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Don’t Get Dealt a Bad Hand: Do Your Foreign Transactions Violate the Foreign Corrupt Practices Act?

The U.S. Justice Department and the Securities Exchange Commission continues its aggressive enforcement of the Foreign Corrupt Practices Act (FCPA) and its pursuit of U.S. companies who bribe or attempt to bribe “foreign officials” or “instrumentalities of foreign governments.”  Just this past Friday, the Las Vegas Sands Corporation, an international gambling empire, informed the Securities and Exchange Commission that, based upon an internal investigation of its operations, it likely violated a federal law against bribing foreign officials.  A few days earlier, the Kimco Realty Corporation, a real estate investment trust specializing in shopping centers, disclosed that it had been served with a subpoena from the S.E.C. as part of the investigation into foreign bribery by Wal-Mart in its Mexican subsidiary and elsewhere.  That investigation came about after extensive reporting in The New York Times by David Barstow and Alexandra Xanic von Bertrab about tactics used by Walmart de Mexico to gain approval to build stores in Mexico.

Does the Justice Department’s aggressive enforcement of the FCPA place U.S. companies at a competitive disadvantage in the global economy?  The U.S. Chamber of Commerce thinks so.  The Chamber’s Institute for Legal Reform, one of the leading voices seeking greater certainty and reform, claims that the current enforcement of the FCPA hampers U.S. companies conducting business, principally because the FCPA can be enforced so broadly and without solid guidance.  Some of the government’s recent charges against pharmaceutical companies alleged to have made payments to foreign doctors who may be part of “state-controlled health systems” are examples of how the FCPA can be used in areas once thought to fall outside its purview.

In response to criticisms regarding the broad and perhaps, arbitrary ways the government is applying the law, the Justice Department and S.E.C. issued a resource guide in November 2012, seeking to provide guidance with respect to their interpretation and enforcement of the law.  Still, the Chamber and U.S. companies say the guidance remains unclear and there are no definitive guideposts as to what is and what is not a violation of the FCPA and whether it will or will not apply to a transaction.