For thirty five years now, a United States company that operates or sells goods in or to foreign countries has been subject to the Foreign Corrupt Practices Act. The Act seeks to prevent American companies (and persons) from bribing foreign officials. In 1998, Congress added additional provisions extending the reach of the FCPA to foreign companies and foreign nationals. For most of its thirty five year history, it has been only sporadically enforced by the Justice Department. In recent years, however, enforcement has increased. For example, in 2004, there were five FCPA enforcement actions. In 2010, there were 74 FCPA enforcement actions and $1.3 billion in fines and penalties assessed against businesses. In short, the FCPA has become a major legal issue for multinational companies. This entry and three subsequent entries will provide a brief primer on
(1) who is subject to the FCPA,
(2) what conduct is prohibited under the statutory regime,
(3) what is required of certain entities under the FCPA, and
(4) what penalties can a party expect for violating the FCPA.
Who Is Subject to the FCPA?
There are three broad groups subject to the FCPA: (1) issuers, (2) domestic concerns, and (3) any person other than an issuer or domestic concern. Broadly speaking, the FCPA applies to all U.S. citizens (including corporations, persons, partnerships, etc.) and foreign citizens that have a connection to the U.S. Nevertheless, there is some nuance between the three groups that is helpful for understanding the prohibitions of the FCPA as well as the affirmative duties contained in the FCPA.
Issuers
An issuer is any company that has a class of securities registered with any U.S. national security exchange or that is required to report their activity with the SEC. The issuer includes that registered or reporting entity and any officer, director, employee, or agent of that issuer or any stockholder acting on the issuer’s behalf. Issuers have reporting requirements that the other groups do not.
Domestic Concerns
A domestic concern is any individual who is a citizen, national, or resident of the United States, and any corporation, partnership or other business entity which either has its principal place of business in the United States or which is organized under the laws of a state of the United States or one of its territories, possessions, or commonwealths. If the entity is an issuer, it is not a domestic concern. This definition captures all other U.S. based individuals and entities, along with anyone acting on their behalf.
Any Person Other Than An Issuer or Domestic Concern
Foreign companies that were also issuers have always been subject to the FPCA. In 1998, Congress broadened the reach of the FCPA and now all “persons” may be subject to the FCPA. A “person” under the FCPA means any natural person other than a national of the United States, or any corporation, partnership, or unincorporated organization organized under the law of a foreign nation or a political subdivision thereof. This provision brings foreign individuals and foreign entities under the strictures of the FCPA, obviously. However, the ability to reach conduct of foreign individuals and foreign entities is limited to those individuals and entities who have availed themselves of the jurisdiction of U.S. courts. That is an entire subject matter in its own right, but in essence, the foreign individual or entity must have some contact with the U.S. in order for the FCPA to apply to them. For example, if a foreign company operates a large manufacturing operation in the U.S., it is likely subject to the FCPA for acts it takes in other countries in violation of the FCPA.
In short, everyone is governed by the FCPA. The use of a foreign subsidiary to complete a prohibited transaction will subject the U.S. parent company to liability under the FCPA, and a U.S. citizen (a.k.a. a “domestic concern”) working for a foreign company may subject himself to the FCPA for a bribe paid to a foreign official. In the next post, we will see what acts are prohibited by the FCPA. See you soon.
The LegalJones Blog 
Posted on February 20, 2012
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