Foreign Corrupt Practices Act

Foreign Corrupt Practices Act

June 08, 2011 | By Keith Martin in Washington, DC

Foreign Corrupt Practices Act prosecutions of US businesses for bribing foreign government officials are on a notable upswing.

The CEO and CFO of Lindsay Manufacturing Co. were found guilty in May of paying bribes, including a $300,000 Ferrari, to two officials of the CommisiĆ³n Federal de Electricidad, the national electric utility in Mexico. The two US executives face up to 30 years in prison and fines of up to $750,000 each. Sentencing is scheduled for September 16.

The US Securities and Exchange Commission has reportedly delivered letters of inquiry to at least 10 hedge funds, banks and private equity funds requesting information about their dealings with sovereign wealth funds. The letters suggest the SEC views employees of such funds as foreign government officials.

The Foreign Corrupt Practices Act makes it a crime for a US company or citizen to give anything of value to a foreign government official or employee of an international public organization in an effort to win or retain business or secure any improper advantage.

A foreign company may become subject to the Foreign Corrupt Practices Act by raising money in US capital markets.

The US Chamber of Commerce has hired a former US attorney general, Michael Mukasey, to lobby Congress for changes in the statute.

The Chamber wants five changes, including a compliance defense: a company should not be held liable when an employee circumvents internal procedures to pay bribes. It also wants to limit successor liability. Under current law, a company can become liable for crimes that a company it acquires or becomes associated with by merger committed before the merger.