Foreign Corrupt Practices Act Essay Example

parameters of the FCPA, where violation can occur if five conditions are not met according to the payments prohibition provision.

The FCPA applies to all companies, employees, agents, or individuals and their potentially liable actions. A parent corporation controlling a foreign subsidiary's activity may also be held accountable for any wrongdoing. To violate the FCPA, corrupt payments must aim to induce an official into misusing their position for a business advantage from governmental decisions. The FCPA allows some types of payments and affirmative defenses like grease payments made to secure routine government actions.

The "FCPA Anti-bribery Provision" categorizes license acquisition, police protection, visa and work-order processing as regular government responsibilities. In case of bribery allegations, individuals or companies may claim an affirmative defense by proving that the payment was lawful according to foreign country laws or used for advertising or product demonstration. The FCPA enforces fines and penalties for bribery and involves criminal consequences from the Department of Justice as well as civil ramifications from the SEC.

Violations of the anti-bribery provision may result in penalties of up to $2,000,000 for business entities and fines up to $100,000 and imprisonment for five years for employees, officers, and agents. If suspected of violating this provision, companies may be sued by either the Attorney General or SEC. As regulators place more emphasis on compliance with FCPA regulations, it is increasingly important for businesses to comply. To prevent or remedy potential violations, some companies have established internal audit teams to enhance their processes and controls in detecting possible FCPA breaches. However, not all firms can adhere to every regulation while still performing lawful operations.

In the United States vs. Kay case (No.

05-20604, 2007 U.S.), there could be wider enforcement actions under the FCPA, leading to a broader reach (according to "FCPA Gets Broader Reach"). The two individuals involved were Douglas Murphy, the President of American Rice, Inc., and David Kay, the Vice President for Caribbean Operations.

The company took various measures to decrease sales and tax expenses on their rice exports to Haiti, including compensating officials to resolve tax-related problems, understating imports to lessen duties and taxes, and compensating officials to condone the understating. However, the district court dismissed the indictment by ruling that the FCPA did not include paying foreign officials to decrease taxes. Conversely, in the case United States vs. Kay, the court of appeal disregarded this decision and determined that providing bribes to foreign officials with the intention of unlawful avoidance of sales taxes was within the scope of FCPA.

Kay and Murphy broadened the FCPA after their conviction for bribing officials in Haiti to protect their business. Although some argued that criminal responsibility under the statute exceeded its explicit terms, the court disagreed. To avoid significant fines and penalties, it is crucial for businesses to have well-defined compliance procedures. Despite greater guidance on FCPA provisions, companies frequently ignore certain aspects and are charged with illegal transactions.

Imperial Metal Industries and its subsidiary, Control Components Inc., are being investigated for potential violations of the FCPA. The investigation is based on allegations that former employees in China, Brazil, India, and Malaysia engaged in bribery, which could be considered a breach of the anti-bribery provision. Control Components Inc. is a global supplier that designs and manufactures valve systems for industries such as power generation, oil and

gas, petrochemicals, pulp and paper. Currently pending is the trial of six former executives from Control Components Inc., who were indicted by the Department of Justice for violating the anti-bribery provision of the FCPA.

Furthermore, a couple of ex-officers have admitted guilt in association with similar accusations ("FCPA Digest"). Earlier, in August 2007, Imperial Metal Industries stated that they had launched an internal inquiry into abnormal payments related to specific Control Conglomerate, Inc. agreements and had informed governmental agencies ("FCPA Digest").