Foreign Corrupt Practices Act

Most large companies and corporations with publicly traded securities are already aware of the need to comply with the Foreign Corrupt Practices Act. However, there are many emerging and middle-market companies who are either not aware of the FCPA, or if they have heard of it, may not fully appreciate the need for compliance.

Unfortunately, many businesses have the following misconceptions regarding the FCPA:

  1. All that is necessary to comply is making sure a cash bribe is not given to some high level foreign official by the business;
  2. A company is not responsible if bad acts are done by an independent agent or distributor without the knowledge of company management;
  3. If a person in a foreign country #1, does a bad act in a foreign country #2, the U.S. government is not concerned; or
  4. “Business is just done this way, so my company does not really need to be concerned about it.”

All four of the above statements are wrong.

Violations of the FCPA can result in existential threats to a business’s ability to survive and can result in arrest, prosecution and incarceration for the individuals involved. Collateral damage can include breach of compliance-with-law covenants in contracts, the inability to obtain new equity or debt financing, and greatly complicating the ability to sell a business to a strategic or financial buyer.

Many companies have ethical policy statements as part of their internal statements of policy, and some post them on their website. Such statements may well come back to haunt companies and their boards of directors if the company does not have a proper FCPA compliance program in place, and an FCPA violation occurred. There is also a question of whether the board has properly discharged its fiduciary duties if the company has an overseas business, and the board did not require that a proper FCPA compliance program be implemented.

If you feel your company is or may be subject to the FCPA, it would be appropriate to seek legal counsel to discuss how to properly evaluate the risk and implement an effective compliance program.

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