Ten Things That Everybody Knows About

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• Ten Things That Everybody Knows About
• The Foreign Corrupt Practices Act
• ? And That Arent So!
• Simeon M. Kriesberg
• Mayer, Brown, Rowe Maw LLP
• Washington, D.C.
• skriesberg_at_mayerbrownrowe.com
• May 23, 2006

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Introduction

• Twain It Aint What You Dont Know that Gets
  You Into Trouble. Its What You Know for Sure
  that Just Aint So.
• Worst Case You are Guided by Your
  Misconceptions.
• Best Practices You are Guided by Sound
  Knowledge of What the Law Says and How It is
  Applied.
• Ten Common Misconceptions about the FCPA that Can
  Cause Real Trouble.

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1. The FCPA is an Antibribery Statute.

• Apart from Antibribery Provisions, The FCPA Has
  Accounting Provisions that Provide Independent
  Grounds for Liability.
• Accounting Provisions Include Books and Records
  Provisions and Internal Controls Provisions.
• Books and Records Must Accurately and Fairly
  Reflect Transactions and Dispositions of Assets.
• Internal Controls Must Suffice to Provide
  Reasonable Assurances that Transactions are
  Executed in Accordance with Management
  Authorizations.
• Bribery is Not a Predicate for Liability under
  the Accounting Provisions.

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2. The FCPA Bars Americans from Foreign Bribery.

• The FCPA is a Species of Securities Law.
• Any Issuer of Securities Registered with the SEC
  is Subject to the FCPA, Regardless of Country of
  Incorporation.
• Foreign Subsidiaries or Joint Ventures of an
  Issuer, Controlled in Fact by the Issuer, are
  Also Subject to the FCPA.
• Foreign Nationals Who Commit Acts in the United
  States in Furtherance of Prohibited Activities
  are Also Subject to the FCPA.

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3. The FCPA Bars Bribes of Foreign Government
Officials.

• The FCPA Bars Bribes Also of Foreign Political
  Parties, Party Officials, and Candidates.
• The FCPA Bars Bribes Also of Officials of Public
  International Organizations.
• The FCPA Bars Bribes Also of These Foreign
  Parties Even if the Purpose is to Influence U.S.
  Government Officials.

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4. The FCPA Focuses on Payments to Induce a
Foreign Official to Do an Unlawful Act.

• The FCPA Also Bars Payments to Influence A Lawful
  Act by a Foreign Official, or to Induce an
  Official to Refrain from Acting.
• The FCPA Also Bars Payments to Secure an Improper
  Advantage.

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5. Compliance with the FCPA Means Not Making
Payments to Foreign Officials.

• Giving Anything of Value Can Be a Violation
  Gifts in Kind, Entertainment, Travel Expenses.
• Charitable Donations to an Organization in which
  a Foreign Official or Officials Family has an
  Interest Can be a Violation.

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6. The FCPA Bars All Corrupt Payments to Foreign
Officials.

• The FCPA Includes an Express Exception for
  Facilitating Payments.
• The Exception Applies to Payments Made to
  Expedite or Secure Performance of Routine
  Governmental Action.
• Obtaining Permits, Scheduling Inspections,
  Supplying Power and Water, and Unloading Cargo
  Are Examples.
• The Exception Does Not Apply to Decisions to
  Award or Continue Business.

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7. The FCPA is a Unique Burden on American
Companies.

• As Already Noted, Foreign Issuers are As Much
  Subject to the FCPA as American Companies.
• Furthermore, 1997 OECD Convention on Combating
  Bribery of Foreign Public Officials in
  International Business Transactions Has Made the
  Playing Field More Even.
• The Convention Has Been Signed by Major European
  Countries, Japan, Korea, Mexico, Argentina,
  Brazil, Chile, and Others.

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8. In Case of FCPA Penalties, Individuals Can
Look to Corporate Indemnification.

• The FCPA Expressly Bars Indemnification of
  Individuals Who Are Penalized.
• Penalties Can Be Severe 10,000 Civil Fine for
  Entities and Individuals, 100,000 Criminal Fine
  and Up to Five Years in Prison for Individuals,
  2 Million Criminal Fine for Entities, Plus Other
  Related Statutes (RICO, Mail and Wire Fraud),
  Plus Debarment from Government Contracts and
  Denial of Export Licenses.
• There is No Indemnification for Reputational
  Damage.

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9. Corrupt Intent is Crucial to Liability under
the FCPA.

• Although the Antibribery Provisions Refer to
  Corrupt Purposes, Intent is Inferred from the
  Circumstances, Regardless of Direct Evidence.
• Furthermore, the Accounting Provisions May Be
  Invoked Even in the Absence of Corrupt Intent (or
  in the Absence of Questionable Payments).

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10. The Enforcement Agencies Will Never Discover
What a Foreign Agent Did in Some Remote Country.

• Competitors and Former Employees Are a Fertile
  Source of Information to Enforcement Agencies.
• Thanks to Sarbanes-Oxley Act, SEC Resources for
  FCPA Enforcement are Extensive.
• The Use of FCPA Allegations and Whistle-Blowing
  as a Weapon in Private Litigation against a
  Corporation by a Disgruntled Former Employee is
  Increasingly Common.

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Conclusion

• An Effective FCPA Compliance Program Should
  Ensure that All Relevant Employees and Agents, at
  Home and Abroad, Separate FCPA Misconceptions
  from Reality.
• That Should Help Your Company to Avoid Trouble
  from What You Dont Know As Well As From What
  You Know for Sure that Just Aint So.

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