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The Foreign Corrupt Practices Act Turns 39

39

Today our favorite statute, the Foreign Corrupt Practices Act, turn 39.

President Jimmy Carter’s December 20, 1977 signing statement stated in full as follows.

“I am pleased to sign into law S. 305, the Foreign Corrupt Practices Act of 1977 and the Domestic and Foreign Investment Improved Disclosure Act of 1977. During my campaign for the Presidency, I repeatedly stressed the need for tough legislation to prohibit corporate bribery. S. 305 provides that necessary sanction. I share Congress’s belief that bribery is ethically repugnant and competitively unnecessary. Corrupt practices between corporations and public officials overseas undermine the integrity and stability of governments and harm our relations with other countries. Recent revelations of widespread overseas bribery have eroded public confidence in our basic institutions.

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Lennox International – The Most Absurd FCPA Voluntary Disclosure Ever?

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Lennox International is involved in the heating, air conditioning, and refrigeration markets.

The question needs to be asked: what made the company so hot as to recently disclose to the DOJ and SEC an investigation into a $475 payment in Russia to release a shipment of goods being held by customs officials?

The disclosure is arguably one of the most absurd FCPA disclosures ever.

There is of course no legal obligation to voluntarily disclose, something even the DOJ acknowledges in its April 2016 FCPA Pilot Program. But then again, returning to an issue first highlighted in this 2009, voluntary disclosure is the fuel that feeds FCPA enforcement and is extremely lucrative for FCPA Inc. Indeed, who can forget the words of the former DOJ Fraud Section Chief in this Wall Street Journal article “if you get two of these [FCPA investigations] a year as a partner, you’re pretty much set.”

Lennox’s decision to disclose was presumably a business decision made by the board of directors or audit committee based on the advise of FCPA counsel. If FCPA counsel did indeed advise company leaders to disclose, that advise needs to be seriously questioned.

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Survey Responses Indicate That The More Things Change, The More They Remain The Same

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The “Story of the Foreign Corrupt Practices” highlights how Congress clearly understood and appreciated the many difficult foreign business conditions facing U.S. companies.

For instance, the 1976 SEC Report on Questionable and Illegal Corporate Payments and Practices, on which Congress placed great reliance during its multi-year legislative process leading to the FCPA, documented a wide range of foreign corporate payments to a variety of recipients for a variety of reasons including payments “to persuade low-level governmental officials to perform functions or services which they are obligated to perform as part of their governmental responsibilities, but which they may refuse or delay unless compensated.”

Congress could have legislated as to the wide range of foreign corporate payments brought to its attention and certain bills introduced during the multi-year legislative process leading to the FCPA did indeed capture a wide range of payments. Yet, in passing the FCPA Congress intended to capture only a narrow range of foreign corporate payments.

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How A Foreign Non-Issuer Company Can Become Subject To The FCPA’s Anti-Bribery Provisions

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This recent report suggests that Angelica Rivera, wife of Mexico President Enrique Pena Nieto, is using a luxury property in Florida bought by a company (Grupo Pierdant) that is expected to bid for lucrative Mexican government contracts. According to the report, Grupo Pierdant has also paid the property tax on an additional Florida property bought by a holding company set up by Rivera.

This post uses the recent report to review how a foreign non-issuer company (such as Grupo Pierdant) can become subject to the FCPA’s anti-bribery provisions.

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Skittish Then, Still Skittish Now

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The more things change, the more things stay the same, including the skittishness of the business community surrounding the Foreign Corrupt Practices Act and related laws and its attendant real-world consequences.

This recent “Global Anti-Corruption Survey” (a survey of 330 “respondents around the world to understand companies’ usage of anti-corruption programs and its impact on business decisions as well as due diligence in practice) contains a litany of responses concerning the 50% (or so) of respondents who, because of “concerns about violating anti-corruption regulations”

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