New York-based FCPA attorneys with Joseph Potashnik and Associates PC offer consultation to U.S. and foreign companies and individuals in terms of developing, implementing and rigorously reviewing their FCPA compliance programs, and in advising their overseas branches, subsidiaries, managers and agents regarding FCPA-compliant corporate procedures for handling contracts with foreign government entities or involving government officials. We also represent clients investigated and prosecuted by the federal government for FCPA violations.
What is the FCPA
Since 1977, U.S. companies conducting business with foreign government entities and government officials have been governed by the Foreign Corrupt Practices Act (FCPA), which provides that they may not bribe any foreign official in order to obtain or retain business. However, until relatively recently the US government did not really enforce the FCPA.
This changed dramatically during the past ten years. The SEC and the Department of Justice are now aggressively pursuing hundreds of FCPA enforcement cases against American and foreign companies. According to the government’s own admission they have about 150 FCPA investigations at any given time.
FCPA enforcement remains a high priority on the UD government’s list. In addition to the DOJ and SEC, the FBI have now joined the group of federal agencies actively involved in FCPA criminal investigations.
Practice indicates that the government’s FCPA enforcement is not just theoretical. The SEC and DOJ have brought FCPA criminal charges against numerous individuals and companies.
Companies and individuals charged with FCPA violations may be subject to substantial fines, imprisonment, and/or forfeiture of property. With the recent increase in zealous enforcement by government agencies, companies must be correspondingly vigilant in ensuring compliance with the Act and its provisions.
Our goal is always to prevent litigation through thorough preparation and review. In cases where FCPA investigations have been already initiated our attorneys can prevent or minimize the client’s criminal and financial exposure by negotiating alternative methods of resolution. For example, in a recent FCPA case we were able to negotiate a deferred prosecution agreement with the government. In fact, this is not an uncommon result in FCPA prosecutions as the government attempts to encourage companies to voluntarily disclose information and cooperate with federal investigators. In these cases, the corporation may be taking the blame allowing the executives and corporate officers to avoid prosecution.
FCPA International Enforcement
The FCPA enforcement is not limited to the US borders. Most countries have adapted similar anti-corruption statutes and the US together with many foreign governments is very active in aggressive pursuing of international corruption and bribery. The US government has put a lot of pressure on other countries to cooperate with it in its FCPA enforcement efforts.
The United States is a signatory (along with dozens of other countries) to the Organization of Economic Cooperation and Development Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (“OECD Convention”) which requires each participating country to pass legislation similar to the FCPA’s accounting and anti-bribery provisions. All OECD Convention counties cooperate in the international investigation and enforcement of anti-bribery laws.
Besides the OECD Convention, there are several other international bodies and agreements created to address foreign bribery. These include the E.U. Conventions, the Asian Development Bank (ADB)/OECD Anti-Corruption Action Plan for Asia and the Pacific, the World Bank Governance and Anti-Corruption Strategy, and the U.N. Convention Against Corruption (UNCAC). All of them provide for criminal civil penalties for bribery, long statutes of limitations, and other anti-bribery provisions.
What Chinese Companies Should Know About the FCPA
Our attorneys consult Chinese companies, both Chinese and US based on matters of the FCPA compliance. The FCPA makes it illegal to use the mail or any other type of interstate communications (including electronic and wire communications) to assist in any way of making or offering to make a prohibited payment that one knows will go to a foreign official in order to influence that official to give a business any type of unlawful advantage.
As can be seen, the FCPA’s provisions are very broad and can potentially affect a large variety of commercial activity. It is important to note that prohibited activity is not limited to direct payments made to an official to obtain an illegal advantage as long as one knows that the payment has any relevance at all to potential bribery of a foreign official, one can be liable under the FCPA.
Since 1977, the anti-bribery provisions of the FCPA have applied to all U.S. persons and certain foreign issuers of securities. Amendments made to the FCPA in 1998 extended the anti-bribery provisions of the FCPA to foreign firms and persons who perform, directly or through agents, an action in assistance of a corrupt payment that would take place within the United States.
The FCPA also requires all companies whose securities are listed in the United States to meet its accounting provisions. These accounting provisions were designed to operate together with the anti-bribery provisions of the FCPA, and require corporations covered by the provisions to (a) make and keep books and records that accurately and fairly reflect the transactions of the corporation and (b) devise and maintain an adequate system of internal accounting controls. In large measure, these provisions are designed to further safeguard against FCPA-prohibited payments, as well as other financial improprieties.
China is among the countries viewed by the SEC as presenting a high risk of FCPA violations, due to a large amount of government corruption. As a result, Chinese companies have been among those at the focus of FCPA enforcement and almost one-third of FCPA enforcement actions last year related to business conducted in China.
FCPA enforcement also targets certain industries, which are seen as high-risk in terms of FCPA violations. High-risk industries specifically identified by the SEC in its FCPA Resource Guide include aerospace and defense manufacturing, banking and finance, health care and life sciences, energy, telecommunications, and transportation.
Most recently, a Chinese energy company, Keyuan Petrochemicals Inc. settled with the SEC after being accused of FCPA violations.
Keyuan was based in China but registered with the SEC and traded stock in the United States through a reverse merger with a shell corporation. The SEC alleged that Keyuan’s accounting practices involved FCPA violations which consisted of keeping an off-balance-sheet cash account that was used to distribute gifts to Chinese government officials, including local authorities.
Among the lessons to be learned from this case is that any dealings with foreign officials will be rigorously scrutinized, even if the officials are relatively unimportant local officers. This is especially true when it comes to a “high-risk” country such as China or if your company is involved in a “high-risk” industry.
Chinese companies should also be aware that an FCPA investigation can come to involve other matters. If your company is investigated for FCPA violations, eventually the accusations may include securities violations, mail fraud, money laundering, and other forms of financial misconduct.
Finally, there is no such thing as a “simple” FCPA case. The provisions of the FCPA are wide-ranging and complex, and potentially affect many, if not most, activities of a company doing business overseas. Companies doing business involved with high-risk countries or industries need to be especially vigilant about FCPA compliance.
Our attorneys have a wide range of experience in the issues confronting Chinese companies as well as United States companies doing business in China. With our expertise and in-depth knowledge of FCPA and other relevant issues, we can help your company craft a strong compliance program that will protect your business and help you avoid the many FCPA pitfalls along the way. If your company is already being investigated for FCPA violations, our attorneys will mount an effective and strategic defense to lead to the optimal outcome in your case.
New York International Criminal Attorneys
Our team of white-collar defense attorneys assists clients in the US and across the globe in cross-border criminal and regulatory matters. Our FCPA attorneys provide guidance to clients in multiple industries on conducting business globally during a time of increased FCPA enforcement. Our attorneys’ expertise on FCPA includes issues directly associated with compliance programs, as well as risk assessment, conducting internal investigations concerning potential violations, transaction counseling as to dealing with state-owned entities or other high-risk enterprises, and advice to buyers and sellers regarding FCPA due diligence in mergers and acquisitions.
We understand the need for discretion involved in these matters, and provide tactful and sensitive resolution of compliance issues and potential violations by U.S. and foreign companies. We encourage our clients to be proactive in forestalling any potential FCPA issues and assist them in implementing and crafting such measures as formal policy statements, company-wide ethics manuals, training programs and seminars, putting in place mechanisms for coordinating/operating the compliance program (“compliance clearinghouse”), maintaining accurate accounting and record-keeping systems, and setting up anonymous reporting procedures.
To obtain a thorough and extensive consultation concerning any FCPA issues your company may face, contact Joseph Potashnik and Associates PC at (212) 577-6677.