The United States has long been a world leader in its efforts to combat bribery and corruption, and there are countless examples, large and small, of investigations and prosecutions of public officials and those involved in corrupting them. Given the federal system of government in the US, the legislative framework for combating corruption and the related enforcement efforts exists at the local, state and federal levels. The US federal government, however, and in particular the US Department of Justice (DOJ) and the Federal Bureau of Investigation (FBI), have special roles in addressing public corruption.
Today, those federal agencies have at their disposal a wide variety of federal public corruption offences, ranging from a very broad federal bribery and gratuity statute (18 USC Section 201) to more focused legislation such as the Foreign Corrupt Practices Act of 1977 (FCPA). The principal statutes addressing bribery and corruption are discussed in Section II.i, although there exists a large number of government agency ethics rules, local and state laws and regulations, and election and campaign finance laws that are largely beyond the scope of this chapter.
II DOMESTIC BRIBERY: LEGAL FRAMEWORK
The primary statute that expressly criminalises corruption of US federal public officials is 18 USC Section 201. The statute has two principal subparts: Section 201(b), which criminalises bribery, and Section 201(c), which prohibits the payment or receipt of gratuities. The primary difference is that Section 201(b) requires proof of a quid pro quo, while the gratuities provision does not.
To obtain conviction of the bribe payer under Section 201(b)(1), the government must prove that something of value was given, offered, or promised to a federal public official corruptly to influence an official act. To secure conviction of the person bribed under Section 201(b)(2), the government must show that a public official accepted, solicited or agreed to accept anything of value corruptly in return for ‘being influenced in the performance of any official act’.
A gratuities conviction only requires that the thing of value be knowingly or wilfully offered or given ‘for or because of any official act’, rather than corruptly to influence the official act.2
18 USC Section 666 applies when governmental or other entities receive federal programme benefits of over US$10,000. The bribery provisions contained in Section 666(a) (1)(b) penalise an agent of the entity receiving the funds who corruptly solicits, accepts or agrees to accept anything of value ‘intending to be influenced or rewarded in connection with any business, transaction, or series of transactions’ of the receiving entity involving anything of value of US$5,000 or more. Section 666(a)(2) covers the bribe payer.
The Hobbs Act, 18 USC Section 1951, also targets public corruption by criminalising extortion under colour of official right. The Act applies to any public official who ‘has obtained a payment to which he was not entitled, knowing that the payment was made in return for official acts’.3 The Supreme Court has held that a conviction for extortion under colour of official right does not require the government to prove that the payment was affirmatively induced by the official; rather, ‘the coercive element is provided by the public office itself ’.4 The Act also has a broader jurisdictional reach as it can be applied to state public officials so long as the activity ‘affects commerce’. This requirement can be satisfied even if the effect is de minimis.5
ii Prohibition on paying and receiving
The bribery and gratuities provisions of 18 USC Section 201 prohibit both making and receiving either bribes or gratuities. The Hobbs Act prohibition on extortion under colour of official right applies only to the receipt of bribes.
iii Definition of public official
Public officials are defined broadly under Section 201 as not only federal government officers or employees, but also ‘person[s] acting for or on behalf of the United States, or any department, agency, or branch of Government thereof [. . .] in any official function, under or by authority of any such department, agency, or branch of government [. . .]’.6 The Supreme Court has extended the reach of Section 201 officers of a private, non-profit corporation administering and expending federal community development block grants. The Court made clear, however, that the mere presence of some federal assistance would not bring a local organisation and its employees within the jurisdiction of Section 201. Rather, to be a public official, ‘an individual must possess some degree of official responsibility for carrying out a federal program or policy’.7
Even if an official is not covered under Section 201, Section 666 potentially expands the reach of bribery prohibitions beyond the Section 201 definition to include agents of any state and local organisations that receive more than US$10,000 in federal funds in any one year period.
iv Public official participation in commercial activities
Members of Congress are prohibited from earning outside income that exceeds 15 per cent of the annual rate of basic pay for Level II of the Executive Schedule (currently US$187,000) in any calendar year.8 Members of Congress may not receive any income from employment or affiliation with any entity that provides services involving a fiduciary relationship and may not sit on a corporation’s board of directors.9 Presidential appointees in the executive branch subject to Senate confirmation are prohibited from all outside earned income.10 ‘Covered non-career employees’ of the executive branch (generally presidential appointees not subject to confirmation by the Senate) have the same restrictions on outside income as members of Congress.11 Executive branch career civil servants not subject to Senate confirmation have no cap on their outside earned income but cannot engage in outside employment that conflicts with their official duties.12
v Gifts, travel, meals, and entertainment restrictions
The giving of gifts or gratuities to public officials is restricted by 18 USC Section 201(c). The statute also prohibits public officials from receiving gifts under certain circumstances. The gratuities provisions of Section 201 largely overlap with the bribery provisions contained in the same statute, except that the gratuities provisions do not require the gift to be given with the intent to influence the public official. Instead, a gratuities violation occurs if a person offers anything of value ‘for or because of’ any official act performed or to be performed. As interpreted by the Supreme Court, the improper gift ‘may constitute merely a reward for some future act that the public official will take and may have already determined to take, or for a past act that he has already taken’.13
House and Senate rules prohibit Members from receiving gifts worth US$50 or more, or multiple gifts from a single source that total US$100 or more in a calendar year. The rules also ban gifts of any value from a registered lobbyist, agent, or foreign principal.14
In addition, executive branch employees may not accept gifts of over US$20 in value (or multiple gifts from a single source totalling US$50 in a calendar year), including ‘transportation, local travel, lodgings and meals’ that are given because of the official’s position or that come from ‘prohibited sources’.15 A prohibited source is a person or entity who (1) is doing or seeking to do business with or who is regulated by the official’s agency or (2) has interests that may be substantially affected by performance or non-performance of the employee’s official duties.16 In 2009, President Obama tightened restrictions for presidential appointees in the executive branch, banning all gifts from registered lobbyists, even those valued at under US$20.17
The Ethics Reform Act of 1989, 5 USC Section 7353, provides the statutory underpinning for the gift bans promulgated in regulations and House and Senate rules. The Act generally prohibits federal officials, including House members and staff, from soliciting or accepting anything of value, except as provided in rules and regulations issued by their supervising ethics office.
vi Gifts and gratuities
As discussed in subsection v, above, gifts to members of Congress valued at less than US$50, or multiple gifts from a single person that do not exceed US$100 in a single calendar year, are permissible if they are not made by registered lobbyists or agents of a foreign government.18 Gifts with a value of under US$10 will not count towards the US$100 limit. House and Senate rules also contain several other narrow exceptions to the gift ban, including informational materials, contributions to a member’s campaign fund, and food and refreshments of nominal value that do not constitute a meal. Additionally, members can attend ‘widely attended events’ free of charge where at least 25 non-congressional employees will be in attendance and the event is related to their official duties.
Executive branch employees are permitted to receive gifts of under US$20 but cannot receive gifts totalling US$50 from the same person in the same year.19 Exceptions for executive branch officials not appointed by the President exist for widely attended events and for food and refreshments provided when travelling abroad on official business, so long as the refreshments are not provided by a foreign government and do not exceed the official’s daily allowance.20 All executive branch officials can receive gifts motivated by family relationship or personal friendship.
vii Political contributions
In general, the Federal Election Campaign Act prohibits any foreign national from contributing, donating, or spending funds, directly or indirectly, to any federal, state, or local election.21 Foreign nationals broadly covers foreign governments, political parties, corporations, associations, partnerships, individuals with foreign citizenship, and immigrants who do not have lawful permanent resident status.22
In addition, a domestic subsidiary of a foreign company may not establish a federal political action committee to make political contributions if the foreign corporation finances the PAC’s establishment, administration or solicitation costs, or individual foreign nationals participate in the operation of the PAC, serve on its board, make decisions regarding PAC contributions or expenditures, or participate in selecting persons to operate the PAC.23
Finally, a domestic subsidiary of a foreign corporation (or a domestic corporation owned by foreign nationals) may not donate in connection with state and local elections if the activities are financed by the foreign parent or individual foreign nationals are involved in making donations.24
viii Private commercial bribery
No US federal statute specifically addresses private commercial bribery. Federal prosecutors may, however, prosecute commercial bribery through the use of several existing laws. Section 1346 of Title 18 gives prosecutors broad leeway by extending liability under the mail and wire fraud statutes to ‘a scheme or artifice to deprive another of the intangible right to honest services’. Honest services fraud has been used to prosecute employees of private companies who breach a fiduciary duty to their employers by, for example, taking or paying bribes.25 With respect to international business, another federal criminal statute that the DOJ has used to prosecute commercial bribery in some circumstances is the Travel Act, 18 USC Section 1952. The Travel Act makes it a crime to travel in interstate or foreign commerce or to use ‘the mail or any facility in interstate or foreign commerce’ with intent to ‘promote, manage, establish, carry on, or facilitate the promotion, management, establishment or carrying on, of any unlawful activity’.
The definition of ‘unlawful activity’ broadly includes ‘extortion [and] bribery [. . .] in violation of the laws of the State in which committed or of the United States’.26 This definition assimilates state commercial bribery laws (as well as the laws of the District of Columbia and federal territories) and provides a basis for federal criminal liability where an individual violates state commercial bribery laws and uses, for example, a phone, fax, wire transfer or email to further the commercial bribe, or travels across state lines in furtherance of the scheme. Currently, approximately 36 US states have commercial bribery laws.
As discussed, 18 USC Section 666 also criminalises bribing recipients of federal programme funds. Such recipients can include private companies.
For individuals convicted under Section 201 for bribery, both the payer and the recipient of the bribe may be punished by up to 15 years’ imprisonment or a fine of up to US$250,000 or both, or triple the value of the bribe, whichever is greater.27 Violations of the gratuities provisions, on the other hand, are punishable by a maximum of two years’ imprisonment and a fine of US$250,000.28
A violation of 18 USC Section 666 carries a maximum penalty of 10 years’ imprisonment and a fine of US$250,000.29
A Hobbs Act violation is punishable by up to 20 years’ imprisonment and a fine of up to US$250,000.30
A violation of the Travel Act (based on bribery conduct) is punishable by up to five years’ imprisonment and a fine of the greater of US$250,000 or twice the pecuniary gain or loss.
III ENFORCEMENT: DOMESTIC BRIBERY
Domestic bribery laws are criminal offences pursued through both the US federal and state courts. There are no enacting regulations for domestic bribery laws, and the statutes do not provide a private cause of action. Statutory and case law on domestic bribery has remained mostly stable in recent years. This section discusses the areas of recent change in domestic bribery case law and statutes.
i Limiting honest services fraud to bribes and kickbacks
Federal prosecutors have long used the mail and wire fraud statutes (18 USC Sections 1341 and 1343) to combat public and private corruption, and in the late 1980s, Congress created honest services fraud to give prosecutors another tool in battling corruption.31 In 1987, the Supreme Court held in McNally v. United States, 483 US 350 (1987), that 18 USC Sections 1341 and 1343 did not reach ‘honest services fraud’. Congress responded by passing 18 USC Section 1346, which specifically defines a ‘scheme or artifice to defraud’ as including the failure to provide honest services.32 In United States v. Skilling, however, the Supreme Court narrowed the reach of the honest services fraud statute to bribery and kickback schemes in order to avoid finding the statute unconstitutionally vague.33
In June 2016, the Supreme Court further narrowed the scope of honest services fraud, and the Hobbes Act, when it unanimously overturned the conviction of former Virginia Governor Bob McDonnell on grounds that federal prosecutors had erroneously relied on a ‘boundless’ definition of an ‘official act’ that could result in criminally liability under 18 USC Sections 1346 and 1951.34 McDonnell was convicted on federal bribery charges in 2014 for accepting US$175,000 in loans, gifts, and other benefits in exchange for arranging meetings, hosting promotional events, and contacting other government officials on the payee’s behalf. The Court clarified that an official act must (1) be a decision or action on a ‘question, matter, cause, suit, or controversy’; (2) ‘involve a formal exercise of governmental power’; and (3) be something specific and focused that is ‘pending’ or ‘may by law be brought’ before a government official.35 Conversely, setting up a meeting, talking to another government official or organising an event, without more, does not constitute an official act, and thus cannot support convictions under 18 USC Sections 1346 and 1951.36
ii Influencing employment decisions by a member of Congress
Congress adopted the Honest Leadership and Open Government Act of 2007 in response to lobbying scandals on Capitol Hill involving Jack Abramoff, a former lobbyist, and Randy ‘Duke’ Cunningham, a former House Representative.37 The statute bars any congressperson, congressional staffer, or employee of the executive branch, from taking or influencing an official act with the intent to make or influence private hiring decisions on the basis of political party affiliation (18 USC Section 227 (a)–(b)).
IV FOREIGN BRIBERY: LEGAL FRAMEWORK
i Foreign bribery law and its elements
The FCPA, as amended in 1988 and 1998, broadly prohibits making corrupt payments to foreign officials in connection with international business. The operative prohibition of the FCPA’s ‘anti-bribery provisions’ has the following elements:
- a the defendant falls within one of three categories of legal or natural persons covered by the FCPA (issuer, domestic concern, or foreign company or national);
- b the defendant acted corruptly and wilfully;
- c the defendant made a payment, offer, authorisation or promise to pay money or anything of value, either directly or through a third party;
- d the payment was made to any of the following (a ‘covered recipient’):
• a foreign official;
• a foreign political party or party official;
• a candidate for foreign political office; or
• any other person while knowing that the payment will be passed on to one of the above; and
- e the payment was for the purpose of:
• influencing any official act or decision of that person;
• inducing that person to do or omit to do any act in violation of his or her lawful duty;
• inducing that person to use his or her influence with a foreign government to affect or influence any government act or decision; or
• securing any improper advantage in order to obtain or retain business, or direct business to any person.38
The FCPA also requires issuers, that is publicly held corporations reporting to, or having a class of securities registered with, the Securities and Exchange Commission (SEC), to keep accurate books and records and to establish internal accounting controls designed to, inter alia, prevent the maintenance or disbursement of funds that could be used as a source of improper payments to foreign officials. These ‘accounting provisions’ are discussed further in Section V.
ii Definition of foreign public official
The FCPA prohibits payments made directly or indirectly to ‘any foreign official’ or ‘any foreign political party or candidate thereof, or any candidate for foreign political office’. The Act defines a foreign official as any ‘officer or employee of a foreign government or any department, agency, or instrumentality thereof, or of a public international organization, or any person acting in an official capacity for or on behalf of such government or department, agency, or instrumentality, or for or on behalf of any such public international organization’.39 Public international organisations include any entity designated as such by executive order of the President (e.g., the United Nations and the World Bank).40
As a general matter, the DOJ and the SEC regard officers and employees of corporations and other business entities that are wholly or primarily owned or controlled by a foreign government as government officials for the purposes of the FCPA. In countries where enterprises owned or controlled by the government account for substantial economic activity (e.g., China), there can therefore be large numbers of individuals holding business positions who must be treated as ‘foreign officials’ for FCPA purposes. Consultants and advisers that have been retained by foreign government agencies to assist in carrying out official functions typically are also considered to be ‘foreign officials’, as are members of royal families and certain traditional and tribal leaders, depending on the facts and circumstances.
In determining whether an entity is a government instrumentality, courts have considered the following, non-exhaustive list of factors in their analysis:
- a the foreign state’s characterisation of the entity and its employees;
- b the foreign state’s degree of control over the entity;
- c the purpose of the entity’s activities;
- d the entity’s obligations and privileges under the foreign state’s law, including whether the entity exercises exclusive or controlling power to administer its designated functions;
- e the circumstances surrounding the entity’s creation; and
- f the foreign state’s extent of ownership of the entity.41
In their November 2012 Resource Guide to the FCPA, the DOJ and SEC endorsed these six factors, and identified the following five additional factors:
- a the exclusive or controlling power vested in the entity to administer its designated functions;
- b the level of financial support by the foreign state;
- c the entity’s provision of services to the jurisdiction’s residents;
- d whether the governmental end or purpose sought to be achieved is expressed in the policies of the foreign government; and
- e the general perception that the entity is performing official or governmental functions.42
In US v. Esquenazi, the US Court of Appeals for the Eleventh Circuit defined the term ‘instrumentality’ under the FCPA.43 In Esquenazi, the DOJ alleged that executives of a private telecommunications company in Florida used intermediaries to make almost US$1 million in payments to executives of the Haitian national telecommunications company, Teleco, in exchange for securing lower rates and other business advantages. The court held Teleco to be an ‘instrument’ of the Haitian government. The court defined instrumentality as ‘an entity controlled by the government of a foreign country that performs a function the controlling government treats as its own.’44 The court enumerated non-exhaustive lists of factors to separately determine whether the government ‘controls’ the entity45 and whether the entity performs a function the government ‘treats as its own’.46
iii Gifts, travel, meals and entertainment restrictions
Whether payments for gifts, meals, travel or entertainment for the benefit of a foreign official are permissible under the FCPA turns on whether the gifts or payments in question are made with the requisite corrupt intent. There is no de minimis provision or materiality threshold in the statute; so conceivably, even gifts of nominal value made to a foreign official in exchange for favourable official action could trigger liability.
It is, however, an affirmative defence to liability that a payment was a ‘reasonable and bona fide expenditure, such as travel and lodging expenses [. . .] directly related’ to the promotion of products or the execution of a contract.47 The DOJ has issued several Opinion Releases which provide some guidance with respect to gift-giving.48
Likewise, the DOJ and SEC’s recent Resource Guide to the FCPA advises:
Some hallmarks of appropriate gift-giving are when the gift is given openly and transparently, properly recorded in the giver’s books and records, provided only to reflect esteem or gratitude, and permitted under local law.
Items of nominal value, such as cab fare, reasonable meals and entertainment expenses, or company promotional items, are unlikely to improperly influence an official, and, as a result, are not, without more, items that have resulted in enforcement action by DOJ or SEC. The larger or more extravagant the gift, however, the more likely it was given with an improper purpose.49
There are two primary affirmative defences to liability under the FCPA. First, as noted above, the FCPA allows reasonable and bona fide expenditures directly related to the promotion, demonstration or explanation of products and services or for the execution or performance of a contract with a foreign government.50 This defence, however, does not apply to all promotional expenses: ‘If a payment or gift is corruptly made, in return for an official act or omission, then it cannot be a bona fide, good-faith payment, and this defense would not be available.’51
Second, it is a defence that the payment was lawful under the written laws of the foreign country.52 This defence is rarely of much practical utility, since the conduct in question must be expressly permitted by a country’s written laws (i.e., the absence of an express prohibition on the particular conduct is not sufficient).
v Facilitating payments
The FCPA contains a narrowly defined exception for ‘facilitating’ or ‘grease’ payments made to expedite ‘routine governmental action by a [covered official]’.53 Routine governmental action is defined as:
only an action which is ordinarily and commonly performed by a foreign official in:
a obtaining permits, licenses, or other official documents to qualify a person to do business in a foreign country;
b processing governmental papers, such as visas and work orders;
c providing police protection, mail pick-up and delivery, or scheduling inspections associated with contract performance or inspections related to transit of goods across country;
d providing phone service, power, and water supply, loading and unloading cargo, or protecting perishable products or commodities from deterioration; or
e actions of a similar nature.54
The FCPA emphasises that the exclusion applies only to non-discretionary actions related to the award of business: ‘routine governmental action does not include any decision by a foreign official whether, or on what terms, to award new business to or to continue business with a particular party’.55 In practice, US authorities have also construed this exception only to apply to relatively small payments, though the FCPA is silent on this point. At a minimum, ‘grease’ payments should be approached with considerable caution. FCPA compliance programmes are trending away from permitting such payments.
vi Payments through third parties or intermediaries
In addition to payments made directly to foreign officials, political parties, and candidates for office, the FCPA also prohibits any payment to ‘any person, while knowing that all or a portion of such money or thing of value will be offered, given, or promised, directly or indirectly’, to a covered official for a proscribed purpose. The FCPA, as amended in 1988, defines ‘knowing’ as actual awareness that an improper payment will be made or a firm belief that such a result is ‘substantially certain’.56 The legislative history emphasises that this standard encompasses instances of ‘wilful blindness’, ‘conscious disregard’ or ‘deliberate ignorance’ of the acts of an intermediary.57
vii Individual and corporate liability
Both companies and individuals can face liability for violations of the FCPA. The FCPA’s jurisdiction extends to ‘issuers’, ‘domestic concerns’ and, in some circumstances, foreign nationals or businesses.58 An issuer is a corporation that has issued securities registered in the United States or is required to make periodic reports to the SEC.59 A domestic concern is any individual who is a citizen, national or resident of the US, or any business entity with its principle place of business in the US or that is organised under the laws of any state of the United States.60 US issuers and US persons (i.e., US nationals and legal entities organised under the laws of the US or any state thereof) may be held liable for any act in furtherance of a corrupt payment, regardless of any connection to the territory of the US or US interstate commerce. Jurisdiction will apply with respect to foreign issuers and non-citizen US residents if they make use of the US mails or US interstate commerce in furtherance of a corrupt payment.61
A foreign national or company is subject to liability if it causes an act in furtherance of a corrupt payment within the territory of the United States.62 US parent companies can also be held liable for the acts of their foreign subsidiaries if they authorised, directed, or controlled the activity in question. In one recent SEC enforcement case, a federal court found that it had jurisdiction over foreign national defendants, executives of Magyar Telekom who allegedly bribed officials in Macedonia and Montenegro, based largely on emails relating to the corrupt scheme that had passed through computer servers in the United States.63 The court found jurisdiction even though none of the defendants were physically present in the United States when sending or receiving the emails.64 Furthermore, the court found that because Magyar was an issuer, any attempt by the foreign defendants to conceal their bribes in relation to public filings constituted conduct sufficiently ‘directed toward the United States’ to give rise to personal jurisdiction.65
viii Civil and criminal enforcement
Companies and individuals can face both criminal and civil enforcement under the FCPA.
ix Agency enforcement
The DOJ is responsible for all criminal enforcement of the FCPA and for civil enforcement with respect to domestic concerns, foreign companies that are not issuers, directors, officers, shareholders, employees, and agents of the foregoing, as well as foreign nationals. The SEC is responsible for civil enforcement with respect to issuers and their directors, officers, shareholders, employees and agents.
Self-reporting of violations and cooperation with the DOJ and the SEC are factors that can lead to reduced monetary penalties, or an otherwise more favourable settlement, or a decision by the government not to prosecute. For example, under the US Sentencing Guidelines companies are only eligible for certain sentence mitigation credit if they self-reported the violation.66 In determining whether to bring charges, federal prosecutors are required to consider the Principles of Federal Prosecution of Business Organizations (the Principles), which explicitly provide for consideration of cooperation and self-reporting.67
Similarly, the SEC will consider cooperation and self-reporting as mitigating factors under its 2001 Report of Investigation pursuant to Section 21(a) of the Securities and Exchange Act of 1934, which is commonly referred to as the ‘Seaboard Report’.68
In the November 2012 Resources Guide to the FCPA, the DOJ and SEC reaffirmed that both agencies ‘place a high premium on self-reporting, along with cooperation and remedial efforts, in determining the appropriate resolution of FCPA matters’ in their Resources Guide.69 Even after the publication of this guidance, however, the adequacy of the DOJ and SEC’s guidance regarding the benefits of self-reporting and cooperation, and the sufficiency of those benefits, are still hotly debated topics within US legal and corporate circles.70
In the context of cooperation by corporations, a September 2015 DOJ policy memorandum, commonly referred to as the Yates Memo, underscores the Department’s determination to identify and prosecute individuals responsible for corporate misconduct and provides that, as a threshold matter, in order to qualify for any cooperation credit corporations must provide to the Department ‘all relevant facts relating to the individuals responsible for the misconduct’ and that ‘absent extraordinary circumstances or approved departmental policy, the Department will not release culpable individuals from civil or criminal liability when resolving a matter with a corporation’.71
Most recently, in April 2016, the Department further refined and articulated its approach on self-reporting, cooperation, and remediation in its ‘Foreign Corrupt Practices Act Enforcement Plan and Guidance’ memorandum. The Memorandum announced a one-year Pilot Program that is designed to ‘motivate[e] companies to voluntarily self-disclose FCPA-related misconduct, fully cooperate with the Fraud Section, and, where appropriate, remediate flaws in their controls and compliance programs’.72 The Pilot Program, which applies to business organisations only, provides new guidance concerning mitigation credit offered in relation to FCPA prosecutions that is separate from, and in addition to, any mitigation credit available under the Sentencing Guidelines. The Pilot Program reflects an effort by the DOJ ‘to increase transparency regarding charging decisions in corporate prosecutions’, which was described in recent statements by former Assistant Attorney General Leslie Caldwell as one of the Department’s top priorities.73 The Program is also designed to ‘increase the Fraud Section’s ability to prosecute individual wrongdoers whose conduct might otherwise have gone undiscovered’ by making full disclosure of individual wrongdoing a condition of full cooperation by business organizations.74
In order to qualify for full mitigation credit under the pilot program, a company must (1) voluntarily self-disclose; (2) fully cooperate with a DOJ investigation; and (3) remediate, as appropriate, internal controls and compliance programmes. A company that meets all three requirements and also disgorges profits can receive up to a 50 per cent reduction off the bottom end of the Sentencing Guidelines fine range. Additionally, if the company has implemented an effective compliance programme at the time of resolution, the Department typically will not require the appointment of a compliance monitor. In some circumstances, full compliance with the Pilot Program can even result in declination to prosecute, and the memorandum suggests that declination is more likely if a company takes part in the program. The Department initially planned to assess the effectiveness of the Pilot Program in April 2017 and make a determination as to whether to continue it in its present or some other form; to date, however, there have been no updates regarding this assessment, so the long-term status of the Program remains unclear.
Plea-bargaining and negotiated settlements play a major role in FCPA enforcement as the criminal and civil penalties involved following an adverse result at trial can be severe. This is particularly true with respect to companies, which have strong incentives to avoid adverse publicity and prolonged uncertainty. Moreover, as mentioned in subsection x, below, genuine cooperation with an investigation can result in more favourable settlements, including reduced monetary penalties. The DOJ has also increasingly turned to alternative dispositions such as deferred prosecution agreements (DPAs) and non-prosecution agreements (NPAs), which can allow a company to avoid criminal conviction. The SEC has recently introduced these forms of settlement as well. On April 22, 2013, the SEC announced its first ever FCPA-related NPA, in connection with its investigation into the Ralph Lauren Corporation for bribes paid by a subsidiary to government officials in Argentina from 2005 to 2009.75 When announcing the NPA, the SEC noted that its decision not to charge the company was ‘due to the company’s prompt reporting of the violations on its own initiative, the completeness of the information it provided, and its extensive, thorough, and real-time cooperation with the SEC’s investigation’.76
Individuals, on the other hand, may have different incentives. While plea-bargaining is certainly available, widely used, and often beneficial, it is also the case that the prospect of potential incarceration and reputational harm, combined with available strategies to defend these cases, has resulted in a number of FCPA trials in recent years.
xii Prosecution of foreign companies and individuals
Foreign companies can be prosecuted under Section 78dd-3, part of the 1998 amendments to the Act. The DOJ explains that: ‘A foreign company or person is now subject to the FCPA if it takes any act in furtherance of the corrupt payment while within the territory of the United States.’77 The statute does not also require that such acts make use of the mail or any other instrumentality of interstate commerce. The DOJ interprets this section as ‘conferring jurisdiction whenever a foreign company or national causes an act to be done within the territory of the United States by any person acting as that company’s or national’s agent’.78
In a 2011 case, a US court dismissed an FCPA 78dd-3 charge against a foreign defendant who mailed a package containing an allegedly corrupt purchase agreement from the United Kingdom to the United States because the act of mailing the package took place outside of the United States.79
Companies that violate the anti-bribery provisions of the FCPA may be fined the greater of US$2 million per violation or twice the gain or loss resulting from the improper payment. Individuals who violate the anti-bribery provisions are subject to penalties of the greater of US$250,000 per violation or twice the gain or loss resulting from the improper payment and may also face up to five years’ imprisonment.80 The applicable statute of limitations is five years. Officers, directors, stockholders and employees of business entities may be prosecuted for violations of the FCPA irrespective of whether the business entity itself is prosecuted. Any fine imposed upon an officer, director, stockholder, employee or agent may not be paid or reimbursed, directly or indirectly, by the business entity.81
Beyond these statutory maximum sentences, the penalties in any particular case will be calculated under the US Sentencing Guidelines, which provide a framework for determining penalties based on a series of factors including the characteristics of the offence, the characteristics of the offender, and various mitigating and aggravating factors.
The FCPA’s anti-bribery provisions provide that the DOJ or the SEC, as appropriate, may impose civil penalties not greater than US$10,000 per violation.82 In practice, however, these relatively modest civil fines tend not to be meaningful, both because the DOJ invariably brings FCPA enforcement cases as criminal cases and because the SEC frequently uses other civil enforcement powers available to it. The SEC’s civil enforcement powers include issuing administrative cease-and-desist orders and, through court action, obtaining civil injunctions; civil fines typically are much smaller than the profits disgorged by the SEC.83 Importantly, in June 2017, the US Supreme Court ruled that claims for disgorgement brought by the SEC are governed by a five-year statute of limitations.84 In Kokesh v. SEC, the Court unanimously held that disgorgement, as it is applied in SEC enforcement proceedings, operates as a ‘penalty’ for purposes of the general federal statute of limitations applicable to ‘actions for the enforcement of … any …penalty’, thus subjecting this remedy to the same statute of limitations as claims by the SEC for civil fines, penalties other than disgorgement and forfeitures.85
Any entity found to have violated the FCPA’s anti-bribery provisions may also be barred from US government contracting. Even an indictment may render an entity ineligible to sell goods or services to the US government. A finding that an entity has violated the FCPA can also have negative collateral consequences in other dealings with US government agencies, including the ability to obtain US export licences and the ability to participate in programmes sponsored by the Overseas Private Investment Corporation, the Export-Import Bank of the United States, the Agency for International Development and other agencies.
V ASSOCIATED OFFENCES: FINANCIAL RECORD-KEEPING AND MONEY LAUNDERING
i Financial record-keeping laws and regulations
The FCPA’s accounting provisions require all issuers to (1) keep books, records, and accounts that accurately reflect the issuer’s transactions; and (2) establish and maintain a system of internal controls that are sufficient to ensure accountability for assets in accordance with management’s ‘general or specific authorization’.86 The records must be kept to ‘reasonable detail’, which the Act defines as the level of detail that ‘would satisfy prudent officials in the conduct of their affairs’.87 The FCPA holds issuers strictly liable on civil grounds for the bookkeeping violations of consolidated subsidiaries and affiliates.88 Criminal liability arises when a firm or person either knowingly circumvents or knowingly fails to implement internal accounting controls; or knowingly falsifies books, records, or accounts.89
Where an issuer holds 50 per cent or less of the voting power of a domestic or foreign firm, the FCPA requires that the issuer ‘proceed in good faith to use its influence, to the extent reasonable under the issuer’s circumstances, to cause such domestic or foreign firm to devise and maintain a system of internal accounting controls consistent with [the FCPA’s requirements]’.90
ii Disclosure of violations or irregularities
The FCPA does not require companies to disclose violations. A public company may have a disclosure obligation under US securities laws if it determines, typically in consultation with disclosure counsel, that a violation or irregularity rises to the level of being material information concerning the issuer’s financial condition.
iii Prosecution under financial record-keeping legislation
Both the books and records and internal controls provisions of the FCPA are frequently used to prosecute bribery-related conduct. Sometimes these provisions are used in addition to the anti-bribery provisions; in other circumstances these provisions are used exclusively to prosecute bribery-related conduct, including in situations where there may be jurisdictional or proof challenges to an anti-bribery charge, as well as part of a negotiated disposition.91
The FCPA’s accounting provisions are also used to prosecute cases of commercial bribery, as well as various forms of fraud and accounting-related misconduct.92
iv Sanctions for record-keeping violations
Companies that ‘knowingly and willfully’ violate the books and records and internal controls provisions of the FCPA may be fined the greater of US$25 million per violation or twice the gain or loss resulting from the improper conduct. Individuals who violate these provisions are subject to penalties of the greater of US$5 million per violation or twice the gain or loss resulting from the improper conduct and may also face up to 20 years’ imprisonment.93 The applicable statute of limitations is five years.94
The SEC’s civil enforcement powers with respect to violations of the accounting provisions are similar to its powers with respect to violations of the anti-bribery provisions. They include cease-and-desist orders, civil fines and disgorgement of profits.95
v Tax deductibility of domestic or foreign bribes
The US Internal Revenue Code expressly prohibits the tax deductibility of domestic and foreign bribes.96
vi Money laundering laws and regulations
Both foreign and domestic bribery are considered predicate offences under US federal money laundering statutes where a financial transaction occurs in whole or in part in the United States.97 Violation of the money laundering statute does not require a proof of violation of the underlying unlawful activity.98
Knowledge of criminal activity can be established from facts indicating that underlying criminal activity is likely; thus, wilful blindness is covered by the statute.99 A transaction can constitute almost any form of surrendering the proceeds from an underlying crime.100 The effect on foreign or interstate commerce need only be de minimis.101 Proceeds of crime is defined in the statute as ‘any property derived from or obtained or retained, directly or indirectly, through some form of unlawful activity’,102 and courts have been permissive in interpreting the scope of the text.103
However, there is some uncertainty as to when ‘proceeds’ means profits from the illegal activities or just the cash flow from all receipts associated with the activity. A plurality of the Supreme Court held that proceeds means profits in the context of an illegal gambling business.104 Most lower courts have interpreted this to mean that the proceeds-means-profit principle only applies where there was a risk that the offender would be effectively punished twice for the same transaction, where the transaction is part of the predicate offence.105
Two sections of the money laundering statute are most relevant in the context of foreign bribery:
- a Section 1956(a)(1) prohibits attempted or executed financial transactions involving the proceeds of predicate offences with the intent of promoting further predicate offences; with the intent of evading taxation; knowing the transaction is designed to conceal laundering of the proceeds; or knowing the transaction is designed to avoid anti-money laundering reporting requirements.
- b Section 1956(a)(2) prohibits the international transportation or transmission (or attempted transportation or transmission) of funds with the intent to promote a predicate offence; knowing that the purpose is to conceal laundering of the funds and knowing that the funds are the proceeds of a predicate offence; or knowing that the purpose is to avoid reporting requirements and knowing that the funds are the proceeds of a predicate offence.
Transactions may fall afoul of Section 1956(a)(1) and (2) if they are meant to promote predicate offences, conceal predicate offences or are designed to avoid anti-money laundering reporting requirements.
Most courts have defined promotion as any transaction that helps the underlying offence continue to prosper.106 Under Section 1956(a)(2), the international transmission or transportation provision, all that is required is that the offender use the transported funds to promote a predicate offence; the funds need not themselves flow from a predicate offence.107
Concealment is defined as having a purpose to conceal, so it would be an offence even if the concealment is not successful.108 Engaging in unnecessary transactions to add extra degrees of separation between an individual and the source of the funds supports a finding of ‘concealment’ under the money laundering statute.109
A variety of case-specific factors influence a court’s finding of concealment. As one court suggested:
Evidence that may be considered when determining whether a transaction was designed to conceal […] includes, among others, [deceptive] statements by a defendant probative of intent to conceal; unusual secrecy surrounding the transactions; structuring the transaction to avoid attention; depositing illegal profits in the bank account of a legitimate business; highly irregular features of the transaction; using third parties to conceal the real owner; a series of unusual financial moves cumulating in the transaction; or expert testimony on practices of criminals.110
Structuring transactions to evade reporting requirements
The money laundering statute prohibits the structuring of a transaction to avoid an obligation to report.111 The reporting requirements for financial transactions designed to prevent money laundering is discussed in Section V.ix. One of the requirements for the offence is actual knowledge of the underlying reporting requirement.112
Structuring violations are more commonly brought under 31 USC Section 5324. It is prohibited for a person to cause the failure to submit a report required by law, to cause a false report to be submitted, or to structure transactions in such a way as to evade reporting requirements.113
vii Prosecution under money laundering laws
Money laundering laws are used to prosecute bribery-related conduct. For example, in the prosecution of a Swiss lawyer for foreign bribery and money laundering activity, the money laundering charges succeeded where the FCPA charges failed on jurisdictional grounds.114
Because its scope can be wider than the coverage of the FCPA, money laundering charges are often included as a count in cases of potential corruption.115
In addition, on a number of occasions the DOJ has used the money laundering laws to prosecute foreign officials who are the recipients of corrupt payments and who cannot be prosecuted under the FCPA itself.116
viii Sanctions for money laundering violations
Violations of Sections 1956(a)(1) and (2) are punishable by a fine of no more than US$500,000 or twice the value of the property involved in the transaction, whichever is greater, and imprisonment for not more than 20 years.117 Violations of Section 1957 are punishable by a fine of not more than twice the amount of the criminally derived property involved in the transaction and imprisonment for not more than 10 years.118
ix Civil forfeiture
Any property, real or personal, involved in a transaction or attempted transaction in violation of Sections 1956(a)(1) and (2) is also subject to forfeiture pursuant to 18 USC Section 981(a)(1)(A) and (C).119 As part of its commitment to the global fight against international corruption, the DOJ launched the Kleptocracy Asset Recovery Initiative in 2010 to specifically target and recover stolen assets that are laundered into the United States. In July 2016, the DOJ filed civil forfeiture complaints seeking to recover more than US$1 billion in assets associated with an international conspiracy to launder funds misappropriated from a Malaysian sovereign wealth fund, 1Malaysia Development Berhad (1MDB).120 A year later, the DOJ filed a supplemental civil forfeiture action seeking recovery of assets valued at approximately US$540 million.121 The complaints filed by the DOJ represent the largest single action brought under the Kleptocracy Asset Recovery Initiative to date.
x Disclosure of suspicious transactions
31 USC Section 5322 makes it unlawful for certain institutions and persons to fail to disclose certain kinds of transactions that may be associated with bribery:
- a financial institution are obligated to report cash transactions involving US$10,000 or more;122
- b trades and businesses other than financial institutions are obligated to report cash transactions involving US$10,000 or more;123
- c persons in the US are required to report foreign financial agency transactions;124 and
- d financial institutions are required to file suspicious transaction reports under appropriate circumstances.125
In order to establish that a violation of Section 5322 was wilful, the burden is on the government to prove that the accused knew that his or her breach of the statute was unlawful.126
Violations of Section 5322 are punishable by a term of imprisonment of not more than five years or a fine of not more than US$250,000, or both.127 Violations committed during the commission of another federal crime or as part of a pattern of illegal activity involving more than US$100,000 over the course of 12 months can be punished by a term of imprisonment of not more than 10 years or a fine of not more than US$500,000, or both.128
VI ENFORCEMENT: FOREIGN BRIBERY AND ASSOCIATED OFFENCES
The DOJ and the SEC have jurisdiction to enforce the anti-bribery provisions of the FCPA. For a discussion of significant trends, developments and cases in anti-bribery enforcement, see the preface to this edition of The Anti-Corruption and Anti-Bribery Review.
VII INTERNATIONAL ORGANISATIONS AND AGREEMENTS
The United States has signed and ratified a number of significant treaties related to the fight against corruption, including: the Organisation for Economic Co-operation and Development (OECD) Anti-Bribery Convention; the United Nations Convention Against Corruption (UNCAC); and the Inter-American Convention Against Corruption. The United States has signed, but not ratified, the Council of Europe Criminal Law Convention.
The United States has made two relevant reservations to these treaties: under the UNCAC, the US has declined to provide a specific right of action for corruption; and under the Inter-American Convention against Corruption, the US has declined to enact laws expressly rendering illegal the ‘illicit enrichment’ as defined in the Convention. Article IX of the Inter-American Convention requires a state party to, subject to the fundamental principles of its legal systems, ‘establish under its laws as an offense a significant increase in the assets of a government official that he cannot reasonably explain in relation to his lawful earnings during the performance of his functions’.129
VIII LEGISLATIVE DEVELOPMENTS
i Military Construction and Veterans Affairs, and Related Agencies Appropriations Act
On 4 June 2013, Representative Alan Grayson offered an amendment to the House version of the Military Construction and Veterans Affairs, and Related Agencies Appropriations Act 2014.130 This amendment, House Amendment 89, would have prevented funds allocated under the bill from being used for contracts with companies that, within the preceding three years, had been ‘convicted or had a civil judgment rendered against them’ for, among other things, ‘bribery’.131
The bill was abandoned in favour of the House’s Consolidated Appropriations Act, 2014, which did not contain the Grayson Amendment’s anti-bribery language.132
ii The STOCK Act
In July 2012, the Stop Trading on Congressional Knowledge Act (the STOCK Act) was enacted. The STOCK Act bans insider trading on Capitol Hill. The STOCK Act was a response to public reaction to an investigative news television broadcast questioning whether lawmakers made investments based on their knowledge of legislative activity.133 President Obama had also called for such an act in his 24 January 2012 State of the Union Speech.134 The STOCK Act provides a variety of mechanisms for preventing insider trading and increasing transparency to the public. It covers legislators, executive branch officials, and their spouses and children.135
IX OTHER LAWS AFFECTING THE RESPONSE TO CORRUPTION
The attorney-client privilege is one of the oldest and best recognised privileges for confidential communications between a client and his or her attorney. The US Supreme Court has recognised the privilege, stating that by assuring confidentiality the privilege encourages clients to make ‘full and frank’ disclosure to their attorneys, who are then better able to provide candid advice and effective representation.136
The privilege is supported by two related doctrines, the joint defence privilege or ‘common interest rule’, and the work product doctrine. In general, the common interest rule protects the confidentiality of communications from one party to another party where a joint defence or strategy has been decided upon between the parties and their counsel. The work product doctrine protects materials prepared in anticipation of litigation from discovery by opposing counsel, including the government.
It is essential that multinational companies and their counsel understand these privileges and doctrines in connection with everything from routine counselling regarding anti-corruption compliance matters to defence of a government investigation to the proper handling of an internal investigation.
In the US, whistle-blowers enjoy protection under a wide variety of federal and state laws. The US False Claims Act, 31 USC Sections 3729–3733, for example, encourages whistle-blowers by promising them a percentage of the money received or damages won by the government and at the same time protects them from wrongful dismissal or retaliation.
Notably, the Dodd-Frank Wall Street Reform and Consumer Protection Act (2010) offers significant incentives and increases protections for whistle-blowers who provide original information concerning violations of the federal securities laws. In response to this legislation, in 2012 the SEC has established a Whistleblower Office to administer its whistle-blower programme.137 These developments are significant for domestic and foreign ‘issuers’ of securities because the FCPA is among the US securities laws covered by these Dodd-Frank whistle-blower provisions, so that employees who blow the whistle on foreign official bribery may now be eligible for significant recoveries.
The existence of a compliance programme, whether effective or not, is not a defence to prosecution under the FCPA or any other federal bribery-related statute. The existence of an effective compliance and ethics programme is considered as a sentencing mitigation factor under Chapter 8 of the US Sentencing Guidelines. In addition, under the DOJ’s Principles of Prosecution of Business Organizations, federal prosecutors are required to consider as one of the factors in deciding whether to charge an organisation with a crime, ‘the existence and effectiveness of the corporation’s pre-existing compliance program’.138
While Chapter 8 and the Principles of Prosecution of Business Organizations are of general application and not specifically addressed to anti-corruption compliance, many recent settled FCPA enforcement actions describe in significant detail the DOJ’s and SEC’s views regarding the essential elements of an effective anti-corruption compliance programme. These details are typically set out in an attachment to a form of settlement agreement. In settling FCPA cases, both the DOJ and the SEC have frequently cited the existence of a genuine compliance programme as a mitigating factor.
Significantly, in 2012 the DOJ announced its decision not to prosecute a company after an FCPA investigation, citing the company’s pre-existing compliance programme as one reason for that decision, along with its self-disclosure and robust cooperation.139 Similarly, in 2013 the SEC praised a company’s ‘enhanced compliance program’ and compliance training as among the factors that resulted in the SEC’s decision to enter into a Non-Prosecution Agreement with the company rather than charge it with FCPA violations.140
Most recently, in February 2017 the DOJ released the Evaluation of Corporate Compliance Programs (the Evaluation Guidance), a guidance document that sets forth a list of common questions that the Fraud Section may ask in evaluating corporate compliance programmes in the context of a criminal investigation.141 The questions are divided into 11 topics: (1) analysis and remediation of underlying misconduct; (2) senior and middle management; (3) autonomy and resources; (4) policies and procedures; (5) risk assessment; (6) training and communication; (7) confidential reporting and investigation; (8) incentives and disciplinary measures; (9) continuous improvement, periodic testing and review; (10) third-party management; and (11) mergers and acquisitions.142 Although the Evaluation Guidance does not indicate correct answers to the compliance questions, it does give companies insight into the Fraud Section’s views on the components of an effective compliance programme and builds upon the DOJ’s hiring of a full-time compliance expert in 2015.
XI OUTLOOK AND CONCLUSIONS
Enforcement of the FCPA has been a significant priority of US agencies for many years, and it is expected that it will remain so for the foreseeable future. In March 2016, former Assistant Attorney General Leslie Caldwell emphasised that the DOJ had ‘provided more resources to the Fraud Section, specifically within the FCPA Unit. We have begun hiring ten new prosecutors in the unit, an increase of 50 percent. In a parallel effort, the FBI added three new fully operational squads to their International Corruption Unit. This will make a substantial difference in our ability to bring high-impact cases and greatly enhance the department’s ability to root out significant economic corruption’.143 In September 2016, former SEC Chair Mary Jo White emphasised the importance of the SEC’s FCPA enforcement programme, stating that: ‘Vigorous enforcement of the FCPA is a high priority for both the SEC and DOJ. The SEC’s record enforcing the FCPA is very strong, and 2016 is no exception.’144 Indeed, there was a significant uptick in FCPA enforcement during the latter part of the Obama administration. In the past fiscal year alone, the SEC ‘filed 17 actions against entities and individuals for FCPA violations, a nearly 30 percent increase from 2015, and obtained more than US$290 million in monetary penalties’.145 In the last two months of the Obama administration, the DOJ and SEC each resolved FCPA enforcement actions against six companies, and the SEC alone recovered a total of US$328 million in civil penalties and disgorgement. The investigation and enforcement focus cut across a range of industries, including pharmaceutical and medical device companies, construction, petrochemical, mining, food processing, and manufacturing sectors, and the DOJ and SEC continued to actively and aggressively pursue large-scale corporate bribery cases.
Notably, there has been a lull in enforcement under the early Trump administration. In September 2017, Deputy Attorney General Rod Rosenstein explained that existing federal policies on prosecuting corporate crime were ‘under review’.146 Rosenstein added that he ‘anticipate[d] there may be some change to the policy on corporate prosecutions’, and that the DOJ ‘may in the near future make an announcement about what changes [it] [is] going to make to corporate fraud principles’.147 Caution should be taken, however, before drawing any conclusions about the new administration’s enforcement priorities, as the absence of prosecutions may simply be a by-product of personnel issues, including turnover and the current lack of permanent leadership, or otherwise reflect normal variation in enforcement patterns.
In recent years, both the DOJ and the SEC have expressed their intention to bring more cases against individuals in addition to cases against companies, and their enforcement efforts over the past few years reflect this. In September 2015, the DOJ issued a policy memorandum re-emphasising the Department’s dedication to identifying and prosecuting individuals for corporate misconduct.148 The memo directs prosecutors to focus on individuals from the very beginning of investigations, stating ‘[o]ne of the most effective ways to combat corporate misconduct is by seeking accountability from the individuals who perpetrated the wrongdoing’. Underpinning the policy is the view that individual accountability deters future illegal activity, incentivises changes in corporate behaviour, ensures that the proper parties are held responsible for their actions and promotes the public’s confidence in the US justice system. The result of this attention to individual prosecutions has been more litigation and court decisions regarding the FCPA and more trials. These trends are expected to continue. In April 2017, Attorney General Jeff Sessions confirmed that ‘[t]he Justice Department will continue to emphasize the importance of holding individuals accountable for corporate misconduct.’149
Self-reporting by companies of FCPA issues continues to be a significant, if not uncontroversial, feature of the US government’s FCPA enforcement programme. In April 2016, the DOJ launched the FCPA Pilot Program to further incentivise companies to report alleged violations as a means of obtaining mitigation credit, or in some circumstances a declination to prosecute. Consequently, it is expected that self-reporting will remain a common phenomenon.
1 Mark F Mendelsohn is a partner at Paul, Weiss, Rifkind, Wharton & Garrison LLP. The author would like to thank Adam L Dulberg and Lina Dagnew for their substantial assistance in the preparation of this chapter.
2 18 U.S.C. §201(c).
3 Evans v. United States, 504 U.S. 255, 268 (1992).
4 Id. at 266.
5 See, e.g., United States v. Rabbitt, 583 F.2d 1014, 1023 (8th Cir. 1978).
6 18 U.S.C. §201(a).
7 Dixson v. United States, 465 U.S. 482, 499 (1984).
8 5 U.S.C. §501 (1978); U.S. Office of Personnel Management, 2017 Pay Tables for Executive and Senior Level Employees (2017), available at www.opm.gov/policy-data-oversight/pay-leave/salaries-wages/salary-tables/pdf/2017/EX.pdf.
9 5 U.S.C. §501 (1978).
10 5 C.F.R. §2635.804(a) (2007).
11 5 C.F.R. §2625.804(b).
12 18 U.S.C. §208; 5 C.F.R. §2635; U.S. Office of Gov’t Ethics, Outside Employment Limitations, available at www.oge.gov/Topics/Outside-Employment-and-Activities/Outside-Employment-Limitations/.
13 United States v. Sun-Diamond Growers of California, 526 U.S. 398, 405 (1999).
14 See Rule 25 of the Rules of the House of Representatives (2008), available at www.ethics. house.gov/sites/ethics.house.gov/files/documents/2008_House_Ethics_Manual.pdf. Standing Rule XXXV of the Senate (2015), available at https://www.ethics.senate.gov/public/index.cfm/files/serve?File_id=efa7bf74-4a50-46a5-bb6f-b8d26b9755bf#page=9.
15 5 C.F.R. §2635.
16 5 C.F.R. §2635.203(d).
17 Exec. Order No. 13490 74 FR 4673, 2009 WL 166652 (2009), available at www.whitehouse.gov/the_press_office/ExecutiveOrder-EthicsCommitments.
18 See footnote 14 above. For general background on the House and Senate Rules see, House Committee on Ethics, The House Gift Rule, available at http://ethics.house.gov/gifts/house-gift-rule; Senate Select Committee on Ethics, Gifts, available at www.ethics.senate.gov/public/index.cfm/gifts.
19 5 C.F.R. §2635.204(a); U.S. Office of Gov’t Ethics, Gifts From Outside Sources, available at www.oge.gov/Topics/Gifts-and-Payments/Gifts-from-Outside-Sources/.
20 5 C.F.R. §2635.204.
21 52 U.S.C. §30121.
22 52 U.S.C. §30121(b).
23 11 C.F.R. 110.20(i); the Federal Election Committee, Foreign Nationals Brochure, available at
25 For example, a manager at Apple was convicted of wire fraud for accepting kickbacks in exchange for providing information to Apple suppliers on price targets and future products. Jim Edwards, An Apple Exec Is Going To Prison For Taking Kickbacks On Leaked Information (Dec. 8, 2014), available at
26 18 U.S.C. §1952(b) (2012).
27 18 U.S.C. §201(b); 18 U.S.C. §3571(b). See also Sun-Diamond, 526 U.S. at 405. Corporations convicted under 18 U.S.C. 3571(c) may be fined up to US$500,000.
28 18 U.S.C. §201(c); 18 U.S.C. §3571.
29 18 U.S.C. §666(a); 18 U.S.C. §3571.
30 18 U.S.C. §1951; 18 U.S.C. §3571.
31 Peter J Henning and Lee J Radek, The Prosecution and Defense of Public Corruption, 8 (2011).
32 18 U.S.C. §1346.
33 130 S. Ct. 2896, 2929 (2010).
34 McDonnell v. United States, 139 S.Ct. 2355 (2016).
35 Id. at 2357.
37 Peter J Henning and Lee J Radek, The Prosecution and Defense of Public Corruption, 67 (2011).
38 See 15. U.S.C. §§78dd-1(a), 78dd-2(a), 78dd-3(a) (1998).
39 15 U.S.C. §78dd-1(f )(1)(a).
40 8 C.F.R. § 319.5 (2004).
41 See United States v. Carson, 2011 U.S. Dist. LEXIS 88853 (C.D. Cal. 18 May 2011); 15 U.S.C. §§78dd-1(f)(1), 78dd-2(h)(2), 78dd-3(f )(2).
42 A Resource Guide to the U.S. Foreign Corrupt Practices Act (Nov. 2012) at 20, available at
43 United States v. Esquenazi, 752 F.3d 912, 925 (11th Cir. 2014).
45 Id. (‘[C]ourts and juries should look to the foreign government’s formal designation of that entity; whether the government has a majority interest in the entity; the government’s ability to hire and fire the entity’s principals; the extent to which the entity’s profits, if any, go directly into the governmental fisc, and, by the same token, the extent to which the government funds the entity if it fails to break even; and the length of time these indicia have existed.’)
46 Id. (‘Courts and juries should examine whether the entity has a monopoly over the function it exists to carry out; whether the government subsidizes the costs associated with the entity providing services; whether the entity provides services to the public at large in the foreign country; and whether the public and the government of that foreign country generally perceive the entity to be performing a governmental function.’)
47 15 U.S.C. § 78dd-l(c)(2)(A)-(B). (See discussion of defences, Part D).
48 See, e.g., DOJ FCPA Review Procedure Release Op.’s 81-01 (1981), 81-02 (1981), 82-01 (1982).
49 A Resource Guide to the U.S. Foreign Corrupt Practices Act (Nov. 2012) at 15, available at
50 15 U.S.C. §78dd-l(c)(2)(A)-(B).
51 H.R. Conf. Rep. No. 100-418, at 922 (1988).
52 15 U.S.C. §78dd-l(c)(l).
53 15 U.S.C. §§78dd-l(b), 78dd-2(b), 78dd-3(b).
54 15 U.S.C. §78dd-3(f )(4)
55 15 U.S.C. §§78dd-l(f )(3), 78dd-2(h)(4), 78dd-3(f )(4).
56 15 U.S.C. §§78dd-1(f )(2), 78dd-2(h)(3), 78dd-3(f )(3).
57 H.R. Conf. Rep. No. 100-418, at 919-21 (1988).
58 15 U.S.C. §§78dd-l(a), 78dd-2(a).
59 15 U.S.C. §78dd-l(a).
60 15 U.S.C. §78dd-2(h).
61 15 U.S.C. §§78dd-1(a), 78dd-2(a).
62 15 U.S.C. §78dd-3(a).
63 SEC v. Straub, No. 1:11-cv-09645-RJS (S.D.N.Y. Feb. 8, 2013).
65 Id. But see SEC v. Steffen, No. 1:11-cv-09073-SAS (S.D.N.Y. Feb. 19, 2013) (finding no personal jurisdiction over a foreign defendant who allegedly pressured executives to authorise bribes during a telephone call with the United States and commenting that ‘the exercise of jurisdiction over foreign defendants based on the effect of their conduct on SEC filings is in need of a limiting principle’).
66 U.S.S.G. §8C2.5(g)(1).
67 Memorandum from Mark R Filip, Deputy Attorney Gen., Dep’t of Justice, on Principles of Fed. Prosecution of Bus. Orgs. to Heads of Dep’t Components and U.S. Attorneys, U.S.A.M. §§9–28.700 (28 August 2008), available at www.usdoj.gov/opa/documents/corp-charging-guidelines.pdf.
68 See Exchange Act Release No. 44969, Accounting and Auditing Enforcement Release No. 1470 (23 October 2001).
69 A Resource Guide to the U.S. Foreign Corrupt Practices Act (Nov. 2012) at 54, available at
70 See., e.g. Bruce Carton, U.S. Chamber of Commerce Pushes for Further FCPA Clarity and Reforms, (Feb. 20, 2013), available at www.complianceweek.com/us-chamber-of-commerce-pushes-for-further-fcpa-clarity-and-reforms/article/281053/.
71 See DOJ Memorandum Authored by Deputy Attorney General Sally Quillian Yates (Yates Memo) on Individual Accountability for Corporate Wrongdoing (9 September 2015) at 2-5, www.justice.gov/dag/file/769036/download.
72 U.S. Dep’t of Justice, The Fraud Section’s Foreign Corrupt Practices Act Enforcement Plan and Guidance 2 (the ‘Memorandum’) (Apr. 5, 2016), www.justice.gov/opa/file/838386/download. In addition to the Pilot Program, the memorandum also announces other enhancements to DOJ’s FCPA enforcement framework, including an increase in DOJ and FBI staff dedicated to FCPA prosecutions and enhanced collaboration efforts with foreign authorities.
73 Leslie Caldwell, Assistant Attorney General, Dep’t of Justice, Remarks at American Conference Institute’s 32nd Annual International Conference on FCPA (Nov. 17, 2015), www.justice.gov/opa/speech/assistant-attorney-general-leslie-r-caldwell-delivers-remarks-american-conference.
74 Memorandum at 2.
75 SEC Press Rel. 2013-65, SEC Announces Non-Prosecution Agreement With Ralph Lauren Corporation Involving FCPA Misconduct (22 April 2013), www.sec.gov/News/PressRelease/Detail/PressRelease/1365171514780.
77 U.S. Dep’t of Justice, U.S.A.M., Criminal Resource Manual §§9–1018 (2000).
79 U.S. v. Patel, No. 09-cr-338 (D.D.C. June 2011).
80 15 U.S.C. §§78dd-2(g), 78dd-3(e), 78ff(c); 18 U.S.C. §3571.
81 15 U.S.C. §§78dd-2(g)(3), 78dd-3(e)(3), 78ff(c)(3) (2002).
82 15 U.S.C. §§78dd-2(g), 78dd-3(e), 78ff(c).
83 15 U.S.C. §§78u, 78u-3 (2010).
84 Kokesh v. SEC, No. 16-529, slip op. at 5 (U.S. June 5, 2017) (Sotomayor, J.)
85 See id.
86 15 U.S.C. §78m(b) (2006).
87 15 U.S.C. §78m(b); see SEC v. World-Wide Coin Invs., Ltd., 567 F. Supp. 724, 750 (N.D. Ga. 1983) (‘Among the factors that determine the internal accounting control environment of a company are its organizational structure, including the competence of personnel, the degree and manner of delegation and responsibility, the quality of internal budgets and financial reports, and the checks and balances that separate incompatible activities.’)
88 15 U.S.C. §78m(b).
89 15 U.S.C. §78m(b)(4)-(5); e.g., SEC v. Kelly, 765 F. Supp. 2d 301, 322 (S.D.N.Y. 2011) (‘SEC need not prove scienter to succeed on a claim [. . . liability] is predicated on reasonableness [. . .] of defendant’s conduct [. . .]’).
90 15 U.S.C. §78m(b)(6).
91 See, e.g., In the Matter of Watts Water Technologies, Inc. and Leesen Chang, SEC Administrative Proceeding File No. 3-148585 (13 October 2011).
92 See, e.g., United States v. Control Components Inc., No. 8:09-cr-00162 (C.D. Cal. 22 July 2009); United States v. SSI Int’l Far East Ltd., No. 3:06-cr-00398-KI (D. Or. 16 October 2011).
93 15 U.S.C. §78ff(a); 18 U.S.C. §3571.
94 18 U.S.C. §3282 (2003).
95 15 U.S.C. §78u.
96 See 26 U.S.C. §162(c)(1)(2006).
97 18 U.S.C. §1956(c)(7) (2012) (listing the predicate offences as ‘specified unlawful activit[ies]’).
98 See 18 U.S.C. §1956.
99 United States v. Quinones, 635 F.3d 590, 594 (2d Cir. 2011) (quoting United States v. Ferrarini, 219 F.3d 145, 154 (2d Cir. 2000) (‘A conscious avoidance instruction permits a jury to find that a defendant had culpable knowledge of a fact when the evidence shows that the defendant intentionally avoided confirming the fact’).
100 E.g., United States v. Blair, 661 F.3d 755, 764 (4th Cir. 2011) (‘Almost any exchange of money between two parties qualifies as a financial transaction subject to criminal prosecution under § 1956, provided that the transaction has at least a minimal effect on interstate commerce and satisfies at least one of the four intent requirements. . .’).
101 E.g., id.
102 18 U.S.C. §1956(c)(9) (2012).
103 United States v. Akintonbi, 159 F.3d 401, 403 (9th Cir. 1998) (finding that checks with no value were proceeds under the statute).
104 United States v. Santos, 553 U.S. 507, 515–516 (2008).
105 E.g., United States v. Richardson, 658 F.3d 333, 340 (3d Cir. 2011).
106 United States v. Lee, 558 F.3d 638, 642 (7th Cir. 2009) (payment of the advertising expenses of a prostitution enterprise promoted the underlying offence).
107 18 U.S.C. §1956(a)(2)(A); United States v. Moreland, 622 F.3d. 1147 (9th Cir. 2010).
108 United States v. Heid, 651 F.3d 850, 855 (8th Cir. 2011).
109 See, e.g., United States v. Blankenship, 382 F.3d 1110, 1129-30 (11th Cir. 2004) (finding that a defendant’s performance of the ‘minimum number of transactions reasonably necessary’ to spend money at issue and failure to use intermediate accounts or dissociate himself from the accounts in which money was deposited supported a finding that the defendant did not engage in money laundering).
110 United States v. Magluta, 418 F.3d 1166, 1176 (11th Cir. 2005).
111 18 U.S.C. §1956(a)(1-2); see also United States v. Bowman, 235 F.3d 1113, 1118 (8th Cir. 2000).
112 Bowman, 235 F.3d at 1118 (citing United States v. Young, 45 F.3d 1405, 1413 (10th Cir. 1995), cert. denied, 515 U.S. 1169 (1995)) (not reaching the structure of the transaction because the evidence indicated that offender was unaware of the requirement government alleged).
113 31 U.S.C. §5324(a)–(c).
114 See United States v. Bodmer, 342 F. Supp. 2d 176, 191-92 (S.D.N.Y. 2004) (finding that a foreign national defendant had conspired to violate the money laundering statue’s international transfer of funds provision even where, under the pre-1998 version of the FCPA, he was not subject to criminal punishment under the FCPA).
115 See, e.g., United States v. Kozeny, 638 F. Supp. 2d 348 (S.D.N.Y. 2009) (finding testimony of two witnesses that defendant agreed with others that one of the uses of his investment would be bribing foreign government officials sufficient for a reasonable jury to find conspiracy to launder money under Section 1956(a)(2)).
116 See, e.g., United States v. Jean Rene Duperval, No. 1:09-cr-21010-JEM (S.D. Fl. 2009) (money laundering prosecution of former director of international relations for Haiti Telco).
117 18 U.S.C. §1956(a)(1)(2).
118 18 U.S.C. §1957(b)(1)(2) (2012).
119 18 U.S.C. §981(a)(1)(A) and (C).
120 See DOJ Press Release 16-839, United States Seeks to Recover More Than US$1 Billion Obtained from Corruption Involving Malaysian Sovereign Wealth Fund (20 July 2016), www.justice.gov/opa/pr/united-states-seeks-recover-more-1-billion-obtained-corruption-involving-malaysian-sovereign.
121 See DOJ Press Release 17-655, U.S. Seeks to Recover Approximately US$540 Million Obtained From Corruption Involving Malaysian Sovereign Wealth Fund (15 June 2017), www.justice.gov/opa/pr/us-seeks
122 31 U.S.C. §5313.
123 31 U.S.C. §5331 (2011); 31 C.F.R. §§103.22, 103.30 (2011).
124 31 U.S.C. §5314 ; 31 C.F.R. §103.24.
125 31 U.S.C. §5318 (2011).
126 Ratzlaf v. United States, 510 U.S. 135, 137 (1994); see also United States v. Tatoyan, 474 F.3d 1174, 1177 (9th Cir. 2007).
127 31 U.S.C. §5322(a) (2001).
128 31 U.S.C. §5322(b).
129 Inter-American Convention Against Corruption, Article IX, 29 March 1996.
130 H.R. 2216, 113th Cong. (2013), available at http://beta.congress.gov/bill/113th/house-bill/2216.
132 See H.R. 3547, 113th Cong. (2013), available at www.congress.gov/bill/113th-congress/house-bill/3547/.
133 Deirdre Walsh, CNN exclusive: Obama signs STOCK Act to address ‘defecit of trust’ in Washington, CNN (4 April 2012), available at www.cnn.com/2012/04/04/politics/stock-act-signing/index.html.
134 The White House, Office of the Press Secretary, Remarks by the President in State of the Union Address (24 January 2012), available at www.whitehouse.gov/the-press-office/remarks-president-state-union-address.
135 Deidre Walsh and Dana Bash, ‘Congress closes loophole in stock trading law after CNN report’, (August 3, 2012), available at www.cnn.com/2012/08/02/politics/stock-act-loophole/index.html.
136 Upjohn Co. v. United States, 449 U.S. 383, 389 (1981).
137 Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, 124 Stat 1376 (2010).
138 U.S. Dep’t of Justice, U.S.A.M., Criminal Resource Manual, §§9–28.300.
139 See DOJ Press Rel. 12-534, Former Morgan Stanley Managing Director Pleads Guilty for Role in Evading Internal Controls Required by FCPA (25 April 2012), www.justice.gov/opa/pr/2012/April/12-crm-534.html.288.
140 See SEC Press Rel. 2013-65, SEC Announces Non-Prosecution Agreement With Ralph Lauren Corporation Involving FCPA Misconduct (22 April 2013), www.sec.gov/News/PressRelease/Detail/PressRelease/1365171514780.
141 U.S. Dep’t of Just., Criminal Division, Fraud Section, Evaluation of Corporate Compliance Programs (Feb. 8, 2017), www.justice.gov/criminal-fraud/page/file/937501/download.
142 See id.
143 Statement of Assistant Attorney General Leslie Caldwell, American Bar Association’s 30th Annual National Institute on White Collar Crime (March 4, 2016), www.justice.gov/opa/speech/assistant-attorney-
144 Keynote Remarks of SEC Chair Mary Joe White at the International Bar Association Annual Conference Legal Practice Division Luncheon (September 21, 2016), www.sec.gov/news/speech/securities-regulation-
145 See id.
146 ‘Justice Department mulls changing corporate prosecution policy’, Reuters (14 September 2017), www.reuters.com/article/us-usa-justice-whitecollar/justice-department-mulls-changing-corporate-prosecution-policy-idUSKCN1BP2KD.
148 See Yates Memo on Individual Accountability for Corporate Wrongdoing (9 September 2015) at 1,
149 Statement of Attorney General Jeff Sessions, Ethics and Compliance Initiative Annual Conference (April 24, 2017), www.justice.gov/opa/speech/attorney-general-jeff-sessions-delivers-remarks-ethics-and-compliance-initiative-annual.