Foreign Corrupt Practices Act

COMPLIANCE WITH THE
FOREIGN CORRUPT PRACTICES ACT OF 1977

IN THE POST-SARBANES-OXLEY WORLD
Jay G. Martin
Shareholder
Winstead Sechrest & Minick P.C.
2400 Bank One Center
910 Travis Street
Houston, Texas 77002
Telephone: (713) 650-2765
Facsimile: (713) 650-2400
jmartin@winstead.com
www.winstead.com
February 2004
Jay G. Martin 2004
TABLE OF CONTENTS
Page
Executive Summary
A.
B.
C.
D.
E.
Introduction. ............................................................................................................1
Overview of Foreign Corrupt Practices Act of 1977...............................................1
Impact of the OECD Anti-Bribery Convention on FCPA........................................3
United Nations Convention Against Corruption. ....................................................4
Implementation of a FCPA Compliance Programs. ................................................4
I.
Introduction..........................................................................................................................1
II.
The Anti-Bribery Provisions of the FCPA ..........................................................................1

A.
Provisions ................................................................................................................1
B.
FCPA Exception for Facilitating Payments ............................................................3
C.
Foreign Subsidiaries................................................................................................4
D.
FCPA and Business Relationships...........................................................................7
E.
Joint Ventures with a State-Owned Entity ...............................................................7
III.
Record-Keeping and Accounting Provisions of the FCPA..................................................7

A.
Application to Public Companies ............................................................................7
B.
No Materiality Standard ..........................................................................................8
C.
Foreign Subsidiaries................................................................................................8
IV.
Affirmative Defenses Under FCPA for Routine Actions ....................................................8

A.
Overview. .................................................................................................................8
B.
Payment of Gifts and Promotional Expenses...........................................................9
C.
Local Law Defense...................................................................................................9
V.
1998 Amendments to the FCPA in Response to 1998 Anti-Bribery Convention of

the OECD and the UN Convention Against Corruption and Fair Competition Act
of 1998 ...............................................................................................................................10
A.
Introduction. ..........................................................................................................10
B.
The OECD Convention ..........................................................................................12
C.
Summary of the Impact of the 1998 Amendments to the FCPA.............................15
D.
Detailed Discussion of Amendments to the FCPA Brought About by 1998
Amendments ...........................................................................................................16
1)
Broader Jurisdiction ..................................................................................16
2)
Beyond "Business" - Securing "Any Improper Advantage".......................16
3)
Payments to International Officials ...........................................................17
4)
Non-U.S. Persons Now Fully Covered by Criminal Penalties ..................17
5)
Application to U.S. Persons Abroad ..........................................................17
E.
Implications of 1998 FCPA Amendments for U.S. Companies .............................17
Jay G. Martin 2004
F.
G.
Future Developments Under the OECD Convention.............................................18

United Nations Convention Against Corruption ...................................................18
VI.
Prudent Selection of Foreign Consultants .........................................................................19
VII.
Enforcement of FCPA........................................................................................................21
A.
DOJ Opinion Procedure........................................................................................21
B.
Fines and Penalties. Enforcement responsibilities of the FCPA are divided
between the DOJ and the SEC ...............................................................................22
VIII.
Implementing an Effective FCPA Compliance Program...................................................26
IX.
Summary of Some Recent FCPA Enforcement Actions and Cases ..................................28

A.
Settlement of Suit Against Baker Hughes by Alan Ferguson.................................28
B.
ExxonMobil and ChevronTexaco Subpoenaed In Connection With FCPA
Kazakhstan Bribery Case.......................................................................................28
C.
Halliburton FCPA Violation in Nigeria. ...............................................................29
D.
Saybolt v. Schreiber. ..............................................................................................30
E.
United States v. Basu. ............................................................................................31
F.
United States v. Syncor Taiwan, Inc. .....................................................................32
G.
United States v. Sengupta. .....................................................................................32
H.
U.S. v. David Kay and Douglas Murphy (S. Dist Texas - Houston)......................33
I.
Baker Hughes.........................................................................................................34
1)
Facts Alleged by the SEC...........................................................................35
2)
The Baker Hughes Consent Decree. ..........................................................36
3)
Action Against KPMG-SSH and Harsono. ................................................37
4)
Action Against Former Company Officers. ...............................................38
J.
U.S. v. Cantor. .......................................................................................................39
K.
U.S. v. King and Barquero.....................................................................................39
L.
U.S. v. Halford; U.S. v. Reitz. ................................................................................40
M.
U.S. v. Rothrock. ....................................................................................................40
N.
Chiquita Brands International...............................................................................41
O.
DOJ Opinion Procedure Release 2001-01. ...........................................................41
P.
Metcalf & Eddy. .....................................................................................................42
1)
The Alleged Facts. .....................................................................................42
2)
Implications of M&E..................................................................................43
Q.
Saybolt. ..................................................................................................................44
R.
United States v. Tannenbaum. ...............................................................................45
S.
Triton. ....................................................................................................................46
1)
Background. ...............................................................................................46
2)
The Settlement............................................................................................47
X.
Conclusion. ........................................................................................................................48

Jay G. Martin 2004
COMPLIANCE WITH THE

FOREIGN CORRUPT PRACTICES ACT OF 1977
IN THE POST-SARBANES-OXLEY WORLD
Executive Summary
A.
Introduction.
It is vital for every company in the United States with foreign operations or sales to
carefully consider whether it has effective policies and procedures in place that adequately
manage the company's risks under the Foreign Corrupt Practices Act of 1977 ("FCPA" or "Act")
as such Act was amended in 1988 and 1998. The sharp rise in U.S. direct investment abroad has
rekindled a host of FCPA concerns some familiar, others more subtle affecting a wide variety
of business transactions. This trend, combined with the privatization of many state-run
enterprises, the increasing competition for business abroad, and the further opening of emerging
markets in Latin America, Asia and Africa, warrants a renewed awareness of FCPA prohibitions
by U.S. companies. In addition, the Sarbanes-Oxley Act of 20021 places significant additional
burdens on corporate officials to ensure that their company's accounts and financial statements
accurately reflect the financial condition of their companies. While most business executives are
aware of the FCPA's basic objectives and requirements, many do not do an adequate job of
protecting their companies and their employees from potentially disastrous consequences stiff
fines and prison sentences that could result from a failure to comply with the Act.
B.
Overview of Foreign Corrupt Practices Act of 1977.
Congress enacted the FCPA in 1977, in response to recently discovered but widespread
bribery of foreign officials by United States business interests. Congress resolved to interdict
such bribery, not just because it is morally and economically suspect, but also because it was
causing foreign policy problems for the United States.2 In particular, these concerns arose from
revelations that United States defense contractors and oil companies had made large payments to
high government officials in Japan, the Netherlands, and Italy.3 Congress also discovered that
more than 400 corporations had made questionable or illegal payments in excess of $300 million
to foreign officials for a wide ranges of favorable actions on behalf of the companies.4
See Corporate and Criminal Fraud Accountability Act of 2002, Title VIII, Pub. L. No. 107-204, 116 Stat. 745
(2002).
The House Committee stated that such bribes were "counter to the moral expectations and values of the
American public," "erode[d] public confidence in the integrity of the free market system," "embarrass[ed]
friendly governments, lower[ed] the esteem for the United States among the citizens of foreign nations, and
lend[ed] credence to the suspicions sown by foreign opponents of the United States that American enterprises
exert a corrupting influence on the political processes of their nations." H.R. Rep. No. 95-640, at 4-5 (1977); S
Rep. No. 95-114 at 3-4 (1977), reprinted in 1977 U.S.C.C.A.N. 4098, 4100-01.
H.R. Rep. No. 95-640, at 5; S.Rep. No. 95-114, at 3.
H.R. Rep. No. 95-640, at 4; S.Rep. No. 95-114, at 3.

Jay G. Martin 2004
The FCPA's anti-bribery provisions prohibit most indirect or direct payments to foreign
and international officials, regardless of the amount. The Act's anti-bribery provisions are
applicable to issuers of securities in the U.S. market, U.S. companies and persons and foreign
entities if acts in furtherance of bribery were committed in the U.S. or through the U.S. mails.
The anti-bribery provisions of the FCPA prohibit giving anything of value to a foreign or
international official, with corrupt intent, for the purpose of obtaining or retaining business or
gaining an improper advantage.
A limited exception to the prohibition on payments to foreign officials under the FCPA is
payments for routine, non-discretionary governmental actions, also referred to as facilitating
payments. For example, payments in connection with obtaining governmental permits or
licenses, and processing visas. Although the amount for a permissible facilitating payment is not
defined by statute, it is generally thought that a facilitating payment should not exceed a few
hundred dollars.
There are two affirmative defenses under the FCPA's anti-bribery provisions: (1) if a
payment or offer of anything of value is in accordance with the written laws of the country in
which the payment is being made; and (2) the payment of reasonable and bona fide expenditures
directly related to the business of the payer, such as travel, lodging and meal expenses for a
foreign official. However, considerable caution should be used in conducting activities in
reliance on the bona fide expenditures defense. In United States v. Metcalf & Eddy, Inc. (D
Mass. 1999), a company was found to have violated the FCPA by paying travel expenses for an
Egyptian government official and his family, with the knowledge that the official was capable of
exerting influence on the award of a bid for a project in which the company was competing. The
expenses covered by the company for the government official and his family were deemed by the
court to be unreasonable (i.e. first class travel, cash advances in addition to paid per diem, etc.)
The FCPA's accounting provisions were added to the Act in 1994. They require all
companies that are securities issuers5 under the Securities Exchange Act of 1934 ("Exchange
Act"), whether domestic or foreign, to maintain record-keeping and disclosure requirements in
order to prevent "off-book" accounting practices that facilitate bribery. The FCPA's books and
records provisions apply to all U.S. and foreign companies that are issuers under the Act. Recent
accounting violation cases illustrate a move by the Securities and Exchange Commission
("SEC") to hold U.S. companies responsible for the accounting violations of their foreign
subsidiaries.
A foreign subsidiary of a U.S. corporation is a foreign legal person, having the nationality
of its country of incorporation, and is thus not technically subject to the FCPA's anti-bribery
provisions except in respect of acts done by it within a territory of the U.S. However, a U.S.
parent company is itself at risk of liability if it is found to have authorized, directed or controlled
5
Issuers are essentially publicly-traded companies any corporation (domestic or foreign) that has registered a
class of securities with the SEC or is required to file reports with the SEC, e.g. any corporation with its stocks,
bonds, or American Depository receipts traded on U.S. stock exchanges or the NASDAQ Stock Market, as well
as their officers, directors, employees, agents and their shareholders acting on behalf of the issuer.
Jay G. Martin 2004
a foreign subsidiary committing an act of bribery. Even a finding of willful blindness or reckless
disregard on the part of the parent company will suffice to trigger liability in the absence of
express authorization, though negligence alone will not. In all likelihood, any form of effective
control over a subsidiary's activities will probably be enough to expose the parent company to
the risk of liability under the FCPA. A U.S. issuer parent company is also obliged to enforce the
FCPA books and records provisions in foreign subsidiaries which it controls.
The FCPA divides enforcement responsibilities between the Department of Justice
("DOJ") and the SEC. However, because the FCPA casts such a wide net, FCPA violations may
arise in a number of contexts. As a result, other agencies may get involved in the investigation
of FCPA violations, in addition to the DOJ and the SEC. Allegations of civil violations of the
FCPA anti-bribery provisions by non-issuers are also investigated by the DOJ6; allegations of
civil violations of the record-keeping and anti-bribery provisions of the FCPA by issuers are, on
the other hand, investigated by the SEC. SEC investigations against issuers are conducted by
attorneys assigned to the SEC's Division of Enforcement in Washington D.C. and by
enforcement attorneys in SEC regional offices. By contrast to the DOJ Criminal Division which
can rely on the greater evidence-gathering tools available to its criminal prosecutors, FCPA
investigations by the SEC have until now been constrained by limited enforcement resources
and, as a result, the SEC has pursued relatively few investigations of violations of the FCPA antibribery provisions.
Penalties for FCPA violations may be civil and/or criminal. Penalties for criminal
violations are determined according to the United States Sentencing Guidelines Manual and
include imposition of fines against companies and/or individuals -- i.e. directors, managers,
employees -- as well as imprisonment.
C.
Impact of the OECD Anti-Bribery Convention on FCPA.
The FCPA was amended in 1998 in order to comply with the 1998 Anti-Bribery
Convention of the Organization for Economic Cooperation and Development ("OECD"), which
has been adopted by 34 countries, including the U.S. The OECD Convention ("OECD
Convention") requires countries to impose effective and dissuasive sanctions and its provisions
capture the illicit activities of intermediaries. It establishes the basis for cooperation between
countries with respect to legal assistance and extradition in cases involving covered commercial
bribery offenses. The OECD Convention also imposes corporate liability for bribery and makes
bribery of foreign public officials a predicate offense for the purposes of money laundering. In
addition, the parties to the OECD Convention commit to implement a program of systematic
monitoring of the implementation of their respective national laws. The passage of the OECD
6
Non-issuers, for the purpose of the application of the FCPA, are "domestic concerns other than issuers", i.e. any
corporation, partnership, association, joint-stock company, business trust, unincorporated organization, or sole
proprietorship that has its principal place of business in the U.S., or that is organized under the laws of the U.S.,
or a territory, possession, or commonwealth of the U.S., as well as any person other than an issuer or a domestic
concern, i.e. any business entity that is organized under the laws of foreign countries and does not trade on the
U.S. stock exchange.
Jay G. Martin 2004
Convention marks an important step in the international movement to criminalize bribery in that
its signatories account for about two-thirds of all global exports and approximately 90 percent of
worldwide foreign direct investment.
D.
United Nations Convention Against Corruption.
In December 2003, 97 countries signed the new United Nations ("UN") Convention
Against Corruption ("UN Convention"). This is the latest in a series of moves to force the
international community to take action against bribery and other forms of corruption. The new
UN Convention will come into effect upon ratification by 30 of its signatories.
Like the OECD Convention, the new UN Convention is not self-executing. Each party to
the UN Convention is required to adopt domestic legislation implementing the UN Convention's
requirements. Unlike the OECD Convention, however, the UN Convention goes far beyond
bribery of public officials. It covers bribery in the private sector as well and includes such
additional topics as embezzlement, money laundering, corporate record-keeping, obstruction of
justice, extradition and international law enforcement cooperation. Implementation is to be
monitored by a UN watchdog committee.
E.
Implementation of a FCPA Compliance Programs.
In the Caremark case, the Delaware Chancery Court held that the failure of a company to
have an adequate corporate information and reporting system in place could constitute a breach
of fiduciary duty by the company's board of directors. Among other things, this could leave
directors liable for losses incurred by companies for non-compliance with applicable law
including the FCPA. See In re Caremark International Inc. Derivative Litigation, 698 A.2d 959
(Del Ch. 1996).
In order to meet the requirements of the Sarbanes-Oxley Act of 2002 and the standards of
the Federal Sentencing Guidelines for Organizations, it is prudent for companies to take a
number of compliance actions with respect to the FCPA:
Adopt a FCPA Corporate Policy. Every company should adopt a written corporate
policy on FCPA compliance and distribute the policy to all employees, including
those located in overseas offices. The FCPA policy should be carefully crafted to
reflect the actual business and operations of the company (and not merely duplicated
from another company's policy or standards). The FCPA policy, as well as
implementing procedures, should be updated regularly to reflect new developments in
the U.S., the widespread adoption of the OECD Convention, and rapidly evolving
changes in other anti-bribery laws around the world.
Adopt Comprehensive Implementing Procedures for FCPA Compliance. A company

should implement its FCPA policy by putting in place comprehensive monitoring and
reporting procedures. Possibilities include establishment of an executive-level FCPA
Review Committee to manage and review FCPA issues as they arise, designation of
Jay G. Martin 2004
an FCPA Compliance Officer or Ombudsman to whom FCPA referrals may be made

by employees on a confidential basis, development of screening methods and
checklists to identify when FCPA issues may occur during normal business
operations, development of questionnaires for use internally and with third-parties,
and development of appropriate contract language for inclusion in all agreements that
may give rise to FCPA concerns.
Communicate With and Train Employees on Requirements of FCPA. As important as

it is to have an appropriate FCPA policy and procedures, it is equally important that
all pertinent information be communicated effectively to employees. The language
used in the compliance and training materials must be clear and understandable to
employees at all levels of the organization. Affected employees should also receive
adequate training regarding the FCPA policy and procedures. Each employee with
substantive responsibilities that relate to overseas operations or sales should be
required to attend periodic training sessions, incorporating practical guidance on how
to deal with situations that may arise in the course of the employee's work. Such
FCPA training is best conducted in person by a company's compliance officer or legal
counsel so that issues particular to a group of employees can be addressed. The
company should keep a detailed record of the employees who attend these training
sessions.
Act Swiftly if FCPA Violations Occur. In the event allegations of FCPA violations
are received, the company should take swift action to investigate. In the event actual
FCPA violations have occurred, the company should have in place standard
disciplinary procedures that apply to all employees who violate the FCPA policy.
Prompt action must be taken with respect to actual abuses in an effort to avoid
repeated occurrences. The company should also assess whether or not its policy and
procedures need to be modified and its internal enforcement strengthened. In
appropriate cases, the company should consider voluntary disclosure of apparent
FCPA violations to the federal government in order to mitigate its exposure to
enforcement action.
Review FCPA Matters Regularly. The company's FCPA Review Committee or

Compliance Officer should report, on a regular basis, to the company's board of
directors any policy violations, enforcement measures and disciplinary actions. The
board of directors should periodically evaluate the effectiveness of the FCPA policy
and procedures.
If done properly, an FCPA comprehensive compliance program can become a valuable

corporate asset that enhances company operations, facilitates compliance with law and mitigates
damage when and if violations take place.

Jay G. Martin 2004
I.
Introduction
Congress enacted the FCPA in 1977,7 largely in response to disclosures in the early
1970s of questionable payments by large U.S. companies. Those questionable payments took the
form of either illegal political contributions or payments to foreign officials to secure contracts,
many of which bordered on bribery. Accordingly, the principal focus of the FCPA is its
sweeping prohibition against foreign bribery.8
In addition, the FCPA sets forth provisions on record-keeping and accounting practices
by U.S. companies, aimed at prohibiting the establishment of corporate slush funds used to
finance illegal payments. The record-keeping and accounting provisions apply to all U.S.
companies that are "issuers"9 those that have stock registered with the Securities and Exchange
Commission ("SEC") and not just those with foreign operations. The anti-bribery provisions
of the FCPA apply to all companies, regardless of whether they have stock registered with the
SEC.10
The FCPA affects not only procurement and concession decisions, but also the
structuring of foreign investments. These might include government requirements covering
technology transfers, local participation in projects or other local benefits like infrastructure
development. Additional issues are faced by companies with joint ventures involving foreign
governments, state-owned companies or private foreign entities that are owned or controlled by
government officials.
II.
The Anti-Bribery Provisions of the FCPA
A.
Provisions. The anti-bribery provisions of the FCPA make it illegal for any
company, whether or not publicly traded, to bribe any foreign official for the purpose of
obtaining or retaining business or securing any improper advantage.11 A foreign official is
7
Act of Dec. 19, 1977, Pub. L. No. 95-213, 91 Stat. 1494, as amended by the Foreign Corrupt Practice Act
Amendments of 1988, Pub. L. No. 100-418, 102 Stat. 1415, 15 U.S.C. 78m(b) (accounting standards), 15
U.S.C. 78dd-1 (1988) (prohibited foreign trade practices by issuers) and 15 U.S.C. 78dd-2 (1988)
(prohibited foreign trade practices by domestic concerns), as amended by the International Anti-bribery and
Fair Competition Act of 1998, 15 U.S.C. 78dd-1 to 78dd-3, 78ff (West Supp. 1999), Pub. L. No. 105-366,
112 Stat. 3302 (1998).
15 U.S.C. 78dd-l(a) (West Supp. 1998) (for issuers), 78dd-2(a) (West Supp. 1998) (for domestic concerns).
15 U.S.C. 78dd-2(a); 78l; See also 15 U.S.C. 78o(d).
10
15 U.S.C. 78dd-1(a) (for issuers); 78dd-2(a) (for domestic concerns).
11
A violation of the anti-bribery provisions of the FCPA generally consists of five primary elements, which may be
summarized as follows:
any issuer or person of the U.S. who either uses the U.S. mails or other instrumentalities of interstate commerce or
performs an act outside the U.S. (see 15 U.S.C. 78dd-1(a) (for "issuers"), 78dd-2(a) (for domestic concerns)),
makes a payment of or an offer, authorization or promise to pay (see 15 U.S.C. 78dd-1(a)(1) (for
issuers), 78dd-2(a) (for domestic concerns)) money or anything of value (see 15 U.S.C. 78dd1(a)(3) (for issuers), 78dd-2(a)(3) (for domestic concerns)),
Jay G. Martin 2004
defined as someone having discretionary authority.12 The FCPA prohibits individuals and
businesses from offering, promising or authorizing (either directly or indirectly) the payment of
anything of value to any foreign official, government employee, officer of a public international
organization, foreign political party or political candidate, or any person acting on behalf of any
of these entities.13 The provisions also forbid direct bribes and bribes made through
intermediaries.14 The anti-bribery provisions affect both issuers and domestic concerns, as well
as their individual employees, officers, directors, stockholders and agents. The SEC and the
Department of Justice ("DOJ") can convict individual corporate employees under the FCPA,
regardless of whether the corporation is found guilty.15
A foreign public official is defined quite broadly by the FCPA and includes "any
officer or employee of a foreign government or any department, agency, or instrumentality
thereof, or any person acting in an official capacity for or on behalf of any such government,
department, agency or instrumentality". By contrast with Article 1 of the OECD Convention,
the definition of foreign public official in the FCPA does not mention persons holding
judicial office in a foreign country.
Another area of potential uncertainty under the FCPA involves officials of public
enterprises. Such enterprises are covered in U.S. law as instrumentalities, making their
officers, directors, employees, etc., foreign officials under the FCPA. Neither the FCPA nor
its history define the term instrumentality, thus leaving it to U.S. companies to determine
whether an enterprise is an instrumentality or not. This can be difficult in some cases. For
instance, are instrumentalities only enterprises that are wholly or majority-owned by the
to any "foreign official" or foreign political party while "knowing" that the payment or promise to pay will be
passed on to one of the above (see 15 U.S.C. 78dd-1(a)(1)-(2) (for issuers), 78dd-2(a)(l)-(2) (for domestic
concerns)),
"corruptly" for the purpose of influencing an official act or decision of that person; inducing the person to do or
omit to do any act in violation of his or her lawful duty (See S. REP. NO. 95-114, at 10 (1977), reprinted in 1977
U.S.C.C.A.N 4098, 4108), and
in order to obtain, retain or direct business to any person or securing an improper advantage (See 15 U.S.C.
78dd-1(a)(1)-(2) (2000) (for issuers) and 78dd-2(a)(l)-(2) (2000) (for domestic concerns)). There is no serious
difficulty in meeting the "interstate nexus" requirement: the interstate nexus can be as slight as a single
letter, fax, cable, phone call, or airline ticket, in the furtherance of the effort to make a prohibited
payment. In Sam P. Wallace Co. (D.P.R. 1983), for instance, the mailing of checks was deemed "uses
of means and instrumentalities of interstate commerce, that is, interstate and foreign bank processing
channels". In United States v. Harry G. Carpenter (Criminal Information No. 85-353 1985), a Western
Union international telex was cited as the use of a means and instrumentality of interstate commerce
for the purposes of the FCPA. In United States v. Reitz (W.D. Mo, 2001), the plea stated that in
furtherance of the bribery act the defendant and other conspirators corresponded via e-mail and
facsimile transmission and engaged in numerous telephone conversations. In U.S. v. Mead (D.N.J.
1998), the requisite interstate nexus was proven by the use of emails and international travel.
12
See 15 U.S.C. 78dd-1(f)(1), 78dd-2(h)(2).
13
See 15 U.S.C. 78dd-1(a) (for "issuers"), 78dd-2(a) (for "domestic concerns").
14
See 15 U.S.C. 78dd-1(a)(3) (for "issuers"), 78dd-2(a)(3) (for "domestic concerns").
15
See 15 U.S.C. 78ff(c)(2)(B); 78dd-2(g)(2)(B).

Jay G. Martin 2004
foreign government? Does the term instrumentality cover enterprises that are controlled by
the government, or entities in the process of privatization? While other U.S. laws may
contain some clues to a possible definition, most are in the domestic context and thus may be
of limited relevance. For instance, the Foreign Sovereign Immunities Act (FSIA) defines an
agency or instrumentality of a foreign state as an entity, "a majority of whose shares or other
ownership interest is owned by a foreign state or political division".
B.
FCPA Exception for Facilitating Payments. The FCPA was amended in 1988 to
clarify that certain payments known as grease or facilitating payments were not intended to be
covered under the FCPA.16 This exception covers any payment, the purpose of which is to
expedite or secure the performance of a routine governmental action.17 "Routine governmental
action" includes actions that a government official routinely performs,18 including:
obtaining permits, licenses, or other official documents that allow one to do

business in a foreign country,19
processing governmental papers (such as visas and work orders),
scheduling inspections,
providing police protection,
mail pick-up and delivery,
phone, power or water service, and
loading and unloading cargo.20
A violation of the FCPA occurs when payments other than grease payments or facilitating
payments are made corruptly to obtain or retain business, gain an improper advantage or to
facilitate nondiscretionary actions performed by governmental officials.21
There is an absence of any clear, published guidance as to what is meant by facilitating
payments and where the limits are. The FCPA contains no per se limit on the size of the
facilitating payments, focusing instead on the purpose of the payment. No court has interpreted
the application of the facilitating payment exception and there are no settled cases to assist in
precisely delineating the boundary between acceptable and unacceptable payments. There are
also no relevant DOJ Opinions addressing facilitating payments. If a company asks the DOJ for
informal advice or reports a facilitating payment, the DOJ will sometimes determine straight
away, on the basis of judgment and experience, whether it falls within the facilitating payment
16
See 15 U.S.C. 78dd-1(b) (for issuers) and 78dd-2(b) (for domestic concerns); It should be noted that this exception is
not provided for in the statute governing domestic bribery (18 U.S.C. 201).
17
Id.
18
See 15 U.S.C. 78dd-1(f)(3)(A)(i) (2000) (for issuers); 78dd-2(h)(4)(A)(i) (2000) (for domestic concerns).
19
Id.
20
See 15 U.S.C. 78dd-1(f)(3)(A)(ii-iv) (for issuers); 78dd-2(h)(4)(A)(ii-iv) (for domestic concerns).
21
See 15 U.S.C. 78dd-1(f)(3)(B) (for issuers); 78dd-2(h)(4)(B) (for domestic concerns; See also H.R. CONF. REP. NO. 100576, at 921 (1988)).
Jay G. Martin 2004
exception and if so, take no further action. This operates as a sort of informal, undocumented 'de
minimis' rule.
Companies have developed different strategies to deal with facilitating payments. At
least two major oil companies (i.e., BP and Shell Oil) impose a policy, applicable to their worldwide operations, that irrespective of the existence of the facilitating payments exception in the
FCPA, no discretionary payments are to be made by their employees without express approval,
as a way of reducing the scope for misjudgment by local employees.
C.
Foreign Subsidiaries. Generally, the activities of a foreign subsidiary of a U.S.
corporation are not subject to the FCPA.22 However, the U.S. parent may be held liable under
the FCPA for its foreign subsidiary's acts if the relationship between the U.S. parent and
subsidiary is sufficiently close. A sufficiently close relationship could be found where, for
example, the U.S. parent authorizes, directs or participates in the subsidiary's activities. Due to
the potential for liability under the vicarious liability provisions of the FCPA, reliance on the
mere fact that one's subsidiary is incorporated abroad is ill-advised, particularly where there is
U.S. management and control of the subsidiary, or where the relationship between the U.S.
parent and the subsidiary is sufficiently close.
There may be, depending on the circumstances, two possible ways of reaching corporate
subsidiaries under the FCPA: (1) through the direct liability of either the subsidiary or its
officials or both; or (2) holding either the parent or its officials or both liable for the actions of
the subsidiary.
When Congress was initially considering the FCPA, the original House bill would have
extended the FCPA's anti-bribery provisions to foreign subsidiaries owned or controlled by U.S.
persons.23 The House Committee on Interstate and Foreign Commerce said it was "appropriate
to extend the coverage of the FCPA to non-U.S. based subsidiaries because of the extensive use
of such entities as a conduit for questionable or improper foreign payments authorized by their
domestic parent."24 Recognizing the "inherent jurisdictional, enforcement and diplomatic
difficulties" that this would entail, however,25 the House deferred to the Senate in conference and
dropped this provision.26 In so doing, the conferees emphasized "that any issuer or domestic
concern which engages in bribery of foreign officials indirectly through any other person or
entity would itself be liable under the bill."27
22
Although the FCPA is ambiguous, its legislative history and case law confirm that foreign subsidiaries of U.S. companies
acting on their own behalf and not as agents of their U.S. parent are not covered by the anti-bribery provisions. See H.R.
CONF. REP. NO. 95-831, at 15 (1977), reprinted in 1977 U.S.C.C.A.N. 4098, 4126; See also Dooley v. United Technologies
Corp., 803 F. Supp. 428, 439 (D.D.C. 1992) (legislative history excludes foreign subsidiaries from FCPA coverage).
23
H.R. Rep. No. 95-640, at 11-12 (1977).
24
Id.
25
H.R. Rep. No. 95-831, at 14 (1977), reprinted in 1977 U.S.C.C.A.N. 4121, 4126.
26
Id.
27
Id.
Jay G. Martin 2004
As amended in 1998, the FCPA provides for direct liability of the foreign subsidiary of a
U.S. firm (or any officer, director, employee, agent or stockholder acting on the subsidiary's
behalf) if the subsidiary is an issuer or if the subsidiary (or principal) causes an act in furtherance
of the bribe to take place in U.S. territory.28 The FCPA also reaches the foreign subsidiary's
officials if they are U.S. nationals.29 In addition, it is possible that a foreign subsidiary of a U.S.
corporation might face criminal liability under the local law of the state where it operates.
Alternatively, under U.S. law the parent might be held liable for the subsidiary's actions through
a variety of theories. For example, if the U.S. parent authorizes the subsidiary to make an
unlawful payment, the FCPA applies.30
The FCPA also prohibits payments to "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."31 This prohibition could apply to funds transferred by a U.S. parent corporation
to a foreign subsidiary. As originally enacted, this provision contained a "knowing or having
reason to know" standard.32 The 1988 Amendments to the FCPA removed the "or having reason
to know" language and defined a person's state of mind as knowing if "(1) such person is aware
that such person is engaging in such conduct, that such circumstance exists, or that such result is
substantially certain to occur; or (2) such person has a firm belief that such circumstance exists
or that such result is substantially certain to occur."33 Moreover, 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."34
In adopting the 1988 Amendments to the FCPA, the conferees stated that "simple
negligence" or "mere foolishness" should not trigger liability under the FCPA.35 They also
emphasized, however, that the knowing standard was intended to cover "conscious disregard,"
"willful blindness " or' "deliberate ignorance."36 Accordingly, a company making a payment to
another person, such as a foreign subsidiary, cannot rely on a "head-in-the- sand" defense in
ignoring the high probability of an unlawful payment.37
28
15 U.S.C. 78dd-1(a) (Supp. 1999); 15 U.S.C. 78dd-3(a) (Supp. 1999).
29
15 U.S.C. 78dd-2(i) (Supp. 1999).
30
15 U.S.C. 78dd-1(a), 2(a), and 3(a) (Supp. 1999).
31
15 U.S.C. 78dd-1(a)(3), 2(a)(3), and 3(a)(3) (Supp. 1999).
32
15 U.S.C. 78dd-1(a)(3), 2(a)(3), and 3(a)(3) (Supp. 1979).
33
Foreign Corrupt Practices Act Amendments of 1988, Pub. L. No. 100-418, 5003(a), (c), 102 Stat. 1418, 142324 (1988).
34
15 U.S.C. 78dd-1(f)(2), -2(h)(3) (1997).
35
H.R. Conf. Rep. No. 100-576, at 919-20 (1988), reprinted in 1988 U.S.C.C.A.N. 1547, 1953.
36
Id.
37
Id.
Jay G. Martin 2004
Issuers may also be liable for foreign subsidiaries' actions under the books and records
provisions of the FCPA.38 These provisions require issuers to keep accurate records and to
maintain an adequate system of internal accounting controls.39 Although the 1977 version of the
FCPA did not specify the extent to which the books and records provisions applied to foreign
subsidiaries of issuers,40 the Senate Banking, Housing and Urban Affairs Committee noted in its
report on the FCPA that a U.S. company which 'looks the other way' in order to be able to raise
the defense that it was ignorant of bribes made by a foreign subsidiary, could be in violation of
[the section] requiring companies to devise and maintain adequate accounting controls. Under
the accounting section no off-the-books accounting fund could be lawfully maintained, either by
a U.S. parent or by a foreign subsidiary, and no improper payment could be lawfully disguised.41
In the 1988 Amendments to the FCPA Congress clarified that the books and records
requirements only apply to foreign subsidiaries of issuers in those cases in which the parent
holds more than 50 percent of the voting power of the subsidiary.42 These requirements also
apply where the parent consolidates its financial reports with those of the subsidiary.43 Where
the parent holds 50 percent or less of such voting power, the parent is required only "to proceed
in good faith to use its influence, to the extent reasonable under the issuer's circumstances"44 to
ensure that the foreign subsidiary maintains a system of internal accounting controls that would
comply with the statute's requirements.45 The conferees acknowledged in their agreement on this
provision that "it is unrealistic to expect a minority owner to exert a disproportionate degree of
influence over the accounting practices of a subsidiary."46
Under U.S. law a parent can also be held liable for unlawful payments by its foreign
subsidiary when the subsidiary is deemed to be the "alter ego" of the parent because of the extent
to which the parent dominates the operations of the subsidiary, or when the subsidiary acts as the
agent of the parent.47
38
15 U.S.C. 78(m) (1997).
39
Id.
40
15 U.S.C. 78(m) (1976); 15 U.S.C. 78dd-(1), -(2) (Supp. 1978).
41
S. Rep. No. 95-114, at 11 (1977), reprinted in 1977 U.S.C.C.A.N. 4098, 4109.
42
H.R. Conf. Rep. No. 100-576, supra note 31, at 917.
43
United States Dep't of State, Battling International Bribery; First Annual Report on Enforcement and
Monitoring of the OECD Convention, at D-5 (1999) (United States response to OECD questionnaire relating to
four issues).
44
15 U.S.C. 78m(b)(6) (1997).
45
H.R. Conf. Rep. No. 100-576 supra note 31, at 917.
46
Id.
47
See H. Lowell Brown, Parent-Subsidiary Liability Under the Foreign Corrupt Practices Act, 50 Baylor L. Rev.
1, 38 (1998). In a number of other OECD countries, under certain circumstances courts may disregard the
principle of separate legal identity of a subsidiary. See Org. for Econ. Cooperation and Dev., Responsibility of
Parent Companies for their Subsidiaries 8-13 (1980). It is not clear to what extent this concept might apply in
cases involving bribery by foreign subsidiaries.
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D.
FCPA and Business Relationships. The elements of an FCPA violation can arise
in a wide variety of ordinary business transactions. For example, payment of anything of value
can include a stock interest in a joint venture company, a contractual right or interest, or even
access to credit. As a result, the mere formation of a joint venture, the arrangement of financing
or the establishment of a relationship with certain foreign parties i.e., a foreign government
official or someone close to that official can raise FCPA issues. Even in the context of a purely
private joint venture, the ability of the joint venture to operate in a foreign country may turn on
discretionary government decisions, including foreign investment approvals, the obtaining of
discretionary licenses or concessions, tax concessions, and other benefits. As a condition to
investment approval or the award of a contract, the government may require the foreign investor
to partner with a local firm, subcontract certain work to local firms, meet specified local
employment standards or build infrastructure.
E.
Joint Ventures with a State-Owned Entity. In a joint venture with a state-owned
entity, that is, a state-owned company or a company owned or controlled by a foreign official,
additional issues arise. Because the FCPA does not distinguish between foreign officials acting
in a sovereign capacity on behalf of their government or governmental agency, and those acting
in a commercial capacity for a state instrumentality, virtually any transaction between a person
subject to the FCPA and the employees of a state-owned entity from the simple payment of
director's fees to employment contracts to stock options can raise FCPA issues.
III.
Record-Keeping and Accounting Provisions of the FCPA
A.
Application to Public Companies. The record-keeping and accounting provisions
of the FCPA are essentially consistent with good general accounting practices. The accounting
provisions of the FCPA amend the Exchange Act48 to add record-keeping and disclosure
requirements to those persons and entities already subject to the Exchange Act.49 All issuers
(public companies that file Form 10-K reports) must observe the accounting provisions, whether
or not they engage in foreign activities.50 Because the accounting provisions are codified in the
Exchange Act, the SEC is responsible for the enforcement of these provisions.
Under the FCPA, public companies are required to:
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;
Create a system of internal accounting controls that will provide reasonable
assurances that transactions are properly authorized; and
48
15 U.S.C. 78a et seq. (1994).
49
15 U.S.C. 78m(b).
50
See 15 U.S.C. 78m(b)(2)(A); See also 15 U.S.C. 78m(b)(6); Lewis v. Sporek, 612 F. Supp. 1316, 1333 (N.D. Cal. 1985)
(discussing need for FCPA's accounting provisions as a deterrent for bribery).
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Record accurately all amounts on the company's books.51
B.
No Materiality Standard. It should be noted that there is no materiality standard
under the FCPA; companies must have reasonable record-keeping and accounting provisions to
account for all money and not just sums that would be material in the traditional financial
sense.52 In short, records must include information that might alert the SEC to impropriety. In
practice, the record-keeping provisions are intended to prevent three types of improprieties:
The failure to record improper transactions;

The falsification of records to conceal improper transactions; and
The creation of records that are quantitatively correct, but fail to specify the
qualitative aspects of a transaction that might reveal the true purpose of a
particular payment.53
C.
Foreign Subsidiaries. There are different rules regarding the applicability of the
FCPA's record-keeping requirements to foreign subsidiaries of U.S. issuers. An issuer will be
liable for enforcement of these requirements with regard to a subsidiary if it controls that
subsidiary. As clarified by the then SEC Chairman Harold Williams in a formal statement of
policy given in January 1981 and codified in section 78m(b)(6) in the 1988 Amendments to the
FCPA, the SEC applies practical tests in determining whether the issuer controls the subsidiary
and is thereby bound to enforce the accounting provisions where the issuer controls more than
50 percent of the voting securities of its subsidiary, compliance is expected. Compliance would
also be expected if there is between 20 and 50 percent ownership, subject to some demonstration
by the issuer that this does not amount to control. The 1988 Amendments to the FCPA clarified
the issue of parent company responsibility for the accounting practices of its foreign subsidiary
or affiliate. If a U.S. firm owns 50 percent or less of a foreign firm, and the U.S. firm reasonably
and in good faith uses its influence to cause the foreign subsidiary or affiliate to make and keep
accurate books and records and establish a system of internal accounting controls, then the U.S.
firm has no legal responsibility for the accounting practices of the foreign firm.54
IV.
Affirmative Defenses Under FCPA for Routine Actions
A.
Overview.
The FCPA provides two affirmative defenses:
That the payment, gift, offer or promise of anything of value constituted a

reasonable and bona fide expenditure; and
51
See 15 U.S.C. 78m(b)(2)(B).
52
See 15 U.S.C. 78m(b)(2)(A); 78m(b)(7).
53
See SEC v. World-Wide Com Inv., Ltd., 567 F. Supp. 724, 752 (N.D. Ga. 1983).
54
See Dooley v. United Technologies Corp., 803 F. Supp. 428 at 439 (D.D.C. 1992).
Jay G. Martin 2004
That the payment, gift, offer or promise of anything of value to a foreign official,
political party or candidate was done in accordance with the written laws of that
country.55
B.
Payment of Gifts and Promotional Expenses.
In order to constitute a reasonable and bona fide expenditure under the FCPA, however,
such expenditure must be directly related to the promotion of products and/or services or to the
execution of a contract with the foreign government or agency.56 Sensitive cases may arise when
companies plan promotional tours for visiting foreign officials and include recreational activities
in the agenda. Although the DOJ, through its opinion release procedure, has approved
promotional trips on several occasions, including payments for the entertainment of a foreign
official and his wife, it has not commented on the nature or cost of the entertainment: these
opinions suggest only that the DOJ recognizes the business purpose of including some
entertainment in promotional activities. Nor has any court interpreted the application of the
defense.
The Metcalf & Eddy case,57 in which the DOJ interpreted the provision of airfare, travel
expenses, and pocket money to an Egyptian official and his family during business trips to the
U.S. as exceeding the legitimate levels for bona fide promotional expenses, suggests only that
the DOJ would allow such expenses where the level of the expense is reasonable and the
payments are accurately documented and subject to audit. In addition to promotional activities,
bona fide expenditures directly related to the "execution or performance of a contract with a
foreign government or agency" may also be a difficult issue for companies. DOJ opinions
related to this provision include the approval of a proposal by a U.S. business to bring French
officials to the U.S. to show them a plant similar to the one proposed for construction in France,
and the approval of a proposal by an American petroleum company to provide training to
employees of a foreign government, where that training was required by local law. In neither
case, however, does the Opinion Release reveal what tests or standards were applied by the DOJ
in deciding not to take any enforcement action.
C.
Local Law Defense.
The FCPA provides that it shall be an affirmative defense that the payment, gift, or offer
of payment was 'lawful under the written laws and regulations of the foreign official's country'.
This seemingly broad defense leaves open the issue of what is "lawful" under the written laws of
a country. The defense was introduced into the FCPA when it was amended in 1988, with the
intention of "codifying" previous DOJ practice as evidenced by a series of Review Letters issued
to companies who had raised the question under the then-existing review procedure. An
examination of several of these review releases dating from the 1980s shows that the language
55
15 U.S.C. 78dd-1(c)(l); 78dd-2(c)(l).
56
15 U.S.C. 78dd-1(c)(2); 78dd-2(c)(2).
57
U.S. v. Metcalf & Eddy (D. Ma. 1999), FCPA Rep. 699.749.
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most frequently used by the DOJ in explaining its decision not to take enforcement action was
that the conduct in question did "not violate" or was "not in violation of the local law. This does
little to resolve the ambiguity. Nor is the U.S. Department of State in a position to provide
specific guidance. Its brochure, Fighting Global Corruption Business Risk Management,
produced in consultation with the other government departments concerned, states at page 28 of
the current edition, "Whether a payment was lawful under the written laws of a foreign country
may be difficult to determine."
V.
1998 Amendments to the FCPA in Response to 1998
Anti-Bribery Convention of the OECD and the UN Convention
Against Corruption and Fair Competition Act of 1998
A.
Introduction.
The Organization for Economic Cooperation and Development ("OECD") resurrected the
international antibribery movement in May of 1994 when the Committee on International
Investment and Multinational Enterprises issued a pivotal report condemning international
bribery.58 The 1994 Report called on member states to take steps to eliminate bribes to foreign
government officials.59
Shortly thereafter, the OECD Council endorsed the 1994 Report's findings in its
Recommendation on Bribery in International Business Transactions ("Recommendation").60 The
Recommendation also called on the OECD to establish an Antibribery Working Group, whose
mission would be to develop concrete proposals to curb the use of bribes to win overseas
contracts.61
The international antibribery movement received a boost in March 1996 when twentyone countries signed the Inter-American Convention Against Corruption62 ("Inter-American
Convention"). The Inter-American Convention, an initiative of the Organization of American
States, directed signatories to adopt legislation comparable to the FCPA.63 Two months later,
58
See Report on the OECD Recommendation on Bribes in International Business Transactions, OECD Document
C(94)75 (May 10, 1994) [hereinafter "1994 Report"], at 3 (noting that international bribery "exacts a heavy
economic cost, hindering the development of international trade and investment" and "is especially damaging to
developing countries, since it diverts needed financial and other assistance from the developed world").
59
See the 1994 Report, supra note 57 at 3-4.
60
Council Recommendation on Bribery in International Business Transactions, May 27, 1994, 33 I.L.M. 1389.
61
See id. at 1392.
62
March 29, 1996, 35 I.L.M. 724.
63
See id., art. VII, 35 I.L.M. at 730 ("The States Parties that have not yet done so shall adopt the necessary
legislative or other measures to establish as criminal offenses under their domestic law the acts of corruption
described in [this Convention, including bribery] and to facilitate cooperation among themselves pursuant to
this Convention").
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OECD members agreed in principle to end the tax deductibility of bribes to foreign officials.64
Later, in June 1996, the G-7 nations endorsed the criminalization of bribery and called on the
OECD to advance international efforts in that area.65 The antibribery movement seemed poised
for a breakthrough.
That breakthrough came in May 1997, when the OECD Council adopted its Revised
Recommendation on Combating Bribery in International Business Transactions ("Revised
Recommendation"), together with Agreed Common Elements of Criminal Legislation and
Related Action ("Agreed Common Elements").66 The Revised Recommendation and Agreed
Common Elements were intended to guide the negotiators as they worked out a binding
antibribery agreement. The Revised Recommendation also established a timetable for action,
creating a deadline for negotiations and calling on member states to ratify the OECD Convention
and adopt antibribery legislation by the end of 1998.67
In December 1997 U.S. Secretary of State Madeleine Albright and ministers representing
the other members of the OECD68 and five non-members participating in the Working Group on
Bribery in International Business Transactions of the Committee on International Investment and
Multinational Enterprises ("CIME") (the "Working Group")69 signed the Convention on
Combating Bribery of Foreign Public Official in International Business Transactions (hereinafter
the "OECD Convention").70 The OECD Convention, the product of several years of intense
64
See Council Recommendation on the Tax Deductibility of Bribes to Foreign Public Officials, OECD Doc.
C(96)27/FINAL, April 11, 1996, 35 I.L.M. 1311, 1312 (recommending that "those Member countries which do
not disallow the deductibility of bribes to foreign public officials re-examine such treatment with the intention
of denying this deductibility").
65
See G-7 Emphasizes Trade, Investment, 5 Wash. Trade Daily (TRIG) No. 131, pt. 1 (July 1, 1996).
66
Revised Recommendation on Combating Bribery in International Business Transactions, OECD Doc.

C(97)123/FINAL, May 23, 1997, 36 I.L.M. 1016. (The Agreed Common Elements are annexed to the Revised
Recommendation.)
67
See id. at 1019 (setting a December 1997 deadline for reaching an agreement; recommending that parties submit
domestic legislation to criminalize bribery to their domestic legislatures by April 1, 1998; and asking parties to
enact appropriate implementing legislation by the end of 1998).
68
The 29 current members of the OECD are : Australia, Austria, Belgium, Canada, the Czech Republic, Denmark,
Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Korea, Luxembourg, Mexico, the
Netherlands, New Zealand, Norway, Poland, Portugal, Spain, Sweden, Switzerland, Turkey, the United
Kingdom, and the United States. See Pub. Affairs Div., Pub. Affairs and Communications Directorate, Org. for
Econ.
Co-operation
and
Development,
Annual
Report
121
(2000)
available
at
http://www.oecd.org/publications/e-book/0100331e.pdf.
69
Argentina, Brazil, Bulgaria, Chile, and the Slovak Republic. See Comm. On Int'l Investment and Multinational
Enterprises, Org. for Econ. Co-operation and Dev., Report by the Committee on International Investment and
Multinational Enterprises: Implementation of the Convention on Bribery in International Business Transactions
and the 1997 Revised Recommendation 6, OECD Doc. C/MIN(2000) available at
http://www.oecd.org/daf/noncorruption/instruments.htm [hereinafter "CIME Report"].
70
One OECD member, Australia, did not sign the OECD Convention at that time, but rather signed later, on
December 7, 1998, because of certain domestic law requirements. See Convention on Combating Bribery of
Jay G. Martin 2004
11
negotiations within the OECD,71 has been hailed by the U.S. government as a "bold and historic
step in the fight against international commercial bribery,"72 and as "a major milestone in U.S.
efforts over more than two decades to have other major trading nations join us in criminalizing
the bribery of foreign public officials in international business transactions."73
B.
The OECD Convention. The OECD Convention entered into force on February
15, 1999.74 On July 27, 2000, the U.S. Senate gave its [advice] and consent to ratification of the
OECD Convention, clearing the way for the U.S. to join its second international anticorruption
treaty. The U.S. deposited its instrument of ratification with the Organization of American
States ("OAS") on September 29, 2000. The OECD Convention entered into force as to the
United States on October 29, 2000.
The OECD Convention is a consensus document that balances the competing interests
and concerns of more than thirty countries. As such, it fails to address some issues, such as the
coverage of foreign political parties and officials, that are part of the bribery problem. Moreover,
the OECD Convention itself will not end international bribery; the parties must still pass
domestic implementing legislation and establish effective enforcement procedures.
Nevertheless, the OECD Convention is by a very wide margin the most significant step
forward in the battle against international corruption since enactment of the FCPA more than
twenty-five years ago.
Ratification of the OECD Convention by the U.S. required no changes to U.S. law. In
connection with U.S. ratification of the OECD Convention in 1998, the FCPA was amended in
several respects; no further amendments to the FCPA were deemed necessary. The most
controversial provision of the OECD Convention for the United States was its illicit enrichment
provision; the U.S. ultimately decided to exercise an "opt out" right built into the OECD
Convention with respect to that provision because of the constitutional conflict that would arise
from implementing its presumption of guilt. This "opt out" is reflected in an understanding that
emphasizes that the U.S. uses other means to combat the illicit enrichment of public officials.
As of January 2001, 29 countries, including the U.S., had deposited their instruments of
acceptance for approval or ratification of the OECD Convention.75 Ministers of OECD member
Foreign Public Officials in International Business Transactions, Dec. 17, 1997, S. Treaty Doc. No. 105-43
(1998), 37 I.L.M. 1 [hereinafter "Convention"]. See also S2375, 105th Congress (1998), Pub. L. No. 105-366.
71
See United States Dep't of State, Second Annual Report on Combating Bribery of Foreign Public Officials in
International Business Transactions 1-2 (2000) available at http://www.state.gov/www.issues/economic/antibribery-index/htm1 [hereinafter "Annual Report"].
72
Press Statement, Office of the Spokesman, United States Dep't of State, OECD Anti-Bribery Convention, para 2
(Nov. 21, 1997), available at http://secretary.state.gov/www/briefings/statements/971121.html.
73
Annual Report, supra note 70 at v.
74
CIME Report, supra note 68, at 6.
75
See Org. for Econ. Co-operation and Dev., Steps Taken and Planned Future Actions by Each Participating
Country to Ratify and Implement the Convention on Combating Bribery of Foreign Public Officials in
International Business Transactions (2000). Per Article 15 of the Convention, the OECD Convention, once in
Jay G. Martin 2004
12
states have urged that all signatories ratify the OECD Convention and implement it fully as soon
as possible.76 The signatories include most of the major exporting countries in the world,77
whose companies account for the lion's share of international contracting.78
The OECD Convention requires that parties criminalize the bribery of foreign public
officials for the purpose of obtaining or retaining business.79 Parties must establish jurisdiction
over this offense on the basis of territoriality 80 and, in some cases, nationality.81 However, the
OECD Convention does not directly address acts of bribery by foreign-incorporated subsidiaries
of companies that are subject to the parties' national laws proscribing the bribery of foreign
public officials.
Under the OECD Convention, each party is obligated to take necessary measures that
establish that it is a criminal offense under its law for any person intentionally to offer, promise
or give any undue pecuniary 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 of international business.82
Parties are also required to take necessary measures to criminalize "complicity in,
including incitement, aiding and abetting, or authorization of an act of bribery of a foreign public
official."83 "Foreign public official" is defined broadly as "any person holding a legislative,
administrative or judicial office of a foreign country, whether appointed or elected; any person
exercising a public function for a foreign country, including for a public agency or public
enterprises; and any official or agent of a public international organization."84
force, becomes effective for those acceding to it sixty days after the deposit of the appropriate instrument. See
OECD Convention supra note 65 art. 15. The following countries have deposited their instruments of
acceptance, approval, or ratification of the Convention as of January 2001: Australia, Austria, Belgium, Brazil,
Bulgaria, Canada, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Italy,
Japan, Korea, Mexico, Norway, Netherlands, Poland, Slovak Republic, Spain, Sweden, Switzerland, Turkey,
Portugal, United Kingdom and the United States.
76
See Org. for Econ. Co-operation and Dev., Shaping

PAC/COM/NEWS(2000)70(2000)(ministerial communique).
77
Org. for Econ. Co-operation and Dev., The OECD Guidelines for Multinational Enterprises: Review 2000 at 5,
OECD Doc. DAFFEE/IME/WPG (2000).
78
Id.
79
Convention, supra note 69, art. 1(1).
80
81
82
83
84
Convention, supra note 69, art. 1(4)(a).
Globalization,
para
30
Doc.

Jay G. Martin 2004
13
The OECD Convention also requires that bribery of foreign public officials be punishable
by "effective, proportionate and dissuasive criminal penalties," comparable to those that apply to
the bribery of a party's domestic public officials.85 The OECD Convention addresses the "supply
side" of the bribery equation in that it reaches only the conduct of the briber, and not the conduct
of the bribe recipient, or the "demand side".86
Article 4 of the OECD Convention, which pertains to jurisdiction, takes into account the
fact that parties' legal systems may have different jurisdictional bases. The starting point is
territoriality: "Each Party shall take such measures as may be necessary to establish its
jurisdiction over the bribery of a foreign public official when the offense is committed in whole
or in part in its territory."87 The Commentaries to the Convention, adopted concurrently with the
text of the Convention, 88 provide that "[t]he territorial basis for jurisdiction should be interpreted
broadly so that an extensive physical connection to the bribery act is not required."89
The OECD Convention also provides in Article 12 for a process of "self and mutual
evaluation", pursuant to which: (1) States Parties will report to the OECD on steps taken in their
country to implement and enforce the OECD Convention and the OECD's 1997 Revised
Recommendation of the Council on Combating Bribery (which also urges prompt
implementation of its Recommendation on Tax Deductibility of Bribes to Foreign Public
Officials, adopted 11 April C(96) 27/FINAL)), and (2) other States Parties will assess the extent
to which those States Parties have in fact implemented the OECD Convention and are enforcing
it effectively. Thus, the process envisioned is a peer review process. The OECD Convention did
not detail how that process was to occur but left its elaboration to the Working Group.
By the end of 2001, the OECD Convention was in force for all thirty OECD Member
Countries except Ireland, plus five non-member countries Argentina, Brazil, Bulgaria, Chile,
and Slovenia (which acceded to the OECD Convention in 2001).90 During the year 2001, the
OECD Convention entered into force for the following countries: Argentina, Chile, Italy,
Luxembourg, the Netherlands, New Zealand, Portugal, and Slovenia. Implementing legislation
for the OECD Convention entered into force for Luxembourg, the Netherlands, New Zealand,
Poland, Portugal, and Ireland.
The monitoring procedures for the OECD Convention developed by the OECD
Convention Working Group consist of two phases, for self-evaluation and mutual evaluation,
85
86
87
88
Commentaries on the Convention on Combating Bribery of Foreign Public Officials in International Business
Transactions, Dec. 17, 1997, para. 25 S. Treaty Doc. No. 105-43 (1998), 37 I.L.M. 8.
89
Id. at 83.
90
See OECD Convention on Combating Bribery of Foreign Public Officials in International Business
Transactions ("OECD Convention"), available at http://oecd.org/oecd/pages/home/displayedgeneral/0,3380,ENdocument-31-nodirectorate-no-6-7198-31,FF.html (last visited June 25, 2002).
Jay G. Martin 2004
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respectively. The objective of Phase One is to evaluate: (1) whether implementing legislation
meets the OECD Convention's standards; and (2) initial actions to implement the Revised
Recommendation on Combating Bribery in International Business Transactions, a call for
effective measures to deter, prevent, and combat bribery of foreign public officials issued by the
OECD Council in 1997. The purpose of Phase Two is to study the structures each country puts
in place to enforce the laws and rules implementing the OECD Convention and to assess their
application in practice, with the goal of improving the parties' capacities to fight bribery.91
Both the Phase One and Phase Two Reviews are conducted by two States Parties
designated as peer reviewers and personnel from the OECD Secretariat. In both Phases, the
OECD reviewers submit detailed written questions to appropriate authorities of the country
under review and receive written responses. The Phase 2 process also includes a site visit to the
country under review. The reviewers prepare a draft report, which is discussed in the OECD
Working Group on Bribery. The final report, once it has been transmitted to the OECD Council,
is a public document that can be found on the OECD's website.92
C.
Summary of the Impact of the 1998 Amendments to the FCPA. While the FCPA
was in most respects consistent with the terms of the OECD Convention, full implementation of
the OECD Convention required several changes to the FCPA, and the Clinton Administration
used the occasion to expand the penalties for foreign nationals under the FCPA. The 1998 FCPA
Amendments made five changes to the FCPA: (1) broadened the jurisdictional reach of the
FCPA over non-U.S. persons acting within the United States; (2) broadened the jurisdictional
reach over U.S. persons outside the United States; (3) expanded the FCPA to cover payments
made to secure any improper advantage, incorporating a broader definition of business activities
covered by the FCPA; (4) expanded the definition of foreign officials; and (5) eliminated the
exemption of certain non-U.S. nationals from criminal penalties. In keeping with the terms of
the Senate's advice and consent, the 1998 FCPA Amendments also provide for monitoring of the
OECD Convention's ratification and implementation process.
In general, rather than asserting the broadest possible U.S. jurisdiction, the 1998 FCPA
Amendments adopt a "mirror-image" approach. This approach is designed to assert U.S.
jurisdiction to the same extent that other OECD signatory states will in their own implementing
legislation. Because of legal principles common to most European countries, their domestic laws
generally apply to their nationals acting anywhere in the world, but not to foreign subsidiaries of
their domestic corporations. Accordingly, the FCPA 1998 Amendments refrain from unilaterally
extending the FCPA's scope to include foreign subsidiaries of U.S. companies. Rather, this issue
is left for future multilateral negotiations.
Perhaps the two changes to the FCPA of greatest potential importance to U.S. companies
are the formal extension of FCPA coverage to U.S. persons outside the U.S. when there is no
nexus with U.S. commerce, and the addition of the term any improper advantage to the FCPA.
91
See OECD, Bribery Convention: Procedure of Self- and Mutual Evaluation, Phase 2, available at
http://www.oecd.org/pdf/M00007000/M0007223.pdf.
92
See http://www.oecd.org (click on "Corruption").

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The term any improper advantage is taken directly from the OECD Convention text, but is an
undefined term as to which there is no agreed upon interpretation. The other changes brought
about by the FCPA 1998 Amendments expand the coverage over, and increase the penalties
applicable to, foreign nationals present in the U.S.
D.
Detailed Discussion of Amendments to the FCPA Brought About by 1998
Amendments. As alluded to earlier, the FCPA 1998 Amendments, which implement U.S.
obligations under the OECD Convention, amends the FCPA in the following respects:
1)
Broader Jurisdiction. The FCPA's original jurisdiction, although broadly

construed by enforcement authorities, was to some degree limited in its
reach. The FCPA's prohibitions only applied to issuers of U.S. securities
and to domestic concerns (essentially "U.S. persons" and entities).
Violations occurred only if the prohibited activity involved an instrument
of "interstate commerce." Thus, the FCPA's jurisdiction was a mixture of
nationality and territoriality, with territoriality serving as a limitation in all
cases.
The 1998 FCPA Amendments broaden both the territorial and nationality-based
jurisdictional reach of the FCPA. First, they provide that "any person" - including a foreign
person or firm - who commits a corrupt act while in the U.S. will be covered by the FCPA.
Second, the 1998 FCPA Amendments expand the reach of the FCPA under an alternative
provision to cover all actions of U.S. persons and businesses, even if no territorial link exists
with the U.S. In fact, the territorial nexus requirement was interpreted so broadly by U.S. law in one case government prosecutors relied on e-mails sent by employees back to the U.S. - that
the amendment of the jurisdictional provisions will not represent a major change for U.S.
companies. The assertion of territorial jurisdiction over all foreign persons will, however,
represent a major change for foreign companies.
2)
Beyond "Business" - Securing "Any Improper Advantage". The FCPA

originally covered payments made to a foreign official in three situations:
(a) to influence an act or decision of the official in his official capacity;
(b) to induce the official to violate his lawful duty; or (c) to induce the
official to use his influence to affect a government decision. The 1998
FCPA Amendments expand this "quid pro quo" requirement by adding a
fourth situation: payments to secure "any improper advantage." At the
same time, the FCPA's requirement that the payments be made to obtain,
retain or direct business has been kept unchanged. The placement of the
improper advantage requirement is analytically confusing, since its role in
the OECD Convention is to expand the "business" element, rather than the
quid pro quo requirement. U.S. enforcement authorities have interpreted
the "business" element broadly enough to include activities beyond the
procurement and retention of business deals, such as payments for special
tax dispensation and the obtaining of payments owed under contracts
already performed. The improper advantage language, notwithstanding
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its apparent misplacement in the FCPA, provides a more concrete basis for
that enforcement posture and may allow for further expansion into other
activities.
3)
Payments to International Officials. The OECD Convention specifically

includes officials of public international organizations, such as the World
Bank, the International Monetary Fund, or the World Trade Organization,
within the definition of public officials to whom corrupt payments are
prohibited. The 1998 Amendments modify the FCPA's original definition
of "foreign officials" to include such persons within the scope of its
prohibitions, as well.
4)
Non-U.S. Persons Now Fully Covered by Criminal Penalties. Prior to the

passage of the 1998 FCPA Amendments, the FCPA covered foreign
nationals employed by or acting as agents of U.S. companies only if they
were "subject to the jurisdiction of the United States." This language,
although never tested by the courts, was interpreted as subjecting non-U.S.
employees or agents to criminal penalties only if they were U.S. residents.
(Non-U.S. officers, directors, and shareholders have always been subject
to criminal liability under a separate provision.) Whether or not this was
the correct reading, the 1998 FCPA Amendments eliminate this
restriction, thus subjecting all employees or agents of U.S. businesses to
both civil and criminal penalties.
5)
Application to U.S. Persons Abroad. The FCPA now applies to U.S.

nationals and U.S. companies for illicit conduct that takes place wholly
outside the U.S., without any use of an "instrumentality of interstate
commerce." Moreover, principles of vicarious liability will apply to U.S.
companies for acts taken on their behalf by their officers, directors,
employees, agents or stockholders outside the U.S., regardless of the
nationality of that person.
E.
Implications of 1998 FCPA Amendments for U.S. Companies. The 1998 FCPA
Amendments will have some implications for U.S. companies, although not dramatic ones. For
example, the 1998 FCPA Amendments will require most U.S. companies to modify their FCPA
compliance programs to reflect the expanded reach of the FCPA. The necessary modifications
may be less significant than may appear at first blush, however. For many companies, the
expansion of the FCPA's jurisdictional reach beyond the territorial nexus requirement will likely
not require any change in behavior, because few U.S. companies have based their compliance
strategies on avoiding a U.S. nexus. However, the expanded definition of "foreign official" and
the concept of improper advantage must be factored into written programs and the education and
training of company personnel.
Of far greater potential importance, of course, is the promise of laws comparable to the
FCPA in most of the leading industrial countries of the world. The completeness of
Jay G. Martin 2004
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implementation and the commitment to enforcement can be expected to differ significantly

among signatory countries. Nonetheless, the OECD Convention will give U.S. companies a new
weapon in dealing with third parties from signatory states. Affected third parties will include not
just competitor companies from countries that have ratified the OECD Convention, but also
prospective agents, consultants, or partners from those countries. In dealing with such third
parties, the OECD Convention will be a rational basis for urging common compliance standards
and for rejecting requests for illicit payments.
In short, after a 21-year period in which a unilateral U.S. law was the only meaningful
prohibition against making corrupt payments abroad, the OECD Convention should help level
the proverbial playing field. To the extent that other countries implement and enforce the OECD
Convention's requirements, major companies from other countries will face a risk of criminal
liability for transnational bribery.
The other new dynamic will be international monitoring of compliance with the OECD
Convention. Although vigilant monitoring may become an important factor in fulfilling the
promise of the OECD Convention, at this point it remains simply a stated, but untested,
objective. And, as with all of the foregoing, monitoring is contingent on entry into force of the
OECD Convention, which in turn depends on ratification by the requisite number of signatories.
F.
Future Developments Under the OECD Convention. The OECD Working Group
on Bribery continues to meet, and interested parties continue to identify and discuss objectives
for future negotiations. Perhaps the most immediate priority for Transparency International, the
non-governmental organization that has been a pivotal moving force behind the OECD
Convention, is the monitoring process. Beyond monitoring, money laundering and offshore
money centers are subjects the Working Group has identified as important to effective
implementation of the OECD Convention. There has also been discussion of seeking to amend
the OECD Convention to apply to foreign subsidiaries of companies in signatory states and to
encompass corrupt payments to political candidates and political parties, as well as to public
officials. Outside the U.S., there is considerable interest in the former, almost none in the latter.
G.
United Nations Convention Against Corruption. In December 2003, 97 countries
signed the new United Nations ("UN") Convention Against Corruption ("UN Convention"). This
is the latest in a series of moves to force the international community to take action against
bribery and other forms of corruption. The new UN Anticorruption Convention will come into
effect upon ratification by 30 of its signatories.
Like the OECD Convention, the new UN Convention is not self-executing. Each party to
the UN Convention is required to adopt domestic legislation implementing the UN Convention's
requirements. Unlike the OECD Convention, however, the UN Convention goes far beyond
bribery of public officials. It covers bribery in the private sector as well and includes such
additional topics as embezzlement, money laundering, corporate record-keeping, obstruction of
justice, extradition and international law enforcement cooperation. Implementation is to be
monitored by a UN watchdog committee.

Jay G. Martin 2004
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Among the more interesting features of the new UN Convention is the wording used to
describe what constitutes bribery of a government official. The essence of the offense under the
UN Convention is "[t]he promise, offering or giving . . . of an undue advantage . . . in order that
the UN official act or refrain from acting in the exercise of his or her official duties." This
formulation is quite different from the formulation that appears in the FCPA where the essence
of the crime is promising or giving something of value in order to obtain or retain business.
As alluded to previously above, shortly after the United States ratified the OECD
Convention in 1998, the FCPA was amended to bring it into conformity with the OECD
Convention. The 1998 amendments, among other things, added the concept of a seeking an
undue advantage in order to obtain or retain business as a basis for prosecution. Now that the
UN Convention has gone one step further by eliminating the business goal as an element of the
crime, it will be interesting to see if the Bush Administration proposes legislation to eliminate
that requirement from the FCPA as well. It will also be interesting to see if the Bush
Administration proposes to eliminate the FCPA's exceptions for payments to secure routine
governmental action or reasonable business promotional expenditures because neither of those
exceptions appears in the UN Convention.
VI.
Prudent Selection of Foreign Consultants
A company's use of foreign consultants or other service providers creates opportunity for
FCPA violations. Areas of particular vulnerability include assistance in obtaining a contract with
the government or a government owned corporation, acquiring government-owned real estate,
and securing favorable legislation or regulations.
Two basic precautions can substantially reduce the possibility of violating the FCPA as a
result of payments to or action by a consultant. First, obtain as much information as possible
about the consultant. Second, require the consultant to execute a written agreement with
adequate representations and warranties, and a full discussion of his duties and responsibilities.
The country desks at the U.S. State and Commerce Department are useful for conducting
background checks on consultants, as are the commercial attach at the local U.S. Embassy,
business and banking references, local law firms, U.S. branches of law and accounting firms
based in the country, international investigative agencies, newspapers and other public
disclosures, trade associations, Chambers of Commerce, and officers at local offices of U.S.
corporations. Further, the consultant should be asked to complete and sign a questionnaire on
behalf of himself, his company, and all principal associates (collectively, the consultant).
The questionnaire should request complete information about the consultant's company
(including copies of any annual reports and audited financial statements); references (including
banking and legal); business plan describing the consultant's activities and resources
commitment; a statement regarding other employment, business interests, or other businesses in
which the consultant is engaged; a description of the consultant's experience in a company's
business or in providing similar services; and a description of the consultant's language skills and
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other credentials. In addition, there should be a series of questions specifically addressing areas
covered by the FCPA (for example, any official position with or duties for the foreign
government; any office in any political party; any candidacy for political office; any member of
the consultant's family who is an official of the foreign government or political party or a
candidate for political office; assistance in the project from third parties; and previous
employment by the foreign government). This information should be carefully reviewed and
retained for at least five years.
The consultant should execute a written agreement with the company he is being hired by
that includes representations and warranties aimed at ensuring FCPA compliance. One approach
is to incorporate the consultant's signed questionnaire into the representations and warranties
section of the agreement with the consultant. In addition, the consultant should state that he is
familiar with the FCPA; has read it and understands it; has not and will not violate it; knows and
understands the company's policy on FCPA compliance; and willfully supports the company's
activities to prevent violations of the FCPA.
The agreement should also contain representations that the consultant has conducted and
will conduct his affairs regarding the venture in accordance with all applicable laws; that the
consultant has not made, authorized, or offered any payment or the giving of anything of value
(directly or indirectly) to any foreign official, political party, or officer thereof, candidate for
political office, or to any third party knowing the payment will be made to someone in the above
list to influence that entity to use his or her authority to sway any government act or decision to
obtain or retain business for the company; and that all financial records and billings regarding
the venture for which the consultant is responsible will accurately and fairly reflect the facts,
activities, and transactions relating thereto.
The agreement should prohibit assignment to third parties of fees paid to the consultant;
state that all payments will be made by check directly to the consultant; and obligate the
consultant to indemnify the company for damages and fines incurred as a result of the
consultant's violations of the FCPA (including the recovery of previous payments).
Additionally, the company should be allowed to terminate the agreement immediately if FCPA
violations occur. Even if the consultant speaks and writes English well, the agreement and
background questionnaire should be translated into the consultant's primary language (along with
English versions) to be executed.
When U.S. companies join with foreign companies to pursue various projects, they
should conduct the same due diligence in investigating their foreign partners as they do with
foreign consultants. This is especially critical when the foreign partner will be working directly
with local authorities on behalf of the venture and when the foreign partner has among its
principals government or party officials or political candidates.

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VII.
Enforcement of FCPA
A.
DOJ Opinion Procedure. The DOJ has a formal opinion procedure93 pursuant to
which companies may seek a statement from the DOJ of its present enforcement intentions with
respect to a proposed transaction. As long as the facts which form the basis of the opinion are
accurate and do not materially change, the issuance of a favorable opinion, in effect, immunizes
the recipient from prosecution. These opinions are not made public. These opinions do not have
any value as binding precedent and are strictly limited to the facts of the particular proposed
transaction, and the DOJ rarely explains its reasoning.
In practice, the opinion procedure has been infrequently used since the enactment of the
FCPA. Since the opinion procedure was started in 1980, the DOJ has averaged fewer than two
of these opinions per year. As one might expect, the DOJ has been somewhat conservative in
providing "no action" assurances, although recent opinions have shown a readiness to adopt a
practical approach in reviewing increasingly complex international transactions, even suggesting
acceptable alternatives. In the absence of a significant body of case law or of any guidelines,
counsel with a specialist FCPA practice have regularly looked to the DOJ opinions for guidance.
As a practical matter, companies evaluate benefits, costs and risks when filing an opinion
request. First, if the transaction is not cleared by DOJ, the requestor must, in all likelihood,
decline to go forward with the proposed course of conduct: proceeding under these
circumstances could be tantamount to admitting that the party had the requisite knowledge that a
corrupt payment would be made. Hence a company is unlikely to request an opinion if it is not
ready to refrain from the envisaged action in case of a "negative" indication. Second, DOJ
rulings are technically not binding on other federal agencies (although the SEC has publicly
stated that it will refrain from prosecuting issuers that have obtained a positive DOJ opinion, i.e.
an indication that DOJ would not take enforcement action with respect to the matter raised in the
opinion).94 Third, in today's fast-paced commercial world, the thirty days within which the DOJ
must render an opinion may be, in some circumstances, too long to make this a practical
alternative; in fact, the opinion procedure can take longer than thirty days as the DOJ may
request additional information after the initial request is filed. The DOJ, however, has shown
itself somewhat sensitive to the time constraints of a commercial transaction and has accelerated
its review when appropriate, on one occasion taking only five days. Fourth, although the
materials submitted are exempted from disclosure under the Freedom of Information Act
("FOIA"), confidentiality cannot be assured because the DOJ retains the right to release a
summary indicating, in general terms, the nature of the requestor's business and the foreign
country in which the proposed conduct is to take place, and the general nature and circumstances
of the proposed conduct. Fifth, the facts submitted, if acted upon, may raise the possibility of a
93
See Foreign Corrupt Practices Act Opinion Procedure, 65 Fed. Reg. 7675 (codified at 28 C.F.R. pt. 80).
94
A 1980 interpretative release (No. 34-17099, Aug. 28, 1980) stated that the SEC would take no enforcement
action with respect to which an issuer had obtained a Release Letter from the DOJ prior to May 31, 1981. A
subsequent interpretative release (No. 34-18255, Nov. 12, 1981) extended this policy "until further notice."
This statement of policy has not been revoked since 1981.
Jay G. Martin 2004
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DOJ investigation. Prosecution is still possible even after the issuance of a positive opinion, as
obtaining clearance only establishes a rebuttable presumption that a requestor's conduct is in
compliance with those provisions of the FCPA. The risk is greater if the facts change, and the
transaction goes ahead in a form which does not correspond exactly with the description supplied
to the DOJ and on which the opinion was based.
Few of the proposed transactions that have led to the DOJ giving an opinion that it does
not intend to take enforcement action have been obvious borderline cases. Obviously, as a
practical matter, no company will approach the DOJ to seek a review of a transaction that might
clearly involve an illegal payment. Officials in the Fraud Section of DOJ are prepared to discuss
issues and alternatives informally with counsel and company representatives in situations that
involve gray areas, in order to provide a higher degree of comfort to companies facing questions
under the FCPA. This factor, along with the desire of a growing number of companies to seek
guidance in structuring international mergers, acquisitions and joint ventures in such a way as to
minimize the risk of inheriting liability, may well encourage the broader use of the opinion
process in the future.
B.
Fines and Penalties. Enforcement responsibilities of the FCPA are divided
between the DOJ and the SEC. The DOJ is responsible for all criminal enforcement of the
FCPA provisions and for civil enforcement of the anti-bribery provisions with respect to
domestic concerns and foreign companies and nationals. The SEC is responsible for civil
enforcement of both the anti-bribery and accounting provisions with respect to issuers.
Generally speaking, it is the SEC that enforces the record-keeping and accounting provisions of
the FCPA, while the DOJ enforces the anti-bribery part. In practice, the SEC enforces the laws
against entities under its jurisdiction, including those requiring companies to file appropriate
proxy statements and make appropriate disclosures. If, in the course of that enforcement, the
SEC considers that the company has done something that amounts to an FCPA violation, it will
add that count as an additional ground upon which to prosecute the company. The Fraud Section
of the DOJ's Criminal Division has had, since 1994, sole control over the criminal enforcement
of the FCPA. In spite of the fact that over the history of the FCPA there have been relatively few
prosecutions, there has been a continuing serious commitment and dedication on the part of the
DOJ to detect, investigate and prosecute bribery cases under the FCPA. Resources have been
consistently assigned to deal with allegations of FCPA violations. Prosecutorial expertise has
been developed and applied.
Despite an abundance of articles and commentaries that have been written on the FCPA,
there is only a limited amount of authoritative or official guidance available on compliance with
the FCPA. There are few litigated cases - civil or criminal -- which test the outer limits of the
FCPA or deal with the difficult questions raised by the business purpose test, payments to third
party beneficiaries, the exercise of nationality jurisdiction, the scope of the definition of a foreign
official, and other areas of uncertainty. Much of the authority or guidance regarding the FCPA
comes from speeches from DOJ and SEC officials, DOJ opinions, DOJ and SEC complaints,
settlements that have been filed, and informal discussions of issues between companies' counsel
and the DOJ or the SEC. Some general publications are also available.
Jay G. Martin 2004
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There is also an anti-corruption brochure issued by the Department of State and a

brochure offering guidance on the FCPA published by the DOJ and the Department of
Commerce, as well as annual reports to Congress made by the Departments of Commerce and
State, that also include a summary and analysis of laws, by country, that have been passed to
implement the OECD Convention. These publications are produced in consultation and cooperation with the other agencies involved. There is also information on the tax deductibility of
bribes. Attorneys and trade experts of the U.S. Departments of Justice, State and Commerce, as
well as websites maintained by each of these Departments, are also available to assist U.S.
companies under the FCPA. The status of these various sources of information is often not clear.
Although the number of prosecutions and civil enforcement actions for FCPA violations
has not been great, the enforcement history of the FCPA demonstrates a willingness on the part
of the DOJ and SEC to prosecute large and medium-sized companies, and often high-level
officers of those companies, alleged to have been involved in violations of the FCPA throughout
the world. Since the inception of the FCPA, enforcement cases have arisen out of activities in
over twenty different countries such as Argentina, Brazil, Canada, Colombia, the Cook Islands,
Costa Rica, the Dominican Republic, Egypt, Germany, Haiti, Iraq, Israel, Italy, Jamaica, Mexico,
Niger, Nigeria, Panama, Russia, Saudi Arabia, Trinidad and Tobago, and Venezuela.
Most of the criminal cases brought under the FCPA have involved direct and overtly
corrupt payments to foreign government officials. The DOJ has prosecuted a variety of
schemes, companies and individuals under the FCPA. Cases have involved industries such as
the aircraft industry, the automotive industry, the construction industry, the energy industry, and
the food and agriculture industry. For example, in one early group of cases, the DOJ prosecuted
a company and its high-level officers for bribing the officials of Pemex, the national oil company
of Mexico, in order to gain several multimillion dollar contracts with Pemex. In another case,
the DOJ prosecuted employees of a bus company for bribing officials of a provincial government
in Canada to secure a contract to provide buses to the transit authority. Major companies such as
General Electric, Goodyear, IBM, Baker Hughes, Halliburton and Lockheed Corporation and
their high-level employees have been the subject of criminal FCPA prosecution for various
bribery schemes.
Since 1988, the FCPA has permitted both criminal prosecutions and civil actions against
offenders. Statutory criminal penalties for individuals include fines up to $100,000 per violation
or imprisonment for up to five years, or both. As a result of the 1988 Amendments to the FCPA,
individual officers, directors and employees of companies may be prosecuted even if the
company for which they work is not liable.95 Fines assessed against individuals may not be
reimbursed by the company.96 Business entities may be fined up to $2 million per violation.97
Because the alternative fine provisions of the Sentencing Reform Act apply,98 these penalties can
95
See generally H.R. CONF. REP. NO. 100-576.
96
15 U.S.C. 78dd-2(g)(3).
97
15 U.S.C. 78dd-2(g)(l).
98
See 18 U.S.C. 3571 (1994).

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be increased significantly.99 In a prosecution involving the Lockheed Corporation, for example,

the alternative fine provisions led to a combined civil and criminal fine of $24.8 million.100 The
FCPA also allows for a civil fine of up to $10,000 against any officer, director, employee or
agent of a firm who willfully violates the anti-bribery provisions of the FCPA.101 In addition to
the foregoing statutory penalties, the collateral consequences of a mere indictment can include
loss of export privileges, suspension and debarment from U.S. government contracting, and loss
of benefits under government programs, such as financing and insurance.
Over the years, there have been advances in the sophistication of the mechanisms used in
bribery itself as well as in the techniques of enforcement. Generally, the pattern has changed
from the classic suitcase filled with cash to more subtle scenarios involving intermediaries,
complex transactions with government entities, and misstatements of business or promotional
expenses. This has multiplied the suspicious indicators or so-called 'red flags' companies need to
look for - especially in the joint venture context and in foreign mergers and acquisitions - and has
led to the need for an increasingly broad array of safeguards to be deployed.
Allegations of FCPA violations come to the attention of the U.S. authorities by a number
of routes. No central mechanism exists for recording, tracking or compiling statistics about the
initial complaints or who makes them. Sources of allegations include competitors, former
employees, companies that have an internal audit process and have discovered suspicious
payments, subcontractors, joint venture partners, agents, foreign government officials or party
representatives, overseas representatives of the U.S. including FBI agents posted overseas, and
newspapers and journalists. Allegations are made in person, by telephone, facsimile
transmission, mail, or through the bribery hotlines of the DOJ and Commerce Department
(although the Commerce hotline is primarily intended as a means for U.S. companies to report
allegations of bribery by foreign companies), or the SEC Complaint Center. Each federal
agency's Inspector General also maintains confidential hotlines to report suspected fraud and
abuse.
Anonymous complaints have been an increasing source of allegations of FCPA violations
in recent years. Where the identity of the complainant is known, enforcement authorities cannot
guarantee that it will not be disclosed during the course of an investigation or prosecution.
Whistleblowers have brought their allegations directly to the DOJ Fraud Section, to the FBI, to
the SEC or to other agencies.
Since the enactment of the FCPA, the DOJ has brought a relative small number of
enforcement actions and these typically allege violations of 78dd-1 and 78dd-2 of the FCPA
(i.e. corrupt payments by an issuer or domestic concern): approximately 32 criminal
prosecutions and seven civil enforcement actions have been brought by the DOJ under the anti99
See 1988 U.S.C.C.A.N. 1957 (1988) (indicating that the FCPA penalty provisions do not override the
alternative fine provisions).
100
United States v. Lockheed Corp., 3 FOREIGN CORRUPT PRAC. ACT REP. (Bus. Laws, Inc.) 699.175.
101
15 U.S.C. 78dd-2(g); 78dd.

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bribery provisions of the FCPA. Only in a few cases has the DOJ brought prosecutions for
violations of the accounting and record-keeping provisions, aside from its role in prosecuting
violations of the bribery provisions of the FCPA. Since only some thirty separate alleged bribery
schemes have been prosecuted during 30 years under the FCPA, it is difficult to draw broad
conclusions about enforcement. There are no reliable statistics or other information available
which would reveal the number of allegations received, the number of investigations
commenced, terminated or abandoned, or that might shed light on the reasons which led to
decisions not to proceed.
Between 1977 and 2001, twenty-one companies and twenty-six individuals were
convicted for criminal violations of the FCPA. Corporate fines have ranged from US$ 1,500 to
US$ 3.5 million (the agreement by Lockheed in January 1995 to pay a record fine of US$
21.8 million being the only instance in which this range was exceeded). Fines imposed on
individuals have ranged from US$ 2,500 to US$ 309,000. Before the 1994 sentencing of a
Lockheed executive and of a General Electric international sales manager to, respectively, 18
and 84 months of imprisonment, no director, officer or employee of a company had gone to jail
for an FCPA violation. Since then, two individuals have been sentenced to jail, in U.S. vs.
David H. Mead and Frerik Pluitners (four months of imprisonment) and in U.S. vs. Herbert
Tannebaum (one year of imprisonment), both in 1998. Fines levied under the FCPA will most
probably increase in the future and it is likely that more directors and officers will receive
mandatory prison terms for their involvement in bribery.
The FCPA's anti-bribery provisions contain no period of limitations for criminal actions.
As a result, the general five-year federal limitation period provided by 18 U.S.C. para. 3282
applies for the filing of an indictment. The period can be extended for up to three years, upon a
request by a prosecutor and upon a finding by a court that additional time is needed to gather
evidence located abroad. However, the period is not suspended by any act of investigation prior
to the indictment.
For businesses, adverse publicity, investigation, indictment and prosecution may be a
more important deterrent than fines or imprisonment. News of a FCPA investigation can affect
the ability of a company to do business and can prove embarrassing or damaging to relationships
in the country where the alleged bribery has occurred. From a public relations standpoint, an
allegation of bribery can be disastrous for a company once it emerges in the news media that an
FCPA investigation is under way. The potential consequences of any criminal indictment are
well illustrated by the ongoing action against Arthur Andersen LLP arising out of the criminal
investigation into the affairs of Enron.
Beyond the public relations concerns, the costs in terms of legal fees and management
time of having to defend a FCPA Enforcement action are themselves far from negligible. Worse
still, in the view of large private companies and their counsel, is the threat of suspension of
export privileges, as happened to the Lockheed Corporation in 1994, or the withdrawal of
eligibility to bid for government contracts or apply for government programs. A mere
indictment for an FCPA violation is grounds for suspension, as happened to the Harris
Corporation which was tried and acquitted on FCPA charges in 1991. Once an agency bars
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or suspends a company from federal non-procurement or procurement activities, other agencies

in turn are required by the Code of Federal Regulations under its Title 48: "Federal Acquisition
Regulations System" to exclude the company. Furthermore, the U.S. will not provide advocacy
assistance unless the company certifies that it and its affiliates have not engaged in bribery of
foreign public officials in connection with the matter, and maintain a policy prohibiting such
bribery. Corporate violators of the FCPA may also be excluded from participating in trade
missions.
Conduct that violates the bribery provisions of the FCPA may also give rise to a private
cause of action for treble damages under the Racketeer Influenced and Corrupt Organizations
Act (RICO),102 or to actions under other federal or state laws. For example, an action might be
brought under RICO by a competitor who alleges that the bribery caused the defendant to win a
foreign contract. In W. S. Kirkpatrick v. Environmental Tectonics,103 the U.S. Supreme Court
held that the act of state doctrine does not bar a suit alleging that a bribe caused the defendant to
win a foreign contract. Violating the FCPA may also invite costly lawsuits. For example, after
the DOJ had prosecuted a company for bribing officials of Pemex, the national oil company of
Mexico, the Mexican company itself filed a major civil action against some eighteen known
defendants "and other unknown" conspirators seeking more than US$45 million in direct
damages under the Sherman Act, the Robinson-Patman Act, RICO, and further counts of
commercial bribery and fraud.
Taken together, the potential collateral consequences operate as a strong disincentive to
having the corporation indicted, let alone contesting the case to trial. There are many compelling
reasons for companies to settle with the DOJ and the SEC, and this may explain the high
percentage of cases which end in plea agreements. Given the commercial impact of an allegation
of an FCPA violation, companies do not have much appetite to take on the risks of going to trial.
VIII.
Implementing an Effective FCPA Compliance Program
An important effect of the FCPA is that it encourages the development of corporate legal
compliance programs ("compliance programs"). Compliance programs are probably the single
most important measure contributing to prevention and deterrence. A recent practice has been
the frequent imposition of a compliance program on the defendant corporation as a condition of a
plea agreement under the FCPA. Beginning in the Metcalf & Eddy matter, the government has
required annual certifications directed to the DOJ, and has also required the company itself to
conduct a periodic review of its compliance program to ensure that it took into account any
changes in the company's organization and lines of business. In addition, in a case involving a
violation of the FCPA, the existence of an effective corporate compliance program is, according
to the sentencing guidelines, a mitigating factor.
102
18 U.S.C. 1962-1968 (1998).
103
110 S. Ct. 701 (1990).

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The main features of a successful FCPA compliance program are strong commitment
from senior management in creating and communicating a 'compliance culture', regular and
thorough training, and consistent enforcement. The components of a FCPA compliance program
might include internal controls coupled with review by an internal Audit Committee,
implementation of a policy prohibiting discretionary payments, training and familiarization of
employees with the main provisions of the FCPA, a requirement that all employees regularly
sign an undertaking to be bound by the corporate conduct policy, and the systematic screening
('due diligence') of the technical capability, background, connections, reputation and financial
stability of any potential foreign business partner in order to reduce the likelihood of bribery by
an agent for which the company would be liable. Among larger U.S. corporations it is common
for the FCPA compliance program to form part of an overall corporate compliance policy which
also addresses insider dealing, antitrust and export regulations.
Compliance programs are by now well-developed and well-understood among large
public companies. The indirect or collateral damage that would be inflicted on such companies
by an indictment for violation of the FCPA of itself operates as a powerful incentive to enforce
compliance throughout the entire organization. Many larger companies insist on a single worldwide policy which they apply equally to their foreign subsidiaries and their U.S. operations.
U.S. companies doing business in foreign countries should be proactive in their FCPA
compliance, especially in light of the impact of the U.S. Federal Sentencing Guidelines.
Numerous steps should be taken, including the following:
The company's Code of Business Conduct and Compliance Manual should

state explicitly that it is the company's intent to comply with all laws,
including the FCPA, in conducting business.
A separate policy statement on FCPA compliance should be adopted and

distributed to all employees or, at the very least, to those who have any
possible connection with foreign business or contact with foreign officials.
A team should be created or a person designated to implement the FCPA

compliance program.
Regular briefings and interactive training sessions should be given to the

board of directors, senior management, and all employees who have any
possible connection with foreign business or contact with foreign officials
with regard to "Red Flags". In addition, each employee in this latter group
should be required to sign an affidavit annually that he or she has no
information regarding violations of the FCPA. A brief memorandum
explaining the key provisions of the FCPA should be distributed with the
affidavit.
Internal auditors, the board of directors' Audit Committee, and the

company's outside auditors should be informed on an ongoing basis about
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the FCPA, its requirements, the company's foreign activities, the

company's intent and efforts to comply with the FCPA, and any suspected
violations of the FCPA.
Effective reporting and disciplinary mechanisms should be established.
Effective procedures should be developed for screening foreign

consultants and all business partners.
All of the company's books and records should be maintained so that they
always accurately and fairly reflect the company's transactions and
disposition of assets.
FCPA provisions should be drafted for inclusions in agreements with

consultants and joint venture partners.
IX.
Summary of Some Recent FCPA Enforcement Actions and Cases
A.
Settlement of Suit Against Baker Hughes by Alan Ferguson.
On or about October 7, 2003, Baker Hughes settled a lawsuit brought against it by a

former employee who said he was fired because he refused to bribe a Nigerian official to win a
contract in 1999. Ferguson, a British national, was regional operations manager of Baker
Hughes' oil and gas drilling operations in Nigeria. He sued Baker Hughes in a state court in
Houston in March of 2002, contending he lost his job five months after refusing to give the
Nigerian a share of the company's revenues from a job it was bidding on. Within days of the
lawsuit, the SEC and the DOJ launched a formal investigation of Baker Hughes' business
activities in Nigeria to determine if there had been any violations of the FCPA. In August 2003,
the investigation was expanded to include Baker Hughes activities in Angola and Kazakhstan.
Baker Hughes has stated that it had begun its own investigation into its Nigerian
operations prior to the allegations by its former employee and basically completed the
investigation during the first quarter of 2003. Baker Hughes also launched its own investigation
of its Angola and Kazakhstan operations and is cooperating fully with the SEC. Baker Hughes'
completed internal investigation identified apparent deficiencies with respect to certain of its
operations in Nigeria in its books and records and internal controls, and potential liabilities to
governmental authorities in Nigeria. The potential liabilities are not believed to be large enough
to have a material effect on Baker Hughes' financial condition.
B.
ExxonMobil and ChevronTexaco Subpoenaed In Connection With FCPA

Kazakhstan Bribery Case.
The central Asian republic of Kazakhstan is an increasingly important source of oil and
gas production for U.S. energy companies. In September 2003, ChevronTexaco received a
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subpoena from the DOJ, which is investigating allegations of bribery and violations of the FCPA
in Kazakhstan's oil industry. ChevronTexaco is complying with the subpoena.
On June 12, 2003, a former senior Mobil Oil Corp. executive pleaded guilty to evading
taxes on more than $7 million he received for negotiating oil deals, including pacts between
Kazakhastan officials and U.S. executives. J. Bryan Williams, 63, entered the plea in U.S.
District Court in Manhattan to charges of conspiracy and tax evasion, agreeing to serve at least
three years and two months in prison with a maximum of four years and nine months in prison.
Judge Harold Baer set sentencing for September 18, when Williams will also face potential fines
and restitution of millions of dollars. During the plea, Williams said he did not disclose
payments he received to Mobil Oil. A prosecutor two months ago said Mobil Oil was a subject
of the government's ongoing investigation in the case.
During the plea, Williams said he opened two bank accounts in Switzerland in 1993 in
the name of a British Virgin Islands corporation. He said he used the accounts between 1993 and
2000 to hide more than $7 million from the Internal Revenue Service. He said money included a
$2 million payment he had received from people, organizations or governments he did business
with on behalf of Mobil Oil. During the plea, Williams did not mention James H. Giffen, a New
York businessman accused of making more than $78 million in unlawful payments to two senior
Kazakh officials.
James Giffen, a U.S. investment banker, was indicted in March 2003 on bribery charges.
He is accused of transferring $78 million in payments in 1996 from Mobil Oil Corporation
("Mobil") to senior Kazakhstan government officials, including President Nursultan Nazarbayev
and oil minister Nurlan Balgimbaev. Prosecutors have asserted that Giffen paid off senior
officials in six separate oil transactions, including Mobil's $1.05 billion investment in
Kazakstan's Tengiz field. In April 2003, former Mobil executive J. Bryan Williams was indicted
for taking a $2 million kickback in connection with the Tengiz transaction.
Mobil, which merged with Exxon in 1999 to form Exxon Mobil Corporation, has also
been subpoenaed as part of the bribery investigation. Exxon Mobil has stated that it has no
knowledge of any illegal payments. ChevronTexaco, a 20 percent investor in Tengiz, has also
denied any wrongdoing.
C.
Halliburton FCPA Violation in Nigeria.
Nigerian President Olusegun Obasanjo has ordered an investigation into the $2.4 million
in improper payments a Halliburton Company unit made to a Nigerian tax official. Halliburton
has revealed in recent filings with the SEC that it made payments to an "entity owned by a
Nigerian national who held himself out as a tax consultant, when in fact he was an employee of a
local tax authority." Halliburton could owe as much as $5 million in back taxes. Halliburton is
currently being investigated by the DOJ in the U.S., the French government and the Nigerian
government.

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After discovering the improper payments, Halliburton officials fired several employees,
although no senior officers lost their jobs. The payments were made between 2001 and 2002.
Halliburton has acknowledged that it had given some money to a Nigerian government official in
exchange for favorable tax treatment.
D.
Saybolt v. Schreiber.
On April 21, 2003, the U.S. Court of Appeals for the Second Circuit vacated a decision
by the District Court for the Southern District of New York and held that the attorney
representing a U.S. company could be sued by the former shareholders of that company for
incorrectly advising it that certain activities would be permissible under the FCPA. Although the
outcome of this case was determined by the legal principles of collateral estoppel and privity, the
decision is important to companies doing business overseas because it is a reminder that the
determination of whether a payment would be legal under the FCPA can have a significant
impact not only on the company itself, but also on the attorneys who assist the company in
making FCPA compliance decisions.
Saybolt International was a privately-held Dutch company with various worldwide
subsidiaries involved in the testing of bulk commodities; one of its subsidiaries was Saybolt
North America (Saybolt N.A.), a U.S. company incorporated in Delaware and headquartered in
New Jersey. All the officers and directors of Saybolt International were also the officers and
directors of Saybolt N.A.; David Mead, for example, was the CEO of Saybolt N.A. and also a
director of Saybolt International.
In 1995, another of Saybolt International's subsidiaries under David Mead's supervision,
Saybolt de Panama, needed to acquire a parcel of land in Panama but could not do so unless it
paid a $50,000 bribe to a Panamanian government official. Mead raised the issue at a Saybolt
N.A. board meeting; Phillippe Schreiber, a director of Saybolt N.A. who also occasionally
provided legal advice to the company, told Mead that it would be illegal under the FCPA for
Saybolt N.A. to pay this bribe; however, Schreiber later advised Mead, and others at the
company, that although Saybolt N.A. was prohibited from bribing the official, the company's
Dutch parent (Saybolt International) could legally make the payment. Apparently based on this
erroneous advice, Saybolt N.A. arranged for the bribe to be paid out of Saybolt International
funds in December 1995.
One year later, U.S. government officials investigating possible environmental infractions
by Saybolt N.A. discovered evidence of the bribe in Panama and shortly thereafter brought
criminal proceedings against both the company and its officers. Mead was arrested in January
1998 and was released from his duties at Saybolt; he was indicted by a grand jury for violating
the FCPA and was convicted, despite his argument that he believed the payment was legally
made based on Schreiber's advice. Saybolt North America was also charged with violating the
FCPA, pled guilty, and paid millions of dollars in criminal penalties.
Shortly after the criminal proceedings were concluded, the former shareholders of
Saybolt N.A.sold to another company while the proceedings were pendingbrought suit to
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recover damages from the attorney who had incorrectly advised the company that the
Panamanian official could be legally paid through a foreign affiliate. Plaintiffs complained that
the bribe would not have been made but for Schreiber's advice, and that he breached his fiduciary
duty to the company by providing this erroneous counsel, resulting in the loss of millions of
dollars in criminal fines assessed against Saybolt N.A. In his motion for summary judgment,
Schreiber argued that because the company affirmed in its guilty plea that it paid the bribe with
knowledge of the corruptness of its actions, Saybolt N.A.'s assignees cannot now argue that the
company believed its acts to be lawful. The lower court agreed with Schreiber and concluded
that because the company had already pled guilty to the FCPA violations, and because its CEO
had already been convicted for his own role in the alleged bribery despite trying to argue that
Schreiber was actually responsible for the violation, the company's former shareholders were
estopped from now claiming that the harm to the company was caused by the lawyer's incorrect
advice.
On appeal, the Second Circuit overturned the district court's decision and allowed the
shareholders to sue the lawyer. It reasoned that because the statutory elements of the FCPA do
not include knowledge that the act is a violation of the FCPA, Saybolt N.A.'s guilty plea does not
preclude the company from asserting now that it did not know it was violating the FCPA when it
paid the Panamanian official through its Dutch affiliate. Second, the Court of Appeals
determined that at the time of his trial, David Mead (who had been relieved of his duties when
arrested) did not have a sufficiently close relationship with the company to legally attribute his
conviction to Saybolt N.A. The result was that neither the CEO's conviction nor the company's
guilty plea could be cited to prevent the company's shareholders from alleging that it believed its
actions were legal when it arranged the payment to the Panamanian official, and would not have
violated the FCPA if not for the erroneous advice of the company's lawyer. This case has been
remanded for further proceedings in the District Court for the Southern District of New York.
E.
United States v. Basu.
In a case arising from facts very similar to those in U.S. v. Sengupta, Ramendra Basu, an
Indian national and former Task Manager with the World Bank's office in Washington, D.C.,
pled guilty to one count of conspiracy to commit wire fraud and one count of violating the
FCPA. In his plea, entered December 17, 2002, the defendant, who had been responsible for
awarding funds for consulting contracts in connection with World Bank development projects,
admitted to facilitating the payment of a $50,000 bribe to a Kenyan government official via an
American and a Swedish consultant. Jurisdiction was premised on a January 1999 e-mail sent by
the defendant, in Washington, D.C. to the Swedish consultant. The e-mail included the bank
account number of a Kenyan company that was working with the American consultant on a
World Bank urban transport project in Kenya. The defendant admitted that he sent the e-mail
with the knowledge that the money would be funneled by the American consultant to the
Swedish consultant and eventually to a Kenyan official. The defendant is required to pay
$127,000 in restitution and currently faces a possible maximum sentence of five years
imprisonment and a $100,000 fine.

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Interestingly, in both Sengupta and Basu, the DOJ apparently received substantial
cooperation from both the Swedish and Kenyan authorities.
F.
United States v. Syncor Taiwan, Inc.
On December 3, 2002, Syncor Taiwan, Inc, a Taiwanese company indirectly whollyowned by Syncor International Corp., a California provider of high technology health care
services, pled guilty to one count of violating the FCPA and agreed to pay a $2 million criminal
fine the maximum statutory penalty for a single violation of the FCPA. The same day, Syncor
International Corporation, the issuer-parent, entered into a consent decree with the SEC related
to Syncor Taiwan's conduct and agreed to pay a $500,000 civil fine the largest fine imposed as
of that date in an FCPA civil enforcement action by the SEC.
Syncor International Corporation voluntarily disclosed in November 2002 that its planned
merger partner, Cardinal Health Inc., had, in the course of its merger due diligence, discovered
evidence of possible improper payments to state-owned healthcare facilities abroad. According
to public papers in the case, Syncor Taiwan paid physicians employed by state-owned hospitals
in Taiwan in order to secure sales of radiopharmaceuticals and to obtain referrals of patients to
medical imaging centers owned and operated by Syncor Taiwan. The improper payments, which
totaled $457,117, were made with the authorization of the chairman of the board of directors of
Syncor Taiwan. The payments were recorded as "promotional and advertising expenses."
Syncor Taiwan, Inc. was the first case in which the DOJ criminally prosecuted a foreign
subsidiary of a U.S. company under the 1998 FCPA Amendments to section 78dd-3 of the
FCPA, which extended the FCPA's prohibitions on improper payments to foreign officials to
cover any act in furtherance of such payments by "any person," including foreign corporations,
"while in the territory of the United States."104 The plea agreement states that on several
occasions the Chairman of Syncor Taiwan sent e-mails from California to Taiwan approving
budgets for Syncor Taiwan that incorporated amounts to be paid to officials of state-owned
hospitals.
G.
United States v. Sengupta.
In June of 2002, Gautam Sengupta, a former Task Manager with the World Bank's
offices in Washington, D.C., pled guilty to one count of wire fraud and one count of violating the
FCPA in a prosecution by the DOJ in federal district court in Washington, D.C. The DOJ
charged that Sengupta entered into an agreement with a Swedish consultant to direct World
Bank-funded projects to that consultant in exchange for kickbacks. Sengupta received a request
for a payment from a Kenyan government official in connection with a World Bank-funded
project and agreed to pass the request on to the Swedish consultant, who later paid the official.
The DOJ asserted jurisdiction over Sengupta based on the new prohibition on foreign
persons making corrupt payments while on U.S. territory.
104
See 15 U.S.C. 78dd-3(a).

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H.
U.S. v. David Kay and Douglas Murphy (S. Dist Texas - Houston).
In the Spring of 2002, Defendants Douglas Murphy and David Kay were charged by a
twelve-count indictment with violations of the FCPA. The indictment alleged that defendants, as
president and vice president of American Rice, Inc. ("ARI"), made improper payments to
officials in the Republic of Haiti to reduce customs duties and sales taxes allegedly owed by ARI
to the Haitian government. Defendants moved to dismiss the indictment under Federal Rule of
Criminal Procedure 12(b)(2). Defendants presented the following arguments in support of
dismissal:
The plain language of the FCPA does not prohibit payments to reduce customs
duties or tax obligations.
The legislative history of the FCPA confirms that Congress intended to limit the
types of acts made criminal by the FCPA.
Under the rule of lenity, the Court must resolve all ambiguities in the statute in
favor of the Defendants.
The FCPA does not provide fair warning that the alleged conduct is prohibited.
The central question before the court was whether payments to foreign government
officials made for the purpose of reducing customs duties and taxes fall under the scope of
obtaining or retaining business concept found in the text of the FCPA. The defendants contend
that the FCPA, on its face, does not prohibit such payments. Rather, the FCPA only prohibits
payments made to obtain or retain business, which, according to defendants, limits the scope of
the FCPA to payments to secure new business or to renew existing business. Defendants further
argue that they did not make the alleged payments to Haitian officials to obtain new business or
to renew existing business.
In responding to the defendant's arguments, the U.S. government argued that the FCPA
applies, without any textual limit, to all bribes made for the purpose of obtaining or retaining
business. The government further argued that defendants' payments to reduce customs duties
and sales taxes were essential to ARI to be able to conduct business in Haiti and, thus, the
payments, therefore, constituted prohibited payments made to retain business. In addition, the
government argued that other provisions in the FCPA demonstrate that the statute is not as
limited in its scope as defendants suggest. In support of this last argument, the government
pointed specifically to the fact that the FCPA provides for an exception to liability for "routine
governmental actions."
On April 16, 2002, the district court dismissed the indictment against Murphy and Kay on
the grounds that it failed to state the elements of an offense under 15 U.S.C. 78dd-1(a) and
78dd-2(a). The court reasoned that improper payments made to reduce customs duties and sales
taxes were outside the scope of the FCPA because they were not made to obtain or retain
business. In so doing, the court rejected the government's argument that the FCPA applies to all
Jay G. Martin 2004
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bribes made for the purpose of obtaining or retaining business, not just those payments made to
secure new business or renew existing business. The court relied heavily on the legislative
history of the FCPA, particularly what it cited as Congress' failure to amend the obtain or retain
business language to cover payments made for other improper advantage as well.
The DOJ appealed the court's decision to the United States Court of Appeals for the Fifth
Circuit. Recently, on February 4, 2004, the Fifth Circuit issued an opinion holding that the
district court had erred in finding that, as a matter of law, an indictment alleging illicit payments
to foreign officials for the purpose of avoiding substantial portions of customs duties and sales
taxes to obtain or retain business are not the kind of bribes that the FCPA criminalizes.105 The
Fifth Circuit held instead that such payments could (but do not necessarily) come within the
ambit of the FCPA. In light of this finding, the case was remanded to the District Court for
further proceedings.
After the DOJ's prosecution was dismissed, the SEC filed a civil action against Murphy,
Kay, and Lawrence Theriot, a company consultant, also in federal district court in Texas. The
SEC complaint alleges that Kay authorized over $500,000 in bribery payments to Haitian
customs officials and directed that those payments be recorded as routine business expenditures.
Mr. Theriot is alleged to have aided and abetted Kay's and Murphy's violations. The complaint
further alleges that Mr. Murphy knew of the bribery scheme but took no action to stop it and is
liable as a "control person" for Kay's actions.
I.
Baker Hughes.
In a series of related cases, the SEC and DOJ extended their reach under the FCPA to
parties and circumstances not covered by previous FCPA enforcement actions. These cases, one
of which included an unprecedented joint enforcement action by the DOJ and SEC, involve
Baker Hughes, a Texas oilfield services company, two former officers of Baker Hughes, an
Indonesian affiliate of a "Big Five" accounting firm (KPMG), and an Indonesian national who is
a partner in the affiliate accounting firm. The government has settled the cases against the
company, the outside accounting firm, and its partner; the individual cases are being litigated.
As described below, the court papers in these cases, filed in Houston on September 11,
2001, allege jurisdiction in one of the cases on the grounds that a foreign national is an "agent"
of an "issuer," even though there is no evident nexus to U.S. commerce. Also invoked was a
provision of the FCPA, adopted in 1998, that covers non-U.S. persons who take actions within
U.S. territory. On the facts in the public record, both the Indonesian accounting firm and its
individual partner appear to have been outside U.S. jurisdiction. And in two instances cited in
the complaint against Baker Hughes, involving payments to third-party intermediaries, the
language of the court papers suggest that the government may have imposed something close to
strict liability for third-party actions.
105
See United States of America v David Kay and Douglas Murphy, 2004 W.L. 223918 (5th Cir) (Tex).
Jay G. Martin 2004
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1)
Facts Alleged by the SEC.
The cases arose out of a single set of facts. Court documents allege the facts to be as
follows. Baker Hughes, an issuer under the FCPA, controls PT Eastman Christiensen ("PTEC"),
an Indonesian corporation headquartered in Jakarta, Indonesia. In February 1999, the Indonesian
tax authority notified PTEC that the company owed $3.2 million in taxes to the Indonesian
government. Soon after, PTEC retained KPMG Siddharta Siddharta & Harsono ("KPMG-SSH")
to represent PTEC before the authority.
During KPMG-SSH's meetings with an Indonesian tax official to discuss the merits of the
tax assessment, the tax official repeatedly requested that PTEC make a payment to the official.
In exchange for the payment, the tax official stated that he would reduce PTEC's tax assessment.
The KPMG-SSH employee (an Australian citizen) responsible for the PTEC case ("KPMG-SSH
Manager") met with Sonny Harsono, a KPMG-SSH partner, to discuss the tax official's request
for payment. Harsono suggested that if Baker Hughes wished to make the payment, KPMG-SSH
would make the payment, and they discussed generating a false invoice for KPMG-SSH's
services that would cover money for the improper payment.
The KPMG-SSH Manager subsequently informed Baker Hughes' Asia-Pacific Tax
Manager (the "BH Tax Manager") of Harsono's suggestion and noted that the Indonesian tax
official was willing to reduce the assessment from $3.2 million to $270,000 in exchange for a
payment of $75,000. The BH Tax Manager allegedly relayed that information to James W.
Harris, Controller of Baker Hughes, and to Baker Hughes' unnamed FCPA advisor. The FCPA
advisor informed Harris and the BH Tax Manager that the payment would violate the FCPA and
that KPMG-SSH must provide written assurances that it would not make illegal payments.
Subsequently, Harris informed Baker Hughes' General Counsel and Eric L. Mattson, Baker
Hughes' Chief Financial Officer, about the situation. The General Counsel instructed Mattson
and Harris not to enter into the transaction, and to work with the FCPA advisor to resolve the
issue.
Contrary to the instruction, Mattson and Harris allegedly subsequently authorized the
BH Tax Manager to proceed with the payment to the Indonesian official. Under the direction of
Harsono, KPMG-SSH created and sent a false invoice to PTEC for $143,000, which comprised
the $75,000 to be paid to the tax official and the remainder for KPMG-SSH's actual fees. PTEC
paid KPMG-SSH the $143,000 and improperly entered the transaction on its books and records
as payment for professional services rendered. Soon thereafter, PTEC received a tax assessment
of approximately $270,000 from the Indonesian tax authority.
Upon discovering the payment to the Indonesian tax official, Baker Hughes' General
Counsel and FCPA advisor undertook immediate corrective action, including the following steps
cited by the SEC: attempting to stop payment; reporting to the Audit Committee, voluntarily
disclosing the payment to the SEC and the DOJ, correcting Baker Hughes' books and records;
firing KPMG-SSH; obtaining resignation of senior management officials responsible for the
action; challenging the $270,000 tax assessment as erroneous and paying $2.1 million, which it
believed to be the correct tax assessment, to the Indonesian government; and implementing more
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comprehensive FCPA procedures. Baker Hughes also cooperated with the SEC's investigation,
including declining to assert attorney-client privilege with regard to its communications during
the period of the Indonesian transaction.
In investigating the Indonesian payments, Baker Hughes discovered that it also had made
payments to agents in India and Brazil without ensuring that money would not pass to foreign
officials. The transaction in India related to the activities of a wholly-owned subsidiary of a
company, Western Geophysical Corporation, which Baker Hughes acquired in August 1998. In
October 1998, an agent of the subsidiary paid $15,000 to obtain shipping permits in India that
would normally require a "no objection certificate" from the Indian Coastal Commission and
later sought reimbursement from the company. The subsidiary paid the agent and recorded the
payment without determining to whom the money ultimately would be paid, inaccurately
describing it as payment for a "Shipping Permit."
In Brazil, Baker Hughes approved a $10,000 payment made by its Brazilian agent to
obtain approval from the Brazilian Commercial Registry for the restructuring of Baker Hughes
entities in Brazil. Baker Hughes recorded this $10,000 payment without determining to whom
the money ultimately would be paid and inaccurately described it as an "advance payment for
expenses related to the commercial registry board of Rio de Janeiro."
2)
The Baker Hughes Consent Decree.
The SEC found that Baker Hughes violated the books and records and internal controls
provisions of the FCPA. As a result of the settlement, the SEC ordered Baker Hughes to cease
and desist from committing or causing any violation of the FCPA, but imposed no fine. The
settlement terms highlight the mitigating effects of Baker Hughes' aggressive internal
investigation and remedial action, including termination of senior management officials
responsible for the payments and the company's cooperation with U.S. enforcement authorities.
Cooperation included the waiver of attorney-client privilege regarding advice during the time
period under investigation, a requirement being asserted with increasing frequency by the DOJ
and the SEC. Possibly because, as part of its response to the payments, Baker Hughes
implemented "enhanced FCPA policies and procedures," the consent decree imposed no
additional compliance obligations on the company.
The consent decree also reinforces the SEC's position that an accounting violation can be
based on qualitative (as opposed to quantitative) materiality. The amount of the payments at
issue in all three countries may very well not meet purely quantitative thresholds of materiality
for the company. In addition, the public documents do not explicitly say that the payments in
India and Brazil were actual bribes. The violation seems to be based on the company's failure to
perform due diligence sufficient to ensure that the payments, whatever their size, were not
bribes. In public statements, SEC officials have suggested that the payments may not have been
accompanied by back-up documentation sufficient under generally-accepted accounting
principles. The consent decree includes a specific requirement that due diligence be conducted
in the future.

Jay G. Martin 2004
36
Finally, the India payment highlights the potential risks that arise in the wake of an
acquisition. The payment occurred only two months after Baker Hughes acquired Western
Geophysical, and was not discovered until much later, a circumstance that underscores the
importance of implementing FCPA compliance controls on acquirees' operations as quickly as
possible.
3)
Action Against KPMG-SSH and Harsono.
The combined action by the SEC and DOJ against KPMG-SSH and Harsono has several
striking features. It is an unprecedented joint action by the two enforcement authorities.
Without admitting or denying the allegations against them, KPMG-SSH and Harsono consented
to an order that enjoins them from violating and aiding and abetting the violation of the
antibribery provisions, the internal controls provisions, and the books and records provisions of
the FCPA. Significantly, the decree imposes no financial penalty against the firm or Harsono.
This case raises interesting jurisdictional issues because of the nationality of the
defendants. Harsono is an Indonesian citizen, and KPMG-SSH is an Indonesian firm and an
affiliate of KPMG International, a Swiss association with member firms in 159 countries. The
jurisdictional issue is also complicated by the decision of the SEC and DOJ to file a joint civil
action.
With respect to the jurisdiction of the SEC, the complaint alleges that Harsono violated
15 U.S.C. 78dd-1(a) and that KPMG-SSH and Harsono aided and abetted Baker Hughes'
violation of the books and records and internal controls provisions of the FCPA.
Section 78dd-1(a) prohibits issuers and their "agents" from using the means or instrumentalities
of interstate commerce in furtherance of an improper payment to a foreign official. This
provision is facially broad enough to prohibit the activities of non-U.S. nationals that use
interstate commerce. Rather than citing any facts implicating such activities, however, the
consent decree merely alleges that Harsono and KPMG-SSH "directly or indirectly" used the
instrumentalities of interstate commerce. The complaint only describes KPMG-SSH's contacts
with the Baker Hughes' Asia-Pacific Tax Manager, who was based in Australia. Further, even if
the requirements of Section 78dd-1(a) are met, the SEC must still establish personal jurisdiction
over a defendant. It is unclear from the complaint what leverage was brought to bear to
encourage Harsono and KPMG-SSH to submit to U.S. jurisdiction.
With respect to the jurisdiction of the DOJ, the complaint alleges KPMG-SSH and
Harsono violated 15 U.S.C. 78dd-3(a) of the FCPA. Section 78dd-3(a) prohibits "any person"
from using the instrumentalities of interstate commerce in furtherance of an improper payment to
a foreign official "while in the territory of the United States" (emphasis added). The complaint
alleges no facts that indicate that Harsono or KPMG-SSH officials engaged in any activities
within the territory of the United States; indeed, the public papers do not make clear why the
DOJ chose this section as the basis for jurisdiction. Although from a purely legal perspective,
KPMG-SSH and Harsono would have had strong arguments against the assertion of both subject
matter and personal jurisdiction, their consent to jurisdiction ensured a quick settlement without
risking financial or criminal penalties or a protracted legal struggle.
Jay G. Martin 2004
37
Finally, the case is also noteworthy because it is one of the first FCPA cases against an
outside accounting firm. Such cases are common in the general securities fraud area, and their
appearance in the FCPA arena reinforces the view from recent cases that U.S. enforcement
agencies are willing to target outside professional advisors.
4)
Action Against Former Company Officers.
The SEC civil complaint against Mattson, former Chief Financial Officer of Baker
Hughes, and Harris, former Controller of Baker Hughes, for their activities related to the
Indonesian payment alleges that they violated both antibribery and accounting provisions of the
FCPA. The two are also charged with aiding and abetting the Baker Hughes accounting
violations. Although the allegations suggest willful disregard or intent on the part of the
individuals, to date no criminal proceedings have been instituted against them. Harris is
contesting the charges. Litigation could test the obtain or retain business prong of the FCPA,
which has been expansively construed by enforcement officials to include any financial benefit,
but, like many aspects of the FCPA, has never fully been litigated. The statements in the press
by Harris' attorney suggest a potential argument based on reliance on KPMG-SSH, so this may
also be an issue in any litigation.
First, the company allegedly authorized a payment to influence an official to reduce an
inaccurate tax assessment. The company was not seeking to obtain new business but merely an
accurate tax assessment. The culture of corruption that permeates the governments of many
countries is a challenge for U.S. businesses. It is quite apparent that no one involved in this
incident believed that the proposed tax assessment was accurate. Nonetheless, the unappealing
choice was either to pay the bribe and receive an accurate tax assessment or not pay the bribe and
receive an erroneous tax assessment which likely could not be overturned. The FCPA
commands that companies and individuals subject to the FCPA choose to forego paying bribes.
Second, charges were filed against KPMG's Indonesian affiliate and one of its senior
partners, an Indonesian national. This is an example of how U.S. law enforcement authorities
can bring enforcement actions against foreign entities and nationals under the extended reach of
the FCPA.
Third, as noted above, the SEC and the DOJ filed a joint civil action against KPMG-SSH
and Harsono. Joint governmental investigations, through which the SEC and DOJ can pool their
resources, provide a potent enforcement tool.
Fourth, it is noteworthy that the parent company, Baker Hughes, avoided criminal
sanctions and settled administrative proceedings by the SEC, agreeing to the entry of a ceaseand-desist order. Baker Hughes received this comparatively lenient treatment because it
promptly took a number of corrective actions upon discovery of the FCPA violation, which
included instructing KPMG-SSH not to pay the Indonesian tax official, firing KPMG-SSH,
engaging outside counsel to report to its Audit Committee regarding the matter, voluntarily
disclosing the illicit payment to the SEC and DOJ, disclosing the matter to its outside auditors
and correcting its books and records, obtaining the resignation of the relevant executives,
Jay G. Martin 2004
38
implementing enhanced FCPA procedures, and cooperating with the SEC's investigation by not
asserting its attorney-client privilege with respect to relevant communications. Although
voluntary disclosures have many perils, this disclosure was rewarded with a decision by the SEC
and DOJ not to proceed with criminal charges or an injunction in federal court.
J.
U.S. v. Cantor.
In June 2001, the U.S. Attorney for the Southern District of New York charged Joshua C.
Cantor, former president of American Banknote Holographics, Inc. ("ABNH"), with conspiracy
to violate the accounting and recordkeeping provisions of the FCPA, and on unrelated facts,
conspiracy to violate the antibribery provisions of the FCPA.
ABNH and its parent company American Banknote Corporation ("ABN") design and
manufacture products that include counterfeit-resistant technology. In an effort to boost the price
of ABNH stock prior to a public offering of the company, Cantor and unnamed coconspirators
devised and put into effect a scheme to inflate the revenue and earnings of ABNH. The reports
of the increased revenues and earnings were then reported to the public and the SEC. By
including sales to customers that did not occur or that were incomplete as of the time they were
recorded, ABNH showed an upward trend in its revenue and earnings when in fact revenue and
earnings were in decline.
The government separately alleged that Cantor conspired with unnamed individuals to
violate the antibribery provisions of the FCPA, in making payments through its UK sales agent
to a Swiss bank account for the benefit of the Director of Issues and Vaults, a department of the
Saudi Arabian Monetary Agency ("SAMA"), an agency of the Kingdom of Saudi Arabia.
Cantor allegedly paid the official $239,000 to obtain a contract to supply holograms for
commemorative banknotes, and SAMA ultimately awarded the bid to ABNH.
The case alleges only a conspiracy to violate the FCPA antibribery provisions, even
though the information states that the government official in question did receive at least a
portion of the amount intended for him. The conspiracy charge may reflect potential problems of
proving the second-leg payment to the foreign official.
K.
U.S. v. King and Barquero.
On June 27, 2001, the U.S. Attorney for the Western District of Missouri indicted Robert
King and Pablo Barquero Hernandez ("Barquero") on charges of FCPA antibribery violations,
conspiracy, and acts in interstate and foreign commerce in aid of racketeering. King, a U.S.
citizen and stockholder in Owl Securities & Investments, Ltd. ("OSI") (a "domestic concern"
incorporated in Nevada with its principal place of business in Kansas City, Missouri), and
Barquero, a Costa Rican national and "agent" of OSI, allegedly made payments to Costa Rican
officials, political parties, party officials, and candidates for public office to obtain a land
concession to develop new port facilities in Costa Rica. The defendants attempted to acquire the
land concession on behalf of OSI Proyectos, a Costa Rican affiliate of OSI.

Jay G. Martin 2004
39
The indictment hints at some interesting jurisdictional issues. The government describes
Barquero as "an agent of OSI" and cites instances when he apparently used the mails or
instrumentalities of interstate commerce in furtherance of the scheme. The indictment indicates
that the assertion of jurisdiction over Barquero is based on Sections 78-dd(2)(a) and (g) of the
FCPA, but not Section 78-dd(3), which targets foreign nationals based on a territorial nexus.
Prior to the 1998 Amendments, the FCPA did not permit the imposition of criminal penalties on
foreign agents of domestic concerns. This case appears to be the first time criminal liability has
been asserted against a foreign national under Section 78-dd(2)(a) and the expanded penalty
provisions of 78-dd(2)(g).
King and Barquero is also one of the few FCPA cases to involve political contributions.
The prohibition against illicit payments to candidates and political parties has been problematic
because the line between legitimate and illicit political contributions is often not clear and the
compliance with local law defense may be available.
L.
U.S. v. Halford; U.S. v. Reitz.
In addition to King and Barquero, DOJ also targeted other officers of OSI. On August 3,
2001, Richard Halford, former Chief Financial Officer of OSI, agreed to plead guilty to
conspiracy to violate the FCPA and three counts of tax evasion for his participation in raising
funds for the payment of the Costa Rican officials. Also on August 3, Albert Reitz, a former
officer and director of OSI, agreed to plead guilty to conspiracy to violate the FCPA, mail fraud,
making of a false statement, and filing a false tax return, for his participation in raising funds for
the Costa Rican officials. Sentencing has not yet taken place.
M.
U.S. v. Rothrock.
On June 13, 2001, the DOJ entered into a plea agreement with another corporate
executive, Daniel Rothrock, in District Court for the Western District of Texas for criminal
violations of the accounting provisions of the FCPA. Rothrock agreed to plead guilty to one
count of knowingly and willfully falsifying and causing to be falsified, books, records, and
accounts of his former employer, Allied Products Corporation ("Allied") in violation of
15 U.S.C. 78m(b)(2)(A).
Cooper Division, an operating division of Allied (an issuer within the meaning of the
Exchange Act), manufactured and sold workover rigs and other oilfield well serving equipment.
Rothrock served as Vice-President of Cooper Division and was an officer, employee and agent
of Allied. In August 1991, Cooper entered into a contract to sell approximately 20 workover rigs
for $5.5 million to RVO Zarubezhneftestroy ("Nestro"), an entity owned by the government of
the USSR and later by the government of the Russian Republic and, therefore, an
"instrumentality" of a foreign government under the FCPA.
The Director General of the Russian buyer, Nestro, also served as a director of Trading &
Business Services, Ltd. (TBS), an entity owned equally by Nestro and Comco, a Swiss company.
Cooper Division agreed to pay a sales commission of $300,000 to TBS "for the ultimate benefit
Jay G. Martin 2004
40
of the Director General of Nestro" to obtain the contract for the sale of workover rigs. To
facilitate the payment, Rothrock and TBS created a fake invoice for a company called "Educa,"
and Rothrock labeled the payment to Educa as a "consultation fee and market study" in Allied's
books.
As part of the plea agreement, Rothrock agreed to cooperate fully with U.S. law
enforcement agencies. The government agreed to concur with Rothrock's request for probation.
A criminal violation of the accounting and internal controls provision of the FCPA carries a
maximum sentence of imprisonment of five years, a $250,000 fine, and a mandatory assessment
of $100.
The terms of the plea agreement suggest that the government's likely strategy is to obtain
the cooperation of a corporate officer to facilitate prosecution of the company or other corporate
executives.
N.
Chiquita Brands International.
The SEC announced on October 3, 2001, that Chiquita Brands International Inc. had
consented to the entry of a cease-and-desist order for a books and records and internal controls
violations relating to two improper payments totaling $30,000 allegedly made by employees of
its wholly-owned subsidiary located in Colombia to customs officials in exchange for a license
renewal. In addition to agreeing to a cease-and-desist order, Chiquita has assented to pay a fine
of $100,000. The case provides an example of the SEC's interest in pursuing FCPA cases, and of
the effective strict liability the accounting provisions create for issuers with respect to the acts of
their foreign subsidiaries.
O.
DOJ Opinion Procedure Release 2001-01.
The DOJ addressed the issue of past payments by a foreign joint venture partner in
Opinion Procedure Release 2001-01. In this release, a U.S. company requested clarification of
how DOJ would view a fifty-fifty joint venture with a French company and, in particular, how
DOJ would view certain provisions of the joint venture that address contracts entered into by the
French company prior to the enactment of French Law No. 2000-595 Against Corrupt Practices
("FLAC").
The U.S. company's representations to DOJ included assurances by the French company
that: (1) none of the contracts were originally procured in violation of any antibribery laws;
(2) all agent agreements entered into prior to January 1, 2000, had been terminated, and a
compliance program for all future agency relationships had been adopted; and (3) the U.S.
company retained the right to terminate the joint venture if the French company were convicted
of, or admitted, violating the FLAC or if, in the opinion of the U.S. company, the French
company has violated antibribery laws in such a manner as to have a "materially adverse effect"
on the joint venture. While the DOJ agreed not to pursue enforcement action, it qualified its
decision in a number of respects.

Jay G. Martin 2004
41
The DOJ first noted that, even if the French company did not violate the FLAC or
previous French antibribery laws but did contribute contracts that were in violation of another
antibribery law (such as the domestic law of the country of a foreign official who may have
received a bribe), the U.S. company could face FCPA liability for any continuing payments to
those foreign officials. The DOJ also specifically declined to endorse the "materially adverse
effect" standard because it may not be sufficient to allow the U.S. company to remove itself from
the joint venture in the case of continuing bribes, which would expose it to FCPA liability.
Finally, the DOJ commented favorably on the U.S. company's FCPA compliance program;
however, it refused to endorse any specific parts of the program, and, in fact, the release did not
discuss any of the compliance program's details.
This case confirms the value of measures designed to avoid an allegation that a current
payment to a joint venture may be viewed as reimbursement of a party's past illicit payment.
The DOJ caveats highlight DOJ's aggressive views regarding withdrawal obligations in
transactions where corruption issues have arisen.
P.
Metcalf & Eddy.
On December 9, 1999, the DOJ released a consent agreement resolving a civil action
brought under the FCPA against Metcalf & Eddy, a Massachusetts environmental engineering
company (M&E). This case is one of the most important FCPA agreements ever issued on the
subject of travel and entertainment expenses provided to foreign officials and their families, an
issue that many U.S. corporations face on a regular basis. The draft complaint reflects an
aggressive DOJ position on a number of key issues, and the consent agreement incorporates an
onerous and far-reaching array of compliance requirements.
1)
The Alleged Facts.
M&E is a "domestic concern" (not an "issuer") under the FCPA. The DOJ complaint
alleged that a predecessor to M&E provided benefits to the chairman of an Egyptian
governmental instrumentality responsible for sewage and wastewater treatment facilities in the
city of Alexandria. The benefits were allegedly provided to induce him to use his influence to
support the granting of two contracts funded by the U.S. Agency for International Development
(USAID) (worth approximately $11 million and $24 million, respectively) to M&E. Although
the chairman was not the actual decisionmaker in the contract award process, the decisionmakers
were his subordinates, and DOJ alleged that M&E provided benefits to the chairman knowing
that he could influence the contract awards directly through his subordinates or indirectly to
USAID.
The benefits provided were the costs of travel, lodging, and entertainment for two trips by
the chairman, his wife, and his two children from Egypt to the United States. The first trip
involved stops in Washington, Chicago and Orlando; the second included stays in Paris and San
Diego. In addition, M&E paid the chairman per diem at 150 percent of the rate authorized by the
Federal Travel Regulations, and it paid the per diem in a lump sum in advance of the travel.
Although USAID approved the per diem amounts, the complaint noted that the per diem
Jay G. Martin 2004
42
amounts were not "necessary expenses" and that the payment of the additional 50% had not been
justified or documented by M&E. Moreover, despite having advanced the per diem, M&E
separately paid most of the travel and entertainment expenses actually incurred during the trips;
the complaint notes that the advanced per diem lump sums thus became "unrestricted cash
payments." Finally, M&E paid to upgrade the chairman's airline tickets to first class and bought
first class tickets for his family. The total monetary value of the benefits provided is unstated.
In addition, the DOJ alleged that M&E failed to maintain accurate books and records and
effective internal controls (notwithstanding that, as a non-issuer, the company was not legally
required to do so by the FCPA) and lacked an effective FCPA compliance program, although it
is not clear whether these failures form a separate basis for FCPA liability.
2)
Implications of M&E.
a)
Liability for Excessive Travel and Entertainment. This case is

significant, first, simply because the FCPA is used to punish the
provision of travel and entertainment expenses, which typically do
not entail very large sums. The FCPA provides an affirmative
defense for the payment of "reasonable and bona fide" business
expenses related to certain marketing and contracting activities, a
standard that frequently raises interpretive issues. In this case,
DOJ used the Federal Travel Regulations as a benchmark for
measuring justifiable travel expenses, but challenged USAID's
approval of the per diem payments, and, in light of the additional
reimbursement of expenses, characterized the per diem as "in
effect, unrestricted cash payments."
b)
Liability for Payments to Family Members. The complaint

explicitly alleged that paying for the first class travel of the
chairman's immediate family members was "a payment of a thing
of value to the Chairman." While the 1991 Liebo case also
involved in part a gift of airline tickets to an official and his fianc,
the focus of liability was the gift to the official himself and its
effect on influencing the official's cousin, the key decisionmaker
for the contract at issue in that case.
c)
Books and Records Requirements for Domestic Concerns. The

complaint specifically cited a failure to keep proper books and
records as a partial basis for liability, even though it described
M&E as a "domestic concern," not an "issuer." Implicit in this
allegation is the contention that domestic concerns may be subject
to the FCPA requirement to keep books, records, and accounts in
reasonable detail so that they fairly reflect transactions and
dispositions of assets.

Jay G. Martin 2004
43
d)
Successor Liability. The case is also unusual in that it involves

liability of a company for the acts of its predecessor. It is possible
that this explains the civil rather than criminal nature of the case.
e)
Sanctions Imposed. The consent agreement imposes a civil fine of

$400,000 on M&E, plus an additional $50,000 charge to cover the
costs of the investigation. It also permanently enjoins the company
and its officers and agents from violating the FCPA in the future.
In addition to fines, the undertaking imposes an aggressive panoply of compliance

obligations on M&E. In nine pages of detailed discussion, the DOJ enumerates the compliance
elements that M&E must satisfy. Although some element may be punitive, they also reflect
DOJ's views of policies, procedures, and safeguards that are appropriate, at least under the
circumstances of this case. They include:
a "clearly articulated" corporate policy

assignment of responsibility for compliance to one or more senior company officers
establishment of an independent committee to review contracts retaining agents and
consultants
due diligence procedures for potential agents, consultants, and business partners
procedures designed to inhibit discretion of corporate authority to persons at risk of making
payments
regular training, including training of agents, consultants, and other representatives
an effective reporting system for company employees to report possible violations
appropriate disciplinary mechanisms for employees violating policies
antibribery clauses in all contracts with consultants or business partners, including periodic
certifications, prior approval of any subcontractors, and termination clauses for violations
books and records and internal accounting requirements identical to requirements imposed on
issuers under the FCPA
periodic certifications on FCPA compliance to USAID and other U.S. government entities
based on independent outside audits
periodic reviews of the FCPA compliance program by outside law firms or auditors
full disclosure of future and past payments activities to the DOJ, and
availability of company directors and officers to law enforcement officials
Q.
Saybolt.
On August 18, 1998, Saybolt, Inc. ("Saybolt"), a petroleum inspection company, and
Saybolt North America, Inc. agreed to plead guilty to charges of violating the Clean Air Act,
FCPA violations, and conspiracy to violate the FCPA. Pursuant to the plea agreement, the
companies agreed to pay a total fine of $4.9 million. Of the total fine, $3.4 million (including
nearly a million dollars in disgorgement) was for falsifying petroleum test data and $1.5 related
to the FCPA charges. In addition, the companies will be placed on probation for five years and
have agreed to cooperate with the authorities in the investigation and prosecution of the
individuals implicated in the violations. During the period when the violations occurred, Saybolt
Jay G. Martin 2004
44
and Saybolt North America, Inc. were U.S. subsidiaries of Saybolt International, B.V., a
Netherlands-based company. In May 1997, Core Laboratories, N.V., also a Dutch company,
acquired Saybolt International.
The Saybolt indictment stemmed from charges that Saybolt, Inc.'s former President and
CEO, David Mead, and its former Chairman of the Board, Frerik Pluimers (who was also the
President and CEO of Saybolt International), authorized a subordinate to pay a $50,000 cash
bribe to certain Panamanian government officials within the Panamanian Ministry of Industries
and Commerce who had requested such a payment in October 1995. Specifically, the
indictments charge that on December 20, 1995, an individual acting at the behest of Mead and
Pluimers paid $50,000 to the Panamanian Minister of Mines and Materials in a Panama City bar.
The indictment alleges further that Pluimers and Mead approved the $50,000 disbursement from
funds controlled by Saybolt International, Saybolt's Dutch parent company.
The payment was allegedly made in exchange for certain concessions from the
Government of Panama, including: government contracts for Saybolt's Panamanian affiliate,
Saybolt de Panama, S.A.; a lease of prime real estate along the Panama Canal; and expedited tax
breaks. Subsequent to the payment, the Government of Panama approved these concessions.
On January 29, 1998, Mead, a British citizen with U.S. resident alien status, was arrested
in Houston on five charges: two counts of violating the FCPA, one count of conspiracy to violate
the FCPA, and two racketeering counts. After a trial held in October 1998, a jury convicted
Mead on the conspiracy and racketeering charges. In March 1999, Mead was sentenced to four
months in prison, four months of home detention, three years of probation, and the payment of a
$20,000 fine. Pluimers, a Dutch national and resident at all times material to the indictment, was
indicted on identical charges; however, he remains at-large in The Netherlands.
The Saybolt case is significant in several respects. First, it represents the first case in
which a non-resident foreign national was indicted for violating the FCPA.5 Second, the $1.5
million fine imposed on Saybolt is large in comparison to the amount of the bribe paid ($50,000).
Third, a substantial amount of incriminating evidence against Saybolt and its officials consisted
of e-mails discussing the payment. Fourth, evidence of the FCPA violations was discovered in
the course of an unrelated criminal investigation arising from an Environmental Protection
Agency audit. Finally, prosecutors noted that Mead's sentence should put U.S. executives on
notice that U.S. enforcement authorities will seek jail terms for bribery offenses.
R.
United States v. Tannenbaum.
On August 5, 1998, Herbert Tannenbaum entered into a plea agreement with the DOJ and
the U.S. Attorney for the Southern District of New York in which he agreed to plead guilty to
one count of conspiracy to violate the FCPA. The criminal information alleged that from 1996
until March 25, 1998, Herbert Tannenbaum, the president of Tanner Management, and his
coconspirators conspired to violate the FCPA by offering to make clandestine payments to an
undercover agent posing as a procurement officer of the government of Argentina to induce the
agent to purchase garbage incinerators on behalf of Argentina. To disguise the offered
Jay G. Martin 2004
45
payments, Tannenbaum allegedly opened a bank account in the name of a fictitious entity.
Although the indictment does not mention the amount of the offered bribe, the plea agreement
notes that the value offered payment was between $120,000 and $200,000.
One particularly significant aspect of the Tannenbaum case is the plea agreement's
detailed illustration of how the U.S. Federal Sentencing Guidelines ("Guidelines") are applied in
the context of the FCPA. Tannenbaum's stipulated Guidelines range was twelve to eighteen
months incarceration.
S.
Triton.
1)
Background.
Triton Energy is an international oil exploration and production company headquartered

in Dallas that is now owned by Amerada Hess. Although it had been a public company for some
time when it became involved in oil exploration in Indonesia, it was still run by its founder and
retained the enterprising outlook and informal procedures that one so often finds in smaller
companies where the original entrepreneurs remain in control. As a result, Triton Energy at the
time lacked the kinds of comprehensive and detailed FCPA compliance programs and general
internal controls that have since become prevalent in well-managed concerns.
In 1988, Triton Energy, through its subsidiary, Triton Indonesia, acquired control of an
oil field in Indonesia from a Canadian company known as Nordell. Indonesia then had a
notorious reputation for corruption. In connection with the transaction, Triton Indonesia, at
Nordell's insistence, retained as its agent one Roland Siouffi, a French expatriate who had been
living in Indonesia and who had been a Nordell officer. Triton was told that Siouffi would be an
essential intermediary between Triton Indonesia and Indonesia government bureaus, including
Pertamina, the national oil company, for such matters as government approval of the transaction
and government approval of various other aspects of operating the concession. Triton Indonesia
entered into contracts with Siouffi and entities he controlled; the contracts did not contain FCPA
compliance clauses, although drafts proposed by Triton had included such clauses.
Over the ensuing years, Triton Indonesia made substantial payments to Siouffi and his
companies for his assistance in obtaining various kinds of government approvals and actions, for
example expediting government audit reports and obtaining relief on disputed tax issues.
Siouffi's invoices, however, did not refer to these missions, but rather referred inaccurately to
such things as "rig repairs." Triton Indonesia booked the payments in accordance with Siouffi's
invoices. Thus, to that extent, its books and records were inaccurate. A Triton Indonesia manager
kept a side record of the true purposes of the payments; he also kept a diary in which he recorded
the true nature of the payments. The diary contained some entries which could be construed as
indicating that Siouffi had said that a government official received some of the money Triton
Indonesia had paid Siouffi.
A Triton Energy internal auditor visited Triton Indonesia and thereafter prepared a
memorandum for senior Triton Energy management expressing concerns about possible
Jay G. Martin 2004
46
improper payments and bookings. He gave the memorandum to Triton Energy's then President
and then chief financial officer. On receipt and out of concern for the possible impact on Triton's
relations with the Indonesian government, the then President directed that all copies of the
memorandum be collected and destroyed. As is so often the case, a copy survived. Some efforts
were made to pursue the underlying concerns, but they were ineffectual.
In the meantime, Triton and Nordell had fallen into a bitter dispute. At the same time, a
disgruntled Triton Energy employee who had been involved in internal audit work sued the
company for wrongful discharge. In both disputes, Triton's antagonists made accusations that
Triton had been engaged in corrupt practices in Indonesia.
Soon thereafter, Triton heard from both the DOJ and the SEC. Former management's
initial reaction was to provide limited information, but the old management was on the way out
for other reasons. New management (new CEO, CFO, and General Counsel), with the support of
a board that was being transformed, decided to cooperate more fully with the authorities. As part
of its cooperation and in connection with related shareholder derivative litigation, the company
formed a special board committee, composed of outside directors and directed outside counsel to
undertake an internal investigation.
2)
The Settlement.
Initially, both the DOJ and the SEC indicated that they would investigate the matter, and
both did so at the outset. Over time, the SEC took the lead. Although Triton Energy was
cooperating, the SEC insisted on its own thorough document review and deposition program. In
the meantime, Triton's board and management had been transformed. The "old guard" who had
been in charge when the underlying events had taken place were all gone. The new board and
management instituted comprehensive and up-to-date FCPA compliance procedures.
After years of investigation and arduous negotiation, the matter was resolved with the
SEC with the understanding that the DOJ would take no further action. Pursuant to the
settlement, the SEC brought a civil injunctive action in federal court against Triton Energy and
two former managers of Triton Indonesia. The complaint alleged violations of the antibribery,
books and records, and internal controls provisions of the FCPA and sought an injunction as to
each. The complaint did not allege that Triton Indonesia had made payments in order to obtain
government business in the narrow sense of the word; rather, it alleged that Triton Indonesia had
made the payments in order to obtain such things as tax relief.
Triton Energy and one of the managers entered into consent judgments simultaneously
with the filing of the complaint. Neither one admitted or denied the allegations. Triton Energy
consented to the entry of an injunction only with respect to the books and records and internal
controls provisions of the FCPA; the manager consented to an injunction with respect to those
provisions and the antibribery provisions. Triton Energy paid a civil penalty of $300,000; the
manager paid $50,000 (which Triton Energy reimbursed with the SEC's consent). The second
manager, who was separately represented, entered into a settlement some time later.

Jay G. Martin 2004
47
The SEC also brought administrative proceedings against various Triton Energy and
Triton Indonesia personnel, including the former President of Triton Energy (who also had been
a director), the former chief financial officer of Triton Energy, and two lower level employees
who had been involved in preparing and auditing Triton Energy's books and records. These
administrative cease and desist proceedings targeted the books and records violations. The
actions against the former President and CFO focused on their failure to take proper action when
confronted with the memorandum Triton's internal auditor had circulated to them concerning
potential corrupt activities in Indonesia. All four consented to cease and desist orders barring
them from committing or causing future violations of the FCPA's books and records provisions;
the former President and CFO also consented to an order barring future violations of the
antibribery provisions.
X.
Conclusion.
The FCPA is a federal statute criminalizing the bribery of foreign public officials and
certain others106 for a business benefit. It also is the source of the generally applicable securities
law obligations that publicly traded companies maintain complete and accurate books and
records and systems of internal controls. Although U.S. parent companies are not automatically
liable for the acts of their foreign subsidiaries under the FCPA's antibribery provisions, the
securities laws hold U.S. companies strictly liable for the recordkeeping and control practices of
their majority-owned or controlled foreign subsidiaries.107 Moreover, parent companies risk
antibribery liability if they authorize an improper payment by a foreign subsidiary or fund the
activities of that subsidiary with knowledge that an improper payment may be made. Under the
FCPA, the concept of knowledge extends beyond actual awareness of a payment and into
circumstances indicating a parent's willful ignorance, for example, through disregard of "red
flags," of an improper payment or transaction.108
The effect of the FCPA, the OECD Convention and the UN Convention has been to create
strong incentives for U.S. parent companies, especially publicly-traded companies, to adopt
corporate-wide antibribery policies and compliance procedures as well as accounting and
internal control standards that flow down not only to their domestic U.S. subsidiaries, but also to
their foreign subsidiaries. These incentives have been reinforced by developments in federal
106
These others include officers or employees of state-owned enterprises and of certain public international
organizations, as well as foreign political parties and candidates for office. 15 U.S.C. 78dd-1(a), 78dd-2(a),
78dd-3(a).
107
See SEC v. Syncor Int'1 Corp., (D.D.C. 2002), Lit. Rel. No. 17877 (Dec. 10, 2002); In the matter of Chiquita
Brands Int'1, Inc., Admin. Proc. Rel. No. 34-44902 (Oct. 3, 2001); In the Matter of International Business
Machines Corp., Admin. Proc. Rel. No. 34-43761 (Dec. 21, 2000); SEC v. Triton Energy Corp. (D.D.C. 1997),
Lit. Rel. No. 15266 (Feb. 27, 1997), FCPA Rep. 699.471. For minority-owned subsidiaries, only a good faith
effort on the parent's part to secure compliance by the foreign subsidiary is required. However, where the parent
controls the foreign subsidiary, compliance will be expected. In the Matter of BellSouth Corporation, Admin.
Proc. Rel. No. 34-45279 (Jan. 15, 2002).
108
15 U.S.C. 78dd-1(a)(3), 78dd-1(f)(2), 78dd-2(a)(3), 78dd-2(h)(3), 78dd-3(a)(3), 78dd-3(f)(3).

Jay G. Martin 2004
48
criminal law penalty standards, most notably the Guidelines109. The Guidelines provide for a
reduced culpability score (the basis for the calculation of penalties in the event of a criminal
violation of law) for corporations that maintain "an effective program to prevent and detect
violations of law."110 In addition, the DOJ and the SEC, the two agencies with enforcement
authority over the FCPA, both expect that responsible companies will, among other steps, have
in place an FCPA compliance program.111
Although enforcement officials have not defined the precise elements of an FCPA
program, settled prosecutions such as the Metcalf & Eddy case in 1999112 provide companies and
their counsel with a road map with respect to the elements they will typically expect to find.
These elements include not only an antibribery policy, but also more detailed guidelines and
procedures that are specific to the FCPA. For almost every company, it will be critical to have a
policy and procedures regarding the engagement of third parties, such as agents, consultants,
joint venture partners, representatives, and even subcontractors, to ensure that those relationships
do not become vehicles for the making of improper payments. Additional risk areas treated in
policies and procedures often include gifts and entertainment, travel and travel-related expenses,
events sponsorship, political contributions, and facilitating payments.
Under the Guidelines, however, it is not enough to have FCPA policies and procedures.
It is critical that relevant personnel within the organization be properly trained in these policies
and procedures, and that they be policed and enforced, for example, through internal or external
audits, internal or external FCPA legal audits, or the like.
In the wake of the Sarbanes-Oxley Act, issuers need to redouble their efforts to maintain
effective FCPA compliance controls not only at the parent level but also in their foreign
subsidiaries. Although prevention has its costs, the cost of an FCPA violation has always been
much higher, and recent events have caused that cost to escalate even further. Now more than
ever, Board of Directors and Audit Committees will play a key role in internal corporate
investigations involving potential improper payment issues abroad, and will exercise their
business judgment in favor of making voluntary disclosure of FCPA violations.
FCPA violations can have severe repercussions on a company and its employees. In
addition to heavy fines and potential jail time for company officers and employees, violations of
the FCPA can also cause adverse results under other laws. For example, the facts in an FCPA
case could point up violations of other federal antifraud provisions (such as the Racketeer
Influenced and Corrupt Organizations Act); federal agencies will debar FCPA violators from
109
Federal Sentencing Guidelines Manual, ch. 8.
110
Federal Sentencing Guidelines 8C2.5(f).
111
Memorandum From Larry D. Thompson, Deputy Attorney General, to Heads of Department Components,
United States Attorneys, Re: Principles of Federal Prosecution of Business Organizations (January 20, 2003);
Report of Investigation Pursuant to Section 21(a) of the Securities Exchange Act of 1934 and Commission
Statement on the Relationship of Cooperation to Agency Enforcement Decisions, Rel. No. 34-44969 (Oct. 23,
2001).
112
U.S. v. Metcalf & Eddy (D. Ma. 1999), FCPA Rep. 699.749.
Jay G. Martin 2004
49
participating in federal purchases; FCPA violators may be precluded from obtaining export
licenses: and adverse publicity and other lawsuits, including shareholders' actions, may be
generated.

Jay G. Martin 2004
50

Foreign Corrupt Practices Act

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Foreign Corrupt Practices Act

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COMPLIANCE WITH THE

FOREIGN CORRUPT PRACTICES ACT OF 1977

The Anti-Bribery Provisions of the FCPA ..........................................................................1

Record-Keeping and Accounting Provisions of the FCPA..................................................7

Affirmative Defenses Under FCPA for Routine Actions ....................................................8

1998 Amendments to the FCPA in Response to 1998 Anti-Bribery Convention of

Future Developments Under the OECD Convention.............................................18

Prudent Selection of Foreign Consultants .........................................................................19

Implementing an Effective FCPA Compliance Program...................................................26

Summary of Some Recent FCPA Enforcement Actions and Cases ..................................28

Winstead Sechrest & Minick P.C.

COMPLIANCE WITH THE

Overview of Foreign Corrupt Practices Act of 1977.

H.R. Rep. No. 95-640, at 5; S.Rep. No. 95-114, at 3.

H.R. Rep. No. 95-640, at 4; S.Rep. No. 95-114, at 3.

Impact of the OECD Anti-Bribery Convention on FCPA.

United Nations Convention Against Corruption.

Implementation of a FCPA Compliance Programs.

Adopt Comprehensive Implementing Procedures for FCPA Compliance. A company

an FCPA Compliance Officer or Ombudsman to whom FCPA referrals may be made

Communicate With and Train Employees on Requirements of FCPA. As important as

Review FCPA Matters Regularly. The company's FCPA Review Committee or

If done properly, an FCPA comprehensive compliance program can become a valuable

Winstead Sechrest & Minick P.C.

15 U.S.C. 78dd-2(a); 78l; See also 15 U.S.C. 78o(d).

15 U.S.C. 78dd-1(a) (for issuers); 78dd-2(a) (for domestic concerns).

See 15 U.S.C. 78dd-1(f)(1), 78dd-2(h)(2).

See 15 U.S.C. 78dd-1(a) (for "issuers"), 78dd-2(a) (for "domestic concerns").

See 15 U.S.C. 78dd-1(a)(3) (for "issuers"), 78dd-2(a)(3) (for "domestic concerns").

See 15 U.S.C. 78ff(c)(2)(B); 78dd-2(g)(2)(B).

obtaining permits, licenses, or other official documents that allow one to do

See 15 U.S.C. 78dd-1(f)(3)(A)(ii-iv) (for issuers); 78dd-2(h)(4)(A)(ii-iv) (for domestic concerns).

H.R. Rep. No. 95-640, at 11-12 (1977).

15 U.S.C. 78dd-1(a) (Supp. 1999); 15 U.S.C. 78dd-3(a) (Supp. 1999).

15 U.S.C. 78dd-2(i) (Supp. 1999).

15 U.S.C. 78dd-1(a), 2(a), and 3(a) (Supp. 1999).

15 U.S.C. 78dd-1(a)(3), 2(a)(3), and 3(a)(3) (Supp. 1999).

15 U.S.C. 78dd-1(a)(3), 2(a)(3), and 3(a)(3) (Supp. 1979).

15 U.S.C. 78dd-1(f)(2), -2(h)(3) (1997).

15 U.S.C. 78(m) (1997).

15 U.S.C. 78(m) (1976); 15 U.S.C. 78dd-(1), -(2) (Supp. 1978).

S. Rep. No. 95-114, at 11 (1977), reprinted in 1977 U.S.C.C.A.N. 4098, 4109.

H.R. Conf. Rep. No. 100-576, supra note 31, at 917.

15 U.S.C. 78m(b)(6) (1997).

H.R. Conf. Rep. No. 100-576 supra note 31, at 917.

15 U.S.C. 78a et seq. (1994).

Record accurately all amounts on the company's books.51

The failure to record improper transactions;

The FCPA provides two affirmative defenses:

That the payment, gift, offer or promise of anything of value constituted a

See 15 U.S.C. 78m(b)(2)(B).

See 15 U.S.C. 78m(b)(2)(A); 78m(b)(7).

Payment of Gifts and Promotional Expenses.

Local Law Defense.

15 U.S.C. 78dd-1(c)(l); 78dd-2(c)(l).

15 U.S.C. 78dd-1(c)(2); 78dd-2(c)(2).

See the 1994 Report, supra note 57 at 3-4.

See id. at 1392.

March 29, 1996, 35 I.L.M. 724.

Revised Recommendation on Combating Bribery in International Business Transactions, OECD Doc.

Annual Report, supra note 70 at v.

CIME Report, supra note 68, at 6.

See Org. for Econ. Co-operation and Dev., Shaping