Commercial bribery is prohibited by many anti-corruption laws throughout the world, such as the UK Bribery Act (UKBA). The anti-bribery provisions of the U.S. Foreign Corrupt Practices Act (FCPA) focus on official bribery, however, leaving commercial bribery to be pursued by U.S. law enforcement, if at all, under a variety of federal statutes lacking the reach and impact of the FCPA.
As a result, many compliance officers, in-house counsel and defense attorneys have failed to focus on commercial bribery when implementing and maintaining anti-corruption compliance programs and conducting related training, audits and investigations.
While the potential reach of the UKBA has begun to broaden perceptions appropriately inclusive and robust, recent comments by one senior U.S. Securities and Exchange Commission (SEC) official should remind us that the FCPA's accounting provisions may serve as a vehicle for penalizing companies for acts of commercial bribery if they result in the maintenance of inaccurate books and records or otherwise undermine a company's system of internal controls.
In November, during the American Conference Institute's 30th International Conference on the FCPA, FCPA Unite Chief at the SEC, Kara Brockmeyer, emphasized the relevance of commercial bribery when analyzing an issuer's books-and-records obligations under the FCPA. Brockmeyer observed that the SEC does not focus on commercial bribery in the first instance during an investigation. She made clear, however, that wqhen the SEC discovers transactions involving commercial bribery, a company's books and records will be scrutinized, and regulatory actions or even charges may be pursued.
Brockmeyer's comments signal renewed interest in pursuing FCPA liability for commercial bribery -- on at least two previous occasions, FCPA enforcement actions have included allegations involving commercial bribery.
The accounting provisions of the FCPA are designed to ensure that 'issuers' maintain accurate accounting records for all transactions. An issuer is any company that is listed on a U.S. securities exchange (with stock or American Depository Receipts) or any company that has stock traded in the over-the-counter market in the United States and is required to file SEC reports.
There is no materiality threshold under the books-and-records requirement; instead, any transaction, regardless of its amount, may be problematic if the circumstances are such that it would be reasonable to expect accuracy in the issuer's books and records.
Essentially, the accounting provisions hold an issuer strictly liable for violations in connection with all transactions, and not just those transactions that run afoul of the anti-bribery provisions of the FCPA.
The move to address commercial bribery via the accounting provisions represents a natural progression in FCPA enforcement by bringing it more in line with the UKBA and other foreign anti-corruption laws.
Multinational issuers will be well served by revisiting their FCPA compliance programs and reminding employees of the risks involved in commercial and official bribery. In addition, issuers should ensure their internal controls are designed in such a way that they can prevent, detect and remediate issues and irregularities arising from potential instances of commercial as well as official bribery.
Alex Brackett is a partner in the Richmond office of McGuireWoods LLP. His practice focuses primarily on advising and supporting corporate and individual clients in the areas of white-collar criminal defense and internal investigations. Ryan Bonistalli is an Associate in the Richmond office of McGuireWoods LLP. His practice focuses on white-collar criminal defense and complex litigation matters. The Legal Alert upon which this post is based can be found on the McGuireWoods website here.