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When Overseas Junkets Involve the FCPA

Written by Orchid


August 20, 2014


When Overseas Junkets Involve the FCPA As you meander down the length of a beach in these waning summer days, don’t daydream yourself into foreign market sales without suntan lotion and a copy of the Foreign Corrupt Practices Act.  You may otherwise find yourself ending up having to disband your entire overseas sales force if the Securities and Exchange Commission comes calling. A settlement this summer of a federal prosecution against a firearms manufacturer offers an illustration of how the FCPA applies to the conduct of employees abroad and to accounting practices.  The simple parameters are this:  (1.) employees are prohibited from making, authorizing, or offering bribes during their efforts to conduct international business transactions; and, (2.) “bribes” are not legitimate “business expenses.”  For both areas, companies are effectively required to have written compliance policies and internal controls. The US Department of Justice with the US Securities and Exchange Commission in 2012 published an extensive guidance document to the Foreign Corrupt Practices Act (FCPA).  The guidance will walk you through the statute, broken down essentially into the “anti-bribery provisions” and the “accounting provisions.”  The FCPA applies to any company listed on a national securities exchange in the US, or, if the company’s stock trades OTC in the US and the company is required to file SEC reports.  The FCPA also applies to any individual over whom the US has jurisdiction, as well as any business organized under the laws of the US, its states, territories, possessions, or commonwealths, or that has its principal place of business in the US. The nature of the alleged transactions in the recent federal case involved things like making payments to government officials to secure sales contracts.  In one instance, the company didn’t win the contract.  In another instance, the contract was cancelled.  The FCPA applies whether the company completes an actual goods shipment, or not. As with most federal government prosecutions that we review, the company faced allegations that it failed to institute policies and employee training relating to major federal statutes.  The presence of written compliance policies signal a company awareness of the legal obligations that impact its operating environment, at the very least from a leadership perspective.  If you are missing standard company policies, you are missing a fundamental component of your defense, in the event that something goes wrong. Compliance policies coupled with employee training signals a company-wide culture of lawfulness that can avoid having to do things like firing your entire international sales force.  The bigger the company and the more far-flung the transactions, the more critical the employee training becomes to staying within the lines and avoiding the drain of responding to a federal investigation and defending charges. With all this in mind, you may now resume your regularly scheduled August activity of beach combing.