An extract from The Anti-Bribery and Anti-Corruption Review, 9th Edition

Domestic bribery: legal framework

i Elements

The primary statute that expressly criminalises corruption of US federal public officials is 18 USC Section 201. The statute has two principal subparts: Section 201(b), which criminalises bribery, and Section 201(c), which prohibits the payment or receipt of gratuities. The primary difference is that Section 201(b) requires proof of a quid pro quo, while the gratuities provision does not.

To obtain conviction of the bribe payer under Section 201(b)(1), the government must prove that something of value was given, offered, or promised to a federal public official corruptly to influence an official act. To secure conviction of the person bribed under Section 201(b)(2), the government must show that a public official accepted, solicited or agreed to accept anything of value corruptly in return for 'being influenced in the performance of any official act'.

A gratuities conviction only requires that the thing of value be knowingly or wilfully offered or given 'for or because of any official act', rather than corruptly to influence the official act.2

18 USC Section 666 applies when governmental or other entities receive federal programme benefits of over US$10,000. The bribery provisions contained in Section 666(a)(1)(b) penalise an agent of the entity receiving the funds who corruptly solicits, accepts or agrees to accept anything of value 'intending to be influenced or rewarded in connection with any business, transaction, or series of transactions' of the receiving entity involving anything of value of US$5,000 or more. Section 666(a)(2) covers the bribe payer.

The Hobbs Act, 18 USC Section 1951, also targets public corruption by criminalising extortion under colour of official right. The Act applies to any public official who 'has obtained a payment to which he was not entitled, knowing that the payment was made in return for official acts'.3 The Supreme Court has held that a conviction for extortion under colour of official right does not require the government to prove that the payment was affirmatively induced by the official; rather, 'the coercive element is provided by the public office itself'.4 The Act also has a broader jurisdictional reach as it can be applied to state public officials so long as the activity 'affects commerce'. This requirement can be satisfied even if the effect is de minimis.5

ii Prohibition on paying and receiving

The bribery and gratuities provisions of 18 USC Section 201 prohibit both making and receiving either bribes or gratuities. The Hobbs Act prohibition on extortion under colour of official right applies only to the receipt of bribes.

iii Definition of public official

Public officials are defined broadly under Section 201 as not only federal government officers or employees, but also 'person[s] acting for or on behalf of the United States, or any department, agency, or branch of Government thereof . . . in any official function, under or by authority of any such department, agency, or branch of government'.6 The Supreme Court has extended the reach of Section 201 to officers of a private, non-profit corporation administering and expending federal community development block grants. The Court made clear, however, that the mere presence of some federal assistance would not bring a local organisation and its employees within the jurisdiction of Section 201. Rather, to be a public official, 'an individual must possess some degree of official responsibility for carrying out a federal program or policy'.7

Even if an official is not covered under Section 201, Section 666 potentially expands the reach of bribery prohibitions beyond the Section 201 definition to include agents of any state and local organisations that receive more than US$10,000 in federal funds in any one-year period.

iv Public official participation in commercial activities

Members of Congress are prohibited from earning outside income that exceeds 15 per cent of the annual rate of basic pay for Level II of the Executive Schedule (currently US$192,300) in any calendar year.8 Members of Congress may not receive any income from employment or affiliation with any entity that provides services involving a fiduciary relationship and may not sit on a corporation's board of directors.9 Presidential appointees in the executive branch subject to Senate confirmation are prohibited from all outside earned income.10 'Covered non-career employees' of the executive branch (generally presidential appointees not subject to confirmation by the Senate) have the same restrictions on outside income as members of Congress.11 Executive branch career civil servants not subject to Senate confirmation have no cap on their outside earned income but cannot engage in outside employment that conflicts with their official duties.12

v Gifts, travel, meals and entertainment restrictions

The giving of gifts or gratuities to public officials is restricted by 18 USC Section 201(c). The statute also prohibits public officials from receiving gifts under certain circumstances. The gratuities provisions of Section 201 largely overlap with the bribery provisions contained in the same statute, except that the gratuities provisions do not require the gift to be given with the intent to influence the public official. Instead, a gratuities violation occurs if a person offers anything of value 'for or because of' any official act performed or to be performed. As interpreted by the Supreme Court, the improper gift 'may constitute merely a reward for some future act that the public official will take and may have already determined to take, or for a past act that he has already taken'.13

House and Senate rules prohibit Members from receiving gifts worth US$50 or more, or multiple gifts from a single source that total US$100 or more in a calendar year. The rules also ban gifts of any value from a registered lobbyist, agent, or foreign principal.14

In addition, executive branch employees may not accept gifts of over US$20 in value (or multiple gifts from a single source totalling US$50 in a calendar year), including 'transportation, local travel, lodgings and meals' that are given because of the official's position or that come from 'prohibited sources'.15 A prohibited source is a person or entity who (1) is doing or seeking to do business with or who is regulated by the official's agency or (2) has interests that may be substantially affected by performance or non-performance of the employee's official duties.16 In 2009, President Obama tightened restrictions for presidential appointees in the executive branch, banning all gifts from registered lobbyists, even those valued at under US$20.17 In 2017, President Trump signed a similar executive order precluding executive agency appointees from accepting any gifts from registered lobbyists.18

The Ethics Reform Act of 1989, 5 USC Section 7353, provides the statutory underpinning for the gift bans promulgated in regulations and House and Senate rules. The Act generally prohibits federal officials, including House members and staff, from soliciting or accepting anything of value, except as provided in rules and regulations issued by their supervising ethics office.

vi Gifts and gratuities

As discussed in Section II.v, gifts to members of Congress valued at less than US$50, or multiple gifts from a single person that do not exceed US$100 in a single calendar year, are permissible if they are not made by registered lobbyists or agents of a foreign government.19 Gifts with a value of under US$10 will not count towards the US$100 limit. House and Senate rules also contain several other narrow exceptions to the gift ban, including informational materials, contributions to a member's campaign fund, and food and refreshments of nominal value that do not constitute a meal. Additionally, members can attend 'widely attended events' free of charge where at least 25 non-congressional employees will be in attendance and the event is related to their official duties.

Executive branch employees are permitted to receive gifts of under US$20 but cannot receive gifts totalling US$50 from the same person in the same year.20 Exceptions for executive branch officials not appointed by the President exist for widely attended events and for food and refreshments provided when travelling abroad on official business, so long as the refreshments are not provided by a foreign government and do not exceed the official's daily allowance.21 All executive branch officials can receive gifts motivated by family relationship or personal friendship.

vii Political contributions

In general, the Federal Election Campaign Act prohibits any foreign national from contributing, donating, or spending funds, directly or indirectly, to any federal, state, or local election.22 Foreign nationals broadly covers foreign governments, political parties, corporations, associations, partnerships, individuals with foreign citizenship, and immigrants who do not have lawful permanent resident status.23

In addition, a domestic subsidiary of a foreign company may not establish a federal political action committee to make political contributions if the foreign corporation finances the PAC's establishment, administration or solicitation costs, or individual foreign nationals participate in the operation of the PAC, serve on its board, make decisions regarding PAC contributions or expenditures, or participate in selecting persons to operate the PAC.24

Finally, a domestic subsidiary of a foreign corporation (or a domestic corporation owned by foreign nationals) may not donate in connection with state and local elections if the activities are financed by the foreign parent or individual foreign nationals are involved in making donations.25

viii Registration of foreign agents

The 1938 Foreign Agents Registration Act (FARA) requires persons acting as agents of foreign principals in a political or quasi-political capacity to make periodic public disclosure of: (1) their relationship with a foreign principal, and (2) activities, receipts and disbursements in support of those activities.26 Administrative enforcement of the FARA is the responsibility of the DOJ, National Security Division, Counterintelligence and Export Control Section.

Historically, enforcement of the FARA has been relatively limited, but that is changing. Between 1966 and 2015, the DOJ brought only seven criminal FARA cases, and there were only three convictions.27 In 2017-2018, Special Counsel Robert Muller's investigation of Russia's efforts to interfere with the 2016 US presidential election resulted in prosecutions for FARA violations, including guilty pleas entered by President Trump's former campaign manager, Paul Manafort, and his associate Rick Gates, in connection with their previous work in Ukraine, and by former National Security Advisor Michael Flynn for false statements he made to the FBI regarding communications with the Russian Ambassador to the US and work his company did for the Republic of Turkey.28 In March 2019, the Assistant Attorney General for National Security John Demers announced the DOJ's plan to treat FARA as 'an enforcement priority' and assign a dedicated former prosecutor from Special Counsel Muller's team to revamp the FARA enforcement unit.29 Since 2017, there have been eight FARA cases, including charges against Russian nationals and companies 'for committing crimes while seeking to interfere in the US political system' and a settlement with a prominent law firm (including a disgorgement of $4.6 million in fees) for false statements made during 'inquiries from the FARA Unit[.]'30 While many of the DOJ's views on the appropriate interpretation and application of FARA are not publicly available, the DOJ has published redacted copies of the confidential advisory opinions it issued since 1 January 2010 as well as three opinions it issued in 1984, 1988, and 2003.31

ix Private commercial bribery

No US federal statute specifically addresses private commercial bribery. Federal prosecutors may, however, prosecute commercial bribery through the use of several existing laws. Section 1346 of Title 18 gives prosecutors broad leeway by extending liability under the mail and wire fraud statutes to 'a scheme or artifice to deprive another of the intangible right to honest services'. Honest services fraud has been used to prosecute employees of private companies who breach a fiduciary duty to their employers by, for example, taking or paying bribes.32 With respect to international business, another federal criminal statute that the DOJ has used to prosecute commercial bribery in some circumstances is the Travel Act, 18 USC Section 1952. The Travel Act makes it a crime to travel in interstate or foreign commerce or to use 'the mail or any facility in interstate or foreign commerce' with intent to 'promote, manage, establish, carry on, or facilitate the promotion, management, establishment or carrying on, of any unlawful activity'.

The definition of 'unlawful activity' broadly includes 'extortion [and] bribery . . . in violation of the laws of the State in which committed or of the United States'.33 This definition assimilates state commercial bribery laws (as well as the laws of the District of Columbia and federal territories) and provides a basis for federal criminal liability where an individual violates state commercial bribery laws and uses, for example, a phone, fax, wire transfer or email to further the commercial bribe, or travels across state lines in furtherance of the scheme. Currently, approximately 36 US states have commercial bribery laws.

As discussed, 18 USC Section 666 also criminalises bribing recipients of federal programme funds. Such recipients can include private companies.

x Penalties

For individuals convicted under Section 201 for bribery, both the payer and the recipient of the bribe may be punished by up to 15 years' imprisonment or a fine of up to US$250,000 or both, or triple the value of the bribe, whichever is greater.34 Violations of the gratuities provisions, on the other hand, are punishable by a maximum of two years' imprisonment and a fine of US$250,000.35

A violation of 18 USC Section 666 carries a maximum penalty of 10 years' imprisonment and a fine of US$250,000.36

A Hobbs Act violation is punishable by up to 20 years' imprisonment and a fine of up to US$250,000.37

A violation of the Travel Act (based on bribery conduct) is punishable by up to five years' imprisonment and a fine of the greater of US$250,000 or twice the pecuniary gain or loss.

Foreign bribery: legal framework

i Foreign bribery law and its elements

The FCPA, as amended in 1988 and 1998, broadly prohibits making corrupt payments to foreign officials in connection with international business. The operative prohibition of the FCPA's 'anti-bribery provisions' has the following elements:

  1. the defendant falls within one of three categories of legal or natural persons covered by the FCPA (issuer, domestic concern, or foreign company or national);
  2. the defendant acted corruptly and wilfully;
  3. the defendant made a payment, offer, authorisation or promise to pay money or anything of value, either directly or through a third party;
  4. the payment was made to any of the following (a 'covered recipient'):
    • foreign official;
    • a foreign political party or party official;
    • a candidate for foreign political office; or
    • any other person while knowing that the payment will be passed on to one of the above; and
  5. the payment was for the purpose of:
    • influencing any official act or decision of that person;
    • inducing that person to do or omit to do any act in violation of his or her lawful duty;
    • inducing that person to use his or her influence with a foreign government to affect or influence any government act or decision; or
    • securing any improper advantage to obtain or retain business, or direct business to any person.46

The FCPA also requires issuers, that is publicly held corporations reporting to, or having a class of securities registered with, the Securities and Exchange Commission (SEC), to keep accurate books and records and to establish internal accounting controls designed to, inter alia, prevent the maintenance or disbursement of funds that could be used as a source of improper payments to foreign officials. These 'accounting provisions' are discussed further in Section V.

ii Definition of foreign public official

The FCPA prohibits payments made directly or indirectly to 'any foreign official' or 'any foreign political party or candidate thereof, or any candidate for foreign political office'. The Act defines a foreign official as 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 such government or department, agency, or instrumentality, or for or on behalf of any such public international organization'.47 Public international organisations include any entity designated as such by executive order of the President (e.g., the United Nations and the World Bank).48

As a general matter, the DOJ and the SEC regard officers and employees of corporations and other business entities that are wholly or primarily owned or controlled by a foreign government as government officials for the purposes of the FCPA. In countries where enterprises owned or controlled by the government account for substantial economic activity (e.g., China), there can therefore be large numbers of individuals holding business positions who must be treated as 'foreign officials' for FCPA purposes. Consultants and advisers that have been retained by foreign government agencies to assist in carrying out official functions typically are also considered to be 'foreign officials', as are members of royal families and certain traditional and tribal leaders, depending on the facts and circumstances.

In determining whether an entity is a government instrumentality, courts have considered the following, non-exhaustive list of factors in their analysis:

  1. the foreign state's characterisation of the entity and its employees;
  2. the foreign state's degree of control over the entity;
  3. the purpose of the entity's activities;
  4. the entity's obligations and privileges under the foreign state's law, including whether the entity exercises exclusive or controlling power to administer its designated functions;
  5. the circumstances surrounding the entity's creation; and
  6. the foreign state's extent of ownership of the entity.49

In their November 2012 Resource Guide to the FCPA, the DOJ and SEC endorsed these six factors, and identified the following five additional factors:

  1. the exclusive or controlling power vested in the entity to administer its designated functions;
  2. the level of financial support by the foreign state;
  3. the entity's provision of services to the jurisdiction's residents;
  4. whether the governmental end or purpose sought to be achieved is expressed in the policies of the foreign government; and
  5. the general perception that the entity is performing official or governmental functions.50

In US v. Esquenazi, the US Court of Appeals for the Eleventh Circuit defined the term 'instrumentality' under the FCPA.51 In Esquenazi, the DOJ alleged that executives of a private telecommunications company in Florida used intermediaries to make almost US$1 million in payments to executives of the Haitian national telecommunications company, Teleco, in exchange for securing lower rates and other business advantages. The court held Teleco to be an 'instrument' of the Haitian government. The court defined instrumentality as 'an entity controlled by the government of a foreign country that performs a function the controlling government treats as its own'.52 The court enumerated non-exhaustive lists of factors to separately determine whether the government 'controls' the entity53 and whether the entity performs a function the government 'treats as its own'.54

iii Gifts, travel, meals and entertainment restrictions

Whether payments for gifts, meals, travel or entertainment for the benefit of a foreign official are permissible under the FCPA turns on whether the gifts or payments in question are made with the requisite corrupt intent. There is no de minimis provision or materiality threshold in the statute; so conceivably, even gifts of nominal value made to a foreign official in exchange for favourable official action could trigger liability.

It is, however, an affirmative defence to liability that a payment was a 'reasonable and bona fide expenditure, such as travel and lodging expenses . . . directly related' to the promotion of products or the execution of a contract.55 The DOJ has issued several Opinion Releases that provide some guidance with respect to gift-giving.56

Likewise, the DOJ and SEC's recent Resource Guide to the FCPA advises:

Some hallmarks of appropriate gift-giving are when the gift is given openly and transparently, properly recorded in the giver's books and records, provided only to reflect esteem or gratitude, and permitted under local law.
Items of nominal value, such as cab fare, reasonable meals and entertainment expenses, or company promotional items, are unlikely to improperly influence an official, and, as a result, are not, without more, items that have resulted in enforcement action by DOJ or SEC. The larger or more extravagant the gift, however, the more likely it was given with an improper purpose.57
iv Defences

There are two primary affirmative defences to liability under the FCPA. First, as noted above, the FCPA allows reasonable and bona fide expenditures directly related to the promotion, demonstration or explanation of products and services or for the execution or performance of a contract with a foreign government.58 This defence, however, does not apply to all promotional expenses: 'If a payment or gift is corruptly made, in return for an official act or omission, then it cannot be a bona fide, good-faith payment, and this defense would not be available.'59

Second, it is a defence that the payment was lawful under the written laws of the foreign country.60 This defence is rarely of much practical utility, since the conduct in question must be expressly permitted by a country's written laws (i.e., the absence of an express prohibition on the particular conduct is not sufficient).

v Facilitating payments

The FCPA contains a narrowly defined exception for 'facilitating' or 'grease' payments made to expedite 'routine governmental action by a [covered official]'.61 Routine governmental action is defined as:

only an action which is ordinarily and commonly performed by a foreign official in:
a obtaining permits, licenses, or other official documents to qualify a person to do business in a foreign country;
b processing governmental papers, such as visas and work orders;
c providing police protection, mail pick-up and delivery, or scheduling inspections associated with contract performance or inspections related to transit of goods across country;
d providing phone service, power, and water supply, loading and unloading cargo, or protecting perishable products or commodities from deterioration; or
e actions of a similar nature.62

The FCPA emphasises that the exclusion applies only to non-discretionary actions related to the award of business: 'routine governmental action 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'.63 In practice, US authorities have also construed this exception only to apply to relatively small payments, though the FCPA is silent on this point. At a minimum, 'grease' payments should be approached with considerable caution. FCPA compliance programmes are trending away from permitting such payments.

vi Payments through third parties or intermediaries

In addition to payments made directly to foreign officials, political parties, and candidates for office, the FCPA also prohibits any payment to 'any person, while knowing that all or a portion of such money or thing of value will be offered, given, or promised, directly or indirectly', to a covered official for a proscribed purpose. The FCPA, as amended in 1988, defines 'knowing' as actual awareness that an improper payment will be made or a firm belief that such a payment is 'substantially certain'.64 The legislative history emphasises that this standard encompasses instances of 'wilful blindness', 'conscious disregard' or 'deliberate ignorance' of the acts of an intermediary.65

vii Individual and corporate liability

Both companies and individuals can face liability for violations of the FCPA. The FCPA's jurisdiction extends to 'issuers', 'domestic concerns' and, in some circumstances, foreign nationals or businesses.66 An issuer is a corporation that has issued securities registered in the United States or is required to make periodic reports to the SEC.67 A domestic concern is any individual who is a citizen, national or resident of the United States, or any business entity with its principle place of business in the United States or that is organised under the laws of any state of the United States.68 US issuers and US persons (i.e., US nationals and legal entities organised under the laws of the United States or any state thereof) may be held liable for any act in furtherance of a corrupt payment, regardless of any connection to the territory of the United States or US interstate commerce. Jurisdiction will apply with respect to foreign issuers and non-citizen US residents if they make use of the US mails or US interstate commerce in furtherance of a corrupt payment.69

A foreign national or company is subject to liability if it causes an act in furtherance of a corrupt payment within the territory of the United States.70 US parent companies can also be held liable for the acts of their foreign subsidiaries if they authorised, directed, or controlled the activity in question. In one recent SEC enforcement case, a federal court found that it had jurisdiction over foreign national defendants, executives of Magyar Telekom who allegedly bribed officials in Macedonia and Montenegro, based largely on emails relating to the corrupt scheme that had passed through computer servers in the United States.71 The court found jurisdiction even though none of the defendants were physically present in the United States when sending or receiving the emails.72 Furthermore, the court found that because Magyar was an issuer, any attempt by the foreign defendants to conceal their bribes in relation to public filings constituted conduct sufficiently 'directed toward the United States' to give rise to personal jurisdiction.73

viii Civil and criminal enforcement

Companies and individuals can face both criminal and civil enforcement under the FCPA.

ix Agency enforcement

The DOJ is responsible for all criminal enforcement of the FCPA and for civil enforcement with respect to domestic concerns, foreign companies that are not issuers, directors, officers, shareholders, employees, and agents of the foregoing, as well as foreign nationals. The SEC is responsible for civil enforcement with respect to issuers and their directors, officers, shareholders, employees and agents.

x Leniency

Self-reporting of violations and cooperation with the DOJ and the SEC are factors that can lead to reduced monetary penalties, or an otherwise more favourable settlement, or a decision by the government not to prosecute. For example, under the US Sentencing Guidelines, companies are only eligible for certain sentence mitigation credit if they self-reported the violation.74 In determining whether to bring charges, federal prosecutors are required to consider the Principles of Federal Prosecution of Business Organizations (the Principles), which explicitly provide for consideration of cooperation and self-reporting.75

Similarly, the SEC will consider cooperation and self-reporting as mitigating factors under its 2001 Report of Investigation pursuant to Section 21(a) of the Securities and Exchange Act of 1934, which is commonly referred to as the 'Seaboard Report'.76

In the November 2012 Resources Guide to the FCPA, the DOJ and SEC reaffirmed that both agencies 'place a high premium on self-reporting, along with cooperation and remedial efforts, in determining the appropriate resolution of FCPA matters' in their Resources Guide.77 Even after the publication of this guidance, however, the adequacy of the DOJ and SEC's guidance regarding the benefits of self-reporting and cooperation, and the sufficiency of those benefits, are still hotly debated topics within US legal and corporate circles.78

With regard to cooperation by corporations, in November 2017, the Department refined its approach on self-reporting, cooperation, and remediation in its FCPA Corporate Enforcement Policy, which formalised the year-and-a-half-long FCPA Pilot Program the Department announced in April 2016.79 The Program, which applied to business organisations only, reflected an effort by the DOJ 'to increase transparency regarding charging decisions in corporate prosecutions', and to 'increase the Fraud Section's ability to prosecute individual wrongdoers whose conduct might otherwise have gone undiscovered' by making full disclosure of individual wrongdoing a condition of full cooperation by business organisations.80

The Corporate Enforcement Policy retains many of the features of the original Pilot Program, but goes further to incentivise self-reporting in two ways. First, it creates a rebuttable 'presumption' that companies will receive a full declination of prosecution if they voluntarily self-disclose, remediate misconduct, and cooperate with the Department's investigation.81 This differs from the language of the earlier Pilot Program, which stated only that the Department would 'consider' such declinations. The new Policy's presumption may be overcome, however, in cases with 'aggravating circumstances involving the seriousness of the offense or the nature of the offender'.82 Second, the new Policy commits the Department to providing specific fine reductions for non-recidivist companies that meet the Policy's requirements. Specifically, the Policy states that where aggravating factors overcome the presumption of a declination, a company will still receive a 50 per cent discount off the low end of the fine recommended under the US Sentencing Guidelines, and generally will not be required to appoint a corporate compliance monitor.83 Under the prior Pilot Program, companies in this situation were promised only a discount of 'up to' 50 per cent.

In March 2019, the DOJ released additional updates to its Corporate Enforcement Policy, allowing companies to secure cooperation credit for providing information on 'all individuals substantially involved[,]' and relaxing the prior requirement under the September 2015 DOJ policy memorandum, commonly referred to as the Yates Memo.84 The revised policy also extends declination presumptions to companies engaged in acquisitions that uncover misconduct during the due diligence process, voluntarily disclose it, and cooperate in follow-up investigations.85 In October 2018, the DOJ also updated its guidance on the principles prosecutors in the Criminal Division must use to assess if a monitor is needed, including if the misconduct (1) involved manipulation of books and records or an inadequate compliance programme; (2) was pervasive and involved senior management; and (3) was remedied through the company's significant investment in the compliance programme.86

Last year, the Department introduced a new Policy on Coordination of Corporate Resolution Penalties, which aims to 'discourage disproportionate enforcement of laws by multiple authorities' - also described as 'piling on'.87 The aim of the Policy is to avoid unfair duplicative penalties from overlapping enforcement agencies, foreign and domestic, directed at the same conduct. The Policy provides that enforcement authority should not be used against companies for purposes unrelated to the investigation and prosecution of crimes, and that Department lawyers and enforcement authorities in other federal, state or local offices should coordinate with one another to achieve an overall equitable result.88 The Policy also sets out factors Department lawyers should evaluate to determine when multiple penalties serve the interests of justice in a particular case.89 Relatedly, in March 2019, the US Commodity Futures Trading Commission (CFTC) announced, for the first time, that it would investigate 'violations of the [Commodity Exchange Act] carried out through foreign corrupt practices[,]' and work together with the DOJ, SEC and other law enforcement agencies to avoid 'pil[ing] onto other existing investigations.'90 A month after the announcement, a large global commodity trading company disclosed that the CFTC is coordinating with the DOJ to investigate the company and its subsidiaries for potential violations of the CEA 'through corrupt practices in connection with commodities.'91

xi Plea-bargaining

Plea-bargaining and negotiated settlements play a major role in FCPA enforcement as the criminal and civil penalties involved following an adverse result at trial can be severe. This is particularly true with respect to companies, which have strong incentives to avoid adverse publicity and prolonged uncertainty. Moreover, as mentioned in Section X, below, genuine cooperation with an investigation can result in more favourable settlements, including reduced monetary penalties. The DOJ has also increasingly turned to alternative dispositions such as deferred prosecution agreements (DPAs) and non-prosecution agreements (NPAs), which can allow a company to avoid criminal conviction. The SEC has recently introduced these forms of settlement as well. On 22 April 2013, the SEC announced its first ever FCPA-related NPA, in connection with its investigation into the Ralph Lauren Corporation for bribes paid by a subsidiary to government officials in Argentina from 2005 to 2009.92 When announcing the NPA, the SEC noted that its decision not to charge the company was 'due to the company's prompt reporting of the violations on its own initiative, the completeness of the information it provided, and its extensive, thorough, and real-time cooperation with the SEC's investigation'.93

Individuals, on the other hand, may have different incentives. While plea-bargaining is certainly available, widely used, and often beneficial, it is also the case that the prospect of potential incarceration and reputational harm, combined with available strategies to defend these cases, has resulted in a number of FCPA trials in recent years.

xii Prosecution of foreign companies and individuals

Foreign companies can be prosecuted under Section 78dd-3, part of the 1998 amendments to the Act. The DOJ explains that: 'A foreign company or person is now subject to the FCPA if it takes any act in furtherance of the corrupt payment while within the territory of the United States.'94 The statute does not also require that such acts make use of the mail or any other instrumentality of interstate commerce. The DOJ interprets this Section as 'conferring jurisdiction whenever a foreign company or national causes an act to be done within the territory of the United States by any person acting as that company's or national's agent'.95

In a 2011 case, a US court dismissed an FCPA 78dd-3 charge against a foreign defendant who mailed a package containing an allegedly corrupt purchase agreement from the United Kingdom to the United States because the act of mailing the package took place outside the United States.96 Moreover, the US Court of Appeals for the Second Circuit held in August 2018 that non-resident foreign nationals cannot be held liable for violating the FCPA under accomplice liability theories such as conspiracy or aiding and abetting unless they acted as an agent of a domestic concern or were physically present in the United States.97 A likely result of this ruling is that it may be harder for the DOJ to bring future FCPA cases against foreign nationals acting wholly extraterritorially.

xiii PenaltiesCriminal penalties

Companies that violate the anti-bribery provisions of the FCPA may be fined the greater of US$2 million per violation or twice the gain or loss resulting from the improper payment. Individuals who violate the anti-bribery provisions are subject to penalties of the greater of US$250,000 per violation or twice the gain or loss resulting from the improper payment and may also face up to five years' imprisonment.98 The applicable statute of limitations is five years. Officers, directors, stockholders and employees of business entities may be prosecuted for violations of the FCPA irrespective of whether the business entity itself is prosecuted. Any fine imposed upon an officer, director, stockholder, employee or agent may not be paid or reimbursed, directly or indirectly, by the business entity.99

Beyond these statutory maximum sentences, the penalties in any particular case will be calculated under the US Sentencing Guidelines, which provide a framework for determining penalties based on a series of factors, including the characteristics of the offence, the characteristics of the offender, and various mitigating and aggravating factors.

Civil penalties

The FCPA's anti-bribery provisions provide that the DOJ or the SEC, as appropriate, may impose civil penalties not greater than US$10,000 per violation.100 In practice, however, these relatively modest civil fines tend not to be meaningful, both because the DOJ invariably brings FCPA enforcement cases as criminal cases and because the SEC frequently uses other civil enforcement powers available to it. The SEC's civil enforcement powers include issuing administrative cease-and-desist orders and, through court action, obtaining civil injunctions; civil fines typically are much smaller than the profits disgorged by the SEC.101 Importantly, in June 2017, the US Supreme Court ruled that claims for disgorgement brought by the SEC are governed by a five-year statute of limitations.102 In Kokesh v. SEC, the Court unanimously held that disgorgement, as it is applied in SEC enforcement proceedings, operates as a 'penalty' for purposes of the general federal statute of limitations applicable to 'actions for the enforcement of . . . any . . . penalty', thus subjecting this remedy to the same statute of limitations as claims by the SEC for civil fines, penalties other than disgorgement and forfeitures.103

Any entity found to have violated the FCPA's anti-bribery provisions may also be barred from US government contracting. Even an indictment may render an entity ineligible to sell goods or services to the US government. A finding that an entity has violated the FCPA can also have negative collateral consequences in other dealings with US government agencies, including the ability to obtain US export licences and the ability to participate in programmes sponsored by the Overseas Private Investment Corporation, the Export-Import Bank of the United States, the Agency for International Development and other agencies.