To: Belinda
From: participants
Subject: Pay to Play
Date: August 20, 2018
The Foreign Corrupt Practices Act (FCPA) was established to enhance accountability and transparency in business transactions. Therefore, this memo will seek to analyze some of the FCPA issues that are related to the case scenario involving the deputy minister of Growastan. In this case scenario, the telecommunication service company confirmed to have received a proposal from the Growastan ministry of communication for its services. However, further details emerge that the proposition offered to Thomas Doright and his team was illegal and unethical. As much as the Growastan deputy minister of communication is involved, the FCPA regulations should be considered to determine the legality of the involved payments. Furthermore, this memo will seek to evaluate some of the applicable penalties and criminal offences committed by the whole telecommunication service team. In addition, the memo will also explore some of the defenses that can be used by the Phone and Build corporation regarding FCPA violations.
Issues In FCPA
The ramifications of the FCPA apply to both individual and organizations’ illegal transactions. Therefore, it is important to justify the fact that FCPA regulations are influenced by certain factors that are within its jurisdictions. Some of these major issues include; domestic concerns, issuer and territorial authority. For instance, “Issuer” is a major FCPA statute which incorporates all the regulations applied to businesses ( Trautman & Altenbaumer-Price, 2013) . Therefore, this concept helps to affirm that any company that trades in the United States financial markets is liable to the stipulation of the FCPA. In this perspective, an “issuer” statute does not exclude foreign-based firms as long as they are involved in the financial markets of US. As much as the “issuer” statute only considers business and corporations, all the members representing the issuer are liable for prosecution.
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However, organizations that do not fall under the “issuer” statute may be categorized under “domestic concerns.” Generally, “domestic concerns” is a statute of FCPA that applies for either an individual or any other business entity established under the federal law ( Trautman & Altenbaumer-Price, 2013) . Therefore, any individual who violates the FCPA regulations under this category is answerable to its regulations. Furthermore, major amendments have been made to the jurisdictions of FCPA. For instance, a territorial jurisdiction was implemented to incorporates all those organizations that do not fall under “issuer or domestic concerns.” This key amendment was made in 1998 to prosecute any individual or a business entity that involves in corrupt activities in the U.S territory ( Choi & Davis, 2014) .
For many years, FCPA enforcement has been a priority of SEC. Thus, in reviewing the legalities associated with some of the enumerated payments, it is clear that most of the stated cases violated FCPA guidelines. For instance, $100000 payment to the deputy minister, purchase of a sports car and donations to a political campaign all fall under the FCPA violations. The three payment scenarios are illegal since they are executed to appeal for favouritism in the submitted business proposition. In addition, the payments are not executed in line with the procurement requirements. Regarding these violations, Doright and the company are therefore, answerable to the criminal penalties postulated in the FCPA. However, the expedited government fee is a legal payment since it is clearly highlighted in a standard procurement process. This is due to the fact that the $1000 expedited service see is a payment made after the tender has been awarded to the concerned parties.
Possible Criminal or Civil Penalties
The FCPA violations are prosecuted by the SEC’s department of justice. For instance, any bribery act carried out by an organization can attract a $2 million fine as per the FCPA penalty guidelines ( Choi & Davis, 2014). Furthermore, individuals such as directors and CEOs who acted on behalf of the company to perpetrate the bribe are answerable to either a five-year jail term or a $100000 fine ( Choi & Davis, 2014). However, accounting violations are not an exception since the law clearly highlights that such offences will attract a fine of about $25 million with the individual perpetrators liable for a 20-year jail term ( Choi & Davis, 2014). The civil penalty ramifications on the other hand postulate that, for an anti-bribery violation, a business entity or a corporation is liable to about $16 million fine. However, the accounting violation in this criminal penalty is determined by the magnitude of the loss. In the event that the Phone and Build corporation gets involved in an illegal transaction with the deputy minister, then it is liable to the FCPA penalties. In event that Phone and Build corporation pays $100000 to the deputy minister and also donates funds for a political campaign, then it should be held accountable for FCPA violations. In such a case, the corporation is liable to both criminal and civil penalties as highlighted by FCPA. Therefore, both the company and Doright are subjects to a hefty fine or an individual jail term as stipulated by law. Even though the expedition fee is legal, it should not be considered by the company since it does not justify for an award of a business contract.
Defenses For Violating FCPA Jurisdictions
In line with the FCPA violations, the Phone and Build company can use the “local law defense” in its arguments ( Choi & Davis, 2014). In this perspective, the company can argue that the payment made is legal as per the written law governing the foreign country. For instance, the purchase of a sports car is a reasonable payment that can be argued using this particular “local law defense.” Also, the company can argue that the funds used in the transaction are “reasonable and a bona fide business expenditure.” This will help to ascertain that the money used by the corporation in its business transactions clearly followed the guidelines stipulated in the ethics of businesses. Furthermore, Phone and Build can also argue that it provided its services to further a government’s routine practice which is clearly a non-discretionary act. Therefore, the $100,000 payment made to the deputy minister can be argued to have been used to further the government’s practice in the ministry. However, it is up to the attorney in charge to determine whether the payments made was to facilitate a government routine course or the foreign written law justifies the payment used. Also, the attorney can seek to clarify if the FCPA guidelines allow for the suggested defenses.
UK’s 2010 Anti-Bribery Act
The Bribery Act of the United Kingdom harbours similarities with the US FCPA. Even though both policies are similar, it is important to explore some of the key differences. For instance, the Bribery Act of UK harbours elaborate guidelines meant to incorporate all the divisions in the commercial sector ( Belch, 2014). On the other hand, the FCPA only associates itself with the bribery acts perpetrated towards foreign agents. This difference helps to ascertain that the UK Bribery Act has a wider scope as compared to the FCPA. This is because, its legal ramifications apply to all the members of the public involved in bribery acts. However, such individuals are only prosecuted based on the magnitude of damage ( Belch, 2014). Unlike the FCPA, the Bribery Act does not require the ill-motivated intentions of the briber ( Bean & MacGuidwin, 2013). In this perspective, the violations committed by an agent to a foreign public official is primarily considered a personal offense. Therefore, an agent involved in influencing the actions of a foreign official is prosecuted on an individual capacity. Unlike FCPA, the UK bribery act is applicable to the individual receiving the bribe ( Belch, 2014). In this perspective, both parties involved in bribe are liable for penalties.
Based on these policy differences, Phone and Build corporation will suffer the same fate with the United Kingdom’s Bribery Act. The company’s action of donating funds for a political campaign violates the bribery act regulations. This is because the donation was performed with a view of getting kickbacks which is a clear act of bribery. Furthermore, paying $100000 to a deputy minister and purchasing a sports car in order to swiftly get a contract are all geared towards influencing the course of action from another party. Even though the two payments are considered to be reasonable in business, they are rendered to enhance favouritism which is a clear act of bribery. Therefore, the three aspects are illegal when it comes to the United Kingdom Bribery Act of 2010. However, the expedited government service fee does not harbour illegalities as per the ramifications of the Bribery Act. This is because it is considered a post-award notification. Therefore, it is up to Doright and the whole staff to understand the regulations underlining the company’s practice. Based on this assertion, it is important to analyze the ethics, and the laws governing business operations in foreign countries. The contract case of Phone and Build may not have been negatively implicated by the Growastan government since it does not violet the country’s rules. It is, therefore, important to understand the culture and the regulations governing the operations of the target country before getting involved in any business activity. This will serve to evade some of the consequences associated with violating the stipulated regulations.
References
Bean, B. W., & MacGuidwin, E. H. (2013). Unscrewing the Inscrutable: The UK Bribery Act 2010. Ind. Int'l & Comp. L. Rev. , 23 , 63.
Belch, G. (2014). An analysis of the efficacy of the bribery Act 2010. Aberdeen Student L. Rev. , 5 , 134.
Choi, S. J., & Davis, K. E. (2014). Foreign Affairs and Enforcement of the Foreign Corrupt Practices Act. Journal of Empirical Legal Studies , 11 (3), 409-445.
Trautman, L., & Altenbaumer-Price, K. (2013). Foreign Corrupt Practices Act: An Update on and SEC and DOJ Guidance.
