The Foreign Corrupt Act Case

Abstract:

The Foreign Corrupt Act of 1977 was, in my opinion, one of our nation's brighter ideas. It prohibits entities and owners of entities from gaining an unfair advantage by opening their wallets to very influential foreign officials. It really is the same as stopping police from accepting kickbacks to look the other way. It really is a necessary precaution to level the playing field for all businesses and business owners. In this paper you will read what brought about the need for this act, the impact it use to have on businesses both national and international (including sparking up other laws and acts similar to it), the impact it now has on businesses, who enforces the act, what happens when the act is violated, and steps that can be taken to prevent any problems pertaining to the FCPA.

The United States department of justice has many provisions in place to make sure that businesses and people are conducting activities above the table. One of those provisions is the Foreign Corrupt Act (FCPA) of 1977. Congress had good reasons to pass this act to prohibit certain activities. It impacts business on both a national and international level and can have serious consequences if found guilty of violating the act but there are ways to prevent having any worries of violating the FCPA.

The reason behind congress passing the FCPA was "for the purpose of making it unlawful for certain classes of persons and entities to make payments to foreign government officials to assist in obtaining or retaining business,"( U.S. Department of Justice). In simple terms, it prevents businesses and stockholder from bribing influential foreign officials to secure a contract. It also prohibits accountants from covering up the bribes. The U.S. saw the need when they noticed businesses giving side payments or valuable gifts to foreign officials as a way to either tap into a certain market or maintain a hold on it. An example would be if a major cosmetic company wanted to freeze out their competition in Japan and presented a very valuable gift to a Japanese official so they could maintain a hold on the cosmetic market there. The FCPA stops this kind of activity to try and ensure everyone is on a level playing field. The FCPA does not however, prohibit payment to minor officials who just speed things up.

The U.S. was actually the first to pass such a law. In fact "for twenty years, the FCPA was the only law of its kind in the world," (Hollowell & Miller, 2011). For a while it actually put U.S. businesses at a disadvantage because other countries saw bribery as another form of business. "A report from the OECD, found that several member nations had laws that enabled firms to claim tax deductions on bribes paid to overseas businesses," (Ambassador Solutions). So initially this had a negative impact on national business and a positive one on international businesses because it took U.S. businesses out the race for the most part. However the turn around came in 1997 when OECD established the Anti-bribery Convention which is now signed by 38 countries and The UN's Convention against corruption signed by 140 countries. This impacts