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What Congress Intended The Third-Party Payment Provisions To Capture As Well As Not Capture

Call me old-fashioned or a rule of law purist.

However, in this the Foreign Corrupt Practice Act’s 40th year, it is prudent to take a step back and ponder what Congress actually intended to capture, and not capture, by enacting the FCPA.

Indeed, as the recent Hoskins decision yet again demonstrated (see here [1]) a common thread in most FCPA judicial decisions is judges consulting the legislative history in interpreting the FCPA.

As readers no doubt know, most FCPA enforcement actions concern, in whole or in part, the conduct of various third parties.

The FCPA can clearly result in legal liability for business organizations based on the conduct of third parties, but only if the so-called third-party payment provisions are met.

The FCPA’s anti-bribery provisions apply not only to direct payments or things of value offered or provided to “foreign officials” to assist in “obtaining or retaining” business, but also to payments or things of value offered or provided 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 any foreign official …”

The FCPA defines “knowing” as follows:

“(A) A person’s state of mind is “knowing” with respect to conduct, a circumstance, or a result if (i) such person is aware that such person is engaging in such conduct, that such circumstance exists, or that such result is substantially certain to occur; or (ii) such person has a firm belief that such circumstance exists or that such result is substantially certain to occur.

(B) When knowledge of the existence of a particular circumstance is required for an offense, such knowledge is established if a person is aware of a high probability of the existence of such circumstance, unless the person actually believes that such circumstance does not exist.”

In the language of the law, the above definition includes not only actual knowledge, but also so-called constructive knowledge often referred to as conscious disregard or willful blindness.

[2]

In the legislative history, Congress articulated what the third-party payment provisions were intended to capture as well as not capture. A Senate Report stated:

“[The provisions] are meant to prevent management from adopting ‘head-in-the-sand’ approach to bribery in order to avoid liability by ignoring facts and circumstances underlying the subject transaction which would indicate the payment of a bribe. […]  On the other hand, the mere fact of doing business in a country where corrupt payments are common, or the employment of an agent with personal relationships with government officials in the country where the company seeks to do business, would not establish such a course of conduct.  Similarly, the payment of a commission that is higher than customary would not by itself violate [the provisions] without other evidence that the increased amount of commission is to permit a corrupt payment to be made.”

A House Report likewise stated:

“The definition of ‘knowing’ is intended to make it clear that a ‘head in the sand’ approach to the payment of bribes through third parties will not be tolerated.  Knowing is therefore defined to include conscious disregard of a high probability that a payment to a third payment will be transmitted by that party to a foreign official …”.

The House Report further stated:

“… [M]ere negligence will not give rise to a civil prosecution under the FCPA.  There must be a showing of reckless disregard or knowledge.  […]  [N]either mere negligence nor reckless disregard will give rise to a criminal prosecution under the FCPA.  In order to bring a criminal prosecution for violation of the third party payments provisions, a showing of knowledge as defined in the [FCPA] would be required.”

Is it possible to reconcile this Congressional intent with certain FCPA enforcement actions involving third parties?

That is for you to decide.

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