Foreign Bribes and Corruption Violate the FCPA
Given the competitive landscape of the global economy, individuals and companies in the United States may be tempted to violate international trade law by bribing foreign governments, political officials, and businesses to secure business or to gain a competitive or strategic advantage. In some countries, bribing is a part of their customs and practices. However, companies bribing foreign officials or families is illegal.
Similarly, foreign firms and persons may also attempt to make such corrupt payments in the U.S to achieve the same objectives. Both activities are violations of the Foreign Corrupt Practices Act (FCPA) that would likely go undetected if not for the brave efforts of whistleblowers. If you have knowledge of foreign corruption and bribery, you should consult an experienced foreign bribery and FCPA whistleblower attorney.
Newman & Shapiro, located in Massachusetts, works with whistleblowers throughout the nation. We are keenly aware that whistleblowers play a crucial role in combating foreign corruption and bribery. This matters because of the significant adverse impact such unlawful conduct can have on international trade and foreign relations. Ultimately, foreign corruption and bribery are criminal and civil offenses that also pose a potential threat to national security.
Well-versed in the Foreign Corrupt Practices Act, the whistleblower provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), and other U.S. laws such as the False Claims Act that have applications to international corruption and bribery cases, our legal team has a well-earned reputation for providing whistleblowers with informed representation. When you become our client, we will help you navigate the legal system, work tirelessly to protect your rights, and help you obtain the reward you have earned.
What is the Foreign Corrupt Practices Act
Enacted in 1977, the FCPA makes it illegal for companies, their officers, and agents to influence foreign officials (e,g, ministers, businessmen, party politicians) with payments or anything of value to secure business. The FCPA was amended in 1998 by making it illegal for foreign businesses to engage in similar conduct in the U.S. In short, payments, gifts, and donations that violate the laws of the country in which business is being conducted are prohibited by the FCPA.
Examples of corrupt payments include:
- Cash and payments, including consulting fees and commissions
- Expensive gifts, travel, and entertainment
- Charitable contributions
The anti-bribery provisions of the FCPA apply to the following individuals and entities as defined by The Securities and Exchange Commission (SEC) regulations:
- Issuers — Entities that are registered under Section 12 of the Exchange Act or required to file periodic and other reports with the SEC under Section 15(d) of the Exchange Act, as well as companies that trade stock over the market and are required to file reports with the SEC
- Domestic concerns — Any U.S. citizen, resident, company, association, or organization founded under the U.S. law whose principal place of business is in the U.S.
- Foreign nationals and entities — A broad range of foreign individuals or entities doing business inside the U.S. that attempt to use bribery to secure financial contracts
FCPA Accounting Provisions
In addition to the FCPA anti-bribery provisions, U.S. companies must also adhere to strict accounting and recordkeeping requirements, which are designed to maintain legality and integrity when doing business with international corporations. Discrepancies in recordkeeping may be an indication of a potential FCPA violation.
Under the internal controls provision of the FCPA, issuers must establish and implement a system of internal accounting controls to ensure management’s control, authority, and responsibility for the firm’s assets. Such control systems and accounting practices must:
- Ensure financial transactions are conducted with management’s authorization
- Maintain conformity in reporting and accounting of assets in connection with financial transactions
- Make sure that company assets can only be accessed with authorization from management
- Allow for records to be checked periodically and appropriate actions taken if any discrepancies are discovered
By manipulating its financial records, a business may be able to illegally divert money to foreign governments or businesses in an attempt to circumvent the FCPA. Payment schemes like slush funds, off-books accounts and systematic payments to foreign business officials are classic examples of how corrupt companies may attempt to conceal bribery.
Common violations of the FCPA internal-control provision include:
- Falsifying documents to conceal bribery payments
- Fraudulently classifying bribes as business expenses
- Overbilling with an understanding that some of the payment is a bribe
- Hiring candidates solely based on referrals by client executives and government officials
It is important to note the overlap of the FCPA’s accounting and internal control provisions with requirements of the Sarbanes-Oxley Act of 2002 (SOX), which was enacted in response to the accounting scandals that impacted the financial markets in the late 1980s and early 1990s. In short, SOX has contributed to increasing FCPA enforcement actions brought by the SEC.
The SEC Whistleblower Program and Foreign Corruption
Individuals with knowledge of bribery, fraud, other FCPA violations committed by U.S. companies in other nations or by foreign companies in the U.S. may be entitled to a reward under the SEC Whistleblower Program which was established by Dodd-Frank. Both American and foreign whistleblowers are eligible to receive a reward, as long as the information provided to the SEC leads to an enforcement action that results in a financial recovery. Nonetheless, the whistleblower can receive up to 30 percent of the proceeds recovered by the Commission.
Additionally, some FCPA violations may violate U.S. commodities laws, such as the Commodities and Exchange Act, as well as regulations established by the Commodities Futures Trading Commission (CFTC). Corrupt practices that may fall under the CFTC whistleblower program include:
- Manipulating prices in commodity markets that drive U.S. derivatives prices
- Bribes to secure business in connection with regulated activities (e.g. trading, advising, or dealing in swaps or derivatives), with investor funds
- Corrupt practices used to manipulate benchmark prices of derivatives contracts
Ultimately, violators of the Foreign Corrupt Practices Act and other applicable laws and regulations face imprisonment and severe fines. Moreover, the SEC has recovered millions of dollars in enforcement actions against corporations, businessmen, and politicians for bribing foreign officials for business and work contracts — earning whistleblowers significant rewards.
Contact Our International Trade Law Attorneys
Given the exacting procedural requirements of the SEC Whistleblower program and the challenge of reporting foreign corruption and bribery, you need the powerful representation that Newman & Shapiro provides. When you work with our winning legal team, we will fight to protect your rights and reputation and help you obtain the whistleblower reward you have earned. Please contact our office today to speak with our experienced foreign bribery and FCPA whistleblower attorneys.