strumentality, absent a special mechanism of foreign-government control.
Because enforcement actions often
hinge on this broad definition, compliance officers typically advise erring
on the side of caution. Some clarity regarding who is considered a foreign official under the FCPA may be forthcoming — for the first time, the definition
of “instrumentality” is before a circuit
court in the Haiti Telco case — but until
a ruling is issued, businesses should
continue to take care when interacting
The FCPA contains two notable safe
harbor exceptions. First, it permits
facilitation payments for “routine gov-
ernmental action.” Second, it allows
payments that are lawful under the for-
eign country’s laws or were reasonable
expenses related to product promo-
tion or contract execution. Businesses
should be prepared to justify the appli-
cation of such provisions by providing
evidence of custom or the reasonable-
ness of the payment. Because the U.K.’s
Bribery Act does not allow facilitation
payments, that exception under the
FCPA is effectively neutered for com-
panies subject to both laws.
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Critically, the FCPA also prohibits corrupt payments through third parties
when the originator knows that the
money will go directly or indirectly
to a foreign official. The state of mind
requirement for “knowing” is rather inclusive, and government investigators
generally take the position that firms
doing business abroad are responsible
for knowing where their funds are going. As a result, due diligence and caution are particularly important when
initiating and maintaining relationships abroad.
As noted above, FCPA-related investigations and enforcement actions have
increased steadily in recent years.
This trend has been reinforced by the
increased incentives under the Dodd-Frank financial reforms for whistleblowers to report violations. Although
the DOJ has had some notable defeats
at trial in recent FCPA cases, the total
amount recovered in FCPA settlements
remains high. Revelations by The New
York Times regarding systematic bribes
paid by Walmart in Mexico reflect a
new level of media consciousness regarding FCPA enforcement and will
likely lead to further investigations.
While it was once thought that government investigators were less likely
to focus on small and mid-sized companies, recent bribery investigations, including a coordinated sting of defense-industry executives in early 2010 (the
Africa Sting case) have proven otherwise. Thus, there is greater urgency for
small and mid-size companies that con-