Conventional wisdom has it that the US FCPA—unlike, say, the UK Bribery Act—doesn’t cover commercial bribery. See, eg, this, this, this, this, this, and this. Goodyear’s payment of over $16 million to the SEC to resolve allegations of bribery, including bribery of employees at private entities, see SEC Release & Order, should put that myth to rest.
True, the FCPA’s so-called “Anti-Bribery Provision” only prohibits bribery of “public officials”.15 U.S.C. § 78dd-1(a)(1). That’s cold comfort because governments often hold stakes in businesses, so telling a “public” enterprise from a “private” company can be tough. See Tim Coleman & Melissa Handover, Foreign Officials under the FCPA—A Foreign Concept?, China Law and Practice (May/June 2013); Freshfields Briefing: The US Foreign Corrupt Practices Act—guidance published by US government at 2–3 (Nov. 2012).
And as Goodyear learned, the FCPA isn’t limited to its Anti-Bribery Provision. The equally important “Books and Record Provision” requires US issuers to keep records that “accurately and fairly reflect the transactions and dispositions of the [company’s] assets”.15 U.S.C. § 78m(b)(2). That means a company may violate the FCPA by failing to record bribes to a foreign public official. It equally means that a company may violate the FCPA by failing to record bribes to an employee of a private company.
Nor is the FCPA the only arrow in a US prosecutor’s quiver. The Travel Act prohibits interstate or foreign travel to commit, among other things, “bribery . . . in violation of the laws of the State in which [it is] committed or of the United States”.18 U.S.C. § 1952(b)(i)(2) (known as the Travel Act). Where state law prohibits commercial bribery—as do the laws of California, Delaware, Illinois, Florida, and New York—foreign travel to bribe employees of a commercial entity can invite federal criminal charges. See, eg, Information, United States v. Control Components, Inc., No. 09-CR-162-JVS (C.D. Cal. July 22, 2009).
The DOJ’s and SEC’s position is clear:
“Companies and individuals should also remember that, whether an entity is an instrumentality of a foreign government or a private entity, commercial (i.e., private-to-private) bribery may still violate the FCPA’s accounting provisions, the Travel Act, anti-money laundering laws, and other federal or foreign laws. Any type of corrupt payment thus carries a risk of prosecution.”
The upshot is that in running compliance programs, conducting M&A due diligence, or investigating alleged misconduct, companies who neglect the risk of commercial bribery do so at their peril.
