For The Defense, October 2010 - DRI Today

for the “promotion, demonstration, or explanationof products or services” or the“execution or performance of a contract.”15 U.S.C. §§78dd-1(c)(2)(A) to -1(c)(2)(B).However, a company must show that the expenseswere “reasonable” and “bona fide”and “directly related” to a business purpose.The Schering- Plough, Lucent andUTStarcom cases alert business leaders tothe fact that FCPA enforcement will subjecta wide variety of business practices toreview. To use an affirmative defense forbusiness expenditures, companies mustretain some control over the expendituresto ensure that they have legitimate businesspurposes.Obtain or Retain BusinessOne common misperception about theFCPA is that improper payments must berelated to securing government contracts.In fact, the FCPA is more broadly focused onpayments that grant companies improperadvantages over competitors, regardless ofwhether government contracts are, in fact,in play. As a result, business leaders mustunderstand the administrative and regulatorypractices of the foreign countrieswhere they do business.United States v. Kay, 359 F.3d 738 (5thCir. 2004), was the seminal decision thatclarified the breadth of the FCPA’s “obtainor retain” violation element. In Kay, thecourt held that payments to lower corporatetaxes and custom duties could violatethe FCPA. In other words, the FCPA doesnot simply criminalize making paymentsto secure government contracts. Paymentsoffered for many other purposes also areillegal under the FCPA.Since the Kay decision, the SEC andthe DOJ have initiated several FCPAenforcement matters involving improperpayments to obtain various foreign governmentlicenses, permits and certifications.In July 2009, for example, Helmerich& Payne Inc. consented to a two-year,deferred- prosecution agreement with theDOJ under which it would pay a fine of$1 million dollars, and it settled a parallelaction with the SEC by consentingto a disgorgement of $375,681, includingprejudgment interest, in connection withimproper payments made through custombrokers to custom officials in Argentinaand Venezuela to expedite the importationand exportation of certain equipmentand other materials. See DOJ Press ReleaseNo. 09-741, Helmerich & Payne Agrees toPay $1 Million Penalty to Resolve Allegationsof Foreign Bribery in South America(July 30, 2009), http://www.justice.gov/opa/pr/2009/July/09-crm-741.html, and SEC NewsDigest, Enforcement Proceedings, In theMatter of Helmerich & Payne, Inc. (July 30,2009), http://www.sec.gov/news/digest/2009/dig073009.htm.Business executives must understandthe FCPA- related violation risks associatedwith routine business activities such asexporting products into foreign markets.The following is a list of relevant questions:• Does local law require a license, permitor certification?• Is a company relying on a third partyto obtain various licenses, permits orcertifications? If so, has the companyperformed due diligence to ensure complianceby that third party with theFCPA?For over 25 years, LMI has provideddefendants with award winningrecord acquisition, medical recordanalysis, complex litigation anddocument management services,all delivered via LM[I]SIGHT,our secure client site designedexclusively for the defense.Our experienced medical and legalprofessionals stand ready to deliver theinsight you need, when you need it.• Who is interacting with foreign officialsto obtain licenses, permits or certifications?Has that employee requested anyunusual reimbursements?• Will the company issue payment to alicensing agency or to an individual official?Issuing payments to individuals isinadvisable.• Have the licensing agencies providedinvoices or other supportingdocumentation?Any Acts Within the Territoryof the United StatesIn 1998, several amendments expandedthe power of the Foreign Corrupt Practices.As a result, a foreign business or individualbreaks the law under the Foreign CorruptPractices Act if they cause, directly orthrough another, an act to further a corruptpayment that takes place within theUnited States.Recently, the government has aggressivelypursued FCPA criminal prosecu-Elizabeth B. Juliano, Founder & Chief Executive Officer1 9 8 4-2 0 0 9CELEBRATING 25 YEARSTRANSFORMING INFORMATION, DELIVERING INSIGHTwww.medicineforthedefense.com1 800.778.5424For The Defense n October 2010 n 61