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

This [1] 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.

In 1998, the FCPA was amended to, among other things, create a new statutory section (dd-3) applicable – in FCPA speak – to a “person” other than an “issuer” (which dd-1 covers) or a “domestic concern” (which dd-2 covers).

In plain English, this amendment extended the FCPA’s anti-bribery provisions to certain foreign companies and foreign nationals. Whether a foreign non-issuer company is subject to the FCPA’s anti-bribery provisions is dependent on dd-3’s jurisdictional nexus being met.

Specifically, dd-3 provides that, as to “persons” other than an “issuer” or “domestic concerns,” the FCPA’s anti-bribery provisions apply to the extent that, “while in the territory of the U.S.,” the person “makes use of the mails or any means or instrumentality of interstate commerce” or engages in “any other act in furtherance” of an improper payment scheme.

Senate and House Reports relevant to the 1998 amendment stated:

 “[The amendment] creates a new section in the FCPA, providing for criminal and civil penalties over persons not covered under the existing FCPA provisions regarding issuers and domestic concerns. This section closes the gap left in the original FCPA and implements the OECD Convention’s requirement that Parties criminalize bribery by ‘any person.’ The prohibited acts are the same as those covered by [the existing provisions in the FCPA] with two qualifications.

First, the offense created under this section requires that an act in furtherance of the bribe be taken within the territory of the United States. The OECD Convention requires each Party to ‘take such measures as may be necessary to establish its jurisdiction over the bribery of a foreign public official when the offense is committed in whole or in party in its territory.’  The new offense complies with this section by providing for criminal jurisdiction in this country over bribery by foreign nationals of foreign officials when the foreign national takes some act in furtherance of the bribery within the territory of the United States. […]  As envisioned in the OECD the territorial basis for jurisdiction should be interpreted broadly so that an extensive physical connection to the bribery act is not required.  […] The second difference from the existing FCPA provisions is that this section expands the commerce nexus to include not only the use of the mails or any means or instrumentality of interstate commerce but ‘any other act’ within the United States.”

The DOJ has invoked the dd-3 prong of the FCPA’s anti-bribery provisions in bringing corporate FCPA enforcement actions against, among others, companies from Korea, France Germany, Japan, Switzerland, Russia and China, as well as citizens of Japan, the United Kingdom, and Israel. In analyzing why FCPA enforcement has generally increased in the modern era, dd-3 is certainly one of the answers.

Set forth below is what the DOJ/SEC say about dd-3 in the 2012 FCPA Guidance (a document which reflects the DOJ and SEC’s view of FCPA enforcement).

“The FCPA also applies to certain foreign nationals or entities that are not issuers or domestic concerns. Since 1998, the FCPA’s anti-bribery provisions have applied to foreign persons and foreign non-issuer entities that, either directly or through an agent, engage in any act in furtherance of a corrupt payment (or an offer, promise, or authorization to pay) while in the territory of the United States. Also, officers, directors, employees, agents, or stockholders acting on behalf of such persons or entities may be subject to the FCPA’s anti-bribery prohibitions.”

Back to Grupo Pierdant and the recent media reports.

Given that the thing of value allegedly provided to Mexico’s first lady is physically located in the U.S, there would seem to be jurisdiction over Grupo Pierdant to the extent the thing of value was in furtherance of a corrupt scheme.

That the thing of value was allegedly provided to the wife of Mexico’s President, not to the “foreign official” directly, would seem to be of little practical significance to the DOJ. Indeed, several corporate FCPA enforcement actions have been based, in whole or in part, on things of value provided to family members of “foreign officials” [2] with the recent BNY Mellon [3] and Qualcomm [4] “internship” enforcement actions being the most recent examples.

An open issue would appear to be what discretion did Pena Nieto or Rivera have on the Mexican government contracts Grupo Pierdant was seeking.

Regardless of this ultimate answer, it would seem – based strictly on the information in the recent media reports – that the DOJ should be interested in the reported conduct.

Whether the DOJ will open an FCPA inquiry centered on the wife of Mexico’s President is another question.