Foreign Corrupt Practices Act Fraud

Bribery is a bad thing. Most people can agree on this simple statement, and yet Congress needed to pass The Foreign Corrupt Practices Act  (“FCPA”) into law in 1977 in order to have the right to police the foreign corrupt practices of multi-national corporations. Corporations were found to be using company assets for bribes to obtain & maintain business, avoid paying taxes or for other anti-competitive purposes. Investigations in the 1970s by Congress and the SEC led to more than 400 companies admitting to varied forms of large, institutionalized corporate bribery schemes.  These admissions amount to FCPA fraud today, as the Foreign Corrupt Practices Act approaches 50 years in existence.  In fact, FCPA fraud has become one of the largest, most actionable areas for whistleblowers, all based around international bribery by companies with a nexus to the United States.

FCPA fraud today is dually prosecuted by the U.S. Department of Justice as well as the Securities and Exchange Commission, which covers both the criminal and civil violations of the Act. The Foreign Corrupt Practices Act makes it illegal to bribe or attempt to bribe any foreign government official to obtain or retain business.  The books and records provision of the Foreign Corrupt Practices Act requires that issuers maintain a system of internal accounting controls to prevent any accounting irregularities related to obfuscating international bribery schemes. 

FCPA fraud has been prosecuted in every industry imaginable, including telecommunications, oil & gas, defense, medical devices, agriculture, transportation, pharmaceuticals and entertainment.  The creativity and breath of FCPA violations is impossible to encompass in a short list, and the sheer magnitude of the quantity of FCPA fraud is evident by the fact that recoveries under the FCPA has totaled billions of dollars in recent years.

Foreign Corrupt Practices

Foreign Corrupt Practices prosecuted under the FCPA include:

  • Bribing, attempting to bribe or promising to bribe a foreign government official;

  • Corrupt payments through third-party intermediaries;

  • Misrepresenting bribes as expenses such as travel, consulting fees, commissions or education;

  • Off-the-books accounting and other financial machinations to obscure FCPA violations; and

  • Failing to provide an effective internal control system to manage the firms’ assets and avoid FCPA infractions.

Goals of Bribery

Bribery comes in many different forms, and targets a wide range of goals, some of which are the following:

  • Garner or maintain contracts for good and services;

  • Evade taxes, penalties, customs duties or secure other types of favorable tax treatments;

  • Obtain government action to prevent competitors from entering a market; and

  • Avoid a licensing or permit requirement, obtain an exception to a government regulation, or influence an enforcement or legal process.

WJN has been a reliable partner for many international whistleblowers who have chosen to come forward and report violations of the FCPA.  Working systematically together, we help our clients develop the best strategy through which to pursue enforcement of the FCPA in a manner that positions them for the greatest change of success as a whistleblower.  FCPA fraud appears to be seen as a “cost of doing business” by so many international companies, and we expect that FCPA enforcement and settlements will continue to grow in the coming years as a direct result of this cynical business stance.

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