audit director roundtable, finance practice © 2009 corporate executive board. all rights reserved....

© 2009 Corporate Executive Board. All Rights Reserved. ADR1B2ZMP1 1

Audit Director Roundtable, Finance Practice

The FCPA establishes both anti-bribery prohibitions and accounting reporting standards, while the latter applies only to those companies affected by the FCPA and who list securities in the United States

Prohibitions of FCPAIn this period of rapid change in anti-corruption enforcements activity, the following trends have emerged in recent year which are evident in case law:

• Increase in the frequency and severity of litigation (example: profit disgorgement)

• More creative methods of resolution in criminal cases (example: deferred prosecution for a cooperative defendant)

• A spike in self-reporting violation in hopes that cooperation will reduce penalties

• Post-proceeding monitoring of compliance conduct

Applies to all companies under the FCPA

Anti-Bribery ProhibitionsIn general, the FCPA makes it unlawful for:•U.S. Corporations to bribe foreign government officials•Foreign corporation and persons, directly or through agents, an act of furtherance of the corrupt payment to take place in the United States and its territories.

If your company is listed in the United States

Companies whose securities are listed in the United States must keep books that accurately and fairly reflect the transactions of the corporation and maintain a system of adequate internal accounting controls.

Yes

Accounting Reporting Standards

No

No Extra Prohibitions

Source: Audit Director Roundtable, “The Foreign Corrupt Practices Act Prepackaged Presentation ,” Corporate Executive Board, 2008.



Five Elements Constituting a Violation

Who Who

• Potentially applies to any individual, firm, officer, director, employee, or agent of the firm and any stockholder acting on behalf of the firm • Encompasses any third party relationships such as foreign affiliates and joint ventures

CorruptIntent

CorruptIntent

• Person making or authorizing the payment must have corrupt intent• Payment must be intended to prompt the recipient to misuse his official position to direct business wrongfully to the payer or any other person• Offer of a corrupt payment can constitute a violation even if the corrupt act does not succeed

Payment Payment

Prohibits paying, offering, or promising to pay money or anything of value

Extends to corrupt payments to:•A foreign official•A foreign political party or party official•Any candidate for foreign political office

Recipient Recipient

Payment must be made for the purpose of:•influencing, inducing or otherwise affecting an official act, decision or omission thereof•securing an improper advantage•assisting in obtaining or retaining business for any person or entity

Business Purpose Test

Business Purpose Test

With respect to the anti-bribery prohibitions, there are 5 distinct elements which must be met to constitute a violation




Sanctions Against Noncompliance

• Business entities are subject to a fine up to $2 million dollars per violation.

• Officers, directors, employees, and agents of the firm can face fines up to $250,000 and/ or 5 years imprisonment per violation.*

• For both business entities and individuals, a civil action for a fine of $10,000 may be levied for violations.*

• For both business entities and individuals, a court may impose an additional fine not to exceed the greater of (i) the amount of gain as a result of the violation or (ii) a specified dollar amount.*

• Business entities may be fined up to $25 million.

• Employees that knowingly violate the provisions are subject to $5 million dollars in fines and 20 years’ imprisonment.*

• Business entities can be subject to civil penalties ranging from $50,000 to $500,000.

• For individuals, a civil action for a fine up to $100,000 may be levied for violations.*

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Criminal Sanctions Civil Sanctions

* Fines levied against individuals may not be paid by their employer or principal

Enforced by the Department of Justice Enforced by the Securities and Exchange Commission

(and DOJ in rare circumstances)

There are both civil and criminal sanctions that can be brought against an individual and a corporation for violating FCPA’s anti-bribery or accounting laws


audit director roundtable, finance practice © 2009 corporate executive board. all rights reserved....

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