The Catholic University of America

 

Summary of Federal Laws

Miscellaneous Laws Affecting Universities

Foreign Corrupt Practices Act

15 USC §78dd-1 et seq.***

22 CFR § Part 709

 

 


The FCPA contains both anti-bribery and accounting provisions. The anti-bribery provisions prohibit U.S. persons and businesses (domestic concerns), U.S. and foreign public companies listed on stock exchanges in the United States or which are required to file periodic reports with the Securities and Exchange Commission (issuers), and certain foreign persons and businesses acting while in the territory of the United States (territorial jurisdiction) from making corrupt payments to foreign officials to obtain or retain business.

The accounting provisions require issuers to make and keep accurate books and records and to devise
and maintain an adequate system of internal accounting controls. The accounting provisions also prohibit individuals and businesses from knowingly falsifying books and records or knowingly circumventing or failing to implement a system of internal control

The anti-bribery provisions of the FCPA prohibit individuals and businesses from bribing foreign government officials to obtain or retain business. In particular, the act prohibits:

(1) any offer, payment, promise to pay, or authorization of the payment of any money, or offer, gift, promise to give, or authorization of the giving;
(2) to a foreign official;
(3) of anything of value;
(4) directly or indirectly
(5) for the purpose of obtaining business, retaining business, or otherwise securing an improper advantage;
(6) with knowledge; and
(7) with corrupt intent.

Congress defined “corruptly” as a word “used in order to make clear that the offer, payment, promise, or gift, must be intended to induce the recipient to misuse his official position; for example, wrongfully to direct business to the payor or his client, to obtain preferential legislation or regulations, or to induce a foreign official to fail to perform an official function. The word ‘corruptly’ connotes an evil motive or purpose. (H.R. Rep. No. 95-640, at 7.)

Affirmative Defenses: The FCPA also provides two affirmative defenses:

First defense:reasonable and bona fide expenditures:

FCPA permits the payment of expenses directly related “to the promotion, demonstration, or explanation of a company’s products or services, or [that] are related to a company’s execution or performance of a contract with a foreign government or agency.”

The Department of Justice (DOJ) and Securities and Exchange Commission (SEC) have articulated when this “reasonable and bona fide expenditures” affirmative defense is likely to apply. While expenses related to personal entertainment are not permitted, and may constitute a violation of the FCPA, product demonstration or promotional activities (including travel and expenses for meetings) generally fall within the defense.

The DOJ and SEC have also provided the following non-exhaustive guidance to help ensure that expenditures are “reasonable and bona fide”:

1. Do not select the particular foreign official; or else select the official based on pre-determined, merit based criteria;
2. Pay all costs directly to vendors and/or reimburse costs only upon presentation of a receipt;
3. Do not advance funds or pay for reimbursements in cash;
4. All stipends must be reasonable approximations of costs to be incurred and/or expenses are limited to those necessary and reasonable;
5. Expenditures must be transparent at the University and with foreign country;
6. Payment of expenses cannot be conditioned on any action by foreign official;
7. Obtain written confirmation that payment of expenses is not contrary to any foreign law;
8. Provide no additional compensation, stipends, or spending money beyond what is necessary to pay for actual expenses incurred; and
9. Ensure costs and expenses are accurately recorded. (page 24 of DOJ manual below)

Second defense: Local Law

For the local law defense to apply, a defendant must establish that “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.” The defendant must establish that the payment was lawful under the foreign country’s written laws and regulations at the time of the offense.This defense is rarely available. See page 23 of the DOJ resource guide below.
 

 

 

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Resources

 

A Resource Guide to the FCPA (DOJ and SEC)