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Foreign Corrupt Practices Act (FCPA)

Virginia International Tax Attorney Advising Clients on FCPA Requirements

The Foreign Corrupt Practices Act (FCPA) sets forth strict prohibitions and penalties on corruptive business practices occurring both in and outside of the U.S.  Recognizing the need for a statute aimed at combatting corruption around the world, Congress enacted the FCPA in 1977.  The United States Department of Justice and the Securities and Exchange Commission (SEC) have joint responsibility for enforcing the Foreign Corrupt Practices Act and FCPA enforcement is a top priority for both of these agencies.  The FCPA has two primary provisions: (1) the anti-bribery provisions and (2) the accounting provisions.

Anti-Bribery Provisions of the FCPA

The anti-bribery provisions of the FCPA prohibit corrupt payments or bribes to foreign officials in order to obtain or keep business.  The FCPA anti-bribery provisions apply to both U.S. businesses and individuals (including company officers, directors, stockholders and employees) as well as foreign firms and persons who take any actions in furtherance of a corrupt payment while within the territory of the United States. 

Persons found to have violated the anti-bribery provisions are subject to stiff fines and penalties.  Corporations and business entities can face civil penalties of up to a maximum of $16,000 per violation and individual officers, directors, stockholders, employees and agents can also be fined up to $16,000 per each violation.  Defendants can also be subject to harsh criminal penalties – up to $2 million for business entities and corporations and up to $250,000 for officers, directors, stockholders, employees and agents.  Additionally, these individuals face the possibility of up to five years in prison. 

Beyond these fines and penalties violators may find themselves subject to the federal “Alternative Fines Act.”  Under this Act the criminal fines can be increased up to twice the amount the person sought to gain from the corrupt payment.  Moreover, individuals and companies who have taken actions in violation of the FCPA run the risk of additional far-reaching consequences, such as being barred from conducting business with the federal government and becoming ineligible to receive export licenses.

Accounting Provisions of the FCPA

Beyond its strict anti-bribery provisions, the FCPA also sets forth accounting and record-keeping requirements for companies whose securities are listed in the United States.  Under the FCPA, these companies must make and keep accurate books and records reflecting their transactions and develop and implement an adequate system of internal accounting controls. 

Persons found to be in violation of FCPA accounting provisions run the risk of both criminal and civil sanctions.  Criminal penalties can run as high as $25 million for corporations and business entities and up to $5 million for individuals (officers, directors, stockholders, employees and agents).  In addition, individual violators can be sentenced to prison for up to a maximum of 20 years for each offense.  Civil penalties for accounting provision violations are the greater of (a) the value of the gain as a result from the violations or (b) a specified dollar limitation - as high as $150,000 for individuals and $725,000 for corporations and business entities.

Contact Thorn Law Group Today

If you have been accused of violating the Foreign Corrupt Practices Act it is very important to discuss your situation with a skilled tax law attorney.  Certain defenses may be available to you, including showing that the payment you made to a foreign official was lawful in accordance with the laws of that country.  You may also be able to assert that your payment was a reasonable expenditure directly related to promotional activities in the country.

Contact Kevin E. Thorn, Managing Partner of Thorn Law Group, today to schedule a confidential consultation with an experienced tax law attorney in our Virginia offices.  Please phone 703-752-3752 or email ket@thornlawgroup.com.

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