Foreign Corrupt Practices Act
Foreign Corrupt Practices Act Summary
The Foreign Corrupt Practices Act (FCPA) law was originally enacted to put an end to the corruption of big businesses in corporate America by making it illegal to bribe foreign officials. It was designed to protect companies and level the commercial playing field. In this respect it is fair to say that it has been successful. However, today there are still cases of corruption and bribery within business. An example is that there is an investigation into the computer and printing giant Hewlett Packard whose executives supposedly paid out over $10.9 million in funds between 2004 -2006 to the Russian Prosecutor General in order to secure a contract to supply computer equipment to Russia. Also, back in 2008 Siemens AG paid an eye popping $450 million fine for violating the laws of the FCPA. As long as there is trade and industry there will be corruption, however the FCPA is there as a reminder to anyone that if they are thinking about greasing the palm of a foreign official, then it could prove very costly indeed.
Foreign Corrupt Practices Act Whistleblower Protection
Qui tam is an old law which offers strong incentives to people who will report such violations of the law. These people are known as whistleblowers or relators. Qui tam is actually a shortened Latin phrase that in full says “qui tam pro domino rege quam prose ipso in hac parte sequitir”. Translated it means: he who sues in a matter for the king also does so for himself. This means that any person who uncovers and exposes any type of fraud against the government will be entitled to a share in the rewards should the case be successful. For example, the share is normally somewhere between 10% and 30% and the fraud being exposed has to be over $1 million. As you can see, this is quite some incentive and these are known as whistleblower provisions.
In many cases under qui tam law persons who expose corrupt actions are also entitled to protection so that under no circumstances can an employer terminate, suspend, demote, harass or threaten someone who has exposed the company to bribery. If this happens then the whistleblower is entitled to seek financial damages that could prove costly to the company.
If you think you have uncovered a violation of the FCPA, you should talk to an experience employment attorney immediately. Find out if you have a case and what your next steps should be. You can call and talk to one of our experienced attorneys at 1-888-204-1014 for free. And of course the call is confidential.
History of the Foreign Corrupt Practices Act of 1977
The Foreign Corrupt Practices Act was enacted by the then president Jimmy Carter in 1977 after an investigation into illegal payments. The investigating committee (the US Securities and Exchange Commission) found that over 400 top US corporations admitted that they made illegal or at the very least questionable payments to foreign political parties, foreign governments and foreign officials to the tune of over $300 million.
These abuses ran the whole range of illegality and included bribery of foreign officials to induce some type of favorable outcome to something known as facilitating payments. These payments were made to ensure that government bodies turned a blind eye to certain clerical or ministerial duties that would otherwise have been necessary. Two famous bribes came firstly from the aerospace company Lockheed in which they paid foreign governments to favor their products thus creating a very rosy future for the company (albeit illegally). The second bribe came from the company Chiquita Brands International who were one of America's largest importers of bananas and tropical fruits. It comically became known as the “Bananagate”' scandal when it was leaked that the company executive bribed the then Honduran President Oswaldo Lopez Arrellano to the sum of $2.5 million so that he would lower taxes.
How Does the Foreign Corrupt Practices Act of 1977 help the economy?
- Levels the playing field
It is fair to say that bribery distorts all competition and a large company with an even larger bank balance could have greased the palm of the odd government official to land a large contract, or alternatively may have given a helping hand to the campaigns of foreign politicians so that trading in their country suddenly became a whole lot easier. Instead what the FCPA has done is to level the playing field so to speak so that the most competitive company can win a bid or contract and not just the one with the most money.
- The ruling protects companies that operate in corrupt markets
The Foreign Corrupt Practices Act is a shield that allows companies to carry out their business in an ethical way when trading with corrupt countries where bribery is still rife. For example if you have a governmental official stating that 'if the company buys him a new car then just maybe their operating license will be granted', it can be a little tricky and before the law, there probably wasn't much room for maneuvering apart from purchasing the said vehicle. However post 1977 it's not about the company saying “look, it's not that I'm a mean guy and I don't value our business relationship and therefore I'm not going to buy you that car!” Instead the company can say that “doing that is against the law, and I will go to jail if I buy you that car, and for that reason I'm not about to go to jail for anybody”. Therefore it acts as a protective measure where everybody knows where they stand.
- Reduces the financial implications of doing business
All around the world it is estimated that more than $1 trillion are paid each year in bribes by companies to foreign parties or officials. Once this is done is sets precedence in that bribes may be continued to be paid in the future so that business can carry on. Also other corrupt governments or organizations may get wind of the fact that a company gives bribes and to that effect will expect financial gain in order to assist with the growth or expansion of the company.
- The ruling helps businesses detect corrupt partners
Through strong and incentivized compliance methods such as thorough due diligence processes and whistleblowing, it allows companies to find out pretty quickly who potentially corrupt agencies, politicians or parties will be. One such method is the qui tam principle.