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Watergate Scandal in 1972 and subsequent investigations by Securities Exchange Commission led to the discovery of corporations’ use of questionable funds to bribe certain foreign government and political parties. Lockheed Martin scandal also played a pivotal role in the enactment of FCPA where Lockheed Martin executives admitted paying bribes foreign persons including Dutch officials, key Japanese and West German politicians, Italian officials, high ranking military personnel and to the people from Hong Kong and Saudi Arabia with the aim of selling Lockheed aircraft.
FCPA’s purpose is to prohibit bribery for certain persons and entities where such payments made to foreign government officials to assist obtain or retain business. Prohibited acts as per the FCPA is quite extensive including sending e-mails, placing a telephone or money transfer through a U.S. bank that would result in an offer, a payment, a promise to pay, or an authorization of the payment of money or anything of value to a foreign official.
Who shall comply?
FCPA has prescribed three different persons (real or legal) with regards to the jurisdiction of the FCPA. Such persons are:
Issuers that have securities registered as per the Securities Exchange Act of 1934, or issuers that have to file reports in compliance therewith (“Issuer”). Officers, directors, agents, employees or any shareholders acting on behalf of such Issuer are also covered by the FCPA;
Real persons who are a citizen, national or resident of the USA, or any legal persons who have their headquarters located in USA or have been incorporated as per the laws of the USA. Officers, directors, employees, agents or any shareholders acting on behalf of such person(s) are also covered by the FCPA. FCPA defines the abovementioned persons as “Domestic Concern”; and
Any real or legal person apart from the ones mentioned above may also be subject to the provisions of the FCPA. As per the FCPA, foreign, non-resident and non- Issuers within the USA shall not commit any acts prohibited by the FCPA. To clarify, making a wire transfer through a bank located in USA would constitute a violation of the FCPA even if the person(s) responsible for the violation are a foreign, non-resident and a non-Issuer. Officers, directors, employees, agents or any shareholders acting on behalf of such person(s) are also covered by the FCPA.
FCPA also has a catch all provision to prevent companies from using proxies to bribe foreign officials. This includes working through third parties such as consultants and partners in a joint venture. Similar to the UK Bribery Act of 2010, FCPA has an extraterritorial reach as well.
Who enforces it?
Both Securities Exchange Commission and U.S. Department of Justice enforce the provisions of the FCPA. Such enforcement includes sanctions and penalties. Penalties prescribed by the FCPA include fines up to the double amount of the expected benefit from the bribery. Legal persons may be required to accept an independent corporate monitor established for the purpose of legal person’s compliance with the FCPA. In addition, real persons involved in violation of the FCPA can face imprisonment for up to five years. Civil action may be sought by the Securities Exchange Commission against the real persons who are related with the legal persons such as employees, shareholders, officers, directors, and third parties who engaged in the bribery.
FCPA and Turkey
Several companies have been fined for the violation of the FCPA through their actions in Turkey. Such fines and penalties were a result of the activities of Issuers and Domestic Concerns. Most recent fine is paid to the Securities Exhanges Comission by the Fresenius Medical Care AG & Co KGaA due to the violation of the FCPA. It has been stated by the Securities Exchange Commission that the company has engaged in misconduct in several countries including Turkey. Several other legal persons were also the targets for investigation for their activities in Turkey concerning the FCPA. Turkish companies may also be subject to the FCPA as an Issuer or due to their activities in USA. The broad interpretation of the activities stipulated under the FCPA (even a telephone call in United States may lead to an investigation) may result in an investigation and possible sanctions. Issuers and Domestic Concerns should also set up compliance measures for their business partnerships in Turkey. This is especially more substantial for the foreign companies that have subsidiaries in Turkey and post-acquisition of a Turkish company where due-diligence were not conducted thoroughly. Violation of the FCPA may also constitute a violation of the bribery legislation of Turkey.
Author: Batuhan Ecin
