U.S. Foreign Corrupt Practices Act (FCPA)
Prohibits corruptly offering, promising or paying anything of value to a foreign government official to obtain or retain business
“Foreign government official” includes employees of state-owned customers Requires that Company’s books and records accurately and completely reflect transactions and dispositions of assets, regardless of dollar value Applies to the Company and all of its employees globally No “Ostrich” Defense – cannot turn a blind eye Severe penalties for non-compliance
Fines and penalties for Company and employee
Revocation of licenses, e.g. export license
Barred from doing business with U.S. government Recent Enforcement Explosion – More international cooperation and enforcement
FCPA – Risk Areas
Hiring sales agents, distributors, consultants or service agents overseas
Can be criminally liable for agent’s actions
Business transactions with state-owned entities
Entertainment, meals, travel and gifts involving foreign government officials or state-owned customers
Company requires reasonable entertainment and meals, pre-approval for travel and gifts
Accurate books and records (e.g., expense reports)
JVs/M&A due diligence and post-acquisition integration
Percentage of business with foreign government contracts and in which countries
Donations to charitable organizations
“We’ll give you business if you donate to X charity”
Improper payments to process visas, customs, permits, etc.
For all activities: Conduct thorough on-board due diligence
Lucent: Travel and lavish per diems for “factory inspections” where Lucent did not have factories; education expenses were billed as “marketing costs.” Paid $1 million criminal fine, and $1.5 civil fine; 2 year deferred prosecution agreement.

FCPA – Red Flags
Requests for payment in cash
Requests for unusually large