Bribery and Corruption E-Book

Brian P. Loughman

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Serie: Wiley Corporate F&A
• Sprache: Englisch

Seitenzahl: 651

Veröffentlichungsjahr: 2011

Beschreibung

As businesses continue to expand globally into new and emerging markets, bribery and corruption risks have increased exponentially. Bribery and Corruption offers a comprehensive look at this growing problem, and at the Foreign Corrupt Practices Act (FCPA) and other international anti-bribery and corruption conventions. Presenting hypothetical examples of situations companies will face, along with practical solutions, the book offers detailed global guidance on a region and country-specific basis. The FCPA prohibits US companies and their subsidiaries from bribing foreign officials, either directly or indirectly through intermediaries, for the purpose of obtaining or retaining business. It also requires companies to keep accurate records of all business transactions and maintain an effective system of internal accounting controls. Internationally, the Organization of Economic Cooperation and Development's (OECD's) anti-bribery convention has been adopted by 38 countries and creates legally binding standards related to bribery of foreign public officials. Written by renowned accounting fraud experts Richard A. Sibery and Brian P. Loughman, and providing an introduction and overview of the Foreign Corrupt Practices Act (FCPA) and international bribery laws, Bribery and Corruption considers: * How to conduct FCPA risk assessments and investigations * How to consider FCPA specific financial controls * How to implement an FCPA compliance program and how to measure FCPA compliance The risk of bribery and corruption continues to be an area of concern for companies around the world, but armed with Bribery and Corruption, it is easier than ever to understand the challenges that exist and how to deal with them.

Leseprobe

Contents

Cover

Wiley Corporate F&A Series

Title Page

Copyright

Dedication

Foreword

Preface

Chapter 1: Introduction

Enforcement Trends

Anti-Corruption Compliance Programs

Remember the Purpose

Notes

Chapter 2: Overview of FCPA

Legislative History

Overview and Key FCPA Statutory Elements

Ancillary Statutes

Summary

Notes

Chapter 3: The U.K. Bribery Act and International Bribery and Corruption Initiatives

U.K. Bribery Act of 2010

Global Anti-Corruption Initiatives

Summary

Notes

Chapter 4: Compliance Programs

Goals of an Effective Anti-Corruption Compliance Program

Accepted Standards and Guidance

What Should an Anti-Corruption Program Include?

Summary

Notes

Chapter 5: Policies and Procedures

Bribery, Corruption, and Fraud Prevention Policies

Communication and Training

Internal Financial Controls

Summary

Notes

Chapter 6: Risk Assessments

Scoping the Risk Assessment

Conducting the Risk Assessment

Gap Analysis

Reporting

Documenting the Risk Assessment

Summary

Notes

Chapter 7: Monitoring

Building an Anti-Corruption Monitoring Program

Conducting the Anti-Corruption Compliance Audit

Reporting the Results

Audits of Agents/Intermediaries

Use of Data Analytics in Monitoring

Summary

Notes

Chapter 8: Anti-Corruption Due Diligence

Current Transaction Market Perspectives

The FCPA Due Diligence Regulatory Environment

Why Is Anti-Corruption Due Diligence Significant?

Unique Considerations of Anti-Corruption Due Diligence

What to Do When Violations Are Found During Anti-Corruption Due Diligence

Summary

Notes

Chapter 9: Investigations

Trigger Events

Triage

Response

Remediation

Summary

Notes

Chapter 10: Regional Considerations for Bribery and Corruption Risks

Asia-Pacific

Europe

India and South Asia

Middle East

Africa

Latin America

Notes

Contributors

Chapter 11: Industry Considerations for Bribery and Corruption Risks

Aerospace and Defense

Automotive

Construction and Real Estate

Consumer Products

Diversified Industrial

Energy

Financial Services

Life Sciences

Media and Entertainment

Mining and Metals

Retail and Wholesale

Technology

Transportation

Notes

Contributors

Acknowledgments

About the Authors

About the Contributors

Index

Wiley Corporate F&A Series

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Library of Congress Cataloging-in-Publication Data

Loughman, Brian P.

Bribery and corruption: navigating the global risks/Brian P. Loughman, Richard A. Sibery.

p. cm. – (Wiley corporate F & A series; 568)

Published simultaneously in Canada.

Includes index.

ISBN 978-1-118-01136-2 (hardback); ISBN 978-1-118-16618-5 (ebk); ISBN 978-1-118-16619-2 (ebk); ISBN 978-1-118-16620-8 (ebk)

1. International business enterprises–Law and legislation–Criminal provisions.

2. Bribery. 3. Corporations, Foreign–Corrupt practice. I. Sibery, Richard A. II. Title.

K5216.L68 2011

345′.02323–dc23

2011025471

To David Stulb, the Global Leader of Ernst & Young's Fraud Investigation andDispute Services practice. David is a long-time mentor, colleague, and friend.His support has been instrumental in the creation of this book and thesuccess of Ernst & Young's anti-corruption team.

Foreword

Brian Loughman, Rick Sibery, and the professionals from Ernst & Young's Fraud Investigation & Dispute Services (FIDS) practice have done a fine job in putting together a highly practical, comprehensive guide on the global risks of bribery and corruption. This is a topic that has grown in complexity and risk—and this guide is helpful to all of us who must navigate this road in challenging jurisdictions throughout the world.

It is no secret that bribery and corruption continue, for good and welcome reasons, to be an increasing focus of governments and public institutions around the world. New laws continue to be passed, and enforcement outside the United States is increasing, though many jurisdictions remain woefully behind in enforcing anticorruption laws. The United States continues to be a leader in aggressively enforcing the Foreign Corrupt Practices Act (FCPA). During 2010 and 2011, we have seen heavy fines, many individual prosecutions, and even an FCPA sting. The Department of Justice and the Securities and Exchange Commission are working with their counterparts throughout the world to ensure an even playing field for companies as they compete for contracts and expand business in far-reaching corners of the world.

The most significant recent change has been in the United Kingdom. The U.K. Bribery Act of 2010, which came into force in July 2011, is a significant step forward in anticorruption legislation. Comments from the U.K.'s Serious Fraud Office indicate that enforcement is also likely to be aggressive.

This guide capably walks through the U.S. and U.K. laws, providing a helpful outline of the major legal principles—including the sometimes-overlooked books and records provision of the FCPA and the important and new concept in the U.K. law of an “adequate procedures” defense—in effect, a defense where a company has a robust compliance program.

The book gives readers a clear and thorough picture of the key elements of who should form an anticorruption compliance program. Brian and Rick hit all the key elements and in doing so provide sound, practical explanations and guidance: from setting the overall tone for an organization through anticorruption policies and procedures; to establishing proactive steps to identify and monitor bribery and corruption risks throughout the organization; to being prepared to respond when an issue is identified through an investigative protocol/ombudsman process. At GE, we think of these elements as “prevention, detection and response.” Each element is discussed in a realistic and understandable manner. Brian and Rick also illustrate how bribery and corruption issues may change over time and provide examples of how a company's anticorruption program should continuously evolve to maintain its effectiveness—including “learning from misses,” since there is no such thing as a perfect program.

I have had the pleasure of working with Brian, Rick, and Ernst & Young's FIDS practice. This book makes the considerable experience of the Ernst & Young professionals very clear. I especially like the chapter on the regions of the world that highlights the importance of understanding the local environment when expanding into new geographies. It underscores the value of having local knowledge and perspective in helping to identify and address bribery and corruption risks. Likewise, the chapter on industries contextualizes the rest of the book across a broad spectrum of diverse business areas. While certain industries have been a focus for enforcement activity (e.g., pharmaceuticals and energy), it is helpful to see bribery and corruption risks considered across a wide range of industries.

Many thanks to my friends at Ernst & Young for helping us all increase our understanding and awareness of what should be done to effectively navigate global bribery and corruption risks. I am sure you will find this a rewarding book to consult.

Brackett DennistonSenior Vice President and General CounselGeneral Electric Company

Preface

The risk of bribery and corruption continues to be an area of concern for companies around the world. As businesses continue to expand globally into new and emerging markets, bribery and corruption risks have increased exponentially due to increased awareness and enforcement.

Bribery and Corruption: Navigating the Global Risks offers a comprehensive picture of this growing problem and what companies should be doing to mitigate their risks. The book provides background on the Foreign Corrupt Practices Act, the U.K. Bribery Act, and international anti-bribery and corruption conventions, highlighting recent enforcement trends and regulatory expectation. Practical considerations and solutions are offered to help companies develop and refine their response to bribery and corruption through an anti-corruption compliance program.

The book includes an overview of several regions of the world as well as further detail on a number of countries. Regional commonalities and “red flags” are highlighted, and country-specific laws and enforcement information are included. Insights from an industry perspective are provided on trends and potential areas of focus for players in a number of industries.

This book was written by a group of experienced professionals from Ernst & Young's Fraud Investigation & Dispute Services (FIDS) practices worldwide. Ernst & Young firms have FIDS practices is in over 50 countries, including over 1,000 dedicated professionals focused on assisting companies with fraud issues. We have drawn upon the collective experience of this group to share our views and experience in a way that we hope will provide practical guidance with real-world issues.

Chapter 1

Introduction

Bribery and corruption has an impact on everyone, and while the impact is not immediately recognizable to most of us, the global impact cannot be underestimated. From developing countries in Africa, Latin America, and Asia to the United States, Western Europe, and the United Kingdom, bribery and corruption continues to create an uneven playing field in international trade, commerce, and the process of government. Problems range from the small payment demanded by a customs official to inappropriately process an import package, to multimillion-dollar payments to secure a large government contract. These are just two examples of the myriad of scenarios that businesses face in the international market place.

“A part of the culture.” “The cost of doing business.” “Our competitors are doing it.” “Not a big deal.” These refrains are just a few of the reasons given to make corrupt payments. Only in recent years have we begun to see a change. One would be very hard-pressed to identify a country that has not banned corruption within its own borders. Even the most remote, undeveloped, totalitarian regime has laws on the books against bribery (albeit selectively enforced). However, it was only just over 30 years ago that the United States took a strong stand against corruption outside its borders. The Foreign Corrupt Practices Act of 1977 (FCPA) was an attempt to level the playing field by preventing corrupt payments to foreign government officials for the purposes of gaining new business.

For many, many years the FCPA was the only game in town. Even then, most businesses either hadn't heard of it or didn't see it as a significant deterrent. Enforcement was rare, and when heard about, usually involved exotic locales and large payments to government insiders. And so was the case of the FCPA for many years. Bribery and corruption remained global scourges, and there were additional attempts to level the playing field and reduce their effects. The Organization for Economic Cooperation and Development (OECD) Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (OECD Anti-Bribery Convention) in 1997 was a significant step forward and at least notionally gained worldwide support.

As the new century arrived, the tide began to change. The FCPA had always had teeth—too many teeth, argued some. But it was enforcement and the advent of modern corporate compliance programs that began to turn the tide and start a wave of focus on bribery and corruption that still surges forward. Billions of dollars in fines, penalties, disgorgement of profits, and professional fees signal that we are in a world that has bribery and corruption firmly in the center of any international company's radar. The United Kingdom passed a law that many believe surpasses the FCPA in its breadth and limitations. Whether viewed as the beginning of a new era of shrinking bribery and corruption or simply as regulatory enforcement stepping over the line, the current regulatory environment demands attention.

The objective of this book is to help businesspeople understand the relevant bribery and corruption legislation, enforcement environment, and how to effectively manage the associated risks. First, we lay the groundwork by discussing bribery and corruption legislation both in the United States and around the world. We focus on laws limiting foreign bribery and corruption as the area of domestic bribery and its enforcement is much more mature and outside the scope of this book. We then discuss bribery and corruption policies, procedures, and monitoring. These chapters focus on establishing an anti-corruption compliance program. Understanding and establishing an effective anti-corruption environment through focused internal controls, training, risk assessment and monitoring is the goal. We discuss how to respond to common corruption challenges, appropriately investigate issues, and mitigate corruption concerns. We have also supplemented the book with geographic and industry profiles of corruption challenges.

Figure 1.1 shows the elements of an Anti-Corruption Compliance Program and is the framework of this book. Each of the elements are described in detail throughout the book.

Figure 1.1 Anti-Corruption Compliance Program

A casual search of the Internet for bribery and corruption guidance results in an ever-expanding number of articles, books, blogs, courses, seminars, and software products that are there to assist businesses respond to bribery and corruption risks. This book was written to be a practical guide to businesspeople who are trying to understand their company's risks and how to respond. There are other resources that will provide much more legal analysis on the statutes and the implications of resulting cases.

Bribery and corruption has a very detrimental effect on an economy. The World Bank has estimated that 0.5 percent of gross domestic product (GDP) is lost through corruption each year.1 Engaging in corrupt practices also creates a very unfavorable business environment by encouraging unfair advantage and anti-competitive practices. In addition to allowing organized crime to flourish, corruption is one of the primary obstacles to the economic development of a country; it undermines the rule of law, weakens trust in public institutions, and challenges democratic principles.2 For example, Transparency International, a nonprofit international organization that tracks global corruption, estimates that former Indonesian leader Suharto embezzled anywhere between $15 and $35 billion from his country and that Ferdinand Marcos in the Philippines, Joseph-Désiré Mobutu in Zaire, and Sani Abacha in Nigeria may have embezzled up to $5 billion each.3

Saddam Hussein's regime engaged in very widespread corruption highlighted by corrupt payments it received as a result of the United Nations' “oil-for-food program” that was designed to alleviate the economic sanctions against Iraq for the benefit of its people. Well-known companies from around the world were involved in this program, and there have been a string of prosecutions and settlements in the years since it ended.

The impact of bribery and corruption can't be understated.

Although anti-corruption laws have been enacted by many countries, the FCPA and U.K. Bribery Act are generally the most expansive in terms of proscribed activities and jurisdictional reach. The FCPA is the most aggressively enforced by several orders of magnitude. Accordingly, these are the laws that most global companies use as the standards for their anti-corruption compliance programs. Consult with your legal counsel concerning local bribery laws that might apply to the jurisdictions where you do business, but know and understand the FCPA and U.K. Bribery Act and use them as the foundation for your global anti-corruption compliance program, including anti-corruption policies, procedures, controls, and training activities.

The FCPA makes it unlawful for U.S. persons and companies to pay bribes to foreign government officials (non-U.S.) for the purpose of obtaining or retaining business or for any improper advantage. The FCPA prohibits direct and indirect bribe paying through intermediaries. The FCPA also requires U.S. and non-U.S. companies with securities listed in the United States (issuers) to adhere to its books and records provisions. These provisions, which were designed to operate in tandem with the anti-bribery provisions of the FCPA, require issuers to make and keep detailed books and records that accurately and fairly reflect the transactions of the corporation and to devise and maintain an adequate system of internal accounting controls.4 In practice, the accounting provisions have been interpreted very broadly to include false accounting or record keeping for any illegal act, including commercial bribes paid both within and outside the United States.

We discuss the U.K. Bribery Act, which came into effect on July 1, 2011, at length in the book. It remains to be seen whether the act will be enforced in a similar way as the FCPA. Serious Fraud Office (SFO) officials have painted a picture of strong enforcement using a practical approach. The question of jurisdiction and how it will be enforced is of particular concern. Some say the U.K. authorities will try to start off with a bang and bring a big case. What will happen remains to be seen, but our expectation is that the U.K. Bribery Act has further changed the landscape of anti-corruption enforcement and will continue in the vein of FCPA enforcement.

Enforcement Trends

For many years the FCPA was not a statute that the U.S. Department of Justice (DOJ) aggressively or significantly utilized to prosecute international bribery. In fact, there are few reported decisions of such prosecutions in the first 20 to 25 years in the life of the statute. In the past few years, however, the number of DOJ prosecutions and Securities and Exchange Commission (SEC) enforcement actions has steadily increased from a few in 2004 to over 70 in 2010. More important, DOJ officials have steadily warned that this trend will only continue.

For example, in a November 2010 FCPA conference, Deputy Attorney General Lanny Breuer indicated that we were in a “new era” of FCPA enforcement and warned that those worried about more aggressive anti-bribery enforcement “are right to be more concerned.” Mr. Breuer added that “[o]ur FCPA enforcement is stronger than it's ever been—and getting stronger.” He noted figures indicating that the DOJ had recently imposed more than US$1 billion in criminal penalties in FCPA-related cases in any single 12-month period and that more individuals were going to jail.

At other recent conferences, Mr. Breuer and other DOJ officials have indicated the importance of companies having effective FCPA compliance programs that prevent fraud and corruption. The importance of effective FCPA compliance programs is highlighted by the recent enactment of the U.K. Bribery Act of 2010, wherein a defense to a prosecution under that act is having “adequate procedures.”5 Such procedures refer to a company having an effective anti-corruption/bribery compliance program in place.

Global companies are challenged on how to compete for business in countries where the norm is to demand/seek/make (bribe) payments to obtain and retain business, yet seek to be compliant with the FCPA and other broad-based laws. U.S. regulators have focused on industries, and a central theme of these agreements has been building or strengthening anti-corruption compliance programs. Industries investigated have included oil and gas, medical devices, tobacco, telecommunications, and aerospace and defense. In addition to comments by DOJ officials outlined earlier, Cheryl J. Scarboro, chief of the SEC's newly formed FCPA Unit, said that the SEC “will continue to focus on industry-wide sweeps, and no industry is immune from investigation.”6

The 2008 Siemens corruption investigation, which led to the largest fine (US$1.6 billion) so far imposed by regulators from different countries, is a recent example of international cooperation among governments in attacking global corruption. The OECD's Anti-Bribery Convention, which sets forth standards for anti-corruption legislation, explains confronting conflicting jurisdictions, “when more than one Party has jurisdiction over an alleged offense described in this Convention, the Parties involved shall, at the request of one of them, consult with a view to determining the most appropriate jurisdiction for prosecution.”7

Anti-Corruption Compliance Programs

A well-thought-out and comprehensive anti-corruption compliance program is the benchmark that leading companies are utilizing to manage their corruption risks. It can be a challenge to reach this benchmark in the current tumultuous business and regulatory environment. Companies are facing significant economic challenges with shrinking margins and more expectations of growth. International markets and developing economies continue to be the focus for increasing revenues and profits. All the while, the expectation is that overhead (and associated head count) will be kept low. When considering these economic challenges and constraints and adding the unprecedented level of bribery and corruption enforcement, it is no wonder that many are daunted. The chapters that follow are meant to be a guide to understand and meet the challenges of building an effective anti-corruption compliance program. Credence is also given to the necessity of accomplishing these challenges with limited resources. A one-size-fits-all approach is not the answer. Balancing risk with available resources is a key point to implementing a strong anti-corruption compliance program.

Remember the Purpose

As you read through the book, we encourage you to remember the original reason for dealing with bribery and corruption problems: promoting transparency and a level playing field for all businesses. At the end of the day, most international businesses benefit significantly from less corruption. They can focus their efforts on selling a good product or service and not on greasing the right palm. Many companies and even entire industries have made significant strides over the past decade in cleaning up businesses that at one time was thought impossible, and in many instances with little or no impact on their bottom line. That's not to say there are not locations or industries that still need significant help. It also doesn't mean there aren't difficult business decisions to be made. We have tried to pull together our experiences in a way that will assist you when these situations arise. We hope we have been successful.

Notes

1. “Explanatory Memorandum on the UN Convention against Corruption.” United Nations Convention against Corruption, September 30, 2009; www.fco.gov.uk/en/publications-and-documents/treaty-command-papers-ems/explanatory-memoranda/explanatory-memoranda-2005/corruption.

2. “What Effect Does Bribery and Corruption Have on Business Transactions?” Tackling Bribery and Corruption; www.anticorruption.ie/en/ACJS/Pages/FQ08000019.

3. “The Costs of Corruption.” World Bank News & Broadcast, April 8, 2004; http://web.worldbank.org/WBSITE/EXTERNAL/NEWS/0contentMDK:20190187menuPK:34457pagePK:34370piPK:34424theSitePK:4607,00.html.

4. “Foreign Corrupt Practices Act: An Overview.” DOJ; www.justice.gov/criminal/fraud/fcpa/.

5. The U.K. Bribery Act of 2010 and the adequate procedures guidance are discussed further in Chapters 3 and 4.

6. “SEC Charges Seven Oil Services and Freight Forwarding Companies for Widespread Bribery of Customs Officials.” SEC, November 4, 2010; www.sec.gov/news/press/2010/2010-214.htm.

7. “Expert Meeting of the OECD Anti-Bribery Convention.” OECD, November 21, 2007; www.oecd.org/dataoecd/18/56/39691044.pdf.

Chapter 2

Overview of FCPA

The U.S. Foreign Corrupt Practices Act of 1977 (FCPA), containing criminal and civil sanctions, prohibits U.S. citizens, domestic or foreign companies, and persons acting on behalf of such companies to make use of any means or instrumentalities of interstate commerce to corruptly pay or offer to pay directly or indirectly, money or anything of value to a foreign official in order to obtain or retain business.1 The FCPA also requires “issuers,” including foreign companies with securities traded on a U.S. exchange or required to file reports with the Securities and Exchange Commission (SEC), to keep accounting records that accurately reflect business transactions, and maintain effective internal controls.2

In sum, the FCPA provides the following:

Anti-bribery provisions:

Makes it a criminal offense for U.S. companies or persons to bribe foreign officials for business purposes.

Books and records and internal control provisions:

Requires U.S. issuers (SEC registrants) to make and keep detailed and accurate financial records.

Prohibits the falsifying of corporate records to conceal bribes to foreign officials and other improper payments that reflect value provided to the foreign official.

Issuers must devise and maintain a system of internal accounting controls to ensure accurate reporting of transactions, safeguarding of assets, and that financial statements are prepared in accordance with generally accepted accounting principles (GAAP).

This chapter provides the essential statutory elements in order to understand the FCPA. Before discussing these elements, some contextual and legislative history is helpful in order to understand the statutory requirements. The FCPA was passed as a result of SEC investigations in the mid-1970s, where over 400 U.S. companies admitted to making questionable or illegal payments in excess of US$300 million to foreign government officials, politicians, and political parties in return for favorable actions.3

The abuses ran the gamut from bribery of high foreign officials to secure some type of favorable action by a foreign government to so-called facilitating payments that were allegedly made to ensure that government functionaries discharged certain ministerial or clerical duties. Congress enacted the FCPA to bring a halt to the bribery of foreign officials and to restore public confidence in the integrity of the American business system.4

In response to these and other investigations and scandals, the FCPA was enacted. Since its enactment, the FCPA has been amended on a number of occasions, significantly in 1998 where the Act was amended to conform to the Organization for Economic Cooperation and Development (OECD) Convention of 1997.

Despite the reasons for its enactment in 1977 and amendments, as well as broad jurisdictional reach, initially the FCPA was not a statute that the U.S. Department of Justice (DOJ) aggressively or significantly utilized to prosecute international bribery. In fact, there are few reported prosecutions in the early years of the life of the statute. In the past few years, however, the number of DOJ and SEC investigations has increased from a few in 2005 to over 200 in 2010.5

Today, in an era of increasing FCPA investigations and government scrutiny, a challenge for global companies is how to fairly compete for business in countries where the culture is to demand/seek/make (bribe) payments to obtain and retain business, yet seek to be compliant with the FCPA and other broad-based international laws, and strive for sufficient due diligence to improve and/or maintain an effective compliance program.6 Chapter 4 discusses anti-corruption compliance programs in detail.

Legislative History

After two-and-a-half years of hearings investigating international business corruption as noted earlier, Congress enacted the FCPA intending to bring a halt to the bribery of foreign officials and to restore public confidence in the integrity of the American business system.

In signing the FCPA into law on December 20, 1977, President Jimmy Carter stated, in part:

I share Congress' belief that bribery is ethically repugnant and competitively unnecessary. Corrupt practices between corporations and public officials overseas undermine the integrity and stability of governments and harm our relations with other countries. Recent revelations of widespread overseas bribery have eroded public confidence in our basic institutions.7

However, over the years that followed, American companies were found to be at a disadvantage in conducting business abroad, particularly in competition with foreign businesses. In introducing legislation to amend the FCPA in 1998 and seeking consistency of law to international standards,8 the Senate Committee on Banking, Housing, and Urban Affairs stated:

Since the passage of the FCPA, American businesses have operated at a disadvantage relative to foreign competitors who have continued to pay bribes without fear of penalty. Such bribery is estimated to affect overseas procurements valued in the billions of dollars each year. [. . .]

This legislation, coupled with implementation of the OECD Convention by our major trading partners, will go a long way towards leveling the playing field for U.S. businesses in international contracts.

In 1988, Congress directed the Executive Branch actively to seek to level the playing field by encouraging our trading partners to enact legislation similar to the FCPA. These efforts eventually culminated in the Organization for Economic Cooperation and Development Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (the “OECD Convention”). Thirty-three countries, comprising most of the significant trading countries in the world, signed this Convention in Paris in December 1997.9

On November 10, 1998, President Bill Clinton signed into law the International Anti-Bribery and Fair Competition Act of 1998 (amending the FCPA of 1977), in order to implement the OECD Convention into the existing law. (The OECD Convention is further explained in Chapter 3.) In his signing statement, President Clinton added:

The United States has led the effort to curb international bribery. We have long believed bribery is inconsistent with democratic values, such as good governance and the rule of law. It is also contrary to basic principles of fair competition and harmful to efforts to promote economic development. Since the enactment in 1977 of the Foreign Corrupt Practices Act, U.S. businesses have faced criminal penalties if they engaged in business-related bribery of foreign public officials. Foreign competitors, however, did not have similar restrictions and could engage in this corrupt activity without fear of penalty. . . .

The OECD Convention . . . is designed to change all that. . . . The United States intends to work diligently, through the monitoring-process to be established under the OECD, to ensure that the Convention is widely ratified and fully implemented. We will continue our leadership in the international fight against corruption.10

Overview and Key FCPA Statutory Elements

The FCPA contains criminal anti-bribery/corruption provisions, which are investigated by the DOJ. As reflected earlier, the statute also contains books and records and internal controls provisions, which are normally civil violations and investigated by the SEC. The DOJ and the SEC tend to work together when necessary to enforce the provisions of the FCPA.11

Anti-Bribery Provisions

The anti-bribery provisions make it unlawful for a U.S. person, corporation, and certain foreign issuers of securities, to make a payment to a foreign official for the purpose of obtaining or retaining business.12

The Statute

The FCPA provisions are detailed. Later in this chapter, we set forth the relevant provisions of the statute and thereafter attempt to simplify the understanding by indicating practical considerations and how courts have interpreted the requirements of the statute. Before doing so, however, it's important to provide some definitional perspective.

Who Does the Statute Apply To?

The FCPA has broad application. It applies to what it refers to as a “domestic concern.” It defines a “domestic concern” as

(A) any individual who is a citizen, national, or resident of the United States; and (B) any corporation, partnership, association, joint-stock company, business trust, unincorporated organization, or sole proprietorship which has its principal place of business in the United States, or which is organized under the laws of a State of the United States or a territory, possession, or commonwealth of the United States.13

The statute also applies to any issuer that has a class of securities registered pursuant to Section 78 of Title 15, United States Code, or that is required to file reports under Section 78o(d) of Title 15, or for any officer, director, employee, or agent of such issuer or any stockholder thereof acting on behalf of such issuer.14

Thus, the act can apply to an individual; business, regardless of whether it is a public corporation or private business; or for that matter a sole proprietorship, and even a foreign company that has a class of securities registered within the United States. Because of the law of conspiracy (i.e., two or more persons agreeing to commit a crime with one conspirator committing an overt act as defined in 18 U.S.C. 371), foreign firms and individuals can be criminally liable under the FCPA.

What Is a Foreign Official?

In the legislative history discussed earlier and, as we see in the following language of the statute, the FCPA refers to the phrase foreign official in the context of bribery to retain or obtain business. The term foreign official means any officer or employee of a foreign government or any department, agency, or instrumentality thereof, or of a public international organization, or any person acting in an official capacity for or on behalf of any such government or department, agency, or instrumentality, or for or on behalf of any such public international organization.15

Instances of the broad definition and application of a foreign official can include judges, legislators, doctors, or administrators at government-controlled hospitals; officials from government-controlled universities; United Nations officials and persons working for international organizations; private persons acting in an official capacity; and a spouse, dependent, or sibling of an official.16

What Do the Criminal FCPA Bribery Statutory Provisions Prohibit?

The criminal anti-bribery statutory provisions of the FCPA provide as follows:

(a) It shall be unlawful for any domestic concern, other than an issuer which is subject to section 78dd-1 of this title, or for any officer, director, employee, or agent of such domestic concern or any stockholder thereof acting on behalf of such domestic concern, to make use of the mails or any means or instrumentality of interstate commerce corruptly in furtherance of an 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—

1. any foreign official for purposes of—

A. (i) influencing any act or decision of such foreign official in his official capacity, (ii) inducing such foreign official to do or omit to do any act in violation of the lawful duty of such official, or (iii) securing any improper advantage; or

B. inducing such foreign official to use his influence with a foreign government or instrumentality thereof to affect or influence any act or decision of such government or instrumentality, in order to assist such domestic concern in obtaining or retaining business for or with, or directing business to, any person;

2. any foreign political party or official thereof or any candidate for foreign political office for purposes of—

A. (i) influencing any act or decision of such party, official, or candidate in its or his official capacity, (ii) inducing such party, official, or candidate to do or omit to do an act in violation of the lawful duty of such party, official, or candidate, or (iii) securing any improper advantage; or

B. inducing such party, official, or candidate to use its or his influence with a foreign government or instrumentality thereof to affect or influence any act or decision of such government or instrumentality, in order to assist such domestic concern in obtaining or retaining business for or with, or directing business to, any person;

3. any person, while knowing17 that all or a portion of such money or thing of value will be offered, given, or promised, directly or indirectly, to any foreign official, to any foreign political party or official thereof, or to any candidate for foreign political office, for purposes of—

A. (i) influencing any act or decision of such foreign official, political party, party official, or candidate in his or its official capacity, (ii) inducing such foreign official, political party, party official, or candidate to do or omit to do any act in violation of the lawful duty of such foreign official, political party, party official, or candidate, or (iii) securing any improper advantage; or

B. inducing such foreign official, political party, party official, or candidate to use his or its influence with a foreign government or instrumentality thereof to affect or influence any act or decision of such government or instrumentality, in order to assist such domestic concern in obtaining or retaining business for or with, or directing business to, any person.18

The Elements of the Statute

While the number of FCPA cases prosecuted is not large, a recent case provides guidance that, in effect, simplifies the understanding of what constitutes a violation of the FCPA. In the prosecution of Congressman William J. Jefferson, for a violation of the FCPA, among other violations,19 a Virginia district court case indicated that in order to obtain a criminal conviction under the FCPA, the government must prove beyond a reasonable doubt that the defendant is a

1. domestic concern, corporate issuer, individual, firm, officer, director, employee, agent/stockholder of a firm;

2. that made use of a means or instrumentality of interstate commerce;

3. corruptly;

4. in furtherance of an offer or payment of anything of value to any person;

5. while knowing that the money or item of value would be offered or given directly or indirectly to any foreign official; and

6. for purposes of influencing any act or decision of such foreign official in his or her official capacity.20

Interpretation and Practical Considerations

As a practical matter, anything of value can include cash, lavish gifts or entertainment, improper campaign contributions, scholarships, travel for families, and overpayment for services or underpricing of assets.

“Obtaining or retaining business or improper advantage” can mean receiving increased profits, preventing government action, getting regulatory approvals, retaining/renewing a contract, and avoiding duties or taxes.

The corruption element can mean the following: seeking to obtain some quid pro quo, intending to influence someone improperly, acting contrary to law, or doing an act secretively or surreptitiously. In some instances, acting corruptly can be inferred by law enforcement given the circumstances.

The “in furtherance” element can include approving a payment of some sort, relaying e-mail instructions to make a payment, discussing a payment by phone or in a meeting, acquiescing in payment, knowingly cooperating regarding a payment, covering up a payment, or creating or accepting a false invoice.

The “directly or indirectly” element can mean a payment while knowing there is a high probability that payment will pass through an official, intermediary, or third parties agreeing to a demand for a payment. This includes making a payment through a third party, agents, business partners, or joint venture, where knowledge exists or can be inferred that the payment, in whole or in part, will go directly or indirectly to a foreign official. For example, in U.S. v. Kay,21 the federal court said that Congress intended the FCPA to apply broadly to direct and indirect payments to assist the payor in obtaining reduced customs and tax liabilities. In Kay, the court said that the FCPA did not prohibit every payment to a foreign official, but rather payments that were intended to influence a foreign official to act in his/her official capacity, to act or refraining from acting in violation of his/her duty, or to secure an improper or wrongful benefit or advantage to the payor or beneficiary.22

In May 2011, two executives of a company were convicted of conspiracy and FCPA violations. An individual from a Mexican company, hired to serve as a representative for the U.S. company, was convicted of conspiracy to commit money laundering.23 According to the DOJ, the executives of a U.S. company hired a Mexican company as its sales representative to obtain contracts from a Mexican state-owned utility company. The government's evidence showed that the sales representative's company received a 30 percent commission where a percentage of the commission was used to pay Mexican government officials in exchange for contract awards. The evidence further showed that the executives understood that all or part of the commissions would be used to bribe government utility officials in exchange for obtaining contracts. The evidence also showed that the representative submitted invoices to the U.S. company for commissions where the executives then caused monies to be wired to the representative, knowing that the invoices were fraudulent and commission payments were being used to pay bribes.24

Exceptions and Affirmative Defenses

The FCPA provides exceptions to the statue if the conduct is for a routine government action, and it provides affirmative defenses to prohibited conduct.

The statute provides that the prohibited conduct previously stated “shall not apply to any facilitating or expediting payment to a foreign official, political party, or party official the purpose of which is to expedite or to secure the performance of a routine governmental action by a foreign official, political party, or party official.”25 This, for example, means that:

. . . only an action which is ordinarily and commonly performed by a foreign official in—obtaining permits, licenses, or other official documents to qualify a person to do business in a foreign country; processing governmental papers, such as visas and work orders; providing police protection, mail pick-up and delivery, or scheduling inspections associated with contract performance or inspections related to transit of goods across country; providing phone service, power and water supply, loading and unloading cargo, or protecting perishable products or commodities from deterioration; or actions of a similar nature.26

Routine governmental action, however, “does not include any decision by a foreign official whether, or on what terms, to award new business to or to continue business with a particular party, or any action taken by a foreign official involved in the decision-making process to encourage a decision to award new business to or continue business with a particular party.”27

The statute provides for affirmative defense if the “the payment, gift, offer, or promise of anything of value that was made was lawful under the written laws and regulations of the foreign official's, political party's, party official's, or candidate's country.”28

It is also an affirmative defense if “the payment, gift, offer, or promise of anything of value that was made was a reasonable and bona fide expenditure, such as travel and lodging expenses, incurred by or on behalf of a foreign official, party, party official, or candidate and was directly related to the promotion, demonstration, or explanation of products or services; or the execution or performance of a contract with a foreign government or agency thereof.”29

Other Instructive Aspects of the Criminal Provisions and FCPA Generally

The FCPA contains provision that can assist the public in determining whether certain conduct might be a violation of the statute. The DOJ has established procedures wherein an individual or entity can request guidance and an opinion from the attorney general on a particular or contemplated matter or transaction. Section 78dd-2(f) of Title 15 provides that:

The Attorney General shall, within 30 days after receiving such a request, issue an opinion in response to that request. The opinion shall state whether or not certain specified prospective conduct would, for purposes of the Department of Justice's present enforcement policy, violate the preceding provisions of this section. Additional requests for opinions may be filed with the Attorney General regarding other specified prospective conduct that is beyond the scope of conduct specified in previous requests.

There is a further benefit from seeking such an opinion. Should the DOJ file a criminal action based on the facts and information provided in the request for opinion, the procedures permit for a rebuttable presumption—somewhat of a defense—that the alleged misconduct is in conformity with enforcement policy. Section 78dd-(2)(f) provides:

In any action brought under the applicable provisions of this section, there shall be a rebuttable presumption that conduct, which is specified in a request by a domestic concern and for which the Attorney General has issued an opinion that such conduct is in conformity with the Department of Justice's present enforcement policy, is in compliance with the preceding provisions of this section. Such a presumption may be rebutted by a preponderance of the evidence. In considering the presumption for purposes of this paragraph, a court shall weigh all relevant factors, including but not limited to whether the information submitted to the Attorney General was accurate and complete and whether it was within the scope of the conduct specified in any request received by the Attorney General.

As the statute indicates, one must be careful and accurate in the information provided in seeking such an opinion, for inaccuracy can rebut the presumption in favor of conformity with enforcement policy. The procedures for seeking guidance or a statement from the DOJ on potential enforcement actions can be obtained at www.justice.gov/criminal/fraud/fcpa/. (For further guidance, Chapter 8, “Anti-Corruption Due Diligence,” contains an example of an opinion.)

By omission, it should be noted that there is no materiality element on value in the statute. Therefore, it can be illegal to offer anything of value as a bribe, including cash or noncash items.30 The government focuses on the intent of the bribery rather than on the amount.31

Because of its broad application and the application of conspiracy law, jurisdiction under the FCPA can reach conduct or activity that takes place entirely outside of the United States.32

Penalties

The foregoing criminal statute provides for imprisonment and fines. For an individual, imprisonment can be up to five years and a US$100,000 fine. Depending on the circumstances, entities can be fined up to US$2 million per occurrence.

The Books and Records and Internal Control Provisions of the FCPA

The FCPA requires companies whose securities are listed in the United States (thus, it can include foreign companies) to meet its accounting and internal controls provisions. These provisions, which complement enforcement of the anti-bribery provisions, require corporations to make and keep books and records that accurately and fairly reflect the transactions of the corporation and to devise and maintain an adequate system of internal accounting controls.33

These provisions are normally enforced by the SEC, meaning they are civil in nature. However, the internal controls provisions can sometimes lead to criminal violations, which are investigated by the DOJ.

The Statute

Like the anti-bribery provisions, the books and records and internal control provisions are detailed and contain directives, as is the case with other securities regulations. In this section, we focus on the key aspects of these provisions in terms of anti-corruption. These provisions apply to issuers and provide as follows:34

b. Form of report; books, records, and internal accounting; directives

2. Every issuer which has a class of securities registered pursuant to section 78l of this title and every issuer which is required to file reports pursuant to section 78o(d) of this title shall–

A. make and keep books, records, and accounts, which, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the issuer;

B. devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances that—

i. transactions are executed in accordance with management's general or specific authorization;

ii. transactions are recorded as necessary (I) to permit preparation of financial statements in conformity with generally accepted accounting principles or any other criteria applicable to such statements, and (II) to maintain accountability for assets;

iii. access to assets is permitted only in accordance with management's general or specific authorization; and

iv. the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. . .35

As indicated, the books and records and internal controls provisions are very detailed, and only the basic or key statutory provisions are provided. To better understand these provisions, some definition and interpretation is helpful.

Interpretation and Practical Considerations of These Provisions

The statute does not permit an entity to effectively ignore its responsibilities regarding these provisions. The statute provides that “[n]o person shall knowingly circumvent or knowingly fail to implement a system of internal accounting controls or knowingly falsify any book, record, or account described in” the above provisions under paragraph (2).36 Thus, the statute requires affirmative action on the part of companies and its board and officers. But there are some limitations on this point. For example, section 78(b)(6) provides that if corporation holds 50 percent or less of the voting power with respect to a domestic or foreign subsidiary or affiliate, it must only attempt in good faith to use its influence to cause the firm's compliance with this section.37

Practically speaking, the purpose behind the record keeping and internal accounting controls standards and rules is to prevent the hiding of bribery through misrepresentation in accounting records. The books and records provisions require covered companies to make and keep books and records “which, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the issuer.”38 Further, the internal controls provisions require companies to devise and maintain a system that provides “reasonable assurances that . . . transactions are executed in accordance with the management's general or specific authorization.”39 According to the statute, these terms mean “such level and degree of assurance that would satisfy prudent officials in the conduct of their own affairs.”40

With respect to civil/administrative liability, there is no materiality threshold. These provisions cover all transactions, not just those directly related to a corrupt payment. Moreover, civil books and records and internal controls charges do not require a corrupt intent. They instead require that the books and records be accurate and effective internal controls be in place.

Mischaracterizing the nature of a bribe or facilitating payment as a normal operational expense may be considered a books and records violation. The books and records provisions have been interpreted to require indication of the character of a payment—that is, bribes should be recorded as such, and facilitation payments should be recorded as such. Recording a bribe, for instance, as a “logistics expense” or “customs duties” or in any other category may be deemed a violation.

The following hypothetical scenario highlights the issue, which can lead to false accounting or inaccurate entries: an agent for the American company bribes an entity in Asia to obtain or retain business on behalf of the American company; how the company reflects that transaction in its ledger and other accounting records can have FCPA consequences.

Moreover, consider the following example of a violation of the books and records or internal controls provisions. In a civil matter, an SEC cease-and-desist order indicated that the recording of a payment to Argentinian customs officials in accounting records as “Amortization—Fixed Costs” was improper and thus a violation of the books and records provisions.41

Keep in mind that improper payments to a foreign official to obtain or retain business that results in a books and records or internal controls violation can also result in criminal anti-bribery charges. This is so given that improper payments falsely characterized on a company's books and records also forms the basis of facts that constitute a criminal bribery violation. Thus, the risk of books and records or internal controls violation cannot be underestimated.

Penalties

Penalties for the books and records and internal control provisions can be fines of up to US$25 million for companies. For individuals, the penalties include up to 20 years in prison and a fine of up to US$5 million.

Ancillary Statutes

Other statutes that criminalize conduct similar or related to criminal acts under the FCPA include the following laws.

Conspiracy—18 USC 371

By its nature, an FCPA violation includes conduct of two or more individuals or entities. Conspiracy generally involves an agreement or plan between two or more persons to commit at least one crime. The defendant must know of the object of the crime—that is, what the agreement seeks to accomplish (the specific crime) and that a person who is part of the conspiracy accomplishes at least one overt act. In other words, a conspiracy is a kind of criminal partnership to do something unlawful, and the agreed-upon crime does not have to be committed. The agreement is the crime. Further, it is not necessary that the conspirators made a formal agreement, but rather that there was an agreed-upon plan to commit a crime. The conspirators need not have agreed on every detail of the conspiracy.

Bribery of a Public Official—18 USC 201

In some instances and depending on who was bribed (usually here an American official), the government may decide not to charge an FCPA violation, but rather the substantive offense of bribery of a public official. There are various forms of bribery, including kickback schemes, but generally the elements to these types of criminal offenses are similar to those for an FCPA anti-bribery violation. The elements to bribery of a public official are that: (1) the defendant gave, offered, or promised something of value to a public official; and (2) the defendant acted corruptly, that is, with the intent to influence an official act by the public official to influence the public official to commit or allow a fraud on the United States, or to induce the public official to do or to omit to do an act in violation of his or her lawful duty.

Mail or Wire Fraud—18 USC 1341 or 1343

In many instances, to constitute a federal crime it must involve an element of interstate commerce. Otherwise, the criminal misconduct may fall to the states to prosecute. The concept of interstate commerce or foreign commerce provides the federal government with a broad jurisdictional basis upon which to attack criminal activity. Two such crimes include the use of the mails or any use of a wire communication (e.g., telephone, radio, television, or Internet) in any scheme, including bribery and kickback schemes, or the making of false statements/promises to obtain money or a thing of value. As one can imagine, the criminal conduct can be broad and extend beyond U.S. borders.

The elements for both crimes are similar. They involve: (1) knowingly participating or devising or intending to devise a scheme or plan to defraud for obtaining money or property by means of false or fraudulent pretenses, representations, or promises; (2) the statements made or facts omitted as part of the scheme were material; that is, they had a natural tendency to influence, or were capable of influencing, a person to part with money or property; (3) the individual acted with the intent to defraud (e.g., intent to deceive or cheat); and (4) the scheme or plan to defraud included the use of the mails or wire communications.

As indicated, the difference between mail and wire fraud is the use of the mails or wire communications in interstate or foreign commerce.

False Statement to Federal Agency or Official—18 USC 1001

Invariably, witnesses or potential targets of an FCPA or any investigation may be interviewed by a federal law enforcement agent. Lying to that agent is a federal offense (e.g., misrepresenting an accounting entry in connection with a bribe payment). This offense is different than perjury, where a false material statement was made under oath. The elements to an offense under Section 1001 include the knowingly and willfully making a false statement or using a document containing a false statement in a matter within the jurisdiction of a governmental agency, wherein the untrue statement dealt with a material matter in the activities or decisions of the particular agency.

The Travel Act—18 USC 1952

This statute is entitled Interstate and Foreign Travel or Transportation in Aid of Racketeering Enterprises, but it is commonly known as the Travel Act. That act prohibits interstate travel or using the mails or any facility in interstate or foreign commerce with intent to, among other acts, otherwise promote, manage, establish, carry on, or facilitate the promotion, management, establishment, or carrying on of any unlawful activity. Given the language of the statute, it is conceivable that someone who engages in conduct tantamount to an FCPA violation can also be in violation of this statute.

The Exchange Act—Section 20 Control Person

Section 20 of the Securities and Exchange Act of 1934 (Exchange Act) provides liability of controlling persons and persons who aid and abet violations under such act. The effect of this statute is that it substantially broadens the ability of the SEC to seek civil penalties. Specifically, Section 20(a) provides that:

Every person who, directly or indirectly, controls any person liable under any provision of this title or of any rule or regulation there-under shall also be liable jointly and severally with and to the same extent as such controlled person to any person to whom such controlled person is liable, unless the controlling person acted in good faith and did not directly or indirectly induce the act or acts constituting the violation or cause of action.

Money Laundering—18 USC 1956 or 1957

As a result of some of the aforementioned crimes, such misconduct can lead to charges of money laundering. Money laundering generally involves conducting other financial transactions to promote the scheme and/or otherwise disguise the source or nature of proceeds of illegal conduct. There are various forms in which one can commit money laundering. Generally, the elements involve an individual (1) conducting or intending to conduct a financial transaction involving property that represented the proceeds of a specific prior crime; (2) knowing that the property represented the proceeds of the specific crime; (3) acting with the intent to promote or disguising the specified crime; and doing something that was a substantial step toward committing the crime.

Another form of money laundering occurs where the individual (1) knowingly engaged or attempted to engage in a monetary transaction; (2) knew the transaction involved criminally derived property; (3) the property had a value greater than US$10,000; (4) the property was, in fact, derived from a specific crime, and the transaction occurred in the United States or maritime or territorial jurisdiction of the United States.

Summary

As reflected in this chapter, the FCPA's jurisdictional reach is broad. While the numbers of investigations and prosecutions has been limited over the history of the statute, the DOJ and the SEC have made it clear in the past few years that enforcement of the FCPA is a priority. And while it may be the culture in other countries to pay a bribe in order to obtain or retain business, regulators are not sympathetic of U.S. companies and individuals engaging in such behavior. Companies will have to improve their due diligence in how and who they engaged in business aboard. The chapters that follow will provide guidance on how to enhance your due diligence procedures, internal controls and accounting procedures, and anti-corruption compliance programs.

Notes

1. See 15 U.S.C. Section 78dd-2 and 78m (quotations omitted). The information in this chapter is for informational/education purposes only and should not be construed as legal advice.

2. See 15 U.S.C Section 78 (quotations omitted).

3. See www.justice.gov/criminal/fraud/fcpa/docs/lay-persons-guide.pdf.

4. Id.

5. See Response of the United States Questions Concerning Phase 3 OECD Working Group on Bribery, May 3, 2010, (Part II) at www.justice.gov/criminal/fraud/fcpa/docs/response3.pdf.

6. See United States Sentencing Guidelines for Organizations, as amended (November 1, 2010), Chapter 8 at Section 8B2.1 (Part B—Remedying Harm from Criminal Conduct, and Effective Compliance and Ethics Program). See also Chapter 4 for more information on compliance programs.

7. John T. Woolley and Gerhard Peters, The American Presidency Project, Santa Barbara, CA, at www.presidency.ucsb.edu/ws/pid=7036.

8. See Senate Report No. 105-277.

9. Id. (quotations omitted).

10. William J. Clinton, Statement by the President, November 10, 1998; www.justice.gov/criminal/fraud/fcpa/docs/signing.pdf.

11. Other relevant authority in the anti-corruption area includes The U.N. Convention Against Corruption (2005), European Union Convention on Corruption (1997), Council of Europe Criminal Law Convention on Corruption (2002), Inter-American Convention Against Corruption (1996), and the African Union Convention (2006). The Transparency International Corruption Index provides an index that measures the level of corruption by country. See www.transparency.org.

12. See Notes 1 and 2.

13. See 15 USC 78dd-2(h)(1).

14. See 15 U.S.C. 78dd-1.

15. See 15 U.S.C. 78dd-2(h)(1).

16. See www.justice.gov/criminal/fraud/fcpa/docs/lay-persons-guide.pdf for other examples.

17. The state of mind or knowledge requirement occurs where “such person is aware that such person is engaging in such conduct, that such circumstance exists, or that such result is substantially certain to occur; or such person has a firm belief that such circumstance exists or that such result is substantially certain to occur. When knowledge of the existence of a particular circumstance is required for an offense, such knowledge is established if a person is aware of a high probability of the existence of such circumstance, unless the person actually believes that such circumstance does not exist.” 15 U.S.C. 78dd-2(h) (3) (section numbering omitted; footnote added in quote).

18. See 15 U.S.C.78dd-2.

19. The federal court in Virginia relied on a 2003 FCPA higher court appellate decision from New York. See Stichting Ter Behartiging Van Oudaandeelhouders in Het Kapitaal Van Saybolt Int'l B.V. v. Schreiber, 327 F.3d 173 (2d Cir. 2003).

20. See U.S. v. Jefferson, 594 F. Supp. 2d 655 (E.D. Va. 2009). That decision was affirmed by the appellate court (see 546 F.3d 300 (4th Cir. 2008)) and further review upon request of Congressman Jefferson was denied by the Supreme Court. See 129 S.Ct. 2383 (2009).

21.