- FCPA Professor - https://fcpaprofessor.com -

A Demand Side Prohibition Belongs In The FCPA And Here Is How To Accomplish It

Prior posts here [1]here [2] and here [3] in 2019 highlighted a bill introduced in the House of Representatives titled the Foreign Extortion Prevention Act [4] which sought to capture the so-called “demand side” of bribery by foreign officials given that the FCPA’s current anti-bribery provisions only capture the so-called “supply side” of bribery.

The bill sought to prohibit such conduct – not through amending the FCPA – but through amending 18 USC 201 (the domestic bribery statute) and the prior post highlighted how this potential statutory placement was odd and could lead to several areas of incongruous between liability for the “bribe” payor (what the FCPA captures) and the “bribe” demander (what the Foreign Extortion Prevention Act sought to capture).

Recently, Representative Shelia Jackson Lee (D-TX), along with a bipartisan group of co-sponsors, reintroduced the bill (H.R. 4737 [5]). Once again, the bill seeks to capture the “demand side” of bribery through amending 18 USC 201 – and not the FCPA – and therefore presents the same issues as hinted at above.

Consistent with this post [6] from 2019, I continue to believe that if Congress seeks to explicitly capture the “demand side” of bribery (the DOJ already uses the money laundering laws against alleged “bribe taking” foreign officials when there is jurisdiction), this goal is best accomplished through amending the FCPA and set forth here [7] are FCPA amendments I previously drafted (and shared with certain legislative aides) to accomplish this task.

First, some general observations in the hopes that members of Congress fully understand Foreign Corrupt Practices Act enforcement.

Member of Congress need to understand that if the demand-side prohibition is placed in the FCPA that the DOJ will likely use the same enforcement theories currently used in enforcing the “supply-side” FCPA prohibition.

In other words, members of Congress may have in mind a prohibition against bona fide, traditional foreign government officials demanding “bribes”, but need to understand that the DOJ interprets the term “foreign official” to include not just such obvious “foreign officials,” but also employees (regardless of rank, title, or position) of alleged state-owned or state-controlled entities (SOEs) as well as physicians, lab personnel and others associated with most foreign healthcare systems. Moreover, members of Congress need to understand that the DOJ interprets the term “anything of value” broadly to include not just cash and other obvious things of value (cars, jewelry, etc.), but also “golf in the morning and beer drinking in the evening,” charitable donations, internships and job opportunities for family members of alleged foreign officials, and many other things.

In short, it is up to members of Congress to decide whether they want legislation that captures a mid-level procurement manager at an SOE demanding an internship for a family member, a low-ranking bureaucratic official demanding a golf outing followed by drinks, or a foreign physician demanding a contribution to his/her favorite bona fide charitable organization. This is a policy choice for members of Congress, but member of Congress need to understand that this type of enforcement is likely to happen if the “demand side” prohibition is placed in the FCPA’s anti-bribery provisions and if the DOJ continues with its “supply-side” enforcement theories.

Another issue members of Congress need to understand and/or contemplate is how far should the “demand-side” prohibition extend? Does Congress want to make it illegal for “foreign officials” to demand “bribes” just of U.S. business organizations and U.S. citizens, nationals, etc? Or does Congress want to make it illegal for “foreign officials” to demand “bribes” of all the business organizations and individuals subject to the FCPA’s anti-bribery provisions.

For instance, the dd-1 prong of the FCPA captures not just U.S. issuers, but also foreign issuers (assuming there is jurisdiction – more on that later). In addition, the dd-3 prong of the FCPA captures (assuming there is jurisdiction – more on that later) theoretically any foreign non-issuer company in the world as well as all non-U.S. citizens, nationals, etc.

In short, members of Congress need to answer the policy question of whether U.S. criminal law enforcement should apply to … say … a Chinese physician who demands a round of golf from a representative of a French company?

[8]

With these general observations in mind, the remainder of this post describes the proposed FCPA amendments to capture the “demand side” in the FCPA’s anti-bribery provisions.

For starters, the proposed amendments do not disrupt the current structure of the FCPA (i.e. dd-1, dd-2, dd-3, the definitions, the exemption, the affirmative defenses). (Note: the only exception is that the proposed amendments includes the definition of “interstate commerce” in dd-1. Oddly, the current FCPA defines “interstate commerce” in dd-2 and dd-3, but not dd-1).

The proposed amendments divide each section of the FCPA’s anti-bribery provisions (dd-1, dd-2 and dd-3) into a “supply prohibition” and a “demand prohibition.” For the “demand prohibition” the proposed amendments generally mirror the existing substantive language of the Foreign Extortion Prevention Act. Moreover, the “demand prohibition” in each statutory section includes a jurisdictional element that is consistent with the FCPA’s current jurisdictional elements depending on the status of the “supply-side” participant.

If a foreign official “demands” a bribe from a U.S. issuer, the “demand side” prohibition will apply irrespective of whether such conduct makes use of the mails or any means or instrumentality of interstate commerce in furtherance of the conduct (consistent with the current alternative jurisdiction prong found in dd-1 applicable to U.S. issuers).

If a foreign official “demands” a bribe from a non-U.S. issuer, the “demand side” prohibition will apply to the extent use of the mails or any means of instrumentality of interstate commerce is used in furtherance of the “demand” or subsequent receipt (consistent with the current jurisdiction prong found in dd-1 applicable to non-U.S. issuers and recognizing that the alternative jurisdiction prong found in dd-1 is applicable only to U.S. issuers).

If a foreign official “demands” a bribe from a “domestic concern” (FCPA speak for all forms of U.S. business organizations other than U.S. issuers as well as all U.S. citizens, nationals, etc.) the “demand side” prohibition will apply irrespective of whether such conduct makes use of the mails or any means or instrumentality of interstate commerce in furtherance of the conduct (consistent with the current alternative jurisdiction prong found in dd-2 applicable to domestic concerns).

If a foreign official “demands” a bribe from a “person other than an issuer or domestic concern” (FCPA speak for non-issuer foreign business organizations and foreign nationals), the “demand side’ prohibition will apply to the extent the foreign official “while in the territory of the United States corruptly makes use of the mails or any means or instrumentality of interstate commerce in furtherance of the conduct (consistent with the current jurisdiction prong found in dd-3).

Might there be some jurisdictional struggles in prosecuting foreign officials for “demanding” bribes under the proposed amendments? Surely there will be, but the proposed amendments keep in place the current jurisdictional elements of the FCPA given the status of the actor.

In short, if Congress determines that a demand-side prohibition of bribery is needed, for the reasons discussed in prior posts and this post, it belongs in the FCPA and these proposed FCPA amendments [7] demonstrate how to accomplish it.

FCPA Institute Online

The most comprehensive online FCPA training course available. Over 12 hours of narrated instruction from Professor Koehler allowing professionals to elevate their FCPA knowledge and practical skills at their own pace.    

Register [9]