FCPA Penalties & Violations Overview
“Do you have questions about FCPA? I would love to help. I formerly prosecuted FCPA cases at the DOJ as a trial attorney. I now serve as external Counsel and CCO on all types of FCPA investigations and compliance matters for governments and corporations.”Samer B. Korkor – Head of FCPA Group
Click here to view Samer’s bio or send a text to 714-294-2000 to setup a call with Samer and Dr. Nick Oberheiden.
- The Foreign Corrupt Practices Act (“FCPA”) contains two important sections: (1) the antibribery provisions and (2) the accounting and recordkeeping provisions.
- The FCPA broadly prohibits the bribing of foreign officials and requires the adequate maintenance of books, records, and internal controls.
- The Act contains an exception for “routine governmental action” which means that the FCPA does not apply to certain activities such as facilitating or expending payments for routine governmental action.
- There are also defenses to the FCPA including situations where the payment of a gift, offer, or promise is lawful in the foreign official’s home country or was the product of a bona fide expenditure.
- Both civil and criminal penalties for individuals and companies can be very significant, including monetary fines and imprisonment.
- Consider hiring a team of FCPA lawyers to advise you on how to respond to charges of FCPA violations.
Experienced FCPA Penalties Defense Team
If you have been charged or are being investigated in connection with a violation of the FCPA, now is the time to take prompt action in your defense.
FCPA charges could result in significant civil and criminal penalties, jail time, and damage to your business and customer relationships not to mention the reputational harm that could ensue.
It is critical that you are represented by an experienced team of defense attorneys with extensive knowledge of the FCPA and a track record of successful litigation.
Our attorneys include former FBI agents, former U.S. attorneys, and former prosecutors, all poised to offer you the best chance of success in your defense.
Do not wait to get in touch with a qualified defense attorney today. Put Oberheiden, P.C. on your side to fight for your freedom and reputation.
The Foreign Corrupt Practices Act
Enacted in 1977, the Foreign Corrupt Practices Act (“FCPA”) contains two important sections:
- (1) the antibribery provisions (15 U.S.C. §§ 78dd-1, 78dd-2, and 78dd-3), and
- (2) the accounting and recordkeeping provisions (15 U.S.C. § 78m(b)).
These provisions generally prohibit the bribing of foreign officials to obtain or retain business and require that companies maintain adequate books, records, and internal controls in their accounting practices.
The FCPA applies to prohibited conduct anywhere in the world and extends to the actions of publicly traded companies and their officers, directors, shareholders, employees, and agents.
Its geographic reach could also encompass foreign private companies in certain circumstances, which we explain in detail below.
The Anti-Bribery Provisions
The anti-bribery provisions of the FCPA prohibit any offer, payment, or promise to pay money or anything of value to any foreign official, foreign political party, or candidate that is intended to influence any act or decision of that party in order to assist in obtaining or retaining business.
“Anything of value” is an elusive term but could include cash, medical supplies, vehicles, or even different kinds of computer equipment.
With regards to “bribes,” the FCPA also prohibits bribes made to any person while knowing that some or all of that payment will be used by that person—directly or indirectly—to bribe a foreign official. These “indirect bribes” includes a reckless disregard to bribery and can subject that individual to charges for violating the FCPA.
The Accounting Provisions
The FCPA’s accounting provisions encompass requirements for a company’s books and records as well as internal controls.
The former requires that the company maintain books, records, and other accounts that reflect the transactions of the company’s assets accurately and in detail.
The latter requires that the company maintain internal controls in their accounting systems in order to provide reasonable assurances that transactions are carried out with management’s authorization, that transactions are recorded properly, that access to capital is limited to those with authorization, and that the company regularly conducts accurate comparisons of assets.
The Exception and Defenses to the FCPA
“Routine Governmental Actions”
The FCPA contains an exception for routine governmental action. This means that the FCPA does not apply to certain activities such as “facilitating or expediting payment” regarding a routine governmental action.
Examples of activities that are classified as “routine governmental actions” include obtaining permits, licenses, or other documents to do business; processing governmental papers; providing police protection or inspections for contract performance; or providing telephone service, power, and water supply.
However, this does not include certain foreign official decisions such as the decision of whether or not to award or to continue awarding business contracts to a particular company over other companies.
Payment of Gift, Offer, or Promise That Is Lawful in the Foreign Official’s Home Country or a Reasonable and Bona Fide Expenditure
The FCPA provides for two affirmative defenses by which the payment of a gift, offer, promise, or anything else of value to a foreign official will not subject the individual to liability.
The first situation occurs when the gift, offer, or promise is lawful under the written laws of the foreign official’s home country.
The second situation occurs when the gift, offer, or promise is a reasonable and bona fide expenditure. Examples of “bona fide” expenditures include travel and lodging incurred on behalf of the foreign official.
Therefore, as long as the individual can successfully demonstrate one of the above two affirmative defenses with respect to the gift, offer, or promise to the foreign official, that individual can avoid liability under the FCPA.
Examples of FCPA Cases
Last year in 2019, companies paid $2.9 billion in FCPA cases, which included resolutions with various federal agencies such as the SEC and the DOJ.
These FCPA enforcement proceedings involved multiple high-profile and well-known corporate defendants such as Deutsche Bank, Microsoft, Juniper Networks, and Barclays.
Below we offer a few examples of investigations into these companies for violations of the FCPA:
- In September 2019, the SEC charged Barclays with FCPA violations pertaining to its hiring practices. According to the SEC, Barclays failed to maintain internal accounting controls around its hiring practices that provided reasonable assurance that its employees were not bribing foreign officials, Barclays agreed to pay over $6 million in disgorgement, almost $1 million in prejudgment interest, and about $1.5 million in civil penalties.
- In August 2019, the SEC charged the networking and cybersecurity company, Juniper Networks, with violations of the FCPA through its Russian and Chinese subsidiaries. Juniper agreed to settle charges for violations of the accounting provisions by paying more $11.7 million in monetary relief including $4 million in disgorgement, over $1.2 million in prejudgment interest, and about $6.5 million in civil penalties.
- In August 2019, the SEC charged Deutsche Bank with violations of the FCPA. The SEC alleged that Deutsche Bank hired relatives of foreign officials to improperly influence them regarding investment banking business. These hires bypassed the company’s highly competitive hiring process and were often less qualified than other applicants who were hired through the formal hiring process. Deutsche Bank agreed to pay disgorgement of almost $11 million, prejudgment interest of almost $2.4 million, and civil penalties of about $3 million.
- In July 2019, the SEC charged Microsoft Corporation with FCPA violations in connection with its operations at four foreign subsidiaries. Specifically, the SEC alleged that the Microsoft Hungary subsidiary provided discounts on software licenses to its resellers, distributors, and other third parties. Instead of passing the discounts to the company’s government customers, the discounts funded improper payments and provided improper travel and gifts to foreign government officials. Microsoft agreed to about $13.7 million in disgorgement, about $2.7 million in prejudgment interest, and $8.7 million as a criminal fine from its non-prosecution agreement with the DOJ.
Federal Agencies Involved in Investigations for FCPA Violations
The SEC and DOJ are jointly responsible for investigations and enforcement of the FCPA.
The SEC is charged with the civil enforcement of the anti-bribery and accounting provisions, while the DOJ is responsible for criminal prosecution as well as civil investigations of these provisions.
Other federal agencies involved in the investigative process include the Department of Homeland Security, the Internal Revenue Service, and the Department of the Treasury, as some examples.
Further, it is important to remember that violations of the FCPA can also result in violations of other provisions of the securities laws as well as other federal criminal statutes, which may bring in more enforcement authorities.
Penalties for FCPA Violations
Individuals and companies are subject to a variety of sanctions for FCPA violations including civil and criminal penalties, disgorgement or restitution orders plus prejudgment interest, suspensions and debarments, and even imprisonment.
These penalties can be quite significant.
For the anti-bribery provisions, companies can be subject to criminal fines of up to $2 million. Individuals can be fined up to $250,000 and subject to five years imprisonment. For the accounting provisions, companies can be subject to a fine of up to $25 million, while individuals may be fined up to $5 million and subject to imprisonment terms of up to 20 years.
Further, under the Alternative Fines Act (18 U.S.C. § 3571(d)), courts are authorized to impose higher fines than those authorized by the FCPA—such as up to twice the amount the violator obtained through the corruption—if facts supporting the decision to increase the fines are included in the indictment and either proven to the jury or agreed to in a guilty plea.
For the anti-bribery provisions, the FCPA provides that companies may be liable for a civil penalty of up to $16,000 per violation. Individuals could also be subject to a civil penalty of $16,000 per violation.
For the accounting provisions, companies and individuals can be subject to a penalty not to exceed the greater of the gross amount of their pecuniary gain from the violation or a specified dollar limitation based on the seriousness of the violation—ranging from $75,000 to $725,000 for a company and $7,500 to $150,000 for an individual.
Need Advice Regarding FCPA Violations & Penalties?
Being investigated for FCPA violations can be a worrisome time and could waste needless time and expense. It could also result in substantial criminal and civil penalties as well as imprisonment.
If you have been charged with violations of the FCPA or think an investigation could be initiated against you or your company, it is time to get in touch with an attorney.
At Oberheiden, P.C., we have a well-qualified team of FCPA attorneys poised to defend you against these unwarranted charges. We are experienced in providing legal advice to our clients charged with FCPA violations, preparing individualized defense strategies, and fighting for our clients’ rights.
Call us at 888-680-1745 or contact our office for a free consultation.