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Highlights from the Long-Awaited FCPA Guidance

The guidance jointly issued by the Department of Justice and the Securities & Exchange Commission on Wednesday on the Foreign Corrupt Practices Act isn’t a difficult read, and anyone who practices in this area has presumably already devoured the 130-page document.

But for those who haven’t yet redlined the entire thing, we’re here to help. Below are a collection of the more interesting and helpful tidbits from the guidance.

Defining “Anything of Value”:

In enacting the FCPA, Congress recognized that bribes can come in many shapes and sizes—a broad range of unfair benefits—and so the statute prohibits the corrupt “offer, payment, promise to pay, or authorization of the payment of any money, or offer, gift, promise to give, or authorization of the giving of anything of value to” a foreign official.

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Foreign Corrupt Practices Act (FCPA): An Overview

The Foreign Corrupt Practices Act of 1977, as amended, 15 U.S.C. §§ 78dd-1, et seq. (“FCPA”), was enacted for the purpose of making it unlawful for certain classes of persons and entities to make payments to foreign government officials to assist in obtaining or retaining business. Specifically, the anti-bribery provisions of the FCPA prohibit the willful use of the mails or any means of instrumentality of interstate commerce corruptly in furtherance of any offer, payment, promise to pay, or authorization of the payment of money or anything of value to any person, while knowing that all or a portion of such money or thing of value will be offered, given or promised, directly or indirectly, to a foreign official to influence the foreign official in his or her official capacity, induce the foreign official to do or omit to do an act in violation of his or her lawful duty, or to secure any improper advantage in order to assist in obtaining or retaining business for or with, or directing business to, any person.

Since 1977, the anti-bribery provisions of the FCPA have applied to all U.S. persons and certain foreign issuers of securities. With the enactment of certain amendments in 1998, the anti-bribery provisions of the FCPA now also apply to foreign firms and persons who cause, directly or through agents, an act in furtherance of such a corrupt payment to take place within the territory of the United States.

The FCPA also requires companies whose securities are listed in the United States to meet its accounting provisions. See 15 U.S.C. § 78m. These accounting provisions, which were designed to operate in tandem with the anti-bribery provisions of the FCPA, require corporations covered by the provisions to (a) make and keep books and records that accurately and fairly reflect the transactions of the corporation and (b) devise and maintain an adequate system of internal accounting controls.

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Think the “Foreign Corrupt Practices Act” is a U.S. Issue? Think Again!

Last February the former chief executive of KBR, Inc. was sentenced to 30 months in prison for his role in a massive, decade-long scheme to bribe Nigerian government officials to win $6 billion in contracts for development of the Bonny Island liquefied natural gas facility.

Albert “Jack” Stanley, 69, had pleaded guilty in September 2008 in a scheme to route $182 million in bribes to Nigerian government officials. And his sentencing sent a chill through executive suites of not just U.S. corporations, but multi-national and non-U.S. foreign corporations as well.

But what really caught the attention of the executive suite world-wide was the degree to which persons and companies outside of the United States became caught up in a bribery and kick-back scandal prosecuted under a law generally thought to affect only U.S. companies.

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Walmart’s Debacle – What PE Firms Can Learn

The recent allegations against Wal-Mart that the company engaged in bribery to assist in its expansion efforts illuminates the great challenges facing multinational companies transacting overseas.

Tyson Foods, Diageo, IBM and Pfizer have been alleged to violate the Foreign Corrupt Practices Act (FCPA).

And while these larger corporations have been subject to scrutiny, the Department of Justice is sure to be taking a closer look at smaller companies too as it ramps up its effort to clean its international house.

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Updated Walmart Statement in Response to Recent NY Times Article About Compliance with the U.S. FCPA

“Walmart has been working diligently on U.S. Foreign Corrupt Practices Act (FCPA) compliance and has a rigorous process in place to quickly and aggressively manage issues like this when they arise.

“In the last year, we have taken a number of specific, concrete actions to investigate this matter and strengthen our global FCPA compliance processes and procedures around the world and in Bentonville and Mexico.

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Updated Walmart Statement in Response to Recent New York Times Article About Compliance with the U.S. Foreign Corrupt Practices Act,” PR Newswire Press Release, Apr 24, 2012

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SEC-China letter sent to all Hollywood studios

A letter from the Securities and Exchange Commission was sent to all six major Hollywood studios and DreamWorks Animation probing potential violations of the Foreign Corrupt Practices Act in their dealings with China, knowledgeable people not authorized to speak publicly confirmed.

In earlier reports, it was not clear how many studios had received the letter.

The fact that all did indicates that the SEC is looking into general industry practices and not the actions of any specific company.

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The Corruption Law that Scares the Bejesus Out of Corporate America (FCPA)

Walmart’s Mexican bribery scandal is shining the spotlight on the Foreign Corrupt Practices Act, an obscure law that’s become a bane for some of the world’s largest corporations.

Up until this past weekend, there was a very good chance that the average New York Times business page reader had never heard of the Foreign Corrupt Practices Act. It’s the sort of law that the public ordinarily doesn’t have much reason to think about, even as it keeps corporate lawyers and c-suite executives tossing in their sleep. But thanks to the the paper’s damning investigation into Walmart’s cover-up of bribery at its Mexican subsidiary, this low-key statute is suddenly getting its turn in the spotlight.

The statute, generally referred to as the FCPA, was passed in 1977 and bans individuals and companies from bribing foreign government officials to win business or influence their decision making. Those who run afoul of the law can face large fines or prison time. For decades after it was enacted, it was barely used. But in the last five years, it has evolved from an obscure vestige of the post-Watergate era into into one of the most talked about and feared laws in America’s board rooms.

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Top Ten Basics of Foreign Corrupt Practices Act Compliance for the Small Legal Department

The Foreign Corrupt Practices Act [15 U.S.C. § 78dd-1, 15 U.S.C. §§ 78m(b)(2)(A) and (B)of 1977 is a well-established US law which impacts every US company which does business outside the USA. The Obama Administration has set a goal of doubling US exports in the next five years, so FCPA compliance will become important to many small and mid-size US companies.

The FCPA has two provisions- Anti-Bribery and Accounting. In essence, the Anti-Bribery Provisions make it a crime for any US individual, business entity or employee of a US business entity to offer or provide, directly or through a 3rd party, anything of value to a foreign government official with corrupt intent to influence an award or continuation of business or to gain an unfair advantage. The Accounting Provisions basically make it illegal for a company that reports to the SEC to have false or inaccurate books or records or to fail to maintain a system of internal accounting controls.

The standard of intent and knowledge in the Anti-Bribery cases is minimal – intent and knowledge are usually inferred from that fact that bribery took place. The Accounting Provisions do not require intent.The SEC brings Accounting cases as civil actions so its burden of proof is a mere preponderance of the evidence. The government does not lose FCPA cases. Below are ten FCPA basics small legal departments need to be aware of to stay compliant.

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Bribery and the Gathering Storm over Compliance

Apr 1, 2011. The British Ministry of Justice has announced guidelines for the implementation of the far-reaching Bribery Act of 2010, which goes into effect on July 1. Meanwhile, while the Securities and Exchange Commission is set this month to announce rules required by the Dodd-Frank Act to encourage whistleblowers to disclose information about corporate misconduct, most likely including violations of the U.S. Foreign Corrupt Practices Act.

The Bribery Act is sure to drive up the costs of compliance programs for American companies doing business in Britain, while the Dodd-Frank Act’s whistleblower provisions may well render those programs superfluous, even though they will still be required by the Sarbanes-Oxley Act.

The Foreign Corrupt Practices Act prohibits individuals and companies from paying bribes to foreign officials to obtain or retain business in the country. It also requires corporations that file reports with the S.E.C. to maintain accurate books and records in accordance with the accounting rules. The law, first adopted in 1977, has grown in importance over the past decade as the Justice Department, working with the S.E.C., has brought a number of cases against multinational companies for corrupt payments, resulting in millions of dollars of fines and penalties.

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IBM pays $ 10 million to settle Foreign Corrupt Practices complaint

Mar 23, 2011. IBM has agreed to pay $10 million to settle a complaint its employees bribed South Korean and Chinese officials with cash, gifts and entertainment in return for business for more than a decade.

The U.S. Securities and Exchange Commission alleged employees of IBM Korea and a local joint venture with LG Electronics paid bribes to South Korean government officials, according to a court document.

One manager in Korea twice handed over shopping bags full of cash, totaling 40 million Korean won ($38,186), in parking lots, while another paid into the bank account of a “hostess in a drink shop” to win business, the SEC said.

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