Bribery attorneys practicing white collar criminal defense and Corporate General Counsel are often consulted with regard to the Federal anti-bribery laws as they relate to foreign officials. One of the questions often raised by criminal attorneys is – what constitutes a “foreign official?” It is considered bribery under the Foreign Corrupt Practices Act (FCPA) for American businesses to corruptly provide “anything of value” to a “foreign official”. More specifically, such payments cannot be made to:
1. Any foreign official;
2. Any foreign political party or official therof;
3. Any candidate for foreign political office; or
4. Any person, while knowing that all or a portion of the payment will be offered, given, or promised to an individual falling within one of these three categories.
Foreign official is further defined by the FCPA as “any officer or employee of a foreign government or any department, agency, or instrumentality thereof or of a public international organization, or any per¬son acting in an official capacity for or on behalf of any such government or department, agency, or in¬strumentality, or for or on behalf of any such public international organization.” (emphasis added)
While these definitions are useful in determining what constitutes a foreign official for purposes of the FCPA, the DOJ and SEC recently issued FCPA guidance, which further addresses this issue in an attempt to provide additional clarity as many foreign countries are not organized in the same manner as the United States.
The guidance acknowledges that many foreign countries operate through state-owned and controlled “businesses”, especially in industries such as defense contracting, aerospace, healthcare, banking, energy, public transportation, and telecommunication. As such, even low level employees of these industries in foreign countries can be considered “foreign officials” under the standard set forth in the FCPA.
The issue is often whether the business is considered an “instrumentality” of a foreign government. The guidance sets forth a number of factors to consider in determining whether such a business is really a government entity which include:
1. The circumstances around the creation of the entity;
2. The entity’s purpose;
3. The amount of the foreign country’s ownership of the entity;
4. The characterization of the entity by the foreign country;
5. The foreign country’s amount of control over the entity;
6. The amount of financial support for the entity by the foreign country;
7. The services provided by the entity to the foreign country’s residents;
8. The entity’s requirements and benefits under the foreign country’s law;
9. The power of the entity to administer its own services; and
10. The general perception of whether the entity is engaged in governmental functions.
This list can be summarized as an analysis of the control, status, ownership, and function of an entity to decide if it is an “instrumentality” of a foreign country. The DOJ and SEC suggest that out of this list, no one is more important than the other. However, they further simplify the analysis by stating that a foreign entity will probably not qualify as an “instrumentality” if the government or someone who is clearly a government official doesn’t own a majority of its shares. There are limited exceptions to this general rule, such as when an entity is not “owned” by the government or a government official, but the government exercises substantial control over the entity despite the lack of majority ownership.
The guidance distinguishes between foreign officials and foreign governments, indicating that it is permissible under the FCPA for a company to make payments to a foreign government. However, it further explains that in the event payments are contemplated to foreign governments, there should be due diligence in place to ensure such payments are not ultimately used for corrupt reasons like for the personal benefit of someone that is clearly a government official. In other words, any payments to a foreign government that is simply a disguised payment to a government official will likely violate the anti-bribery provisions of the FCPA. The guidance also warns that even if a payment doesn’t fall within the anti-bribery provisions of the FCPA, it could still be found to be illegal under the money laundering laws, and other federal or foreign laws.
Finally, the FCPA includes employees and representatives of public international organizations in its definition of “foreign officials.” Such public international organizations include the International Monetary Fund, the World Trade Organization, the Organization of American States, the World Bank, the OECD, and the World Intellectual Property Organization. A complete list of these organizations that constitute “foreign officials” as public international organizations under the FCPA is provided in 22 U.S.C. §288.