The United States Department of Justice (“DOJ”) conducted investigations in the early 1970’s and found that over 400 domestic corporations admitted to spending 300 million dollars in bribes to foreign officials, predominantly for the purpose of winning contracts abroad.  The Foreign Corrupt Practices Act (“FCPA”) was enacted in 1977  to prevent such abuses and makes it a criminal offense for U.S. companies, and any SEC registrant, to bribe or otherwise induce a foreign official. 

Known as the “anti-bribery” provisions of the FCPA, the provisions that address the above-described abuses are accompanied by the FCPA’s “books and records” provisions to prevent attempts to hide or obscure such bribery payments. The books and records provisions, applying only to SEC issuers of securities, require that the finances of all covered entities are maintained in a transparent manner with enough detail so that if such illicit payments were made they could be identified.  The anti-bribery and books and records provisions are a powerful combination, and occasionally are violated in tandem.  However, even in the absence of proof that bribes were paid, a set of books and records without enough detail or otherwise obscuring payments could still trigger the wrath of the statute.

Sarbanes-Oxley has triggered renewed interest in the FCPA through the increased level of scrutiny of transactions and questionable payments. Moreover, the increased liability for corporate officers and the recent wave of merger and acquisition activity have also likely triggered renewed interest in FCPA compliance and increased voluntary FCPA disclosures.  The result has been that the DOJ, who announced that FCPA enforcement was of high priority, and the SEC have increased their resources relative to FCPA enforcement.

It is imperative that U.S. companies conducting business in foreign countries be proactive in complying with the provisions of the FCPA.  An effective FCPA compliance program should be comprised of several components, not the least of which is a zero tolerance policy for violations of all laws, including the FCPA.  Furthermore, the chief compliance officer of the organization should designate a member of the Compliance Committee to implement the FCPA Compliance Program.  The company’s policies and procedures should be promulgated clearly and concisely and should enunciate each employee’s compliance responsibilities.  Indeed, all company employees interacting with foreign business officials should receive, read and certify that they understand all expectations related to the FCPA Compliance Program.  Further, all board members, senior management, and employees who may interact with foreign officials or conduct business abroad should be trained and should sign Certificates of Compliance certifying they have no knowledge of FCPA violations.  All of the company’s books and records should be maintained at a secured location and accurately reflect the company’s financial transactions.  Furthermore, the atmosphere surrounding FCPA compliance should be such that employees are able to report violations without fear of retribution, and of course, violators should be disciplined.