Monday, June 30, 2008

Scrutiny Increased on Payments to Foreign Officials

As a result of Watergate, Congress enacted the Foreign Corrupt Practices Act (FCPA)many years ago.

Lately, due in part to increasing globalization, the S.E.C. and the Justice Department have ramped up FCPA investigations and prosecutions against U.S. and foreign companies and individuals.

FCPA is made up of two parts, an anti-bribery provision and an accounting provision.

The anti-bribery provision prohibits the offer, authorization, promise or payment of anything of value to a foreign official, political party, official, or candidate for public office in order to obtain or retain business. It applies to issuers, domestic concerns, or persons acting within the U.S.

The accounting provision includes both a books and records provision and an internal control provision, and only applies to companies issuing securities registered on U.S. stock exchanges.

The FCPA specifically excludes "grease payments"- payments that expedite or secure the performance of routine governmental action or merely move a particular matter toward an eventual act or decision. These types of nondiscretionary payments could include payments made to obtain permits, licenses or other official documents, and to receive services such as mail, telephone, water, power, etc.

The trend over the past few years clearly indicates that the DOJ/SEC focus in the area has intensified. And the fines are increasingly steep, and can include disgorgement. As a result, more and more companies appear to be self-reporting violations before the feds come knocking at their doors.

When in doubt, seek out an attorney who has a working knowledge of the FCPA.

David Finn


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