Foreign Corrupt Practices Act

The FCPA prohibits the corrupt payment or promise of anything of value to a foreign official to assist the payor in obtaining or retaining business.  The FCPA applies to any individual, firm, employee or agent of a firm and any stockholder acting on behalf of the firm.  The FCPA also applies to any entity foreign or domestic that has a class of securities registered pursuant to the Securities and Exchange Act.

A single violation may place more than a person/entity in criminal and civil jeopardy. The business entity as well as its officers, directors, employees, agents or shareholders acting on behalf of the entity may be penalized for a violation of the FCPA.  For each violation, issuers and domestic concerns may be subject to a fine of up to $2,000,000 and individuals may be subject to a fine up to $100,000 and imprisonment of up to 5 years, as well as civil penalties. 

The accounting provisions of the FCPA require issuers to maintain records and implement adequate internal accounting controls.  These controls include policy statements, designated compliance officials, training and discipline for employees and third parties, internal investigations to review accusations, due diligence with regard to third party contractors and compliance audits.

A violation of the accounting provisions can result in a criminal fine up to $25,000,000 for an entity, and an individual may face a $5,000,000 fine and imprisonment up to 20 years, as well as additional civil penalties.

Accordingly to Assistant Attorney General Lanny Breuer, FCPA is one of the Department of Justice's top priorities. The Fraud section has developed a group of experienced prosecutors who specialize in FCPA investigations and prosecutions, and as of 2009, the Department was pursuing more than 120 FCPA investigations ^[1].

In this period of rapid globalization, many entities are conducting business overseas. The FCPA does not just apply to foreign and domestic publically traded companies. Almost any U.S. entity doing business overseas, from a private small business to a one man shop, can be subject to the Act. It is important to understand that private sales with an interface with a government even through intermediaries and subsidiaries may be subject to the enforcement jurisdiction of the Act.

Contact Conaway & Strickler, PC to learn more information . 

^[1] . Lanny A. Breuer, Keynote address to pharmaceutical regulatory forum, November 12, 2009.