or some of the payment will be passed
on improperly to a foreign official. The
FCPA defines "foreign official" broadly
to include any officer or employee of a
foreign government or a public inter-
national organization; the definition is
generally understood to include officers
and employees of a commercial enter-
prise owned by a foreign government
as well as relatives of the officials. This
broad definition of a "foreign official" is
currently being challenged in the U.S.
courts but the recent decisions suggest
it will be read to be expansive. As such,
companies need to vigilantly investigate
their foreign agents, joint venture part-
ners, business associates, and employees
to make sure they do not fall within the
definition unknowingly. Additionally, the
Act has what is essentially strict liability
for books and records violations, so a
company that doesn't have compliance
policies in place for its bookkeeping
could be walking a dangerous path.
Knowing your foreign operations and
partners is just the first step in FCPA
compliance. The second part is having
in place the proper compliance program.
because it will educate your employ-
ees in the U.S. law, search out possible
violations, and alert you to increased
risks. Equally importantly, should your
company face prosecution for a viola-
tion by a foreign employee, it will allow
the company to argue to the government
prosecutors that the U.S. operations and
executives did not have the requisite
"knowledge" of the payment. The Act
prohibits payments made to a third party
while knowing that they will benefit a
government official. The Act's knowledge
standard encompasses the concepts
of "conscious disregard" and "willful
blindness." Thus, a company that ignores
red flags or doesn't have policies and
procedures in place to prevent improper
payments may be viewed as turning a
blind eye. This can be an awful and
costly surprise for a company.
The other reasons for a compliance
program are the dramatic increase in
criminal prosecutions, charges against
individual executives, and fines. While
we may never again see a prosecu-
tion like Siemens with fines and costs
exceeding $1 billion USD, the average
fine in an FCPA case is steadily increas-
ing. In addition, most settlements with
to install expensive and burdensome
compliance programs with outside
independent monitors. These forced
compliance programs are almost always
more expensive than the sensible poli-
cies a company can install without a
government prosecutor overseeing and
approving the program.
This brings us back to the difficult
concern facing smaller companies and
one of the reasons for the lag in FCPA
compliance found in the Deloitte sur-
vey. Compliance programs can involve
drafting policies, training employees
in the U.S. and abroad, vetting foreign
agents and subsidiaries, regular certi-
fications, hotlines, and other measures
that typically involve significant at-
torney time. This can be prohibitively
expensive, especially in this tough
economy, at the hourly rates charged
by the big international law firms. It is
important for smaller U.S. and foreign
companies to consider compliance
programs at a fixed rate or from small
law firms that provide sophisticated
compliance at an accessible rate.