The anti-bribery provisions of the Foreign Corrupt Practices Act define “foreign official” to mean in pertinent part: “any officer or employee of a foreign government or any department, agency, or instrumentality thereof … or any person acting in an official capacity for or on behalf of any such government or department, agency, or instrumentality …”.
Having reviewed the FCPA’s entire legislative history, it is clear that Congress intended “foreign” to mean non-U.S. as Congress learned of payments to: the political campaign of the President of the Republic of Korea; a Saudi Arabian general; Italian political parties; Japanese Prime Minister Tanaka; Prince Bernhard (the Inspector General of the Dutch Armed Forces and the husband of Queen Juliana of the Netherlands); Oswaldo Lopez Arellano, the President of Honduras; and Albert Bernard Bongo, the President of Gabon.
However, foreign companies can be subject to the FCPA’s anti-bribery provisions (either because the company is a so-called issuer under the dd-1 prong of the FCPA or under the dd-3 prong of the FCPA).
When a foreign company is involved does “foreign” official still mean non-U.S. or can it mean “foreign” as it relates to the specific company at issue?
This issue was highlighted in this previous post concerning the SEC’s 1996 enforcement action against Montedison, an Italian corporation which included allegations that Montedison violated the FCPA’s books and records and internal control provisions when the company concealed “hundreds of million of dollars of payments that, among other things, were used to bribe politicians in Italy and other persons.” According to a knowledgeable source at the SEC at the time, there was a belief that there were no “foreign” officials involved because Montedison, an Italian company, allegedly bribed Italian officials.
However, and in seeming contradiction to the above belief, in recent years the DOJ has brought FCPA enforcement actions against foreign companies for bribing their own “domestic” officials because the officials – as it relates to the U.S. – were “foreign.”
For instance, a large portion of the FCPA enforcement action against Brazil-based Odebrecht / Braskem concerned the company bribing Brazilian officials. (See here). Likewise, the FCPA enforcement action against Chilean chemical and mining company Sociedad Quimica y Minera de Chile S.A. (SQM) involved conduct with Chilean officials.
In other words, in these enforcement actions the officials bribed were not “foreign” to the companies resolving the enforcement but “foreign” to the U.S.
I was reminded of this “foreign official” head scratcher when analyzing the DOJ’s recent $1 million enforcement action against the subsidiary of a Chinese company for conduct involving public officials in Los Angeles, including bribery, honest services fraud, and foreign and conduit campaign contributions. (See here).
According to the DOJ, China-based Shenzhen Hazens established Jia Yuan USA Co. to acquire, operate and redevelop the Los Angeles Luxe City Center Hotel. In doing so, the company needed approval from various department and committees of the City of Los Angeles. According to the NPA, a company employee sent a L.A. council member Katy Perry concert tickets valued at approximately $1,000 total for the council member and his family. In addition, at the council member’s request, the company organized and coordinated a trip for the council member and his family members to China during which the company “paid for multiple meals for [the council member] and his family, entry tickets to two theme parks, and gifts for [the council member’s] children.”
The NPA used to resolve the matter involved Jia Yuan USA Co., a Delaware Corporation, and as it relates to this entity, the L.A. council member would not be a “foreign” official but a domestic official. But then again, in many FCPA enforcement actions the corporate entity technically entering into the plea agreement or deferred prosecution agreement is a foreign subsidiary of the U.S. parent in which the same dynamic would apply (i.e. a Chinese subsidiary of a U.S. parent company resolves an FCPA enforcement action even though as it relates to the Chinese subsidiary the officials involved were not “foreign” but domestic Chinese officials).
Could the DOJ have brought an FCPA enforcement action against China-based Shenzhen Hazens based on the conduct of Jia Yuan USA?
This depends on the introductory question of whether the “foreign” in “foreign official” means non-U.S. or whether it can mean “foreign” as to the specific company at issue.
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