FOREIGN CORRUPT PRACTICES ACT
The Foreign Corrupt Practice Act
The Foreign Corrupt Practices Act is one of the government’s most powerful tools to effectively combat corruption involving foreign officials. The government, through its twin enforcers, the Department of Justice and the Securities Exchange Commission (SEC) enforces and prosecutes violations of the Foreign Corrupt Practices Act also known as the FCPA.
Why Choose Our Firm?
The Firm is one of the few firms in the U.S. that has defended clients in a Foreign Corrupt Practices Act trial having defended the former treasurer of Venezuela and her husband, the former chief of Security for the President of Venezuela, in a multi-week trial. The Firm also represents a businessman in Peru who has never been charged with a crime in connection with a-decade-long Odebrecht investigation. The Firm represented a target of the FIFA investigation in Brazil and successfully avoided an indictment. The Firm represents an executive in Ecuador connected to the Seguros Sucres investigation. Indeed, the Firm has extensive experience in Latin America and has previously coordinated with lawyers in Peru, Ecuador, and Brazil in connection with transnational Foreign Corrupt Practices Act investigations. Furthermore, the Firm’s managing member Mr. Feldman is fluent in Spanish. Based on this experience, the Firm is well positioned to assist clients in Latin America, including in Argentina, Peru, Brazil, and Venezuela. Miami is the gateway to Latin America,
In addition, the Firm believes in preparing each case for trial and the Firm strongly believes in aggressively attacking novel or unique applications of the law. This is especially significant given some of the recent decisions which substantially narrow the FCPA’s application including extraterritorial conduct and foreign nationals.
To this end, the Firm also has litigated sophisticated issues related to the Foreign Corrupt Practices Act, including, among others:
- The application of the international promotional money laundering statute to foreign bribery offenses.
- The application of the Classified Information Protection Act (CIPA) to a cooperating witness in the government’s prosecution.
- The application of the fugitive disentitlement doctrine to a foreign nationals’ challenges to the court’s extraterritorial jurisdiction.
- The use of foreign bribery laws – never provided to the grand jurors – to allege the specified unlawful activity necessary to state the offense of international promotional money laundering.
- The legality of suspending the statute of limitations for almost 3 years based on Mutual Legal Treaty (MLAT) Requests to Switzerland.
- Whether a “U.S. resident” who is not a permanent resident, national, or U.S. citizen is a “domestic concern” under the Foreign Corrupt Practices Act.
- The application of the Due Process clause to an arrest warrant in an in rem civil forfeiture action alleging that a brokerage account contains proceeds of foreign bribery offenses which never occurred anywhere near U.S. soil.
- Discovery of grand jury testimony of relevant witnesses.
- Rule 15 depositions in foreign countries.
Equally as significant, businesses and individuals ensnared in these investigations should select an attorney who is willing to challenge (and has a track record of challenging) the government because the government, historically, boasts a mediocre record at trial in Foreign Corrupt Practices Act cases having suffered losses in several high-profile cases. And so, the government continues to fashion new ways to undermine valid pre-trial challenges. One of the ways that the government does this is to seek an order from the court determining that any foreign national that has not appeared in U.S. court cannot obtain discovery or raise technical, legal challenges to the indictment under a doctrine known as “fugitive disentitlement.” Our Firm, where applicable, will continue to challenge this application of this doctrine to clients who are not fugitives, who have not fled the U.S., and candidly, have no true nexus to the United States.
Foreign Corrupt Practices Act Anti-Bribery Provisions (DOJ)
The FCPA has criminal provisions known as the anti-bribery provisions. The Department of Justice prosecutes violations of the anti-bribery provisions of the Foreign Corrupt Practices Act.
Very generally, the text of the anti-bribery provisions of the FCPA prohibits a narrow sub-set of persons (issuers, domestic persons, and persons within the territory of the U.S.) from corruptly offering, promising, or giving anything of value to an employee or officer of a foreign government, an agency or department of a foreign government, a foreign political party or member thereof, a foreign political candidate, or an instrumentality of a foreign government (e.g. a state owned business):
- To influence any act of that person in their official capacity.
- To induce that person to do or omit from doing any act in violation of a lawful duty of that official.
- To secure any improper advantage.
- To assist the person offering or giving or promising anything of value to obtain business from or with any person
- To assist the person offering or giving or promising anything of value to retain business for or with to any person.
- To assist the person offering or giving or promising anything of value to direct business to any person.
“Anything of value” may include, among other things:
- Cash
- Computer equipment
- A favorable construction contract
- College tuition payments
- Medical supplies
- Lavish gifts and entertainment
- Vehicles.
Indeed, the term anything of value appears equally as broad as the term “remuneration” in the context of the Anti-Kickback statute in health care fraud and kickback investigations and prosecutions. Nonetheless, in both instances, the person must act with the requisite intentionality and there must be a clear nexus between the act and the thing of value.
The Foreign Corrupt Practices Act may also prohibit paying anything of value while “knowing” that some or each of the payments will be used by the person, directly or indirectly, to bribe foreign officials or other prohibited recipients. In this context, “knowing” might include willful blindness to the high probability of bribery.
Does the Foreign Corrupt Practices Act Apply to Me, My Business, the Company I work for, or My Conduct?
Viewed broadly, the FCPA applies to certain individuals and businesses who corruptly pay or offer anything of value to a foreign official, a foreign political party, foreign political candidate, or any person that knows that the portion of money or thing of value will be offered, given, or promised to a foreign official, which includes an instrumentality of a foreign government, a foreign political party, or a foreign political candidate.
Three Categories
The Foreign Corrupt Practices Act anti-bribery provisions only apply to three types of persons or business:
Issuers
- Any company listed on a national securities exchange in the United States (stock or American Depository Receipts);
- Any company whose stock trades in the over-the-counter market in the United States and the company is required to file reports with the Securities and Exchange Commission; and
Domestic Concerns
- Any individual who is a citizen, national, or resident of the United States;
- Any corporation, partnership, association, joint-stock company, business trust, unincorporated organization or sole proprietorship, that is organized under the laws of the United States or its states, territories, possessions or commonwealths or that has its principal place of business in the United States; and
- Any officer, director, employees, stockholders, or agents acting on behalf of domestic concerns, including foreign nationals or foreign companies.
Courts very recently have grappled with the extent to which the government maintains jurisdiction over an agent of a domestic concern and what defines the agency relationships in this context. The right to control the conduct of the agent and any undertakings of the agent is significant. Absent that right, and evidence demonstrating that right, the government’s novel agency theories remain dubious, at best.
Persons Committing Certain Acts within Territorial Jurisdiction of U.S.
The FCPA’s criminal provisions may also apply to a third category of person which does not include issuers or domestic concerns. That category prohibits any person or any officer, director, employee or agent of such person, or any stockholder thereof while acting on behalf of such person while in the territory of the United States to engage in certain conduct prohibited by the FCPA.
For example, if a Brazilian national caused a wire transfer to be sent from a bank in New York to Brazil while the national was sitting in the bank for the purpose of influencing a foreign official to award a lucrative contract as part of an official act, such person might be considered within the territorial jurisdiction of the U.S. under this prong, and therefore, fall into the third FCPA category of persons.
Courts have recently held, including the Second Circuit Court of Appeals, that if the person does not commit specific proscribed conduct in the U.S. then that person cannot be held liable for FCPA violations under a conspiracy or aiding and abetting theory of FCPA liability. Simply put, the government cannot use conspiracy statutes when the person must fall into one of these three Congressionally authorized categories of FCPA persons.
Foreign Officials, Foreign Political Candidates, Foreign Political Parties
The conduct which the FCPA prohibits also only applies to a specific (but broad) sub-set of persons:
- Foreign Political Parties
- Members of a Foreign Political Party
- Foreign Political Candidates
- Any officer of a foreign government.
- Any employee of a foreign government.
- Any department of a foreign government
- Any agency of a foreign government
- Any instrumentality of a foreign government.
In deciding whether the entity (for example a state-owned telecommunications company) is an instrumentality of a foreign government, it is critical to ask the following two questions:
Question 1: Whether the foreign government “controls” the entity. In deciding question 1, it is important to consider:
- Foreign government’s formal designation of that entity;
- Whether the government has a majority interest in the entity;
- The government’s ability to hire and fire the entity’s principals;
- The extent to which the entity’s profits, if any, go directly into the government fisc;
- The extent to which the government funds the entity if it fails to break even; and
- The length of time that these “indicia” have existed, e.g. the length of the government’s control over the entity.
Question 2: Whether the entity performs a function the controlling government treats as its own. In deciding question 2, it is important to consider:
- Whether the entity has a monopoly over the function it provides;
- Whether the government subsidizes the costs associated with the entity providing services;
- Whether the entity provides services to the public at large in the foreign country; and
- Whether the public and the government of that foreign country generally view the entity to be performing a government function.
Corruptly/Willfully
To prove any violation of the FCPA anti-bribery provisions, the government must demonstrate beyond a reasonable doubt that the client acted “corruptly.” An act is “corruptly” done if done voluntarily and intentionally, and with a bad purpose or evil motive of accomplishing either an unlawful end or result, or a lawful end or result but by some unlawful method or means.
Affirmative Defenses to the Foreign Corrupt Practices Act
There are also limited affirmative defenses to violations of the FCPA. Those defenses are authorized under the FCPA and include:
Local Law Defense: the payment, gift, offer, or promise of anything of value that was made, was lawful under the written laws and regulations of the foreign official’s, political party’s, party official’s, or candidate’s country.
Bona Fide Expenditure Defense: the payment, gift, offer, or promise of anything of value that was made, was a reasonable and bona fide expenditure, such as travel and lodging expenses, incurred by or on behalf of a foreign official, party, party official, or candidate and was directly related to:
(A) the promotion, demonstration, or explanation of products or services; or
(B) the execution or performance of a contract with a foreign government or agency thereof.
While these defenses are narrow, the local law defense potentially supplies clients and foreign nationals with a powerful defense to a particular payment or gift.
Routine Government Expenditure. In addition to the affirmative defenses proscribed by the FCPA, there is a defense known as “the routine government expenditure” exception which exempts persons from FCPA liability if the payment is a facilitating or expediting payment to a foreign official, political party, or party official the purpose of which is to expedite or to secure the performance of a routine governmental action by a foreign official, political party, or party official.
This exception is even narrower than the other defenses. Examples of “routine governmental action” include processing visas, providing police protection or mail service, and supplying utilities like phone service, power, and water. Routine government action does not include a decision to award new business or to continue business with a particular party.
Closing Note: Money Laundering Side-Step of the Foreign Corrupt Practices Act
In the majority, if not all, new foreign bribery prosecutions, the government is seeking to circumvent legal challenges to its prosecution by charging clients with violations of the money laundering statute. This is because foreign officials cannot be charged with a violation of the FCPA and because, to allege a violation of the FCPA, the person must generally have some nexus to the United States either by having established a business which operates here, by committing an act in furtherance of a conspiracy that involves interstate communications while physically present here or by having some legal status here (permanent resident or citizen).
So, what the government does is: first, they allege a violation of the money laundering statute, Section 1956, and second, they allege that the funds being laundered (e.g. transported, transmitted, transferred) contain the proceeds of a violation of a foreign law related to the bribery of a public official.
In other words, the funds (or monetary instruments) are proceeds of a violation of a foreign country’s bribery laws, not U.S. law. The policy rationale for this is straightforward: the government does not want to allow foreign nationals (or persons with a defined status in the U.S.) to deposit money derived from corrupt activities, even if they occur outside our land, in the U.S. financial system.
In addition, Congress extended the statute of limitations in the money laundering statute for certain offenses. And so, the government has 7 years, not 5 years, to prosecute money laundering offenses where the specified unlawful activity (the illegal conduct that makes it money laundering) involves a bribery of a public official in violation of a foreign law.
Andrew S. Feldman and the Firm have significant experience with the FCPA and defending foreign nationals accused of or under investigation for violations related to foreign bribery offenses. Please do not hesitate to contact the Firm.
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