Commercial Bribery May Be Future Target in FCPA Enforcement Actions

The Foreign Corrupt Practices Act (FCPA) is a powerful weapon to stop corporations from attempting to win or retain business abroad by making bribe payments to or bestowing lavish gifts on foreign government officials or their family members. The FCPA also prohibits companies from using accounting tricks to hide bribery of government officials or commercial bribery. Since the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 instituted a whistleblower program, anyone can collaborate with the government by notifying the Justice Department or the Securities and Exchange Commission (SEC) about foreign bribery operations. Dodd-Frank allows for substantial financial rewards to insider informants who blow the whistle on FCPA violations.

FCPA’s Accounting Provisions Allow Government to Pursue Companies Attempting to Hide Commercial Bribery With Accounting Irregularities

Several of the SEC’s recent enforcement actions have focused on companies that violate the FCPA’s accounting provisions. Most press coverage concerning the FCPA relates to the statute’s first prong, the anti-bribery provision that forbids companies from making bribes to foreign officials or their family members in an effort to get or keep business. But the FCPA also contains a second prong concerning accounting measures.

The accounting provisions of the statute apply only to U.S. “issuers,” meaning companies that are required to file reports with the SEC. The “books and records” provision requires an issuer to set up and maintain books, records, and accounts that detail the company’s transactions in a reasonable and accurate manner. In addition, the “internal controls” provision mandates that an issuer establish a system of internal accounting controls to ensure that company management maintain control and responsibility of company assets.

The FCPA’s One-Two Punch: Accounting Provisions Apply to More Than Just Bribery

Many people do not realize that the scope of the FCPA’s two prongs is different. The accounting provisions do not require the government to establish that suspect transactions represented bribes to foreign officials. The accounting provisions apply to all transactions, including those involving commercial bribery. Like payments to a foreign government official, commercial bribes also are generally hidden in a company’s books and described as marketing expenses or commissions, for example.

In the past, the U.S. government has generally pursued violations of the FCPA’s accounting prong in tandem with violations of the statute’s anti-bribery prong. More recently, however, the SEC has resolved cases that involved proof only of accounting violations without proof of accompanying anti-bribery violations. Thus far, all the cases concerning the improper booking of commercial bribes have reportedly included bribes intended for public officials as well. Still, as the government’s Resource Guide to the U.S. Foreign Corrupt Practices Act warned in 2012, commercial bribery may, in and of itself, constitute a violation of the FCPA’s accounting provisions.

Contact Us to Notify Government About FCPA Violations

Waters & Kraus represents whistleblowers in a variety of matters involving foreign bribery violations. If you have FCPA claims against your employer or another business, contact us by email or call our qui tam attorneys at 800.226.9880 to learn more about our practice and how we can collaborate with the government to redress illegal foreign bribery schemes or FCPA accounting violations. Our experienced lawyers, such as Loren Jacobson and Caitlyn Silhan in the firm’s Texas office, are working to level the playing field in international business operations.

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