The Department of Justice (DOJ) and the US Securities and Exchange Commission’s (SEC) recent settlement agreements with Armor Holdings, Inc. are a costly reminder that the definition of “foreign official” in the US Foreign Corrupt Practices Act (FCPA) extend beyond officers and employees of foreign governments.

On July 13, 2011, the SEC announced that it charged Armor Holdings with violating the FCPA. On the same day, the DOJ reported that it had entered into an agreement with Armor Holdings to settle parallel criminal charges. The company agreed to settle the SEC charges by paying $5.69 million in disgorged profits, prejudgment interest, and penalties for its participation in a bribery scheme involving a UN procurement official. Pursuant to the terms of its non-prosecution agreement with the DOJ, Armor Holdings will pay a $10.29 million penalty. It will also be required to report semi-annually to the DOJ on implementation of compliance measures and cooperate fully with the Department.

According to the SEC complaint, Armor Holdings was involved in a bribery scheme to obtain contracts to supply body armor for use in UN peacekeeping missions. Between 2001 and 2006, Armor Holdings’ UK subsidiary made at least 92 payments, totaling approximately $222,750, to a third-party sales agent. The payments were made with the understanding that some of the money would be given to a UN official who could direct business to the UK subsidiary. Within the same time period, the UN granted Armor Holdings two three-year contracts for the supply of body armor.

FCPA Statutory Terms

The FCPA’s definition of “foreign official” has been widely discussed and criticized for its lack of clarity. Through the use of deferred prosecution agreements, non-prosecution agreements, and plea deals, the SEC and the DOJ have maintained the broadest possible construction of “foreign official.” However, in the case of Armor Holdings, the conduct allegedly engaged in by Armor Holdings’ UK subsidiary is clearly proscribed by the FCPA.

The FCPA is explicit in defining “foreign official” to include “any officer or employee . . . of a public international organization.” The FCPA defines a public international organization as an organization designated by Executive Order pursuant to Section 1 of the International Organizations Immunities Act (22 U.S.C. § 288) or by Executive order of the President. This includes any “public international organization in which the US participates pursuant to any treaty or under the authority of any Act of Congress authorizing such participation or making an appropriation for such participation.” (22 U.S.C. § 288). For instance, The UN was declared a public international organization by Executive Order 9698 in 1946.

Although the settlements with Armor Holdings do not represent an attempt by the DOJ or SEC to broaden the definition of “foreign official,” they may still come as a surprise to some in the business community. Since most of the recent discussions and publicized news about the FCPA relate to “foreign official[s]” of “foreign government[s],” the fact that officers and employees of public international organizations are also “foreign official[s]” may drop off the radar screen. Because it is not intuitive who comes under the umbrella of “foreign official,” it is imperative that companies have adequate compliance procedures in place to ensure careful and regular review of their foreign business relationships. Without such steps, companies and individuals run the risk that the scope of the FCPA may be far broader than they realized.