Government Continues Aggressive Use of the Foreign Corrupt Practices Act
In a recent prosecution in the Western District of Virginia, a tobacco executive who allegedly paid more than $3 million to officials in Kyrgyz received three years probation and a $5,000 fine. The sentence, which was much less than the five-year minimum prison term recommended by the federal sentencing guidelines or the 38 months suggested by the prosecutor, resulted from the substantial assistance he provided to the government during the investigation. The executive’s punishment was part of a U.S. bribery investigation into the company that now owns Dimon, Alliance One International, Inc., a Morrisville, N.C., tobacco merchant. Alliance One Osh, the company’s Krygyzstan operation, and Alliance One International, were also sentenced to $9.45 million in fines. Moreover, Alliance One settled complaints with the Securities and Exchange Commission by paying the government an additional $10 million for profits resulting from the bribe-facilitated tobacco contracts.
This case is another example of the government’s aggressive use of the Foreign Corrupt Practices Act (FCPA), which prohibits and sanctions improper payments to a foreign government official in order to influence, obtain or retain business. Specifically, the anti-bribery provisions of the FCPA state that it is a crime to offer or give anything of value to a foreign government official, a foreign political party, a foreign party official, or a foreign political candidate in order to obtain or retain business for or with, or to direct business to, any person. The FCPA broadly defines “foreign official” to include any “officer or employee of a foreign government or any department, agency, or instrumentality thereof, or of a public international organization, or any person acting in an official capacity for or on behalf of any such government or department, agency, or instrumentality, or for or on behalf of any such public international organization.”
For purposes of liability under the FCPA, it does not matter whether the payment is made directly or indirectly. Thus, it is also a violation of the FCPA if the payment is paid to a third party “knowing” that it would be passed through to a government official. The FCPA’s definition of “knowing” goes beyond actual knowledge. A firm belief that the third party will pass through all or part of the payment to a government official, or an awareness of facts that create a “high probability” of such a pass-through, constitute knowledge under the Act.
The FCPA, which has both criminal and civil aspects, is enforced by the Department of Justice and the Securities and Exchange Commission. Penalties for violation of the FCPA are severe and potentially devastating for both corporations
and individuals, and include imprisonment for individuals and fines for corporations and individuals. Statutory criminal penalties for individuals include fines up to $100,000 per violation and/or imprisonment up to five years.
Individual directors, officers, and employees of companies may be prosecuted, even if the company for which they work is not. Companies may be fined up to $2 million per violation. The FCPA also allows a civil action
for a fine of up to $10,000 against any firm that violates the antibribery provisions of the FCPA, and against any director, officer, employee or agent of a company who willfully violates the antibribery provisions of the Act.
Companies should keep in mind that they can suffer harsh consequences even if they are not ultimately convicted of a violation of the Act as mere indictment under the FCPA can trigger its own set of sanctions. Indictments can result
in the loss of U.S. Government financing and insurance, and suspension or debarment from U.S. Government contracts and licenses to operate both in the United States and abroad. FCPA prosecutions also often include charges of
other criminal violations, such as mail and wire fraud and conspiracy, further compounding the potential penalties. Those actions can move forward even if the Company is not convicted of the FCPA offense.