tional organizations include entities such as the World Bank, the International Monetary Fund, the World Intellectual Property Organization, the World Trade Organization, the O EC D , the Organization o f American States, and numer ous others. A comprehensive list o f organizations designated as "public international organizations" is contained in 22 U.S.C. 288 and can also be found on the U.S. Government Printing Office website at http://www.gpo.gov/fdsys/. How Are Payments to Third Parties Treated? The FCPA expressly prohibits corrupt payments made through third parties or intermediaries.129Specifically, it covers payments made to "any person, while knowing that all or a portion o f such money or thing o f value will be offered, given, or promised, directly or indirectly,"130to a foreign official. Many companies doing business in a foreign country retain a local individual or company to help them conduct business. Although these foreign agents may pro vide entirely legitimate advice regarding local customs and procedures and may help facilitate business transactions, 21 companies should be aware o f the risks involved in engag ing third-party agents or intermediaries. The fact that a bribe is paid by a third party does not eliminate the poten tial for criminal or civil FCPA liability.131 For instance, a four-company joint venture used two agents-- a British lawyer and a Japanese trading company--to bribe Nigerian government officials in order to win a series o f liquefied natural gas construc tion projects.132 Together, the four multi-national cor porations and the Japanese trading company paid a combined $1.7 billion in civil and criminal sanctions for their decade-long bribery scheme. In addition, the subsidiary o f one of the companies pleaded guilty and a number o f individuals, including the British lawyer and the former C EO o f one o f the companies' subsidiaries, received significant prison terms. Similarly, a medical device manufacturer entered into a deferred prosecution agreement as the result o f corrupt payments it authorized its local Chinese distributor to pay to Chinese officials.133 Another company, a manufacturer o f specialty chemicals, committed multiple FCPA viola tions through its agents in Iraq: a Canadian national and the Canadian's companies. Among other acts, the Canadian national paid and promised to pay more than $1.5 million in bribes to officials o f the Iraqi Ministry o f Oil to secure sales o f a fuel additive. Both the company and the Canadian national pleaded guilty to criminal charges and resolved civil enforcement actions by SEC. 134 In another case, the U.S. subsidiary o f a Swiss freight forwarding company was charged with paying bribes on behalf o f its customers in several countries.135Although the U.S. subsidiary was not an issuer under the FCPA, it was an "agent" o f several U.S. issuers and was thus charged directly with violating the FCPA. Charges against the freight for warding company and seven o f its customers resulted in over $236.5 million in sanctions.136 Because Congress anticipated the use o f third-party agents in bribery schemes--for example, to avoid actual knowledge o f a bribe--it defined the term "knowing" in a way that prevents individuals and businesses from avoiding liability by putting "any person" between themselves and chapter 2 The FCPA: Anti-Bribery Provisions the foreign officials.137 Under the FCPA, a person's state of mind is "knowing" with respect to conduct, a circumstance, or a result if the person: is aware that [he] is engaging in such conduct, that such circumstance exists, or that such result is substantially certain to occur; or has a firm belief that such circumstance exists or that such result is substantially certain to occur.138 Thus, a person has the requisite knowledge when he is aware o f a high probability o f the existence o f such circum stance, unless the person actually believes that such circum stance does not exist.139As Congress made clear, it meant to impose liability not only on those with actual knowledge o f wrongdoing, but also on those who purposefully avoid actual knowledge: [T]he so-called "head-in-the-sand" problem--vari ously described in the pertinent authorities as "con scious disregard," "willful blindness" or "deliberate ignorance"--should be covered so that management officials could not take refuge from the Act's prohi bitions by their unwarranted obliviousness to any action (or inaction), language or other "signaling de vice" that should reasonably alert them of the "high probability" o f an FCPA violation.140 Common red flags associated with third parties include: excessive commissions to third-party agents or consultants; unreasonably large discounts to third-party distributors; third-party "consulting agreements" that include only vaguely described services; the third-party consultant is in a different line of business than that for which it has been engaged; the third party is related to or closely associated with the foreign official; 22  the third party became part o f the transaction at the express request or insistence o f the foreign official; the third party is merely a shell company incorpo rated in an offshore jurisdiction; and the third party requests payment to offshore bank accounts. Businesses may reduce the FCPA risks associated with third-party agents by implementing an effective com pliance program, which includes due diligence o f any pro spective foreign agents. United States v. Kozeny, et al. In December 2011, the U.S. Court of Appeals for the Second Circuit upheld a conscious avoidance instruction given during the 2009 trial of a businessman who was convicted of conspiring to violate the FCPA's anti-bribery provisions by agreeing to make payments to Azeri officials in a scheme to encourage the privatization of the Azerbaijan Republic's state oil company The court of appeals found that the instruction did not lack a factual predicate, citing evidence and testimony at trial demonstrating that the defendant knew corruption was pervasive in Azerbaijan; that he was aware of his business partner's reputation for misconduct; that he had created two U S companies in order to shield himself and other investors from potential liability for payments made in violation of the FCPA; and that the defendant expressed concerns during a conference call about whether his business partner and company were bribing officials . The court of appeals also rejected the defendant's contention that the conscious avoidance charge had improperly permitted the jury to convict him based on negligence, explaining that ample evidence in the record showed that the defendant had "serious concerns" about the legality of his partner's business practices "and worked to avoid learning exactly what [he] was doing," and noting that the district court had specifically instructed the jury not to convict based on negligence . What Affirmative Defenses Are Available? The FCPA's anti-bribery provisions contain two affir mative defenses: (1) that the payment was lawful under the written laws o f the foreign country (the "local law" defense), and (2) that the money was spent as part o f demonstrating a product or performing a contractual obligation (the "reason able and bona fide business expenditure" defense). Because these are affirmative defenses, the defendant bears the burden o f proving them. The Local Law Defense For the local law defense to apply, a defendant must establish that "the payment, gift, offer, or promise o f any thing o f value that was made, was lawful under the writ ten laws and regulations o f the foreign official's, political party's, party official's, or candidate's country."141The defen dant must establish that the payment was lawful under the foreign country's written laws and regulations at the time o f the offense. In creating the local law defense in 1988, Congress sought "to make clear that the absence o f written laws in a foreign official's country would not by itself be suf ficient to satisfy this defense."142 Thus, the fact that bribes may not be prosecuted under local law is insufficient to establish the defense. In practice, the local law defense arises infrequently, as the written laws and regulations o f coun tries rarely, if ever, permit corrupt payments. Nevertheless, if a defendant can establish that conduct that otherwise falls within the scope o f the FCPA's anti-bribery provisions was lawful under written, local law, he or she would have a defense to prosecution. In United States v. Kozeny, the defendant unsuccess fully sought to assert the local law defense regarding the law o f Azerbaijan. The parties disputed the contents and appli cability o f Azeri law, and each presented expert reports and testimony on behalf o f their conflicting interpretations. The court ruled that the defendant could not invoke the FCPA's affirmative defense because Azeri law did not actually legal ize the bribe payment. The court concluded that an excep tion under Azeri law relieving bribe payors who voluntarily 23 disclose bribe payments to the authorities o f criminal liabil ity did not make the bribes legal.143 Reasonable and Bona Fide Expenditures The FCPA allows companies to provide reasonable and bona fide travel and lodging expenses to a foreign official, and it is an affirmative defense where expenses are directly related to the promotion, demonstration, or explanation o f a company's products or services, or are related to a company's execution or performance o f a con tract with a foreign government or agency.144 Trips that are primarily for personal entertainment purposes, how ever, are not bona fide business expenses and may violate the FCPA's anti-bribery provisions.145 Moreover, when expenditures, bona fide or not, are mischaracterized in a company's books and records, or where unauthorized or improper expenditures occur due to a failure to imple ment adequate internal controls, they may also violate the FCPA's accounting provisions. Purposeful mischaracterization o f expenditures may also, o f course, indicate a corrupt intent. D O J and SEC have consistently recognized that busi nesses, both foreign and domestic, are permitted to pay for reasonable expenses associated with the promotion o f their products and services or the execution o f existing contracts. In addition, D O J has frequently provided guidance about legitimate promotional and contract-related expenses-- addressing travel and lodging expenses in particular-- through several opinion procedure releases. Under the cir cumstances presented in those releases,146D O J opined that the following types o f expenditures on behalf o f foreign officials did not warrant FCPA enforcement action: travel and expenses to visit company facilities or operations; travel and expenses for training; and product demonstration or promotional activities, including travel and expenses for meetings. Whether any particular payment is a bona fide expen diture necessarily requires a fact-specific analysis. But the following non-exhaustive list o f safeguards, compiled from several releases, may be helpful to businesses in evaluating chap ter 2 The FCPA: Anti-Bribery Provisions whether a particular expenditure is appropriate or may risk violating the FCPA: Do not select the particular officials who will par ticipate in the party's proposed trip or program147 or else select them based on pre-determined, meritbased criteria.148 Pay all costs directly to travel and lodging vendors and/or reimburse costs only upon presentation o f a receipt.149 Do not advance funds or pay for reimbursements in cash.150 Ensure that any stipends are reasonable approxima tions o f costs likely to be incurred151 and/or that expenses are limited to those that are necessary and reasonable.152 Ensure the expenditures are transparent, both within the company and to the foreign government.115533 Do not condition payment o f expenses on any action by the foreign official.154 Obtain written confirmation that payment o f the expenses is not contrary to local law.155 Provide no additional compensation, stipends, or spending money beyond what is necessary to pay for actual expenses incurred.156 Ensure that costs and expenses on behalf o f the foreign officials will be accurately recorded in the company's books and records.157 In sum, while certain expenditures are more likely to raise red flags, they will not give rise to prosecution if they are (1) reasonable, (2) bona fide, and (3) directly related to (4) the promotion, demonstration, or explanation of products or services or the execution or performance o f a contract.158 24 What Are Facilitating or Expediting Payments? The FCPA's bribery prohibition contains a narrow exception for "facilitating or expediting payments" made in furtherance o f routine governmental action.159 The facili tating payments exception applies only when a payment is made to further "routine governmental action" that involves non-discretionary acts.160 Examples of "routine governmen tal action" include processing visas, providing police pro tection or mail service, and supplying utilities like phone service, power, and water. Routine government action does not include a decision to award new business or to continue business with a particular party.161 Nor does it include acts that are within an official's discretion or that would consti tute misuse o f an official's office.162Thus, paying an official a small amount to have the power turned on at a factory might be a facilitating payment; paying an inspector to ignore the fact that the company does not have a valid permit to operate the factory would not be a facilitating payment. Examples of "Routine Governmental Action" An action which is ordinarily and commonly performed by a foreign official in-- obtaining permits, licenses, or other official documents to qualify a person to do business in a foreign country; processing governmental papers, such as visas and work orders; providing police protection, mail pickup and delivery, or scheduling inspections associated with contract performance or inspections related to transit of goods across country; providing phone service, power and water supply, loading and unloading cargo, or protecting perishable products or commodities from deterioration; or actions of a similar nature . Whether a payment falls within the exception is not dependent on the size o f the payment, though size can be telling, as a large payment is more suggestive of corrupt intent to influence a non-routine governmental action. But, like the FCPA's anti-bribery provisions more generally, the facilitating payments exception focuses on the purpose o f the payment rather than its value. For instance, an Oklahomabased corporation violated the FCPA when its subsidiary paid Argentine customs officials approximately $166,000 to secure customs clearance for equipment and materials that lacked required certifications or could not be imported under local law and to pay a lower-than-applicable duty rate. The company's Venezuelan subsidiary had also paid Venezuelan customs officials approximately $7,000 to permit the importation and exportation o f equipment and materials not in compliance with local regulations and to avoid a full inspection o f the imported goods.163 In another case, three subsidiaries of a global supplier of oil drilling products and services were criminally charged with authorizing an agent to make at least 378 corrupt payments (totaling approximately $2.1 million) to Nigerian Customs Service officials for pref erential treatment during the customs process, including the reduction or elimination o f customs duties.164 Labeling a bribe as a "facilitating payment" in a com pany's books and records does not make it one. A Swiss offshore drilling company, for example, recorded pay ments to its customs agent in the subsidiary's "facilitat ing payment" account, even though company personnel believed the payments were, in fact, bribes. The company was charged with violating both the FCPA's anti-bribery and accounting provisions.165 Although true facilitating payments are not ille gal under the FCPA, they may still violate local law in the countries where the company is operating, and the O E C D 's Working Group on Bribery recommends that all countries encourage companies to prohibit or discourage facilitating payments, which the United States has done regularly.166 In addition, other countries' foreign bribery laws, such as the United Kingdom's, may not contain an exception for facilitating payments.167 Individuals and companies should therefore be aware that although true facilitating payments 25 are permissible under the FCPA, they may still subject a company or individual to sanctions. As with any expenditure, facilitating payments may still violate the FCPA if they are not properly recorded in an issuer's books and records.168 chap ter 2 The FCPA: Anti-Bribery Provisions Hypothetical: Facilitating Payments Company A is a large multi-national mining company with operations in Foreign Country, where it recently identified a significant new ore deposit. It has ready buyers for the new ore but has limited capacity to get it to market. In order to increase the size and speed of its ore export, Company A will need to build a new road from its facility to the port that can accommodate larger trucks. Company A retains an agent in Foreign Country to assist it in obtaining the required permits, including an environmental permit, to build the road . The agent informs Company A's vice president for international operations that he plans to make a one-time small cash payment to a clerk in the relevant government office to ensure that the clerk files and stamps the permit applications expeditiously, as the agent has experienced delays of three months when he has not made this "grease" payment. The clerk has no discretion about whether to file and stamp the permit applications once the requisite filing fee has been paid . The vice president authorizes the payment. A few months later, the agent tells the vice president that he has run into a problem obtaining a necessary environmental permit. It turns out that the planned road construction would adversely impact an environmentally sensitive and protected local wetland . While the problem could be overcome by rerouting the road, such rerouting would cost Company A $1 million more and would slow down construction by six months. It would also increase the transit time for the ore and reduce the number of monthly shipments. The agent tells the vice president that he is good friends with the director of Foreign Country's Department of Natural Resources and that it would only take a modest cash payment to the director and the "problem would go away. " The vice president authorizes the payment, and the agent makes it. After receiving the payment, the director issues the permit, and Company A constructs its new road through the wetlands. Was the paym ent to the clerk a violation of the FCPA? No . Under these circumstances, the payment to the clerk would qualify as a facilitating payment, since it is a one-time, small payment to obtain a routine, non-discretionary governmental service that Company A is entitled to receive (i.e., the stamping and filing of the permit application) . However, while the payment may qualify as an exception to the FCPA's anti-bribery provisions, it may violate other laws, both in Foreign Country and elsewhere. In addition, if the payment is not accurately recorded, it could violate the FCPA's books and records provision . Was the paym ent to the director a violation of the FCPA? Yes. The payment to the director of the Department of Natural Resources was in clear violation of the FCPA, since it was designed to corruptly influence a foreign official into improperly approving a permit. The issuance of the environmental permit was a discretionary act, and indeed, Company A should not have received it. Company A, its vice president, and the local agent may all be prosecuted for authorizing and paying the bribe . 26 Does the FCPA Apply to Cases of Extortion or Duress? Situations involving extortion or duress will not give rise to FCPA liability because a payment made in response to true extortionate demands under imminent threat o fphysical harm cannot be said to have been made with corrupt intent or for the purpose of obtaining or retaining business.169 In enacting the FCPA, Congress recognized that real-world situations might arise in which a business is compelled to pay an official in order to avoid threats to health and safety. As Congress explained, "a payment to an official to keep an oil rig from being dynamited should not be held to be made with the requisite corrupt purpose."170 Mere economic coercion, however, does not amount to extortion. As Congress noted when it enacted the FCPA: "The defense that the payment was demanded on the part of a government official as a price for gaining entry into a mar ket or to obtain a contract would not suffice since at some point the U.S. company would make a conscious decision whether or not to pay a bribe."171 The fact that the payment was "first proposed by the recipient ... does not alter the cor rupt purpose on the part of the person paying the bribe."172 This distinction between extortion and economic coer cion was recognized by the court in United States v. Kozeny. There, the court concluded that although an individual who makes a payment under duress (i.e., upon threat o f physi cal harm) will not be criminally liable under the FCPA,173 a bribe payor who claims payment was demanded as a price for gaining market entry or obtaining a contract "cannot argue that he lacked the intent to bribe the official because he made the `conscious decision' to pay the official."174 While the bribe payor in this situation "could have turned his back and walked away," in the oil rig example, "he could not."175 Businesses operating in high-risk countries may face real threats o f violence or harm to their employees, and payments made in response to imminent threats to health or safety do not violate the FC PA .176 If such a situation arises, and to ensure the safety o f its employees, companies should immediately contact the appropriate U.S. embassy for assistance. Principles of Corporate Liability for Anti-Bribery Violations General principles of corporate liability apply to the FCPA. Thus, a company is liable when its directors, officers, employees, or agents, acting within the scope of their employ ment, commit FCPA violations intended, at least in part, to benefit the company.177 Similarly, just as with any other stat ute, D O J and SEC look to principles of parent-subsidiary and successor liability in evaluating corporate liability. Parent-Subsidiary Liability There are two ways in which a parent company may be liable for bribes paid by its subsidiary. First, a parent may have participated sufficiently in the activity to be directly liable for the conduct-- as, for example, when it directed its subsidiary's misconduct or otherwise directly participated in the bribe scheme. Second, a parent may be liable for its subsidiary's con duct under traditional agency principles. The fundamental characteristic of agency is control.178Accordingly, D O J and SEC evaluate the parent's control--including the parent's knowledge and direction of the subsidiary's actions, both generally and in the context o f the specific transaction-- when evaluating whether a subsidiary is an agent o f the par ent. Although the formal relationship between the parent and subsidiary is important in this analysis, so are the practi cal realities ofhow the parent and subsidiary actually interact. If an agency relationship exists, a subsidiary's actions and knowledge are imputed to its parent.179 Moreover, under traditional principles o f respondeat superior, a com pany is liable for the acts o f its agents, including its employ ees, undertaken within the scope o f their employment and intended, at least in part, to benefit the company.180 Thus, if an agency relationship exists between a parent and a subsidiary, the parent is liable for bribery committed by the subsidiary's employees. For example, SEC brought an administrative action against a parent for bribes paid by the president o f its indirect, wholly owned subsidiary. In that matter, the subsidiary's president reported directly to the C E O o f the parent issuer, and the issuer routinely identified 27 the president as a member o f its senior management in its annual filing with SEC and in annual reports. Additionally, the parent's legal department approved the retention o f the third-party agent through whom the bribes were arranged despite a lack o f documented due diligence and an agency agreement that violated corporate policy; also, an official of the parent approved one o f the payments to the third-party agent.181 Under these circumstances, the parent company had sufficient knowledge and control o f its subsidiary's actions to be liable under the FCPA. Successor Liability Companies acquire a host o f liabilities when they merge with or acquire another company, including those aris ing out of contracts, torts, regulations, and statutes. As a gen eral legal matter, when a company merges with or acquires another company, the successor company assumes the prede cessor company's liabilities.182Successor liability is an integral component of corporate law and, among other things, pre vents companies from avoiding liability by reorganizing.183 Successor liability applies to all kinds o f civil and criminal liabilities,184and FCPA violations are no exception. Whether successor liability applies to a particular corporate transac tion depends on the facts and the applicable state, federal, and foreign law. Successor liability does not, however, create liability where none existed before. For example, if an issuer were to acquire a foreign company that was not previously subject to the FCPA's jurisdiction, the mere acquisition of that foreign company would not retroactively create FCPA liability for the acquiring issuer. D O J and SEC encourage companies to conduct pre acquisition due diligence and improve compliance pro grams and internal controls after acquisition for a variety o f reasons. First, due diligence helps an acquiring company to accurately value the target company. Contracts obtained through bribes may be legally unenforceable, business obtained illegally may be lost when bribe payments are stopped, there may be liability for prior illegal conduct, and the prior corrupt acts may harm the acquiring company's reputation and future business prospects. Identifying these issues before an acquisition allows companies to better chap ter 2 The FCPA: Anti-Bribery Provisions evaluate any potential post-acquisition liability and thus properly assess the target's value.185 Second, due diligence reduces the risk that the acquired company will continue to pay bribes. Proper pre-acquisition due diligence can iden tify business and regional risks and can also lay the founda tion for a swift and successful post-acquisition integration into the acquiring company's corporate control and com pliance environment. Third, the consequences o f potential violations uncovered through due diligence can be handled by the parties in an orderly and efficient manner through negotiation o f the costs and responsibilities for the inves tigation and remediation. Finally, comprehensive due dili gence demonstrates a genuine commitment to uncovering and preventing FCPA violations. In a significant number o f instances, D O J and SEC have declined to take action against companies that voluntarily disclosed and remediated conduct and cooperated with D O J and SEC in the merger and acquisition context.186 And D O J and SEC have only taken action against successor companies in limited cir cumstances, generally in cases involving egregious and sustained violations or where the successor company directly participated in the violations or failed to stop the misconduct from continuing after the acquisition. In one case, a U.S.-based issuer was charged with books and records and internal controls violations for continuing a kickback scheme originated by its predecessor.187Another recent case involved a merger between two tobacco leaf merchants, where prior to the merger each company committed FCPA violations through its foreign subsidiaries, involving multiple countries over the course o f many years. At each company, the bribes were directed by the parent company's senior management. The two issuers then merged to form a new public company. Under these circumstances-- the merger o f two public companies that had each engaged in 28 Practical Tips to Reduce FCPA Risk in Mergers and Acquisitions Companies pursuing mergers or acquisitions can take certain steps to identify and potentially reduce FCPA risks: M & A Opinion Procedure Release Requests: One option is to seek an opinion from DOJ in anticipation of a potential acquisition, such as occurred with Opinion Release 08-02. That case involved special circumstances, namely, severely limited pre-acquisition due diligence available to the potential acquiring company, and, because it was an opinion release (i.e., providing certain assurances by DOJ concerning prospective conduct), it necessarily imposed demanding standards and prescriptive timeframes in return for specific assurances from DOJ, which SEC, as a matter of discretion, also honors. Thus, obtaining an opinion from DOJ can be a good way to address specific due diligence challenges, but, because of the nature of such an opinion, it will likely contain more stringent requirements than may be necessary in all circumstances. M & A Risk-Based FCPA Due Diligence and Disclosure: As a practical matter, most acquisitions will typically not require the type of prospective assurances contained in an opinion from DOJ . DOJ and SEC encourage companies engaging in mergers and acquisitions to: (1) conduct thorough risk-based FCPA and anti-corruption due diligence on potential new business acquisitions; (2) ensure that the acquiring company's code of conduct and compliance policies and procedures regarding the FCPA and other anti-corruption laws apply as quickly as is practicable to newly acquired businesses or merged entities; (3) train the directors, officers, and employees of newly acquired businesses or merged entities, and when appropriate, train agents and business partners, on the FCPA and other relevant anti-corruption laws and the company's code of conduct and compliance policies and procedures; (4) conduct an FCPA-specific audit of all newly acquired or merged businesses as quickly as practicable; and (5) disclose any corrupt payments discovered as part of its due diligence of newly acquired entities or merged entities. DOJ and SEC will give meaningful credit to companies who undertake these actions, and, in appropriate circumstances, DOJ and SEC may consequently decline to bring enforcement actions. bribery--both the new entity and the foreign subsidiaries were liable under the FCPA. The new parent entered into a non-prosecution agreement with D O J and settled a civil action with SEC, while the company's subsidiaries, which also merged, pleaded guilty.188 More often, D O J and SE C have pursued enforce ment actions against the predecessor company (rather than the acquiring company), particularly when the acquiring company uncovered and timely remedied the violations or when the government's investigation of the predecessor company preceded the acquisition. In one such case, an Ohio-based health care company's due diligence o f an acquisition target uncovered FCPA vio lations by the target's subsidiary, and, before the merger was completed, the subsidiary's violations were disclosed to D O J and SEC . The subsidiary pleaded guilty and paid a $2 million criminal fine,189 the acquisition target settled with SE C and paid a $500,000 civil penalty,190 and no successor liability was sought against the acquir ing entity. In another case, a Pennsylvania-based issuer that supplied heating and air conditioning products and services was subject to an ongoing investigation by D O J and SEC at the time that it was acquired; D O J and SEC resolved enforcement actions only against the predecessor company, which had by that time become a wholly owned subsidiary o f the successor company.191 D O J and SEC have also brought actions only against a predecessor company where its FCPA violations are discov ered after acquisition. For example, when a Florida-based U.S. company discovered in post-acquisition due diligence that the telecommunications company (a domestic con cern) it had acquired had engaged in foreign bribery, the successor company disclosed the FCPA violations to DOJ. It then conducted an internal investigation, cooperated fully with DO J, and took appropriate remedial action-- including terminating senior management at the acquired 29 company. No enforcement action was taken against the suc cessor, but the predecessor company pleaded guilty to one count o f violating the FCPA and agreed to pay a $2 million fine.192Later, four executives from the predecessor company were convicted o f FCPA violations, three o f whom received terms o f imprisonment.193 On occasion, when an enforcement action has been taken against a predecessor company, the succes sor seeks assurances that it will not be subject to a future enforcement action. In one such case, a Dutch predeces sor resolved FCPA charges with D O J through a deferred prosecution agreement.194 While both the predecessor and successor signed the agreement, which included a commitment to ongoing cooperation and an improved compliance program, only the predecessor company was charged; in signing the agreement, the successor company gained the certainty o f conditional release from criminal liability, even though it was not being pursued for FCPA violations.195 In another case, after a Connecticut-based company uncovered FCPA violations by a California company it sought to acquire, both companies voluntarily disclosed the conduct to D O J and S E C .196 The prede cessor company resolved its criminal liability through a non-prosecution agreement with D O J that included an $800,000 monetary penalty and also settled with SEC, paying a total o f $1.1 million in disgorgement, pre-judg ment interest, and civil penalties. The successor company proceeded with the acquisition and separately entered into a non-prosecution agreement with D O J in which it agreed, among other things, to ensure full performance o f the predecessor company's non-prosecution agreement. This agreement provided certainty to the successor con cerning its FCPA liability. 197 Importantly, a successor company's voluntary disclo sure, appropriate due diligence, and implementation o f an effective compliance program may also decrease the likeli hood o f an enforcement action regarding an acquired com pany's post-acquisition conduct when pre-acquisition due diligence is not possible.198 chap ter 2 The FCPA: Anti-Bribery Provisions 30 Hypothetical: Successor Liability Where Acquired Company Was Not Previously Subject to the FCPA Company A is a Delaware corporation with its principal offices in the United States and whose shares are listed on a national U.S. exchange. Company A is considering acquiring Foreign Company, which is not an issuer or a domestic concern . Foreign Company takes no actions within the United States that would make it subject to territorial jurisdiction . Company As proposed acquisition would make Foreign Company a subsidiary of Company A. Scenario 1: Prior to acquiring Foreign Company, Company A engages in extensive due diligence of Foreign Company, including: (1) having its legal, accounting, and compliance departments review Foreign Company's sales and financial data, its customer contracts, and its third-party and distributor agreements; (2) performing a risk-based analysis of Foreign Company's customer base; (3) performing an audit of selected transactions engaged in by Foreign Company; and (4) engaging in discussions with Foreign Company's general counsel, vice president of sales, and head of internal audit regarding all corruption risks, compliance efforts, and any other corruption-related issues that have surfaced at Foreign Company over the past ten years. This due diligence aims to determine whether Foreign Company has appropriate anti-corruption and compliance policies in place, whether Foreign Company's employees have been adequately trained regarding those policies, how Foreign Company ensures that those policies are followed, and what remedial actions are taken if the policies are violated . During the course of its due diligence, Company A learns that Foreign Company has made several potentially improper payments in the form of an inflated commission to a third-party agent in connection with a government contract with Foreign Country. Immediately after the acquisition, Company A discloses the conduct to DOJ and SEC, suspends and terminates those employees and the third-party agent responsible for the payments, and makes certain that the illegal payments have stopped . It also quickly integrates Foreign Company into Company A's own robust internal controls, including its anti-corruption and compliance policies, which it communicates to its new employees through required online and in-person training in the local language. Company A also requires Foreign Company's third-party distributors and other agents to sign anti-corruption certifications, complete training, and sign new contracts that incorporate FCPA and anti corruption representations and warranties and audit rights. Based on these facts, could DOJ or SEC prosecute Company A? No. Although DOJ and SEC have jurisdiction over Company A because it is an issuer, neither could pursue Company A for conduct that occurred prior to its acquisition of Foreign Company. As Foreign Company was neither an issuer nor a domestic concern and was not subject to U.S. territorial jurisdiction, DOJ and SEC have no jurisdiction over its pre-acquisition misconduct. The acquisition of a company does not create jurisdiction where none existed before. Importantly, Company A's extensive pre-acquisition due diligence allowed it to identify and halt the corruption . As there was no continuing misconduct post-acquisition, the FCPA was not violated . Scenario 2: Company A performs only minimal and pro forma pre-acquisition due diligence . It does not conduct a risk-based analysis, and its review of Foreign Company's data, contracts, and third-party and distributor agreements is cursory. Company A acquires Foreign Company and makes it a wholly owned subsidiary Although Company A circulates its compliance policies to all new personnel after the acquisition, it does not translate the compliance policies into the local language or train its new personnel or third-party agents on anti-corruption issues A few months after the acquisition, an employee in Company A's international sales office (Sales Employee) learns from a legacy Foreign Company employee that for years the government contract that generated most of Foreign Company's revenues depended on inflated commissions to a third-party agent "to make the right person happy at Foreign Government Agency." Sales Employee is told that unless the payments continue the business will likely be lost, which would mean that Company A's new acquisition would quickly become a financial failure. The payments continue for two (c o n t'd ) 31 chap ter 2 The FCPA: Anti-Bribery Provisions L. years after the acquisition . After another employee of Company A reports the long-running bribe scheme to a director at Foreign Government Agency, Company A stops the payments and DOJ and SEC investigate . Based on these facts, would DOJ or SEC charge Company A? Yes. DOJ and SEC have prosecuted companies like Company A in similar circumstances. Any charges would not, however, be premised upon successor liability, but rather on Company A's post-acquisition bribe payments, which themselves created criminal and civil liability for Company A. Scenario 3: Under local law, Company A's ability to conduct pre-acquisition due diligence on Foreign Company is limited . In the due diligence it does conduct, Company A determines that Foreign Company is doing business in high-risk countries and in high-risk industries but finds no red flags specific to Foreign Company's operations. Post-acquisition, Company A conducts extensive due diligence and determines that Foreign Company had paid bribes to officials with Foreign Government Agency Company A takes prompt action to remediate the problem, including following the measures set forth in Opinion Procedure Release No . 08-02. Among other actions, it voluntarily discloses the misconduct to DOJ and SEC, ensures all bribes are immediately stopped, takes remedial action against all parties involved in the corruption, and quickly incorporates Foreign Company into a robust compliance program and Company A's other internal controls Based on these facts, would DOJ or SEC prosecute Company A? DOJ and SEC have declined to prosecute companies like Company A in similar circumstances. Companies can follow the measures set forth in Opinion Procedure Release No . 08-02, or seek their own opinions, where adequate pre-acquisition due diligence is not possible. Hypothetical: Successor Liability Where Acquired Company Was Already Subject to the FCPA Both Company A and Company B are Delaware corporations with their principal offices in the United States. Both companies' shares are listed on a national U.S. exchange. Scenario 1: Company A is considering acquiring several of Company B's business lines. Prior to the acquisition, Company A engages in extensive due diligence, including: (1) having its legal, accounting, and compliance departments review Company B's sales and financial data, its customer contracts, and its third-party and distributor agreements; (2) performing a risk-based analysis of Company B's customer base; (3) performing an audit of selected transactions engaged in by Company B; and (4) engaging in discussions with Company B's general counsel, vice president of sales, and head of internal audit regarding all corruption risks, compliance efforts, and any other major corruption-related issues that have surfaced at Company B over the past ten years. This due diligence aims to determine whether Company B has appropriate anti-corruption and compliance policies in place, whether Company B's employees have been adequately trained regarding those policies, how Company B ensures that those policies are followed, and what remedial actions are taken if the policies are violated . During the course of its due diligence, Company A learns that Company B has made several potentially improper payments in connection with a government contract with Foreign Country. As a condition of the acquisition, Company A requires Company B to disclose the misconduct to the government. Company A makes certain that the illegal payments (c o n t'd ) 32 have stopped and quickly integrates Company B's business lines into Company A's own robust internal controls, including its anti-corruption and compliance policies, which it communicates to its new employees through required online and in person training in the local language. Company A also requires Company B's third-party distributors and other agents to sign anti-corruption certifications, complete training, and sign new contracts that incorporate FCPA and anti-corruption representations and warranties and audit rights. Based on these facts, would DOJ or SEC prosecute? DOJ and SEC have declined to prosecute companies like Company A in similar circumstances. DOJ and SEC encourage companies like Company A to conduct extensive FCPA due diligence. By uncovering the corruption, Company A put itself in a favorable position, and, because the corrupt payments have stopped, Company A has no continuing liability. Whether DOJ and SEC might charge Company B depends on facts and circumstances beyond the scope of this hypothetical . DOJ would consider its Principles o f Federal Prosecution o f Business Organizations and SEC would consider the factors contained in the Seaboard Report, both of which are discussed in Chapter 5. In general, the more egregious and long-standing the corruption, the more likely it is that DOJ and SEC would prosecute Company B. In certain limited circumstances, DOJ and SEC have in the past declined to bring charges against acquired companies, recognizing that acquiring companies may bear much of the reputational damage and costs associated with such charges. Scenario 2: Company A plans to acquire Company B. Although, as in Scenario 1, Company A conducts extensive due diligence, it does not uncover the bribery until after the acquisition . Company A then makes certain that the illegal payments stop and voluntarily discloses the misconduct to DOJ and SEC. It quickly integrates Company B into Company A's own robust internal controls, including its anti-corruption and compliance policies, which it communicates to its new employees through required online and in-person training in the local language. Company A also requires Company B's third-party distributors and other agents to sign anti-corruption certifications, complete training, and sign new contracts that incorporate FCPA and anti corruption representations and warranties and audit rights. Based on these facts, would DOJ or SEC prosecute? Absent unusual circumstances not contemplated by this hypothetical, DOJ and SEC are unlikely to prosecute Company A for the pre-acquisition misconduct of Company B, provided that Company B still exists in a form that would allow it to be prosecuted separately (e.g., Company B is a subsidiary of Company A) . DOJ and SEC understand that no due diligence is perfect and that society benefits when companies with strong compliance programs acquire and improve companies with weak ones. At the same time, however, neither the liability for corruption--nor the harms caused by it-- are eliminated when one company acquires another. Whether DOJ and SEC will pursue a case against Company B (or, in unusual circumstances, Company A) will depend on consideration of all the factors in the Principles o f Federal Prosecution o f Business Organizations and the Seaboard Report, respectively. Scenario 3: Company A merges with Company B, which is in the same line of business and interacts with the same Foreign Government customers, and forms Company C. Due diligence before the merger reveals that both Company A and Company B have been engaging in similar bribery. In both cases, the bribery was extensive and known by high-level management within the companies. Based on these facts, would DOJ or SEC prosecute? Yes. DOJ and SEC have prosecuted companies like Company C on the basis of successor liability. Company C is a combination of two companies that both violated the FCPA, and their merger does not eliminate their liability. In addition, since Company C is an ongoing concern, DOJ and SEC may impose a monitorship to ensure that the bribery has ceased and a compliance program is developed to prevent future misconduct. 33 Additional Principles of Criminal Liability for Anti-Bribery Violations: Aiding and Abetting and Conspiracy Under federal law, individuals or companies that aid or abet a crime, including an FCPA violation, are as guilty as if they had directly committed the offense themselves. The aiding and abetting statute provides that whoever "commits an offense against the United States or aids, abets, counsels, commands, induces or procures its commission," or "will fully causes an act to be done which if directly performed by him or another would be an offense against the United States," is punishable as a principal.199Aiding and abetting is not an independent crime, and the government must prove that an underlying FCPA violation was committed.200 Individuals and companies, including foreign nation als and companies, may also be liable for conspiring to violate the FCPA --i.e., for agreeing to commit an FCPA violation--even if they are not, or could not be, indepen dently charged with a substantive FCPA violation. For instance, a foreign, non-issuer company could be convicted o f conspiring with a domestic concern to violate the FCPA. Under certain circumstances, it could also be held liable for the domestic concern's substantive FCPA violations under Pinkerton v. United States, which imposes liability on a defendant for reasonably foreseeable crimes committed by a co-conspirator in furtherance o f a conspiracy that the defendant joined.201 A foreign company or individual may be held liable for aiding and abetting an FCPA violation or for conspiring to violate the FCPA, even if the foreign company or indi vidual did not take any act in furtherance o f the corrupt payment while in the territory o f the United States. In con spiracy cases, the United States generally has jurisdiction over all the conspirators where at least one conspirator is an issuer, domestic concern, or commits a reasonably fore seeable overt act within the United States.202 For example, if a foreign company or individual conspires to violate the FCPA with someone who commits an overt act within the United States, the United States can prosecute the foreign company or individual for the conspiracy. The same prin ciple applies to aiding and abetting violations. For instance, chap ter 2 The FCPA: Anti-Bribery Provisions even though they took no action in the United States, Japanese and European companies were charged with con spiring with and aiding and abetting a domestic concern's FCPA violations.203 Additional Principles of Civil Liability for Anti-Bribery Violations: Aiding and Abetting and Causing Both companies and individuals can be held civilly liable for aiding and abetting FCPA anti-bribery violations if they knowingly or recklessly provide substantial assis tance to a violator.204 Similarly, in the administrative pro ceeding context, companies and individuals may be held liable for causing FCPA violations.205 This liability extends to the subsidiaries and agents o f U.S. issuers. In one case, the U.S. subsidiary o f a Swiss freight for warding company was held civilly liable for paying bribes on behalf o f its customers in several countries.206Although the U.S. subsidiary was not an issuer for purposes o f the FCPA, it was an "agent" o f several U.S. issuers. By paying bribes on behalf o f its issuers' customers, the subsidiary both directly violated and aided and abetted the issuers' FCPA violations. What Is the Applicable Statute of Limitations? S tatute o f Limitations in Criminal Cases The FCPA's anti-bribery and accounting provisions do not specify a statute o f limitations for criminal actions. Accordingly, the general five-year limitations period set forth in 18 U.S.C. 3282 applies to substantive criminal violations o f the Act.207 In cases involving FCPA conspiracies, the govern ment may be able to reach conduct occurring before the five-year limitations period applicable to conspiracies 34 under 18 U.S.C. 371. For conspiracy offenses, the govern ment generally need prove only that one act in furtherance o f the conspiracy occurred during the limitations period, thus enabling the government to prosecute bribes paid or accounting violations occurring more than five years prior to the filing o f formal charges.208 There are at least two ways in which the applicable limitations period is commonly extended. First, compa nies or individuals cooperating with D O J may enter into a tolling agreement that voluntarily extends the limitations period. Second, under 18 U.S.C. 3292, the government may seek a court order suspending the statute o f limitations posed in a criminal case for up to three years in order to obtain evidence from foreign countries. Generally, the sus pension period begins when the official request is made by the U.S. government to the foreign authority and ends on the date on which the foreign authority takes final action on the request.209 Statute o f Limitations in Civil Actions In civil cases brought by SEC , the statute o f lim ita tions is set by 28 U.S.C. 2462, which provides for a fiveyear limitation on any "suit or proceeding for the enforce ment o f any civil fine, penalty, or forfeiture." The five-year period begins to run "when the claim first accrued." The five-year limitations period applies to SEC actions seek ing civil penalties, but it does not prevent SEC from seeking equitable remedies, such as an injunction or the disgorgement o f ill-gotten gains, for conduct pre-dating the five-year period. In cases against individuals who are not residents o f the United States, the statute is tolled for any period when the defendants are not "found within the United States in order that proper service may be made thereon."210 Furthermore, companies or individuals coop erating with SE C may enter into tolling agreements that voluntarily extend the limitations period. 35 chap ter 2 The FCPA: Anti-Bribery Provisions 36 chap ter 3 The FCPA: A ccounting Provisions L. THE FCPA: ACCOUNTING PROVISIONS In a d d i t i o n t o t h e a n t i - b r i b e r y p r o v i s i o n s , t h e F C P A c o n t a i n s a c c o u n t i n g p r o v i s io n s a p p li c a b l e t o p u b lic c o m p a n ie s . T h e F C P A 's a c c o u n t in g p r o v is io n s o p e r a t e in t a n d e m w i t h t h e a n t i - b r i b e r y p r o v i s i o n s 211 a n d p r o h i b i t o f f - t h e - b o o k s a c c o u n tin g . C o m p a n y m a n a g e m e n t a n d in v e sto r s rely o n a c o m p a n y 's fin an cial s t a t e m e n t s a n d in t e r n a l a c c o u n t i n g c o n t r o ls t o e n s u r e t r a n s p a r e n c y in t h e f i n a n cial h e a lth o f th e b u s in e s s , th e risk s u n d e rta k e n , a n d th e tr a n sa c tio n s b e tw e e n th e c o m p a n y a n d its c u s to m e r s a n d b u s in e s s p a r tn e r s. T h e a c c o u n tin g p ro v i sio n s are d e sig n e d to "stre n g th e n th e accu racy o f th e c o rp o ra te b o o k s an d re c o rd s a n d th e reliab ility o f th e a u d it p r o c e s s w h ich c o n stitu te th e fo u n d a tio n s o f o u r s y s t e m o f c o r p o r a t e d i s c l o s u r e . " 212 The accounting provisions consist o f two primary components. First, under the "books and records" pro vision, issuers must make and keep books, records, and accounts that, in reasonable detail, accurately and fairly reflect an issuer's transactions and dispositions o f an issu er's assets.213 Second, under the "internal controls" provi sion, issuers must devise and maintain a system o f internal accounting controls sufficient to assure management's con trol, authority, and responsibility over the firm's assets.214 These components, and other aspects o f the accounting provisions, are discussed in greater detail below. Although the accounting provisions were originally enacted as part ofthe FCPA, they do not apply only to brib ery-related violations. Rather, the accounting provisions ensure that all public companies account for all o f their assets and liabilities accurately and in reasonable detail, and they form the backbone for most accounting fraud and issuer disclosure cases brought by D O J and SEC .215 38 In the past, "corporate bribery has been concealed by the falsification of corporate books and records" and the accounting provisions "remove[] this avenue of coverup ." Senate Report No. 95-114, a t 3 (1977) What Is Covered by the Accounting Provisions? Books and Records Provision Bribes, both foreign and domestic, are often mischarac- terized in companies' books and records. Section 13(b)(2)(A) of the Exchange Act (15 U.S.C. 78m (b)(2)(A )), commonly called the "books and records" provision, requires issuers to "make and keep books, records, and accounts, which, in reasonable detail, accurately and fairly reflect the transac tions and dispositions o f the assets o f the issuer."216 The "in reasonable detail" qualification was adopted by Congress "in light o f the concern that such a standard, if unqualified, might connote a degree o f exactitude and precision which is unrealistic."217 The addition o f this phrase was intended to make clear "that the issuer's records should reflect trans actions in conformity with accepted methods o f recording economic events and effectively prevent off-the-books slush funds and payments o f bribes."218 The term "reasonable detail" is defined in the statute as the level o f detail that would "satisfy prudent officials in the conduct of their own affairs."219Thus, as Congress noted when it adopted this definition, " [t]he concept ofreasonableness o f necessity contemplates the weighing o f a number of relevant factors, including the costs o f compliance."220 Although the standard is one o f reasonable detail, it is never appropriate to mischaracterize transactions in a company's books and records.221 Bribes are often concealed under the guise o f legitimate payments, such as commis sions or consulting fees. In instances where all the elements o f a violation of the anti-bribery provisions are not met--where, for exam ple, there was no use o f interstate commerce-- companies nonetheless may be liable if the improper payments are inac curately recorded. Consistent with the FCPA's approach to prohibiting payments o f any value that are made with a corrupt purpose, there is no materiality threshold under the books and records provision. In combination with the inter nal controls provision, the requirement that issuers main tain books and records that accurately and fairly reflect the corporation's transactions "assure [s], among other things, that the assets o f the issuer are used for proper corporate purpose[s]."222 As with the anti-bribery provisions, D O J's and S E C 's enforcement of the books and records provision has typically involved misreporting o f either large bribe pay ments or widespread inaccurate recording o f smaller pay ments made as part o f a systemic pattern o f bribery. Bribes Have Been Mischaracterized As: Commissions or Royalties Consulting Fees Sales and Marketing Expenses Scientific Incentives or Studies Travel and Entertainment Expenses Rebates or Discounts After Sales Service Fees Miscellaneous Expenses Petty Cash Withdrawals Free Goods Intercompany Accounts Supplier / Vendor Payments Write-offs "Customs Intervention" Payments 39 Internal Controls Provision The payment o f bribes often occurs in companies that have weak internal control environments. Internal controls over financial reporting are the processes used by compa nies to provide reasonable assurances regarding the reliabil ity o f financial reporting and the preparation o f financial statements. They include various components, such as: a control environment that covers the tone set by the organi zation regarding integrity and ethics; risk assessments; con trol activities that cover policies and procedures designed to ensure that management directives are carried out (e.g., approvals, authorizations, reconciliations, and segregation o f duties); information and communication; and monitor ing. Section 13(b)(2)(B) o f the Exchange Act (15 U.S.C. 78m (b)(2)(B)), commonly called the "internal controls" provision, requires issuers to : devise and maintain a system o f internal accounting controls sufficient to provide reasonable assurances that-- (i) transactions are executed in accordance with man agement's general or specific authorization; (ii) transactions are recorded as necessary (I) to per mit preparation o f financial statements in conformity with generally accepted accounting principles or any other criteria applicable to such statements, and (II) to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management's general or specific authorization; and (iv) the recorded accountability for assets is com pared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences ,...223 chap ter 3 The FCPA: Accounting Provisions An effective compliance program is a critical com ponent o f an issuer's internal controls. Fundamentally, the design o f a company's internal controls must take into account the operational realities and risks attendant to the company's business, such as: the nature o f its products or services; how the products or services get to market; the nature o f its work force; the degree o f regulation; the extent o f its government interaction; and the degree to which it has operations in countries with a high risk o f corruption. A company's compliance program should be tailored to these differences. Businesses whose operations expose them to a high risk o f corruption will necessarily devise and employ different internal controls than businesses that have a lesser exposure to corruption, just as a financial services company would be expected to devise and employ different internal controls than a manufacturer. A 2008 case against a German manufacturer o f indus trial and consumer products illustrates a systemic internal controls problem involving bribery that was unprecedented in scale and geographic reach. From 2001 to 2007, the com pany created elaborate payment schemes--including slush Like the "reasonable detail" requirement in the books and records provision, the Act defines "reasonable assurances" as "such level o f detail and degree o f assurance as would satisfy prudent officials in the conduct o f their own affairs."224 The Act does not specify a particular set o f controls that companies are required to implement. Rather, the internal controls provision gives companies the flexibility to develop and maintain a system o f controls that is appro priate to their particular needs and circumstances. Companies with ineffective internal controls often face risks o f embezzlement and self-dealing by employees, commercial bribery, export control problems, and violations o f other U.S. and local laws. 40 funds, off-the-books accounts, and systematic payments to business consultants and other intermediaries--to facilitate bribery. Payments were made in ways that obscured their purpose and the ultimate recipients o f the money. In some cases, employees obtained large amounts of cash from cash desks and then transported the cash in suitcases across inter national borders. Authorizations for some payments were placed on sticky notes and later removed to avoid any perma nent record. The company made payments totaling approxi mately $1.36 billion through various mechanisms, including $805.5 million as bribes and $554.5 million for unknown purposes.225The company was charged with internal controls and books and records violations, along with anti-bribery violations, and paid over $1.6 billion to resolve the case with authorities in the United States and Germany.226 The types o f internal control failures identified in the above example exist in many other cases where companies were charged with internal controls violations.227 A 2010 case against a multi-national automobile manufacturer involved bribery that occurred over a long period o f time in multiple countries.228 In that case, the company used doz ens o f ledger accounts, known internally as "internal third party accounts" to maintain credit balances for the ben efit o f government officials.229 The accounts were funded through several bogus pricing mechanisms, such as "price surcharges" "price inclusions" or excessive commissions.230 The company also used artificial discounts or rebates on sales contracts to generate the money to pay the bribes.231 The bribes also were made through phony sales intermedi aries and corrupt business partners, as well as through the use o f cash desks.232Sales executives would obtain cash from the company in amounts as high as hundreds o f thousands o f dollars, enabling the company to obscure the purpose and recipients o f the money paid to government officials.233 In addition to bribery charges, the company was charged with internal controls and books and records violations. Good internal controls can prevent not only FCPA violations, but also other illegal or unethical conduct by the company, its subsidiaries, and its employees. D O J and SEC have repeatedly brought FCPA cases that also involved other types o f misconduct, such as financial fraud,234 commercial bribery,235 export controls violations,236 and embezzlement or self-dealing by company employees.237 Potential Reporting and Anti-Fraud Violations Issuers have reporting obligations under Section 13(a) o f the Exchange Act, which requires issuers to file an annual report that contains comprehensive information about the issuer. Failure to properly disclose material infor mation about the issuer's business, including material rev enue, expenses, profits, assets, or liabilities related to bribery o f foreign government officials, may give rise to anti-fraud and reporting violations under Sections 10(b) and 13(a) of the Exchange Act. For example, a California-based technology company was charged with reporting violations, in addition to viola tions o f the FCPA's anti-bribery and accounting provisions, when its bribery scheme led to material misstatements in its SEC filings.238The company was awarded contracts procured through bribery of Chinese officials that generated material revenue and profits. The revenue and profits helped the com pany offset losses incurred to develop new products expected to become the company's future source o f revenue growth. The company improperly recorded the bribe payments as sales commission expenses in its books and records. Companies engaged in bribery may also be engaged in activity that violates the anti-fraud and reporting provi sions. For example, an oil and gas pipeline company and its employees engaged in a long-running scheme to use the company's petty cash accounts in Nigeria to make a vari ety o f corrupt payments to Nigerian tax and court officials using false invoices.239 The company and its employees also engaged in a fraudulent scheme to minimize the company's tax obligations in Bolivia by using false invoices to claim false offsets to its value-added tax obligations. The scheme resulted in material overstatements o f the company's net income in the company's financial statements, which vio lated the Exchange Act's anti-fraud and reporting provi sions. Both schemes also violated the books and records and internal controls provisions. 41 W hat Are Management's O ther Obligations? Sarbanes-Oxley Act o f 2002 In 2002, in response to a series o f accounting scandals involving U.S. companies, Congress enacted the SarbanesOxley Act (Sarbanes-Oxley or SO X ),240 which strength ened the accounting requirements for issuers. All issuers must comply with Sarbanes-Oxley's requirements, several o f which have FCPA implications. SO X Section 302 (15 U.S.C. 7241)-- Responsibility o f Corporate Officers for the Accuracy and Validity o f Corporate Financial Reports Section 302 o f Sarbanes-Oxley requires that a com pany's "principal officers" (typically the Chief Executive Officer (C EO ) and Chief Financial Officer (C F O )) take responsibility for and certify the integrity o f their compa ny's financial reports on a quarterly basis. Under Exchange Act Rule 13a-14, which is commonly called the "SO X cer tification" rule, each periodic report filed by an issuer must include a certification signed by the issuer's principal execu tive officer and principal financial officer that, among other things, states that: (i) based on the officer's knowledge, the report contains no material misstatements or omissions; (ii) based on the officer's knowledge, the relevant financial statements are accurate in all material respects; (iii) inter nal controls are properly designed; and (iv) the certifying officers have disclosed to the issuer's audit committee and auditors all significant internal control deficiencies. SO X Section 40 4 (15 U.S.C. 7262)-- Reporting on the State o f a Company's Internal Controls over Financial Reporting Sarbanes-Oxley also strengthened a company's required disclosures concerning the state o f its internal con trol over financial reporting. Under Section 404, issuers are required to present in their annual reports management's conclusion regarding the effectiveness o f the company's internal controls over financial reporting. This statement must also assess the effectiveness o f such internal controls and procedures. In addition, the company's independent chap ter 3 The FCPA: A ccounting Provisions auditor must attest to and report on its assessment o f the effectiveness o f the company's internal controls over finan cial reporting. As directed by Section 404, S E C has adopted rules requiring issuers and their independent auditors to report to the public on the effectiveness o f the com pa ny's internal controls over financial reporting.241 These internal controls include those related to illegal acts and fraud--including acts o f bribery--that could result in a material misstatement o f the company's financial statements.242 In 2007, SE C issued guidance on controls over financial reporting.243 SO X Section 802 (18 U.S.C. 1519 and 1520)-- Criminal Penalties for Altering Documents Section 802 o f Sarbanes-Oxley prohibits altering, destroying, mutilating, concealing, or falsifying records, documents, or tangible objects with the intent to obstruct, impede, or influence a potential or actual federal investiga tion. This section also prohibits any accountant from know ingly and willfully violating the requirement that all audit or review papers be maintained for a period o f five years. Who Is Covered by the Accounting Provisions? Civil Liability fo r Issuers, Subsidiaries, and Affiliates The FCPA's accounting provisions apply to every issuer that has a class o f securities registered pursuant to Section 12 o f the Exchange Act or that is required to file annual or other periodic reports pursuant to Section 15(d) o f the Exchange Act.244These provisions apply to any issuer whose securities trade on a national securities exchange in the United States, including foreign issuers with exchangetraded American Depository Receipts.245 They also apply 42 to companies whose stock trades in the over-the-counter market in the United States and which file periodic reports with the Commission, such as annual and quarterly reports. Unlike the FCPA's anti-bribery provisions, the accounting provisions do not apply to private companies.246 Although the FCPA's accounting requirements are directed at "issuers," an issuer's books and records include those o f its consolidated subsidiaries and affiliates. An issu er's responsibility thus extends to ensuring that subsidiaries or affiliates under its control, including foreign subsidiar ies and joint venture partners, comply with the accounting provisions. For instance, D O J and SEC brought enforce ment actions against a California company for violating the FCPA's accounting provisions when two Chinese joint ven tures in which it was a partner paid more than $400,000 in bribes over a four-year period to obtain business in China.247 Sales personnel in China made the illicit payments by obtain ing cash advances from accounting personnel, who recorded the payments on the books as "business fees" or "travel and entertainment" expenses. Although the payments were made exclusively in China by Chinese employees o f the joint ven ture, the California company failed to have adequate internal controls and failed to act on red flags indicating that its affili ates were engaged in bribery. The California company paid $1.15 million in civil disgorgement and a criminal monetary penalty o f $1.7 million. Companies may not be able to exercise the same level o f control over a minority-owned subsidiary or affiliate as they do over a majority or wholly owned entity. Therefore, if a parent company owns less than 50% o f a subsidiary or affiliate, the parent is only required to use its best efforts to cause the minority-owned subsidiary or affiliate to devise and maintain a system o f internal accounting con trols consistent with the issuer's own obligations under the FCPA .248 In evaluating an issuer's good faith efforts, all the circumstances-- including "the relative degree of the issuer's ownership o f the domestic or foreign firm and the laws and practices governing the business operations o f the country in which such firm is located"-- are taken into account.249 Civil Liability fo r Individuals and O ther Entities Companies (including subsidiaries o f issuers) and individuals may also face civil liability for aiding and abet ting or causing an issuer's violation o f the accounting pro visions.250 For example, in April 2010, SEC charged four individuals-- a Country Manager, a Senior Vice President o f Sales, a Regional Financial Director, and an International Controller o f a U.S. issuer--for their roles in schemes to bribe Kyrgyz and Thai government officials to purchase tobacco from their employer. The complaint alleged that, among other things, the individuals aided and abetted the issuer company's violations o f the books and records and internal controls provisions by "knowingly provid[ing] substantial assistance to" the parent company.251 All four executives settled the charges against them, consenting to the entry o f final judgments permanently enjoining them from violating the accounting and anti-bribery provisions, with two executives paying civil penalties.252 As in other areas o f federal securities law, corporate officers also can be held liable as control persons.253 Similarly, in October 2011, SEC brought an admin istrative action against a U.S. water valve manufacturer and a former employee o f the company's Chinese subsidiary for violations o f the FCPA's accounting provisions.254 The Chinese subsidiary had made improper payments to employ ees of certain design institutes to create design specifications that favored the company's valve products. The payments were disguised as sales commissions in the subsidiary's books and records, thereby causing the U.S. issuer's books and records to be inaccurate. The general manager of the subsid iary, who approved the payments and knew or should have known that they were improperly recorded, was ordered to cease-and-desist from committing or causing violations of the accounting provisions, among other charges.255 Additionally, individuals and entities can be held directly civilly liable for falsifying an issuer's books and records or for circumventing internal controls. Exchange Act Rule 13b2-1 provides: "N o person shall, directly or indirectly, falsify or cause to be falsified, any book, record or account subject to [the books and records provision] of the Securities Exchange Act."256 And Section 13(b)(5) of 43 the Exchange Act (15 U.S.C. 78m (b)(5)) provides that " [n]o person shall knowingly circumvent or knowingly fail to implement a system o f internal accounting controls or knowingly falsify any book, record, or account ...."257 The Exchange Act defines "person" to include a "natural person, company, government, or political subdivision, agency, or instrumentality o f a government."258 An issuer's officers and directors may also be held civ illy liable for making false statements to a company's audi tor. Exchange Act Rule 13b2-2 prohibits officers and direc tors from making (or causing to be made) materially false or misleading statements, including an omission o f material facts, to an accountant. This liability arises in connection with any audit, review, or examination o f a company's finan cial statements or in connection with the filing o f any docu ment with SEC .259 Finally, the principal executive and principal finan cial officer, or persons performing similar functions, can be held liable for violating Exchange Act Rule 13a-14 by signing false personal certifications required by SO X. Thus, for example, in January 2011, SEC charged the for mer C EO o f a U.S. issuer for his role in schemes to bribe Iraqi government officials in connection with the United Nations Oil-For-Food Programme and to bribe Iraqi and Indonesian officials to purchase the company's fuel addi tives. There, the company used false invoices and sham con sulting contracts to support large bribes that were passed on to foreign officials through an agent, and the bribes were mischaracterized as legitimate commissions and travel fees in the company's books and records. The officer directed and authorized the bribe payments and their false recording in the books and records. He also signed annual and quar terly S O X certifications in which he falsely represented that the company's financial statements were fairly presented and the company's internal controls sufficiently designed, as well as annual representations to the company's external auditors where he falsely stated that he complied with the company's code o f ethics and was unaware o f any violations o f the code o f ethics by anyone else. The officer was charged with aiding and abetting violations ofthe books and records and internal controls provisions, circumventing internal chap ter 3 The FCPA: A ccounting Provisions controls, falsifying books and records, making false state ments to accountants, and signing false certifications.260 He consented to the entry o f an injunction and paid disgorge ment and a civil penalty.261 He also later pleaded guilty in the United Kingdom to conspiring to corrupt Iraqi and Indonesian officials.262 Criminal Liability for Accounting Violations Criminal liability can be imposed on companies and individuals for knowingly failing to comply with the FCPA's books and records or internal controls provisions.263 As with the FCPA's anti-bribery provisions, individuals are only subject to the FCPA's criminal penalties for violations o f the accounting provisions if they acted "willfully. "264 For example, a French company was criminally charged with failure to implement internal controls and failure to keep accurate books and records, among other violations.265As part o f its deferred prosecution agreement, the company admitted to numerous internal control fail ures, including failure to implement sufficient anti-bribery compliance policies, maintain a sufficient system for the selection and approval o f consultants, and conduct appro priate audits o f payments to purported "business consul tants."266 Likewise, a German company pleaded guilty to internal controls and books and records violations where, from 2001 through 2007, it made payments totaling approximately $1.36 billion through various mechanisms, including $805.5 million as bribes and $554.5 million for unknown purposes.267 Individuals can be held criminally liable for accounting violations. For example, a former managing director o f a U.S. bank's real estate business in China pleaded guilty to conspir ing to evade internal accounting controls in order to trans fer a multi-million dollar ownership interest in a Shanghai building to himself and a Chinese public official with whom 44 he had a personal friendship. The former managing director repeatedly made false representations to his employer about the transaction and the ownership interests involved. 268 Conspiracy and Aiding and A betting Liability As with the FCPA's anti-bribery provisions, compa nies (including subsidiaries o f issuers) and individuals may face criminal liability for conspiring to commit or for aid ing and abetting violations o f the accounting provisions. For example, the subsidiary o f a Houston-based company pleaded guilty both to conspiring to commit and to aiding and abetting the company's books and records and anti-bribery violations.269 The subsidiary paid bribes o f over $4 million and falsely characterized the payments as "commissions" "fees" or "legal services" consequently causing the company's books and records to be inaccurate. Although the subsidiary was not an issuer and therefore could not be charged directly with an accounting violation, it was criminally liable for its involvement in the parent company's accounting violation. Similarly, a U.S. subsidiary o f a Swiss freight for warding company that was not an issuer was charged with conspiring to commit and with aiding and abetting the books and records violations o f its customers, who were issuers and therefore subject to the FCPA's accounting provisions.270 The U.S. subsidiary substantially assisted the issuer-customers in violating the FCPA's books and records provision by masking the true nature o f the bribe payments in the invoices it submitted to the issuer-customers.271 The subsidiary thus faced criminal liability for its involvement in the issuer-customers' FCPA violations even though it was not itself subject to the FCPA's accounting provisions. company's operations and financial condition. A company's financial statements should be complete and fairly repre sent the company's financial condition.272Thus, under U.S. GAAP, any payments to foreign government officials must be properly accounted for in a company's books, records, and financial statements. U.S. laws, including SEC Rules, require issuers to undergo an annual external audit o ftheir financial statements and to make those audited financial statements available to the public by filing them with SEC. SEC Rules and the rules and standards issued by the Public Company Accounting Oversight Board (PCA O B) under SEC oversight, require external auditors to be independent o f the companies that they audit. Independent auditors must comply with the rules and standards set forth by the PC A O B when they perform an audit o f a public company. These audit standards govern, for example, the auditor's responsibility concerning material errors, irregularities, or illegal acts by a client and its officers, directors, and employees. Additionally, the auditor has a responsibility to obtain an understanding of an entity's inter nal controls over financial reporting as part o f its audit and must communicate all significant deficiencies and material weaknesses identified during the audit to management and the audit committee.273 Under Section 10A o f the Exchange Act, indepen dent auditors who discover an illegal act, such as the pay ment o f bribes to domestic or foreign government officials, have certain obligations in connection with their audits of public companies. 274Generally, Section 10A requires audi tors who become aware o f illegal acts to report such acts to appropriate levels within the company and, if the company fails to take appropriate action, to notify SEC. Auditor Obligations All public companies in the United States must file annual financial statements that have been prepared in conformity with U.S. Generally Accepted Accounting Principles (U.S. GAAP). These accounting principles are among the most comprehensive in the world. U.S. GAAP requires an accounting o f all assets, liabilities, revenue, and expenses as well as extensive disclosures concerning the 45 chap ter 3 The FCPA: A ccounting Provisions 46 chap ter 4 O ther Related U.S. Laws L. OTHER RELATED U.S. LAWS B u sin e sse s an d in d iv id u als sh o u ld b e a w a re th a t c o n d u c t th a t v io la te s th e F C P A 's a n t i- b r ib e r y o r a c c o u n t in g p r o v is io n s m a y a ls o v io la t e o t h e r s t a t u t e s o r re g u la tio n s. M o re o v e r, p a y m e n ts to fo re ig n g o v e rn m e n t o fficials a n d in te rm e d i a r ie s m a y v io la t e t h e s e la w s e v e n if all o f th e e le m e n t s o f a n F C P A v io la tio n are n ot p resen t. Travel Act The Travel Act, 18 U.S.C. 1952, prohibits travel in interstate or foreign commerce or using the mail or any facility in interstate or foreign commerce, with the intent to distribute the proceeds o f any unlawful activity or to promote, manage, establish, or carry on any unlawful activ ity.275 "Unlawful activity" includes violations o f not only the FCPA, but also state commercial bribery laws. Thus, bribery between private commercial enterprises may, in some circumstances, be covered by the Travel Act. Said dif ferently, if a company pays kickbacks to an employee o f a private company who is not a foreign official, such privateto-private bribery could possibly be charged under the Travel Act. D O J has previously charged both individual and corporate defendants in FCPA cases with violations of the Travel Act.276 For instance, an individual investor was convicted o f conspiracy to violate the FCPA and the Travel Act in 2009 where the relevant "unlawful activity" under the Travel Act was an FCPA violation involving a bribery scheme in Azerbaijan.277 Also in 2009, a California com pany that engaged in both bribery o f foreign officials in vio lation o f the FCPA and commercial bribery in violation of California state law pleaded guilty to conspiracy to violate the FCPA and the Travel Act, among other charges.278 Money Laundering Many FCPA cases also involve violations o f anti money laundering statutes.279 For example, two Florida executives o f a Miami-based telecommunications company were convicted o f FCPA and money laundering conduct where they conducted financial transactions involving the proceeds o f specified unlawful activities--violations o f the FCPA, the criminal bribery laws o f Haiti, and wire fraud-- in order to conceal and disguise these proceeds. Notably, although foreign officials cannot be prosecuted for FCPA 48 violations,280 three former Haitian officials involved in the same scheme were convicted o f money laundering.281 Mail and Wire Fraud The mail and wire fraud statutes may also apply. In 2006, for example, a wholly owned foreign subsidiary of a U.S. issuer pleaded guilty to both FCPA and wire fraud counts where the scheme included overbilling the sub sidiary's customers--both government and private-- and using part o f the overcharged money to pay kickbacks to the customers' employees. The wire fraud charges alleged that the subsidiary had funds wired from its parent's Oregon bank account to off-the-books bank accounts in South Korea that were controlled by the subsidiary. The funds, amounting to almost $2 million, were then paid to manag ers o f state-owned and private steel production companies in China and South Korea as illegal commission payments and kickbacks that were disguised as refunds, commissions, and other seemingly legitimate expenses.282 sale o f defense articles and services valued at $500,000 or more triggers disclosure requirements concerning fees and commissions, including bribes, in an aggregate amount of $100,000 or more.285 Violations o f A E C A and ITAR can result in civil and criminal penalties.286 Tax Violations Individuals and companies who violate the FCPA may also violate U.S. tax law, which explicitly prohibits tax deduc tions for bribes, such as false sales "commissions" deductions intended to conceal corrupt payments.287 Internal Revenue Service-Criminal Investigation has been involved in a num ber o f FCPA investigations involving tax violations, as well as other financial crimes like money laundering. Certification and Reporting Violations Certain other licensing, certification, and reporting requirements imposed by the U.S. government can also be implicated in the foreign bribery context. For example, as a condition o f its facilitation o f direct loans and loan guar antees to a foreign purchaser o f U.S. goods and services, the Export-Import Bank o f the United States requires the U.S. supplier to make certifications concerning commis sions, fees, or other payments paid in connection with the financial assistance and that it has not and will not violate the FCPA.283 A false certification may give rise to criminal liability for false statements.284 Similarly, manufacturers, exporters, and brokers of certain defense articles and services are subject to regis tration, licensing, and reporting requirements under the Arms Export Control Act (AECA), 22 U.S.C. 2751, et seq., and its implementing regulations, the International Traffic in Arms Regulations (ITAR), 22 C.F.R. 120, et seq. For example, under A E C A and ITAR, all manufactur ers and exporters o f defense articles and services must reg ister with the Directorate o f Defense Trade Controls. The 49 chap ter 4 O ther Related U.S. Laws 50 chapter 5 Guiding Principles of Enforcement GUIDING PRINCIPLES OF ENFORCEMENT What Does DOJ Consider When Deciding Whether to Open an Investigation or Bring Charges? Whether and how D O J will commence, decline, or otherwise resolve an FCPA matter is guided by the Principles o f Federal Prosecution in the case o f individu als, and the Principles o f Federal Prosecution o f Business Organizations in the case o f companies. DOJ Principles o f Federal Prosecution The Principles o f Federal Prosecution, set forth in Chapter 9-27.000 o f the U.S. Attorney's Manual,288 pro vide guidance for D O J prosecutors regarding initiating or declining prosecution, selecting charges, and plea-bar gaining. The Principles o fFederal Prosecution provide that prosecutors should recommend or commence federal pros ecution if the putative defendant's conduct constitutes a federal offense and the admissible evidence will probably be sufficient to obtain and sustain a conviction unless (1) no substantial federal interest would be served by prosecution; (2) the person is subject to effective prosecution in another jurisdiction; or (3) an adequate non-criminal alternative to prosecution exists. In assessing the existence o f a substantial federal interest, the prosecutor is advised to "weigh all rel evant considerations," including the nature and seriousness o f the offense; the deterrent effect o f prosecution; the per son's culpability in connection with the offense; the per son's history with respect to criminal activity; the person's willingness to cooperate in the investigation or prosecu tion o f others; and the probable sentence or other conse quences if the person is convicted. The Principles o fFederal Prosecution also set out the considerations to be weighed when deciding whether to enter into a plea agreement with an individual defendant, including the nature and serious ness o f the offense and the person's willingness to cooperate, as well as the desirability o f prompt and certain disposition o f the case and the expense o f trial and appeal.289 DOJ P rinciples o f F ederal P rosecution o f Business O rganizations The Principles o f Federal Prosecution o f Business Organizations, set forth in Chapter 9-28.000 of the U.S. Attorney's Manual,290provide guidance regarding the resolu tion of cases involving corporate wrongdoing. The Principles o f Federal Prosecution o f Business Organizations recognize that resolution o f corporate criminal cases by means other 52 than indictment, including non-prosecution and deferred prosecution agreements, may be appropriate in certain cir cumstances. Nine factors are considered in conducting an investigation, determining whether to charge a corporation, and negotiating plea or other agreements: the nature and seriousness o f the offense, including the risk o f harm to the public; the pervasiveness o f wrongdoing within the corpo ration, including the complicity in, or the condon ing of, the wrongdoing by corporate management; the corporation's history o f similar misconduct, including prior criminal, civil, and regulatory enforcement actions against it; the corporation's timely and voluntary disclosure of wrongdoing and its willingness to cooperate in the investigation o f its agents; the existence and effectiveness o f the corporation's pre-existing compliance program; the corporation's remedial actions, including any efforts to implement an effective corporate compli ance program or improve an existing one, replace responsible management, discipline or terminate wrongdoers, pay restitution, and cooperate with the relevant government agencies; collateral consequences, including whether there is disproportionate harm to shareholders, pension holders, employees, and others not proven person ally culpable, as well as impact on the public arising from the prosecution; the adequacy o f the prosecution o f individuals responsible for the corporation's malfeasance; and the adequacy o f remedies such as civil or regulatory enforcement actions. As these factors illustrate, in many investigations it will be appropriate for a prosecutor to consider a corpora tion's pre-indictment conduct, including voluntary disclo sure, co operation, and remediation, in determining whether to seek an indictment. In assessing a corporation's coopera tion, prosecutors are prohibited from requesting attorney client privileged materials with two exceptions--when a corporation or its employee asserts an advice-of-counsel defense and when the attorney-client communications were in furtherance o f a crime or fraud. Otherwise, an organi zation's cooperation may only be assessed on the basis of whether it disclosed the relevantfacts underlying an inves tigation-- and not on the basis o f whether it has waived its attorney-client privilege or work product protection.291 What Does SEC Consider When Deciding Whether to Open an Investigation or Bring Charges? S E C 's Enforcement M anual, published by S E C 's Enforcement Division and available on S E C 's website,292 sets forth information about how SEC conducts inves tigations, as well as the guiding principles that SEC staff considers when determining whether to open or close an investigation and whether civil charges are merited. There are various ways that potential FCPA violations come to the attention o f SEC staff, including: tips from informants or whistleblowers; information developed in other inves tigations; self-reports or public disclosures by companies; referrals from other offices or agencies; public sources, such as media reports and trade publications; and proactive investigative techniques, including risk-based initiatives. Investigations can be formal, such as where SEC has issued a formal order o f investigation that authorizes its staff to issue investigative subpoenas for testimony and documents, or informal, such as where the staffproceeds with the inves tigation without the use o f investigative subpoenas. In determining whether to open an investigation and, if so, whether an enforcement action is warranted, SEC staff considers a number o f factors, including: the statutes or rules potentially violated; the egregiousness o f the poten tial violation; the potential magnitude o f the violation; whether the potentially harmed group is particularly vul nerable or at risk; whether the conduct is ongoing; whether the conduct can be investigated efficiently and within the statute o f limitations period; and whether other authorities, including federal or state agencies or regulators, might be better suited to investigate the conduct. SEC staff also may 53 consider whether the case involves a possibly widespread industry practice that should be addressed, whether the case involves a recidivist, and whether the matter gives SEC an opportunity to be visible in a community that might not otherwise be familiar with SEC or the protections afforded by the securities laws. For more information about the Enforcement Division's procedures concerning investigations, enforce ment actions, and cooperation with other regulators, see the Enforcement M anual at http://www.sec.gov/divisions/ enforce.shtml. Self-Reporting, Cooperation, and Remedial Efforts While the conduct underlying any FCPA investiga tion is obviously a fundamental and threshold consider ation in deciding what, if any, action to take, both D O J and SEC place a high premium on self-reporting, along with cooperation and remedial efforts, in determining the appropriate resolution o f FCPA matters. Criminal Cases Under D O J's Principles o f Federal Prosecution o f Business Organizations, federal prosecutors consider a company's cooperation in determining how to resolve a corporate criminal case. Specifically, prosecutors consider whether the company made a voluntary and timely dis closure as well as the company's willingness to provide rel evant information and evidence and identify relevant actors inside and outside the company, including senior execu tives. In addition, prosecutors may consider a company's remedial actions, including efforts to improve an existing compliance program or appropriate disciplining o f wrong doers.293 A company's remedial measures should be mean ingful and illustrate its recognition o f the seriousness o f the misconduct, for example, by taking steps to implement the personnel, operational, and organizational changes neces sary to establish an awareness among employees that crimi nal conduct will not be tolerated.294 The Principles o fFederal Prosecution similarly provide that prosecutors may consider an individual's willingness chap ter 5 Guiding Principles of Enforcement to cooperate in deciding whether a prosecution should be undertaken and how it should be resolved. Although a willingness to cooperate will not, by itself, generally relieve a person o f criminal liability, it may be given "serious con sideration" in evaluating whether to enter into a plea agree ment with a defendant, depending on the nature and value o f the cooperation offered.295 The U.S. Sentencing Guidelines similarly take into account an individual defendant's cooperation and volun tary disclosure. Under 5K1.1, a defendant's cooperation, if sufficiently substantial, may justify the government filing a motion for a reduced sentence. And under 5K2.16, a defendant's voluntary disclosure o f an offense prior to its discovery--if the offense was unlikely to have been discov ered otherwise--may warrant a downward departure in certain circumstances. Chapter 8 o f the Sentencing Guidelines, which gov erns the sentencing o f organizations, takes into account an organization's remediation as part o f an "effective compli ance and ethics program." One o f the seven elements o f such a program provides that after the detection o f crimi nal conduct, "the organization shall take reasonable steps to respond appropriately to the criminal conduct and to prevent further similar criminal conduct, including mak ing any necessary modifications to the organization's compliance and ethics program."296 Having an effective compliance and ethics program may lead to a three-point reduction in an organization's culpability score under 8C2.5, which affects the fine calculation under the Guidelines. Similarly, an organization's self-reporting, cooperation, and acceptance o f responsibility may lead to fine reductions under 8C 2.5(g) by decreasing the culpa bility score. Conversely, an organization will not qualify for the compliance program reduction when it unreason ably delayed reporting the offense.297 Similar to 5K1.1 54 for individuals, organizations can qualify for departures pursuant to 8C4.1 o f the Guidelines for cooperating in the prosecution o f others. Civil Cases SEC's Fram ew ork fo r Evaluating C ooperation by Companies S E C 's framework for evaluating cooperation by com panies is set forth in its 2001 Report o fInvestigation Pursuant to Section 21(a) o f the Securities Exchange Act o f 1934 and Commission Statement on the Relationship o fCooperation to Agency Enforcement Decisions, which is commonly known as the Seaboard Report.298 The report, which explained the Commission's decision not to take enforcement action against a public company for certain accounting violations caused by its subsidiary, details the many factors SEC consid ers in determining whether, and to what extent, it grants leni ency to companies for cooperating in its investigations and for related good corporate citizenship. Specifically, the report identifies four broad measures o f a company's cooperation: self-policing prior to the discovery o f the miscon duct, including establishing effective compliance procedures and an appropriate tone at the top; self-reporting o f misconduct when it is discovered, including conducting a thorough review o f the nature, extent, origins, and consequences of the mis conduct, and promptly, completely, and effectively disclosing the misconduct to the public, to regula tory agencies, and to self-regulatory organizations; remediation, including dismissing or appropriately disciplining wrongdoers, modifying and improv ing internal controls and procedures to prevent recurrence of the misconduct, and appropriately compensating those adversely affected; and cooperation with law enforcement authorities, including providing SEC staff with all informa tion relevant to the underlying violations and the company's remedial efforts. Since every enforcement matter is different, this ana lytical framework sets forth general principles but does not limit S E C 's broad discretion to evaluate every case indi vidually on its own unique facts and circumstances. Similar to S E C 's treatment o f cooperating individuals, credit for cooperation by companies may range from taking no enforcement action to pursuing reduced sanctions in con nection with enforcement actions. SEC's Fram ew ork for Evaluating Cooperation by Individuals In 2010, SEC announced a new cooperation program for individuals.299 SEC staff has a wide range o f tools to facilitate and reward cooperation by individuals, from tak ing no enforcement action to pursuing reduced sanctions in connection with enforcement actions. Although the evalu ation o f cooperation depends on the specific circumstances, SEC generally evaluates four factors to determine whether, to what extent, and in what manner to credit cooperation by individuals: the assistance provided by the cooperating indi vidual in S E C 's investigation or related enforce ment actions, including, among other things: the value and timeliness o f the cooperation, including whether the individual was the first to report the misconduct to SEC or to offer his or her coopera tion; whether the investigation was initiated based upon the information or other cooperation by the individual; the quality o f the cooperation, includ ing whether the individual was truthful and the cooperation was complete; the time and resources conserved as a result o f the individual's coopera tion; and the nature o f the cooperation, such as the type o f assistance provided; the importance o f the matter in which the indi vidual provided cooperation; the societal interest in ensuring that the cooperat ing individual is held accountable for his or her misconduct, including the severity o f the individ ual's misconduct, the culpability o f the individual, and the efforts undertaken by the individual to remediate the harm; and 55  the appropriateness o f a cooperation credit in light o f the profile o f the cooperating individual. Corporate Compliance Program In a global marketplace, an effective compliance pro gram is a critical component o f a company's internal con trols and is essential to detecting and preventing FCPA vio lations.300Effective compliance programs are tailored to the company's specific business and to the risks associated with that business. They are dynamic and evolve as the business and the markets change. An effective compliance program promotes "an orga nizational culture that encourages ethical conduct and a commitment to compliance with the law."301 Such a program protects a company's reputation, ensures investor value and confidence, reduces uncertainty in business transactions, and secures a company's assets.302 A well-constructed, thought fully implemented, and consistently enforced compliance and ethics program helps prevent, detect, remediate, and report misconduct, including FCPA violations. In addition to considering whether a company has self-reported, cooperated, and taken appropriate remedial actions, D O J and SEC also consider the adequacy o f a company's compliance program when deciding what, if any, action to take. The program may influence whether or not charges should be resolved through a deferred prosecution agreement (DPA) or non-prosecution agreement (NPA), as well as the appropriate length o f any DPA or NPA, or the term o f corporate probation. It will often affect the penalty amount and the need for a monitor or self-reporting.303 As discussed above, S E C 's Seaboard Report focuses, among other things, on a company's self-policing prior to the discovery o f the misconduct, including whether it had established effective compliance procedures.304 Likewise, three o f the nine factors set forth in D O J's Principles o f Federal Prosecution of Business Organizations relate, either directly or indirectly, to a compliance program's design and implementation, including the pervasiveness o f wrongdo ing within the company, the existence and effectiveness o f the company's pre-existing compliance program, and the company's remedial actions.305 D O J also considers the U.S. chapter 5 Guiding Principles of Enforcement Sentencing Guidelines' elements o f an effective compliance program, as set forth in 8B2.1 o f the Guidelines. These considerations reflect the recognition that a company's failure to prevent every single violation does not necessarily mean that a particular company's compli ance program was not generally effective. D O J and SEC understand that "no compliance program can ever prevent all criminal activity by a corporation's employees,"306 and they do not hold companies to a standard ofperfection. An assessment o f a company's compliance program, including its design and good faith implementation and enforcement, is an important part o f the government's assessment of whether a violation occurred, and if so, what action should be taken. In appropriate circumstances, D O J and SEC may decline to pursue charges against a company based on the company's effective compliance program, or may otherwise seek to reward a company for its program, even when that program did not prevent the particular underlying FCPA violation that gave rise to the investigation.307 D O J and SEC have no formulaic requirements regarding compliance programs. Rather, they employ a common-sense and pragmatic approach to evaluating com pliance programs, making inquiries related to three basic questions: Is the company's compliance program well designed ? Is it being applied in good faith? Does it work?308 This guide contains information regarding some of the basic elements D O J and SEC consider when evaluating compliance programs. Although the focus is on compliance with the FCPA, given the existence o f anti-corruption laws in many other countries, businesses should consider designing programs focused on anti-corruption compli ance more broadly.309 56 Hallmarks of Effective Compliance Programs Individual companies may have different compliance needs depending on their size and the particular risks asso ciated with their businesses, among other factors. When it comes to compliance, there is no one-size-fits-all program. Thus, the discussion below is meant to provide insight into the aspects o f compliance programs that D O J and SEC assess, recognizing that companies may consider a variety o f factors when making their own determination o f what is appropriate for their specific business needs.310 Indeed, small- and medium-size enterprises likely will have different compliance programs from large multi-national corpora tions, a fact D O J and SEC take into account when evaluat ing companies' compliance programs. Compliance programs that employ a "check-the-box" approach may be inefficient and, more importantly, ineffec tive. Because each compliance program should be tailored to an organization's specific needs, risks, and challenges, the information provided below should not be considered a substitute for a company's own assessment o f the corpo rate compliance program most appropriate for that particu lar business organization. In the end, if designed carefully, implemented earnestly, and enforced fairly, a company's compliance program--no matter how large or small the organization--will allow the company generally to prevent violations, detect those that do occur, and remediate them promptly and appropriately. Commitment from Senior Management and a Clearly Articulated Policy Against Corruption Within a business organization, compliance begins with the board o f directors and senior executives setting the proper tone for the rest o f the company. Managers and employees take their cues from these corporate leaders. Thus, D O J and SEC consider the commitment o f corpo rate leaders to a "culture o f compliance"311 and look to see if this high-level commitment is also reinforced and imple mented by middle managers and employees at all levels of a business. A well-designed compliance program that is not enforced in good faith, such as when corporate man agement explicitly or implicitly encourages employees to engage in misconduct to achieve business objectives, will be ineffective. D O J and SEC have often encountered compa nies with compliance programs that are strong on paper but that nevertheless have significant FCPA violations because management has failed to effectively implement the pro gram even in the face o f obvious signs o f corruption. This may be the result o f aggressive sales staff preventing com pliance personnel from doing their jobs effectively and of senior management, more concerned with securing a valu able business opportunity than enforcing a culture o f com pliance, siding with the sales team. The higher the financial stakes o f the transaction, the greater the temptation for management to choose profit over compliance. A strong ethical culture directly supports a strong compliance program. By adhering to ethical standards, senior managers will inspire middle managers to reinforce those standards. Compliant middle managers, in turn, will encourage employees to strive to attain those standards throughout the organizational structure.312 In short, compliance with the FCPA and ethical rules must start at the top. D O J and SEC thus evaluate whether senior management has clearly articulated company stan dards, communicated them in unambiguous terms, adhered to them scrupulously, and disseminated them throughout the organization. Code o f Conduct and Compliance Policies and Procedures A company's code o f conduct is often the foundation upon which an effective compliance program is built. As D O J has repeatedly noted in its charging documents, the most effective codes are clear, concise, and accessible to all employees and to those conducting business on the com pany's behalf. Indeed, it would be difficult to effectively implement a compliance program if it was not available in the local language so that employees in foreign subsidiaries can access and understand it. When assessing a compliance program, D O J and SEC will review whether the company 57 has taken steps to make certain that the code o f conduct remains current and effective and whether a company has periodically reviewed and updated its code. Whether a company has policies and procedures that outline responsibilities for compliance within the company, detail proper internal controls, auditing practices, and doc umentation policies, and set forth disciplinary procedures will also be considered by D O J and SEC. These types o f policies and procedures will depend on the size and nature o f the business and the risks associated with the business. Effective policies and procedures require an in-depth understanding o f the company's business model, includ ing its products and services, third-party agents, custom ers, government interactions, and industry and geographic risks. Among the risks that a company may need to address include the nature and extent o f transactions with foreign governments, including payments to foreign officials; use o f third parties; gifts, travel, and entertainment expenses; charitable and political donations; and facilitating and expediting payments. For example, some companies with global operations have created web-based approval pro cesses to review and approve routine gifts, travel, and enter tainment involving foreign officials and private customers with clear monetary limits and annual limitations. Many of these systems have built-in flexibility so that senior manage ment, or in-house legal counsel, can be apprised o f and, in appropriate circumstances, approve unique requests. These types o f systems can be a good way to conserve corporate resources while, if properly implemented, preventing and detecting potential FCPA violations. Regardless o f the specific policies and procedures implemented, these standards should apply to personnel at all levels o f the company. Oversight, Autonomy, and Resources In appraising a compliance program, D O J and SEC also consider whether a company has assigned respon sibility for the oversight and implementation o f a com pany's compliance program to one or more specific senior executives within an organization.313 Those individuals must have appropriate authority within the organization, chapter 5 Guiding Principles of Enforcement adequate autonomy from management, and sufficient resources to ensure that the company's compliance program is implemented effectively.314 Adequate autonomy gener ally includes direct access to an organization's governing authority, such as the board o f directors and committees o f the board o f directors (e.g., the audit committee).315 Depending on the size and structure o f an organization, it may be appropriate for day-to-day operational responsi bility to be delegated to other specific individuals within a company.316 D O J and SEC recognize that the reporting structure will depend on the size and complexity o f an organization. Moreover, the amount o f resources devoted to compliance will depend on the company's size, complex ity, industry, geographical reach, and risks associated with the business. In assessing whether a company has reasonable internal controls, D O J and SEC typically consider whether the company devoted adequate staffing and resources to the compliance program given the size, structure, and risk pro file o f the business. Risk Assessment Assessment o f risk is fundamental to developing a strong compliance program, and is another factor D O J and SEC evaluate when assessing a company's compliance program.317 One-size-fits-all compliance programs are generally ill-conceived and ineffective because resources inevitably are spread too thin, with too much focus on lowrisk markets and transactions to the detriment o f high-risk areas. Devoting a disproportionate amount o f time polic ing modest entertainment and gift-giving instead o f focus ing on large government bids, questionable payments to third-party consultants, or excessive discounts to resellers and distributors may indicate that a company's compli ance program is ineffective. A $50 million contract with a government agency in a high-risk country warrants greater 58 scrutiny than modest and routine gifts and entertainment. Similarly, performing identical due diligence on all thirdparty agents, irrespective o f risk factors, is often counter productive, diverting attention and resources away from those third parties that pose the most significant risks. D O J and SEC will give meaningful credit to a company that implements in good faith a comprehensive, risk-based compliance program, even if that program does not pre vent an infraction in a low risk area because greater atten tion and resources had been devoted to a higher risk area. Conversely, a company that fails to prevent an FCPA viola tion on an economically significant, high-risk transaction because it failed to perform a level o f due diligence com mensurate with the size and risk o f the transaction is likely to receive reduced credit based on the quality and effective ness o f its compliance program. As a company's risk for FCPA violations increases, that business should consider increasing its compliance procedures, including due diligence and periodic internal audits. The degree o f appropriate due diligence is fact-spe cific and should vary based on industry, country, size, and nature o f the transaction, and the method and amount of third-party compensation. Factors to consider, for instance, include risks presented by: the country and industry sector, the business opportunity, potential business partners, level o f involvement with governments, amount o f government regulation and oversight, and exposure to customs and immigration in conducting business affairs. When assessing a company's compliance program, D O J and SEC take into account whether and to what degree a company analyzes and addresses the particular risks it faces. Training and Continuing Advice Compliance policies cannot work unless effectively communicated throughout a company. Accordingly, D O J and SEC will evaluate whether a company has taken steps to ensure that relevant policies and procedures have been com municated throughout the organization, including through periodic training and certification for all directors, officers, relevant employees, and, where appropriate, agents and business partners.318 For example, many larger companies have implemented a mix o f web-based and in-person train ing conducted at varying intervals. Such training typically covers company policies and procedures, instruction on applicable laws, practical advice to address real-life scenar ios, and case studies. Regardless o f how a company chooses to conduct its training, however, the information should be presented in a manner appropriate for the targeted audi ence, including providing training and training materials in the local language. For example, companies may want to consider providing different types o f training to their sales personnel and accounting personnel with hypotheticals or sample situations that are similar to the situations they might encounter. In addition to the existence and scope o f a company's training program, a company should develop appropriate measures, depending on the size and sophisti cation o f the particular company, to provide guidance and advice on complying with the company's ethics and com pliance program, including when such advice is needed urgently. Such measures will help ensure that the compli ance program is understood and followed appropriately at all levels o f the company. Incentives and Disciplinary Measures In addition to evaluating the design and implementa tion o f a compliance program throughout an organization, enforcement o f that program is fundamental to its effectiveness.319 A compliance program should apply from the board room to the supply room--no one should be beyond its reach. D O J and SEC will thus consider whether, when enforcing a compliance program, a company has appropri ate and clear disciplinary procedures, whether those proce dures are applied reliably and promptly, and whether they are commensurate with the violation. Many companies have found that publicizing disciplinary actions internally, where appropriate under local law, can have an important deterrent effect, demonstrating that unethical and unlawful actions have swift and sure consequences. D O J and SEC recognize that positive incentives can also drive compliant behavior. These incentives can take many 59 forms such as personnel evaluations and promotions, rewards for improving and developing a company's compliance pro gram, and rewards for ethics and compliance leadership.320 Some organizations, for example, have made adherence to compliance a significant metric for managements bonuses so that compliance becomes an integral part o f managements everyday concern. Beyond financial incentives, some compa nies have highlighted compliance within their organizations by recognizing compliance professionals and internal audit staff. Others have made working in the company's compli ance organization a way to advance an employee's career. SEC, for instance, has encouraged companies to embrace methods to incentivize ethical and lawful behavior: [M]ake integrity, ethics and compliance part o f the promotion, compensation and evaluation processes as well. For at the end o f the day, the most effective way to communicate that "doing the right thing" is a priority, is to reward it. Conversely, if employees are led to believe that, when it comes to compensation and career advancement, all that counts is short-term profitability, and that cutting ethical corners is an ac ceptable way o f getting there, they'll perform to that measure. To cite an example from a different walk o f life: a college football coach can be told that the graduation rates o f his players are what matters, but he'll know differently if the sole focus o f his contract extension talks or the decision to fire him is his winloss record. 321 No matter what the disciplinary scheme or potential incentives a company decides to adopt, D O J and SEC will consider whether they are fairly and consistently applied across the organization. No executive should be above com pliance, no employee below compliance, and no person within an organization deemed too valuable to be disci plined, if warranted. Rewarding good behavior and sanc tioning bad behavior reinforces a culture o f compliance and ethics throughout an organization. Third-Party Due Diligence and Payments D O J's and S E C 's FCPA enforcement actions dem onstrate that third parties, including agents, consultants, and distributors, are commonly used to conceal the pay ment o f bribes to foreign officials in international business chapter 5 Guiding Principles of Enforcement transactions. Risk-based due diligence is particularly impor tant with third parties and will also be considered by D O J and SEC in assessing the effectiveness o f a company's com pliance program. Although the degree o f appropriate due diligence may vary based on industry, country, size and nature o f the transaction, and historical relationship with the third-party, some guiding principles always apply. First, as part o f risk-based due diligence, companies should understand the qualifications and associations of its third-party partners, including its business reputation, and relationship, if any, with foreign officials. The degree of scrutiny should increase as red flags surface. Second, companies should have an understanding of the business rationale for including the third party in the transaction. Among other things, the company should understand the role o f and need for the third party and ensure that the contract terms specifically describe the ser vices to be performed. Additional considerations include payment terms and how those payment terms compare to typical terms in that industry and country, as well as the timing o f the third party's introduction to the business. Moreover, companies may want to confirm and document that the third party is actually performing the work for which it is being paid and that its compensation is com mensurate with the work being provided. Third, companies should undertake some form of ongoing monitoring o f third-party relationships.322Where appropriate, this may include updating due diligence peri odically, exercising audit rights, providing periodic train ing, and requesting annual compliance certifications by the third party. In addition to considering a company's due dili gence on third parties, D O J and SEC also assess whether the company has informed third parties o f the company's 60 Compliance Program Case Study Recent DOJ and SEC actions relating to a financial institution's real estate transactions with a government agency in China illustrate the benefits of implementing and enforcing a comprehensive risk-based compliance program . The case involved a joint venture real estate investment in the Luwan District of Shanghai, China, between a U.S.-based financial institution and a state-owned entity that functioned as the District's real estate arm . The government entity conducted the transactions through two special purpose vehicles ("SPVs"), with the second SPV purchasing a 12% stake in a real estate project The financial institution, through a robust compliance program, frequently trained its employees, imposed a comprehensive payment-approval process designed to prevent bribery, and staffed a compliance department with a direct reporting line to the board of directors . As appropriate given the industry, market, and size and structure of the transactions, the financial institution (1) provided extensive FCPA training to the senior executive responsible for the transactions and (2) conducted extensive due diligence on the transactions, the local government entity, and the SPVs. Due diligence on the entity included reviewing Chinese government records; speaking with sources familiar with the Shanghai real estate market; checking the government entity's payment records and credit references; conducting an on-site visit and placing a pretextual telephone call to the entity's offices; searching media sources; and conducting background checks on the entity's principals . The financial institution vetted the SPVs by obtaining a letter with designated bank account information from a Chinese official associated with the government entity (the "Chinese Official"); using an international law firm to request and review 50 documents from the SPVs' Canadian attorney; interviewing the attorney; and interviewing the SPVs' management. Notwithstanding the financial institution's robust compliance program and good faith enforcement of it, the company failed to learn that the Chinese Official personally owned nearly 50% of the second SPV (and therefore a nearly 6% stake in the joint venture) and that the SPV was used as a vehicle for corrupt payments . This failure was due, in large part, to misrepresentations by the Chinese Official, the financial institution's executive in charge of the project, and the SPV's attorney that the SPV was 100% owned and controlled by the government entity. DOJ and SEC declined to take enforcement action against the financial institution, and its executive pleaded guilty to conspiracy to violate the FCPA's internal control provisions and also settled with SEC. compliance program and commitment to ethical and law ful business practices and, where appropriate, whether it has sought assurances from third parties, through certifica tions and otherwise, o f reciprocal commitments. These can be meaningful ways to mitigate third-party risk. Confidential Reporting and Internal Investigation An effective compliance program should include a mechanism for an organization's employees and others to report suspected or actual misconduct or violations o f the company's policies on a confidential basis and without fear of retaliation.323 Companies may employ, for example, anony mous hotlines or ombudsmen. Moreover, once an allegation is made, companies should have in place an efficient, reliable, and properly funded process for investigating the allegation and documenting the company's response, including any disciplinary or remediation measures taken. Companies will want to consider taking "lessons learned" from any reported violations and the outcome o f any resulting investigation to update their internal controls and compliance program and focus future training on such issues, as appropriate. Continuous Im provement: Periodic Testing and Review Finally, a good compliance program should constantly evolve. A company's business changes over time, as do the environments in which it operates, the nature o f its custom ers, the laws that govern its actions, and the standards o f its 61 industry. In addition, compliance programs that do not just exist on paper but are followed in practice will inevitably uncover compliance weaknesses and require enhancements. Consequently, D O J and SEC evaluate whether companies regularly review and improve their compliance programs and not allow them to become stale. According to one survey, 64% o f general counsel whose companies are subject to the FCPA say there is room for improvement in their FCPA training and compliance pro grams.324An organization should take the time to review and test its controls, and it should think critically about its poten tial weaknesses and risk areas. For example, some companies have undertaken employee surveys to measure their compli ance culture and strength o f internal controls, identify best practices, and detect new risk areas. Other companies period ically test their internal controls with targeted audits to make certain that controls on paper are working in practice. D O J and SEC will give meaningful credit to thoughtful efforts to create a sustainable compliance program if a problem is later discovered. Similarly, undertaking proactive evaluations before a problem strikes can lower the applicable penalty range under the U.S. Sentencing Guidelines.325Although the nature and the frequency o f proactive evaluations may vary depending on the size and complexity o f an organization, the idea behind such efforts is the same: continuous improve ment and sustainability.326 Mergers and Acquisitions: Pre-Acquisition Due Diligence and Post-Acquisition Integration In the context o f the FCPA, mergers and acquisi tions present both risks and opportunities. A company that does not perform adequate FCPA due diligence prior to a merger or acquisition may face both legal and business risks.327 Perhaps most commonly, inadequate due diligence can allow a course o f bribery to continue--with all the attendant harms to a business's profitability and reputation, as well as potential civil and criminal liability. In contrast, companies that conduct effective FCPA due diligence on their acquisition targets are able to evalu ate more accurately each target's value and negotiate for the costs o f the bribery to be borne by the target. In addition, chapter 5 Guiding Principles of Enforcement such actions demonstrate to D O J and SEC a company's commitment to compliance and are taken into account when evaluating any potential enforcement action. For example, D O J and SEC declined to take enforcement action against an acquiring issuer when the issuer, among other things, uncovered the corruption at the company being acquired as part o f due diligence, ensured that the corruption was voluntarily disclosed to the government, cooperated with the investigation, and incorporated the acquired company into its compliance program and inter nal controls. On the other hand, SEC took action against the acquired company, and D O J took action against a sub sidiary o f the acquired company.328 When pre-acquisition due diligence is not possible, D O J has described proce dures, contained in Opinion Procedure Release No. 08-02, pursuant to which companies can nevertheless be rewarded if they choose to conduct thorough post-acquisition FCPA due diligence.329 FCPA due diligence, however, is normally only a portion of the compliance process for mergers and acquisi tions. D O J and SEC evaluate whether the acquiring com pany promptly incorporated the acquired company into all o f its internal controls, including its compliance program. Companies should consider training new employees, reeval uating third parties under company standards, and, where appropriate, conducting audits on new business units. For example, as a result o f due diligence conducted by a California-based issuer before acquiring the majority interest in a joint venture, the issuer learned o f corrupt pay ments to obtain business. However, the issuer only imple mented its internal controls "halfway" so as not to "choke the sales engine and cause a distraction for the sales guys." As a result, the improper payments continued, and the issuer was held liable for violating the FCPA's internal con trols and books and records provisions.330 62 Other Guidance on Compliance and International Best Practices In addition to this guide, the U.S. Departments of Commerce and State haveboth issued publications that contain guidance regarding compliance programs. The Department of Commerce's International Trade Administration has pub lished Business Ethics: A M anualfo r M anaging a Responsible Business Enterprise in Emerging M arket Economies,331 and the Department ofState has published Fighting GlobalCorruption: Business Risk M anagement)32 There is also an emerging international consensus on compliance best practices, and a number o f inter-govern mental and non-governmental organizations have issued guidance regarding best practices for compliance.333 Most notably, the O E C D 's 2009 Anti-Bribery Recommendation and its Annex II, Good Practice Guidance on Internal Controls, Ethics, and Compliance,334 published in February 2010, were drafted based on consultations with the private sector and civil society and set forth specific good practices for ensuring effective compliance programs and measures for preventing and detecting foreign bribery. In addition, businesses may wish to refer to the following resources: Asia-Pacific Economic Cooperation--A nti Corruption Code o fConductfo r Business?'35 International Chamber o f Commerce--IC C Rules on Combating Corruption;336 Transparency International--Business Principlesfo r Countering Bribery;337 United Nations Global Com pact-- The Ten Principles;338 World Bank--Integrity Compliance Guidelines;339and World Economic Forum--PartneringAgainst Corruption-Principlesfo r Countering Bribery.30 Hypothetical: Third-Party Vetting Part 1: Consultants Company A, a U.S. issuer headquartered in Delaware, wants to start doing business in a country that poses high risks of corruption . Company A learns about a potential $50 million contract with the country's Ministry of Immigration . This is a very attractive opportunity to Company A, both for its profitability and to open the door to future projects with the government. At the suggestion of the company's senior vice president of international sales (Sales Executive), Company A hires a local businessman who assures them that he has strong ties to political and government leaders in the country and can help them win the contract. Company A enters into a consulting contract with the local businessman (Consultant) . The agreement requires Consultant to use his best efforts to help the company win the business and provides for Consultant to receive a significant monthly retainer as well as a success fee of 3% of the value of any contract the company wins. W hat steps should Company A consider taking before hiring Consultant? There are several factors here that might lead Company A to perform heightened FCPA-related due diligence prior to retaining Consultant: (1) the market (high-risk country); (2) the size and significance of the deal to the company; (3) the company's first time use of this particular consultant; (4) the consultant's strong ties to political and government leaders; (5) the success fee structure of the contract; and (6) the vaguely-defined services to be provided . In order to minimize the likelihood of incurring FCPA liability, Company A should carefully vet Consultant and his role in the transaction, including close scrutiny of the relationship between Consultant and any Ministry of Immigration officials or other government officials. Although there is nothing inherently illegal about contracting with a third party that has close connections to politicians and government officials to perform legitimate services on a transaction, this type of relationship can be susceptible to corruption . Among other things, Company A may consider conducting due diligence on Consultant, including background (c o n t'd ) 63 chapter 5 Guiding Principles of Enforcement and reference checks; ensuring that the contract spells out exactly what services and deliverables (such as written status reports or other documentation) Consultant is providing; training Consultant on the FCPA and other anti-corruption laws; requiring Consultant to represent that he will abide by the FCPA and other anti-corruption laws; including audit rights in the contract (and exercising those rights); and ensuring that payments requested by Consultant have the proper supporting documentation before they are approved for payment. Part 2: Distributors and Local Partners Assume the following alternative facts: Instead of hiring Consultant, Company A retains an often-used local distributor (Distributor) to sell Company As products to the Ministry of Immigration . In negotiating the pricing structure, Distributor, which had introduced the project to Company A, claims that the standard discount price to Distributor creates insufficient margin for Distributor to cover warehousing, distribution, installation, marketing, and training costs and requests an additional discount or rebate, or, in the alternative, a contribution to its marketing efforts, either in the form of a lump sum or as a percentage of the total contract. The requested discount/allowance is significantly larger than usual, although there is precedent at Company A for granting this level of discount in unique circumstances. Distributor further advises Company A that the Ministry's procurement officials responsible for awarding the contract have expressed a strong preference for including a particular local company (Local Partner) in the transaction as a subcontractor of Company A to perform installation, training, and other services that would normally have been performed by Distributor or Company A. According to Distributor, the Ministry has a solid working relationship with Local Partner, and it would cause less disruption for Local Partner to perform most of the on-site work at the Ministry. One of the principals (Principal 1) of the Local Partner is an official in another government ministry. W hat additional compliance considerations do these alternative facts raise? As with Consultant in the first scenario above, Company A should carefully vet Distributor and Local Partner and their roles in the transaction in order to minimize the likelihood of incurring FCPA liability. While Company A has an established relationship with Distributor, the fact that Distributor has requested an additional discount warrants further inquiry into the economic justification for the change, particularly where, as here, the proposed transaction structure contemplates paying Local Partner to provide many of the same services that Distributor would otherwise provide. In many cases, it may be appropriate for distributors to receive larger discounts to account for unique circumstances in particular transactions. That said, a common mechanism to create additional margin for bribe payments is through excessive discounts or rebates to distributors . Accordingly, when a company has pre-existing relationships with distributors and other third parties, transaction-specific due diligence--including an analysis of payment terms to confirm that the payment is commensurate with the work being performed--can be critical even in circumstances where due diligence of the distributor or other third party raises no initial red flags. Company A should carefully scrutinize the relationship among Local Partner, Distributor, and Ministry of Immigration officials While there is nothing inherently illegal about contracting with a third party that is recommended by the end-user, or even hiring a government official to perform legitimate services on a transaction unrelated to his or her government job, these facts raise additional red flags that warrant significant scrutiny Among other things, Company A would be well-advised to require Principal 1 to verify that he will have no role in the Ministry of Immigration's decision to award the contract to Company A, notify the Ministry of Immigration and his own ministry of his proposed involvement in the transaction, and certify that he will abide by the FCPA and other anti-corruption laws and that his involvement in the transaction is permitted under local law (c o n t'd ) 64 Assume the following additional facts: Under its company policy for a government transaction of this size, Company A requires both finance and compliance approval . The finance officer is concerned that the discounts to Distributor are significantly larger than what they have approved for similar work and will cut too deeply into Company A's profit margin. The finance officer is also skeptical about including Local Partner to perform some of the same services that Company A is paying Distributor to perform . Unsatisfied with Sales Executive's explanation, she requests a meeting with Distributor and Principal 1. At the meeting, Distributor and Principal 1 offer vague and inconsistent justifications for the payments and fail to provide any supporting analysis, and Principal 1 seems to have no real expertise in the industry. During a coffee break, Distributor comments to Sales Executive that the finance officer is nave about "how business is done in my country." Following the meeting, Sales Executive dismisses the finance officer's concerns, assuring her that the proposed transaction structure is reasonable and legitimate . Sales Executive also reminds the finance officer that "the deal is key to their growth in the industry. " The compliance officer focuses his due diligence on vetting Distributor and Local Partner and hires a business investigative firm to conduct a background check. Distributor appears reputable, capable, and financially stable and is willing to take on real risk in the project, financial and otherwise. However, the compliance officer learns that Distributor has established an off-shore bank account for the transaction . The compliance officer further learns that Local Partner's business was organized two years ago and appears financially stable but has no expertise in the industry and has established an off-shore shell company and bank account to conduct this transaction . The background check also reveals that Principal 1 is a former college roommate of a senior official of the Ministry of Immigration . The Sales Executive dismisses the compliance officer's concerns, commenting that what Local Partner does with its payments "isn't our problem ." Sales Executive also strongly objects to the compliance officer's request to meet with Principal 1 to discuss the off-shore company and account, assuring him that it was done for legitimate tax purposes and complaining that if Company A continues to "harass" Local Partner and Distributor, they would partner with Company A's chief competitor. The compliance officer and the finance officer discuss their concerns with each other but ultimately sign off on the deal even though their questions had not been answered. Their decision is motivated in large part by their conversation with Sales Executive, who told them that this was the region's most important contract and that the detailed FCPA questionnaires and robust anti-corruption representations in the contracts placed the burden on Distributor and Local Partner to act ethically. Company A goes forward with the Distributor and Local Partner agreements and wins the contract after six months. The finance officer approves Company A's payments to Local Partner via the offshore account, even though Local Partner's invoices did not contain supporting detail or documentation of any services provided. Company A recorded the payments as legitimate operational expenses on its books and records. Sales Executive received a large year-end bonus due to the award of the contract. In fact, Local Partner and Distributor used part of the payments and discount margin, respectively, to funnel bribe payments to several Ministry of Immigration officials, including Principal 1's former college roommate, in exchange for awarding the contract to Company A . Thousands of dollars are also wired to the personal offshore bank account of Sales Executive. How w ould DOJ and SEC evaluate the potential FCPA liability of Company A and its employees? This is not the case of a single "rogue employee" circumventing an otherwise robust compliance program . Although Company A's finance and compliance officers had the correct instincts to scrutinize the structure and economics of the transaction and the role of the third parties, their due diligence was incomplete . When the initial inquiry identified significant red flags, they approved the transaction despite knowing that their concerns were unanswered or the answers they received raised additional concerns and red flags. Relying on due diligence questionnaires and anti-corruption representations is insufficient, particularly when the risks are readily apparent. Nor can Company A or its employees shield themselves from liability because it was Distributor and Local Partner--rather than Company A directly--that made the payments. The facts suggest that Sales Executive had actual knowledge of or was willfully blind to the consultant's payment of the bribes. He also personally profited from the scheme (both from the kickback and from the bonus he received from the company) and intentionally discouraged the finance and compliance officers from learning the full story. Sales Executive is therefore subject to liability under the anti-bribery, books and records, and internal controls provisions of the FCPA, and others may be as well . Company A may also be liable for violations of the anti-bribery, books and records, and internal controls provisions of the FCPA given the number and significance of red flags that established a high probability of bribery and the role of employees and agents acting on the company's behalf. 65 chapter 5 Guiding Principles of Enforcement 66 chapter 6 FCPA Penalties, Sanctions, and Remedies FCPA PENALTIES, SANCTIONS, AND REMEDIES What Are the Potential Consequences for Violations of the FCPA? The FCPA provides for different criminal and civil penalties for companies and individuals. Criminal Penalties For each violation o f the anti-bribery provisions, the FCPA provides that corporations and other business enti ties are subject to a fine o f up to $2 million.341 Individuals, including officers, directors, stockholders, and agents o f companies, are subject to a fine o f up to $100,000 and imprisonment for up to five years.342 For each violation o f the accounting provisions, the FCPA provides that corporations and other business enti ties are subject to a fine o f up to $25 million.343 Individuals are subject to a fine o f up to $5 million and imprisonment for up to 20 years.344 Under the Alternative Fines Act, 18 U.S.C. 3571(d), courts may impose significantly higher fines than those pro vided by the FCPA --up to twice the benefit that the defen dant sought to obtain by making the corrupt payment, as long as the facts supporting the increased fines are included in the indictment and either proved to the jury beyond a reasonable doubt or admitted in a guilty plea proceeding.345 Fines imposed on individuals may not be paid by their employer or principal.346 U.S. Sentencing Guidelines When calculating penalties for violations of the FCPA, D O J focuses its analysis on the U.S. Sentencing Guidelines (Guidelines)347in all o f its resolutions, including guilty pleas, DPAs, and NPAs. The Guidelines provide a very detailed and predictable structure for calculating penalties for all federal crimes, including violations o f the FCPA. To determine the appropriate penalty, the "offense level" is first calculated by examining both the severity o f the crime and facts specific to the crime, with appropriate reductions for cooperation and acceptance o f responsibility, and, for business entities, addi tional factors such as voluntary disclosure, cooperation, pre existing compliance programs, and remediation. The Guidelines provide for different penalties for the different provisions o f the FCPA. The initial offense level for violations o f the anti-bribery provisions is determined under 2C1.1, while violations o f the accounting provi sions are assessed under 2B1.1. For individuals, the initial offense level is modified by factors set forth in Chapters 3, 4, and 5 o f the Guidelines348to identify a final offense level. This final offense level, combined with other factors, is used 68 to determine whether the Guidelines would recommend that incarceration is appropriate, the length o f any term of incarceration, and the appropriate amount o f any fine. For corporations, the offense level is modified by factors par ticular to organizations as described in Chapter 8 to deter mine the applicable organizational penalty. For example, violations o f the anti-bribery provi sions are calculated pursuant to 2C1.1. The offense level is determined by first identifying the base offense level;349 adding additional levels based on specific offense charac teristics, including whether the offense involved more than one bribe, the value o f the bribe or the benefit that was con ferred, and the level o f the public official;350 adjusting the offense level based on the defendant's role in the offense;351 and using the total offense level as well as the defendant's criminal history category to determine the advisory guide line range.352 For violations o f the accounting provisions assessed under 2B1.1, the procedure is generally the same, except that the specific offense characteristics differ. For instance, for violations o f the FCPA's accounting pro visions, the offense level may be increased if a substantial part o f the scheme occurred outside the United States or if the defendant was an officer or director o f a publicly traded company at the time o f the offense.353 For companies, the offense level is calculated pur suant to 2C1.1 or 2B1.1 in the same way as for an individual--by starting with the base offense level and increasing it as warranted by any applicable specific offense characteristics. The organizational guidelines found in Chapter 8, however, provide the structure for determining the final advisory guideline fine range for organizations. The base fine consists o f the greater o f the amount corresponding to the total offense level, calcu lated pursuant to the Guidelines, or the pecuniary gain or loss from the offense.354 This base fine is then multiplied by a culpability score that can either reduce the fine to as little as five percent o f the base fine or increase the recom mended fine to up to four times the amount o f the base fine.355 As described in 8C2.5, this culpability score is calculated by taking into account numerous factors such as the size o f the organization committing the criminal acts; the involvement in or tolerance o f criminal activ ity by high-level personnel within the organization; and prior m isconduct or obstructive behavior. The culpability score is reduced if the organization had an effective pre existing compliance program to prevent violations and if the organization voluntarily disclosed the offense, cooper ated in the investigation, and accepted responsibility for the criminal conduct.356 Civil Penalties Although only D O J has the authority to pursue crim inal actions, both D O J and SEC have civil enforcement authority under the FCPA. D O J may pursue civil actions for anti-bribery violations by domestic concerns (and their officers, directors, employees, agents, or stockholders) and foreign nationals and companies for violations while in the United States, while SEC may pursue civil actions against issuers and their officers, directors, employees, agents, or stockholders for violations o f the anti-bribery and the accounting provisions.357 For violations o f the anti-bribery provisions, cor porations and other business entities are subject to a civil penalty o f up to $16,000 per violation.358 Individuals, including officers, directors, stockholders, and agents o f companies, are similarly subject to a civil penalty o f up to $16,000 per violation,359 which may not be paid by their employer or principal.360 For violations o f the accounting provisions, SEC may obtain a civil penalty not to exceed the greater o f (a) the gross amount o f the pecuniary gain to the defendant as a result o f the violations or (b) a specified dollar limitation. The specified dollar limitations are based on the egregious ness o f the violation, ranging from $7,500 to $150,000 for an individual and $75,000 to $725,000 for a company.361 SEC may obtain civil penalties both in actions filed in fed eral court and in administrative proceedings.362 Collateral Consequences In addition to the criminal and civil penalties described above, individuals and companies who violate the FCPA may face significant collateral consequences, including suspension 69 or debarment from contracting with the federal government, cross-debarment by multilateral development banks, and the suspension or revocation o f certain export privileges. Debarment Under federal guidelines governing procurement, an individual or company that violates the FCPA or other criminal statutes may be barred from doing business with the federal government. The Federal Acquisition Regulations (FAR) provide for the potential suspension or debarment o f companies that contract with the government upon conviction o f or civil judgment for bribery, falsification or destruction o f records, the making o f false statements, or " [c]ommission o f any other offense indicating a lack o f busi ness integrity or business honesty that seriously and directly affects the present responsibility o f a Government contrac tor or subcontractor."363 These measures are not intended to be punitive and may be imposed only if "in the public's interest for the Government's protection."364 Under the FAR, a decision to debar or suspend is dis cretionary. The decision is not made by D O J prosecutors or SEC staff, but instead by independent debarment authorities within each agency, such as the Department o f Defense or the General Services Administration, which analyze a num ber o f factors to determine whether a company should be sus pended, debarred, or otherwise determined to be ineligible for government contracting. Such factors include whether the contractor has effective internal control systems in place, self-reported the misconduct in a timely manner, and has taken remedial measures.365 If a cause for debarment exists, the contractor has the burden of demonstrating to the satis faction o f the debarring official that it is presently responsible and that debarment is not necessary.366 Each federal depart ment and agency determines the eligibility o f contractors with whom it deals. However, if one department or agency debars or suspends a contractor, the debarment or suspension applies to the entire executive branch o f the federal govern ment, unless a department or agency shows compelling rea sons not to debar or suspend the contractor.367 Although guilty pleas, DPAs, and NPAs do not result in automatic debarment from U.S. government contracting, chapter 6 FCPA Penalties, Sanctions, and Remedies committing a federal crime and the factual admissions underlying a resolution are factors that the independent debarment authorities may consider. Moreover, indictment alone can lead to suspension o f the right to do business with the government.368 The U.S. Attorney's Manual also provides that when a company engages in fraud against the government, a prosecutor may not negotiate away an agen cy's right to debar or delist the company as part o f the plea bargaining process.369 In making debarment determina tions, contracting agencies, including at the state and local level, may consult with D O J in advance o f awarding a con tract. Depending on the circumstances, D O J may provide information to contracting authorities in the context of the corporate settlement about the facts and circumstances underlying the criminal conduct and remediation measures undertaken by the company, if any. This information shar ing is not advocacy, and the ultimate debarment decisions are squarely within the purview o f the independent debar ment authorities. In some situations, the contracting agency may impose its own oversight requirements in order for a company that has admitted to violations o f federal law to be awarded federal contracts, such as the Corporate Integrity Agreements often required by the Department o f Health and Human Services. Cross-Debarment by Multilateral Development Banks Multilateral Development Banks (M DBs), like the World Bank, also have the ability to debar companies and individuals for corrupt practices.370 Each M D B has its own process for evaluating alleged corruption in connection with M DB-funded projects. When appropriate, D O J and SEC work with M D Bs to share evidence and refer cases. On April 9, 2010, the African Development Bank Group, the Asian Development Bank, the European Bank for 70 Reconstruction and Development, the Inter-American Development Bank Group, and the World Bank Group entered into an agreement under which entities debarred by one M D B will be sanctioned for the same misconduct by other signatory M D Bs.371 This cross-debarment agree ment means that if a company is debarred by one M D B, it is debarred by all.372 Loss o f Export Privileges Companies and individuals who violate the FCPA may face consequences under other regulatory regimes, such as the Arms Export Control Act (AECA), 22 U.S.C. 2751, et seq., and its implementing regulations, the International Traffic in Arms Regulations (ITAR), 22 C.F.R. 120, et seq. A E C A and ITAR together provide for the suspension, revocation, amendment, or denial o f an arms export license if an applicant has been indicted or con victed for violating the FCPA.373They also set forth certain factors for the Department o f State's Directorate o f Defense Trade Controls (D D T C )374 to consider when determining whether to grant, deny, or return without action license applications for certain types o f defense materials. One of those factors is whether there is reasonable cause to believe that an applicant for a license has violated (or conspired to violate) the FCPA; if so, the Department o f State "may disapprove the application."375 In addition, it is the policy o f the Department o f State not to consider applications for licenses involving any persons who have been convicted of violating the A E C A or convicted o f conspiracy to violate the A EC A .376 In an action related to the criminal resolu tion o f a U.K. military products manufacturer, the D D T C imposed a "policy o f denial" for export licenses on three of the company's subsidiaries that were involved in violations o f A E C A and ITAR.377 When Is a Compliance Monitor or Independent Consultant Appropriate? One o f the primary goals o f both criminal prosecu tions and civil enforcement actions against companies that violate the FCPA is ensuring that such conduct does not occur again. As a consequence, enhanced compliance and reporting requirements may be part o f criminal and civil resolutions o f FCPA matters. The amount o f enhanced compliance and kind o f reporting required varies according to the facts and circumstances o f individual cases. In criminal cases, a company's sentence, or a DPA or NPA with a company, may require the appointment o f an independent corporate monitor. Whether a monitor is appropriate depends on the specific facts and circumstances o f the case. In 2008, D O J issued internal guidance regard ing the selection and use of corporate monitors in DPAs and NPAs with companies. Additional guidance has since been issued.378A monitor is an independent third party who assesses and monitors a company's adherence to the com pliance requirements o f an agreement that was designed to reduce the risk of recurrence o f the company's misconduct. Appointment o f a monitor is not appropriate in all circum stances, but it may be appropriate, for example, where a com pany does not already have an effective internal compliance program or needs to establish necessary internal controls. In addition, companies are sometimes allowed to engage in self monitoring, typically in cases when the company has made a voluntary disclosure, has been fully cooperative, and has demonstrated a genuine commitment to reform. Factors DOJ and SEC Consider When Determining Whether a Compliance Monitor Is Appropriate Include: Seriousness of the offense Duration of the misconduct Pervasiveness of the misconduct, including whether the conduct cuts across geographic and/ or product lines Nature and size of the company Quality of the company's compliance program at the time of the misconduct Subsequent remediation efforts 71 In civil cases, a company may similarly be required to retain an independent compliance consultant or moni tor to provide an independent, third-party review o f the company's internal controls. The consultant recommends improvements, to the extent necessary, which the company must adopt. When both D O J and SEC require a com pany to retain a monitor, the two agencies have been able to coordinate their requirements so that the company can retain one monitor to fulfill both sets o f requirements. The most successful monitoring relationships are those in which the company embraces the monitor or con sultant. If the company takes the recommendations and suggestions seriously and uses the monitoring period as a time to find and fix any outstanding compliance issues, the company can emerge from the monitorship with a stronger, long-lasting compliance program. chapter 6 FCPA Penalties, Sanctions, and Remedies 72 chapter 7 Resolutions L. RESOLUTIONS What Are the Different Types of Resolutions with DOJ? Criminal Complaints, Informations, and Indictments Charges against individuals and companies are brought in three different ways under the Federal Rules of Criminal Procedure: criminal complaints, criminal infor mations, and indictments. D O J may agree to resolve criminal FCPA mat ters against companies either through a declination or, in appropriate cases, a negotiated resolution resulting in a plea agreement, deferred prosecution agreement, or non-prose cution agreement. For individuals, a negotiated resolution will generally take the form o f a plea agreement, which may include language regarding cooperation, or a non-prosecu tion cooperation agreement. When negotiated resolutions cannot be reached with companies or individuals, the mat ter may proceed to trial. Plea Agreem ents Plea agreements--whether with companies or individuals-- are governed by Rule 11 o f the Federal Rules o f Criminal Procedure. The defendant gener ally admits to the facts supporting the charges, admits guilt, and is convicted o f the charged crimes when the plea agreement is presented to and accepted by a court. The plea agreement may jointly recommend a sentence or fine, jointly recommend an analysis under the U.S. Sentencing Guidelines, or leave such items open for argument at the time o f sentencing. Deferred Prosecution Agreements Under a deferred prosecution agreement, or a DPA as it is commonly known, D O J files a charging document with the court,379 but it simultaneously requests that the prosecution be deferred, that is, postponed for the pur pose o f allowing the company to demonstrate its good conduct. DPAs generally require a defendant to agree to pay a monetary penalty, waive the statute o f limitations, cooperate with the government, admit the relevant facts, and enter into certain compliance and remediation com mitments, potentially including a corporate compliance monitor. DPAs describe the company's conduct, coopera tion, and remediation, if any, and provide a calculation o f the penalty pursuant to the U.S. Sentencing Guidelines. In addition to being publicly filed, D O J places all o f its DPAs on its website. If the company successfully com pletes the term o f the agreement (typically two or three years), D O J will then move to dismiss the filed charges. A company's successful completion o f a DPA is not treated as a criminal conviction. 74 Non-Prosecution Agreements Under a non-prosecution agreement, or an NPA as it is commonly known, D O J maintains the right to file charges but refrains from doing so to allow the company to demonstrate its good conduct during the term o f the NPA. Unlike a DPA, an NPA is not filed with a court but is instead maintained by the parties. In circumstances where an NPA is with a company for FCPA-related offenses, it is made available to the public through D O J's website. The requirements o f an NPA are similar to those o f a DPA, and generally require a waiver o f the statute o f limitations, ongoing cooperation, admission o f the material facts, and compliance and remediation commitments, in addition to payment o f a monetary penalty. If the company complies with the agreement throughout its term, D O J does not file criminal charges. If an individual complies with the terms o f his or her NPA, namely, truthful and complete coopera tion and continued law-abiding conduct, D O J will not pur sue criminal charges. Declinations As discussed above, D O J's decision to bring or decline to bring an enforcement action under the FCPA is made pursuant to the Principles o fFederal Prosecution, in the case o f individuals, and the Principles o f Federal Prosecution o f Business Organizations, in the case o f companies. As described, in the case o f individuals, the Principles o fFederal Prosecution advise prosecutors to weigh all relevant consid erations, including: federal law enforcement priorities; the nature and seriousness o f the offense; the deterrent effect o f prosecution; the person's culpability in connection with the offense; the person's history o f criminal activity; the person's willingness to cooperate in the investi gation or prosecution o f others; and the probable sentence or other consequences if the person is convicted.380 The Principles o f Federal Prosecution provide addi tional commentary about each o f these factors. For instance, they explain that prosecutors should take into account federal law enforcement priorities because federal law enforcement and judicial resources are not sufficient to permit prosecution o f every alleged offense over which federal jurisdiction exists. The deterrent effect o f prosecu tion should also be kept in mind because some offenses, "although seemingly not o f great importance by themselves, if commonly committed would have a substantial cumula tive impact on the community."381 As discussed above, the Principles o f Federal Prosecution o fBusiness Organizations require prosecutors to consider nine factors when determining whether to prose cute a corporate entity for an FCPA violation, including the nature and seriousness o f the offense; the pervasiveness of wrongdoing within the company; the company's history o f similar conduct; the existence and effectiveness o f the com pany's pre-existing compliance program; and the adequacy o f remedies, such as civil or regulatory enforcement actions. Pursuant to these guidelines, D O J has declined to prosecute both individuals and corporate entities in numer ous cases based on the particular facts and circumstances presented in those matters, taking into account the avail able evidence.382 To protect the privacy rights and other interests o f the uncharged and other potentially interested parties, D O J has a long-standing policy not to provide, without the party's consent, non-public information on matters it has declined to prosecute. To put D O J's declina tions in context, however, in the past two years alone, D O J has declined several dozen cases against companies where potential FCPA violations were alleged. As mentioned above, there are rare occasions in which, in conjunction with the public filing o f charges against an individual, it is appropriate to disclose that a company is not also being prosecuted. That was done in a recent case where a former employee was charged but the former corporate employer was not.383 75 What Are the Different Types of Resolutions with SEC? Civil Injunctive Actions and Remedies In a civil injunctive action, SEC seeks a court order compelling the defendant to obey the law in the future. Violating such an order can result in civil or criminal con tempt proceedings. Civil contempt sanctions, brought by SEC, are remedial rather than punitive in nature and serve one o f two purposes: to compensate the party injured as a result o f the violation o f the injunction or force compliance with the terms o f the injunction. Where a defendant has profited from a violation of law, SEC can obtain the equitable relief o f disgorgement o f ill-gotten gains and pre-judgment interest and can also obtain civil money penalties pursuant to Sections 21(d)(3) and 32(c) o f the Exchange Act. SEC may also seek ancillary relief (such as an accounting from a defendant). Pursuant to Section 21(d)(5), SEC also may seek, and any federal court may grant, any other equitable relief that may be appropriate or necessary for the benefit o f investors, such as enhanced remedial measures or the retention o f an inde pendent compliance consultant or monitor. Civil Adm inistrative Actions and Remedies SEC has the ability to institute various types of admin istrative proceedings against a person or an entity that it believes has violated the law. This type o f enforcement action is brought by S E C 's Enforcement Division and is litigated before an SEC administrative law judge (ALJ). The A L J's decision is subject to appeal directly to the Securities and Exchange Commission itself, and the Commission's decision is in turn subject to review by a U.S. Court o f Appeals. Administrative proceedings provide for a variety o f relief. For regulated persons and entities, such as broker dealers and investment advisers and persons associated with them, sanctions include censure, limitation on activities, suspension o f up to twelve months, and bar from associa tion or revocation o f registration. For professionals such as attorneys and accountants, SEC can order in Rule 102(e) chapter 7 Resolutions proceedings that the professional be censured, suspended, or barred from practicing before SEC .384 SEC staff can seek an order from an administrative law judge requiring the respondent to cease and desist from any current or future violations o f the securities laws. In addition, SEC can obtain disgorgement, pre-judgment interest, and civil money pen alties in administrative proceedings under Section 21B o f the Exchange Act, and also can obtain other equitable relief, such as enhanced remedial measures or the retention o f an independent compliance consultant or monitor. Deferred Prosecution Agreements A deferred prosecution agreement is a written agree ment between SEC and a potential cooperating individual or company in which SEC agrees to forego an enforcement action against the individual or company if the individual or company agrees to, among other things: (1) cooper ate truthfully and fully in S E C 's investigation and related enforcement actions; (2) enter into a long-term tolling agreement; (3) comply with express prohibitions and/ or undertakings during a period o f deferred prosecution; and (4) under certain circumstances, agree either to admit or not to contest underlying facts that SEC could assert to establish a violation o f the federal securities laws. If the agreement is violated during the period o f deferred prosecu tion, SEC staff may recommend an enforcement action to the Commission against the individual or company for the original misconduct as well as any additional misconduct. Furthermore, if the Commission authorizes the enforce ment action, SEC staff may use any factual admissions made by the cooperating individual or company in support o f a motion for summary judgment, while maintaining the ability to bring an enforcement action for any additional misconduct at a later date. 76 In May o f 2011, SEC entered into its first deferred prosecution agreement against a company for violating the FCPA.385 In that case, a global manufacturer o f steel pipe products violated the FCPA by bribing Uzbekistan govern ment officials during a bidding process to supply pipelines for transporting oil and natural gas. The company made almost $5 million in profits when it was subsequently awarded several contracts by the Uzbekistan government. The company discovered the misconduct during a world wide review o f its operations and brought it to the govern ment's attention. In addition to self-reporting, the company conducted a thorough internal investigation; provided complete, real-time cooperation with SEC and D O J staff; and undertook extensive remediation, including enhanced anti-corruption procedures and training. Under the terms o f the DPA, the company paid $5.4 million in disgorge ment and prejudgment interest. The company also paid a $3.5 million monetary penalty to resolve a criminal investi gation by D O J through an NPA.386 For further information about deferred prosecution agreements, see S E C 's EnforcementM an u al?317 Non-Prosecution Agreements A non-prosecution agreement is a written agreement between SEC and a potential cooperating individual or com pany, entered into in limited and appropriate circumstances, that provides that SEC will not pursue an enforcement action against the individual or company if the individual or company agrees to, among other things: (1) cooperate truth fully and fully in S E C 's investigation and related enforce ment actions; and (2) comply, under certain circumstances, with express undertakings. If the agreement is violated, SEC staff retains its ability to recommend an enforcement action to the Commission against the individual or company. For further information about non-prosecution agreements, see S E C 's EnforcementM anual.388 Enforcement M anual. The same factors that apply to SEC staff's determination o f whether to recommend an enforce ment action against an individual or entity apply to the decision to close an investigation without recommending enforcement action.389 Generally, SEC staff considers, among other things: the seriousness o f the conduct and potential viola tions; the resources available to SEC staff to pursue the investigation; the sufficiency and strength o f the evidence; the extent o f potential investor harm if an action is not commenced; and the age o f the conduct underlying the potential violations. SEC has declined to take enforcement action against both individuals and companies based on the facts and cir cumstances present in those matters, where, for example, the conduct was not egregious, the company fully coop erated, and the company identified and remediated the misconduct quickly. SEC Enforcement Division policy is to notify individuals and entities at the earliest opportu nity when the staff has determined not to recommend an enforcement action against them to the Commission. This notification takes the form o f a termination letter. In order to protect the privacy rights and other inter ests o f the uncharged and other potentially interested par ties, SEC does not provide non-public information on mat ters it has declined to prosecute. What Are Some Examples of Past Declinations by DOJ and SEC? Neither D O J nor SEC typically publicizes declina tions but, to provide some insight into the process, the fol lowing are recent, anonymized examples o f matters D O J and SEC have declined to pursue: Termination Letters and Declinations As discussed above, S E C 's decision to bring or decline to bring an enforcement action under the FCPA is made pursuant to the guiding principles set forth in S E C 's Example 1: Public Com pany Declination D O J and SEC declined to take enforcement action against a public U.S. company. Factors taken into consider ation included: 77  The company discovered that its employees had received competitor bid information from a third party with connections to the foreign government. The company began an internal investigation, withdrew its contract bid, terminated the employees involved, severed ties to the third-party agent, and voluntarily disclosed the conduct to D O J's Antitrust Division, which also declined prosecution. During the internal investigation, the company uncovered various FCPA red flags, including prior concerns about the third-party agent, all of which the company voluntarily disclosed to D O J and SEC. The company immediately took substantial steps to improve its compliance program. Example 2: Public Company Declination D O J and SEC declined to take enforcement action against a public U.S. company. Factors taken into consider ation included: W ith knowledge o f employees o f the company's subsidiary, a retained construction company paid relatively small bribes, which were wrongly approved by the company's local law firm, to for eign building code inspectors. When the company's compliance department learned o f the bribes, it immediately ended the conduct, terminated its relationship with the con struction company and law firm, and terminated or disciplined the employees involved. The company completed a thorough internal inves tigation and voluntarily disclosed to D O J and SEC. The company reorganized its compliance depart ment, appointed a new compliance officer dedi cated to anti-corruption, improved the training and compliance program, and undertook a review o f all o f the company's international thirdparty relationships. Example 3: Public Company Declination D O J and SEC declined to take enforcement action against a U.S. publicly held industrial services company for chapter 7 Resolutions bribes paid by a small foreign subsidiary. Factors taken into consideration included: The company self-reported the conduct to D O J and SEC. The total amount o f the improper payments was relatively small, and the activity appeared to be an isolated incident by a single employee at the subsidiary. The profits potentially obtained from the improper payments were very small. The payments were detected by the company's existing internal controls. The company's audit committee conducted a thorough independent internal investigation. The results o f the investiga tion were provided to the government. The company cooperated fully with investigations by D O J and SEC. The company implemented significant remedial actions and enhanced its internal control structure. Example 4: Public Company Declination D O J and SEC declined to take enforcement action against a U.S. publicly held oil-and-gas services company for small bribes paid by a foreign subsidiary's customs agent. Factors taken into consideration included: The company's internal controls timely detected a potential bribe before a payment was made. When company management learned o f the potential bribe, management immediately reported the issue to the company's General Counsel and Audit Committee and prevented the payment from occurring. Within weeks o f learning o f the attempted bribe, the company provided in-person FCPA training to employees o f the subsidiary and undertook 78 an extensive internal investigation to determine whether any o f the company's subsidiaries in the same region had engaged in misconduct. The company self-reported the misconduct and the results of its internal investigation to D O J and SEC. The company cooperated fully with investigations by D O J and SEC. In addition to the immediate training at the relevant subsidiary, the company provided comprehensive FCPA training to all o f its employees and conducted an extensive review of its anti-corruption compliance program. The company enhanced its internal controls and record-keeping policies and procedures, includ ing requiring periodic internal audits o f customs payments. As part of its remediation, the company directed that local lawyers rather than customs agents be used to handle its permits, with instructions that "no matter what, we don't pay bribes"-- a policy that resulted in a longer and costlier permit procedure. Example 5: Public Company Declination D O J and SEC declined to take enforcement action against a U.S. publicly held consumer products company in connection with its acquisition o f a foreign company. Factors taken into consideration included: The company identified the potential improper payments to local government officials as part o f its pre-acquisition due diligence. The company promptly developed a comprehen sive plan to investigate, correct, and remediate any FCPA issues after acquisition. The company promptly self-reported the issues prior to acquisition and provided the results o f its investi gation to the government on a real-time basis. The acquiring company's existing internal controls and compliance program were robust. After the acquisition closed, the company imple mented a comprehensive remedial plan, ensured that all improper payments stopped, provided extensive FCPA training to employees o f the new subsidiary, and promptly incorporated the new subsidiary into the company's existing internal controls and compliance environment. Example 6: Private Company Declination In 2011, D O J declined to take prosecutorial action against a privately held U.S. company and its foreign subsid iary. Factors taken into consideration included: The company voluntarily disclosed bribes paid to social security officials in a foreign country. The total amount o f the bribes was small. When discovered, the corrupt practices were imme diately terminated. The conduct was thoroughly investigated, and the results o f the investigation were promptly provided to DOJ. All individuals involved were either terminated or disciplined. The company also terminated its relationship with its foreign law firm. The company instituted improved training and compliance programs commensurate with its size and risk exposure. 79 chapter 7 Resolutions 80 chapter 8 Whistleblower Provisions and Protections WHISTLEBLOWER PROVISIONS AND PROTECTIONS A ssista n c e a n d in fo rm atio n fro m a w h istle b lo w e r w h o k n o w s o f p o s s ib le s e c u r it ie s la w v i o l a t i o n s c a n b e a m o n g t h e m o s t p o w e r f u l w e a p o n s in t h e la w e n fo rc e m e n t a rse n a l. T h ro u g h th eir k n o w le d g e o f th e c irc u m sta n c e s a n d in d iv id u a ls in v o lv e d , w h istle b lo w e rs c an h e lp S E C a n d D O J id e n tify p o te n tia l v io la tio n s m u ch e a rlie r th an m ig h t o th e rw ise h av e b e e n p o s s ib le , th u s allo w in g S E C an d D O J to m in im ize th e h arm to in v e sto rs, b e tte r p r e se r v e th e in te g rity o f th e U .S . c a p ita l m a rk e ts, a n d m o re sw iftly h o ld a c c o u n ta b le th o s e r e s p o n s ib le fo r u n law fu l c o n d u c t. The Sarbanes-Oxley Act of2002 and the Dodd-Frank Act o f 2010 both contain provisions affecting whistleblow ers who report FCPA violations. Sarbanes-Oxley prohibits issuers from retaliating against whistleblowers and provides that employees who are retaliated against for reporting pos sible securities law violations may file a complaint with the Department o f Labor, for which they would be eligible to receive reinstatement, back pay, and other compensation.390 Sarbanes-Oxley also prohibits retaliation against employee whistleblowers under the obstruction o f justice statute.391 In 2010, the Dodd-Frank Act added Section 21F to the Exchange Act, addressing whistleblower incentives and protections. Section 21F authorizes SEC to provide mon etary awards to eligible individuals who voluntarily come forward with high quality, original information that leads to an SEC enforcement action in which over $1,000,000 in sanctions is ordered. 392 The awards range is between 10% and 30% o f the monetary sanctions recovered by the gov ernment. The Dodd-Frank Act also prohibits employers from retaliating against whistleblowers and creates a private right of action for employees who are retaliated against.393 Furthermore, businesses should be aware that retali ation against a whistleblower may also violate state, local, and foreign laws that provide protection o f whistleblowers. 82 O n August 12, 2011, the final rules for S E C 's Whistleblower Program became effective. These rules set forth the requirements for whistleblowers to be eligible for awards consideration, the factors that SEC will use to deter mine the amount o f the award, the categories o f individuals who are excluded from award consideration, and the cate gories o f individuals who are subject to limitations in award considerations.394 The final rules strengthen incentives for employees to report the suspected violations internally through internal compliance programs when appropriate, although it does not require an employee to do so in order to qualify for an award.395 Individuals with information about a possible viola tion o f the federal securities laws, including FCPA viola tions, should submit that information to SEC either online through S E C 's Tips, Complaints, and Referrals (T C R ) Intake and Resolution System (available at https://denebleo.sec.gov/TCRExternal/disclaimer.xhtml) or by mail ing or faxing a completed Form T C R to the Commission's Office o f the Whistleblower. Whistleblowers can submit information anony mously. To be considered under S E C 's whistleblower pro gram as eligible for a reward, however, the information must be submitted on an anonymous whistleblower's behalf by an attorney.396 Whether or not a whistleblower reports anonymously, SEC is committed to protecting the identity o f a whistleblower to the fullest extent possible under the statute.397 S E C 's Office o f the Whistleblower administers S E C 's Whistleblower Program and answers questions from the public regarding the program. Additional informa tion regarding S E C 's Whistleblower Program, including answers to frequently asked questions, is available online at http://www.sec.gov/whistleblower. SEC Office of the Whistleblower 100 F Street NE, Mail Stop 5971 Washington, DC 20549 Facsimile: (703) 813-9322 Online Report Form: http://www.sec.gov/ whistleblower 83 chapter 8 Whistleblower Provisions and Protections 84 chapter 9 DOJ Opinion Procedure DOJ OPINION PROCEDURE D O J's o p in io n p r o c e d u r e is a v a lu a b le m e c h a n is m fo r c o m p a n ie s a n d in d iv id u als to d e te rm in e w h e th e r p r o p o se d c o n d u c t w o u ld b e p ro se c u te d b y D O J u n d e r t h e F C P A . 398 G e n e r a l l y s p e a k i n g , u n d e r t h e o p i n i o n p r o c e d u r e p r o c e s s , p a r tie s su b m it in fo rm a tio n to D O J, a fte r w h ich D O J is s u e s an o p in io n a b o u t w h e t h e r t h e p r o p o s e d c o n d u c t fa lls w ith in its e n f o r c e m e n t p o lic y . A ll o f D O J 's p r i o r o p i n i o n s a r e a v a i l a b l e o n l i n e . 399 P a r t i e s i n t e r e s t e d in o b t a i n i n g s u c h a n o p i n i o n s h o u l d f o l l o w t h e s e s t e p s : 400 First, those seeking an opinion should evaluate whether their question relates to actual, prospective conduct.401 The opinion procedure cannot be used to obtain opinions on purely historical conduct or on hypothetical questions. D O J will not consider a request unless that portion of the transac tion for which an opinion is sought involves only prospective conduct, although the transaction as a whole may have com ponents that already have occurred. An executed contract is not a prerequisite and, in most--if not all--instances, an opinion request should be made before the requestor com mits to proceed with a transaction.402Those seeking requests should be aware that FCPA opinions relate only to the FCPA's anti-bribery provisions.403 Second, before making the request, the company or individual should check that they are either an issuer or a domestic concern, as only those categories o f parties can receive an opinion.404 If the transaction involves more than one issuer or domestic concern, consider making a request for an opinion jointly, as opinions only apply to the parties that request them.405 Third, those seeking an opinion must put their request in writing. The request must be specific and accompanied by all relevant and material information bearing on the con duct and circumstances for which an opinion is requested. Material information includes background information, complete copies o f all operative documents, and detailed statements o f all collateral or oral understandings, if any. Those seeking opinions are under an affirmative obligation to make full and true disclosures.406 Materials disclosed to D O J will not be made public without the consent o f the party submitting them.407 86 Fourth, the request must be signed. For corporate requestors, the signatory should be an appropriate senior officer with operational responsibility for the conduct that is the subject of the request and who has been designated by the corporations chiefexecutive officer. In appropriate cases, D O J also may require the chief executive officer to sign the request. Those signing the request must certify that it contains a true, correct, and complete disclosure with respect to the proposed conduct and the circumstances o f the conduct. 408 Fifth, an original and five copies o f the request should be addressed to the Assistant Attorney General in charge of the Criminal Division, Attention: FCPA Opinion Group.409 The mailing address is P.O. Box 28188 Central Station, Washington, D.C. 20038. D O J also asks that you send an electronic courtesy copy to FCPA.Fraud@usdoj.gov. D O J will evaluate the request for an FCPA opinion.410 A party may withdraw a request for an opinion at any time prior to the release of an opinion.411 If the request is complete and all the relevant information has been submitted, D O J will respond to the request by issuing an opinion within 30 days.412 Ifthe request is incomplete, D O J will identify for the requestor what additional information or documents are required for D O J to review the request. Such information must be pro vided to D O J promptly. Once the additional information has been received, D O J will issue an opinion within 30 days of receipt of that additional information.413 D O J's FCPA opin ions state whether, for purposes o f D O J's present enforcement policy, the prospective conduct would violate either the issuer or domestic concern anti-bribery provisions of the FCPA.414 D O J also may take other positions in the opinion as it con siders appropriate.415To the extent that the opinion concludes that the proposed conduct would not violate the FCPA, a rebuttable presumption is created that the requestor's con duct that was the basis of the opinion is in compliance with the FCPA.416In order to provide non-binding guidance to the business community, D O J makes versions ofits opinions pub licly available on its website.417 If, after receiving an opinion, a party is concerned about prospective conduct that is beyond the scope o f conduct speci fied in a previous request, the party may submit an additional request for an opinion using the procedures outlined above.418 87 chapter 9 DOJ Opinion Procedure 88 chapter 10 Conclusion L. CONCLUSION T h e FCPA w as d e sig n e d to prevent corrupt practices, protect investors, a n d p ro v id e a fair playin g field for th o s e h o n e st c o m p a n ie s trying to win b u si n ess b a se d on quality an d price rather than bribes. Follow ing C o n g re ss' leader s h i p in e n a c t i n g t h e F C P A 3 5 y e a r s a g o , a n d t h r o u g h d e t e r m i n e d i n t e r n a t i o n a l d i p l o m a t i c a n d la w e n f o r c e m e n t e f f o r t s in t h e t i m e s i n c e , la w s like t h e F C P A prohibiting foreign bribery h ave b e e n e n a cte d by m o st of the United States' m ajor trading partners. T h is g u i d e is d e s i g n e d t o p r o v i d e p ra c tic a l a d v i c e a b o u t , a n d u se fu l in sigh ts into, o u r e n fo rc e m e n t co n sid eratio n s. For b u sin e sse s desirin g to c o m p e t e fairly in f o r e i g n m a r k e t s , it is o u r g o a l t o m a x i m i z e t h o s e b u s i n e s s e s ' a b i l i t y t o c o m p l y w ith t h e F C P A in t h e m o s t e f f e c t i v e a n d e f f i c i e n t w a y s u i t a b l e t o t h e i r b u s i n e s s a n d t h e m a r k e t s in w h i c h t h e y o p e r a t e . T h r o u g h o u r o n g o i n g e f f o r t s with th e U.S. a n d international b u sin e ss a n d legal c o m m u n itie s a n d n o n gov ern m en tal organizations, D O J and S E C can continue effectively to protect th e integrity of our m ark ets an d re d u c e corruption aro u n d th e w orld. 90 APPENDIX The Foreign Corrupt Practices Act THE FOREIGN CORRUPT PRACTICES ACT: 15 U.S.C. 78dd-1,78dd-2, 78dd-3, 78m, 78ff 15 U.S.C. 78dd-1 [Section 30A o f the Securities Exchange Act of 1934] Prohibited foreign trade practices by issuers (a) Prohibition It shall be unlawful for any issuer which has a class of securities regis tered pursuant to section 78l of this title or which is required to file reports under section 78o(d) of this title, or for any officer, director, employee, or agent of such issuer or any stockholder thereof acting on behalf of such issuer, to make use of the mails or any means or instrumentality of interstate commerce corruptly in furtherance of an offer, payment, promise to pay, or authorization of the payment of any money, or offer, gift, promise to give, or authorization of the giving of anything of value to-- (1) any foreign official for purposes of-- (A) (i) influencing any act or decision of such foreign official in his official capacity, (ii) inducing such foreign official to do or omit to do any act in violation of the lawful duty of such official, or (iii) securing any improper advantage; or (B) inducing such foreign official to use his influence with a foreign government or instrumentality thereof to affect or influence any act or decision of such government or instrumentality, in order to assist such issuer in obtaining or retaining business for or with, or directing business to, any person; (2) any foreign political party or official thereof or any candidate for foreign political office for purposes of-- (A) (i) influencing any act or decision of such party, official, or candi date in its or his official capacity, (ii) inducing such party, official, or candidate to do or omit to do an act in violation of the lawful duty of such party, official, or candidate, or (iii) securing any improper advan tage; or (B) inducing such party, official, or candidate to use its or his influ ence with a foreign government or instrumentality thereofto affect or influence any act or decision of such government or instrumentality, in order to assist such issuer in obtaining or retaining business for or with, or directing business to, any person; or (3) any person, while knowing that all or a portion of such money or thing of value will be offered, given, or promised, directly or indirectly, to any foreign official, to any foreign political party or official thereof, or to any candidate for foreign political office, for purposes of-- (A) (i) influencing any act or decision of such foreign official, politi cal party, party official, or candidate in his or its official capacity, (ii) inducing such foreign official, political party, party official, or candi date to do or omit to do any act in violation of the lawful duty of such foreign official, political party, party official, or candidate, or (iii) securing any improper advantage; or (B) inducing such foreign official, political party, party official, or 92 candidate to use his or its influence with a foreign government or instrumentality thereof to affect or influence any act or decision of such government or instrumentality, in order to assist such issuer in obtaining or retaining business for or with, or directing business to, any person. (b) Exception for routine governmental action Subsections (a) and (g) of this section shall not apply to any facilitat ing or expediting payment to a foreign official, political party, or party official the purpose of which is to expedite or to secure the perfor mance of a routine governmental action by a foreign official, political party, or party official. (c) Affirmative defenses It shall be an affirmative defense to actions under subsection (a) or (g) of this section that-- (1) the payment, gift, offer, or promise of anything of value that was made, was lawful under the written laws and regulations of the foreign official's, political party's, party official's, or candidate's country; or (2) the payment, gift, offer, or promise of anything of value that was made, was a reasonable and bona fide expenditure, such as travel and lodging expenses, incurred by or on behalf of a foreign official, party, party official, or candidate and was directly related to-- (A) the promotion, demonstration, or explanation of products or ser vices; or (B) the execution or performance of a contract with a foreign govern ment or agency thereof. (d) Guidelines by Attorney General Not later than one year after August 23, 1988, the Attorney General, after consultation with the Commission, the Secretary of Commerce, the United States Trade Representative, the Secretary of State, and the Secretary of the Treasury, and after obtaining the views of all interested persons through public notice and comment procedures, shall deter mine to what extent compliance with this section would be enhanced and the business communitywouldbe assistedbyfurther clarification of the precedingprovisions ofthis section and may, based on such determi nation and to the extent necessary and appropriate, issue-- (1) guidelines describing specific types of conduct, associated with common types of export sales arrangements and business contracts, which for purposes of the Department of Justice's present enforce ment policy, the Attorney General determines would be in confor mance with the preceding provisions of this section; and (2) general precautionary procedures which issuers may use on a vol untary basis to conform their conduct to the Department of Justice's present enforcement policy regarding the preceding provisions of this section. The Attorney General shall issue the guidelines and procedures referred to in the preceding sentence in accordance with the provisions of subchapter II of chapter 5 of Title 5 and those guidelines and proce dures shall be subject to the provisions of chapter 7 of that title. (e) Opinions of Attorney General (1) The Attorney General, after consultation with appropriate depart ments and agencies of the United States and after obtaining the views of all interested persons through public notice and comment pro cedures, shall establish a procedure to provide responses to specific inquiries by issuers concerning conformance of their conduct with the Department ofJustice's present enforcement policy regarding the pre ceding provisions of this section. The Attorney General shall, within 30 days after receiving such a request, issue an opinion in response to that request. The opinion shall state whether or not certain speci fied prospective conduct would, for purposes of the Department of Justice's present enforcement policy, violate the preceding provisions of this section. Additional requests for opinions may be filed with the Attorney General regarding other specified prospective conduct that is beyond the scope of conduct specified in previous requests. In any action brought under the applicable provisions of this section, there shall be a rebuttable presumption that conduct, which is specified in a request by an issuer and for which the Attorney General has issued an opinion that such conduct is in conformity with the Department of Justice's present enforcement policy, is in compliance with the preced ing provisions of this section. Such a presumption may be rebutted by a preponderance of the evidence. In considering the presumption for purposes of this paragraph, a court shall weight all relevant factors, including but not limited to whether the information submitted to the Attorney General was accurate and complete and whether it was within the scope of the conduct specified in any request received by the Attorney General. The Attorney General shall establish the pro cedure required by this paragraph in accordance with the provisions of subchapter II of chapter 5 of Title 5 and that procedure shall be subject to the provisions of chapter 7 of that title. (2) Any document or other material which is provided to, received by, or prepared in the Department ofJustice or any other department or agency of the United States in connection with a request by an issuer under the procedure established under paragraph (1), shall be exempt from disclosure under section 552 of Title 5 and shall not, except with the consent of the issuer, be made publicly available, regardless of whether the Attorney General responds to such a request or the issuer withdraws such request before receiving a response. (3) Any issuer who has made a request to the Attorney General under paragraph (1) may withdraw such request prior to the time the Attorney General issues an opinion in response to such request. Any request so withdrawn shall have no force or effect. (4) The Attorney General shall, to the maximum extent practicable, provide timely guidance concerning the Department of Justice's 93 present enforcement policy with respect to the preceding provi sions of this section to potential exporters and small businesses that are unable to obtain specialized counsel on issues pertaining to such provisions. Such guidance shall be limited to responses to requests under paragraph (1) concerning conformity of specified prospective conduct with the Department ofJustice's present enforcement policy regardingthe precedingprovisions of this section and general explana tions of compliance responsibilities and of potential liabilities under the preceding provisions of this section. (v) actions of a similar nature. APPENDIX The Foreign Corrupt Practices Act (f) Definitions For purposes of this section: (1)(A) The term "foreign official" means any officer or employee of a foreign government or any department, agency, or instrumentality thereof, or of a public international organization, or any person act ing in an official capacity for or on behalf of any such government or department, agency, or instrumentality, or for or on behalfof any such public international organization. (B) For purposes of subparagraph (A), the term "public international organization" means-- (1) an organization that is designated by Executive Order pursuant to section 1 of the International Organizations Immunities Act (22 U.S.C. 288); or (ii) any other international organization that is designated by the President by Executive order for the purposes of this section, effective as of the date of publication of such order in the Federal Register. (2) (A) A person's state of mind is "knowing" with respect to conduct, a circumstance, or a result if-- (i) such person is aware that such person is engaging in such conduct, that such circumstance exists, or that such result is substantially cer tain to occur; or (ii) such person has a firm belief that such circumstance exists or that such result is substantially certain to occur. (B) When knowledge of the existence of a particular circumstance is required for an offense, such knowledge is established if a person is aware of a high probability of the existence of such circumstance, unless the person actually believes that such circumstance does not exist. (3) (A) The term "routine governmental action" means only an action which is ordinarily and commonlyperformedby a foreign official in-- (i) obtaining permits, licenses, or other official documents to qualify a person to do business in a foreign country; (ii) processing governmental papers, such as visas and work orders; (iii) providing police protection, mail pick-up and delivery, or sched uling inspections associated with contract performance or inspections related to transit of goods across country; (iv) providing phone service, power and water supply, loading and unloading cargo, or protecting perishable products or commodities from deterioration; or (B) The term "routine governmental action" does not include any decision by a foreign official whether, or on what terms, to award new business to or to continue business with a particular party, or any action taken by a foreign official involved in the decision-making process to encourage a decision to award new business to or continue business with a particular party. (g) AlternativeJurisdiction (1) It shall also be unlawful for any issuer organized under the laws of the United States, or a State, territory, possession, or commonwealth of the United States or a political subdivision thereof and which has a class of securities registered pursuant to section 78l of this title or which is required to file reports under section 78o(d)) of this title, or for any United States person that is an officer, director, employee, or agent of such issuer or a stockholder thereof acting on behalf of such issuer, to corruptly do any act outside the United States in furtherance of an offer, payment, promise to pay, or authorization of the payment of any money, or offer, gift, promise to give, or authorization of the giving of anything of value to any of the persons or entities set forth in paragraphs (1), (2), and (3) of this subsection (a) of this section for the purposes set forth therein, irrespective of whether such issuer or such officer, director, employee, agent, or stockholder makes use of the mails or any means or instrumentality of interstate commerce in furtherance of such offer, gift, payment, promise, or authorization. (2) As used in this subsection, the term "United States person" means a national of the United States (as defined in section 101 of the Immigration and Nationality Act (8 U.S.C. 1101)) or any corpo ration, partnership, association, joint-stock company, business trust, unincorporated organization, or sole proprietorship organized under the laws ofthe United States or any State, territory, possession, or com monwealth of the United States, or any political subdivision thereof. 15 U.S.C. 78dd-2 Prohibited foreign trade practices by domestic concerns (a) Prohibition It shall be unlawful for any domestic concern, other than an issuer which is subject to section 78dd-1 of this title, or for any officer, direc tor, employee, or agent of such domestic concern or any stockholder thereof acting on behalf of such domestic concern, to make use of the mails or any means or instrumentality of interstate commerce 94 corruptly in furtherance of an offer, payment, promise to pay, or authorization of the payment of any money, or offer, gift, promise to give, or authorization of the giving of anything of value to-- (1) any foreign official for purposes of-- (A) (i) influencing any act or decision of such foreign official in his official capacity, (ii) inducing such foreign official to do or omit to do any act in violation of the lawful duty of such official, or (iii) securing any improper advantage; or (B) inducing such foreign official to use his influence with a foreign government or instrumentality thereof to affect or influence any act or decision of such government or instrumentality, in order to assist such domestic concern in obtaining or retaining business for or with, or directing business to, any person; or (2) any foreign political party or official thereof or any candidate for foreign political office for purposes of-- (A) (i) influencing any act or decision of such party, official, or candi date in its or his official capacity, (ii) inducingsuch party, official, or can didate to do or omit to do an act in violation of the lawful duty of such party, official, or candidate, or (iii) securing any improper advantage; or (B) inducing such party, official, or candidate to use its or his influ ence with a foreign government or instrumentality thereofto affect or influence any act or decision of such government or instrumentality, in order to assist such domestic concern in obtaining or retainingbusi ness for or with, or directingbusiness to, any person; (3) any person, while knowing that all or a portion of such money or thing of value will be offered, given, or promised, directly or indirectly, to any foreign official, to any foreign political party or official thereof, or to any candidate for foreign political office, for purposes of-- (A) (i) influencing any act or decision of such foreign official, politi cal party, party official, or candidate in his or its official capacity, (ii) inducing such foreign official, political party, party official, or candi date to do or omit to do any act in violation of the lawful duty of such foreign official, political party, party official, or candidate, or (iii) securing any improper advantage; or (B) inducing such foreign official, political party, party official, or candidate to use his or its influence with a foreign government or instrumentality thereof to affect or influence any act or decision of such government or instrumentality, in order to assist such domestic concern in obtaining or retaining business for or with, or directing business to, any person. (b) Exception for routine governmental action Subsections (a) and (i) of this section shall not apply to any facilitat ing or expediting payment to a foreign official, political party, or party official the purpose of which is to expedite or to secure the perfor mance of a routine governmental action by a foreign official, political party, or party official. (c) Affirmative defenses It shall be an affirmative defense to actions under subsection (a) or (i) of this section that-- (1) the payment, gift, offer, or promise of anything of value that was made, was lawful under the written laws and regulations of the foreign official's, political party's, party official's, or candidate's country; or (2) the payment, gift, offer, or promise of anything of value that was made, was a reasonable and bona fide expenditure, such as travel and lodging expenses, incurred by or on behalf of a foreign official, party, party official, or candidate and was directly related to-- (A) the promotion, demonstration, or explanation of products or ser vices; or (B) the execution or performance of a contract with a foreign govern ment or agency thereof. (d) Injunctive relief (1) When it appears to the Attorney General that any domestic con cern to which this section applies, or officer, director, employee, agent, or stockholder thereof, is engaged, or about to engage, in any act or practice constituting a violation of subsection (a) or (i) of this sec tion, the Attorney General may, in his discretion, bring a civil action in an appropriate district court of the United States to enjoin such act or practice, and upon a proper showing, a permanent injunction or a temporary restraining order shall be granted without bond. (2) For the purpose of any civil investigation which, in the opinion of the Attorney General, is necessary and proper to enforce this section, the Attorney General or his designee are empowered to administer oaths and affirmations, subpoena witnesses, take evidence, and require the production of any books, papers, or other documents which the Attorney General deems relevant or material to such investigation. The attendance of witnesses and the production of documentary evi dence may be required from any place in the United States, or any territory, possession, or commonwealth of the United States, at any designated place ofhearing. (3) In case of contumacy by, or refusal to obey a subpoena issued to, any person, the Attorney General may invoke the aid of any court of the United States within the jurisdiction of which such investigation or proceeding is carried on, or where such person resides or carries on business, in requiring the attendance and testimony of witnesses and the production of books, papers, or other documents. Any such court may issue an order requiring such person to appear before the Attorney General or his designee, there to produce records, if so 95 ordered, or to give testimony touching the matter under investigation. Any failure to obey such order of the court may be punished by such court as a contempt thereof. All process in any such case maybe served in the judicial district in which such person resides or may be found. The Attorney General may make such rules relating to civil investiga tions as may be necessary or appropriate to implement the provisions of this subsection. APPENDIX The Foreign Corrupt Practices Act (e) Guidelines by Attorney General Not later than 6 months after August 23, 1988, the Attorney General, after consultation with the Securities and Exchange Commission, the Secretary of Commerce, the United States Trade Representative, the Secretary of State, and the Secretary of the Treasury, and after obtain ing the views of all interested persons through public notice and com ment procedures, shall determine to what extent compliance with this section would be enhanced and the business community would be assisted by further clarification of the preceding provisions of this section and may, based on such determination and to the extent neces sary and appropriate, issue-- (1) guidelines describing specific types of conduct, associated with common types of export sales arrangements and business contracts, which for purposes of the Department of Justice's present enforce ment policy, the Attorney General determines would be in confor mance with the preceding provisions of this section; and (2) general precautionary procedures which domestic concerns may use on a voluntary basis to conform their conduct to the Department ofJustice's present enforcement policy regarding the preceding provi sions of this section. The Attorney General shall issue the guidelines and procedures referred to in the preceding sentence in accordance with the provi sions of subchapter II of chapter 5 of Title 5 and those guidelines and procedures shall be subject to the provisions of chapter 7 of that title. (f) Opinions of Attorney General (1) The Attorney General, after consultation with appropriate depart ments and agencies ofthe United States and after obtaining the views of all interested persons through public notice and comment procedures, shall establish a procedure to provide responses to specific inquiries by domestic concerns concerning conformance of their conduct with the Department of Justice's present enforcement policy regarding the pre ceding provisions of this section. The Attorney General shall, within 30 days after receiving such a request, issue an opinion in response to that request. The opinion shall state whether or not certain specified prospective conduct would, for purposes of the Department ofJustice's present enforcement policy, violate the precedingprovisions of this sec tion. Additional requests for opinions may be filed with the Attorney General regarding other specified prospective conduct that is beyond the scope of conduct specified in previous requests. In any action brought under the applicable provisions of this section, there shall be a rebuttable presumption that conduct, which is specified in a request by a domestic concern and for which the Attorney General has issued an opinion that such conduct is in conformity with the Department of Justice's present enforcement policy, is in compliance with the preced ing provisions of this section. Such a presumption may be rebutted by a preponderance ofthe evidence. In consideringthe presumption for pur poses ofthis paragraph, a court shall weigh all relevant factors, including but not limited to whether the information submitted to the Attorney General was accurate and complete and whether it was within the scope of the conduct specified in any request received by the Attorney General. The Attorney General shall establish the procedure required by this paragraph in accordance with the provisions of subchapter II of chapter 5 ofTitle 5 and that procedure shall be subject to the provisions of chapter 7 of that title. (2) Any document or other material which is provided to, received by, or prepared in the Department of Justice or any other department or agency of the United States in connection with a request by a domes tic concern under the procedure established underparagraph (1), shall be exempt from disclosure under section 552 of Title 5 and shall not, except with the consent of the domestic concern, by made publicly available, regardless of whether the Attorney General response to such a request or the domestic concern withdraws such request before receiving a response. (3) Any domestic concern who has made a request to the Attorney General under paragraph (1) may withdraw such request prior to the time the Attorney General issues an opinion in response to such request. Any request so withdrawn shall have no force or effect. (4) The Attorney General shall, to the maximum extent practicable, provide timely guidance concerning the Department ofJustice's pres ent enforcement policy with respect to the preceding provisions of this section to potential exporters and small businesses that are unable to obtain specialized counsel on issues pertaining to such provisions. Such guidance shall be limited to responses to requests under para graph (1) concerning conformity of specified prospective conduct with the Department of Justice's present enforcement policy regard ing the preceding provisions of this section and general explanations of compliance responsibilities and of potential liabilities under the preceding provisions of this section. (g) Penalties (1)(A) Any domestic concern that is not a natural person and that violates subsection (a) or (i) of this section shall be fined not more than $2,000,000. 96 (B) Any domestic concern that is not a natural person and that vio lates subsection (a) or (i) of this section shall be subject to a civil pen alty of not more than $10,000 imposed in an action brought by the Attorney General. (2) (A) Any natural person that is an officer, director, employee, or agent of a domestic concern, or stockholder acting on behalf of such domestic concern, who willfully violates subsection (a) or (i) of this section shall be fined not more than $100,000 or imprisoned not more than 5 years, or both. (B) Any natural person that is an officer, director, employee, or agent of a domestic concern, or stockholder acting on behalfof such domes tic concern, who violates subsection (a) or (i) of this section shall be subject to a civil penalty of not more than $10,000 imposed in an action brought by the Attorney General. (3) Whenever a fine is imposed under paragraph (2) upon any officer, director, employee, agent, or stockholder of a domestic concern, such fine may not be paid, directly or indirectly, by such domestic concern. (h) Definitions For purposes of this section: (1) The term "domestic concern" means-- (3) (A) A person's state of mind is "knowing" with respect to conduct, a circumstance, or a result if-- (i) such person is aware that such person is engaging in such conduct, that such circumstance exists, or that such result is substantially cer tain to occur; or (ii) such person has a firm belief that such circumstance exists or that such result is substantially certain to occur. (B) When knowledge of the existence of a particular circumstance is required for an offense, such knowledge is established if a person is aware of a high probability of the existence of such circumstance, unless the person actually believes that such circumstance does not exist. (4) (A) The term "routine governmental action" means only an action which is ordinarily and commonlyperformedby a foreign official in-- (i) obtaining permits, licenses, or other official documents to qualify a person to do business in a foreign country; (ii) processing governmental papers, such as visas and work orders; (iii) providing police protection, mail pick-up and delivery, or sched uling inspections associated with contract performance or inspections related to transit of goods across country; (iv) providing phone service, power and water supply, loading and unloading cargo, or protecting perishable products or commodities from deterioration; or (v) actions of a similar nature. (A) any individual who is a citizen, national, or resident of the United States; and (B) any corporation, partnership, association, joint-stock company, business trust, unincorporated organization, or sole proprietorship which has its principal place ofbusiness in the United States, or which is organized under the laws of a State of the United States or a terri tory, possession, or commonwealth of the United States. (2) (A) The term "foreign official" means any officer or employee of a foreign government or any department, agency, or instrumentality thereof, or of a public international organization, or any person act ing in an official capacity for or on behalf of any such government or department, agency, or instrumentality, or for or on behalfof any such public international organization. (B) The term "routine governmental action" does not include any decision by a foreign official whether, or on what terms, to award new business to or to continue business with a particular party, or any action taken by a foreign official involved in the decision-making process to encourage a decision to award new business to or continue business with a particular party. (5) The term "interstate commerce" means trade, commerce, transpor tation, or communication among the several States, or between any foreign country and any State or between any State and any place or ship outside thereof, and such term includes the intrastate use of-- (A) a telephone or other interstate means of communication, or (B) any other interstate instrumentality. (B) For purposes of subparagraph (A), the term "public international organization" means-- (i) an organization that has been designated by Executive order pursu ant to Section 1 of the International Organizations Immunities Act (22 U.S.C. 288); or (ii) any other international organization that is designated by the President by Executive order for the purposes of this section, effective as of the date of publication of such order in the Federal Register. (i) Alternative Jurisdiction (1) It shall also be unlawful for any United States person to corruptly do any act outside the United States in furtherance of an offer, pay ment, promise to pay, or authorization of the payment of any money, or offer, gift, promise to give, or authorization of the giving of any thing of value to any of the persons or entities set forth in paragraphs (1), (2), and (3) of subsection (a), for the purposes set forth therein, irrespective of whether such United States person makes use of the mails or any means or instrumentality of interstate commerce in fur therance of such offer, gift, payment, promise, or authorization. 97 (2) As used in this subsection, a "United States person" means a national of the United States (as defined in section 101 of the Immigration and Nationality Act (8 U.S.C. 1101)) or any corpo ration, partnership, association, joint-stock company, business trust, unincorporated organization, or sole proprietorship organized under the laws ofthe United States or any State, territory, possession, or com monwealth of the United States, or any political subdivision thereof. 15 U.S.C. 78dd-3 Prohibited foreign trade practices by persons other than issuers or domestic concerns (a) Prohibition It shall be unlawful for any person other than an issuer that is subject to section 78dd-1 [Section 30A of the Exchange Act] of this title or a domestic concern, or for any officer, director, employee, or agent of such person or any stockholder thereof acting on behalf of such per son, while in the territory of the United States, corruptly to make use of the mails or any means or instrumentality of interstate commerce or to do any other act in furtherance of an offer, payment, promise to pay, or authorization of the payment of any money, or offer, gift, promise to give, or authorization of the giving of anything of value to-- (1) any foreign official for purposes of-- (A) (i) influencing any act or decision of such foreign official in his official capacity, (ii) inducing such foreign official to do or omit to do any act in violation of the lawful duty of such official, or (iii) securing any improper advantage; or (B) inducing such foreign official to use his influence with a foreign government or instrumentality thereof to affect or influence any act or decision of such government or instrumentality, in order to assist such person in obtaining or retainingbusiness for or with, or directing business to, any person; (2) any foreign political party or official thereof or any candidate for foreign political office for purposes of-- (A) (i) influencing any act or decision of such party, official, or candi date in its or his official capacity, (ii) inducingsuch party, official, or can didate to do or omit to do an act in violation of the lawful duty of such party, official, or candidate, or (iii) securing any improper advantage; or (B) inducing such party, official, or candidate to use its or his influ ence with a foreign government or instrumentality thereofto affect or influence any act or decision of such government or instrumentality, in order to assist such person in obtaining or retaining business for or with, or directing business to, any person; or (3) any person, while knowing that all or a portion of such money or thing ofvalue will be offered, given, or promised, directly or indirectly, to any foreign official, to any foreign political party or official thereof, or to any candidate for foreign political office, for purposes of-- APPENDIX The Foreign Corrupt Practices Act (A) (i) influencing any act or decision of such foreign official, politi cal party, party official, or candidate in his or its official capacity, (ii) inducing such foreign official, political party, party official, or candi date to do or omit to do any act in violation of the lawful duty of such foreign official, political party, party official, or candidate, or (iii) securing any improper advantage; or (B) inducing such foreign official, political party, party official, or can didate to use his or its influence with a foreign government or instru mentality thereofto affect or influence any act or decision of such gov ernment or instrumentality, in order to assist such person in obtaining or retaining business for or with, or directing business to, any person. (b) Exception for routine governmental action Subsection (a) of this section shall not apply to any facilitating or expediting payment to a foreign official, political party, or party offi cial the purpose of which is to expedite or to secure the performance of a routine governmental action by a foreign official, political party, or party official. (c) Affirmative defenses It shall be an affirmative defense to actions under subsection (a) ofthis section that-- (1) the payment, gift, offer, or promise of anything of value that was made, was lawful under the written laws and regulations ofthe foreign official's, political party's, party official's, or candidate's country; or (2) the payment, gift, offer, or promise of anything of value that was made, was a reasonable and bona fide expenditure, such as travel and lodging expenses, incurred by or on behalf of a foreign official, party, party official, or candidate and was directly related to-- (A) the promotion, demonstration, or explanation ofproducts or ser vices; or (B) the execution or performance of a contract with a foreign govern ment or agency thereof. (d) Injunctive relief (1) When it appears to the Attorney General that anyperson to which this section applies, or officer, director, employee, agent, or stock holder thereof, is engaged, or about to engage, in any act or practice 98 constituting a violation of subsection (a) of this section, the Attorney General may, in his discretion, bring a civil action in an appropri ate district court of the United States to enjoin such act or practice, and upon a proper showing, a permanent injunction or a temporary restraining order shall be granted without bond. (2) For the purpose of any civil investigation which, in the opinion of the Attorney General, is necessary and proper to enforce this section, the Attorney General or his designee are empowered to administer oaths and affirmations, subpoena witnesses, take evidence, and require the production of any books, papers, or other documents which the Attorney General deems relevant or material to such investigation. The attendance of witnesses and the production of documentary evi dence may be required from any place in the United States, or any territory, possession, or commonwealth of the United States, at any designated place of hearing. (3) In case of contumacy by, or refusal to obey a subpoena issued to, any person, the Attorney General may invoke the aid of any court of the United States within the jurisdiction of which such investigation or proceeding is carried on, or where such person resides or carries on business, in requiring the attendance and testimony of witnesses and the production of books, papers, or other documents. Any such court may issue an order requiring such person to appear before the Attorney General or his designee, there to produce records, if so ordered, or to give testimony touching the matter under investigation. Any failure to obey such order of the court may be punished by such court as a contempt thereof. (4) All process in any such case may be served in the judicial district in which such person resides or may be found. The Attorney General may make such rules relatingto civil investigations as may be necessary or appropriate to implement the provisions of this subsection. (e) Penalties (1) (A) Any juridical person that violates subsection (a) of this section shall be fined not more than $2,000,000. (B) Any juridical person that violates subsection (a) of this section shall be subject to a civil penalty of not more than $10,000 imposed in an action brought by the Attorney General. (2) (A) Any natural person who willfully violates subsection (a) of this section shall be fined not more than $100,000 or imprisoned not more than 5 years, or both. (B) Any natural person who violates subsection (a) of this section shall be subject to a civil penalty of not more than $10,000 imposed in an action brought by the Attorney General. (3) Whenever a fine is imposed under paragraph (2) upon any officer, director, employee, agent, or stockholder of a person, such fine may not be paid, directly or indirectly, by such person. (f) Definitions For purposes of this section: (1) The term "person," when referring to an offender, means any natu ral person other than a national of the United States (as defined in 8 U.S.C. 1101) or any corporation, partnership, association, jointstock company, business trust, unincorporated organization, or sole proprietorship organized under the law of a foreign nation or a politi cal subdivision thereof (2) (A) The term "foreign official" means any officer or employee of a foreign government or any department, agency, or instrumentality thereof, or of a public international organization, or any person act ing in an official capacity for or on behalf of any such government or department, agency, or instrumentality, or for or on behalfof any such public international organization. For purposes of subparagraph (A), the term "public international organization" means-- (i) an organization that has been designated by Executive Order pur suant to Section 1 of the International Organizations Immunities Act (22 U.S.C. 288); or (ii) any other international organization that is designated by the President by Executive order for the purposes of this section, effective as of the date of publication of such order in the Federal Register. (3) (A) A person's state of mind is "knowing" with respect to conduct, a circumstance, or a result if-- (i) such person is aware that such person is engaging in such conduct, that such circumstance exists, or that such result is substantially cer tain to occur; or (ii) such person has a firm belief that such circumstance exists or that such result is substantially certain to occur. (B) When knowledge of the existence of a particular circumstance is required for an offense, such knowledge is established if a person is aware of a high probability of the existence of such circumstance, unless the person actually believes that such circumstance does not exist. (4) (A) The term "routine governmental action" means only an action which is ordinarily and commonlyperformedby a foreign official in-- (i) obtaining permits, licenses, or other official documents to qualify a person to do business in a foreign country; (ii) processing governmental papers, such as visas and work orders; (iii) providing police protection, mail pick-up and delivery, or sched uling inspections associated with contract performance or inspections related to transit of goods across country; (iv) providing phone service, power and water supply, loading and unloading cargo, or protecting perishable products or commodities from deterioration; or (v) actions of a similar nature. 99 (B) The term "routine governmental action" does not include any decision by a foreign official whether, or on what terms, to award new business to or to continue business with a particular party, or any action taken by a foreign official involved in the decision-making process to encourage a decision to award new business to or continue business with a particular party. APPENDIX The Foreign Corrupt Practices Act (5) The term "interstate commerce" means trade, commerce, transpor tation, or communication among the several States, or between any foreign country and any State or between any State and any place or ship outside thereof, and such term includes the intrastate use of-- (A) a telephone or other interstate means of communication, or (B) any other interstate instrumentality. *** 15 U.S.C. 78m [Section 13 of the Securities Exchange Act of 1934] Periodical and other reports (a) Reports by issuer of security; contents Every issuer of a security registered pursuant to section 78l of this title shall file with the Commission, in accordance with such rules and reg ulations as the Commission may prescribe as necessary or appropriate for the proper protection of investors and to insure fair dealing in the security-- (1) such information and documents (and such copies thereof) as the Commission shall require to keep reasonably current the information and documents required to be included in or filed with an applica tion or registration statement filed pursuant to section 78l of this title, except that the Commission may not require the filing of any material contract wholly executed before July 1, 1962. (2) such annual reports (and such copies thereof), certified if required by the rules and regulations of the Commission by independent pub lic accountants, and such quarterly reports (and such copies thereof), as the Commission may prescribe. Every issuer of a security registered on a national securities exchange shall also file a duplicate original of such information, documents, and reports with the exchange. In any registration statement, periodic report, or other reports to be filed with the Commission, an emerging growth company need not present selected financial data in accor dance with section 229.301 of title 17, Code of Federal Regulations, for any period prior to the earliest audited period presented in con nection with its first registration statement that became effective under this chapter or the Securities Act of 1933 [15 U.S.C. 77a, et seq.] and, with respect to any such statement or reports, an emerg ing growth company may not be required to comply with any new or revised financial accounting standard until such date that a com pany that is not an issuer (as defined under section 7201 of this title) is required to comply with such new or revised accounting standard, if such standard applies to companies that are not issuers. (b) Form of report; books, records, and internal accounting; directives (1) The Commission may prescribe, in regard to reports made pursu ant to this chapter, the form or forms in which the required informa tion shall be set forth, the items or details to be shown in the balance sheet and the earnings statement, and the methods to be followed in the preparation of reports, in the appraisal or valuation of assets and liabilities, in the determination of depreciation and depletion, in the differentiation of recurring and nonrecurring income, in the differen tiation of investment and operating income, and in the preparation, where the Commission deems it necessary or desirable, of separate and/or consolidated balance sheets or income accounts of any person directly or indirectly controlling or controlled by the issuer, or any person under direct or indirect common control with the issuer; but in the case of the reports of any person whose methods of accounting are prescribed under the provisions of any law of the United States, or any rule or regulation thereunder, the rules and regulations of the Commission with respect to reports shall not be inconsistent with the requirements imposed by such law or rule or regulation in respect of the same subject matter (except that such rules and regulations of the Commission may be inconsistent with such requirements to the extent that the Commission determines that the public interest or the protection of investors so requires). (2) Every issuer which has a class of securities registered pursuant to section 78l of this title and every issuer which is required to file reports pursuant to section 78o(d) of this title shall-- (A) 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; (B) devise and maintain a system of internal accounting controls suf ficient to provide reasonable assurances that-- (i) transactions are executed in accordance with management's general or specific authorization; (ii) transactions are recorded as necessary (I) to permit preparation of financial statements in conformity with generally accepted accounting 100 principles or any other criteria applicable to such statements, and (II) to maintain accountability for assets; to use such influence shall be conclusively presumed to have complied with the requirements of paragraph (2). (iii) access to assets is permitted only in accordance with manage ment's general or specific authorization; and (iv) the recorded accountability for assets is compared with the exist ing assets at reasonable intervals and appropriate action is taken with respect to any differences; and (7) For the purpose of paragraph (2) of this subsection, the terms "rea sonable assurances" and "reasonable detail" mean such level of detail and degree of assurance as would satisfy prudent officials in the con duct of their own affairs. (C) notwithstanding any other provision of law, pay the allocable share of such issuer of a reasonable annual accounting support fee or fees, determined in accordance with section 7219 of this title. (3) (A) With respect to matters concerning the national security of the United States, no duty or liability under paragraph (2) of this subsec tion shall be imposed upon any person acting in cooperation with the head of any Federal department or agency responsible for such matters if such act in cooperation with such head of a department or agency was done upon the specific, written directive of the head of such department or agency pursuant to Presidential authority to issue such directives. Each directive issued under this paragraph shall set forth the specific facts and circumstances with respect to which the provi sions of this paragraph are to be invoked. Each such directive shall, unless renewed in writing, expire one year after the date of issuance. (B) Each head of a Federal department or agency of the United States who issues such a directive pursuant to this paragraph shall main tain a complete file of all such directives and shall, on October 1 of each year, transmit a summary of matters covered by such directives in force at any time during the previous year to the Permanent Select Committee on Intelligence of the House of Representatives and the Select Committee on Intelligence of the Senate. (4) No criminal liability shall be imposed for failing to comply with the requirements of paragraph (2) of this subsection except as pro vided in paragraph (5) of this subsection. (5) No person shall knowingly circumvent or knowingly fail to imple ment a system of internal accounting controls or knowingly falsify any book, record, or account described in paragraph (2). (6) Where an issuer which has a class of securities registered pursu ant to section 78l of this title or an issuer which is required to file reports pursuant to section 78o(d) of this title holds 50 per centum or less of the voting power with respect to a domestic or foreign firm, the provisions of paragraph (2) require only that the issuer proceed in good faith to use its influence, to the extent reasonable under the issuer's circumstances, to cause such domestic or foreign firm to devise and maintain a system of internal accounting controls consistent with paragraph (2). Such circumstances include the relative degree of the issuer's ownership of the domestic or foreign firm and the laws and practices governing the business operations of the country in which such firm is located. An issuer which demonstrates good faith efforts 15 U.S.C. 78ff Penalties [Section 32 of the Securities Exchange Act of1934] (a) Willful violations; false and misleading statements Any person who willfully violates any provision of this chapter (other than section 78dd-1 of this title [Section 30A of the Exchange Act]), or any rule or regulation thereunder the violation of which is made unlawful or the observance of which is required under the terms of this chapter, or any person who willfully and knowingly makes, or causes to be made, any statement in any application, report, or docu ment required to be filed under this chapter or any rule or regulation thereunder or any undertaking contained in a registration statement as provided in subsection (d) of section 78o of this title, or by any self-regulatory organization in connection with an application for membership or participation therein or to become associated with a member thereof, which statement was false or misleadingwith respect to any material fact, shall upon conviction be fined not more than $5,000,000, or imprisoned not more than 20 years, or both, except that when such person is a person other than a natural person, a fine not exceeding $25,000,000 may be imposed; but no person shall be subject to imprisonment under this section for the violation of any rule or regulation if he proves that he had no knowledge of such rule or regulation. (b) Failure to file information, documents, or reports Any issuer which fails to file information, documents, or reports required to be filed under subsection (d) of section 78o of this title or any rule or regulation thereunder shall forfeit to the United States the sum of $100 for each and every day such failure to file shall continue. Such forfeiture, which shall be in lieu of any criminal penalty for such failure to file which might be deemed to arise under subsection (a) of this section, shall be payable into the Treasury of the United States and shall be recoverable in a civil suit in the name of the United States. (c) Violations by issuers, officers, directors, stockholders, employees, or agents of issuers (1)(A) Any issuer that violates subsection (a) or (g) of section 78dd-1 [Section 30A of the Exchange Act] of this title shall be fined not more than $2,000,000. (B) Any issuer that violates subsection (a) or (g) of section 78dd-1 101 [Section 30A of the Exchange Act]of this title shall be subject to a civil penalty of not more than $10,000 imposed in an action brought by the Commission. (2) (A) Any officer, director, employee, or agent of an issuer, or stock holder acting on behalf of such issuer, who willfully violates subsec tion (a) or (g) of section 78dd-1 [Section 30A of the Exchange Act] of this title shall be fined not more than $100,000, or imprisoned not more than 5 years, or both. (B) Any officer, director, employee, or agent of an issuer, or stock holder acting on behalf of such issuer, who violates subsection (a) or (g) of section 78dd-1 [Section 30A of the Exchange Act] of this title shall be subject to a civil penalty of not more than $10,000 imposed in an action brought by the Commission. (3) Whenever a fine is imposed under paragraph (2) upon any officer, director, employee, agent, or stockholder of an issuer, such fine may not be paid, directly or indirectly, by such issuer. APPENDIX The Foreign Corrupt Practices Act 102 APPENDIX Endnotes L. ENDNOTES 1S. Rep. N o . 9 5 -1 1 4 , at 4 (1 9 7 7 ) [h erein after S. Rep. N o . 9 5 -1 1 4 ], available a t h ttp ://w w w .ju stic e .g o v /c rim in a l/fra u d /fc p a /h isto ry /1 9 7 7 / sen aterpt-95-114.p df. 2Id.; H .R . Rep. N o . 9 5 - 6 4 0 , at 4 - 5 ( 1 9 7 7 ) [h e r e in a fte r H . R . Rep. N o . 9 5 -6 4 0 ], available a t h ttp ://w w w .ju stice .g o v /crim in a l/fra u d /fc p a / h isto ry /1 9 7 7 /h o u sep rt-9 5 -6 4 0 .p d f. The H o u se R ep ort m ade clear C o n g r e s s 's c o n c e r n s : The paym ent o f bribes to influence the acts or decisions o f foreign officials, foreign political parties or can d id ates fo r fo reig n p o litic a l office is u n eth ical. It is co u n ter to th e m o ra l ex p ectatio n s a n d values o f the A m erican p u b lic. B u t n o t o n ly is it u n eth ical, it is b a d b u sin ess as w ell. It erodes p u b lic con fid en ce in the in tegrity o f the free m ark et system . It sh ortcircuits the m arketplace by d irecting business to those com pan ies to o inefficient to com pete in term s o f p rice, q u ality o r service, o r to o lazy to en gage in honest salesm anship, or to o intent upon unloadin g m argin al p ro d u cts. In sh ort, it rew ards corru ption in stead o f efficiency an d p u ts pressure on ethical enterprises to low er their stan dards or risk losin g b u sin e ss. Id. 3See, e.g., U S . A gen cy fo r In t 'l D ev., U S A I D A n t ic o r r u p t io n Strategy 5-6 (2 0 0 5 ), available at h ttp ://tra n sitio n .u sa id .g o v /p o lic y / ad s/2 0 0 /2 0 0 m b o .p d f. The grow ing recognition that corruption poses a severe threat to dom estic an d international security has galvanized e ffo r ts t o c o m b a t it in th e U n it e d S ta te s a n d a b r o a d . See, e.g., I n t 'l A n t i C orruption and G o o d G overnance A ct o f 2000, Pub. L. N o. 106-309, 2 0 2 , 114 Stat. 1 0 9 0 (co d ified as am en ded at 22 U .S .C . 2 1 5 1 -2 1 5 2 (2 0 0 0 )) (n otin g that " [w id esp rea d corruption endangers the stability and security o f societies, underm ines dem ocracy, and jeopardizes the social, p olitical, an d econ om ic developm en t o f a society. . . . [an d that] [c]orru ption facilitates crim in al activities, such as m on ey laun derin g, hin ders econ om ic developm en t, inflates the costs o f d o in g business, an d u n d erm in es th e leg itim acy o f the go v ern m en t a n d p u b lic tru st"). 4See M a r y se T r e m b la y & C a m ille K a r b a s s i, Corruption an d H um an Trafficking 4 ( T r a n sp a r e n c y In t'l, W o r k in g P a p e r N o . 3 , 2 0 1 1 ) , available at h ttp ://issuu.com /tran sparen cyin ternation al/docs/ti-w orkin g_paper_ h u m a n _ t r a f f ic k in g _ 2 8 _ ju n _ 2 0 1 1 ; U S . A g en cy fo r In t 'l D ev., Fo r eig n A id in t h e N a tio n al In t e r e st 4 0 ( 2 0 0 2 ) , available a t h ttp ://p d f.u said .g o v /p d f_ d o c s/P D A B W 9 0 0 .p d f ("N o problem does m ore to alienate citizens from their p olitical leaders an d institutions, and to underm ine political stability and econom ic developm ent, than endem ic corruption am o n g the governm ent, po litical p arty leaders, ju d ges, an d bureaucrats. The m ore en dem ic the co rru p tio n is, the m ore likely it is to be a c co m p an ie d b y o th er serious deficien cies in th e ru le o f law : sm ugglin g, dru g trafficking, crim inal violence, h um an rights abuses, a n d p erso n alizatio n o f pow er."). 5 President G eorge W . B ush observed in 2 0 0 6 that "the culture o f corruption has undercut developm ent and g o o d governance and . . . . im pedes our efforts to p rom ote freedom an d dem ocracy, en d p o v e r ty , a n d c o m b a t in t e r n a tio n a l c r im e a n d t e r r o rism ." P r e s id e n t 's S ta t e m e n t o n K le p to c r a c y , 2 Pu b. Pa pers 1 5 0 4 (A u g . 1 0 , 2 0 0 6 ) , available at h ttp ://g e o rg e w b u sh -w h ite h o u se .arc h iv e s.g o v /n e w s/ relea ses/2 0 0 6 /0 8 /2 0 0 6 0 8 1 0 .h tm l. The adm inistrations o f form er President G eorge W . B ush an d President B arack O b am a b oth recognized the threats p o sed to security an d stability by corruption . For instance, in issuin g a p roclam ation restrictin g the entry o f certain corrupt foreign pu b lic officials, form er President G eorge W . B ush recognized "the serious negative effects that corruption o f public institution s has on the U n ited States' efforts to p rom ote security an d to strengthen dem ocratic in s t it u tio n s a n d fre e m a r k e t sy ste m s. . . ." P r o c la m a tio n N o . 7 7 5 0 , 6 9 F e d . R e g . 2 2 8 7 ( J a n . 1 4 , 2 0 0 4 ) . S im ila rly , P r e sid e n t B a r a c k O b a m a 's N atio n al Security Strategy paper, released in M ay 2 0 1 0 , expressed the a d m in is t r a t io n 's e ffo r ts a n d c o m m itm e n t t o p r o m o t e th e r e c o g n itio n th a t "p ervasive co rru p tio n is a violation o f b asic h u m an righ ts an d a severe im ped im en t to developm en t an d glob al security." The White H ouse, N ational Secu rity Strategy 38 (2 0 1 0 ), available a t h t t p :/ / w w w .w h iteh ou se.gov/sites/d efau lt/files/rss_view er/n ation al_security_ stra te g y .p d f. 6See, e.g., In t 'l C h a m ber of C o m m erce, et a l., C lea n Bu sin e ss Is G ood Bu sin ess: The Business Case Against C orruption (2 0 0 8 ), available at h ttp ://w w w .u n g lo b a lc o m p a c t.o rg /d o c s/n e w s_ ev en ts/8.1/clean _b u sin ess_is_go o d _b u sin ess.p d f; W orld H ealth O rg., Fact Sheet No. 335, Medicines: Corruption a n d Pharmaceuticals (D e c . 2 0 0 9 ), available a t h ttp ://w w w .w h o .in t/m e d ia c e n tre /fa c tsh e e ts/fs3 3 5 / e n / ; D a n ie l K a u fm a n n , Corruption: The Facts, F o reign P ol'y, S u m m e r 1 9 9 7 , at 1 1 9 - 2 0 ; P a o lo M a u r o , Corruption a n d Growth, 1 1 0 Q . J . E c o n . 6 8 1 , 6 8 3 , 7 0 5 (1 9 9 5 ) (fin d in g th at "co rru p tio n low ers private in vestm en t . . . [a n d ] r e d u c [e s ] e c o n o m ic g r o w th . . ." ); T h e W orld Ba n k , T he Data Rev o lutio n: M easuring G overnance and C o rruption, (A pr. 8, 2 0 0 4 ), available a t h ttp ://g o .w o r ld b a n k .o r g /8 7 jU Y 8 G JH 0 . 7See, e.g., The Corruption Eruption, E c o n o m ist (A p r. 2 9 , 2 0 1 0 ), available at h ttp ://w w w .e c o n o m ist.c o m /n o d e /1 6 0 0 5 1 1 4 ( " T h e h id d en co sts o f co rru p tio n are alm o st alw ays m u ch h igh er th an co m p an ies im agine. C o rru p tio n inevitably b egets ever m ore corru p tion : bribe-takers keep return in g to the trough an d bribe-givers open them selves up to b la c k m a il." ); D a n ie l K a u fm a n n a n d S h a n g - Jin W e i, Does "Grease Money" Speed Up the Wheels o f Commerce? 2 ( N a t 'l B u re a u o f E c o n . R e se a rc h , W o rk in g P aper N o . 7 0 9 3 , 1 9 9 9 ), available a t h ttp ://w w w .n b e r.o rg / p a p e r s / w 7 0 9 3 .p d f ( " C o n t r a r y t o th e `e ffic ie n t g r e a s e ' t h e o r y , w e fin d 104 105 that firm s that p ay m ore bribes are also likely to sp en d m ore, n ot less, m anagem ent tim e w ith bureaucrats n egotiatin g regulations, and face h igh er, n o t low er, co st o f capital."). 8F or exam ple, in a n um ber o f recent enforcem ent actions, the sam e em ployees w ho w ere directing or con trollin g the bribe p aym ents were a ls o e n r ic h in g th e m se lv e s at th e e x p e n se o f th e c o m p a n y . See, e.g., C o m p la in t , S E C v. P e te rso n , N o . 1 2 -c v -2 0 3 3 (E .D .N .Y . 2 0 1 2 ), E C F N o . 1, available a t h ttp ://w w w .se c .g o v /litig a tio n /c o m p la in ts/2 0 1 2 / c o m p - p r 2 0 1 2 - 7 8 .p d f; C r im in a l In fo rm a tio n , U n it e d S ta te s v. P e te rson , N o . 1 2 -c r -2 2 4 ( E .D .N .Y . 2 0 1 2 ) , E C F N o . 7 [h e r e in a fte r United States v. Peterson] , available a t h t t p :/ / w w w .ju s t ic e .g o v / c r im in a l/ f r a u d / f c p a / c a s e s / p e t e r s o n g / p e t e r s o n g - i n f o r m a t io n .p d f ; P le a A g r e e m e n t , U n it e d S ta te s v. S ta n le y , N o . 0 8 - c r - 5 9 7 (S .D . T ex . 2 0 0 8 ) , E C F N o . 9 [h e r e in a fte r United States v. Stanley], available a t h t t p :/ / w w w .ju s t ic e .g o v / c r im in a l/ f r a u d / fcpa/cases/stan ley a/09-03-08stan ley -p lea-agree.p d f; Plea A greem en t, U n it e d S ta te s v. S a p siz ia n , N o . 0 6 - c r - 2 0 7 9 7 (S .D . F la. 2 0 0 7 ), E C F N o . 4 2 [h e re in a fte r United States v. Sapsizian], available a t h t t p ://w w w .ju s tic e . go v /crim in al/frau d /fcpa/cases/sapsizian c/06-06-07sapsizian -p lea.p df. 9See, e.g., C o m p la in t , S E C v. T y c o In t 'l L t d ., 0 6 - c v - 2 9 4 2 (S .D .N .Y . 2 0 0 6 ) , E C F N o . 1 [h e re in a fte r S E C v. Tyco In t'l], available a t h t t p ://w w w .s e c . g o v /litigatio n /co m p lain ts/2006/com p 19657.p d f; C om plain t, SE C v. W illb r o s G r o u p , Inc., N o . 0 8 - c v -1 4 9 4 (S .D . T ex . 2 0 0 8 ) , E C F N o . 1 [h e r e in a fte r S E C v. Willbros] , available a t h t t p :/ / w w w .s e c .g o v / litig a tio n / co m p lain ts/2008/com p 20571.p d f. 10See P le a A g r e e m e n t , U n it e d S ta te s v. B r id g e s t o n e C o r p ., N o . 11-cr651 (S .D . Tex. 2 0 1 1 ), E C F N o . 21, available a t h ttp ://w w w .ju stic e .g o v / crim in al/fraud/fcp a/cases/brid geston e/10-05-11bridgeston e-plea.pd f. 11See S. Rep. N o . 9 5 - 1 1 4 , at 6 ; H .R . Rep. 9 5 - 6 4 0 , at 4 ; see also A . C a r l K o tc h ia n , The Payoff: Lockheed's 70-Day Mission to Tokyo, Saturday Rev., J u l. 9 , 1 9 7 7 , at 7. 12U S . Se c . a nd Ex ch a n g e C om m ., Repo r t of th e Se c u r it ie s a nd Ex c h a n g e C o m m issio n on Q u e stio n a b le a nd Illeg a l C orporate Pa ym ents and Pr a c t ic e s 2 -3 ( 1 9 7 6 ) . 13See H .R . Rep. N o . 9 5 - 6 4 0 , at 4 - 5 ; S. Rep. N o . 9 5 - 1 1 4 , at 3 -4. 14 H .R . Rep. N o . 9 5 - 6 4 0 , at 4 - 5 ; S. Rep. N o . 9 5 - 1 1 4 , at 4 . T h e S e n a te R eport observed, for instance, that " [m an agem en ts w hich resort to corporate bribery an d the falsification o f records to enhance their business reveal a lack o f con fiden ce ab o u t them selves," w hile citin g the Secretary o f th e Treasury's testim o n y th at "` [p ]ay in g b rib es-- ap art from b ein g m orally repugn an t an d illegal in m o st cou n tries-- is sim ply n o t n ecessary fo r the su ccessfu l c o n d u ct o f b usin ess here o r overseas.'" Id. 15See S. Rep. N o . 1 0 0 - 8 5 , a t 4 6 ( 1 9 8 7 ) ( r e c o u n tin g F C P A 's h is to r ic a l b ack grou n d an d explain in g that "a stro n g an tibribery statute co u ld help U .S . c o r p o r a t io n s re s is t c o r r u p t d e m a n d s ___ " ) [h e r e in a fte r S. Rep. N o . 100-85]. 16 S. Rep. N o . 9 5 - 1 1 4 , at 7 . 17 O m n ib u s T r a d e a n d C o m p e titiv e n e s s A c t o f 1 9 8 8 , P u b . L . N o . 1 0 0 4 1 8 , 5 0 0 3 , 1 0 2 S ta t. 1 1 0 7 , 1 4 1 5 - 2 5 ( 1 9 8 8 ) ; see also H .R . Rep. N o . 100-576, at 916-24 (1 9 8 8 ) (discussing F C P A am endm ents, including changes to stan dard o f liability for acts o f third p arties) [hereinafter H .R . Rep. N o . 1 0 0 -5 7 6 ]. 18See O m n ib u s T r a d e a n d C o m p e titiv e n e s s A c t o f 1 9 8 8 , 5 0 0 3 ( d ) . T h e am ended statute included the follow ing directive: It is the sense o f the C o n gress th at the P resident sh ould pursue the n egotiation o f an international agreem ent, am ong the m em bers o f the O rganization o f E conom ic C ooperation an d D evelopm ent, to govern persons from those countries concerning acts p ro h ib ite d w ith respect to issuers an d dom estic concerns by the am endm ents m ade by this section. Such international agreem ent sh ould include a process by w hich problem s an d conflicts associated w ith such acts co u ld be resolved. Id.; see also S. Rep. N o . 1 0 5 - 2 7 7 , at 2 ( 1 9 9 8 ) ( d e s c r ib in g e ffo r ts b y E xecutive B ran ch to en courage U .S. tradin g partn ers to enact legislation sim ilar to F C P A fo llo w in g 1988 am en d m en ts) [h erein after S. Rep. N o . 105-277]. 19 C o n v e n t io n o n C o m b a t i n g B r ib e r y o f F o r e ig n P u b lic O ffic ia ls in In tern ation al B usin ess T ran saction s art. 1.1, D ec. 18, 1 9 97, 3 7 I.L .M . 1 [hereinafter A nti-B ribery C onvention]. The A nti-B ribery C onvention requires m em ber countries to m ake it a crim inal offense "for any person in ten tion ally to offer, prom ise or give any u n due p ecu n iary or other advantage, whether directly or through intermediaries, to a foreign public official, for that official or for a third party, in order that the official act or refrain from acting in relation to the performance of official duties, in order to obtain or retain business or other improper advantage in the conduct o f international business." The Convention and its commentaries also call on all parties (a) to ensure that aiding and abetting and authorization of an act o f bribery are criminal offenses, (b) to assert territorial jurisdiction "broadly so that an extensive physical connection to the bribery act is not required," and (c) to assert nationality jurisdiction consistent with the general principles and conditions of each party's legal system. Id. at art. 1.2, cmts. 25, 26. 20See International Anti-Bribery and Fair Competition Act of 1998, Pub. L. 105-366, 112 Stat. 3302 (1998); see also S. Rep. N o . 105-277, at 2-3 (describing amendments to "the FCPA to conform it to the requirements of and to implement the O ECD Convention"). 21There is no private right of action under the FCPA. See, e.g., Lamb v. Phillip Morris, Inc., 915 F.2d 1024, 1028-29 (6th Cir. 1990); McLean v. Int'l Harvester Co., 817 F.2d 1214, 1219 (5th Cir. 1987). 22U.S. D ept. of J u s t ic e , U.S. At t o r n e y s' M anual 9-47.110 (2008) [hereinafter USAM ], available a t http://www.justice.gov/usao/ eousa/foia_reading_room/usam/. 23Go to http://export.gov/worldwide_us/index.asp for more information. 24Additional information about publicly available market research and due diligence assistance is available online. See In'l Trade Admin., M arket Research a n d D ue Diligence, available a t http ://export.gov/ salesandmarketing/eg_main_018204.asp. The International Company Profile reports include a listing of the potential partner's key officers and senior management; banking relationships and other financial information about the company; and market information, including sales and profit figures and potential liabilities. They are not, however, intended to substitute for a company's own due diligence, and the Commercial Service does not offer ICP in countries where Dun & Bradstreet or other private sector vendors are already performing this service. See In'l Trade Admin., International Company Profile, available a t http://export.gov/salesandmarketing/eg_main_018198.asp. 25The Commercial Services' domestic and foreign offices can also be found at http://export.gov/usoffices/index.asp and http://export.gov/ worldwide_us/index.asp. 26This form can be located at http://tcc.export.gov/Report_a_Barrier/ index.asp. 27See In 'l Trade A d m in ., "D oing Bu sin e ss In " G u id e s, available a t http://export.gov/about/eg_main_016806.asp. 28The Bu sin ess Et h ic s M anual is available at http://www.ita.doc.gov/goodgovernance/business_ethics/manual.asp. 29Information about the Advocacy Center can be found at http://export. gov/advocacy. 30Reports on U.S. compliance with these treaties can be found at http:// www.justice.gov/criminal/fraud/fcpa/intlagree/. 31See Statement on Signing the International Anti-Bribery and Fair Competition Act of 1998, 34 Weekly C omp. Pr e s. D o c . 2290, 2291 (Nov. 10, 1998) ("U.S. companies have had to compete on an uneven playing field . . . . The O ECD Convention . . . is designed to change all that. Under the Convention, our major competitors will be obligated to criminalize the bribery o f foreign public officials in international business transactions."). 32Colombia is also a member of the Working Group and is expected to accede to the Anti-Bribery Convention. 33O ECD , Country M onitoring o fthe O E C D Anti-Bribery Convention, available at http://www.oecd.org/document/12/0,3746, en_2649_34859_35692940_1_1_1_1,00.html. 34O ECD , Phase 3 Country M onitoring o fthe O E C D Anti-Bribery Convention, available a t http://www.oecd.org/document/31/0,3746, en_2649_34859_44684959_1_1_1_1,00.html. 35O ECD , Country Reports on the Implementation o fthe O E C D A nti Bribery Convention, available a t http://www.oecd.org/document/24/0,3 746,en_2649_34859_1933144_1_1_1_1,00.html. 36The O ECD Phase 1, 2, and 3 reports on the United States, as well as the U.S. responses to questionnaires, are available at http://www.justice. gov/criminal/fraud/fcpa/intlagree. 37See O ECD Working Group on Bribery, United States: Phase 3, Report on the Application o fthe Convention on Combating Bribery o f Foreign Public Officials in International Business Transactions a n d the 2009 Revised Recommendation on Combating Bribery in International Business Transactions, O c t . 2 0 1 0 , at 6 1 - 6 2 (r e c o m m e n d in g t h a t th e U n i t e d S ta te s " [c]on solidate an d sum m arise publicly available in form ation on the ap p licatio n o f the F C P A in relevant so u rces"), available a t h ttp ://w w w . o e cd .o rg/d atao ecd /1 0 /4 9 /4 6 2 1 3 8 4 l.p d f. 38 U n it e d N a t io n s C o n v e n t io n A g a i n s t C o r r u p t io n , O c t . 3 1 , 2 0 0 3 , S. Treaty D o c . N o . 109-6, 2 3 4 9 U .N .T .S. 4 1 , available a t h ttp ://w w w . u n o d c.org/d ocu m en ts/treaties/U N C A C /P ub lication s/C on ven tion /085 0 0 2 6 _ E .p d f [hereinafter U N C A C ]. 39 F o r m o r e in fo r m a tio n a b o u t th e U N C A C re v ie w m e c h a n is m , see Mechanismfo r the Review o f Implementation o fthe United Nations Convention Against Corruption, U n it e d N a t io n s O ffic e o n D r u g s an d C rim e , available a t h ttp ://w w w .u n o d c .o rg /d o c u m e n ts/tre a tie s/ U N C A C /P ublication s/R eview M ech anism -B asicD ocum en ts/ M echanism _for_the_R eview _of_Im plem en tation _-_B asic_ D ocum en ts_-_E .p df. 40 F o r in fo r m a tio n a b o u t th e s ta tu s o f U N C A C , se e U n it e d N a t io n s O ffice o n D ru g s a n d C rim e , U N C A C Signature and Ratification Status as o f12July 2012, available at h ttp ://w w w .u n o d c .o rg /u n o d c /e n /tre a tie s/ C A C /sign atories.h tm l. 41 O r g a n iz a t io n o f A m e r ic a n S ta te s , In te r - A m e r ic a n C o n v e n t io n A g a i n s t C o rru p tio n , M ar. 29, 1 996, 35 I.L .M . 7 2 4 , available a t h ttp ://w w w .o a s. o rg/ju rid ico/en glish /treaties/b-58.h tm l. For addition al inform ation about the status o f the IA C A C , see O rgan ization o f A m erican States, Sign ato ries an d R atificatio n s, available a t h ttp ://w w w .o a s.o rg /ju rid ic o / en glish /Sigs/b -58.h tm l. 42 C o u n c il o f E u r o p e , C r im i n a l L a w C o n v e n t io n o n C o r r u p t io n , J a n . 2 7 , 1 9 9 9 , 38 I.L .M . 5 0 5 , available a t h ttp ://c o n v e n tio n s.c o e .in t/T re a ty /e n / T reaties/h tm l/173.h tm . 43 F o r a d d it io n a l i n f o r m a tio n a b o u t G R E C O , se e C o u n c il o f E u r o p e , Group o fStates A gainst Corruption, available a t h t t p :/ / w w w .c o e .in t / t / dgh l/m o n ito rin g/greco /d efau lt_ E N .asp . The U n ited States has n ot yet ratified the G R E C O convention. 44 T h e t e x t o f th e F C P A s t a tu t e is s e t fo r t h in th e a p p e n d ix . See also J u r y In stru c tio n s at 2 1 -2 7 , U n it e d S ta te s v. E sq u e n a z i, N o . 0 9 - c r - 2 1 0 1 0 (S .D . F la. A u g . 5, 2 0 1 1 ) , E C F N o . 5 2 0 [h e r e in a fte r United States v. Esquenazi] ( F C P A ju r y in s t r u c t io n s ) ; J u r y I n s tr u c tio n s a t 1 4 - 2 5 , U n i t e d S ta te s v. K a y , N o . 0 1 - c r - 9 1 4 ( S .D . T e x . O c t . 6 , 2 0 0 4 ) , E C F N o . 1 4 2 ( s a m e ), a f f 'd, 5 1 3 F .3 d 4 3 2 , 4 4 6 - 5 2 ( 5 t h C ir. 2 0 0 7 ) , reh'g denied, 5 1 3 F .3 d 4 6 1 ( 5 t h C ir. 2 0 0 8 ) [h e r e in a fte r United States v. K ay ]; J u r y In str u c tio n s at 7 6 - 8 7 , U n it e d S ta te s v. Je ffe r so n , N o . 0 7 -c r-2 0 9 (E .D . V a. Ju ly 3 0 , 2 0 0 9 ), E C F N o . 6 8 4 [h e r e in a fte r United States v. Jefferson] ( s a m e ); J u r y In str u c tio n s a t 8 - 1 0 , U n i t e d S ta te s v. G r e e n , N o . 0 8 - c r - 5 9 ( C . D . C a l. S e p t. 11 , 2 0 0 9 ) , E C F N o . 2 8 8 [h e r e in a fte r United States v. Green] ( s a m e ); J u r y In stru c tio n s at 2 3 -2 9 , U n it e d S ta te s v. B o u rk e , N o . 0 5 -c r-5 1 8 (S .D .N .Y . J u ly 2 0 0 9 ) [h e r e in a fte r United States v. Bourke] (sa m e , n o t d o c k e t e d ) ; J u r y In stru c tio n s at 2 -8 , U n it e d S ta te s v. M e a d , N o . 9 8 -c r-2 4 0 (D .N .J. O c t. 1 9 9 8 ) [h e r e in a fte r United States v. M ead ] (sa m e ). 45 T h e p r o v is io n s o f th e F C P A a p p ly in g t o issu e rs are p a r t o f th e S e c u r itie s Exchange A ct o f 1934 [hereinafter Exchange A ct]. The anti-bribery provisions can be fou n d at Section 30A o f the Exchange A ct, 15 U .S.C . 78dd-1. 46 15 U .S .C . 7 8 l. 47 15 U .S .C . 7 8 o ( d ) . 48 S E C e n fo r c e m e n t a c tio n s h a v e in v o lv e d a n u m b e r o f fo r e ig n issu e rs. See, e.g, C o m p la in t , S E C v. M a g y a r T e le k o m P lc., et a l., N o . 11-cv-9646 (S.D .N .Y . D ec. 29, 2 0 1 1 ), E C F N o . 1 (G erm an and H u n ga rian co m p an ie s), available a t h ttp ://w w w .se c .g o v /litig a tio n / c o m p la in t s /2 0 1 1 /c o m p 2 2 2 1 3 - c o .p d f ; C o m p la in t, S E C v. A lcatelLucent, S.A ., N o . 10-cv-24620 (S.D . Fla. D ec. 27, 2 0 1 0 ), E C F N o. 1 [h e re in a fte r S E C v. Aleatel-Lucent] (F re n c h c o m p a n y ), available a t h ttp://w w w .sec.gov/litigation /com plain ts/2010/com p 21795.pd f; C o m p la in t, S E C v. A B B , L td ., N o . 1 0 -c v -1 6 4 8 (D .D .C . S e p t. 2 9 , 2 0 1 0 ), E C F N o . 1 [h e r e in a fte r S E C v. A B B ] (S w iss c o m p a n y ), available a t h ttp ://w w w .sec.gov/litigation /com plain ts/2010/com p -p r2010-175. p d f ; C o m p la in t , S E C v. D a im le r A G , N o . 1 0 - c v - 4 7 3 ( D . D . C . A p r. 1, 2 0 1 0 ) , E C F N o . 1 [h e r e in a fte r S E C v. D aim ler A G ] (G e r m a n c o m p a n y ), available a t h ttp ://se c .g o v /litig a tio n /c o m p la in ts/2 0 1 0 /c o m p p r 2 0 1 0 - 5 1 .p d f ; C o m p la in t , S E C v. S ie m e n s A k tie n g e se llsch a ft, N o . 08c v - 2 1 6 7 ( D . D . C . D e c . 1 2 , 2 0 0 8 ) , E C F N o . 1 [h e r e in a fte r S E C v. Siemens A G ] (G erm an y co m p an y ), available a t h ttp ://w w w .se c .g o v /litig a tio n / APPENDIX Endnotes c o m p lain ts/2 0 0 8 /c o m p 2 0 8 2 9 .p d f. C ertain D O J en forcem en t actions h a v e lik e w ise in v o lv e d f o r e ig n issu e rs. See, e.g., C r im i n a l In fo r m a tio n , U n it e d S ta te s v. M a g y a r T e le k o m , P lc., N o . 1 1 -c r-5 9 7 (E .D . V a. D e c . 2 9 , 2 0 1 1 ), E C F N o . 1, available a t h ttp ://w w w .ju stic e .g o v /crim in a l/fra u d / fcpa/cases/m agyar-telekom /2011-12-29-inform ation-m agyar-telekom . p d f; N on -P ros. A greem en t, In re D eu tsch e Telekom A G (D ec. 29, 2 0 1 1 ), available at h ttp ://w w w .ju stic e .g o v /crim in a l/fra u d /fcp a /c a se s/d e u tsc h e telek om /2011-12-29-deustch e-telek om -n pa.pd f; C rim inal Inform ation, U n it e d S ta te s v. A lc a te l- L u c e n t, S .A ., N o . 1 0 -c r - 2 0 9 0 7 (S .D . F la. D e c. 2 7 , 2 0 1 0 ) , E C F N o . 1 [h e re in a fte r United States v. Alcatel-Lucent, S.A .], available at h ttp ://w w w .ju stic e .g o v /crim in a l/fra u d /fcp a /c a se s/a lca te letal/12-27-10alcatel-et-al-in fo.p df; C rim in al Inform ation, U n ited S ta te s v. D a im le r A G , N o . 1 0 -c r-6 3 ( D .D .C . M ar. 2 2 , 2 0 1 0 ) , E C F N o . 1 [h e re in a fte r United States v. D aim ler A G ], available a t h t t p :/ /w w w . ju stice.gov/crim in al/frau d/fcpa/cases/daim ler/03-22-10daim lerag-in fo. p d f ; C r im in a l In fo rm a tio n , U n it e d S ta te s v. S ie m e n s A k tie n g e se llsch a ft, N o . 0 8 - c r - 3 6 7 ( D .D .C . D e c . 1 2 , 2 0 0 8 ) , E C F N o . 1 [h e r e in a fte r United States v. Siemens A G ] , available a t h t t p :/ /w w w .ju s t ic e .g o v /c r im in a l/ frau d/fcp a/cases/siem en s/12-12-08siem en sakt-in fo.p df. 49See h t t p :/ / w w w .s e c .g o v / d iv is io n s / c o r p f i n / in t e r n a t l / c o m p a n i e s .s h t m l. 50See, e.g., C o m p la in t , S E C v. T u rn e r, et al., N o . 1 0 -c v -1 3 0 9 ( D .D .C . A u g . 4 , 2 0 1 0 ) , E C F N o . 1 [h e re in a fte r, S E C v. Turner] (c h a r g in g a L eb an sese/C an ad ian agent o f a U K com p an y listed on U .S. exchange w ith v io la tin g th e F C P A fo r brib es o f Iraqi o fficials), available a t h t t p :/ / w w w .sec.go v /litigatio n /co m p lain ts/2 0 1 0 /co m p 2 1 6 1 5 .p d f; Indictm ent, U n it e d S ta te s v. N a a m a n , N o . 0 8 -c r-2 4 6 (D .D .C . A u g . 7 , 2 0 0 8 ), E C F N o . 3 [h e re in a fte r United States v. N aa m a n ] (s a m e ), available a t h t t p : / / w w w .ju stice.gov/crim in al/frau d /fcp a/cases/n aam an o/08-07-08n aam an in d i c t .p d f ; C o m p la in t , S E C v. E lk in , et a l., N o . 1 0 -c v -6 6 1 ( D .D .C . A p r. 2 8 , 2 0 1 0 ) , E C F N o . 1 [h e r e in a fte r S E C v. E lkin ] ( c h a r g in g an em ployee o f U .S. p u blicly trad ed com p an y w ith v iolatin g F C P A for b rib ery o f officials in K y rgy zstan ), available a t h ttp ://w w w .se c .g o v / litig atio n /co m p la in ts/2 0 1 0 /co m p 2 1 5 0 9 .p d f; C rim in al Inform ation, U n it e d S ta te s v. E lk in , N o . 10 -cr-1 5 (W .D . V a. A u g . 3, 2 0 1 0 ), E C F N o . 8 [h e re in a fte r United States v. E lkin] ( s a m e ), available a t h t t p ://w w w . justice.gov/crim in al/frau d /fcpa/cases/elk in /08-03-10elk in -in form ation . p d f ; In d ic tm e n t, U n it e d S ta te s v. T esler, et al., N o . 0 9 -c r-9 8 (S .D . T ex. F eb . 1 7 , 2 0 0 9 ) , E C F N o . 1 [h e r e in a fte r United States v. Tesler] (c h a r g in g a B ritish agent o f U .S. publicly traded com pan y w ith violatin g the F C P A fo r b rib ery o f N ig e ria n o fficials), available a t h ttp ://w w w .ju stice. go v/crim in al/frau d /fcpa/cases/tesler/tesler-in dict.p df; Superseding In d ic tm e n t, United States v. Sapsizian, e t al., supra n o te 8 , E C F 3 2 (ch argin g a French em ployee o f French com p an y trad ed on a U .S. exchange w ith violatin g the F C P A ). 51 15 U .S .C . 7 8 d d - 2 . 52 15 U .S .C . 7 8 d d - 2 ( h ) ( 1 ) . 53 15 U .S .C . 7 8 d d - 2 ( a ) . See, e.g., S u p e r s e d in g In d ic tm e n t, U n it e d S ta te s v. N e x u s T e c h n o lo g ie s , et al., N o . 0 8 - c r - 5 2 2 ( E .D . P a . O c t . 2 8 , 2 0 0 9 ) , E C F N o . 1 0 6 [h e re in a fte r United States v. Nexus Technologies] (p riv a te U .S. com p an y an d corp orate executives ch arged w ith violatin g F C P A for b rib es p a id in V ie tn a m ), available at h ttp ://w w w .ju stic e .g o v /crim in a l/ frau d /fcp a/cases/n gu y en n /09-04-08n g u y en -in d ict.p d f; Indictm ent, United States v. Esquenazi, supra n o te 4 4 , (p riv a te U .S . c o m p a n y a n d co rp o rate executives ch arged w ith F C P A v iolation s for bribes p a id in H a iti), available at h ttp ://w w w .ju stic e .g o v /c rim in a l/fra u d /fc p a /c a se s/ esquen azij/12-08-09esquen azi-in dict.pdf. 54 15 U .S .C . 7 8 d d - 3 ( a ) . A s d i s c u s s e d a b o v e , fo r e ig n c o m p a n ie s th a t have securities registered in the U n ite d States or th at are req u ired to file p eriod ic reports w ith the S E C , in cludin g certain foreign com panies w ith A m e r ic a n D e p o s it o r y R e c e ip ts , are c o v e r e d b y th e F C P A 's a n ti-b rib e ry provisions governing "issuers" under 15 U .S.C . 78dd-1. 106 107 55See In t e r n a t io n a l A n t i- B r ib e r y a n d F a ir C o m p e t i t io n A c t o f 1 9 9 8 , P u b . L . 1 0 5 -3 6 6 , 1 1 2 S tat. 3 3 0 2 (1 9 9 8 ) ; 15 U .S .C . 7 8 d d - 3 (a ); see also U S . D ept. of J u st ic e , C rim inal Reso u rce Manual 9 -1 0 1 8 (N o v . 2 0 0 0 ) (the D ep artm en t "interprets [Section 7 8 d d -3 (a )] as con ferrin g ju r is d i c t io n w h e n e v e r a f o r e ig n c o m p a n y o r n a t io n a l causes an a c t t o b e d o n e w ith in th e territo ry o f th e U n ite d States b y any p e rso n actin g as t h a t c o m p a n y 's o r n a t io n a l's a g e n t." ). T h is in t e r p r e t a t io n is c o n s is te n t w ith U .S . tre aty o b lig a tio n s. See S. Rep. N o . 1 0 5 - 2 1 7 7 ( 1 9 9 8 ) (e x p re ssin g C o n g re ss' in ten tion th at the 1998 am en d m en ts to the F C P A "co n fo rm it to the requirem ents o f an d to im plem ent the O E C D C onvention ."); A n ti-B rib e ry C o n v e n tio n at art. 4 .1 , supra n o te 19 (" E ac h P arty sh all take such m easures as m ay be necessary to establish its ju risd iction over the b rib ery o f a fo reig n p u b lic o fficial w hen the o ffen ce is c o m m itte d in w h o le o r in p a r t in its territo ry ." ). 56 15 U .S .C . 7 8 d d - 3 ( a ) ; see, e.g., C r im i n a l In fo r m a t io n , U n it e d S ta te s v. A lc a te l-L u c e n t F ran ce, S .A ., et al., N o . 1 0 -c r-2 0 9 0 6 (S .D . Fla. D e c . 2 7 , 2 0 1 0 ) , E C F N o . 1 [h e re in a fte r United States v. Alcatel-Lucent France] (subsidiary o f French publicly traded com pany convicted o f conspiracy to v io late F C P A ), available a t h ttp ://w w w .ju stic e .g o v /crim in a l/fra u d / fcpa/cases/alcatel-lucen t-sa-etal/12-27-10alcatel-et- al-in fo.pdf; C rim inal In fo rm a tio n , U n it e d S ta te s v. D a im le r C h r y sle r A u to m o tiv e R u ssia SA O , N o . 10-cr-64 (D .D .C . M ar. 22, 201 0 ), E C F N o. 1 (subsidiary o f G e rm a n p u b lic ly tra d e d co m p a n y c o n v icte d o f v io la tin g F C P A ), available at h ttp ://w w w .ju stice.gov/crim in al/frau d/fcp a/cases/d aim ler/03-221 0 d a im le rru ss ia -in fo .p d f; C r im in a l In fo rm a tio n , U n it e d S ta te s v. S ie m e n s S.A . (A rgen tin a), N o . 08-cr-368 (D .D .C . D ec. 12, 2 0 0 8 ), E C F N o . 1 (subsidiary o f G erm an publicly traded com pany convicted o f violating F C P A ), available a t h ttp ://w w w .ju stic e .g o v /c rim in a l/fra u d /fc p a /c a se s/ siem en s/12-12-08siem en sargen -in fo.pdf. 57See 1 5 U .S .C . 7 8 d d - 2 ( h ) ( 5 ) (d e fin in g " in te r s ta te c o m m e r c e " ), 7 8 d d 3 ( f ) ( 5 ) ( s a m e ); see also 15 U .S .C . 7 8 c ( a ) ( 1 7 ) . 58 15 U S . C . 7 8 d d - 2 ( h ) ( 5 ) , 7 8 d d - 3 ( f ) ( 5 ) . 59S e e 1 5 U .S .C . 7 8 d d - 3 . 60 C r im i n a l In fo r m a t io n , U n i t e d S ta te s v. J G C C o r p ., N o . 1 1 - c r - 2 6 0 (S .D . T ex . A p r. 6 , 2 0 1 1 ) , E C F N o . 1 [h e r e in a fte r United States v. J G C Corp.\, available a t h t t p :/ / w w w .ju s t ic e .g o v / c r im in a l/ f r a u d / f c p a / c a s e s / jgc-corp /04-6-11jgc-corp-in fo.p d f; C rim inal Inform ation, U n ited States v. S n a m p r o g e tti N e th e rla n d s B.V ., N o . 1 0 -c r-4 6 0 (S .D . T ex . Ju l. 7 , 2 0 1 0 ), E C F N o . 1 [h e re in a fte r United States v. Snamprogetti], available a t h ttp://w w w .ju stice.gov/crim in al/frau d/fcp a/cases/sn am progetti/07-0710sn am progetti-in fo.pdf. 61 See 1 5 U .S .C . 7 8 d d - 1 ( g ) ( " irre sp e c tiv e o f w h e th e r s u c h is s u e r o r su c h officer, director, em ployee, agen t, o r sto ck h o ld er m akes use o f the m ails o r any m ean s o r in stru m en tality o f in terstate com m erce in furtheran ce o f such offer, gift, paym ent, p rom ise, or authorization"), 7 8 d d -2 (i) (1) ("irrespective o f w hether such U n ited States person m akes use o f the m ails o r any m eans o r in stru m en tality o f in terstate com m erce in fu rth e ra n c e o f su c h offer, g ift, p a y m e n t, p r o m ise , o r a u th o riz a tio n " ). 62 S. Rep. N o . 1 0 5 - 2 7 7 a t 2 ( " [ T ] h e O E C D C o n v e n t io n c a lls o n p a r tie s to assert n ation ality jurisdiction w hen consistent w ith n ation al legal an d con stitutional principles. A ccordingly, the A ct am ends the F C P A to p rovide for ju risd iction over the acts o f U .S. businesses an d n ationals in fu rtheran ce o f u n law fu l p aym ents th at take place w holly outside the U n ite d States. This exercise o f ju risd iction over U .S. businesses an d n ation als fo r u n law fu l co n d u ct ab ro a d is co n sisten t w ith U .S. legal an d co n stitu tion al p rin ciples an d is essential to p ro tect U .S. interests a b ro a d ." ). 63Id. at 2 -3. 64 15 U S . C . 7 8 d d - 1 ( a ) , 7 8 d d - 2 ( a ) , 7 8 d d - 3 ( a ) . 65See H .R . Rep. N o . 9 5 - 8 3 1 , a t 1 2 (r e fe r r in g t o " b u s in e s s p u r p o s e " t e s t). 66See, e.g, C o m p la in t , S E C v. Siemens A G , supra n o te 4 8 ; C r im in a l In fo r m a tio n , United States v. Siemens A G , supra n o te 4 8 . 67 In a m e n d in g t h e F C P A in 1 9 8 8 , C o n g r e s s m a d e c le a r t h a t th e b u sin e ss purpose elem ent, an d specifically the "retain in g business" p ron g, was m eant to be interpreted broadly: The C onferees w ish to m ake clear that the reference to co rru p t p aym en ts for "retain in g bu sin ess" in p resen t law is n o t lim ite d to the ren ew al o f co n tracts or other business, but also includes a p roh ib ition against corrupt p aym ents related to the execution or p erform ance o f contracts or the carrying o u t o f existin g business, such as a paym ent to a foreign official for the purpose of obtaining more favorable tax treatment. The term should not, however, be construed so broadly as to include lobbying or other normal representations to government officials. H.R. Rep. N o. 100-576, at 1951-52 (internal citations omitted). 68See, e.g, Complaint, SEC v. Panalpina, Inc., No. 10-cv-4334 (S.D. Tex. Nov. 4, 2010), ECF No. 1 [hereinafter S E C v . Panalpina, Inc.], available a t http ://www.sec.gov/litigation/complaints/2010/comp21727.pdf; Criminal Information, United States v. Panalpina, Inc., No. 10-cr765 (S.D. Tex. Nov. 4, 2010), ECF No. 1 [hereinafter United States v. Panalpina, Inc.], available a t http://www.justice.gov/criminal/fraud/ fcpa/cases/panalpina-inc/11-04-10panalpina-info.pdf; Criminal Information, United States v. Panalpina World Transport (Holding) Ltd., No. 10-cr-769 (S.D. Tex. Nov. 4, 2010), ECF No. 1, available a t http://www.justice.gov/criminal/fraud/fcpa/cases/panalpinaworld/11-04-10panalpina-world-info.pdf; see also Press Release, U.S. Sec. and Exchange Comm., SEC Charges Seven Oil Services and Freight Forwarding Companies for Widespread Bribery o f Customs Officials (Nov. 4, 2010) ("The SEC alleges that the companies bribed customs officials in more than 10 countries in exchange for such perks as avoiding applicable customs duties on imported goods, expediting the importation of goods and equipment, extending drilling contracts, and lowering tax assessments."), available a t http://www.sec.gov/ news/press/2010/2010-214.htm; Press Release, U.S. Dept. ofjustice, Oil Services Companies and a Freight Forwarding Company Agree to Resolve Foreign Bribery Investigations and to Pay More Than $156 Million in Criminal Penalties (Nov. 4, 2010) (logistics provider and its subsidiary engaged in scheme to pay thousands of bribes totaling at least $27 million to numerous foreign officials on behalf of customers in oil and gas industry "to circumvent local rules and regulations relating to the import o f goods and materials into numerous foreign jurisdictions"), available at http://www.justice.gov/opa/pr/2010/November/10crm-1251.html. 69United States v. Kay, 359 F.3d 738, 755-56 (5th Cir. 2004). 70Id. at 749. Indeed, the K ay court found that Congress' explicit exclusion of facilitation payments from the scope of the FCPA was evidence that "Congress intended for the FCPA to prohibit a ll other illicit payments that are intended to influence non-trivial official foreign action in an effort to aid in obtaining or retaining business for some person." Id . at 749-50 (emphasis added). 71Id. at 750. 72Id. at 749-55. 73Id. at 756 ("It still must be shown that the bribery was intended to produce an effect--here, through tax savings-- that would `assist in obtaining or retaining business.'"). 74The FCPA does not explicitly define "corruptly," but in drafting the statute Congress adopted the meaning ascribed to the same term in the domestic bribery statute, 18 U S.C. 201(b). See H.R. Rep. N o . 95-640, at 7. 75The House Report states in full: The word "corruptly" is used in order to make clear that the offer, payment, promise, or gift, must be intended to induce the recipient to misuse his official position; for example, wrongfully to direct business to the payor or his client, to obtain preferential legislation or regulations, or to induce a foreign official to fail to perform an official function. The word "corruptly" connotes an evil motive or purpose such as that required under 18 U.S.C. 201(b) which prohibits domestic bribery. As in 18 U.S.C. 201(b), the word "corruptly" indicates an intent or desire wrongfully to influence the recipient. It does not require that the act [be] fully consummated or succeed in producing the desired outcome. Id. The Senate Report provides a nearly identical explanation o f the meaning of the term: The word "corruptly" is used in order to make clear that the offer, payment, promise, or gift, must be intended to induce the recipient to misuse his official position in order to wrongfully direct business to the payor or his client, or to obtain preferential legislation or a favorable regulation. The w ord "corruptly" con n otes an evil m otive or purpose, an intent to w rongfully influence the re c ip ie n t. S. Rep. N o . 9 5 -1 1 4 , at 10. 76See 1 5 U .S .C . 7 8 d d - 1 ( a ) , 7 8 d d - 2 ( a ) , 7 8 d d - 3 ( a ) . 77See, e g ., C o m p la in t , S E C v. M o n s a n t o C o ., N o . 0 5 - c v - 1 4 ( D .D .C . Jan . 6, 2 0 0 5 ) (am o n g other thin gs, the com pan y p a id a $ 5 0 ,0 0 0 bribe to in fluen ce an In d on esian official to rep eal an u n favorable law, w hich w as n o t rep ealed d esp ite the b rib e), available a t h ttp ://w w w .se c .g o v / litig atio n /co m p lain ts/co m p1 9 0 2 3 .p d f; C rim inal Inform ation, U n ited S tate s v. M o n s a n to C o ., N o . 0 5 -cr-8 (D .D .C . Ja n . 6, 2 0 0 5 ) , available a t h ttp://w w w .ju stice.gov/crim in al/frau d/fcp a/cases/m on san to-co/01-06- 05m on santo-in fo.pdf. 78J u r y in s t r u c t io n s in F C P A c a se s h a v e d e f in e d " c o r r u p tly " c o n s is te n t w ith th e d e f in it io n f o u n d in th e le g isla tiv e h isto r y . See, e g , J u r y In str u c tio n s at 2 2 - 2 3 , United States v. Esquenazi, supra n o te 4 4 ; J u r y In str u c tio n s at 1 0 , United States v. Green, supra n o te 4 4 ; J u r y In str u c tio n s at 3 5 , United States v. Jefferson, supra n o te 4 4 ; J u r y In str u c tio n s at 2 5 , United States v. Bourke, supra n o te 4 4 ; J u r y In stru c tio n s at 1 7 , United States v. K ay, supra n o te 4 4 ; J u r y In str u c tio n s at 5, United States v. M ead, supra n o te 4 4 . 79See C o m p la in t , S E C v. I n n o s p e c , Inc., N o . 1 0 - c v - 4 4 8 ( D .D .C . M ar. 1 8 , 2 0 1 0 ) , E C F N o . 1 [h e r e in a fte r S E C v. Innospec] , available a t h t t p : / / w w w .sec.gov/litigation /com p lain ts/2010/com p 21454.pd f; C rim inal In fo rm a tio n at 8, U n it e d S ta te s v. In n o sp e c In c., N o . 1 0 -cr-61 (D .D .C . M a r. 1 7 , 2 0 1 0 ) , E C F N o . 1 [h e r e in a fte r United States v. Innospec], available a t h ttp ://w w w .ju stice .g o v /crim in a l/fra u d /fc p a /ca se s/in n o sp e cinc/03-17-10in n ospec-in fo.pd f. 80See C o m p la in t , S E C v. Innospec, supra n o te 7 9 ; C r im in a l In fo r m a tio n , United States v. Innospec, supra n o te 7 9 . 81 S e e 1 5 U S . C . 7 8 d d - 1 ( c ) ( 2 ) ( A ) , 7 8 d d - 2 ( g ) ( 2 ) ( A ) , a n d 7 8 d d - 3 ( 3 ) ( 2 ) (A ). 82 Compare 15 U .S .C . 7 8 f f ( c ) ( 1 ) ( A ) (c o r p o r a t e c r im in a l li a b ilit y u n d e r is s u e r p r o v is io n ) with 7 8 f f ( c ) ( 2 ) ( A ) (in d iv id u a l c r im in a l l i a b ilit y u n d e r is s u e r p r o v is io n ); compare 15 U .S .C . 7 8 d d - 2 ( g ) ( 1 ) ( A ) (c o r p o r a t e c r im in a l lia b ilit y u n d e r d o m e s t ic c o n c e r n p r o v is io n ) with 7 8 d d - 2 ( g ) ( 2 ) ( A ) (in d iv id u a l c r im in a l lia b ilit y u n d e r is s u e r p r o v i s io n ) ; compare 15 U .S.C . 7 8 d d -3 (e)(1 )(A ) (corporate crim inal liability for territorial p r o v is io n ) with 7 8 d d - 3 ( e ) ( 2 ) ( A ) ( in d iv id u a l c r im in a l li a b ilit y f o r territorial provision ). H ow ever, com panies still m ust act corruptly. See S e ctio n 3 0 A (a ), 15 U S .C . 7 8 d d -1 (a ); 15 U .S .C . 7 8 d d -2 (a ), 7 8 d d -3 (a ). 83 U n it e d S ta te s v. K ay , 5 1 3 F .3 d 4 3 2 , 4 4 8 ( 5 t h C ir. 2 0 0 7 ) ; see also J u r y In str u c tio n s at 3 8 , United States v. Esquenazi, supra n o te 4 4 ; J u r y In str u c tio n s at 1 0 , United States v. Green, supra n o te 4 4 ; J u r y In str u c tio n s at 3 5 , United States v. Jefferson, supra n o te 4 4 ; J u r y In str u c tio n s at 2 5 , United States v. Bourke, supra n o te 4 4 ; J u r y In stru c tio n s at 5, United States v. M ead , supra n o te 4 4 . 84 B r y a n v. U n it e d S ta te s , 5 2 4 U .S . 1 8 4 , 1 9 1 - 9 2 ( 1 9 9 8 ) ( c o n s tr u in g "w illfu lly " in th e c o n te x t o f 1 8 U .S .C . 9 2 4 ( a ) ( 1 ) ( A ) ) ( q u o t in g R a t z l a f v. U n i t e d S ta te s , 5 1 0 U S . 1 3 5 , 1 3 7 ( 1 9 9 4 ) ) ; see also K ay, 5 1 3 F .3 d at 4 4 6 51 (d iscu ssin g Bryan an d term "w illfully" u n der the F C P A ). 85K a y , 5 1 3 F .3 d a t 4 4 7 - 4 8 ; S tic h tin g T e r B e h a r t ig in g V a n d e B e la n g e n V a n O u d a a n d e e lh o u d e r s In H e t K a p it a a l V a n S a y b o lt I n t 'l B .V . v. Schreiber, 3 2 7 F.3d 173, 181 (2 d C ir. 200 3 ). 86 T h e p h r a s e "a n y th in g o f v a lu e " is n o t d e f in e d in th e F C P A , b u t th e identical phrase under the dom estic bribery statute has been broadly c o n s t r u e d t o in c lu d e b o t h tangible a n d intangible b e n e fits. See, eg., U n i t e d S ta te s v. M o o r e , 5 2 5 F .3 d 1 0 3 3 , 1 0 4 8 ( 1 1 t h C ir . 2 0 0 8 ) (r e je c tin g d efen d an ts o b jectio n to in stru ction d efin in g sex as a "th in g o f value," w hich "un am biguously covers intangible con sideration s" ); U n ited S ta te s v. G o r m a n , 8 0 7 F .2 d 1 2 9 9 , 1 3 0 4 -0 5 (6 th C ir. 1 9 8 6 ) (h o ld in g th a t loan s an d p rom ises o f future em ploym ent are "things o f value"); U n ited S ta te s v. W illia m s, 7 0 5 F .2 d 6 0 3 , 6 2 2 - 2 3 ( 2 d C ir. 1 9 8 3 ) (a p p r o v in g ju ry instruction that stock co u ld be a "th in g o f value" if defendant believed it h ad value, even th ou gh the shares h ad n o com m ercial value, an d n otin g th at " [t]h e p h ra se `an y th in g o f v a lu e ' in b rib ery a n d re late d statu tes has c o n siste n tly b e e n giv en a b r o a d m e a n in g " ). 87 S e c t io n 3 0 A ( a ) , 15 U S . C . 7 8 d d - 1 ( a ) ; 15 U S . C . 7 8 d d - 2 ( a ) , 7 8 d d 3(a) (em phasis added). 88 L ik e th e F C P A , th e d o m e s t ic b r ib e r y s ta tu te , 18 U .S .C . 2 0 1 , p r o h ib it s APPENDIX Endnotes givin g, offerin g, o r p ro m isin g "an yth in g o f value." N u m ero u s dom estic b rib ery cases u n der S ectio n 201 have in volved "sm all" d o llar bribes. See, e g , U n it e d S ta te s v. F ra n c o , 6 3 2 F .3 d 8 8 0 , 8 8 2 - 8 4 ( 5 t h C ir. 2 0 1 1 ) (affirm in g bribery convictions o f inm ate fo r p ayin g correction al officer $ 3 2 5 to o b tain cell p h o n e, fo o d , an d m arijuan a, an d n o tin g th at 18 U .S.C . 201 does n ot contain m inim um m on etary threshold); U n ited S ta te s v. W illia m s, 2 1 6 F .3 d 1 0 9 9 , 1 1 0 3 ( D .C . C ir. 2 0 0 0 ) (a ffirm in g b r ib e r y c o n v ic tio n f o r $ 7 0 b r ib e t o v e h ic le in s p e c t o r ) ; U n it e d S ta te s v. T raitz, 871 F.2d 3 6 8 , 3 9 6 (3 rd C ir. 1 989) (affirm ing b ribery conviction for $ 1 0 0 bribe p aid to official o f O ccu pation al H ealth an d Safety A d m in is tr a tio n ); U n it e d S ta te s v. H s ie h H u i M e i C h e n , 7 5 4 F .2 d 8 1 7 , 8 2 2 (9 th C ir. 1 985) (affirm ing b ribery convictions in cludin g $ 1 0 0 bribe t o im m ig ra tio n o ffic ia l); U n it e d S ta te s v. B is h to n , 4 6 3 F .2 d 8 8 7 , 8 8 9 (D .C . C ir. 1972) (affirm ing bribery conviction for $ 1 0 0 bribe to division ch ief o f D istrict o f C o lu m b ia Sew er O peration s D ivision). 89 C o m p la in t , S E C v. D aim ler A G , supra n o te 4 8 ; C r im in a l In fo r m a tio n , United States v. D aim ler A G , supra n o te 4 8 . 90 C o m p la in t , S E C v. H a lli b u r t o n C o m p a n y a n d K B R , In c., N o . 09-cv 3 9 9 (S .D . Tex. Feb. 11, 2 0 0 9 ), E C F N o 1 [h erein after SE C v. Halliburton and K BR ], available at h ttp ://w w w .se c .g o v /litig a tio n /c o m p la in ts/2 0 0 9 / c o m p 2 0 8 9 7 .p d f ; C r im in a l In fo rm a tio n , U n it e d S ta te s v. K e llo g g Brow n & R o o t L L C , N o . 09-cr-71, E C F N o . 1 (S.D . Tex. Feb. 6, 2009) [h e r e in a fte r United States v. K B R ] , available a t h t t p :/ /w w w .ju s t ic e .g o v / crim in al/frau d/fcp a/cases/k elloggb/02-06-09k br-in fo.p df. 91 C o m p la in t , S E C v. H alliburton a n d K B R , supra n o te 9 0 ; C r im in a l In fo r m a tio n , United States v. K B R , supra n o te 9 0 . 92See, e.g., C o m p la in t , S E C v. R A E Sys. In c., N o . 1 0 - c v - 2 0 9 3 ( D .D .C . D e c . 1 0 , 2 0 1 0 ) , E C F N o . 1 [h e r e in a fte r S E C v. R A E Sys., Inc.] (fu r co at, a m o n g o th er extrav agan t gifts), available at h ttp ://w w w .se c .g o v / litig atio n /co m p lain ts/2010/co m p 21770.p d f; N on-Pros. A greem ent, In re R A E Sys. In c. (D e c . 1 0 , 2 0 1 0 ) [h e r e in a fte r In re R A E Sys. Inc.] (sam e), available a t h ttp ://w w w .ju stic e .g o v /c rim in a l/fra u d /fc p a /c a se s/ r a e - s y s t e m s /1 2 - 1 0 - 1 0 r a e - s y s t e m s .p d f; C o m p la in t , S E C v. D aim ler A G , supra n o te 4 8 (a rm o re d M erc ed es B e n z w o rth 3 0 0 ,0 0 0 ); C rim in a l In fo r m a tio n , United States v. D aim ler A G , supra n o te 4 8 (sa m e ). 93See C o m p la in t , S E C v. A B B L t d , N o . 0 4 - c v - 1 1 4 1 ( D . D . C . J u ly 6, 2 0 0 4 ), E C F N o . 1, available a t h ttp ://w w w .se c .g o v /litig a tio n / c o m p l a i n t s / c o m p 1 8 7 7 5 .p d f ; C r im i n a l In fo r m a t io n , U n i t e d S ta te s v. A B B V e tco G ra y In c., et al., N o . 0 4 -c r-2 7 9 (S .D . T ex. Ju n e 2 2 , 2 0 0 4 ), E C F N o . 1 [h e re in a fte r United States v. A B B Vetco G ra y ], available at h ttp://w w w .ju stice.gov/crim in al/frau d/fcp a/cases/abb/06-2204abbvetco-in fo.pd f. 94 C o m p la in t , S E C v. U T S t a r c o m , In c., N o . 0 9 - c v - 6 0 9 4 ( N .D . C a l. D e c . 3 1 , 2 0 0 9 ) , E C F N o . 1 [h e re in a fte r S E C v. UTStarcom ], available a t h ttp://w w w .sec.gov/litigation /com plain ts/2009/com p 21357.pd f; N o n P ro s. A g r e e m e n t , In re U T S t a r c o m In c. (D e c . 3 1 , 2 0 0 9 ) [h e r e in a fte r In re UTStarcom], available a t h ttp ://w w w .ju stic e .g o v /c rim in a l/fra u d /fc p a / cases/utstarcom -in c/12-31-09utstarcom -agree.pdf. 95 C o m p la in t , S E C v. U TStarcom , supra n o te 9 4 ; N o n - P r o s . A g r e e m e n t , In re U TStarcom , supra n o te 94. 96 C o m p la in t , S E C v. U TStarcom , supra n o te 9 4 ; N o n - P r o s . A g r e e m e n t , In re U TStarcom , supra n o te 94. 97 C o m p la in t , S E C v. L u c e n t T e c h n o lo g ie s In c., N o . 0 7 - c v - 2 3 0 1 ( D .D .C . D e c . 2 1 , 2 0 0 7 ) , E C F N o .1 [h e r e in a fte r S E C v. Lucent], available a t h ttp://w w w .sec.gov/litigation /com plain ts/2007/com p 20414.pd f; N o n Pros. A greem en t, In re L u cen t T ech n ologies (N ov. 14, 2 0 0 7 ) [hereinafter In re Lucent], available a t h t t p :/ / w w w .ju s t ic e .g o v / c r i m in a l/ f r a u d / f c p a / cases/lu cen t-tech /11-14-07lu cent-agree.p df. 98 C o m p la in t , S E C v. Lucent, supra n o te 9 7 ; N o n - P r o s . A g r e e m e n t, In re Lucent, supra n o te 97. 99 T h e c o m p a n y c o n s e n t e d t o th e e n t r y o f a fin a l ju d g m e n t p e r m a n e n tly 108 109 en join in g it from future violations o f the b o o k s an d records an d internal controls provision s an d p a id a civil p en alty o f $ 1 ,5 0 0 ,0 0 0 . C o m p lain t, S E C v. Lucent, supra n o te 9 7 . A d d it io n a lly , th e c o m p a n y e n te r e d in to a non-prosecution agreem ent w ith D O J and p aid a $ 1 ,0 0 0 ,0 0 0 m on etary p en alty . N o n -P ro s. A g re e m e n t, In re Lucent, supra n o te 97. 100U n i t e d S ta te s v. L ie b o , 9 2 3 F .2 d 1 3 0 8 , 1 3 1 1 ( 8 t h C ir. 1 9 9 1 ) . 101J u d g m e n t , U n it e d S ta te s v. L ie b o , N o . 8 9 - c r - 7 6 ( D . M in n . J a n . 3 1 , 1 9 9 2 ), available a t h ttp ://w w w .ju stic e .g o v /c rim in a l/fra u d /fc p a /c a se s/ liebor71992-01-31-liebor-ju dgm en t.pdf. 102 C o m p la in t , S E C v. S c h e r in g - P lo u g h C o r p ., N o . 0 4 - c v - 9 4 5 ( D .D .C . Ju n e 9, 2 0 0 4 ), E C F N o . 1, available a t h ttp ://w w w .se c .g o v /litig a tio n / co m p la in ts/c o m p 1 8 7 4 0 .p d f; A d m in . P roceed in g O rder, In the M atter o f Schering-Plough C orp., Exchange A ct R elease N o. 4 9 8 3 8 (Ju n e 9, 2 0 04) (fin din g that com pany violated F C P A accounting provisions and im p o sin g $ 5 0 0 ,0 0 0 civil m o n etary p en alty ), available at h ttp ://w w w .sec. gov/litigation /adm in /34-49838.h tm . 103 F C P A o p in io n p r o c e d u r e re le a se s c a n b e f o u n d a t h t t p :/ /w w w . ju stice .g o v /crim in al/frau d /fc p a /. In the case o f the com p an y seek in g to contribute the $1 .4 2 m illion grant to a local M F I, D O J n oted that it had undertaken each o f these due diligence steps an d con trols, in addition to others, that w ou ld m in im ize the likelih ood that anything o f value w ould be given to any o fficials o f th e E u rasian country. U .S. D ept. of J u stic e, F C P A O p. Release 1 0 -0 2 ( J u ly 16, 2 0 1 0 ) , available a t h t t p :/ /w w w . ju stice.gov/crim in al/frau d /fcp a/op in ion /2010/1002.p d f. 104U .S . D ept. of J u s t ic e , F C P A O p. Rele a se 9 5 -0 1 ( J a n . 11, 1 9 9 5 ), available a t h ttp ://w w w .ju stic e .g o v /crim in a l/fra u d /fcp a / o p in io n /1995/9501.p d f. 105Id. 106Id . 107U .S . D ept. of J u s t ic e , F C P A O p. Rele a se 9 7 - 0 2 (N o v . 5, 1 9 9 7 ), available a t h ttp ://w w w .ju stic e .g o v /crim in a l/fra u d /fcp a / o p i n i o n / 1 9 9 7 / 9 7 0 2 . p d f ; U S . D ept. of J u s t ic e , F C P A O p. Release 06-01 (O ct. 16, 2 0 0 6 ), available at h ttp ://w w w .ju stic e .g o v /crim in a l/ frau d /fcp a/o p in io n /2006/0601.p d f. 108U .S . D ept. of J u s t ic e , F C P A O p. Rele a se 0 6 -0 1 ( O c t . 1 6 , 2 0 0 6 ) . 109Id . 110Id . 111See S e c t io n 3 0 A ( a ) ( 1 ) - ( 3 ) o f th e E x c h a n g e A c t , 15 U .S .C . 7 8 d d - 1 ( a ) (1 )-(3 ); 15 U .S .C . 7 8 d d -2 (a )(1 )-(3 ), 7 8 d d -3 (a )(1 )-(3 ). 112 S e c t io n 3 0 A ( f ) ( 1 ) ( A ) o f th e E x c h a n g e A c t , 1 5 U .S .C . 7 8 d d - 1 ( f ) ( 1 ) (A ); 15 U .S .C . 7 8 d d -2 (h )(2 )(A ), 7 8 d d -3 (f)(2 )(A ). 113U n d e r th e F C P A , an y p e r s o n "a c tin g in an o ffic ia l c a p a c it y fo r or on b eh alf o f " a foreign governm ent, a departm ent, agency, or in stru m en tality th ereo f, o r a p u b lic in tern atio n al o rg an iz atio n , is a foreign official. Section 3 0 A (f)(1 )(A ), 15 U .S .C . 7 8 d d -1 (f)(1 )(A ); 15 U .S .C . 7 8 d d - 2 ( h ) ( 2 ) ( A ) , 7 8 d d - 2 ( f ) ( 2 ) ( A ) . See also U .S . D ept . of J u s t ic e , F C P A O p. Release N o . 1 0 -0 3 , at 2 (S e p t. 1, 2 0 1 0 ) , available at h ttp://w w w .ju stice.gov/crim in al/frau d /fcp a/op in ion /2010/1003.p d f (listin g safeguards to ensure that consultant w as n o t acting on b eh alf o f foreign governm ent). 114B u t see S e c t io n s 3 0 A ( b ) a n d f ( 3 ) ( A ) o f th e E x c h a n g e A c t , 15 U .S .C . 7 8 d d -1 (b ) & (f) (3 ); 15 U S .C . 7 8 d d -2 (b ) & (h )(4 ), 7 8 d d -3 (b ) & ( f) (4) (facilitating paym ents exception). 115E v e n t h o u g h p a y m e n ts t o a fo r e ig n g o v e r n m e n t m a y n o t v io la te th e anti-bribery provisions o f the F C P A , such paym ents m ay violate other U .S . la w s, in c lu d in g w ire fr a u d , m o n e y l a u n d e r in g , a n d t h e F C P A 's accou n tin g provision s. T h is w as the case in a series o f m atters b ro u gh t by D O J an d S E C involving kickbacks to the Iraqi governm ent through the U n it e d N a t io n s O il- fo r - F o o d P r o g r a m m e . See, e.g., C o m p la in t , S E C v. Innospec, supra n o te 7 9 ; C r im in a l In fo r m a tio n , United States v. Innospec, supra n o te 7 9 ; C o m p la in t, S E C v. N o v o N o r d is k A / S , N o . 0 9 -c v -8 6 2 (D .D .C . M ay 11, 2 0 0 9 ), E C F N o . 1, available at h ttp ://w w w .se c .g o v / litig atio n /co m p la in ts/2 0 0 9 /co m p 2 1 0 3 3 .p d f; C rim inal Inform ation, U n it e d S ta te s v. N o v o N o r d is k A / S , N o . 0 9 -c r-1 2 6 ( D .D .C . M a y 11, 2 0 0 9 ), E C F N o . 1, available at h ttp ://w w w .ju stic e .g o v /crim in a l/ fraud/fcp a/cases/n ord iskn /05-11-09n ovo-in fo.pd f; C om plain t, S E C v. In g e rso ll- R a n d C o m p a n y L td ., N o . 0 7 -c v -1 9 5 5 ( D .D .C . O c t. 31, 2 0 0 7 ), E C F N o . 1, available a t h ttp ://w w w .se c .g o v /litig a tio n / co m p lain ts/2 0 0 7 /c o m p 2 0 3 5 3 .p d f; C rim inal Inform ation, U n ited States v. In g e rso ll- R a n d Ita lia n a S p A , N o . 0 7 -c r-2 9 4 ( D .D .C . O c t. 3 1 , 2 0 0 7 ), E C F N o . 1, available a t h ttp ://w w w .ju stic e .g o v /c rim in a l/fra u d /fc p a / cases/in geran d-italian a/10-31-07in gersollran d-in fo.pdf; C om plain t, S E C v. Y o rk I n t 'l C o r p ., N o . 0 7 - c v - l 7 5 0 ( D . D . C . O c t . 1, 2 0 0 7 ) , E C F N o . 1 [h e r e in a fte r S E C v. York In t'l C o rp .], available a t h ttp :/ /w w w .s e c . g o v /litig atio n /co m p lain ts/2 0 0 7 /c o m p 2 0 3 1 9 .p d f; C rim in al Inform ation, U n it e d S ta te s v. Y o rk In t'l C o r p ., N o . 0 7 -c r-2 5 3 (D .D .C . O c t. 1, 2 0 0 7 ), E C F N o . 1 [h e re in a fte r United States v. York In t'l C o rp .], available a t h ttp ://w w w .ju stice.gov/crim in al/frau d/fcpa/cases/york/10-01-07yorkin fo .p d f; C o m p la in t , S E C v. T e x tro n In c., N o . 0 7 -c v -1 5 0 5 ( D .D .C . A u g . 2 3 , 2 0 0 7 ) , E C F N o . 1 [h e r e in a fte r S E C v. Textron], available a t h t t p : / / w w w .sec.gov/litigation /com p lain ts/2007/com p 20251.pd f; N on-Pros. A greem en t, In re T extron Inc. (A u g. 23, 2 0 0 7 ), available at h ttp ://w w w . ju stice.gov/crim in al/frau d/fcpa/cases/textron -in c/08-21-07textron - agree.p df. D O J has issu ed o p in ion p rocedure releases con cern in g p aym ents (th at w ere, in essence, d o n atio n s) to govern m ent agencies or d e p a rtm e n ts. See U .S . D ept. of J u st ic e , F C P A O p. Release 0 9 -0 1 (A ug. 3, 2 0 0 9 ) (involving don ation o f 100 m edical devices to foreign govern m e n t), available at h ttp ://w w w .ju stic e .g o v /c rim in a l/fra u d / f c p a / o p in i o n / 2 0 0 9 / 0 9 0 1 .p d f ; U .S . D ept. of J u st ic e , F C P A O p. Release 06-01 (O ct. 16, 2006) (involving contribution o f $ 2 5,000 to region al custom s d ep artm en t to p ay incentive rew ards to im prove local en fo rcem en t o f an ti-co u n terfeitin g law s), available at h ttp ://w w w .ju stice. go v /crim in al/frau d /fcp a/op in io n /2 0 0 6 /0 6 0 1 .p d f. 116T h e U n i t e d S ta te s h a s s o m e st a te - o w n e d e n titie s, lik e th e T e n n e sse e Valley A uthority, that are instrum en talities o f the governm ent. M cC arth y v. M id d le T en n . E lec. M e m b e rsh ip C o r p ., 4 6 6 F .3 d 3 9 9 , 4 1 1 n .1 8 (6 th C ir. 2 0 0 6 ) (" [T ]h e r e is n o q u estio n th at T V A is an agen cy an d in strum en tality o f the U n ited States." ) (in tern al quotes o m itted ). 117 D u r in g t h e p e r io d s u r r o u n d in g th e F C P A 's a d o p t io n , s t a te - o w n e d entities held virtual m on op olies and operated under state-controlled p rice-settin g in m an y n atio n al in d u stries aro u n d th e w orld . Seegeneraly World Bank, Bureaucrats in Bu sin ess: The Economics and Politics of G overnment Ow nership, World Bank Policy Research R e p o rt at 7 8 (1 9 9 5 ); Sunita Kikeri and Aish etu K olo, State En terpr ises, The World Bank Group (Feb. 2 0 0 6 ), available at h ttp ://rru .w o rld b a n k .o rg /d o c u m e n ts/ p u blicpolicyjou rn al/304K ik eri_K olo.p df. 118Id. a t 1 ( " [A ]ft e r m o r e th a n t w o d e c a d e s o f p r iv a tiz a tio n , g o v e r n m e n t ow n ersh ip an d co n tro l rem ains w idesp read in m an y region s-- an d in m a n y p arts o f th e w orld still d o m in ates certain secto rs."). 119 T o d a te , c o n s is te n t w ith th e a p p r o a c h ta k e n b y D O J a n d S E C , all d istric t co u rts th at h ave co n sid ered th is issu e have co n c lu d e d th at th is is an issu e o f fa c t f o r a ju r y t o d e c id e . See O rd e r, U n ite d S ta te s v. C a rso n , 2011 W L 5101701, N o . 09-cr-77 (C .D . C al. M ay 18, 201 1 ), E C F N o. 3 7 3 [h e r e in a fte r United States v. Carson]; U n it e d S ta te s v. A g u ila r , 7 8 3 F. S u p p . 2 d 1 1 0 8 ( C .D . C a l. 2 0 1 1 ) ; O r d e r , United States v. Esquenazi, supra n o te 4 4 , E C F N o . 3 0 9 ; see also O r d e r , U n it e d S ta te s v. O 'S h e a , N o . 09-cr-629 (S.D . Tex. Jan . 3, 2 0 1 2 ), E C F N o . 142; O rder, U n ited States v. N g u y e n , N o . 0 8 -c r-5 2 2 (E .D . Pa. D e c . 3 0 , 2 0 0 9 ), E C F N o . 1 4 4 . T h ese d istrict cou rt decisions are con sisten t w ith the acceptance b y district courts around the cou n try o f over 35 gu ilty pleas by individuals w ho ad m itted to violatin g the F C P A by b rib in g officials o f state-ow n ed or state -co n tro lle d en tities. See G o v ern m en t's O p p o sitio n to D efe n d a n ts' A m en ded M o tio n to D ism iss C o u n ts O n e T hrough Ten o f the In d ic tm e n t at 1 8 , United States v. Carson, supra n o te 1 1 9 , E C F N o . 3 3 2 ; E x h ib it I, United States v. Carson, supra n o te 1 1 9 , E C F N o . 3 3 5 ( lis t o f exam ples o f en forcem en t action s based on foreign officials o f state-ow ned e n titie s). 120J u r y In str u c tio n s, United States v. Esquenazi, supra n o te 4 4 , E C F N o . 5 2 0 ; O r d e r at 5 a n d J u r y I n str u c tio n s, United States v. Carson, supra n o te 1 1 9 , E C F N o . 3 7 3 an d E C F N o . 5 4 9 ; Aguilar, 7 8 3 F. Su p p . 2 d at 1115. 121 C r im i n a l In fo r m a t io n , U n i t e d S ta te s v. C .E . M illie r C o r p ., et al., N o . 82-cr-7 8 8 (C .D . C al. Sept. 17, 1 9 8 2 ), available at h ttp ://w w w . justice.gov/crim in al/frau d/fcpa/cases/ce-m iller/1982-09-17-ce-m illerin form ation .pdf. 122See C o m p la in t , S E C v. S a m P. W a lla c e C o ., In c., et al., N o . 81 -c v 1 9 1 5 ( D .D .C . A u g . 3 1 , 1 9 8 2 ) ; C r im i n a l In fo r m a t io n , U n it e d S ta te s v. S a m P. W allace C o ., In c., N o . 8 3 -c r-3 4 (D .P .R . F eb. 2 3 , 1 9 8 3 ), available at http://w w w .ju stice.gov/crim in al/frau d/fcp a/cases/sam -w allacec o m p a n y /1 9 8 3 - 0 2 - 2 3 - s a m - w a lla c e - c o m p a n y - in f o r m a t io n .p d f; see also C r im in a l In fo rm a tio n , U n it e d S ta te s v. G o o d y e a r In t'l C o r p ., N o . 89- cr-1 5 6 (D .D .C . M a y 11, 1 9 8 9 ) (Iraq i T ra d in g C o m p a n y id e n tifie d as "in stru m e n ta lity o f th e G o v e rn m e n t o f th e R e p u b lic o f Ira q "), available at h ttp://w w w .ju stice.gov/crim in al/frau d/fcp a/cases/good year/1989- 05-11-goodyear-in form ation .pdf. 123See C o m p la in t , S E C v. A B B , supra n o te 4 8 ; C r im i n a l I n fo r m a t io n at 3, U n it e d S ta te s v. A B B In c., N o . 1 0 -c r-6 6 4 (S .D . T ex. S e p t. 2 9 , 2 0 1 0 ), E C F N o . 1 [h e re in a fte r United States v. A B B ] , available a t h t t p : / / w w w .ju stice.gov/crim in al/frau d /fcp a/cases/abb/09-20-10abbin c-in fo. p d f; C o n stitu ci n P oltica de los E stados U n id o s M exican os [C .P .], as am ended, art. 27, D iario O ficial de la Federacin [D O ], 5 de Febrero de 191 7 (M ex.); Ley D el Servicio Publico de E n ergia Electrica, as am ended, art. 1-3, 10, D iario O ficial de la Federacin [D O ], 22 de D iciem bre de 1975 (M ex.). 124See In d ic tm e n t at 2, United States v. Esquenazi, supra n o te 4 4 , E C F N o . 3; A ffid a v it o f M r. L o u is G a r y L issa d e at 1-9, id., E C F N o . 4 1 7 -2 . 125 C r im in a l In fo r m a tio n at 3 0 - 3 1 , United States v. Alcatel-Lucent France, supra n o te 5 6 , E C F N o . 10. 126Id . 127See I n te r n a tio n a l A n t i- B r ib e r y a n d F a ir C o m p e t i t io n A c t o f 1 9 9 8 , Pub. L. 105-366 2, 112 Stat. 33 0 2 , 33 0 3 , 33 0 5 , 330 8 (1998). 128 S e c t io n 3 0 A ( F ) ( 1 ) ( B ) o f th e E x c h a n g e A c t , 15 U .S .C . 7 8 d d - 1 ( f ) ( 1 ) (B ); 15 U .S.C . 7 8 d d -2 (h )(2 )(B ), 7 8 d d -3 (f)(2 )(B ). 129 T h ir d p a r tie s a n d i n te r m e d ia r ie s th e m se lv e s are a ls o lia b le f o r F C P A violations. Section 3 0 A (a) o f the Exchange A ct, 15 U .S.C . 7 8 d d -1 (a); 15 U .S .C . 7 8 d d -2 (a ), an d 7 8 d d -3 (a ). 130 S e c t io n 3 0 A ( a ) ( 3 ) o f th e E x c h a n g e A c t, 15 U .S .C . 7 8 d d - 1 ( a ) ( 3 ) ; 15 U .S .C . 7 8 d d -2 (a )(3 ), 7 8 d d -3 (a )(3 ). 131See, e.g., C o m p la in t , S E C v. J o h n s o n & J o h n s o n , N o . 1 1 - c v - 6 8 6 ( D .D .C . A p r. 8 , 2 0 1 1 ) [h e r e in a fte r S E C v. Johnson & Johnson] (b r ib e s p a id th ro u gh G re e k a n d R o m an ian a g e n ts)), available a t h ttp ://w w w .se c. g o v /litig atio n /co m p lain ts/2 0 1 1 /c o m p 2 1 9 2 2 .p d f; C rim in al Inform ation, U n i t e d S ta te s v. D e P u y , In c., N o . 1 1 -c r-9 9 ( D . D . C . A p r. 8 , 2 0 1 1 ) , E C F N o . 1 [h e re in a fte r United States v. DePuy] (b r ib e s p a i d t h r o u g h G r e e k agen ts), available a t h ttp ://w w w .ju stic e .g o v /c rim in a l/fra u d /fc p a /c a se s/ d e p u y - in c /0 4 - 0 8 - 1 1 d e p u y - in fo .p d f; C o m p la in t , S E C v. A B B , supra n o te 4 8 (b r ib e s p a i d t h r o u g h M e x ic a n a g e n ts ); C r im i n a l I n fo r m a t io n , United States v. A B B , supra n o te 1 2 3 ( s a m e ); C r im i n a l In fo r m a t io n , U n it e d S ta te s v. In t'l H a rv e ste r C o ., N o . 8 2 -c r-2 4 4 (S .D . T ex . N o v . 1 7 , 1 9 8 2 ) (b rib es p a id th ro u gh M ex ican agen t), available a t h ttp ://w w w .ju stice. gov/crim inal/fraud/fcpa/cases/in tern ation al-harvester/1982-11-17- international-harvester-inform ation.pdf. 132See C r im i n a l In fo r m a t io n , U n it e d S ta te s v. M a r u b e n i C o r p ., N o . 12c r - 2 2 (S .D . T ex . J a n . 1 7 , 2 0 1 2 ) , E C F N o . 1 [h e r e in a fte r United States v. Marubeni], available at h ttp ://w w w .ju stic e .g o v /c rim in a l/fra u d /fc p a / cases/m aruben i/2012-01-17-m aruben i-in form ation .pdf; C rim inal In fo r m a tio n , United States v. J G C Corp., supra n o te 6 0 , E C F N o . 1; C r im in a l In fo r m a tio n , United States v. Snamprogetti, supra n o te 6 0 , E C F N o . 1; C o m p la in t, S E C v. E N I , S .p .A . a n d S n a m p r o g e tti N e th e rla n d s B.V., N o . 1 0-cv -2414 (S .D . Tex. Ju ly 7, 2 0 1 0 ), E C F N o . 1, available at http://w w w .sec.gov/litigation /com plain ts/2010/com p -p r2010-119.p df; C r im in a l In fo rm a tio n , U n it e d S ta te s v. T e c h n ip S .A ., N o . 1 0 -c r-4 3 9 (S .D . T ex . J u n e 2 8 , 2 0 1 0 ) , E C F N o . 1 [h e r e in a fte r United States v. Technip], available a t h ttp ://w w w .ju stic e .g o v /c rim in a l/fra u d /fc p a /c a se s/te c h n ip sa /0 6 - 2 8 - 1 0 - te c h n ip - % 2 0 in fo r m a tio n .p d f; C o m p la in t , S E C v. T e c h n ip , N o . 1 0 - c v - 2 2 8 9 (S .D . T ex . J u n e 2 8 , 2 0 1 0 ) , E C F N o . 1 [h e re in a fte r S E C v. Technip] , available a t h t t p :/ / w w w .s e c .g o v / l i t i g a t i o n / c o m p l a i n t s / 2 0 1 0 / c o m p - p r 2 0 1 0 - 1 1 0 .p d f ; In d ic tm e n t, United States v. Tesler, supra n o te 5 0 ; C o m p la in t , S E C v. Halliburton an d K B R , supra n o te 9 0 ; C r im in a l In fo r m a tio n , United States v. K B R , supra n o te 9 0 ; C r im in a l In fo r m a tio n , United States v. Stanley, N o . 0 8 - c r - 5 9 7 (S .D . T ex . S e p t. 3 , 2 0 0 8 ) , E C F N o . 1, available a t h ttp ://ju stic e .g o v /c rim in a l/fra u d /fc p a /c a se s/sta n le y a /0 8 2 9 -0 8 sta n le y -in fo .p d f. 133See C r im i n a l In fo r m a t io n , U n it e d S ta te s v. A G A M e d ic a l C o r p ., N o . 0 8 -cr-1 7 2 , E C F N o . 1 (D . M in n . Ju n e 3, 2 0 0 8 ), available a t h ttp ://w w w . ju stice.gov/crim in al/frau d/fcpa/cases/agam edcorp/06-03-08aga-in fo. p d f. 134 C o m p la in t , S E C v. Innospec, supra n o te 7 9 ; C r im i n a l In fo r m a tio n , United States v. Innospec, supra n o te 7 9 ; S u p e r s e d in g C r im in a l In fo r m a tio n , United States v. N aam an , supra n o te 5 0 , E C F N o . 15, available a t h ttp ://w w w .ju stic e .g o v /c rim in a l/fra u d /fc p a /c a se s/ n a a m a n o Z 0 6 - 2 4 - 1 0 n a a m a n - s u p s e r s e d - in fo .p d f; C o m p la in t , S E C v. Turner, supra n o te 50. 135See s o u r c e s c i t e d supra n o te 6 8 . 136See s o u r c e s c i t e d supra n o te 6 8 . 137 S e c t io n 3 0 A ( a ) ( 3 ) o f th e E x c h a n g e A c t, 15 U .S .C . 7 8 d d - 1 ( a ) ( 3 ) ; 15 APPENDIX Endnotes U .S .C . 7 8 d d -2 (a )(3 ), 7 8 d d -3 (a )(3 ). 138See S e c t io n 3 0 A ( f ) ( 2 ) ( A ) o f th e E x c h a n g e A c t , 15 U .S .C . 7 8 d d - 1 ( f ) (2 )(A ); 15 U .S .C . 7 8 d d -2 (h )(3 )(A ), 7 8 d d -3 (f)(3 )(A ). 139See S e c t io n 3 0 A ( f ) ( 2 ) ( B ) o f th e E x c h a n g e A c t , 15 U .S .C . 7 8 d d - 1 ( f ) (2 )(B ); 15 U S .C . 7 8 d d -2 (h )(3 )(B ), 7 8 d d -3 (f)(3 )(B ). The "k n o w in g" stan d ard w as in ten d ed to cover " b oth p ro h ib ited actions that are taken w ith `a c tu a l k n o w le d g e ' o f in t e n d e d re su lts as w e ll as o t h e r a c tio n s t h a t, w h ile fa llin g s h o r t o f w h a t th e la w t e r m s `p o s itiv e k n o w le d g e ' nevertheless evidence a conscious disregard o r deliberate ignorance o f know n circum stances that sh ould reasonably alert one to the h igh p r o b a b ilit y o f v io la tio n s o f th e A c t." H .R . Rep. N o . 1 0 0 - 5 7 6 , a t 9 2 0 ; see also O m n ib u s T rad e a n d C o m p e titiv e n e s s A c t o f 1 9 8 8 , P u b. L . N o . 1 0 0 4 1 8 , 5003, 102 Stat. 1107, 1423-24 (1 9 8 8 ). 140 H .R . Rep. N o . 1 0 0 - 5 7 6 , a t 9 2 0 ( 1 9 8 8 ) . 141 S e c t io n 3 0 A ( c ) ( 1 ) o f th e E x c h a n g e A c t , 15 U .S .C . 7 8 d d - 1 ( c ) ( 1 ) ; 15 U .S .C . 7 8 d d -2 (c )(1 ), 7 8 d d -3 (c)(1 ). 142 H .R . Rep. N o . 1 0 0 - 5 7 6 , a t 9 2 2 . T h e c o n fe re e s a ls o n o t e d t h a t " [i ]n in te rp re tin g w h at is `la w fu l u n d e r th e w ritten law s a n d r e g u la tio n s' . . . the n o rm al rules o f leg al co n stru ctio n w o u ld apply." Id. 143See U n i t e d S ta te s v. K o z e n y , 5 8 2 F. S u p p . 2 d 5 3 5 , 5 3 7 - 4 0 (S .D .N .Y . 2 0 0 8 ). Likew ise, the court fou n d that a p rovision under A zeri law that relieved bribe payors o f crim inal liability if they w ere extorted did n o t m ake the bribe paym ents legal. A zeri extortion law p recludes the prosecution o f the payor o f the bribes for the illegal paym ents, but it does n o t m ake the p aym ents legal. Id. at 540-41. 144 S e c t io n 3 0 A ( c ) ( 2 ) ( A ) , ( B ) o f th e E x c h a n g e A c t , 15 U .S .C . 7 8 d d - 1 ( c ) (2); 15 U .S.C . 7 8d d -2(c)(2), 78dd -3(c)(2). 145 F o r e x a m p le , th e E ig h t h C ir c u it C o u r t o f A p p e a ls f o u n d th a t p ro vid in g airline tickets to a govern m ent official in order to corrup tly in flu e n c e th a t o ffic ia l m a y f o r m th e b a s is f o r a v io la tio n o f th e F C P A 's a n ti- b r ib e r y p r o v is io n s . See Liebo, 9 2 3 F. 2 d at 1 3 1 1 - 1 2 . 146See generally U .S . D ept. of J u s t ic e , F C P A O p. Relea se 1 1 -0 1 (Ju n e 30, 2 0 1 1 ) (travel, lo d gin g, an d m eal expenses o f tw o foreign officials fo r tw o-day trip to U n ite d States to learn ab o u t services o f U .S. a d o p tio n service p ro v id er), available at h ttp ://w w w .ju stic e .g o v /crim in a l/ fra u d /fc p a /o p in io n /2 0 1 1 /1 1 -0 1 .p d f; U S . D ept. of J u st ic e, F C P A O p. Rele a se 0 8 - 0 3 ( J u l y 1 1 , 2 0 0 8 ) (s tip e n d s t o r e im b u r s e m in im a l travel expenses o f local, governm ent-affiliated journ alists atten din g press co n feren ce in fo reign co u n try ), available a t h ttp ://w w w .ju stic e .g o v / c r i m in a l/ f r a u d / f c p a / o p in io n / 2 0 0 8 / 0 8 0 3 .p d f ; U .S . D ept. of J u st ic e , F C P A O p. Rele a se 0 7 - 0 2 (S e p t . 1 1 , 2 0 0 7 ) (d o m e s t ic tra v e l, lo d g in g , an d m eal expenses o f six foreign officials for six-w eek education al p ro g ra m ), available a t h ttp ://w w w .ju stic e .g o v /c rim in a l/fra u d /fc p a / o p i n i o n / 2 0 0 7 / 0 7 0 2 .p d f ; U .S . D ept. of J u s t ic e , F C P A O p. Release 07-01 (Ju ly 24, 2 0 0 7 ) (d om estic travel, lo d g in g , an d m eal expenses o f six foreign officials fo r four-day edu cation al an d p ro m o tio n al tour o f U .S . c o m p a n y 's o p e r a tio n s s it e s ), available a t h t t p :/ /w w w .ju s t ic e . g o v / c r i m i n a l / f r a u d / f c p a / o p i n i o n / 2 0 0 7 / 0 7 0 1 . p d f ; U .S . D ept . of J u st ic e , F C P A O p. Release 0 4 - 0 4 (S e p t. 3, 2 0 0 4 ) (trav e l, lo d g in g , an d m o d est p e r d iem expen ses o f five fo reign officials to p articip ate in n in e-day stu d y to u r o f m u tu al in su ran ce co m p an ie s), available at h ttp://w w w .ju stice.go v /crim in al/frau d /fcp a/o p in io n /2 0 0 4 /0 4 0 4 . p d f ; U .S . D ept. of J u st ic e , F C P A O p. Release 0 4 -0 3 (Ju n e 14, 2 0 0 4 ) (travel, lo d gin g, m eal, an d insurance expenses for tw elve foreign officials an d one tran slator on ten-day trip to three U .S. cities to m eet w ith U .S. p u b lic secto r o fficials), available a t h ttp ://w w w .ju stic e .g o v / c r i m in a l/ f r a u d / f c p a / o p in io n / 2 0 0 4 / 0 4 0 3 .p d f ; U .S . D ept. of J u st ic e , F C P A O p. Rele a se 0 4 - 0 1 ( J a n . 6 , 2 0 0 4 ) ( s e m in a r e x p e n se s, in c lu d in g receptions, m eals, tran sportation an d lo d gin g costs, for one-and-a-half day com parative law sem inar on lab o r an d em ploym en t law in foreign co u n try ), available a t h ttp ://w w w .ju stic e .g o v /c rim in a l/fra u d /fc p a / 110 111 o p i n i o n / 2 0 0 4 / 0 4 0 1 . p d f ; U .S . D ept. of J u s t ic e , F C P A O p. Release 96-01 (N ov. 25, 1 996) (travel, lo d gin g, an d m eal expenses o f region al governm ent representatives to attend training courses in U n ited States), available a t h ttp ://w w w .ju stice .g o v /crim in a l/fra u d /fc p a / o p i n i o n / 1 9 9 6 / 9 6 0 1 . p d f ; U S . D ept. of J u s t ic e , F C P A O p. Release 92-01 (Feb. 1 992) (train in g expenses so that foreign officials co u ld effectively p erform duties related to execution an d p erform an ce o f jo in t venture agreem ent, in clu d in g sem in ar fees, airfare, lo d gin g, m eals, and gro u n d tra n sp o rta tio n ), available at h ttp ://w w w .ju stic e .g o v /crim in a l/ frau d /fcp a/rev iew /1992/r9201.p d f. 147U .S . D ept. of J u s t ic e , F C P A O p. Rele a se 1 1 -0 1 ( J u n e 3 0 , 2 0 1 1 ) ; U .S . D ept. of J u st ic e , F C P A O p. Relea se 0 7 - 0 2 (S e p t. 11, 2 0 0 7 ); U .S . D ept. of J u st ic e , F C P A O p. Relea se 0 7 -0 1 ( ju l y 2 4 , 2 0 0 7 ); U .S . D ept. of J u st ic e , F C P A O p. Relea se 0 4 - 0 4 (S e p t. 3, 2 0 0 4 ) ; U .S . D ept. of J u s t ic e , F C P A O p. Relea se 0 4 -0 3 (J u n e 14, 2 0 0 4 ) ; U S . D ept. of J u s t ic e , F C P A O p. Release 0 4 -0 1 ( ja n . 6, 2 0 0 4 ). 148U .S . D ept. of J u s t ic e , F C P A O p. Rele a se 9 6 -0 1 (N o v . 2 5 , 1 9 9 6 ). 149U .S . D ept. of J u s t ic e , F C P A O p. Rele a se 1 1 -0 1 ( j u n e 3 0 , 2 0 1 1 ) ; U .S . D ept. of J u st ic e , F C P A O p. Relea se 0 7 - 0 2 (S e p t. 11, 2 0 0 7 ); U .S . D ept. of J u st ic e , F C P A O p. Relea se 0 7 -0 1 ( ju l y 2 4 , 2 0 0 7 ); U .S . D ept. of J u st ic e , F C P A O p. Relea se 0 4 - 0 4 (S e p t. 3, 2 0 0 4 ) ; U .S . D ept. of J u s t ic e , F C P A O p. Release 0 4 -0 1 ( ja n . 6, 2 0 0 4 ) . 150U .S . D ept. of J u s t ic e , F C P A O p. Rele a se 0 4 -0 1 ( j a n . 6 , 2 0 0 4 ) . 151 U .S . D ept. of J u s t ic e , F C P A O p. Rele a se 0 8 - 0 3 ( j u l y 1 1 , 2 0 0 8 ) . 152U .S . D ept. of J u s t ic e , F C P A O p. Rele a se 1 1 -0 1 ( J u n e 3 0 , 2 0 1 1 ) ; U .S . D ept. of J u st ic e , F C P A O p. Release 9 2 -0 1 (F e b . 1 9 9 2 ). 153U .S . D ept. of J u s t ic e , F C P A O p. Rele a se 0 8 - 0 3 ( J u l y 1 1 , 2 0 0 8 ). 154Id . 155I d .; U .S . D ept. of J u s t ic e , F C P A O p. Rele a se 0 4 - 0 3 ( J u n e 14, 2 0 0 4 ) ; U .S . D ept. of J u st ic e , F C P A O p. Relea se 0 4 -0 1 ( ja n . 6, 2 0 0 4 ) ; U .S . D ept. of J u st ic e , F C P A O p. Relea se 0 7 -0 1 ( J u ly 2 4 , 2007). 156U .S . D ept. of J u s t ic e , F C P A O p. Rele a se 1 1 -0 1 ( J u n e 3 0 , 2 0 1 1 ) ; U .S . D ept. of J u st ic e , F C P A O p. Relea se 0 7 - 0 2 (S e p t. 11, 2 0 0 7 ); U .S . D ept. of J u st ic e , F C P A O p. Relea se 0 7 -0 1 ( ju l y 2 4 , 2 0 0 7 ); U .S . D ept. of J u st ic e , F C P A O p. Relea se 0 4 - 0 4 (S e p t. 3, 2 0 0 4 ) ; U .S . D ept. of J u s t ic e , F C P A O p. Relea se 0 4 -0 3 (J u n e 14, 2 0 0 4 ) ; U S . D ept. of J u s t ic e , F C P A O p. Release 0 4 -0 1 ( ja n . 6, 2 0 0 4 ). 157U .S . D ept. of J u s t ic e , F C P A O p. Rele a se 0 7 -0 1 ( J u ly 2 4 , 2 0 0 7 ) ; U .S . D ept. of J u st ic e , F C P A O p. Relea se 0 8 -0 3 ( J u ly 11, 2 0 0 8 ). 158 F o r e x a m p le , D O J h a s p r e v io u s ly a p p r o v e d e x p e n d itu r e s o n b e h a lf o f fam ily m em bers or fo r entertainm ent purposes under certain, lim ited c ir c u m sta n c e s. See, e.g., U .S . D ept. of J u s t ic e , F C P A Rev. P. Release 83-02 (Ju ly 26, 1983) (declining to take enforcem ent action against com pany seeking to provide p rom otion al tour for foreign official and w ife, w here b oth had already p lan n ed a trip to the U n ited States at their ow n expense and com pan y p ro p o sed to p ay on ly fo r all reasonable and necessary actual dom estic expenses fo r the extension o f their travel to allow th e p ro m o tio n a l to ur, w h ich w o u ld n o t ex ceed $ 5 ,0 0 0 ), available at h ttp://w w w .ju stice.gov/crim in al/frau d/fcp a/review /1983/r8302.p df. 159U n lik e th e lo c a l la w a n d b o n a fid e e x p e n d itu r e s d e fe n se s, th e facilitatin g p aym ents exception is n o t an affirm ative defense to the F C P A . Rather, paym ents o f this k in d fall outside the scope o f the F C P A 's b r ib e r y p r o h ib it io n . P r io r t o 1 9 8 8 , th e " f a c ilita t in g p a y m e n t s " exception w as in co rp o rated in to the defin ition o f "foreign official," w hich excluded from the statute s purview officials w hose duties w ere prim arily m in iste rial o r clerical. See F oreig n C o r ru p t Practices A c t o f 1 9 7 7 , Pub. L. N o . 95-213, 1 0 4 (d )(2 ), 91 Stat. 1494, 1498 (1 9 7 7 ) (providin g that the term foreign official "does n ot include any em ployee o f a foreign governm ent or any departm ent, agency, or instrum entality th ereof w hose du ties are essen tially m in isterial o r clerical"). T h e o rig in al ex cep tio n thus focused on the duties o f the recipient, rather than the purpose o f the paym ent. In practice, how ever, it proved difficult to determ ine w hether a fo r e ig n o ffic ia l's d u tie s w e re " m in is t e r ia l o r cle ric a l." S. Rep. N o . 1 0 0 85, at 53. R e sp o n d in g to criticism th at th e statu to ry lan g u age "d o es n o t clearly reflect C o n g ressio n al in ten t an d the boun daries o f the p ro h ib ited con d uct," C o n gress revised the F C P A to define the exception in term s o f th e p u rp o se o f th e p ay m e n t. H . Rep. N o . 1 0 0 -4 0 , p t. 2, at 7 7 . In d o in g so, C on gress reiterated that w hile its p o licy to exclude facilitatin g paym ents reflected p ractical co n sid eratio n s o f en forcem en t, "such paym en ts sh o uld n o t b e c o n d o n e d ." Id. T h e e n a c te d la n g u a g e reflects th is n arro w p u rp o se . 160 In e x e m p tin g fa c ili t a t in g p a y m e n t s , C o n g r e s s s o u g h t t o d is tin g u is h them as "paym ents w hich m erely m ove a p articu lar m atter tow ard an even tu al act o r d ecision o r w hich d o n o t involve any d iscretion ary action," giving the exam ples o f "a gratuity p aid to a custom s official to speed the p rocessin g o f a custom s docu m en t" or "paym ents m ade to secure perm its, licenses, or the exped itious p erform an ce o f sim ilar duties o f an essentially m in isterial o r clerical n ature w hich m u st o f n ecessity be p erfo rm ed in any event." H .R . Rep. N o . 9 5 -6 4 0 , at 8. 161 S e c t io n 3 0 A ( f ) ( 3 ) ( B ) o f th e E x c h a n g e A c t , 15 U .S .C . 7 8 d d - 1 ( f ) ( 3 ) (B ); 15 U S .C . 7 8 d d -2 (h )(4 )(B ), 7 8 d d -3 (f)(4 )(B ). 162 In a 2 0 0 4 d e c is io n , th e F if th C ir c u it e m p h a s iz e d t h is p r e c is e p o in t , com m entin g on the lim ited nature o f the facilitatin g paym ents exception: A b rief review o f the types o f routine governm ental actions enum erated by C ongress show s how lim ited C ongress w anted to m ake the grease exceptions. R outine governm ental action, for instance, includes "ob tain in g perm its, licenses, or o th er official d o cu m en ts to q u alify a p erso n to d o b usin ess in a fo reign country," and "sch ed u lin g in sp ection s associated w ith contract perform ance or inspections related to tran sit o f go o d s across country." Therefore, routine governm ental action does not in c lu d e th e is s u a n c e o f every o ffic ia l d o c u m e n t o r every in s p e c t io n , b u t o n ly ( 1 ) d o c u m e n t a t io n th a t qualifies a p arty to d o business and (2 ) schedulin g an in spection -- very n arrow categories o f largely n on discretionary, m in isterial activities perform ed by m id- or low -level foreign functionaries. U n it e d S ta te s v. K a y ; 3 5 9 F .3 d 7 3 8 , 7 5 0 - 5 1 (5 th C ir. 2 0 0 4 ) (in te rn a l fo o tn o te o m itted ) (em ph asis in origin al). 163N o n - P r o s . A g r e e m e n t , In re H e lm e r ic h & P ay n e, In c. ( J u l y 2 9 , 2 0 0 9 ) [h e re in a fte r In re Helmerich & Payne], available a t h t t p ://w w w .ju stic e . gov/crim inal/fraud/fcpa/cases/helm erich-payne/06-29-09helm erichagree.p d f; A d m in . P roceed in g O rder, In the M atter o f H elm erich & Payne, Inc., E xch an ge A c t R elease N o . 6 0 4 0 0 (Ju ly 3 0 , 2 0 0 9 ) [h erein after In the M atter o fHelmerich & Payn e], a vailable a t h t t p :/ /w w w .s e c .g o v / litig atio n /ad m in /2 0 0 9 /3 4 -6 0 4 0 0 .p d f. 164 C r im i n a l In fo r m a t io n , V e tc o G r a y C o n t r o ls In c., etal., N o . 07 cr-4 N o . (S .D . Tex. ja n . 5, 2 0 0 7 ), E C F N o s. 1-2, available at h t t p :/ / w w w .ju stice.gov/crim in al/frau d /fcp a/cases/vetco-con trols/02-060 7 v e tc o g ra y -in fo .p d f. 165 C o m p la in t , S E C v. N o b le C o r p ., N o . 1 0 - c v - 4 3 3 6 ( S .D . T e x . N o v . 4 , 2 0 1 0 ), E C F N o . 1, available at h ttp ://w w w .se c .g o v /litig a tio n / co m p la in ts/2 0 1 0 /c o m p 2 1 7 2 8 .p d f; N on -P ros. A greem en t, In re N o b le C o rp . (N ov. 4 , 2 0 1 0 ), available a t h ttp ://w w w .ju stice .g o v /crim in al/ f r a u d / f c p a / c a s e s / n o b l e - c o r p / 1 1 - 0 4 - 1 0 n o b le - c o r p - n p a .p d f ; see also sources cited supra n o te 68. 166W o r k in g G r o u p o n B rib e ry , 2 0 0 9 Recommendation o f the Councilfo r Further Combating Bribery o fForeign Public Officials in International Business Transactions, at V I (r e c o m m e n d in g c o u n tr ie s s h o u ld periodically review their policies and approach to facilitation paym ents and should encourage com panies to p roh ibit or discourage facilitation p aym ents "in v iew o f the corrosive effect o f sm all facilitatio n paym ents, p articu larly o n su stain ab le eco n o m ic d ev elo p m en t and th e ru le o f law " ); W o rk in g G ro u p o n B rib ery , United States: Phase 3, at 2 4 (O c t. 15, 2 0 1 0 ), available a t h ttp ://w w w .o e c d .o rg /d a ta o e c d /1 0 /4 9 /4 6 2 1 3 8 4 1 . p d f (co m m en d in g U n ited States fo r steps taken in line w ith 2 0 0 9 recom m endation to encourage com panies to proh ibit or discourage facilitation paym ents). 167 F a c ilita t in g p a y m e n ts are ille g a l u n d e r th e U .K . B r ib e r y A c t 2 0 1 0 , w h ich cam e in to force on Ju ly 1, 2 0 1 1 , an d w ere also illegal under p r io r U .K . le g isla tio n . See B rib e ry A c t 2 0 1 0 , c .2 3 (E n g .), available a t h t t p :/ / w w w .l e g i s l a t i o n .g o v .u k / u k p g a / 2 0 1 0 / 2 3 / c o n t e n t s ; see also U .K . M in ist r y of J u s t ic e , The Bribery Act 2 0 1 0 : Guidance About Procedures Which Relevant Commercial Organisations Can P ut into Place to Prevent Persons Associated with Themfrom Bribing (Section 9 o f the Bribery Act 2010), at 18 (2 0 1 1 ) , available a t h ttp ://w w w .ju stic e .g o v .u k / gu idan ce/docs/bribery-act-2010-gu idan ce.pdf. 168See, e.g., N o n - P r o s . A g r e e m e n t, In re Helmerich & Payne, supra n o te 1 6 3 ; A d m in . P r o c e e d in g O rd e r, In the M atter o fHelmerich & Payne, supra n o te 163. 169 In o r d e r t o e s ta b lis h d u re ss o r c o e rc io n , a d e f e n d a n t m u s t d e m o n s tr a te that the defendant w as under unlaw ful, present, im m ediate, and im pen d in g threat o f death or serious bodily in jury; that the defen dan t d id n ot n egligently o r recklessly create a situation w here he w ou ld be forced to en gage in crim in al co n d u ct (e.g., h a d been m ak in g p aym ents as p art o f an on goin g bribery schem e); that the defendant h ad no reasonable legal alternative to violatin g the law ; an d that there w as a direct causal relationship betw een the crim inal action an d the avoidance o f the th re ate n e d h arm . See E leve n th C irc u it P attern Ju ry Instr., Sp e cial Instr. N o . 1 6 ( 2 0 0 3 ) ; see also F ifth C ir c u it P a tte rn J u r y In str. N o . 1 .3 6 ( 2 0 0 1 ) ; Sixth C ircu it Pattern Ju ry Instr. N o . 6.05 (2 0 1 0 ); Seventh C ircu it Pattern Ju ry Instr. N o . 6.08 (1 9 9 8 ); N in th C ircu it P attern Ju ry Instr. N o . 6.5 ( 2 0 1 0 ) ; 1 A K e v in F. O 'M a lle y , J a y E . G r e n ig , H o n . W illia m C . L e e , FederalJu ry Practice a n d Instructions 1 9 .0 2 (6 th e d 2 0 0 8 & S u p p . 2012). 170 S. Rep. N o . 9 5 - 1 1 4 , at 11. 171Id. at 10. 172Id. at 11. 173 U n i t e d S ta te s v. K o z e n y , 5 8 2 F. S u p p . 2 d 5 3 5 , 5 4 0 n .3 1 (S .D .N .Y . 2008). 174Kozeny, 5 8 2 F. S u p p . 2 d at 5 4 0 ( c it in g S . Rep. N o . 9 5 - 1 1 4 , at 1 0 -1 1 ). 175Id. 176T h e se p a y m e n ts , h o w e v e r, m u s t b e a c c u r a te ly r e fle c t e d in th e com pany's b o o k s an d record s so th at th e co m p an y an d its m an agem en t are aware o f the paym ents an d can assure that the p aym ents were properly m ade under the circum stances. For exam ple, in one instance, a K azakh im m igration p ro secu to r threaten ed to fine, jail, or d ep o rt em ployees o f a U .S. com pany's subsidiary. B eliev in g th e threats to be genuine, the em ployees in K azak h stan so u gh t gu id an ce fro m sen ior m an agem en t o f the U .S. su bsid iary an d w ere au th orized to m ake the paym ents. The em ployees then p aid the governm ent official a total o f $ 4 5 ,0 0 0 usin g p erson al fun ds. The subsid iary reim bursed the em ployees, but it falsely reco rd ed th e reim b u rsem en ts as "salary advan ces" o r "visa fines." The p aren t com pany, w hich eventually discovered these paym en ts, as w ell as other im properly b ooked cash paym ents m ade to a K azakhstani con sultan t to obtain visas, w as ch arged w ith civil violation s o f the accounting provisions. A d m in . Proceeding O rder, In the M atter o f N A T C O G ro u p Inc., E xch an ge A c t R elease N o . 6 1 3 2 5 (Jan . 11, 2 0 1 0 ), available a t h ttp ://w w w .se c .g o v /litig a tio n /a d m in /2 0 1 0 /3 4 -6 1 3 2 5 .p d f (im p o sin g cease-and-desist order an d $ 6 5 ,0 0 0 civil m on etary pen alty). 177See J u r y I n s tr u c tio n s a t 2 1 , U n i t e d S ta te s v. A g u ila r , N o . 1 0 - c r - 1 0 3 1 (C .D . C al. M ay 16, 201 1 ), E C F N o . 511. 178See, e.g., P acific C a n C o . v. H e w e s , 9 5 F .2 d 4 2 , 4 6 ( 9 t h C ir. 1 9 3 8 ) (" W h ere on e co rp o ratio n is co n tro lle d b y an other, the fo rm er acts n ot for itself but as directed by the latter, the sam e as an agent, an d the p rin cip a l is liab le fo r th e acts o f its agen t w ith in th e sc o p e o f th e agent's au th o rity ." ); U n it e d S ta te s v. N Y N E X C o r p ., 7 8 8 F. S u p p . 16, 18 n .3 (D .D .C . 1 992) (h o ld in g that " [a] corporation can o f course be h eld crim in ally liable for the acts o f its agents," in clu d in g "the co n d u ct o f its su b sid ia rie s." ). 179Pacific Can Co., 9 5 F .2 d at 4 6 ; N Y N E X Corp., 7 8 8 F. S u p p . at 18 n .3 . 180See, e.g., S ta n d a r d O il C o . v. U n it e d S ta te s , 3 0 7 F .2 d 1 2 0 , 1 2 7 ( 5 t h C ir. 1962). 181A d m in . P r o c e e d in g O r d e r , In th e M a t t e r o f U n it e d I n d u s tr ia l C o r p ., E x ch an ge A c t R elease N o . 6 0 0 0 5 (M ay 29, 2 0 0 9 ), available a t h t t p :/ / w w w . s e c .g o v / l i t i g a t i o n / a d m i n / 2 0 0 9 / 3 4 - 6 0 0 0 5 .p d f ; see also L it. R e le a se N o . 2 1 0 6 3 , S E C v. Worzel ( M a y 2 9 , 2 0 0 9 ) , available a t h t t p :/ /w w w .s e c . gov/litigation /litreleases/2009/lr21063.h tm . 182See, e.g., P h ilip U ro fk sy , W hat You D on 't Know Can H u rt You: Successor Liability Resulting From Inadequate F C PA D ue Diligence in M & A Transactions, 1 7 6 3 P L I/C orp. 6 3 1 , 6 3 7 ( 2 0 0 9 ) ( "A s a le g a l m a tte r , w h e n one corporation acquires another, it assum es any existing liabilities o f that corp oration , in clu d in g liability for un law ful paym ents, regardless o f w hether it know s o f them ."). W h eth er or n o t successor liability applies to a p articu lar corporate transaction depends on the facts involved an d state, fe d e ral, an d , p o te n tially , fo re ig n law. 183See, e.g., C a r o ly n L in d se y , M ore Than You Bargain edfor: Successor Liability Under the U.S. Foreign Corrupt Practices Act, 3 5 O hio N .U . L . Rev. 9 5 9 , 9 6 6 ( 2 0 0 9 ) ( "A l lo w i n g a c o m p a n y t o e s c a p e its d e b ts a n d liabilities by m ergin g w ith another entity is con sidered to lead to an u n ju st resu lt." ). 184See, e.g., M e lr o s e D is tille r s , In c. v. U n i t e d S ta te s , 3 5 9 U S . 2 7 1 , 2 7 4 (1 9 5 9 ) (affirm ing crim inal successor liability for antitrust violations); U n i t e d S ta te s v. A l a m o B a n k o f T e x a s, 8 8 0 F .2 d 8 2 8 , 8 3 0 ( 5 t h C ir. 1 9 8 9 ) APPENDIX Endnotes (affirm ing crim inal successor liability for B an k Secrecy A ct violations); U n it e d S ta te s v. P o liz z i, 5 0 0 F .2 d 8 5 6 , 9 0 7 (9 th C ir. 1 9 7 4 ) (a ffirm in g crim inal successor liability for conspiracy an d Travel A ct violations); U n i t e d S ta te s v. S h ie ld s R u b b e r C o r p ., 7 3 2 F. S u p p . 5 6 9 , 5 7 1 - 7 2 (W .D . Pa. 1989) (perm ittin g crim inal successor liability for custom s violation s); see also U n i t e d S ta te s v. M o b ile M a te r ia ls , In c ., 7 7 6 F .2 d 1 4 7 6 , 1 4 7 7 ( 1 0 t h C ir. 1985) (allow ing crim inal p ost-dissolution liability for antitrust, m ail fraud, an d false statem ent violations);. 185 C o m p la in t , S E C v. T h e T i t a n C o r p ., N o . 0 5 - c v - 4 1 1 ( D .D .C . M a r. 1, 2 0 0 5 ) (discovery o f F C P A violations durin g p re-acquisition due diligence p rotected p oten tial acquiring com pany an d led to term ination o f m erger agreem en t), available at h ttp ://w w w .se c .g o v /litig a tio n /c o m p la in ts/ c o m p 1 9 1 0 7 .p d f ; C r im in a l In fo rm a tio n , U n it e d S ta te s v. T ita n C o r p ., N o . 0 5 -c r-3 1 4 (S .D . C a l. M ar. 1, 2 0 0 5 ) (sam e ) [h erein after United States v. Titan C o r p .], a v a ila b le a th t t p :/ / w w w .ju s t ic e .g o v / c r im in a l/ f r a u d / f c p a / cases/titan -corp /03-01-05titan -in fo.p df. 186 F o r a d is c u s s io n o f d e c lin a tio n s , se e C h a p t e r 7. 187See C o m p la in t , S E C v. E l P a so C o r p ., N o . 0 7 - c v - 8 9 9 (S .D .N .Y . F eb . 7 , 2 0 0 7 ) , E C F N o . 1 [h e r e in a fte r S E C v. E l Paso C o rp .] ( c h a r g in g c o m p a n y w ith b ooks an d records and internal controls charges for im proper p aym en ts to Iraq u n d er U .N . O il-fo r-F o o d P ro gram m e), available at h ttp://w w w .sec.go v /litigatio n /co m p lain ts/2 0 0 7 /co m p 1 9 9 9 1 .p d f. 188 C o m p la in t , S E C v. A llia n c e O n e In t'l, In c ., N o . 1 0 - c v - 1 3 1 9 ( D .D .C . A u g. 6, 2 0 1 0 ), E C F N o . 1, available a t h ttp ://w w w .se c .g o v /litig a tio n / com plain ts/2010/com p 21618-allian ce-on e.p df; N on-Pros. A greem ent, In re A llian ce O n e Int'l, Inc. (A u g. 6, 2 0 1 0 ), available a t h ttp ://w w w . ju stice.gov/crim in al/frau d /fcpa/cases/allian ce-on e/08-06-10allian ceo n e - n p a .p d f ; C r im i n a l In fo r m a t io n , U n i t e d S ta te s v. A llia n c e O n e In t'l A G , N o . 1 0-cr-17 (W .D . Va. A u g. 6, 2 0 1 0 ), E C F N o . 3, available at h ttp://w w w .ju stice.gov/crim in al/frau d/fcp a/cases/allian ce-on e/08-061 0 a llia n c e -o n e - in fo .p d f; C r im in a l In fo rm a tio n , U n it e d S ta te s v. A llia n c e O n e T obacco O sh, L L C , N o . 10-cr-16 (W .D . Va. A ug. 6, 2 0 1 0 ), E C F N o . 3, available a t h ttp ://w w w .ju stic e .g o v /c rim in a l/fra u d /fc p a /c a se s/ allian ce-on e/08-06-10allian ce-on e-tobaccoinfo.pd f. 189See C r im i n a l In fo r m a t io n , U n i t e d S ta te s v. S y n c o r T a iw a n , In c ., N o . 0 2 -cr-1 2 4 4 (C .D . C al. D ec. 5, 2 0 0 2 ), E C F N o . 1, available a t h t t p :/ / w w w .justice.gov/crim in al/fraud /fcp a/cases/syn cor-taiw an /12-050 2 sy n c o r-ta iw a n -in fo .p d f; P lea A g re e m e n t, U n it e d S ta te s v. S y n co r T aiw an , Inc., N o . 02-cr-1 2 4 4 (C .D . C al. D ec. 9, 2 0 0 2 ), E C F N o . 14, available at h ttp ://w w w .ju stic e .g o v /crim in a l/fra u d /fcp a /c a se s/sy n c o rtaiw an /12-03-02syn cor-taiw an -plea-agree.pdf. 190See C o m p la in t , S E C v. S y n c o r I n t'l C o r p ., N o . 0 2 - c v - 2 4 2 1 ( D .D .C . D ec. 10, 2 0 0 2 ), E C F N o . 1, available a t h ttp ://w w w .se c .g o v /litig a tio n / c o m p l a i n t s / c o m p 1 7 8 8 7 .h t m ; S E C v. S y n c o r In t e r n a t io n a l C o r p ., S E C L it. R el. 1 7 9 9 7 , (D e c . 10, 2 0 0 2 ), available at h ttp ://w w w .se c .g o v / litigation /litreleases/lr17887.h tm . 191 See C o m p la in t , S E C v. York In t'l Corp., supra n o te 1 1 5 ; C r im in a l In fo r m a tio n , United States v. York In t'l Corp., supra n o te 115. 192See C r im i n a l In fo r m a t io n , U n i t e d S ta te s v. L a t in N o d e , In c ., N o . 0 9 -cr-2 0 2 3 9 (S .D . Fla. M ar. 2 3 , 2 0 0 9 ), E C F N o . 1, available a t h t t p :/ / w w w .ju stice.gov/crim in al/frau d /fcp a/cases/litton -app lied/03-2309 latin n o d e-in fo .p d f; e L an d ia In t'l Inc., A n n u al R ep o rt (F orm 10-K ), at 2 0 (A pr. 2, 2 0 0 9 ), available at h ttp ://w w w .se c .g o v /A rc h iv e s/e d g a r/ d ata/1 3 5 2 8 1 9 /0 0 0 1 1 9 3 1 2 5 0 9 0 7 0 9 6 1 /d 1 0 k .h tm . 193See C r im i n a l In fo r m a t io n , U n i t e d S ta te s v. S a lv o c h , N o . 1 0 - c r - 2 0 8 9 3 (S .D . Fla. D ec. 17, 2 0 1 0 ), E C F N o . 3, available a t h ttp ://w w w .ju stice. gov/crim in al/frau d /fcpa/cases/salvoch /12-17-10salvoch -in fo.p df; C r im in a l In fo rm a tio n , U n it e d S ta te s v. V a sq u e z , N o . 1 0 -c r-2 0 8 9 4 (S .D . Fla. D ec. 17, 2 0 1 0 ), E C F N o . 3, available a t h ttp ://w w w .ju stic e .g o v / crim in al/frau d/fcp a/cases/vasqu ezjp /12-17-10vasqu ez-ju an -in fo.p df; In d ic tm e n t, U n it e d S ta te s v. G r a n a d o s, et al., N o . 1 0 -c r-2 0 8 8 1 , (S .D . 112 113 Fla. D ec. 14, 2 0 1 0 ), E C F N o . 3, available a t h ttp ://w w w .ju stic e .g o v / crim in al/fraud/fcp a/cases/gran ados-jorge/12-21-10gran ados-in dict.p df. 194See D e fe r r e d P ro s. A g r e e m e n t, United States v. Snamprogetti, supra n o te 60, E C F N o . 3, available at h ttp ://w w w .ju stic e .g o v /crim in a l/fra u d / fcpa/cases/sn am p rogetti/07-07-10sn am p rogetti-dp a.p df. 195 Compare C r im in a l In fo r m a tio n , United States v. Snamprogetti, supra n o te 6 0 , with D e fe r r e d P ro s. A g r e e m e n t, United States v. Snamprogetti, supra n o te 6 0 , E C F N o . 3. 196See P ress R e le a se , G e n e r a l E le c tr ic C o ., G e n e r a l E le c tr ic A g r e e s t o A cq u ire In V ision (M ar. 15, 2 0 0 4 ), available at h ttp ://w w w .g e .c o m /file s/ u sa/co m p an y /in v esto r/d o w n lo ad s/sh arp ey e_ p ress_ release.p d f; Press Release, U .S. D ep t. o f Ju stice, InV ision Tech. Inc. Enters in to A greem en t w ith th e U n ite d States (D e c . 6, 2 0 0 4 ), available a t h ttp ://w w w .ju stice. g o v / o p a / p r / 2 0 0 4 / D e c e m b e r / 0 4 _ c r m _ 7 8 0 .h t m ; C o m p a n y N e w s; G.E. Gets InVision, a M aker o fBomb Detectors, N .Y . Tim e s, D e c . 7 , 2 0 0 4 , at C4. 197N o n - P r o s . A g r e e m e n t , In re In V isio n ( D e c . 3 , 2 0 0 4 ) , available a t h ttp://w w w .justice.gov/crim in al/fraud/fcp a/cases/in vision -tech /12-0304in v isio n tech -agree.p df; N o n -P ro s. A greem en t, In re G en eral E lec. C o ., (D e c. 3, 2 0 0 4 ), available a t h ttp ://w w w .ju stic e .g o v /c rim in a l/fra u d /fc p a / cases/in vision-tech /12-03-04in vision tech -agree-ge.pdf; C o m p lain t, S E C v. G E In V isio n , In c., f / k / a In V isio n T e c h n o lo g ie s, In c., N o . 0 5 -c v -6 6 0 , (N .D . C al. Feb. 14, 2 0 0 5 ), E C F N o . 1, available a t h ttp ://w w w .se c .g o v / litigation /com p lain ts/com p19078.p df. 198See U .S . D ept. of J u s t ic e , F C P A O p. Rele a se 0 8 - 0 2 ( J u n e 13, 2 0 0 8 ), available a t h ttp ://w w w .ju stic e .g o v /c rim in a l/fra u d /fc p a / o p i n i o n / 2 0 0 8 / 0 8 0 2 . p d f ; see also P ress R e le a se , U .S . D e p t. o f J u s t i c e , Pfizer H .C .P . C o rp. A grees to Pay $1 5 M illion Penalty to Resolve Foreign B ribery In vestigation (A ug. 7 , 2 0 1 2 ) (" In the 18 m on th s follow in g its acqu isitio n o f W yeth, Pfizer Inc., in con su ltatio n w ith th e d ep artm en t, co n d u cted a due diligence an d investigative review o f the W yeth business o p e r a tio n s a n d in t e g r a t e d P fiz e r In c.'s in te r n a l c o n tr o ls sy ste m in to the form er W yeth business entities. The d epartm en t con sidered these extensive efforts an d the S E C resolution in its determ in ation n o t to pursue a crim inal resolution for the pre-acquisition im proper con d u ct o f W yeth su b sid iaries." ), available at h ttp ://w w w .ju stic e .g o v /o p a /p r/2 0 1 2 / A u gust/12-crm -980.h tm l. 199 18 U .S .C . 2. 200 In e n a c tin g th e F C P A in 1 9 7 7 , C o n g r e s s e x p lic itly n o t e d t h a t " [t]h e concepts o f aidin g an d abetting an d jo in t participation w ould apply to a violation u n der this bill in the sam e m an ner in w hich th ose con cepts have alw ays ap p lied in b o th S E C civil action s an d in im p lied p riv ate action s b ro u g h t u n d e r th e secu rities law s gen erally." H .R . Rep. N o . 9 5 -6 4 0 , at 8. 201Pinkerton h e ld t h a t a c o n s p ir a t o r m a y b e f o u n d g u il ty o f a su b sta n tiv e offense co m m itted by a co -co n sp irato r in fu rtheran ce o f the con spiracy i f th e c o - c o n s p ir a t o r 's a c ts w e re r e a s o n a b ly fo r e se e a b le . See P in k e r to n v. U n ite d States, 32 8 U .S. 6 4 0 , 6 4 7-48 (1 9 4 6 ). 202See U n it e d S ta te s v. M a c A llis te r , 1 6 0 F .3 d 1 3 0 4 , 1 3 0 7 ( 1 1 t h C ir. 1 9 9 8 ) ; U n i t e d S ta te s v. W in te r , 5 0 9 F .2 d 9 7 5 , 9 8 2 ( 5 t h C ir. 1 9 7 5 ) . 203See C r im in a l In fo r m a tio n , United States v. M arubeni, supra n o te 1 3 2 ; C r im in a l In fo r m a tio n , United States v. J G C Corp., supra n o te 6 0 ; C r im in a l In fo r m a tio n , United States v. Snamprogetti, supra n o te 6 0 ; see also C r im in a l In fo r m a tio n , United States v. Technip, supra n o te 1 3 2 . 204 S e c t io n 2 0 (e ) o f th e E x c h a n g e A c t , " P r o s e c u t io n o f P e rso n s W h o A id an d A b et V iolations," explicitly provides that, for p u rp oses o f a civil action seekin g injunctive relief or a civil penalty, "any person that know ingly or recklessly p rovides substan tial assistance to another p erson in violation o f a p rovision o f this chapter, or o f any rule or regulation issu ed u n der th is chapter, sh all be d eem ed to be in violation o f such p ro v isio n to th e sam e ex ten t as th e p e rso n t o w h o m su ch assistan c e is provided." Section 20(e) o f the Exchange A ct, 15 U .S.C . 78t(e). 205 U n d e r S e c t io n 2 1 C ( a ) o f th e E x c h a n g e A c t , th e S E C m a y im p o s e a c e a s e - a n d - d e s is t o r d e r t h r o u g h th e S E C 's a d m in is tr a tiv e p r o c e e d in g s u p o n any p e rso n w h o is v io la tin g , h as v io la ted , o r is ab o u t to v io late any provision o f the Exchange A ct or any rule or regulation thereunder, an d u p on any o th er p erson that is, w as, or w ou ld be a cause o f the violation , due to an act or om ission the person knew or sh ould have know n w ould contribute to such violation. Section 2 1 C (a ) o f the Exchange A ct,15 U .S.C . 78u-3(a). 206See C o m p la in t , S E C v. Panalpina, Inc.,supra n o te 6 8 . 207 1 8 U .S .C . 3 2 8 2 ( a ) p r o v id e s : " E x c e p t as o th e r w ise e x p re ssly p r o v i d e d by law , n o p erso n sh all b e p ro secu ted , tried , o r p u n ish e d fo r any offense, n o t cap ital, un less th e in d ictm en t is fo u n d o r the in fo rm atio n is in stitu ted w ith in five years n ext after such offen se sh all have been co m m itted ." 208See G r u n e w a ld v. U n it e d S ta te s , 3 5 3 U .S . 3 9 1 , 3 9 6 - 9 7 ( 1 9 5 7 ) (h o ld in g governm ent m ust prove conspiracy still existed an d at least on e overt act w as co m m itted w ith in the statute o f lim itatio n s); Fisw ick v. U n it e d S ta te s, 3 2 9 U .S . 2 1 1 , 2 1 6 ( 1 9 4 6 ) ( " T h e sta tu te o f lim ita tio n s, unless susp en ded, runs from the last overt act du rin g the existence o f the conspiracy. The overt acts averred an d p ro ved m ay thus m ark the d u r a t io n , as w e ll as th e s c o p e , o f th e c o n sp ira c y ." ) ( c it a tio n o m i t t e d ) ; see generally Ju lie N . S a r n o ff, Federal C rim inal Conspiracy, 4 8 A m . C rim . L. Rev. 6 6 3 , 6 7 6 (S p r in g 2 0 1 1 ). 209 1 8 U .S .C . 3 2 9 2 . 210 2 8 U .S .C . 2 4 6 2 . 211 S. Rep. N o . 9 5 - 1 1 4 , a t 3 ( n o t in g t h a t, in th e p a s t , "c o r p o r a t e b r ib e r y has been con cealed by the falsification o f corp orate b ook s an d records," th at the acco u n tin g p ro v isio n s "rem ove [] th is avenue o f coverup," an d that " [t]aken together, the accounting requirem ents an d crim inal [anti bribery] p roh ib ition s . . . sh o u ld effectively deter corp orate bribery o f fo re ig n g o v e rn m e n t o ffic ia ls" ). 212 S . Rep. N o . 9 5 - 1 1 4 , at 7. 213S e c t io n 1 3 ( b ) ( 2 ) ( A ) o f th e E x c h a n g e A c t , 15 U .S .C . 7 8 m ( b ) ( 2 ) ( A ) . 214 S e c t io n 13( b ) ( 2 ) ( B ) o f th e E x c h a n g e A c t , 1 5 U .S .C . 7 8 m ( b ) ( 2 ) ( B ) . 215 T h e a c c o u n t in g p r o v is io n s c o n t a in a n a r r o w e x e m p tio n r e la t e d t o nation al security an d the protection o f classified inform ation. U n der this "nation al security" provision, "no duty or liability [under Section 1 3 (b )(2 ) o f the Exchange A ct] shall be im p o sed u p on any person acting in co o p eratio n w ith the h ead o f any fed eral d ep artm en t o r agency responsible for such m atters if such act in cooperation w ith such h ead o f a departm en t or agency w as don e upon the specific, w ritten directive o f the h ead o f such departm en t or agency pursuan t to Presidential authority to issue such directives." S ectio n 1 3 (b )(3 ) o f the E xch an ge A ct, 15 U .S .C . 7 8 m (b )(3 ). A s C o n g ress m ade clear, how ever, the exception is narrow ly tailored an d in ten ded to prevent the disclosure o f classified inform ation. H .R . Rep. 9 4 -8 3 1 , at 11, available a t h ttp ://w w w .ju stic e .g o v /crim in a l/ frau d /fcp a/h istory/1977/corru p trpt-94-831.pd f. 216 S e c t io n 1 3 ( b ) ( 2 ) ( A ) o f th e E x c h a n g e A c t , 15 U .S .C . 7 8 m ( b ) ( 2 ) ( A ) . 217 H .R . Rep. N o . 9 4 - 8 3 1 , at 10. 218Id. 219 S e c t io n 1 3 ( b ) ( 7 ) o f th e E x c h a n g e A c t, 15 U .S .C . 7 8 m ( b ) ( 7 ) . 220 H .R . Rep. N o . 1 0 0 - 5 7 6 , at 9 1 7 (1 9 8 8 ) , available a thttp://www.justice. gov/criminal/fraud/fcpa/history/1988/tradeact-W 0-418pdf. C o n g ress rejected the addition o f p ro p o sed cost-benefit lan guage to the definition "in respon se to con cern s th at su ch a statu to ry p rovision m igh t be abu sed an d w eaken the accoun tin g provisions at a tim e o f increasing concern abou t audit failures an d financial frau d an d resultan t recom m endation s b y ex p erts fo r stro n g e r a c co u n tin g p ra ctic e s a n d a u d it sta n d a rd s." Id. 221See, e.g., C o m p la in t , S E C v. B io m e t , In c., N o . 1 2 - c v - 4 5 4 ( D .D .C . M ar. 2 6 , 2 0 1 2 ) , E C F N o . 1 [h e r e in a fte r S E C v. Biomet], available a t h t t p : / / w w w .sec.gov/litigation /com p lain ts/2012/com p 22306.pd f; C rim inal In fo rm a tio n , U n it e d S ta te s v. B io m e t, In c., N o . 1 2 -c r-8 0 ( D .D .C . M ar. 2 6 , 2 0 1 2 ) [h e re in a fte r United States v. Biomet], available a t h t t p :/ /w w w . ju stice.gov/crim in al/frau d/fcpa/cases/biom et/2012-03-26-biom etin fo r m a tio n .p d f; C o m p la in t, S E C v. S m ith & N e p h e w In c., N o . 12-cv1 8 7 (D .D .C . Feb. 6, 2 0 1 2 ), E C F N o . 1, available a t h ttp ://w w w .se c .g o v / litig atio n /co m p la in ts/2 0 1 2 /co m p 2 2 2 5 2 .p d f; C rim in al Inform ation, U n it e d S ta te s v. S m ith & N e p h e w p lc., N o . 1 2 -c r-3 0 (D .D .C . F eb . 6, 2 0 1 2 ), E C F N o . 1, available a t h ttp ://w w w .ju stic e .g o v /c rim in a l/fra u d / fcpa/cases/sm ith -n ephew /2012-02-06-s-n -inform ation .pdf; C om plain t, S E C v. Johnson & Johnson, supra n o te 1 3 1 ; C r im in a l In fo rm a tio n , United States v. DePuy, supra n o te 1 3 1 ; C o m p la in t , S E C v. M a x w e ll T ech n ologies Inc., N o . 11-cv-258 (D .D .C . Jan . 31, 2 0 1 1 ), E C F N o . 1 [h e re in a fte r S E C v. M axw ell Technologies], available a t h t t p ://w w w .s e c . g o v /litig atio n /co m p lain ts/2 0 1 1 /c o m p 2 1 8 3 2 .p d f; C rim in al Inform ation, U n it e d S ta te s v. M a x w e ll T e c h n o lo g ie s In c., N o . 1 1 -c r-3 2 9 (S .D . C a l. Ja n . 31, 2 0 1 1 ), E C F N o . 1, available at h ttp ://w w w .ju stic e .g o v /crim in a l/ frau d/fcpa/cases/m axw ell/01-31-11m axw ell-tech -in fo.pdf; C om plain t, S E C v. T r a n s o c e a n , In c., N o . 1 0 - c v - 1 8 9 1 ( D . D . C . N o v . 4 , 2 0 1 0 ) , E C F N o . 1, available a t h ttp ://w w w .se c .g o v /litig a tio n /c o m p la in ts/2 0 1 0 / c o m p 2 1 7 2 5 .p d f ; C r im i n a l I n fo r m a t io n , U n i t e d S ta te s v. T r a n s o c e a n , Inc., N o . 10-cr-768 (S .D . Tex. N ov. 4 , 2 0 1 0 ), E C F N o . 1, available at h ttp://w w w .ju stice.gov/crim in al/frau d/fcp a/cases/tran socean -in c/1104-10tran socean -in fo.pdf. 222 S . Rep. N o . 9 5 - 1 1 4 , at 7. 223 S e c t io n 1 3 ( b ) ( 2 ) ( B ) o f th e E x c h a n g e A c t , 15 U .S .C . 7 8 m ( b ) ( 2 ) ( B ) . 224 S e c t io n 13( b ) ( 7 ) o f th e E x c h a n g e A c t , 15 U .S .C . 7 8 m ( b ) ( 7 ) . 225See C o m p la in t , S E C v. Siemens A G , supra n o te 4 8 ; C r im in a l In fo r m a tio n , United States v. Siemens A G , supra n o te 4 8 . 226 C o m p la in t , S E C v. Siemens A G , supra n o te 4 8 ; C r im in a l In fo r m a tio n , United States v. Siemens A G , supra n o te 4 8 ; P ress R e le a se , U .S . D e p t. o f Justice, Siem ens A G an d Three Subsidiaries P lead G u ilty to Foreign C o rru p t Practices A c t V io latio n s an d A gree to Pay $ 4 5 0 M illio n in C o m b in e d C rim in a l Fin es (D e c . 15, 2 0 0 8 ), available a t h ttp ://w w w . ju stice.go v /op a/p r/2 0 0 8 /D ecem b er/0 8 -crm -1 1 0 5 .h tm l. 227See, e.g., C o m p la in t , S E C v. Biomet, supra n o te 2 2 1 (b r ib e s p a id to governm ent h ealthcare providers in w hich ph on y invoices were used to ju stify paym ents an d bribes w ere falsely record ed as "con sultin g fe e s " o r "c o m m is s io n s " in c o m p a n y 's b o o k s a n d r e c o r d s ) ; C r im in a l In fo r m a tio n , United States v. Biomet, supra n o te 2 2 1 (s a m e ); S E C v. Alcatel-Lucent, supra n o te 4 8 (b rib e s p a id to fo re ig n o fficials to secu re telecom m un ication s con tracts w here com pan y lack ed p ro per internal c o n t r o ls a n d p e r m it t e d b o o k s a n d r e c o r d s t o f a ls ifie d ); United States v. Alcatel-Lucent, S.A ., supra n o te 4 8 (sa m e ). 228 C o m p la in t , S E C v. D aim ler A G , supra n o te 4 8 ; C r im in a l In fo r m a tio n , United States v. D aim ler A G , supra n o te 4 8 . 229Id. 230Id. 231Id . 232Id . 233Id . 234See, e.g., C o m p la in t , S E C v. Tyco In t'l, supra n o te 9 ; C o m p la in t , S E C v. W illb ro s, N o . 0 8 -c v -1 4 9 4 (S .D . Tex. M a y 14, 2 0 0 8 ), E C F N o . 1, available at h ttp://w w w .sec.go v /litigatio n /co m p lain ts/2 0 0 8 /co m p 2 0 5 7 1 .p d f. 235See, e.g., C o m p la in t , S E C v. Siemens A G , supra n o te 4 8 ; C o m p la in t , S E C v. York In t'l Corp., supra n o te 1 1 5 ; C o m p la in t , S E C v. Textron, supra n o te 1 1 5 ; C r im i n a l In fo r m a t io n , U n i t e d S ta te s v. C o n t r o l C o m p o n e n t s , Inc., N o . 09-cr-1 6 2 (C .D . C al. Ju ly 22, 2 0 0 9 ), E C F N o . 1 [h erein after United States v. Control Components], available a t h t t p ://w w w .ju s tic e . gov/crim in al/frau d /fcpa/cases/con trol-in c/07-22-09cci-in fo.pd f; C r im i n a l I n fo r m a tio n , U n it e d S ta te s v. S S I I n t 'l F a r E a s t , L t d ., N o . 0 6 -cr3 9 8 , E C F N o . 1 ( D . O r. O c t . 1 0 , 2 0 0 6 ) [h e r e in a fte r United States v. S S I In t'l], available a t h t t p :/ / w w w .ju s t ic e .g o v / c r i m in a l / f r a u d / f c p a / c a s e s / ssi-in tl/10-10-06ssi-in form ation .p df. 236See, e.g., C o m p la in t , S E C v. E l Paso Corp., supra n o te 1 8 7 ; C o m p la in t , S E C v. Innospec, supra n o te 7 9 ; C o m p la in t , S E C v. C h e v r o n C o r p ., 0 7 cv -1 0 2 9 9 (S .D .N .Y . N ov. 14, 2 0 0 7 ), E C F N o . 1, available at h ttp ://w w w . sec.gov/litigation /com p lain ts/2007/com p20363.p df. 237 P le a A g r e e m e n t, United States v. Stanley, supra n o te 8 ; P le a A g r e e m e n t, United States v. Sapsizian, supra n o te 8. 238See C o m p la in t , S E C v. M axw ell Technologies, supra n o te 2 2 1 . 239See C o m p la in t , S E C v. Willbros Group, supra n o te 9. 240 15 U .S .C . 7 2 0 1 , et seq. 241 E x c h a n g e A c t R u le 1 3 a - 1 5 , 1 7 C .F .R . 2 4 0 .1 3 a - 1 5 ; E x c h a n g e A c t Rule 15d-15, 17 C .F.R . 240.15d-15; Item 308 o f R egulation S-K , 17 C .F .R . 2 2 9 .3 0 8 ; Item 15, F orm 20-F, available at h ttp ://w w w .se c .g o v / ab o u t/fo rm s/fo rm 2 0 -f.p d f; G eneral Instruction (B ), Form 4 0-F (for fo reign priv ate issu ers), available a t h ttp ://w w w .se c .g o v /a b o u t/fo rm s/ form 40-f.pdf. 242See U .S . Se c . a nd Ex c h a n g e C omm., C o m m issio n G u id a nce Reg a r d in g M a n a g em e n t 's Repo rt on In t er n a l C o n tro l over Fin a n c ia l Repo r t in g U n d e r Se c t io n 13(a ) or 15(d ) of th e Sec u r ities Exch an g e A ct of 1 9 3 4 , R elease N o . 3 3 -8 8 1 0 (Ju n e 27, 2 0 0 7 ), available a t h ttp ://w w w .se c .g o v /ru le s/in te rp /2 0 0 7 /3 3 -8 8 1 0 . p d f. 243Id . 244 F o r e ig n C o r r u p t P ra c tic e s A c t o f 1 9 7 7 , P u b . L . N o . 9 5 - 2 1 3 , 1 0 2 , 91 Stat. 1494 (1 9 7 7 ). 245See supra n o te 4 8 ; S E C v. Technip, supra n o te 1 3 2 , (F r e n c h c o m p a n y ); United States v. Technip, supra n o te 1 3 2 , (s a m e ); see also A d m in . P roceed in g O rder, In re D iag eo p lc, Exch ange A ct R elease N o . 64 9 7 8 (S E C Ju ly 27, 2 0 1 1 ) ( U K co m p an y ), available a t h ttp ://w w w .se c .g o v / litig a tio n /a d m in /2 0 1 1 /3 4 - 6 4 9 7 8 .p d f; A d m in . P ro ceed in g O rder, In re Statoil, A S A , E xch ange A ct R elease N o . 5 4 5 9 9 (S E C M ay 29, 2 0 0 9 ) (N o rw e g ian co m p an y ), available a t h ttp ://w w w .se c .g o v /litig a tio n / a d m i n / 2 0 0 6 / 3 4 - 5 4 5 9 9 . p d f ; C r im i n a l I n fo r m a tio n , U n it e d S ta te s v. APPENDIX Endnotes S tato il, A S A , N o . 0 6 -cr-9 6 0 (S .D .N .Y . O ct. 13, 2 0 0 6 ) (sam e), available at h ttp://w w w .ju stice.gov/crim in al/frau d/fcp a/cases/statoil-asa-in c/10-1309statoil-in form ation .pd f. 246A l t h o u g h p r iv a te c o m p a n ie s are n o t c o v e r e d b y t h e b o o k s a n d re c o rd s an d internal controls provision s o f the F C P A an d d o n o t fall w ithin S E C 's ju r is d ic t io n , s u c h c o m p a n ie s g e n e ra lly are r e q u ir e d b y fe d e r a l a n d state tax law s an d state corp oration law s to m ain tain accurate bo o k s an d records sufficient to properly calculate taxes ow ed. Further, m ost large private com panies m aintain their b ook s an d records to facilitate the p rep aratio n o f fin an cial statem en ts in co n fo rm ity w ith G A A P to com p ly w ith financial in stitution s' len d in g requirem ents. 247See S E C v. R A E Sys. Inc., supra n o te 9 2 ; In re R A E Sys. Inc., supra n o te 92. 248 See S e c t io n 1 3 ( b ) ( 6 ) o f th e E x c h a n g e A c t , 15 U .S .C . 7 8 m ( b ) (6 ) , w h ich p rovid es th at w here an issuer "h o ld s 50 p er cen tu m o r less o f the v o tin g p ow er w ith resp ect to a d o m estic o r fo reign firm ," th e issuer m u st "p ro ceed in g o o d faith to use its influence, to the extent reasonable under th e is s u e r 's c ir c u m s ta n c e s , t o ca u se s u c h d o m e s t ic o r fo r e ig n firm t o d e v ise an d m aintain a system o f internal accoun tin g controls consistent w ith [Section 13(b )(2)]." 249 See 1 5 U .S .C . 7 8 m ( b ) ( 6 ) . C o n g r e s s a d d e d t h e la n g u a g e in s u b sectio n 7 8 m ( b )(6 ) to th e F C P A in 1 9 8 8 , re c o g n izin g th at " it is unrealistic to expect a m in ority ow ner to exert a d isprop ortion ate degree o f in fluen ce over the ac co u n tin g p ractices o f a su bsid iary." H .R . Rep. N o . 100-576, at 917. The C onferen ce R eport n o ted that, w ith respect to m in ority ow ners, "the am ou n t o f influence w hich an issuer m ay exercise necessarily varies from case to case. W h ile the relative degree o f ow n ersh ip is o b v io u sly on e facto r, o th er facto rs m ay also b e im p o rta n t in determ in in g w hether an issuer h as dem on strated g ood -faith efforts to use its in flu e n c e ." Id.; see also S. Rep. N o . 1 0 0 - 8 5 , at 50. 250 S e c t io n 2 0 ( e ) o f th e E x c h a n g e A c t , t it l e d " P r o s e c u tio n o f P e rso n s W h o A id an d A b et V iolation s," explicitly provides that for p u rp oses o f a civil action seek in g injunctive relief o r a civil pen alty, "any p erso n that know in gly o r recklessly provides su bstan tial assistance to an other p erson in violation o f a p rovision o f this title, or o f any rule or regulation issued u n der this title, sh all b e d eem ed to be in violation o f such p rovision to th e sam e e x te n t as th e p e r so n to w h o m su ch assistan c e is p ro v id e d ." See Section 20(e) o f the Exchange A ct, 15 U .S.C . 78t(e). 251 See C o m p la in t at 1 1 - 1 2 , S E C v. E lkin, supra n o te 5 0 , E C F 1. 252 S E C v. Elkin,supra n o te 5 0 , E C F 6-9 (fin a l ju d g m e n ts ) . 253 See, e.g., C o m p la in t , S E C v. N a t u r e s S u n s h in e P r o d u c t s , In c., e t a l , N o . 09-cv -6 7 2 (D . U ta h , Ju ly 31, 2 0 0 9 ), E C F N o . 2, available a t h ttp ://w w w . sec.gov/litigation /litreleases/2009/lr21162.h tm . 254See A d m in . P r o c e e d in g O r d e r , In re W a tts W a te r T e c h n o lo g ie s , Inc. an d Leesen C h an g, Exchange A ct R elease N o . 65 5 5 5 (S E C O ct. 13, 2 0 1 1 ), available a t h ttp ://w w w .se c .g o v /litig a tio n / ad m in /2 0 1 1 /3 4 -6 5 5 5 5 .p d f. 255Id . at 2 , 4 , 6 -7. 256E x c h a n g e A c t R u le 1 3 b 2 - 1 , 1 7 C .F .R . 2 4 0 .1 3 b 2 - 1 . 257 1 5 U S . C . 7 8 m ( b ) ( 5 ) . 258 S e c t io n 3 ( a ) ( 9 ) o f th e E x c h a n g e A c t , 15 U S . C . 7 8 c ( a ) ( 9 ) . 259E x c h a n g e A c t R u le 1 3 b 2 - 2 , 1 7 C .F .R . 2 4 0 .1 3 b 2 - 2 260 C o m p la in t , S E C v. J e n n in g s , N o . 1 1 - c v - 1 4 4 4 ( D . D . C . J a n . 2 4 , 2 0 1 1 ), E C F N o . 1, available a t h ttp ://w w w .se c .g o v /litig a tio n / co m p lain ts/2011/com p 21822.p d f. 261 C o m p la in t , id., E C F N o . 1; F in a l J u d g m e n t , id., E C F N o . 3. 262 S e r io u s F r a u d O ffic e , I n n o s p e c L t d : F o r m e r C E O a d m its b r ib e r y t o fa lsify p ro d u c t tests (Ju ly 30, 2 0 1 2 ), available a t h ttp ://w w w .sfo .g o v . uk/press-room /latest-press-releases/press-releases-2012/innospec-ltd-form er-ceo-adm its-bribery-to-falsify-product-tests.aspx. 263 1 5 U .S .C . 7 8 m ( b ) ( 4 ) - ( 5 ) . C o n g r e s s a d o p t e d th is la n g u a g e in 1 9 8 8 in 114 115 order to m ake clear that, con sisten t w ith en forcem en t p o licy at the tim e, crim inal p enalties w ou ld n o t be im p o sed "for inadvertent or insignificant errors in b o o k s an d record s, o r in adverten t violation s o f accoun tin g co n tro ls." See S. Rep. N o . 1 0 0 -8 5 , at 4 9 ; H .R . Rep. N o . 1 0 0 -5 7 6 , at 916 (" The C onferees in ten d to cod ify current Securities and Exchange C om m ission (S E C ) enforcem ent p olicy that penalties n ot be im posed for in sig n ifican t o r tech n ical in fractio n s o r in ad v erten t co n d u ct."). 264 15 U .S .C . 7 8 ff( a ) . 265See United States v. Alcatel-Lucent, S.A ., supra n o te 4 8 ; see also United States v. Alcatel-Lucent France, supra n o te 56. 266See D e fe r r e d P ro se c u tio n A g r e e m e n t, United States v. Alcatel-Lucent, S.A., supra n o te 4 8 , E C F N o . 10, available at h ttp ://w w w .ju stice .g o v / crim in al/fraud/fcp a/cases/alcatel-etal/02-22-11alcatel-dp a.p df. 267See P le a A g r e e m e n t, United States v. Siemens A G , supra n o te 4 8 , E C F N o . 14, available a t h ttp ://w w w .ju stic e .g o v /c rim in a l/fra u d /fc p a /c a se s/ siem en s/12-15-08siem en sakt-plea.pdf. 268See M in u te E n tr y o f G u ilt y P le a , United States v. Peterson, supra n o te 8, E C F 13; see also P ress R e le ase , U S . D e p t. o fJu s tic e , F o rm e r M o r g a n Stanley M an agin g D irecto r Pleads G u ilty fo r R ole in E vad in g Internal C o n tro ls R e q u ire d b y F C P A (A pr. 23, 2 0 1 2 ), available at h ttp ://w w w . ju stice.go v /op a/p r/2 0 1 2 /A p ril/1 2 -crm -5 3 4 .h tm l. 269See C r im i n a l In fo r m a t io n , U n it e d S ta te s v. B a k e r H u g h e s S v cs. In t'l, N o . 07-cr-1 2 9 (S .D . Tex. A pr. 11, 2 0 0 7 ), E C F N o . 1, available at h ttp://w w w .justice.gov/crim in al/fraud/fcp a/cases/bak er-h ugh s/04-110 7 b a k e rh u g h e sin tl-in fo .p d f. 270See United States v. Panalpina, Inc., supra n o te 68. 271Id. 272See F A S B S ta t e m e n t o f F in a n c ia l A c c o u n t in g C o n c e p t s N o . 2 , ^ 63-80. 273 P C A O B A u d i t i n g S t a n d a r d N o . 1 2 a n d P C A O B A U S e c t io n 3 2 5 . 274See S e c t io n 1 0 A o f th e E x c h a n g e A c t , 1 5 U .S .C . 7 8 j- 1 . 275 18 U .S .C . 1 9 5 2 . 276See, e.g., United States v. Nexus Technologies, supra n o te 5 3 ; C r im in a l I n fo r m a t io n , U n i t e d S ta te s v. R o b e r t R ic h a r d K in g , et al., N o . 0 1 - c r - 1 9 0 (W .D . M o . Ju n e 27, 2 0 0 1 ), available a t h ttp ://w w w .ju stic e .g o v /crim in a l/ fraud/fcp a/cases/k in gr-etal/05-03-02k in g-robert-in d ict.p df; Superseding In d ic tm e n t, United States v. M ead, supra n o te 4 4 ; C r im in a l In fo r m a tio n , U n it e d S ta te s v. S a y b o lt N o r t h A m e r ic a In c., et a l , N o . 9 8 - c r - 1 0 2 6 6 (D . M ass. A u g. 18, 1 9 9 8 ), available a t h ttp ://w w w .ju stic e .g o v /crim in a l/ frau d/fcp a/cases/saybolt/08-10-98saybolt-in fo.pd f. 277See S e c o n d S u p e r s e d in g I n d ic tm e n t, U n it e d S ta te s v. K o z e n y , N o . 05cr-518 (S .D .N .Y . M ay 2 6 , 2 0 0 9 ), E C F N o . 2 0 3 , available a t h ttp ://w w w . justice.gov/crim in al/frau d /fcpa/cases/k ozen yv/05-26-09b ou rk e2n d - s u p e r se d - in d ic t.p d f; Ju d g m e n t, U n it e d S ta te s v. B o u rk e , N o . 0 5 -c r-5 1 8 (S .D .N .Y . N o v . 12, 2 0 0 9 ), E C F N o . 2 5 3 , available a t h ttp ://w w w .ju stice. gov/crim in al/fraud /fcpa/cases/kozen yv/11-12-09bourk e-judgm en t.pd f. 278 P le a A g r e e m e n t, United States v. Control Components, supra n o te 2 3 5 , E C F N o . 7 ; see also O rd e r, United States v. Carson, supra n o te 1 1 9 , E C F N o . 4 4 0 (denying m otion to dism iss counts alleging Travel A ct v io la tio n s), available a t h ttp ://w w w .ju stic e .g o v /c rim in a l/fra u d /fc p a / cases/carsons/2011-09-20-carson-m inutes-denying-m otion-to-dism iss. p d f. 279See, e.g, C r im in a l In fo r m a tio n , United States v. Esquenazi, supra n o te 4 4 ; C r im in a l In fo r m a tio n , United States v. Green, supra n o te 4 4 ; C r im in a l In fo rm a tio n , U n it e d S ta te s v. G e n e ra l E lec. C o ., N o . 9 2 -c r-8 7 (S .D . O h io Ju ly 22, 1 9 9 2 ), available at h ttp ://w w w .ju stic e .g o v /c rim in a l/fra u d /fc p a / cases/gen eral-electric/1992-07-22-gen eral-electric-in form ation .pdf. 280 F o r e ig n o ffic ia ls m a y " n o t b e c h a r g e d w ith v io la tin g t h e F C P A itse lf, since the [F C P A ] does n o t crim inalize the receipt o f a bribe by a foreign official." U n it e d S ta te s v. B lo n d e k , 7 4 1 F .S u p p . 1 1 6 , 1 1 7 ( N .D . T ex. 1 9 9 0 ) , a f f 'd U n i t e d S ta te s v. C a s tle , 9 2 5 F .2 d 8 3 1 (5 t h C ir . 1 9 9 1 ) ( " W e h o ld that foreign officials m ay n ot be p ro secu ted un der 18 U .S.C . 371 fo r co n sp irin g to v io late th e F C P A ."). F oreign officials, how ever, can be ch arged w ith violatin g the F C P A w hen the foreign official acts as an in t e r m e d ia r y o f a b r ib e p a y m e n t. See, e.g., In fo r m a t io n , U n it e d S ta te s v. B a su , N o . 0 2 -c r-4 7 5 (D .D .C . N o v . 2 6 , 2 0 0 2 ) (W o rld B a n k em ployee ch arged w ith w ire frau d an d F C P A violation s for facilitatin g bribe paym ents to another W orld B an k official and K enyan governm ent o fficial), available a t h ttp ://w w w .ju stic e .g o v /c rim in a l/fra u d /fc p a /c a se s/ b a s u /1 1 - 2 6 - 0 2 b a s u - in fo .p d f; In fo rm a tio n , U n it e d S ta te s v. S e n g u p ta , N o . 0 2-cr-40 (D .D .C . Jan . 30, 2 0 0 2 ), available a t h ttp ://w w w .ju stic e .g o v / crim in al/frau d/fcp a/cases/sen gup ta/01-30-02sen gu p ta-in fo.p df. 281See, e.g. Ju d g m e n ts , United States v. Esquenazi, supra n o te 4 4 , E C F N o s. 182, 816, 8 2 4 (judgm en ts against foreign official defendants). 282 C r im in a l In fo r m a tio n , United States v. S S I In t'l, supra n o te 2 3 5 ( a lle g in g v io la tio n s o f 18 U .S .C . 1 3 4 3 , 1 3 4 6 ) ; P le a A g r e e m e n t , United States v. S S I In t'l, supra n o te 2 3 5 , ( O c t . 10, 2 0 0 6 ) , available a t h t t p : / / w w w .justice.gov/crim in al/fraud /fcp a/cases/con trol-in c/07-24-09ccip le a -a g re e .p d f. 283See E x -Im B a n k , F o r m o f E x p o r t e r s C e r tif ic a t e , E B D - M - 5 6 ( J a n . 2 0 0 7 ), available a t h ttp ://w w w .e x im .g o v /p u b /in s/p d f/e b d -m -5 6 .p d f. 284S e e 18 U .S .C . 1 0 0 1 . 285 2 2 C .F .R . 1 3 0 .2 , 1 3 0 .9 . 286 F o r e x a m p le , in United States v. B A E Systemsplc, B A E p le a d e d g u ilty to con spirin g to defrau d the U n ited States by im pairin g an d im ped in g its law ful fun ction s, to m ak in g false statem en ts abou t its F C P A com pliance p rogram , and to violating the A E C A an d IT A R . B A E p aid a $400 m illion fine an d agreed to an in depen d en t corporate m o n ito r to ensure com p lian ce w ith ap plicable an ti-corru ption an d e x p o rt co n tro l law s. C r im in a l In fo rm a tio n a n d P lea A g re e m e n t, U n it e d S ta te s v. B A E Sys. p lc, N o . 10-cr-35 (D .D .C . M ar. 1, 2 0 1 0 ), E C F N o s.1 , 8, available at h ttp://w w w .ju stice.gov/crim in al/frau d/fcp a/cases/bae-system /02-0110baesystem s-in fo.pdf an d h ttp ://w w w .ju stice.go v /crim in al/frau d /fcp a/ cases/b ae-system /03-01-10b aesystem s-plea-agree.pd f. In an action b ased on the sam e underlying facts as the crim inal guilty plea, B A E entered a civil settlem ent w ith the D irectorate o f D efen se T rade C o n tro ls for violations o f A E C A an d IT A R , in cludin g over 2 5 0 0 IT A R violations that in clu ded a failure to report the paym ent o f fees or com m issions associated w ith defense transactions an d failure to m aintain records in volvin g IT A R -co n tro lled tran saction s. B A E p a id $ 7 9 m illio n in penalties, an d the State D epartm en t im posed a "policy o f denial" for export licenses on three B A E subsidiaries involved in the w ron gful co n d u ct. C o n se n t A greem en t betw een B A E Sys. p lc an d D efen se T rade C o n tro ls at 17-20, B ureau o f P olitical-M ilitary A ffairs, U .S. D ep t. o f State (M ay 16, 2 0 1 1 ), available at h ttp ://w w w .p m d d tc.sta te .g o v /co m p lia n c e / c o n s e n t_ a g re e m e n ts /p d f/B A E S _ C A .p d f; P ro p o se d C h a rg in g L etter, In re Investigation o f B A E System s p lc R egard in g V iolation s o f the A rm s E x po rt C o n tro l A ct an d the In tern ation al T raffic in A rm s R egulations, U .S. D ep t. o f State (M ay 2 0 1 1 ), available a t h ttp ://w w w .p m d d tc.state . gov/com p lian ce/con sen t_agreem en ts/p d f/B A E S_P C L .p d f. 287 2 6 U .S .C . 1 6 2 ( c ) ( 1 ) ; see also P le a A g r e e m e n t , U n it e d S ta te s v. S m ith , N o . 07-cr-69 (C .D . C a l. Sept. 3, 2 0 0 9 ), E C F N o . 89, available a t h t t p :/ / w w w .justice.gov/crim in al/fraud/fcpa/cases/sm ithl/09-03-09sm ith l-pleaa g r e e .p d f; C r im in a l In fo rm a tio n , United States v. Titan Corp., supra n o te 185. 288S e e U S A M 9 - 2 7 .0 0 0 . 289See U S A M 9 - 2 7 .4 2 0 (s e t t in g f o r t h c o n s id e r a t io n s t o b e w e ig h e d w hen determ in in g w hether it w ould be appropriate to enter in to plea agreem ent). 290See U S A M 9 - 2 8 .0 0 0 et seq. 291See U S A M 9 - 2 8 .7 1 0 ( d is c u s s in g a tto r n e y - c lie n t a n d w o r k p r o d u c t p ro te c tio n s). 292See h t t p :/ /w w w .s e c .g o v /d iv is io n s /e n f o r c e /e n f o r c e m e n t m a n u a l .p d f . 293See U S A M 9 - 2 8 .3 0 0 .A ; see also U S A M 9 - 2 8 .7 0 0 .B (e x p la in in g benefits o f cooperation for both governm ent an d corporation ). 294See U S A M 9 - 2 8 .9 0 0 ( d is c u s s in g r e s t it u t io n a n d r e m e d ia t io n ). T h e com m en tary further provides that prosecu tors sh o u ld con sider an d w eigh w hether the corporation appropriately disciplined w rongdoers an d a c o r p o r a t io n 's e ffo r ts t o r e fo r m , in c lu d in g its q u ic k r e c o g n itio n o f th e flaw s in th e p ro g ra m a n d its effo rts to im p ro v e the p ro g ra m . Id. 295S e e U S A M 9 - 2 7 .2 3 0 , 9 - 2 7 .4 2 0 . 296U .S . Se n t e n c in g G u id e lin e s 8 B 2 .1 ( b ) ( 7 ) ( 2 0 1 1 ) . 297I d . 8 C 2 . 5 ( f ) ( 2 ) ( 2 0 1 1 ) . 298 U .S . Se c . a n d Ex c h a n g e C omm., Repo rt of In v e st ig a t io n Pur su a n t to Se c t io n 21(a ) of th e Se c u r it ie s Ex c h a n g e A ct of 1 9 3 4 and C om m ission Statement on the Relationship of C ooperation to Agency Enforcem ent D ecisio n s, S E C Rel. N o s. 34-44969 an d A A E R -1 4 7 0 (O ct. 23, 2 001) [hereinafter Seaboard R ep o rt] available at h ttp ://w w w .se c .g o v /litig atio n / in vestreport/34-44969.h tm . 299 U .S . Se c . a nd Ex c h a n g e C omm., Po licy Statem ent C o n c e r n in g C o o pera t io n by In d iv id u a ls in it s In v e st ig a t io n s and Rela ted En fo r c e m e n ts Ac t io n s , 1 7 C .F .R . 2 0 2 .1 2 (Ja n . 10, 2 0 1 0 ), available a t h ttp ://w w w .se c .g o v /ru le s/ p olicy /2010/34-61340.p d f. 300See U .S . Se n t e n c in g G u id e lin e s at 8 B 2 .1 ( a ) ( 2 ) . 301 U .S . Se n t e n c in g Gu id e l in e s 8 B 2 .1 ( b ) . 302See generally D eb bie Tr o k l u s, e t a l ., C o m plia nce 1 0 1 : H o w to build and maintain an effective compliance and ethics program , Society of C orp. C ompliance and Eth ics (2 0 0 8 ) 3-9 [h erein after C ompliance 1 01] (listin g reason s to im p lem en t c o m p lia n c e p r o g r a m , in c lu d in g p r o t e c t i n g c o m p a n y 's r e p u ta t io n , creating trust betw een m anagem ent an d em ployees, preventing false statem ents to custom ers, creatin g efficiencies an d stream lin in g processes, detectin g em ployee and contractor frau d an d abuse, ensuring highq u ality p ro d u cts an d services, an d p ro vid in g "early w arn in g" system o f in a p p r o p r ia t e a c tio n s ) ; T ra n spa r en c y In t 'l , B u sin e ss Pr in c ip l e s for C o untering Bribery: Small and M edium Enterprise (S M E ) Edition 5 (2 0 0 8 ) (citin g benefits o f anti-bribery p rogram like p ro tectin g reputation , creatin g record o f in tegrity enhances opportun ities to acquire governm ent business, p rotecting com pany assets o th erw ise sq u a n d e re d on b rib e s); Mark Piet h , Harm o n ising An t i-C orruption C om pliance: The O E C D G ood Practice Guidance 4 5 -4 6 (2 0 1 1 ) [hereinafter Harm onising An ti co rru ptio n C om pliance] (citin g n e e d fo r co m p lian ce p ro gram to prevent an d d etect in-house risks, such as w orkplace security or con flicts o f interest, an d external risks, like an ti-trust violation s, em bargo circum vention, environm ental hazards, an d m on ey laun derin g). 303 D e b a r m e n t a u th o r itie s , s u c h as th e D e p a r t m e n t o f D e fe n s e o r th e G e n e r a l S e rv ic e s A d m in is t r a t io n , m a y a ls o c o n s id e r a c o m p a n y 's com pliance program w hen decidin g w hether to debar or suspend a contractor. Specifically, the relevant regulation s p rovide that the debarm ent authority sh ould consider " [w ]hether the con tractor had effective stan dards o f co n d u ct an d in ternal con trol system s in place at the tim e o f the activity w hich constitutes cause for debarm ent or h ad adopted such procedures prior to any G overnm ent investigation o f the activity cited as a cause for debarm ent," an d " [w ]hether the con tractor has in stitu ted o r agreed to institute new or revised review an d con trol procedures an d ethics train in g program s." 4 8 C .F .R . 9 .406-1(a). 304Seaboard R e p o r t, supra n o te 2 9 8 ; U .S . Se c . a nd Ex ch a n g e C omm., Repo rt of In v est ig a t io n Pur su a n t to Se c t io n 21(a ) of the Secu rities Exchange Act of 1 9 3 4 and C om m ission Statement on the Relationship of C ooperation to Agency Enforcement Decisions, S E C Rel. N o . 4 4 9 6 9 (O ct. 23, 20 0 1 ), available at h ttp ://w w w .se c .g o v /litig a tio n /in v e stre p o rt/3 4 -4 4 9 6 9 .h tm . 305 U S A M 9 - 2 8 .3 0 0 . W h e n e v a lu a tin g th e p e r v a siv e n e ss o f w r o n g d o in g w ithin the corp oration , p rosecu tors are advised that w hile it m ay be appropriate to charge a corporation for m in or m iscon du ct w here the w ron gd oin g w as pervasive, "it m ay n o t be appropriate to im pose liability u p o n a c o r p o r a tio n , particularly one with a robust complianceprogram in place, u n d e r a stric t respondeat superior th e o ry fo r th e sin g le iso la te d act o f a r o g u e em p loy ee." Id. 9 - 2 8 .5 0 0 .A (e m p h asis a d d e d ). P ro se cu to rs s h o u l d a ls o c o n s id e r a c o m p a n y 's c o m p lia n c e p r o g r a m w h e n e x a m in in g any rem ed ial action s taken, in clu d in g efforts to im plem en t an effective com plian ce program or to im prove an existin g one. A s the com m entary e x p lain s, "a lth o u g h th e in a d e q u a c y o f a c o rp o ra te c o m p lia n c e p r o g r a m is a factor to consider w hen decidin g w hether to charge a corporation, that c o r p o r a t io n 's q u ic k r e c o g n itio n o f th e fla w s in th e p r o g r a m a n d its e ffo r ts to im prove the program are also factors to con sider as to appropriate d isp o sitio n o f a case." Id. 9 -2 8 .9 0 0 .B . Finally, the Prin ciples o f Fed eral Prosecution o f Business O rganizations provides that prosecutors sh ould c o n s id e r th e e x iste n c e a n d e ffe c tiv e n e ss o f th e c o r p o r a t io n 's p r e - e x is tin g co m p lia n c e p ro g ra m in d e te rm in in g h o w t o treat a c o rp o ra te target. Id. 9-28.800. 306See U S A M 9 - 2 8 .8 0 0 .B ; see also U .S . Se n t e n c in g Gu id el in e s 8 B 2 .1 (a) (2 0 1 1 ) (" The failure to prevent or detect the instant offense does n o t necessarily m ean th at the p ro gram is n o t generally effective in p re v e n tin g a n d d e te c tin g c rim in a l c o n d u c t." ). 307See P ress R e le a se , U .S . D e p t . o f J u s tic e , F o r m e r M o r g a n S ta n le y M an agin g D irecto r Pleads G u ilty fo r R ole in E vad in g In tern al C o n tro ls R eq u ired by F C P A (A pr. 25, 2 0 1 2 ) (d eclin in g to bring crim inal case against corporate em ployer that "h ad con structed an d m ain tain ed a system o f in tern al con trols, w hich p ro v id ed reason able assurances th at its em ployees w ere n o t b rib in g g o v ern m en t o fficials" ), available at h t t p :/ / w w w .ju stice.go v /o p a/p r/2 0 1 2 /A p ril/1 2 -crm -5 3 4 .h tm l; Press Release, U .S. Sec. an d Exchange C o m m ., S E C C h arges Form er M o rgan Stanley APPENDIX Endnotes Executive w ith F C P A V iolation s an d Investm ent A dviser Fraud, N o. 2 0 1 2 -7 8 (Apr. 25, 2 0 1 2 ) (in d icatin g corporate em ployer w as n o t ch arged in th e m a tt e r a n d h a d " c o o p e r a t e d w ith th e S E C 's in q u ir y a n d c o n d u c t e d a thorough internal investigation to determ ine the scope o f the im proper p aym en ts a n d o th er m isco n d u c t in v o lv ed" ), available at h ttp ://w w w .se c. gov/n ew s/p ress/2012/2012-78.h tm . 308S e e U S A M 9 - 2 8 .8 0 0 .B . 309See, e.g., In t 'l C h a m be r of C o m m erc e, I C C Ru les on C ombating C orruption (2 0 1 1 ) [hereinafter I C C Rules on C o m bating C o r r u p t io n ], available a t h t t p :/ /w w w .ic c w b o . org/upload edFiles/IC C /policy/busin ess_in _society/Statem en ts/ IC C _R u les_o n _C o m b atin g_C o rru p tio n _2011ed itio n .p d f; Tra n spa r en c y In t 'l , B u sin e ss Pr in c ip l e s fo r C o u n t er in g B r iber y ( 2 d e d . 2 0 0 9 ) [h e r e in a fte r B u sin e ss Pr in c ip l e s fo r C o u n t er in g B r iber y ], available a t h ttp ://w w w .tr a n sp a r e n c y . o rg /glob al_p riorities/p rivate_sector/b u sin ess_p rin cip les/; United Kingdo m Min ist r y of J u st ic e , The Bribery A ct of 2 0 1 0 , Guidance about procedures w hich relevant commercial organisations can put into place to prevent persons asso ciated w ith them from bribing (2 0 1 0 ), available at h t t p :/ / w w w .justice.gov.u k /d ow n load s/legislation /b rib ery-act-2010-g u id an ce. p d f ; W orld Ba n k Gr o up, In t e g r it y C o m plia n ce G u id elin e s ( 2 0 1 1 ) [h e r e in a fte r In t e g r it y C o m plia n ce G u id e l in e s], available a t h ttp ://site re so u rc e s.w o rld b a n k .o rg /IN T D O II/R e so u rc e s/ I n t e g r it y _ C o m p lia n c e _ G u id e l in e s .p d f ; A sia -Pa c ific Eco n o m ic C o o pe r a tio n , A P E C A n t i-c o r r u p tio n C ode of C o n d u c t fo r Bu sin e ss ( 2 0 0 7 ) [h e r e in a fte r A P E C A n t i-c o r r u p tio n C o d e], available a t h ttp ://w w w .a p e c .o rg /G ro u p s/S O M -S te e rin g -C o m m itte e - on-Econom ic-and-T echnical- C ooperation /T ask - G ro u p s/~ /m e d ia / F i l e s / G r o u p s / A C T / 0 7 _ a c t _ c o d e b r o c h u r e .a s h x ; In t 'l C h a m be r of C o m m erce, Tra n spa r en c y In t 'l , U n it e d N a tio n s G lobal C ompact, an d World Econom ic Forum, Resistin g Exto rtio n a n d S o lic it a t io n in In ter n a tio n a l T r a n s a c t io n s : A C ompany Tool for Employee Training (2 0 1 1 ), available at h ttp ://w w w 3.w eforu m .org/d ocs/W E F _P A C I_R E SIST _R ep ort_2011. p d f ; In t 'l C h a m ber of C o m m er c e, et a l., C lea n Bu sin e ss Is G ood B u sin ess, available a t h ttp ://w w w 3 .w e fo ru m .o rg /d o c s/ W E F _ P A C I_ B u sin e ssC a se F ig h tin g C o rru p tio n _ 2 0 1 1 .p d f; World E co n o m ic Forum , Pa r tn e r in g A g a in st C o r r u p t io n Pr in c ip l e s fo r C o u n t e r in g B r iber y ( 2 0 0 9 ) [h e re in a fte r Pa r tn e r in g A g a in st C o r r u p t io n ], available a t h t t p :/ / w w w 3 . w efo ru m .o rg /d o c s/W E F _ P A C I_ P rin c ip le s_ 2 0 0 9 .p d f; Working Gro up on B riber y, O E C D , G ood Pr a c t ic e Gu id a n ce on In ter n a l C o n t r o l s, Et h ic s , a n d C o m plia n ce 2 0 1 0 , [h e re in a fte r O E C D G ood Pr a c t ic e G u id a n c e ] available a t h t t p :/ /w w w .o e c d . o rg /d a ta o e c d /5 /5 1 /4 4 8 8 4 3 8 9 .p d f; U .N . Global C ompact, The Ten Pr in c ip l e s [h e r e in a fte r Th e Ten Pr in c ip l e s] available a t h t t p : / / w w w .u n globalcom pact.org/abou tT h eG C /T heT en P rin ciples/in dex.htm l. 310 T h is is a lso r e fle c te d in th e Sentencing Guidelines, w h ic h r e c o g n iz e s that n o single, form ulaic set o f requirem ents sh ould be im posed, but in stead focuses on a num ber o f facto rs like applicable in dustry p ractice or the stan dards called fo r by any applicable governm ental regulation, the size o f the organ ization , an d w hether the organ ization has en gaged in s im ila r m i s c o n d u c t in th e p a s t . See U .S . Se n t e n c in g G u id e lin e s 8B 2.1 & app. n ote 2 (2011). 311 T h is w a s u n d e r s c o r e d b y t h e n - S E C C o m m is s io n e r C y n th ia G la s s m a n in 2 0 0 3 in a s p e e c h o n th e S E C 's im p le m e n t a t io n o f th e S a r b a n e s - O x le y A c t: " [T ]h e u ltim ate effectiveness o f the n ew co rp o rate govern an ce rules w ill b e d e te rm in e d b y th e `to n e at th e to p .' A d o p tin g a co d e o f eth ics m e a n s litt le i f th e c o m p a n y 's c h i e f e x e c u tiv e o ffic e r o r its d ir e c t o r s m a k e clear, b y c o n d u c t o r o th e r w ise , t h a t th e c o d e 's p r o v is io n s d o n o t a p p ly 116 117 to them___Corporate officers and directors hold the ultimate power and responsibility for restoring public trust by conducting themselves in a manner that is worthy o f the trust that is placed in them." Cynthia Glassman, SEC Implementation of Sarbanes-Oxley: The New Corporate Governance, Remarks at National Economists Club (April 7, 2003), available a t http ://www.sec.gov/news/speech/spch040703cag.htm . 312Indeed, research has found that "[e]thical culture is the single biggest factor determining the amount of misconduct that will take place in a business." Et h ic s Reso u r c e C e n t e r , 2009 N a tio n al B u sin e ss Et h ic s Survey: Et h ic s in th e Re c e ssio n (2009), at 41. Metrics of ethical culture include ethical leadership (tone at the top), supervisor reinforcement of ethical behavior (middle management reinforcement), and peer commitment (supporting one another in doing the right thing). Et h ic s Reso u r c e C e n t e r , 2011 N a tio n al B u sin e ss Et h ic s Survey: W o rkpla ce Et h ic s in Tr a n sit io n (2012) at 19. Strong ethical cultures and strong ethics and compliance programs are related, as data show that a well-implemented program helps lead to a strong ethical culture. Id. at 34. "Understanding the nature of any gap between the desired culture and the actual culture is a critical first step in determining the nature o f any ethics-based risks inside the organization." David Gebler, The Role o f Culture at 1.7, in S o ciety of C orporate C ompliance and Et h ic s, The C omplete C ompliance and Et h ic s M anual (2011). To create an ethical culture, attention must be paid to norms at all levels o f an organization, including the "tone at the top," "mood in the middle," and "buzz at the bottom." Id. 1.9-1.10. 313See, e.g, U.S. Sen t e n c in g G u id elin es 8B2.1(2)(B)-(C) (2011). 314Id . 315Id. 316Id . 317See, e.g., Et h ic s a nd C o m plia nce O f f ic e r A sso c ia tio n Foundation, The Eth ics and C ompliance Handbo o k: A Pr a c t ic a l G u ide From Lea d in g O r g a n iza t io n s (2008) at 13-26 [hereinafter Th e Et h ic s a nd C o m plia nce H a n d bo o k ]. 318See U S. Se n te n c in g G u id elin es 8B2.1(b)(4) (2011). 319See U S. Se n te n c in g G u id elin es 8B2.1(b)(6) (2011) ("The organization's compliance and ethics program shall be promoted and enforced consistently throughout the organization through (A) appropriate incentives to perform in accordance with the compliance and ethics program; and (B) appropriate disciplinary measures for engaging in criminal conduct and for failing to take reasonable steps to prevent or detect criminal conduct."). 320See, e.g., J o seph E. M urphy, S o ciet y of C orp. C o m plia nce and Et h ic s , U sin g In c e n tiv e s in Yo ur C o m plia n ce a n d Et h ic s Pro gra m (2011) at 1; The Et h ic s a nd C o m plia nce H a n d b o o k , supra note 317, at 111-23. 321Stephen M. Cutler, Director, Division of Enforcement, SEC, Tone at the Top: Getting I t Right, Second Annual General Counsel Roundtable (Dec. 3, 2004), available a t http://www.sec.gov/news/speech/ spch120304smc.htm. 322See, e.g., IC C Rules on C om bating C o r r u ptio n , supra note 309, at 8. 323See, e.g. U.S. Sen te n c in g G u id elin es 8B2.1(b)(5)(C); C o m pliance 101, supra note 302, at 30-33. 324Corporate Board Member/FTI Consulting 2009 Legal Study, Buckle Up. Boards a n d General CounselM ay Face a Bumpy Ride in 2009, at 5 (" Interestingly, while 67% o f general counsel say their company is subject to compliance under the FCPA, 64% of those say there is room for improvement in their FCPA training and compliance programs."). 325See U S. Se n te n c in g G u id elin es 8B2.1(b)(5)(B) ("The organization shall take reasonable steps . . . to evaluate periodically the effectiveness of the organization's compliance and ethics program."). 326See, e.g., C o m pliance 101, supra note 302, at 60-61; The Et h ic s and C o m pliance H a n d b o o k , supra note 317, at 155-60; B u sin e ss Pr in c ip le s fo r C o u n t er in g Bribery, supra note 309, at 14. 327See, e.g., Michael M. Mannix and David S. Black., Compliance Issues in M & A : Performing Diligence on the Target's Ethics a n d Compliance Program at 5.71-5.81, in So c iet y of C orporate C o m pliance and Et h ic s, The C omplete C ompliance and Ethics Manual (2011). 328Complaint, SEC v. Syncor International Corp., supra note 190; Criminal Information, United States v. Syncor Taiwan, Inc., supra note 189. 329U.S. D ept. of J u s t ic e , FCPA O p. Release 08-02 (June 13, 2008), available at http://justice.gov/criminal/fraud/fcpa/opinion/2008/0802. pdf. 330Complaint, S E C v . RaeSys., Inc.,supra note 92; Non-Pros. Agreement, In re R ae Sys. Inc., supra note 92. 331U.S. D ept. of C o m m erc e, Bu sin e ss Et h ic s : A M anual fo r M anaging a Respo nsible B usiness Enterpr ise in Em erging M a rk et E co no m ies (2004), available a t http://www.ita.doc.gov/ goodgovernance/adobe/bem_manual.pdf. 332U.S. D ept. of State, Fig h t in g Glo bal C o r r u pt io n : B u sin e ss Risk Manag em ent (2d e d 2001), available a t http://www.ogc.doc. gov/pdfs/Fighting_Global_Corruption.pdf. 333See H a r m o n isin g A n t i- C o r r u pt io n C o m plia n ce, supra note 302, at 46 ("Anti-corruption compliance is becoming more and more harmonised worldwide."). 334O E C D G ood Pr a c t ic e G u id a n ce, supra note 309. 335A PEC A n t i-co r r u ptio n C ode, supra note 309. 336IC C Ru les on C om bating C o r r u ptio n , supra note 309. 337B u sin e ss Pr in c ip l es fo r C o u n t er in g Bribery, supra note 309. 338T he Ten Pr in c ip l e s, supra note 309. 339In t e g r it y C o m plia nce G u id e l in e s, supra note 309. 340Pa r tn e r in g A g a in st C o r r u pt io n , supra note 309. 341 15 U.S.C. 78dd-2(g)(1)(A), 78dd-3(e)(1)(A), 78ff(c)(1)(A). 34215 U.S.C. 78dd-2(g)(2)(A), 78dd-3(e)(2)(A), 78ff(c)(2)(A). 34315 U.S.C. 78ff(a). 34415 U.S.C. 78ff(a). 34518 U.S.C. 3571(d); see Southern Union v. United States, 132 S. Ct. 2344, 2350-51 & n.4 (2012). 34615 U.S.C. 78dd-2(g)(3), 78dd-3(e)(3), 78ff(c)(3). 347The U.S. Sentencing Guidelines are promulgated by the U.S. Sentencing Commission: The United States Sentencing Commission ("Commission") is an independent agency in the judicial branch composed o f seven voting and two non-voting ex-officio members. Its principal purpose is to establish sentencing policies and practices for the federal criminal justice system that will assure the ends of justice by promulgating detailed guidelines prescribing the appropriate sentences for offenders convicted o f federal crimes. The Guidelines and policy statements promulgated by the Commission are issued pursuant to Section 994(a) of Title 28, United States Code. U.S. Sen te n c in g Gu id elin es 1A1.1 (2011). 348Id . at ch. 3-5. 349Id . 2C1.1. 350Id. 2C1.1(b). 351Id. 3B1.1. 352Id . at ch. 4, 5A. 353Id. 2B1.1(b)(10)(B), 2B1.1(b)(18)(A). 354Id. 8C2.4 (a). 355Id. 8C2.5. 356Id . 8C 2.5(f), 8C2.5(g). 357D O J has exercised this civil authority in limited circumstances in the last thirty years. See, e.g., United States & SEC v. KPMG Siddharta Siddharta & Harsono, et al., No. 01-cv-3105 (S.D. Tex. 2001) (entry of injunction barring company from future FCPA violations based on allegations that company paid bribes to Indonesian tax official in order to reduce the company's tax assessment); United States v. Metcalf & Eddy, Inc., No. 99-cv-12566 (D. Mass. 1999) (entry of injunction barring company from future FCPA violations and requiring maintenance of compliance program based on allegations that it paid excessive marketing and promotional expenses such as airfare, travel expenses, and per diem to an Egyptian official and his family); United States v. American Totalisator Co. Inc., No. 93-cv-161 (D. M d 1993) (entry of injunction barring company from future FCPA violations based on allegations that it paid money to its Greek agent with knowledge that all or some of the money paid would be offered, given, or promised to Greek foreign officials in connection with sale of company's system and spare parts); United States v. Eagle Bus Manufacturing, Inc., No. 91-cv-171 (S.D. Tex. 1991) (entry of injunction barring company from future FCPA violations based on allegations that employees o f the company participated in b r ib e r y s c h e m e t o p a y fo r e ig n o ffic ia ls o f S a s k a tc h e w a n 's s ta te - o w n e d tran spo rtatio n com p an y $ 5 0 ,0 0 0 C A D in con n ection w ith sale o f buses); U n i t e d S ta te s v. C a r v e r , et a l , N o . 7 9 - c v - 1 7 6 8 ( S .D . F la . 1 9 7 9 ) (e n tr y o f injunction barrin g com pan y from future F C P A violations based on allegations that C arver an d H olley, officers an d shareholders o f H olcar O il C o rp ., p a id $1.5 m illion to Q atar foreign official to secure an oil d rillin g c o n c e ssio n a g re e m e n t); U n it e d S ta te s v. K en n y, et al., N o . 79-cv2 038 (D .D .C . 1979) (in con jun ction w ith crim inal p roceed in g, entry o f injunction barrin g com pany from future F C P A violations for p rovidin g illegal financial assistance to political p arty to secure renew al o f stam p distribution agreem ent). 358 15 U .S .C . 7 8 d d - 2 ( g ) ( 1 ) ( B ) , 7 8 d d - 3 ( e ) ( 1 ) ( B ) , 7 8 f f ( c ) ( 1 ) ( B ) ; see also 17 C .F.R . 2 0 1 .1 0 0 4 (providin g adjustm ents for inflation). 359 15 U .S .C . 7 8 d d - 2 ( g ) ( 2 ) ( B ) , 7 8 d d - 3 ( e ) ( 2 ) ( B ) , 7 8 f f ( c ) ( 2 ) ( B ) ; s ee also 17 C .F.R . 2 0 1 .1 0 0 4 (providin g adjustm ents for inflation). 360 15 U .S .C . 7 8 d d - 2 ( g ) ( 3 ) , 7 8 d d - 3 ( e ) ( 3 ) , 7 8 f f ( c ) ( 3 ) ; see also 1 7 C .F .R . 2 0 1 .1 0 0 4 (providin g adjustm ents for inflation). 361 S e c t io n 2 1 ( B ) ( b ) o f th e E x c h a n g e A c t , 15 U .S .C . 7 8 u ( d ) ( 3 ) ; see also 17 C .F.R . 2 0 1 .1 0 0 4 (providin g adjustm ents for inflation). 362See S e c u r itie s E n fo r c e m e n t R e m e d ie s a n d P e n n y S t o c k R e f o r m A c t o f 1990, Pub. L. N o . 101-429, 104 Stat. 931 202, 301, 4 0 1 , an d 4 0 2 (co d ified in scattered section s o f T itle 15 o f the U n ite d States C o d e). 3634 8 C .F .R . 9 .4 0 6 - 2 , 9 .4 0 7 - 2 . 3644 8 C .F .R . 9 .4 0 2 ( b ) . 365See 4 8 C .F .R . 9 .4 0 6 - 1 , 9 .4 0 7 - 1 ( b ) ( 2 ) . S e c t io n 9 .4 0 6 - 1 se ts fo r t h th e follow ing non-exhaustive list o f factors: (1 ) W h eth er the con tractor h ad effective stan dards o f co n d u ct an d in tern al con trol system s in place at the tim e o f the activity w hich constitutes cause for debarm ent or h ad adopted such procedures prior to any G overn m en t in vestigation o f the activity c ite d as a cause for debarm ent. (2 ) W h eth er the con tractor brough t the activity cited as a cause for debarm ent to the attention o f the appropriate G overnm ent agency in a tim ely m anner. (3) W h ether the con tractor has fully investigated the circum stances surrounding the cause for debarm ent and, if so, m ade the result o f the investigation available to the d ebarrin g official. (4 ) W h eth er the co n tracto r co o p erated fully w ith G overn m en t agencies du rin g the investigation and any cou rt or adm inistrative action. (5) W hether the contractor has p aid or has agreed to p ay all crim in al, civil, an d adm in istrative liability for the im pro p er activity, in clu d in g any investigative or adm inistrative costs incurred by the G overnm ent, and has m ade or agreed to m ake fu ll restitution. (6) W h ether the con tractor has taken appropriate disciplinary action against the individuals responsible for the activity w hich constitutes cause for debarm ent. (7) W hether the contractor has im plem ented or agreed to im plem ent rem edial m easures, includin g any identified by the G overnm ent. (8) W hether the con tractor has in stituted or agreed to institute new or revised review an d con trol procedures an d ethics train in g program s. (9) W hether the contractor has h ad adequate tim e to elim inate the circum stances w ithin the c o n t r a c t o r 's o r g a n iz a t io n t h a t l e d t o th e ca u se fo r debarm ent. ( 1 0 ) W h e t h e r t h e c o n t r a c t o r 's m a n a g e m e n t recognizes an d u nderstands the seriousness o f the m isco n d u ct giv in g rise to the cause fo r debarm en t and has im plem ented program s to prevent recurrence. 3664 8 C .F .R . 9 .4 0 6 - 1 ( a ) . 367E x e c . O r d e r N o . 1 2 ,5 4 9 , 51 F e d . R e g . 6 ,3 7 0 (F e b . 1 8 , 1 9 8 6 ) ; E x e c. O rder N o . 12,689, 54 Fed. Reg. 34131 (A ug. 18, 1989). 3684 8 C .F .R . 9 .4 0 7 - 2 ( b ) . 369 U S A M 9 - 2 8 .1 3 0 0 ( 2 0 0 8 ) . 370See, e.g, Afr ic a n D ev elo pm en t Ba n k Gro up, In t e g r it y APPENDIX Endnotes AND AN TI-CO RR U PTIO N PROGRESS REPORT 2 0 09-2010 7, 14 ( "A s th e p r e m ie r f in a n c ia l d e v e lo p m e n t in s t it u tio n in A f r ic a , th e A f D B is d eterm in ed to ro o t o u t m isc o n d u c t, fra u d an d co rru p tio n w ith in its ow n ran ks as w ell as in the im plem en tation o f the projects it finances. In o rder to d o so, the B an k created an anti-corru ption and frau d in vestigation division in N o v em b er 2 0 0 5 as its sole investigative body. The u n it becam e o p eratio n al in Ju n e 2 0 0 6 an d com m en ced in v e s tig a tio n s in J a n u a r y 2 0 0 7 ___ In v e stig a tio n s c o n d u c t e d b y th e IA C D [Integrity an d A n ti-C o rru p tio n D ep artm en t] are n o t crim inal p ro ceed in g s; they are adm in istrative in nature. San ction s range from p erso n n e l d iscip lin ary actions, such as sep aration , to loan can cellation an d debarm ent for con tractors, w hich can be tem porary or perm anent."), available at h ttp ://w w w .a fd b .o rg /file a d m in /u p lo a d s/a fd b /D o c u m e n ts/ P u blication s/In tegrity% 20an d% 20A n ti-C orru ption .p df; The W orld B a n k G r o u p , Procurement: Sanctions Committee (" T h e W o r ld B a n k 's debarm en t process w as first fo rm ulated in July, 1996, an d the Sanctions C o m m ittee w as estab lish ed in N o v em b er 1998 to review allegation s an d recom m en d san ction s to the President. W ritten p rocedures were issued in A u g u s t 2 0 0 1 a n d are p o s t e d o n th e B a n k 's w e b site , a lo n g w ith th e san ctio n action s." ), available a t h ttp ://w e b .w o r ld b a n k .o r g /W B S IT E / E X T E R N A L /P R O JE C T S /P R O C U R E M E N T /0 ,,co n te n tM D K :5 0 0 0 2 2 8 8 ~ p ag eP K :8 4 2 7 l~ p iP K :8 4 2 8 7 ~ th eS iteP K :8 4 2 6 6 ,0 0 .h tm l. 371 See A fr ic a n D e v e lo p m e n t B a n k G r o u p , A s ia n D e v e lo p m e n t B a n k , E uropean B an k for R econ struction an d D evelopm en t, Inter-A m erican D e v e lo p m e n t B a n k G ro u p an d W o rld B a n k G ro u p , Agreement f o r M u tu al Enforcement o f D ebarm ent Decisions (A p r. 9 , 2 0 1 0 ), available at h ttp ://site re so u rc e s.w o rld b a n k .o rg /N E W S /R e so u rc e s/ A greem en tForM utualE n forcem en tofD ebarm en tD ecision s.pdf. 372Id.; see also T h e W o r ld B a n k G r o u p , Cross-Debarment Accord Steps Up Fight Against Corruption (A p r. 9 , 2 0 1 0 ) ( " ` W i t h t o d a y s c r o ss -d e b a rm e n t agreem ent am ong developm ent banks, a clear m essage on anticorruption is b e in g d eliv ered : S te a l a n d ch eat fro m o n e, g e t p u n ish e d b y all,' said W o rld B a n k G ro u p P residen t R o b e rt B . Z o ellick ."), available at h t t p :/ / w eb .w o rld b an k .o rg /W B S IT E /E X T E R N A L /N E W S /0 ,,co n ten tM D K :2 253 5 8 0 5 ~ p ageP K :6 4 2 5 7 0 4 3 ~ p iP K :4 3 7 3 7 6 ~ th eSiteP K :4 6 0 7 ,0 0 .h tm l. 373 2 2 C .F .R . 1 2 6 .7 ( a ) ( 3 ) - ( 4 ) , 1 2 0 .2 7 ( a ) ( 6 ) . 374A u t h o r it y u n d e r th e A E C A is d e le g a t e d t o th e D D T C . See 2 2 C .F .R . 120.1(a). 375 2 2 U S . C . 2 7 7 8 ( g ) ( 1 ) ( A ) ( v i ) , ( g ) ( 3 ) ( B ) . 376 2 2 C .F .R . 1 2 7 .7 (c ). 377See supra n o te 2 8 6 . 378 See G a r y G . G r in d le r , A c t i n g D e p . A t t 'y G e n ., U .S . D e p t. o f Justice, M em . to the H eads o f D epartm en t C om pon en ts and U n ited States A tto rn ey s o n A d d itio n al G u id an ce on the U se o f M o n ito rs in D eferred Prosecution A greem ents an d N on -P rosecution (M ay 25, 2 0 1 0 ), available a t h ttp ://w w w .ju stic e .g o v /d a g /d a g -m e m o -g u id a n ce m o n i t o r s .p d f ; L a n n y A . B re u e r, A s s is t. A t t 'y G e n ., D e p 't o f J u s tic e , M em . to A ll C rim in al D ivision Personnel on Selection o f M o n ito rs in C rim in a l D iv ision M atters (Ju n e 24, 2 0 0 9 ), available at h ttp ://w w w . ju s t ic e .g o v / c r im in a l/ f r a u d / f c p a / d o c s / r e s p o n s e 3 - s u p p - a p p x - 3 .p d f ; see also C r a i g S . M o r f o r d , A c t i n g D e p . A t t 'y G e n ., U .S . D e p t. o f J u s t i c e , M em . to the H eads o f D epartm en t C om p on en ts an d U n ited States A ttorn ey s on Selection an d U se o f M o n ito rs in D eferred P rosecution A greem ents an d N on -P rosecution A greem ents w ith C orporation s (M ar. 7, 2 0 0 8 ), available a t h ttp ://w w w .ju stice .g o v /d a g /m o rfo rd u seofm on itorsm em o-03072008.pd f. 379 H is to r ic a lly , D O J h a d , o n o c c a s io n , a g r e e d t o D P A s w ith c o m p a n ie s th at w ere n o t filed w ith the co u rt. T h at is n o lo n g er th e p ractice o f D O J. 380U S A M 9 - 2 7 .2 3 0 . 381 U S A M 9 - 2 7 .2 3 0 .B . 382 D O J h a s re c e n tly d e c lin e d m a tte r s w h e re s o m e o r a ll o f th e fo llo w in g 118 119 circum stances w ere present: (1) a corporation voluntarily an d fully disclosed the poten tial m iscon duct; (2) corporate principles voluntarily en gaged in interview s w ith D O J an d p ro vid ed truth fu l an d com plete inform ation about their con d uct; (3 ) a p arent com pany con d ucted extensive pre-acquisition due diligence o f p oten tially liable subsidiaries an d en gaged in significant rem ediation efforts post-acq u isition ; (4) a com pan y p ro vid ed in form ation about its extensive com plian ce policies, p roced u res, an d in tern al con trols; (5 ) a com p an y agreed to a civil resolution w ith the Securities an d Exch ange C o m m issio n w hile also dem on stratin g that crim in al declin ation w as appropriate; (6 ) only a single em ployee w as involved in the im proper paym ents; an d (7) the im proper paym ents involved m in im al funds co m p ared to overall business revenues. 383See C r im in a l In fo r m a tio n , United States v. Peterson, supra n o te 8, Press Release, U .S. D ep t. o f Ju stice, Form er M o rgan Stanley M an agin g D irector Pleads G u ilty for R ole in E vadin g Internal C o n tro ls R equ ired by F C P A (A pr. 2 5 , 2 0 1 2 ), available a t h ttp ://w w w .ju stic e .g o v /o p a / p r / 2 0 1 2 / A p r i l / 1 2 - c r m - 5 3 4 .h t m l ( "A f t e r c o n s id e r in g a ll th e a v a ila b le facts and circum stances, in cludin g that M organ Stanley con structed and m ain tain ed a system o f internal controls, w hich p rovided reasonable assurances that its em ployees w ere n o t b rib in g governm ent officials, the D epartm en t o fJu stice declined to bring any enforcem ent action against M o r g a n S ta n le y r e la t e d t o P e te rs o n 's c o n d u c t . T h e c o m p a n y v o lu n ta r ily disclosed this m atter and has cooperated through out the departm en ts in v e stig a tio n ." ); see also P ress R e le a se , U .S . S e c. a n d E x c h a n g e C o m m ., S E C C harges Form er M organ Stanley Executive w ith F C P A V iolation s an d In vestm ent A d viser Frau d (A pr. 25, 2 0 1 2 ), available a t h ttp ://w w w . se c .g o v /n e w s/p re ss/2 0 1 2 /2 0 1 2 -7 8 .h tm (" M o rgan Stanley, w hich is n ot c h a r g e d in th e m a tte r , c o o p e r a t e d w ith th e S E C 's in q u ir y a n d c o n d u c t e d a thorough internal investigation to determ ine the scope o f the im proper p ay m en ts a n d o th er m isco n d u c t involved."). 384S E C R u le s o f P ra c tic e , 1 7 C .F .R . 2 0 1 .1 0 2 ( e ) . 385D e fe r r e d P ro s. A g r e e m e n t , In th e M a t t e r o f T e n a ris, S .A . (M a y 17, 2011), available a t h t t p :/ / w w w .s e c .g o v / n e w s / p r e s s / 2 0 1 1 / 2 0 1 1 - 1 1 2 - d p a . p d f ; see also P ress R e le a se , U .S . S e c. a n d E x c h a n g e C o m m ., T e n a ris t o P ay $ 5 .4 M i llio n in S E C 's F irst- E v e r D e f e r r e d P r o s e c u tio n A g r e e m e n t (M a y 17, 2 0 1 1 ), available at h ttp ://w w w .se c .g o v /n e w s/p re ss/2 0 1 1 /2 0 1 1 - 1 1 2 . htm . 386See N o n - P r o s . A g r e e m e n t, In re T e n a ris, S .A . (M a y 1 7 , 2 0 1 1 ) , available at h ttp ://w w w .ju stice.gov/crim in al/frau d /fcpa/cases/ten aris-sa/2011- 03-14-ten aris.pdf. 387See U S . Se c . a nd Ex c h a n g e C omm., En fo r c e m en t M anual 6.2.3. (M arch 9, 2 0 1 2 ), available a t h ttp ://w w w .se c -g o v /d iv isio n s/ en force/en forcem en tm an u al.pdf. 388S e e id. 6 .2 .4 . 389See id. 2.6. 39018 U .S .C . 1 5 1 4 A (c ). 39118 U .S .C . 1 5 1 3 (e ) . 39215 U .S .C . 7 8 u - 6 ( a ) ( 3 ) . T h e n e w p r o v is io n d e fin e s "o r ig in a l inform ation" to m ean inform ation that: (A ) is d eriv ed fro m th e in d e p en d en t k n o w led ge o r an alysis o f a w h istleb lo w er; (B ) is n o t k n ow n to the C o m m issio n from any other source, unless the w histleblow er is the origin al source o f the in fo rm atio n ; an d (C ) is n o t exclusively derived from an allegation m ade in a ju dicial or adm inistrative hearing, in a governm ental report, hearing, audit, or in vestigation, or from the new s m edia, unless the w histleblow er is a source o f the in form ation . 39315 U .S .C . 7 8 u - 6 ; see also D o d d - F r a n k W a ll S tr e e t R e f o r m a n d C onsum er Protection A ct, Pub. L. N o . 111-203, 922, 124 Stat. 1376, 1841-49 (2010). 394F o r d e t a ile d in fo r m a tio n a b o u t th e p r o g r a m , in c lu d in g e lig ib ility requirem ents an d certain lim itation s that apply, see Section 9 2 2 o f the D o d d -F ra n k W all S treet R e fo rm an d C o n su m e r P ro tectio n A c t, available at h ttp://w w w .sec.gov/about/offices/ow b/dod d-fran k -sec-922.pd f, an d the final rules on eligibility, Exch ange A ct R ule 21F -8, 17 C .F.R . 2 4 0 .2 1 F - 8 . 395F o r e x a m p le , th e r u le s : ( 1 ) m a k e a w h istle b lo w e r e lig ib le f o r an a w a rd if the w histleblow er reports origin al in form ation internally, an d the com pan y in form s the S E C abou t the violation s; (2 ) give w histleblow ers 120 days to report inform ation to the S E C after first reportin g internally an d still be treated as i f he o r she h a d rep o rted to the S E C at the earlier rep o rtin g d ate , thus p reserv in g th eir "p lace in lin e " fo r a p ossible w histleblow er aw ard from the S E C ; an d (3 ) provide that a w h is t le b lo w e r 's v o lu n t a r y p a r t i c ip a t io n in an e n t ity 's in te r n a l c o m p lia n c e a n d r e p o rtin g system s is a fa c to r th at can in crease the am o u n t o f an a w a rd , a n d t h a t a w h is t le b lo w e r 's in te rfe re n c e w ith in te r n a l c o m p lia n c e an d rep o rtin g system is a facto r th at can decrease the am o u n t o f an aw ard. See E x ch an ge A c t R u le 21F , 17 C .F .R . 2 4 0 .2 1 F . 396See E x c h a n g e A c t R u le 2 1 F - 7 ( b ) , 1 7 C .F .R . 2 4 0 .2 1 F - 7 ( b ) . 397 F o r e x a m p le , S E C s t a f f w ill n o t d is c lo s e a w h is t le b lo w e r 's id e n tit y in response to requests under the Freedom o f Inform ation A ct. H ow ever, th e re are lim it s o n S E C 's a b ility t o s h ie ld a w h is t le b lo w e r s id e n tity , an d in certain circum stances S E C m u st disclose it to outside entities. For exam ple, in an adm inistrative or court proceed in g, S E C m ay be required to produce docum ents or other inform ation that w ould r e v e a l th e w h is t le b lo w e r 's id e n tity . In a d d it io n , as p a r t o f o n g o in g S E C investigatory responsibilities, S E C staff m ay use inform ation p ro v id e d b y a w h istleb low er d u rin g th e co u rse o f the in vestigation . In appropriate circum stances, S E C m ay also p rovide in form ation, subject to confidentiality requirem ents, to other governm ental or regulatory entities. Exchange A ct R ule 2 1 F -7 (a), 17 C .F .R . 2 4 0 .2 1 F -7 (a). 398A l t h o u g h S E C d o e s n o t h a v e an o p in io n p r o c e d u r e r e le a se p r o c e s s , it has declared its decision to follow the guid an ce an n oun ced through D O J 's F C P A O p i n i o n R e le a se P ro c e d u re . U .S . S e c . a n d E x c h a n g e C o m m ., S E C R elease N o . 3 4 -1 7 0 9 9 (A u g. 29, 1 9 8 0 ), available a t h t t p :/ / w w w .sec.gov/n ew s/d igest/1980/d ig082980.pd f. S E C Release N o . 3 4 1 7 0 9 9 s t a t e d t h a t, t o e n c o u r a g e issu e rs t o ta k e a d v a n ta g e o f th e D O J 's F C P A R eview Procedure, as a m atter o f p rosecu torial discretion , S E C w ou ld "n o t take enforcem ent action alleging violations o f Section 3 0A in any case w here an issuer h as so u gh t an d o b tain ed an F C P A Review letter from the D ep artm en t, p rior to M ay 31, 1981, statin g that the D ep artm en t w ill n o t take en forcem en t action un der Section 3 0 A w ith resp ect to the tran sactio n involved." Id. T h e release fu rth er n o te d th at it w ou ld revisit this p olicy once the D O J h ad evaluated the results o f the F C P A R eview Procedure after its first year o f operation. A seco n d release stated that the S E C w ou ld continue to adhere to the p olicy announced in R elease N o . 3 4 -1 7 0 9 9 . U S . Sec. an d E xch an ge C o m m ., S E C Release N o . 3 4 -1 8 2 5 5 (N ov. 13, 1 9 8 1 ), available a t h ttp ://w w w .se c .g o v /n e w s/ d igest/1 9 8 1 /d ig 1 1 1 3 8 1 .p d f. 399 B o t h D O J 's o p in io n p r o c e d u r e re le a se s ( f r o m 1 9 9 3 t o p r e s e n t) a n d review p rocedure releases (from 1 9 8 0 -1 9 9 2 ) are available at h ttp ://w w w . justice.gov/crim in al/frau d /fcp a/op in ion . 400 T h e f u ll r e g u la tio n s r e la t in g t o D O J 's o p in io n p r o c e d u r e are a v a ila b le at h ttp ://w w w .ju stice.gov/crim in al/frau d/fcp a/docs/frgn crpt.p df. 401 2 8 C .F .R . 8 0 .1 . 402 2 8 C .F .R . 8 0 .3 . 403 2 8 C .F .R . 8 0 .1 2 ( " N e it h e r th e s u b m is s io n o f a r e q u e s t f o r an F C P A O pin io n , its pendency, n or the issuance o f an F C P A O pin ion , sh all in any w ay alter the resp on sibility o f an issuer to com p ly w ith the a c c o u n tin g re q u ire m e n ts o f 15 U .S .C . 7 8 m ( b ) ( 2 ) a n d (3 ) ." ). 404 2 8 C .F .R . 8 0 .4 . 405 2 8 C .F .R . 8 0 .5 . 406 2 8 C .F .R . 8 0 .6 . 407 2 8 C .F .R . 8 0 .1 4 ( a ) . T h is n o n - d is c lo s u r e p o lic y a p p lie s r e g a rd le ss o f w hether D O J responds to the request or the p arty w ithdraw s the request b e fo re re c e iv in g a re sp o n se . Id. 408 2 8 C .F .R . 8 0 .6 . 409 2 8 C .F .R . 8 0 .2 . 410 In c o n n e c tio n w ith an y r e q u e s t f o r a n F C P A o p in io n , D O J m a y co n d u ct w hatever in depen d en t investigation it believes appropriate. 28 C .F .R . 80.7. 411 2 8 C .F .R . 8 0 .1 5 . O n c e a r e q u e s t is w ith d r a w n , it h a s n o e ffe c t. H ow ever, D O J reserves the right to retain a copy o f any F C P A opin ion request, docum ents, and inform ation su b m itted during the op in ion release p rocedure for any govern m ental p u rp ose, su bject to the restriction s on disclosures in 28 C .F .R . 80.14. 412 2 8 C .F .R . 8 0 .8 . 413 2 8 C .F .R . 8 0 .7 . " S u c h a d d it io n a l in f o r m a tio n , i f f u r n is h e d o rally , m ust be con firm ed in w riting prom ptly. The sam e person w ho sign ed the in itial request m ust sign the w ritten, supplem en tal in form ation and m ust again certify it to be a true, correct an d com plete disclosure o f the r e q u e ste d in fo rm a tio n ." Id. 414 2 8 C .F .R . 8 0 .9 ( "N o o r a l c le a ra n c e , re le a se o r o t h e r s ta te m e n t purporting to limit the enforcement discretion of the Department of Justice may be given. The requesting issuer or domestic concern may rely only upon a written FCPA opinion letter signed by the Attorney General or his designee."). 41528 C.F.R. 80.8. FCPA opinions do not bind or obligate any agency other than DOJ. They also do not affect the requesting party's obligations to any other agency or under any statutory or regulatory provision other than those specifically cited in the particular FCPA opinion. 28 C.F.R. 80.11. If the conduct for which an FCPA opinion is requested is subject to approval by any other agency, such FCPA opinion may not be taken to indicate D O J's views on any legal or factual issues before that other agency. 28 C.F.R. 80.13. 41628 C.F.R. 80.10. D O J can rebut this presumption by a preponderance o f the evidence. A court determining whether the presumption has been rebutted weighs all relevant factors, including whether the submitted information was accurate and complete and the activity was within the scope of conduct specified in the request. Id. As of September 2012, D O J has never pursued an enforcement action against a party for conduct that formed the basis o f an FCPA opinion stating that the prospective conduct would violate D O J's present enforcement policy. 417As a general matter, D O J normally anonymizes much o f the information in its publicly released opinions and includes the general nature and circumstances of the proposed conduct. D O J does not release the identity o f any foreign sales agents or other types of identifying information. 28 C.F.R. 80.14(b). However, D O J may release the identity of the requesting party, the foreign country in which the proposed conduct is to take place, and any actions D O J took in response to the FCPA opinion request. Id. If a party believes that an opinion contains proprietary information, it may request that D O J remove or anonymize those portions of the opinion before it is publicly released. 28 C.F.R. 80.14(c). 41828 C.F.R. 80.16. APPENDIX Endnotes 120 FCPA Unit Fraud Section, Criminal Division U .S. D e p a rtm e n t o f Justice 1400 N ew York Avenue, N .W. W ashington, DC 20005 h ttp ://w w w .justice .g o v /c rim in a l/fra u d /fc p a / FCPA Unit Enforcem ent Division U .S. Securities & Exchange Com m ission 100 F Street, NE W ashington, DC 20549 h ttp ://w w w sec gov/sp otlig ht/fcp a shtml