September 28, 2004

UNITED STATES: PHASE I REVIEW REVIEW OF IMPLEMENTATION OF THE CONVENTION AND 1997 RECOMMENDATION A. IMPLEMENTATION OF THE CONVENTION Formal Issues

The Convention as a whole

Since 1977, the United States has outlawed bribery of foreign officials in commercial transactions by its nationals and companies organised under its laws. The FCPA, as amended, has kept the same structure since its enactment in 1977. It contains two distinct sets of provisions: the antibribery provisions and the books and records and internal controls provisions. Thus, in addition to criminalising bribery of foreign officials by persons and companies in order to obtain or retain business and to providing for significant civil and penal remedies, including injunctions, fines, and imprisonment, the FCPA also mandates that companies with publicly-traded stock keep detailed books and records that accurately reflect corporate payments and transactions and take other steps to ensure that investors can obtain a complete financial picture of those companies’ activities. The Act is also coupled with a prior amendment to U.S. tax laws denying the tax deductibility of bribes. According to U.S. authorities, the passage of the FCPA in 1977 encouraged American companies engaged in international business to develop comprehensive corporate compliance programs, in which corporations establish procedures to prevent the payment of bribes, conduct internal investigations when allegations of bribery are brought to management’s attention, and voluntarily disclose to the government any bribery uncovered as a result of their investigation.

1. ARTICLE

1. THE OFFENCE OF BRIBERY OF FOREIGN PUBLIC OFFICIALS

The structure of the definition of the offence of bribery of foreign public officials in the FCPA is similar to that in the Convention. The specific elements are covered as follows: B29

1.1 Elements of the Offence

1.1.1 any person

Prior to its 1998 amendments, the FCPA prohibited bribes and attempted bribes by “issuers” and “domestic concerns”1. The 1998 amendments extend coverage of the FCPA to all other persons, natural or juridical, who take any act within the U.S. in furtherance of a bribe.2 “Issuers” are essentially publicly-traded companies — any corporation (domestic, or foreign) that has registered a class of securities with the SEC or is required to file reports with the SEC, e.g. any corporation with its stocks, bonds, or American depository receipts traded on U.S. stock exchanges or the NASDAQ Stock Market, as well as their officers, directors, employees, agents, and their shareholders acting on behalf of the issuer. “Domestic concerns other than issuers” are any U.S. citizen, national or resident, as well as any corporation, partnership, association, joint-stock company, business trust, unincorporated organisation, or sole proprietorship that has its principal place of business in the United States, or that is organised under the laws of the United States, or a territory, possession, or commonwealth of the United States. “Any person other than an issuer or a domestic concern” is any natural person who is not a U.S. citizen, national or resident, and any business entity that is organised under the laws of foreign countries and does not trade on the U.S. stock-exchange.

1.1.2 intentionally

The FCPA requires that the person charged has undertaken an act in furtherance of the unlawful payment “corruptly.” The requirement that the person charged have a corrupt intent applies to all of the four purposes prohibited by the FCPA: (i) to influence any act or decision of a foreign official; (ii) to induce such official to violate his lawful duty; (iii) to secure any improper advantage; and (iv) to induce such official to use his influence with the foreign government or instrumentality. “Corruptly” requires intent. The requirement that the payer have a corrupt intent applies to all of these purposes. In some instances, such as a payment to induce an official to misuse his official position, the corrupt intent is apparent from the purpose for which the payment is made. In other instances, however, it is not as apparent that the official is violating his/her duty. Indeed, the evidence may be that the official did no more than he/she would have done without the payment . The United States interprets the FCPA as prohibiting all payments to foreign officials to accomplish the purposes set forth in the statute, regardless of whether that official would have acted or not acted without the payment being made.3 In such instances, the government is required to prove that the payer acted with a specific intent to accomplish something that the law prohibits. The word “corruptly”, as stated in the legislative history of the FCPA, is used in order to make clear that the offer, payment, promise, or gift, must be intended to induce the recipient to misuse his/her official position. “An act is ‘corruptly’ done if done voluntarily and intentionally, and with a bad purpose of accomplishing either an unlawful end or result, or a lawful end or result by some unlawful method or means”4. It does not require that the act be fully consummated, or succeed in producing the desired outcome. 1 15 U.S.C. §§ 78dd-1, 78dd-2(a). 2 15 U.S.C. §§ 78dd-3. 3 The sole exception is when the written law of the foreign country explicitly permits the foreign official to accept the payment. See 15 U.S.C. § 78dd-1(c)(1), 78dd-2(c)(1), 78dd-3(c)(1). 4 See United States v. Liebo, 923 F.2d 1308, 1312 (8th Cir. 1991). B30 Furthermore, under the FCPA penalty provisions in relation to natural persons, there is a requirement that there has been a wilful violation of the FCPA.5 The U.S. authorities explain that this does not introduce a further mens rea element into the offence, nor does it place a further burden on the prosecution. In a recent case, the defendant argued that “wilful” imposed some greater burden on the government. The judge did not rule on this issue, but in the instructions given to the jury defined “wilful” in the same terms as “corruptly”, so that in fact it imposed no greater a burden on the government.

1.1.3 to offer, promise, or give

The FCPA, proscribes acts “in furtherance of an offer, payment, promise to pay, or authorisation of the payment of any money, or offer, gift, promise to give, or authorisation of the giving of anything of value”. The “act in furtherance” element is intended to ensure that the defendant does more than merely conceive the idea of paying a bribe without actually undertaking to do so. Proof of an act in furtherance establishes that the defendant did not merely think about and then reject the idea of paying a bribe but instead committed himself/herself to doing it and thereafter took some act to accomplish his/her objective. The FCPA distinguishes between U.S. companies and nationals, and foreign companies and nationals, with respect to the act that must be taken in furtherance of an offer, etc. For bribery that takes place in the U.S., U.S. companies and nationals must have made use of interstate commerce or instrumentalities, while foreign companies and nationals may have done “any act”. For bribery that takes place abroad, U.S. companies and nationals may also have done “any act”. The U.S. explains that the basis of this distinction is the limited jurisdiction granted to the federal government in the U.S. Constitution “to regulate commerce with foreign Nations, and among the several States.”6 As set forth in the legislative history for the 1998 amendments, this interstate commerce nexus is satisfied for non-U.S. nationals and businesses who, by their very nature, are acting in international commerce when they enter the U.S. to take an action in furtherance of a bribe overseas. Similarly, according to the U.S. Department of Justice, when a U.S. national or business acts abroad, it necessarily acts in international commerce7. The U.S. states that in practice, the requirement that an interstate commerce nexus be proven has not been an issue, due in part to the expansive definition of interstate commerce as codified in the FCPA and other statutes. For instance, an instrumentality of interstate commerce includes an airport, and within the state uses of the telephone, fax and e-mail. The U.S. states further that in practice it is virtually impossible to put into effect a plan to bribe a foreign public official without doing some act involving either use of the mails or means or instrumentality of interstate commerce. The U.S. provides that even in the situation where all the elements of the offence take place in-person, face to face, without the use of mails or any means of interstate commerce, the travel taken by the foreign public official back to his/her country would at least in part be caused by the corrupt offer of the U.S. company or national, thus satisfying the jurisdictional requirement.

1.1.4 any undue pecuniary or other advantage

The Convention was signed by the United States on December 17, 1997 and ratified on November 10, 1998. The U.S. deposited its instrument of ratification with the OECD on December 8, 1998. Congress responded to the signature of the Convention by amending the Foreign Corrupt Practices Act (the “FCPA”) on October 21, 1998. The new legislation, which entered into force on November 10, 1998, extends the FCPA to any person who engages in any act while in the territory of the U.S. and to any U.S. national and company engaged in an act outside the U.S. in furtherance of a proscribed purpose; adds “securing any improper advantage” to the list of improper purposes for payments to foreign officials; expands the term “a foreign official” to include any person acting for or on behalf of “public international organisation”; and allows the U.S. Attorney General to seek injunctive relief against foreign citizens or residents and entities other than “issuers” or “domestic concerns” that have engaged in or are about to engage in a violation of the FCPA.

The FCPA prohibits two categories of improper benefits: (i) the offer, payment, promise to pay, or authorisation of the payment of any money; (ii) the offer, gift, promise to give, or authorisation of the giving of anything of value. The United States views “anything of value” as being as comprehensive as “other advantage”. “Anything of value” 5 . See 15 U.S.C. §§ 78dd-2(g)(2)(A), 78dd-3(e)(2)(A). 6 U.S. Const., Art. I, sec.

8. cl.3; see also U.S. Const., amend. X (“The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”). 7 See S. Rep. 277, 105th Cong., 2nd Sess. (1998); H. Rep. 802, 105th Cong., 2nd Sess. (1998). B31 means any thing that is of value to the recipient and encompasses anything that is given to an official to obtain an improper advantage8. The FCPA contains two “affirmative defences”. The first affirmative defence for a payment which “was lawful under the written laws and regulations of the foreign official’s ... country” seems consistent with the Convention (see Commentary 8 on Article 1 of the Convention). The second affirmative defence, for which there is no equivalent in the Convention, relates to a payment which was a “reasonable and bona fide expenditure, such as travel and lodging expenses”, incurred by or on behalf of a foreign official and “directly related” to the “promotion, demonstration, or explanation of products or services” or “the execution or performance of a contract with a foreign government or agency thereof ”9. The U.S. states that a reasonable and bona fide expenditure as described in the FCPA is clearly not corrupt. It states, however, that the existence of the defence is justified because by making it an affirmative defence, the FCPA makes it clear that the court cannot require the government to prove that a payment was not bona fide as part of its case in chief. Case law does not exist to illustrate the operation of these provisions. However, the Department of Justice has, pursuant to a procedure governed by regulations, issued some Opinion Releases on the application of these particular provisions to questions submitted by issuers and domestic concerns as to whether certain conduct would conform with the provisions10. To date, no payment that the U.S. authorities have investigated has fallen within this exception. The U.S. explains that a company could attempt to disguise a bribe as one of these accepted payments, but the characterisation that the company makes is not controlling. (An affirmative defence under U.S. law is one that assumes that the government has established the elements of the crimes but then offers a recognised defence to that crime. Generally, a defendant bears the burden of proving an affirmative defence11. In some states, the burden remains on the government but only after the defendant produces evidence supporting the defence12.) 8 For instance, in the very first FCPA prosecution, U.S. v. Kenny Int’l Corp. (D.D.C. 1979), the bribe was provided to pay the cost of chartering an aircraft to fly voters to the Cook Islands to re-elect the Premier. 9 15 U.S.C §§ 78dd-1(c), 78dd-2(c) and 78dd-3(c). However, if the government proves a corrupt intent, the payment cannot be deemed to be bona fide: “If a payment or gift is corruptly made, in return for an official act or omission, then it cannot be a bona fide, good-faith payment, and this defense would not be available.” See H. Conf. Rep. 576, 100th Cong. 2nd Sess. 922 (1988). 10 As an example, in Release 81-02 (December 11, 1981), the Department stated it would take no enforcement action where the requester wished to provide samples of its products to officials of the Soviet Ministry of Foreign Trade. The Department stated that the FCPA was not implicated where (i) the samples were intended for the officials’ inspection, testing, and sampling; (ii) the samples were not intended for their personal use; and (iii) the Soviet government had been informed that the company intended to provide the samples. In Release 83-02 (July 26, 1983), the Department stated that it would take no enforcement action where an American company proposed to invite the general manager of a foreign government entity to extend his vacation in the United States to take a promotional tour of the company’s facilities. The company would pay the reasonable and necessary actual expenses of the general manager and his wife during the time he spent touring its facilities. The Department concluded that the FCPA was not implicated where the expenses would be paid directly to the service providers and not to the general manager and the expenses would be accurately recorded in the company’s books and records. 11 See Patterson v. New York, 432 U.S. 197, 210 (1977) (due process requires the government to prove the elements of the crime; the legislature may allocate the burden of proof on affirmative defenses to the defendant). See also 4 W. Blackstone, Commentaries 201 (burden of proving “all . . . circumstances of justification, excuse, or alleviation” rests on the defendant); M. Foster, Crown Law 255 (1762). 12 See Model Penal Code (Am. Law Inst.) §

1.12 (1997). B32 as public corruption, the purpose of the enterprise, and the degree of control exercised over the enterprise by the foreign government. Although there is no case law on this issue, in several FCPA Review Procedure Releases the Department of Justice has treated entities that were owned or controlled by a foreign government as instrumentalities of the foreign government17. including the FCPA26. Where a person encourages or incites a third party to commit an act, but does not himself do any act within the scope of the FCPA, e.g., where he is not in a position to authorise the act, that person can only be prosecuted if the third party actually violates the FCPA. Under U.S. law, a person who “wilfully causes an act to be done which if directly performed by him or another would be an offence against the United States, is punishable as a principal” in the crime27. It is not necessary that the bribe be actually paid or that it be successful, it is sufficient that the third party violates the FCPA by offering, promising, or authorising the proscribed act. serious offences under the U.S. legal system, and the U.S. Government will seek legal assistance from other countries to aid in the prosecution of these offences. The United States will honour requests for mutual legal assistance premised on the Convention. The United States generally does not link the providing of mutual legal assistance to other States with the penalty that it imposes for the analogous domestic violation. 40 15 U.S.C. §§ 78dd-1(g); §§ 78dd-2(i). B42 These provisions apply to a much narrower universe of companies than the antibribery provisions, (i.e. those companies that qualify as “issuers” as defined in the antibribery context). Corrupt Practices Act (FCPA), as amended, was initially enacted in 1977. The United States should be commended for its substantial and sustained contribution to this initiative against corruption in international business transactions, and for its prompt implementation of the Convention through amendments to the FCPA, which entered into force on November 10, 1998. Generally, the FCPA implements the standards set by the Convention in a detailed and comprehensive manner. The formulation of the statute is structured and practical in its scope and applicability. The Working Group noted that there are a few areas that may require clarification. Some of the issues identified may be a product of the style of legislative drafting in the United States. The Working Group recommended that those areas and problems identified might benefit from further discussion during Phase 2 of the evaluation process.

e) The Role and Utility of Corporate Compliance Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B66

f) The FCPA, Small and Medium Sized Enterprises (SMEs) and Start-Ups . . . . . . . . . . . . . . . . . . . . . B68

g) The role of measures to prevent and detect the tax deductibility of bribes . . . . . . . . . . . . . . . . . . . . B69

Specific Issue Related to Bribes Detected when a Taxpayer Has Requested an Advance Pricing Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B70

Specific Issues Related to Bribes paid by Controlled Foreign Corporations . . . . . . . . . . . . . . B70

h) The role of measures to prevent money laundering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B70

C. DOES THE UNITED STATES HAVE ADEQUATE MECHANISMS FOR THE EFFECTIVE PROSECUTION OF FOREIGN BRIBERY OFFENCES AND THE RELATED ACCOUNTING AND MONEY LAUNDERING OFFENCES? . . . . . . . . . . . . . . B72

1. PROSECUTION OF FOREIGN BRIBERY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B72

a) Working of the main enforcement agencies: the SEC and DOJ . . . . . . . . . . . . . . . . . . . . . . . . B72 Enforcement by the SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B72

Enforcement by the DOJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B73

Inter-Agency co-operation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B75

b) Mechanisms for gathering evidence located abroad . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B77

c) Statute of Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B78 B51

d) Elements of the Offence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B78 “Obtaining or Retaining Business” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B79

Interstate Nexus Requirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B80

Payments to Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B81

Definition of “Foreign Public Official” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . B81

Nationality Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B82

Absence of Sanctions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B82

Use of Other Statutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B82

e) Interpretation of exceptions and defences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B83

The Facilitation Payments Exception . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B83

The Affirmative Defence of ‘reasonable and bona fide expenditure’ . . . . . . . . . . . . . . . . B83

The Affirmative Defence of ‘lawfulness under the written laws of the foreign country’ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B85

2. PROSECUTION OF MONEY LAUNDERING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B85

D RECOMMENDATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B87 a) Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B87 Recommendations for Ensuring Effective Measures for Preventing and Detecting Foreign Bribery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B87

Recommendations for Ensuring Adequate Mechanisms for the Effective Prosecution of Foreign Bribery Offences and the related Accounting and Money Laundering Offences . . . . . . . . . . . . . . . . . . . B88

b) Follow-up by the Working Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B88

B52 according to the issues identified by the examining team, rather than the sequence of questions in the Phase 2 questionnaire. The Phase 2 Report should be read in conjunction with the Phase 1 Report as, taken together, they provide an overall evaluation of the U.S. legal and institutional framework in place for combating corruption of foreign officials.

7. The Phase 2 Report adopts the following structure: the introduction, Part A, explains the background and context with regard to the United States. Part B examines the various factors which, in the view of the lead examiners, have a bearing on the effectiveness of the measures available in the U.S. for preventing and detecting foreign bribery. Part C reviews the workings of the system for prosecuting foreign bribery and money laundering offences, with specific reference to features which appear to have a pronounced impact, either positive or negative, on the effectiveness of the overall effort. Part D sets forth the specific recommendations of the Working Group, based on its conclusions, both as to prevention and detection and as to prosecution. It also identifies those matters which the Working Group considers should be followed up as part of the continued monitoring effort. In addition, tables showing sanctions imposed in criminal and civil cases brought under the FCPA in relation to bribery of foreign public officials are annexed to the Report for information. United States territory. However, a U.S. parent company is itself at risk of liability if it is found to have authorised, directed or controlled a foreign subsidiary committing an act of bribery. Even a finding of ‘wilful blindness’ or ‘reckless disregard’ on the part of the parent company will suffice to trigger liability in the absence of express authorisation, though negligence alone will not. In the view of members of the Bar who regularly advise large corporate clients, this means that any form of effective control over the subsidiary’s activities will probably be enough to expose the parent company to the risk of liability. As a result, companies with sufficient knowledge of the FCPA are aware of the risks, especially, as the examining team heard, in the case of industries such as defence, construction and civil engineering, which rely to a large extent on government contracts. A U.S. issuer parent company is obliged to enforce the FCPA books and records provisions in foreign subsidiaries which it controls (see below, section B). B56 this policy “until further notice.” This statement of policy has not been revoked since 1981. B58 from responsibility for making potentially difficult decisions. However, given that a company facing a potential negative opinion may withdraw from the procedure and that there are no statistics available, it is difficult to evaluate if and to what extent the procedure is used for that purpose. 25. Although most, if not all, companies and their in-house counsel interviewed by the examining team would like to have greater clarity in interpreting the FCPA, none of them seemed however prepared to champion a clear call for the issuance of guidelines. It should be mentioned in this connection that when, in 1988, the DOJ invited submissions from the profession as to whether guidelines should be issued about the FCPA, very little interest was shown. In the United States’ view, the FCPA’s terms are straightforward and are grounded in the well-established jurisprudence of domestic bribery law. In those instances in which a company is uncertain about the application of the statute to a particular transaction, the DOJ Opinion Procedure is available; a company that fails to take advantage of this procedure assumes the risk that its conduct may violate the law. In fact, opinion among corporations and law firms appears to be divided as to whether general guidelines would be useful as a deterrent. One view is that guidelines would be a “roadmap for evasion”; the other view is that guidelines would help, in particular for the purpose of planning future overseas transactions. and the Criminal Investigative Division of the Environmental Protection Agency (EPA) was the lead agency in the investigation of Saybolt, Inc’s bribes to Panamanian officials. In this latter case, Saybolt was under investigation by the EPA concerning data falsification allegations when the information regarding the improper payment was discovered.

35. The Internal Revenue Service (IRS) also plays a significant role in investigating illicit payments. Tax examiners are trained and experienced in detecting suspicious payments and, from the discussion with the tax experts who addressed the examining team, it appears that the U.S. gives very detailed guidance to all tax examiners to assist them in the detection of suspicious payments as well as with investigative and interview techniques. The IRS can request a great deal of information in the course of an inquiry into the deductibility of payments to foreign public officials. Tax examiners will look at operating expenses, the use of foreign bank accounts, and the existence of slush funds. Audit guidelines also provide specific investigative techniques to enable examiners to detect illegal payments in particular industries. Furthermore, to obtain additional information related to slush funds, bribes, political contributions, and other tax-related information, the IRS has a special liaison with the SEC and the Financial Crimes Enforcement Network of the Department of Treasury. In addition, even though the U.S. does not, unlike some other Parties to the Convention, have tax legislation requiring a general yearly reporting of commissions paid to third parties, there is mandatory reporting to the State Department in the case of export of arms under the Export Control Act; this information is accessible to the IRS.

3 . Non-issuers, for the purpose of the application of the FCPA, are “domestic concerns other than issuers”, i.e. any corporation, partnership, association, jointstock company, business trust, unincorporated organisation, or sole proprietorship that has its principal place of business in the United States, or that is organised under the laws of the United States, or a territory, possession, or commonwealth of the United States, as well as “any person other than an issuer or a domestic concern”, i.e. any business entity that is organised under the laws of foreign countries and does not trade on the U.S. stock exchange. “Issuers” are essentially publicly-traded companies –any corporation (domestic or foreign) that has registered a class of securities with the SEC or is required to file reports with the SEC, e.g. any corporation with its stocks, bonds, or American Depository receipts traded on U.S. stock exchanges or the NASDAQ Stock Market, as well as their officers, directors, employees, agents and their shareholders acting on behalf of the issuer.

B61 cases which altogether escape the notice of the SEC. One senior member of the accounting profession observed that auditors are understandably reluctant to assume the role of firstline ‘enforcers’. Their priority is to preserve an open relationship of disclosure with the client, and an important element of this relationship is the obligation of confidentiality.

44. As to supervision of auditors, the profession is currently regulated by the SEC, the AICPA and the state accountancy boards who license individuals and firms. Enforcement proceedings are few, but a notable recent instance was the SEC action against Arthur Andersen LLP resulting in a civil penalty of US$7 million for making materially false and misleading reports and engaging in improper professional conduct in connection with its audits of Waste Management Inc. Initiatives are in place at the SEC to complete the ongoing review of each of the five largest independent auditors’ systems for compliance with the rules concerning independence. Further, Transparency International has proposed an annual quality monitoring process to replace the existing peer review system operated by the profession. It is the view of the lead examiners that the effectiveness of the FCPA will most probably be enhanced as a result of upheavals in the auditing profession which have little or nothing to do with the workings of the Act itself. B63 45. The major concern of the lead examiners with regard to the accounting and auditing requirements is that they do not apply, as such, to non-issuers. All U.S. corporations are required by federal tax laws to maintain books and records adequate to support deductions claimed in their tax returns. However, companies that are not ‘issuers’ for the purposes of the FCPA are governed by a patchwork of state corporate laws and accounting regulations, as well as by standards applied by the accounting profession. There is no single specified form in which records must be kept. The four examples of state laws provided by the United States showed variations from one state to another, and a lack of clarity as to the penalties for failing to keep adequate records. This means that there is an entire population of enterprises which falls outside the ambit of the FCPA accounting provisions and of federal auditing requirements, and escapes the controls they impose. Furthermore, the international operations of these enterprises are subject to the legal requirements of their country of incorporation. The applicable rules may not always require consolidation of accounts of the sort which would ensure that records of local transactions would ultimately appear on the U.S. entity’s books. While the United States has brought several enforcement actions against non-issuers for violation of the antibribery provisions of the FCPA, detection of such violations is unpredictable, at best, in the absence of accounting visibility, and it is not clear, in the view of the lead examiners, to what extent this might undermine the deterrent effect of the FCPA. a competitor who alleges that the bribery caused the defendant to win a foreign contract. In W.S. Kirkpatrick v. Environmental Tectonics, 110 S. Ct. 701 (1990), the Supreme Court held that the act of state doctrine does not bar a suit alleging that a bribe caused the defendant to win a foreign contract. Violating the FCPA may also invite costly lawsuits. For example, after the Department of Justice had prosecuted a company for bribing officials of Pemex, the national oil company of Mexico, the Mexican company itself filed a major civil action against some eighteen known defendants “and other unknown” conspirators seeking more than US$45 million in direct damages under the Sherman Act, the Robinson-Patman Act, RICO, and further counts of commercial bribery and fraud.

52. Taken together, the potential collateral consequences operate as a strong disincentive to having the corporation indicted, let alone contesting the case to trial. There are many compelling reasons for companies to settle with the Department of Justice and the SEC, and this may explain the high percentage of cases which end in plea agreements5. Given the commercial impact of an allegation of an FCPA violation, companies do not have much appetite to take on the risks of going to trial. Indeed, at least one member of the Bar expressed regret that this had resulted in a dearth of judicial decisions in contested cases.

59. Assuming that most SMEs are non-issuers, while they are subject to the antibribery provisions of the FCPA, they are not subject to its bookkeeping and accounting requirements or to the auditing requirements of the Exchange Act, and the SEC has no jurisdiction over them. The safeguards afforded by these regimes in terms of deterrence and detection, which have been discussed earlier in the present report, are not applicable to non-issuer SMEs. Compliance programs, which appear to work so well in major multinationals, are typically less well understood, less developed and inadequately implemented, or often completely absent, among smaller companies with less experience, less awareness and fewer resources. This problem is exacerbated in the foreign operations of SMEs – the very environments in which bribery is most likely to occur and least likely to be detected. The effect which has been described elsewhere in this report as “collateral deterrence” – the damage to the business resulting from an FCPA investigation or indictment – might be expected to be greater in the case of small companies for whom indictment could be tantamount to a corporate death sentence. In reality this is likely to be outweighed by a combination of ignorance and the unlikelihood of bribery ever being uncovered. Nor will all SMEs necessarily have ready access to, or the resources to spend on, specialist outside counsel, and they are most unlikely to be familiar with the DOJ opinion procedure or well-informed enough to use it.

60. It is at the level of non-issuer SMEs that the FCPA enforcement system may be at its least effective. For a combination of reasons these companies appear, as it were, to potentially slip through the net. The examiners could not avoid the conclusion that there may be a level of undetected foreign bribery taking place in the international operations of non-issuer SMEs, simply because there are insufficient compliance programs or other systems in place to deter it and insufficient book-keeping, auditing or other control mechanisms in place to detect it. B68

61. At this point it is appropriate to draw a distinction between the foreign subsidiaries of U.S. corporations, as a separate category, and SMEs which may do business both inside and outside the United States. The foreign-incorporated subsidiaries of major U.S. multinationals, though not technically subject to the FCPA, are not immune from the special problems of doing business in a foreign environment. However, despite earlier concerns on the part of the examining team, it became apparent during the on-site visit that these entities often benefit via the U.S. parent both from the visibility afforded by the accounting rules and auditing requirements, and from a frequently elaborate compliance program more or less rigorously enforced by corporate headquarters. The U.S. parent has a strong interest in implementing such programs in any foreign entity over which it has effective control. And, at the very least, there will usually be a lawyer at hand, if not to advise in person, then to frame the problem and seek advice from a qualified source : these companies are the very ones who have ready access to, and can afford, the major specialist law firms with developed FCPA practices. 68. The Patriot Act also provides for the prohibition of correspondent accounts in the U.S. with foreign banks that have no physical presence and makes provision for enhanced “due diligence” procedures both for correspondent banking and for private banking. Minimum standards for private banking will include ascertaining the identity of the nominal and beneficial owners, and the source of funds. These provisions are to be brought into force by Regulations under the Act later this year. The content of the Regulations was still under discussion at the time of the on-site visit. Similarly, provision is made for the prevention of indirect services to foreign shell banks. The Secretary of the Treasury has the power to make Regulations to delineate “the reasonable steps necessary” to comply with this requirement, and the content of these Regulations is in the process of being drafted. B70 69. Another significant development, in the view of the examining team, is the imposition of new obligations on financial institutions to more closely scrutinise the accounts of foreign political figures as a result of issuance of guidelines last year and the enactment of the Patriot Act. In January 2001, the Treasury Department, as part of a multi-governmental agency task force, issued guidelines on enhanced scrutiny of transactions that might involve proceeds of foreign official bribery. The guidelines impose new responsibilities on financial institutions to stop or refrain from doing business with senior political officials unless they demonstrate the legality of what they are doing. Open accounts for such officials, and their immediate families or close associates who have the authority to conduct business on behalf of those officials, are to be scrutinised, and banks are to be proactive in informed compliance with respect to these types of accounts. Although the guidelines are not a federal law or a rule and thus it is not mandatory for an institution to comply, since the enactment of the Patriot Act financial institutions are now required to “conduct enhanced scrutiny of any such account that is requested or maintained by, or on behalf of, a senior foreign political figure that is reasonably designed to detect and report transactions that may involve the proceeds of foreign corruption.” 70. § 5322 of Title 31 of the U.S. Code, which provides for criminal and civil penalties in respect of the statutory obligation for domestic financial institutions to keep records of, and report on, “monetary instrument transactions”, builds a further safeguard into the system of detection and deterrence. This provision is however understood to cover only wilful failure to make suspicious activity reports (SARS) or currency transaction reports. Although there have been few criminal prosecutions to date for failure to report, the lead examiners were told that some actions against financial institutions were currently under consideration as there is a growing understanding that more criminal prosecutions in this area would enhance the anti-money laundering regime. Full information about the level of penalties for failure to report suspicious activity does not appear to be available. However, from what the lead examiners saw in respect of prosecutions against financial institutions regarding failure to report suspicious activity, the monetary penalties imposed do not appear themselves to be very dissuasive. 71. Overall, the changes signalled in the Patriot Act appear to be significant steps in the deterrence and detection of foreign bribery. The concern remains however that many businesses — other than the corporations covered as issuers by the FCPA — appear not to have a general obligation to maintain books and records sufficient to enable them to comply with requests from the competent authorities to reconstruct domestic transactions for investigative purposes, as required by FATF Recommendation No. 12. There appears to be power in the Patriot Act for the Secretary of the Treasury to make Regulations for record keeping and reporting of transactions primarily involving foreign jurisdictions. How wide this power is or how it may be implemented, and whether it will apply generally to medium range corporations conducting foreign business, was however unclear at the time of the on-site visit. organisation. This, coupled with the recent high levels of staff turnover at the SEC, might in time undermine the consistency and effectiveness of its vital role in the enforcement of the FCPA. Enforcement by the DOJ 76. Since the enactment of the FCPA, the Department of Justice has brought a relative small number of enforcement actions and these typically allege violations of Sections § 78dd-1 and § 78dd-2 of the FCPA (i.e. corrupt payments by an issuer or domestic concern) : approximately 32 criminal prosecutions and seven civil enforcement actions have been brought by the DOJ under the antibribery provisions of the FCPA. Only in a few cases has the Department of Justice brought prosecutions for violations of the accounting and record-keeping provisions, aside from its role in prosecuting violations of the bribery provisions of the FCPA. Cases not involving bribery include United States v. Duquette (D. Conn 1984), United States v. Lewis (S.D.N.Y. 1988), United States v. UNC/Lear Services (W.D. Ky. 2000) and United States v. Daniel Rothrock (W.D. Tex. 2001). Since only some thirty separate alleged bribery schemes have been prosecuted during 25 years under the FCPA, it is difficult to draw broad conclusions about enforcement. There are no statistics or other information available which would reveal the number of allegations received, the number of investigations commenced, terminated or abandoned, or that might shed light on the reasons which led to decisions not to proceed. 77. Despite the relatively few prosecutions over the past 25 years the continuing commitment by the DOJ to prosecute bribery cases was readily apparent to the examining team during the on-site visit. It is further borne out by the willingness to use the opportunity to prosecute corporations for violations of the FCPA, recognising, in the words of the guidelines for prosecutors, that the prosecution of corporations provides ‘a unique opportunity for deterrence on a massive scale’. 78. In 1994, criminal enforcement of FCPA violations was centralised under the sole overall control of the Criminal Division Fraud Section, in order to achieve consistency in the way such cases were handled. It has also ensured that a cadre of highly trained FCPA prosecutors is available to lead the prosecution team in each case. This is especially important for prosecutions conducted in federal courts outside the capital, where local Assistant U.S. Attorneys will have the benefit of working on each occasion with an experienced specialist. B73 79. As to resources, the Fraud Section consists of approximately sixty attorneys. Eleven were working on FCPA cases at the time of the on-site visit, many of whom were handling non-FCPA cases as well. Others with relevant expertise are also available. The examining team was told that FCPA cases are given priority when allocating staff, and that steps are taken to ensure that younger attorneys have exposure to the FCPA. Prosecutorial expertise has been developed through regular training in complex white-collar crime prosecution techniques. The cohesiveness of the Fraud Section has benefited from a low level of staff turn-over. The Fraud Section’s budget is large enough to permit travel to judicial districts around the country as well as international travel to gather evidence. The lead examiners were told by DOJ officials that they had never had to drop a case concerning a potential FCPA violation because of lack of human or financial resources. 80. The situation with regard to enforcement priorities is less clear. DOJ prosecutors told the examining team that, despite suggestions to the contrary in the prosecutors’ manual detailing principles of prosecution, there were in fact no established priorities within the DOJ which determined which cases they chose to pursue. Generally, the DOJ, in deciding to charge a company or individuals, will weigh, above all other considerations, the sufficiency of the evidence and the likelihood of winning the case. It follows that the principal standard for indictment applied by Fraud Section prosecutors across the board is whether the prosecutor believes, on the basis of the evidence, that the defendants will be convicted. 81. However, the picture is somewhat clouded by the existence of an early statement of prosecution priorities which appears to run counter to the firmly-held position of the present prosecutors. In November 1979, not long after the FCPA came into force, a public statement was made by the then Assistant Attorney General, Mr. Philip Heymann, of the “enforcement priorities” to be applied by the Department of Justice with respect to the antibribery provisions of the FCPA. In it, he identified a number of factors that “increase the likelihood” of investigation or prosecution, including (i) the making of prohibited payments or gifts in countries where the only other competitors are American companies; (ii) situations in which there are no American competitors, but an American company is the only company engaging in corrupt practices; and (iii) the fact that a foreign nation is making an effort to eliminate corrupt practices. Other circumstances identified as affecting the likelihood of prosecution were: the size of the payment; the size of the transaction; the past conduct of the persons or entities involved; the involvement of senior management officials; and the strength of the available evidence. 82. The Heymann statement of FCPA prosecution priorities was made over twenty years ago, at a time when there had been few significant FCPA prosecutions, and in a context that pre-dated the negotiation and implementation of the OECD Convention. However, at the time it was made it carried the weight of authority, and it is still referred to among members of the Bar8. The lead examiners note that it has never been formally rebutted or superseded by a clear statement of the criteria which now govern the choice of which cases are pursued. Representatives of the DOJ told the examining team that each bribery allegation is evaluated primarily on the quality and quantity of evidence that is available, and the likelihood of a conviction if the matter were presented to a court, and that the only reason for the U.S. to decline a prosecution is lack of sufficient or available evidence. A statement to this effect to a wider public could serve as timely clarification of what is, at the present time, the view of the DOJ as to enforcement priorities. 83. The strong overall impression gained by the lead examiners was that the system for criminal prosecution of FCPA violations appears to be working well. However, its present successful functioning would seem to be, perhaps, too dependent on subjective criteria which have little objective structural framework to back them up. In the absence of a clear statement of current prosecution priorities, the examining team had only the assurances 8 . See Donald R. Cruver, Complying With the Foreign Corrupt Practices Act. A Guide for U.S. Firms Doing Business in the International Market Place (Chicago, Illinois: American Bar Association, 1999), p. 61. B74 of the present prosecutors. The same concern could be expressed with regard to questions as to how allegations of FCPA violations are received and processed, why investigations are launched and why some are discontinued, how expertise is shared and transmitted within the department, and how interaction with other agencies, especially the SEC, is handled (see, below, the section on inter-agency co-operation). As noted earlier in this report, there is an almost complete absence of internal statistics as to how allegations are processed, and thus few tools to facilitate case management analysis, internal auditing and assessment of budget needs. 84. As long as the present team of dedicated and experienced prosecutors remains in place, the lead examiners are confident that the system of enforcement of the FCPA by the Fraud Section should continue to function well. But as a matter of organisational principle and accountability, there are inherent dangers in allowing a situation to develop where the bulk of the intellectual capital of a prosecuting unit – not simply in terms of expertise, but, more critically, in terms of detailed, long-term institutional memory — resides in a small team of specialists and is not underpinned by objective statistics, documentation or process. unconstrained in sharing the fruits of their investigation “at the earliest stage of any investigation”. The exception is where it has been necessary to empanel a federal grand jury, in a matter prosecuted by the DOJ. Evidence given to the grand jury is subject to strict confidentiality and cannot be shared with other agencies, except where the DOJ obtains a court order permitting disclosure. The commencement of a grand jury investigation does not restrict the SEC from furnishing information or evidence to the DOJ. In other cases, the DOJ may, and does, invite the SEC to participate in joint witness examinations. B75 87. Forms of co-operation between DOJ and the SEC also occur in dealing with foreign prosecutors and foreign authorities to whom the DOJ and the SEC must go in order to obtain evidence located overseas. The SEC has worked out arrangements to obtain and share information with criminal authorities in some countries. However, in others, the SEC must rely on mutual legal assistance treaties and agreements that exist between the Department of Justice and other foreign criminal authorities; in these situations, the DOJ usually attempts to obtain the co-operation of the foreign authorities, e.g., by trying to secure their agreement that it may share with the SEC information obtained in the course of an investigation. Co-ordination may also occur in bringing an action, as happened in the American Banknote Holographics, Inc. case in 2001 where the filing of a major SEC financial fraud action that included allegations of foreign bribery was co-ordinated with criminal charges filed by the Department of Justice. 88. It became clear during the course of the on-site visit that the extent of the co-operation between the DOJ and the SEC goes well beyond what is suggested by the fact that the two agencies have only brought one joint formal action, in the Baker Hughes case. However, the lead examiners remarked that this interaction is largely informal, is not supported by any documented process, guidelines, or memorandum of understanding, and depends heavily on the long-standing personal relationships that have grown up over years of working together. In meeting with representatives from the SEC, they noted that there was some lack of awareness of the published statement of policy in which the SEC stated its intention to refrain from pursuing an investigation in a case where the DOJ had given a positive opinion through its Opinion Procedure. The informal nature of these inter-agency exchanges may be contrasted with the existence, according to the SEC’s 2001 Annual Report, of over 30 Formal Information Sharing Agreements between the SEC and its foreign counterparts. Some of the processes employed in international co-operation might, in the view of the lead examiners, usefully be adapted to serve in the domestic sphere. 89. All the representatives from the different government agencies, including tax authorities, who addressed the examining team said they would, and do, report any suspected FCPA violations to the DOJ, but they admitted that this was based on the general duty incumbent on all federal employees to report suspected crimes, and not on any statutory or documented reporting requirements. It appears that, apart from the formal obligation on the FBI to refer all foreign bribery cases to the DOJ, reporting is done on an informal, ad hoc basis and there is no underlying inter-agency procedure such as memoranda of understanding, either between the DOJ and the SEC or between the DOJ and any of the other agencies. The DOJ has explained that the FCPA, though important, carries no special status and that its enforcement must be viewed in the context of the general practice of the agencies concerned with respect to any criminal violations. This, in the view of the lead examiners, fails to take into account one important dimension of the enforcement effort: that, since the OECD Convention, FCPA enforcement has become a matter of international, as well as domestic, obligation. Indeed, the examiners were informed that an informal inter-agency group has been put in place to evaluate the implementation of the antibribery legislation adopted by the other Parties to the OECD Convention. period can be extended for up to three years, upon a request by a prosecutor and upon a finding by a court that additional time is needed to gather evidence located abroad. However, the period is not suspended by any act of investigation prior to the indictment. 95. In response to concerns expressed about the shortness of the limitation period under U.S. federal law by comparison with those applicable in some other Parties to the Convention, the lead examiners were told by the DOJ prosecutors that, in cases where foreign evidence was likely to be needed to support an indictment under the FCPA, it was the automatic practice at the outset to file a motion seeking a three-year extension to the five-year limitation period. Such an extension is invariably granted as it is not discretionary. Indeed, in ruling on an application to extend or toll the statute of limitations, a court need not make any finding as to the importance of the evidence to the prosecution’s case. The statute requires only that the court find two elements: that the prosecution has made an official request and that it appears that evidence is, or was, in a foreign country. The statute is silent on whether the court needs to determine that the evidence is material, substantial, or otherwise important. 96. The Department of Justice went on to point out that, in practice, bribes are usually paid in instalments, which prolongs the time when the last act in furtherance of the bribe was committed, which is the date from which the limitation period starts to run. According to the DOJ, the limitation period has never, so far, proved an obstacle to bringing an indictment. While no prosecutor will risk filing an indictment in the absence of sufficient evidence to secure a conviction, the time available has, to date, been sufficient to allow the indictment to go forward. Interestingly, the DOJ prosecutors recalled that the defence has been known to enter into an agreement with the DOJ to toll the statute of limitations, thereby waiving the right to raise the statute as a bar to any subsequent prosecution, in order to avoid the risk of an imminent indictment where the deadline is looming, and to avoid the collateral consequences that would result. The DOJ prosecutors did however concede that the five-year period could “conceivably” give rise to problems in the future. of the effort to make a prohibited payment. In Sam P. Wallace Co. (D.P.R. 1983), for instance, the mailing of checks was deemed “uses of means and instrumentalities of interstate commerce, that is, interstate and foreign bank processing channels”. In United States v. Harry G. Carpenter (Criminal Information No. 85-353 1985), a Western Union international telex was cited as the use of a means and instrumentality of interstate commerce for the purposes of the FCPA. In United States v. Reitz (W.D. Mo, 2001), the plea stated that in furtherance of the bribery act the defendant and other conspirators corresponded via e-mail and facsimile transmission and engaged in numerous telephone conversations. The lead examiners were told by the U.S. authorities that in all these cases, which were settled by plea agreement, the government was required to proffer proof of the interstate nexus before the court would accept the plea agreement and enter a judgement of conviction. For those cases that proceeded to trial, the government also proved the existence of an interstate nexus. For instance, in U.S. v. Mead (D.N.J. 1998), the requisite interstate nexus was proven by the use of emails and international travel. 105. There has been however at least one instance where the prosecution was not able to proffer proof of the interstate nexus. In SEC v. Montedison (D.D.C. 1996), the SEC did not charge the company with a violation of the FCPA’s antibribery provisions as “the complaint did not allege that Montedison used the mails or any means or instrumentality of interstate commerce in furtherance of bribing a foreign public official” under the FCPA9. The SEC filed a civil injunctive action charging Montedison, an Italian corporation listed on the New York Stock Exchange, with committing financial fraud by falsifying documents to hide bribes totalling nearly US$400 million. It would also appear that in at least two other, hypothetical, cases the “interstate nexus” requirement might not be satisfied, as recognised by DOJ and SEC attorneys : when an e-mail is not sent until long after a bribe has been paid even where it discusses the now-completed bribe, and in the case when a private mail carrier is used, if it does not cross state lines and does not qualify as an “interstate facility”. The United States’ view is however that, even in such instances, it would be highly unlikely that the bribery of a foreign official could have been accomplished without some use of another interstate facility. 9 . See Arthur Aronoff, Senior Counsel for International Trade and Finance in Antibribery Provisions of the FCPA (http://www.ita.doc.gov/legal/fcpa.htlm). B80 Payments to Third Party Beneficiaries 106. Another area of uncertainty is the situation where a benefit is directed to a third party by a foreign public official. The FCPA does not expressly cover the situation and there are no cases supporting the contention of the U.S. that it would be covered in practice. In Phase 1, the Working Group was concerned about the lack of clarity in this regard and recommended that this issue be re-examined in Phase

2. In U.S. v. Kenny (U.S. Dist. Crt., 1979) the personal representative of the Prime Minister of the Cook Islands solicited a payment for the benefit of the Cook Islands Party (of which he was the leader) in order to ensure renewal of Kenny International’s stamp distribution agreement with the government. Instead of prosecuting the case as one in which the benefit was directed to a third party (the Cook Islands Party) by a foreign public official (the Prime Minister), the Department of Justice chose to proceed under the political party provision. However, it is not clear from the plea agreement that the political party influenced the Prime Minister. Definition of “Foreign Public Official” 107. A “foreign public official” is defined quite broadly by the FCPA and includes “any officer or employee of a foreign government or any department, agency, or instrumentality thereof, or any person acting in an official capacity for or on behalf of any such government, department, agency or instrumentality”. By contrast with Article 1 of the OECD Convention, the definition of “foreign public official” in the FCPA does not mention persons holding judicial office in a foreign country. In Phase 1, the U.S. authorities stated that, nevertheless, the definition would cover judges. Although there are no cases addressing this issue, this remained the position of the Department of Justice prosecutors at the time of the Phase 2 on-site visit. 108. Another area of potential uncertainty under the FCPA involves officials of public enterprises. Such enterprises are covered in U.S. law as “instrumentalities”, making their officers, directors, employees, etc., “foreign officials” under the FCPA. Neither the statute nor its history define the term “instrumentality”, thus leaving it to U.S. companies to determine whether an enterprise is an instrumentality or not. This can be difficult in some cases. For instance, are “instrumentalities” only enterprises that are wholly or majority-owned by the foreign government? Does the term “instrumentality” cover enterprises that are controlled by the government, or entities in the process of privatisation? While other U.S. laws may contain some clues to a possible definition, most are however in the domestic context and thus may be of limited relevance. For instance, the Foreign Sovereign Immunities Act (FSIA) defines an agency or instrumentality of a foreign state as an entity, “a majority of whose shares or other ownership interest is owned by a foreign state or political division”. 109. The examining team was provided with examples of FCPA enforcement actions where bribes were paid to officials of state-owned oil companies, state-owned bus companies, utilities commissions, state-owned trading companies, state-owned banks and tax authorities. However these cases do not reveal whether, in conformity with Commentary 14 on the Convention, the FCPA applies where there is indirect foreign control of the enterprise in question, or in the case where the foreign government exercises de facto control over an enterprise, but does not, for example, hold in excess of 50 per cent of the voting shares. In Phase 1, the DOJ explained that among the factors that it considers are the foreign state’s own characterisation of the enterprise and its employees and the degree of control exercised over the enterprise 33 by the foreign government. The DOJ has favoured a broad interpretation and has treated entities owned or controlled by a foreign government as “instrumentalities” of the foreign government. B81 Nationality Jurisdiction 110. The FCPA establishes nationality jurisdiction over “issuers” and “any United States person” under provisions entitled “ alternative jurisdiction”. The U.S. authorities believe that the FCPA also covers acts by a U.S agent on behalf of a domestic concern, i.e. a non-issuer, and acts by a U.S. person acting abroad on behalf of a foreign company. It remains however unclear at this stage whether in practice the nationality jurisdiction established by the 1998 amendments to the FCPA will be interpreted as covering the two situations, as the U.S. has not yet brought prosecutions in such circumstances. Absence of Sanctions 111. Whether sanctions are available in practice under the FCPA for persons who are “domestic concerns” (i.e. U.S. nationals) and have not bribed on behalf of a “domestic concern” or an “issuer” remains unclear, as no penalties, criminal or civil, are prescribed by the FCPA for this type of situation. In other words, if a U.S. national bribes a foreign public official on his or her own behalf and is not acting as an agent, sanctions are not provided, although the act is still an offence. According to the U.S. authorities, it is highly unlikely that this fact pattern would occur, given the broad definition of “domestic concern”. There are however no litigated cases that deal with this question. Use of Other Statutes 112. The U.S. authorities who addressed the examining team explained that potential lacunae in the offences in the FCPA can usually be compensated for by filing indictments under different statutes. They explained that, for instance, the Mail Fraud Statute, Wire Fraud Statute, Interstate and Foreign Travel or Transportation in aid of Racketeering Enterprises Act (ITAR) and RICO have been used in addition to the FCPA to address foreign bribery. It would appear, however, that these statutes would only partly supplement the potential lacunae in the FCPA as they are not themselves comprehensive in their application to foreign bribery. For instance, these statutes import a different mens rea from that required under the offences in the FCPA (e.g. the Mail and Wire Fraud statutes require a fraudulent intent). Moreover, these statutes do not appear to provide for nationality jurisdiction. to prove an “interstate nexus” in respect of U.S. nationals and companies is of some concern given that nationality jurisdiction (which does not require this element) has as yet not been tested. Also, for the reasons given above, reliance on other statutes may not always be sufficient to complement the FCPA in these areas. B82 bribery of its government officials. Also, particularly in the case of some developing countries where laws might be in a state of flux, to rely on constantly changing and uncertain local laws, even with the benefit of local counsel’s opinion, would be extremely risky for the company. Indeed, the amount of legal debate generated around this defence appears to be out of all proportion to its actual use. 2. PROSECUTION OF MONEY LAUNDERING 124. Foreign official bribery became a specified foreign predicate offence for a money laundering violation in the United States with the enactment of the Patriot Act on October 26, 2001. Nevertheless, prior to that date, the United States had mechanisms in place to prosecute the laundering of foreign official bribery. The addition of bribery of a foreign public official and misappropriation of public funds as a foreign predicate offence for money laundering in the United States has clarified the ability of U.S. law to combat money laundering in such cases. 125. There appear, at present, to be few on-going money laundering cases involving foreign bribery, though it is clear that the money laundering/confiscation aspects of foreign bribery cases would be pursued by investigators in cases where there were thought to be available assets. The United States has had a system to confiscate criminal proceeds of many offences that includes criminal forfeiture, civil in rem forfeiture, and administrative forfeiture proceedings. In 2000, the proceeds of money laundering predicate offences, including the FCPA, became directly forfeitable, where previously a separate money laundering transaction needed to be shown. In addition, in 2001, foreign bribery offences became money laundering predicates and thus the proceeds of such offences became directly forfeitable. In accordance with U.S. constitutional principles, confiscation of proceeds ordinarily is only available in respect of offences committed after the relevant changes to the forfeiture legislation came into effect. However, in limited circumstances, United States courts have applied forfeiture retroactively prior to the date of enactment of the statute where the individual had no legitimate right to the property. At the time of the on-site visit the examiners were not advised of any restraint proceedings which had as yet been taken in a foreign bribery case with a view to the eventual confiscation of assets. The examiners were assured that the reason for this was the lack of available assets in such cases and not unwillingness to use the restraint provisions. Since then, the United States has obtained a forfeiture judgement of nearly US$ 16 million in restrained assets of Victor Alberto Venero, an associate of Vladimiro Montesinos. B85 126. Most money laundering prosecutions have been brought so far under U.S. Code § 1956. The offences thereunder are based on a wide-ranging list of predicate offences. The predicate offences can be proved in money laundering proceedings by independent evidence and it is understood that a conviction for the predicate offence is not required. However, in the absence of clear statistics that break down the types of money laundering prosecutions brought in the USA, it appears anecdotally that a large majority of money laundering cases are brought as part of the same proceedings as prosecutions for the underlying criminality. It was thus unclear to the examining team how many “stand-alone” money laundering prosecutions take place against professional launderers, acting on behalf of others. B86 C Antibribery and Books and Records Provisions of The Foreign Corrupt Practices Act Current through Pub. L. 105-366 (November 10, 1998) UNITED STATES CODE TITLE 15. COMMERCE AND TRADE CHAPTER 2B—SECURITIES EXCHANGES § 78m. Periodical and other reports (a) Reports by issuer of security; contents Every issuer of a security registered pursuant to section 78l of this title shall file with the Commission, in accordance with such rules and regulations as the Commission may prescribe as necessary or appropriate for the proper protection of investors and to insure fair dealing in the security — (1) such information and documents (and such copies thereof) as the Commission shall require to keep reasonably current the information and documents required to be included in or filed with an application or registration statement filed pursuant to section 78l of this title, except that the Commission may not require the filing of any material contract wholly executed before July 1, 1962. (2) such annual reports (and such copies thereof), certified if required by the rules and regulations of the Commission by independent public accountants, and such quarterly reports (and such copies thereof), as the Commission may prescribe. Every issuer of a security registered on a national securities exchange shall also file a duplicate original of such information, documents, and reports with the exchange. General determines would be in conformance with the preceding provisions of this section; and (2) general precautionary procedures which issuers may use on a voluntary basis to conform their conduct to the Department of Justice’s present enforcement policy regarding the preceding provisions of this section. The Attorney General shall issue the guidelines and procedures referred to in the preceding sentence in accordance with the provisions of subchapter II of chapter 5 of Title 5 and those guidelines and procedures shall be subject to the provisions of chapter 7 of that title. C93 C96 (B) inducing such party, official, or candidate to use its or his influence with a foreign government or instrumentality thereof to affect or influence any act or decision of such government or instrumentality, in order to assist such domestic concern in obtaining or retaining business for or with, or directing business to, any person; (3) any person, while knowing that all or a portion of such money or thing of value will be offered, given, or promised, directly or indirectly, to any foreign official, to any foreign political party or official thereof, or to any candidate for foreign political office, for purposes of — (A) (i) influencing any act or decision of such foreign official, political party, party official, or candidate in his or its official capacity, (ii) inducing such foreign official, political party, party official, or candidate to do or omit to do any act in violation of the lawful duty of such foreign official, political party, party official, or candidate, or (iii) securing any improper advantage; or (B) inducing such foreign official, political party, party official, or candidate to use his or its influence with a foreign government or instrumentality thereof to affect or influence any act or decision of such government or instrumentality, in order to assist such domestic concern in obtaining or retaining business for or with, or directing business to, any person. (B) Any domestic concern that is not a natural person and that violates subsection (a) or (i) of this section shall be subject to a civil penalty of not more than $10,000 imposed in an action brought by the Attorney General. (2) (A) Any natural person that is an officer, director, employee, or agent of a domestic concern, or stockholder acting on behalf of such domestic concern, who willfully violates subsection (a) or (i) of this section shall be fined not more than $100,000 or imprisoned not more than 5 years, or both. (B) Any natural person that is an officer, director, employee, or agent of a domestic concern, or stockholder acting on behalf of such domestic concern, who violates subsection (a) or (i) of this section shall be subject to a civil penalty of not more than $10,000 imposed in an action brought by the Attorney General. (3) Whenever a fine is imposed under paragraph (2) upon any officer, director, employee, agent, or stockholder of a domestic concern, such fine may not be paid, directly or indirectly, by such domestic concern. employee, agent, or stockholder thereof, is engaged, or about to engage, in any act or practice constituting a violation of subsection (a) of this section, the Attorney General may, in his discretion, bring a civil action in an appropriate district court of the United States to enjoin such act or practice, and upon a proper showing, a permanent injunction or a temporary restraining order shall be granted without bond. (2) For the purpose of any civil investigation which, in the opinion of the Attorney General, is necessary and proper to enforce this section, the Attorney General or his designee are empowered to administer oaths and affirmations, subpoena witnesses, take evidence, and require the production of any books, papers, or other documents which the Attorney General deems relevant or material to such investigation. The attendance of witnesses and the production of documentary evidence may be required from any place in the United States, or any territory, possession, or commonwealth of the United States, at any designated place of hearing. C103 (3) In case of contumacy by, or refusal to obey a subpoena issued to, any person, the Attorney General may invoke the aid of any court of the United States within the jurisdiction of which such investigation or proceeding is carried on, or where such person resides or carries on business, in requiring the attendance and testimony of witnesses and the production of books, papers, or other documents. Any such court may issue an order requiring such person to appear before the Attorney General or his designee, there to produce records, if so ordered, or to give testimony touching the matter under investigation. Any failure to obey such order of the court may be punished by such court as a contempt thereof. (4) All process in any such case may be served in the judicial district in which such person resides or may be found. The Attorney General may make such rules relating to civil investigations as may be necessary or appropriate to implement the provisions of this subsection. A request for an FCPA Opinion must be submitted in writing. An original and five copies of the request should be addressed to the Assistant Attorney General in charge of the Criminal Division, Attention: FCPA Opinion Group. The mailing address is 10th & Constitution Avenue, NW, Bond Building, Washington, DC 20530. and Currency Transactions Reporting Act]. The company and a subsidiary each paid fines of $260,000.

10. U.S. v. Lockheed Corporation, (Cr. No. 79–00270), D.D.C., 1979 [Currency and Foreign Transactions Reporting Act, Wire Fraud, false statements to Export-Import Bank]. The company paid a fine and civil penalties of $647,000.

11. U.S. v. Gulfstream American Corporation, (Cr. No. 79–00007), D.D.C., 1979 [False Statements to Export- Import Bank and Commerce Department]. The company paid a fine of $120,000. 12. U.S. v. Page Airways, Inc., (Cr. No. 79–00273), D.D.C., 1978 [Currency and Foreign Transactions Report Act]. The company paid a fine and civil penalty of $52,647. 13. U.S. v. Textron, Inc., (Cr. No. 79–00330), D.D.C, 1979 [Currency and Foreign Transactions Report Act]. The company paid a fine and civil penalty of $131,670. 14.U.S. v. McDonnell Douglas Corporation., et al., (Cr. No. 79–516), D.D.C., [Mail Fraud, Wire Fraud, conspiracy, false statements to Export-Import Bank]. 31. United States v. Robert Richard King and Pablo Barquero Hernandez (01–00190–01/02–CR–W) W.D. Mo. 2001; United States v. Richard Halford (01–00221–01–Cr–W– 1); United States v. Albert Reitz (01–00222–01–Cr–W–1) Two defendants pleaded to FCPA conspiracy and were sentenced, after a 5K1.1 motion, to 1000 hours of community service. Two defendants indicted for conspiracy, FCPA, and Travel Act violations in connections with an agreement to bribe officials and political parties to obtain a land concession. King was convicted at trial and was sentenced to 30 months incarceration, 2 years’ supervised release, and a payment of a $60,000 fine. Barquero remains a fugitive. 70 Addressing the Challenges of International Bribery and Fair Competition, 2004 32. United States v. Joshua Cantor (No. 01 Cr. 687) S.D.N.Y. 2001 Defendant pled to conspiracy to violate the FCPA and various securities fraud charges. Sentencing is pending. Related SEC complaints and orders filed against American Banknote Holographics Inc., Cantor, and Morris Weissman (see SEC Litigation Release 17068A). 33. United States v. David Kay and Douglas Murphy (No. 4–01–914) S.D. Tex. 2001 Indictment reinstated in February 2004. Trial scheduled for August 2004. 34. United States v. Gautam Sengupta D.D.C. 2002 Defendant pled to mail fraud conspiracy and FCPA. Sentencing is pend- C112 ing. 35. United States v. Richard G. Pitchford (No. 02–365) D.D.C. 2002 Defendant pled to conspiracy, government program fraud, and FCPA and was sentenced to 12 mos. and 1 day incarceration; 3 years supervised release, and a fine of $400,000. 36. United States v. Ramendra Basu (No. 02–475–RWR) D.D.C. 2002 Defendant pled to conspiracy to commit wire fraud and a substantive violation of the FCPA. Sentencing is pending. 37. United States v. Syncor Taiwan, Inc. (No. 02–1244– SVW) C.D. Cal. 2002 Defendant pled guilty to a substantive violation of the FCPA and was sentenced to a $2,000,000 fine. 38. United States v. James H. Giffen (No. 03 Cr 404 (WHP)) S.D.N.Y. 2003 Defendant charged with conspiracy, FCPA, mail & wire fraud, money laundering, tax evasion, and subscribing to false tax returns. Trial scheduled for October 2004. 39. United States v. Hans Bodmer S.D.N.Y. 2003 Trial pending. U.S. v. Liebo $785,000 (aggregated fine for 3 charges of which 1 count on bribery of foreign official) - - $140,000 settlement of civil liability, $75,000 settlement of civil tax liability Multi-object conspiracy to defraud the US; preparation of false tax return Vice President IN RELATED CASE - -

1.5 suspended 3 (of which 60 days home confinement) 600 hrs community service work False statements 11 1989 U.S. v. Goodyear Int’l Corp $250,000 - - - - none 13 1990 1994 U.S. v. Young & Rubicam Inc.; Abrahams v. Young & Rubicam Inc. $500,000 - - - Conspiracy (charges apply to this); RICO violations, perjury, 33 alleged racketeering acts dismissed 12 1989 U.S. v. Joaquin Pou, Alfred G. Duran and Jose Guarsch no corp. charged President, sole shareholder N/A N/A N/A N/A N/A Conspiracy to violate FCPA Intermediary Intermediary flight acquitted ditto ditto C119 Former senior officer 4 former Executives $50,000 penalty N/A - Injunction against future violations N/A Cease and desist order enjoining them from causing further violations 9 2000 SEC. v. IBM Corporation $300,000 civil fine Cease and desist order as to the book and records provision none 10 2001 SEC v. Weissman, Cantor, Gorman and Gentile; SEC v. Weissman, Cantor, Gorman and Gentile; SEC v. American Bank Note Holographics Inc. $75,000 civil penalty Order requiring the corp. to cease and desist from committing or causing any violation, and any future violation, of the FCPA and other accounting controls in the SEC proceedings; permanently restrain from violating the antifraud, periodic reporting, record keeping and internal control provisions of the federal securities laws. “Certain officials not directly involved” 2 Exec. Officers - $20,000 (civil penalty each) Civil actions, permanent restraint orders prohibiting violations of antifraud, periodic reporting, record keeping, internal controls and lying to auditors provisions of the federal securities laws and injunctions suspending them from appearing or practicing before the Commission as accountants. Permanently restrained and enjoined from violating and aiding and abetting violations of the antifraud, periodic reporting, and lying to auditors provisions of the federal securities laws 11 2001 SEC v. KPMG-SSH; SEC v. Eric L. Mattson and James W. Harris - Permanently enjoined from violating and aiding and abetting the violation of the antibribery provisions of the FCPA and the internal controls and books and records provisions of the Exchange Act; Cease and desist order as to the internal controls and books and records provisions of the Exchange Act. none 12 2001 SEC v. Chiquita Brands Int’l, Inc. $100,000 civil penalty Cease and desist order for violating the FCPA books and records and internal accounting controls provisions none 13 2002 SEC v. BellSouth Corporation none Cease and desist order for violating the FCPA books and records and internal accounting controls provisions none D Department of the Treasury • Information on money laundering, customs, and international financial institutions (www.treas.gov). Securities and Exchange Commission (SEC) • Information about SEC enforcement, actions, Complaint Center, and further information for accountants and auditors (www.sec.gov). Agency for International Development (USAID) • Center for Democracy and Governance, USAID’s Efforts on Anticorruption, Handbook on Fighting Corruption (www.info.usaid.gov/democracy/ anticorruption). Inter-Governmental Organizations Organization for Economic Cooperation and Development (OECD) • Anticorruption-OECD Antibribery Convention, Country compliance assessment reports (http://www.oecd.org/home/0,2605,en_2649_201185_1_1_1_1_1,00.html). • ANCORRSEB, the OECD Anticorruption Ring Online, a collection of materials on effective policies and practices (http://www.oecd.org/home/0,2987,en_2649_201185_1_1_1_1_1,00.html 0,,EN_home-124-nondirectorate-no-no-no- 31,00.html). Financial Action Task Force on Money Laundering (FATF) (www1.oecd.org/fatf/). International Criminal Police Organization (INTERPOL) (www interpol.int). Council of Europe (COE) • COE Anticorruption Convention, related programs, and resources (http://www.coe.int/). Organization for Security and Cooperation In Europe (OSCE) • Charter for European Security, Rule of Law and Fight Against Corruption (www.osce.org). Stability Pact for South Eastern Europe • Special Coordinator of the Stability Pact for South Eastern Europe, Anticorniption Initiative and Compact of the Stability Organization of American States (OAS) • The Fight Against Corruption in the Americas; Inter-American Convention Against Corruption; resolutions of the General Assembly, studies, and supporting documents (http://www.oas.org/juridico/english/FightCur.html). The Association of Government Accountants (AGA) (www.agacgfm.org). • Sites Directory for U.S. and International Accounting Associations and State CPA Societies (http://taxsites.com/associations2.html). International Organization of Supreme Audit Organizations (INTOSAI) (www.intosai.org). Global Coalition for Africa (GCA) • Principles to Combat Corruption in Africa Countries; Collaborative Frameworks to Address Corruption (www.gca-cma.org/ecorrtion.htm). South Asian Association for Regional Cooperation (www.saarc.org). Pacific Basin Economic Council (PBEC) • An association of senior business leaders, which represents more than 1,200 businesses in 20 economies in the Pacific Basin region (www.pbec.org). Americas’ Accountability/ Anti-Corruption (AAA) Project (http://www.respondanet.com/engltsh/index. him). Anti-Corruption Network for Transition Economies (www.nobribes.org). Inter-Parliamentary Union (www.ipu.org). World Forum on Democracy (www.fordemocracy.net). National Democratic Institute for International Affairs (NDI) (www.ndi.org). The International Republican Institute (IRI) (www.iri.org). International Center for Journalists (www.icfj.org). World Association of Newspapers (www.fiej.org) D130

1.1.5 whether directly or through intermediaries

The FCPA prohibits payments or gifts, or offers thereof, either directly or through intermediaries. An unlawful payment under the FCPA includes payments made to “any person, while knowing that all or a portion of such money or thing of value will be offered, given, or promised, directly or indirectly” to a foreign official13. The FCPA defines the knowledge requirement as follows14: (A) A person’s state of mind is “knowing” with respect to conduct, a circumstance, or a result if: (i) such person is aware that such person is engaged in such conduct, that such circumstance exists, or that such result is substantially certain to occur; or (ii) such person has a firm belief that such circumstances or that such result is substantially certain to occur. (B) When knowledge of the existence of a particular circumstance is required for an offence, such knowledge is established if a person is aware of a high probability of the existence of such circumstance, unless the person actually believes that such circumstance does not exist. The legislative history reflects a decision by the Congress that a state of mind less than between actual knowledge and greater than simple negligence was required. The standard is one of deliberate disregard or wilful blindness. A business may be found to have known that a result was “substantially certain to occur” when it consciously chose not to find out. “In such cases, knowledge of a fact may be inferred where the defendant has notice of the high probability of the existence of the fact and has failed to establish an honest, contrary disbelief. The inference cannot be overcome by the defendant’s ‘deliberate avoidance of knowledge,’ his or her ‘wilful blindness,’ or his or her ‘conscious disregard’ of the required circumstance or result. As such, it covers any instance where ‘any reasonable person would have realised’ the existence of the circumstances or result and the defendant has “consciously chosen not to ask about what he had reason to believe he would discover.”15

1.1.6 to a foreign public official

Foreign official and country

As amended, the FCPA definition of “foreign official” includes “any officer or employee of a foreign government or any department, agency, or instrumentality thereof, or of a public international organisation, or any person acting in an official capacity for or on behalf of any such government or department, agency, or instrumentality, or for or on behalf of any such public international organisation.”16 The U.S. authorities point out that “foreign official” is defined independently, so that it doesn’t depend on the foreign government’s classification of who is an official. In addition, U.S. case law has confirmed coverage of individuals whose official status may not be readily apparent. The definition would, for example, cover judges, even though they are not expressly included, and even though in a particular country the judiciary might be independent to a degree, which could call into question whether judges were foreign public officials. The FCPA also specifically prohibits payments to “any candidate for foreign political office” and “any foreign political party or official thereof ” to influence that party’s or individual’s decision-making or to induce that party or 13 15 U.S.C. §§ 78dd-1(a)(3), 78dd-2(a)(3), 78dd-3(a)(3). 14 15 U.S.C. §§ 78dd-1(f)(2), 78dd-2(h)(3), 78dd-3(f)(3). 15 H. Conf. Rep. No. 576, 100th Cong., 1st Sess. 921 (1988). 16 15 U.S.C. §§ 78dd-1(f)(1), 78dd-2(h)(2), 78dd-3(f)(2). B33 individual to take any act or to use its or his influence in connection with obtaining or retaining business. In this regard the FCPA has a broader scope than the Convention. Although the FCPA does not define “foreign country,” other provisions of the U.S. Code provide guidance, for instance, the Foreign Agent Registration Act, which has been incorporated into other statutes.

Public enterprises

As regards public enterprises, the FCPA does not contain an explicit reference to “public enterprises” or any definition thereof. At the same time, the Act applies to payments to foreign officials who are employees of “instrumentalities” of foreign governments — a provision which would cover officers, directors and employees of state enterprises. According to the Department of Justice, which enforces the criminal provisions of the FCPA, state-owned business enterprises may, in appropriate circumstances, be considered instrumentalities of a foreign government and their officers and employees to be foreign officials. Among the factors that it considers are the foreign state’s own characterisation of the enterprise and its employees, i.e., whether it prohibits and prosecutes bribery of the enterprise’s employees

Public International Organization

The term “foreign official” also includes any officer or employee of a “public international organization” or any person acting in an official capacity for or on behalf of any such “public international organization”. “Public international organization” is defined in the FCPA18 as: (i) an organization that is designated by Executive Order pursuant to section 1 of the International Organizations Immunities Act; or (ii) any other international organization that is designated by the President by Executive order for the purposes of this section. This aspect of the definition of “foreign official” differs from its counterpart in the Convention in that the FCPA refers to public international organizations that have been designated by Executive Order, not just generally to public international organizations. The U.S. explains that the International Organizations and Immunities Act19 covers practically all the international public organizations that were intended to be covered by the FCPA, except for a few. For example, the European Union is not included in the list under the Act. In order to address these deficiencies, a mechanism was built in to the amendment in order to be able to add an organization under the International Organizations Immunities Act by presidential action, or by asking the President to make a designation independently for the purpose of the FCPA. It is the intention that this will be done with respect to the European Union, and the U.S. will consider any other public international organization for designation under that process. 17 See Release 80- 04 (October 29, 1980) (Saudia, the Saudi government-owned airline), Release 83-2 (July 26, 1983) (expenses of a general manager of a foreign entity that was owned and controlled by the foreign government); Release 93-01 (April 20, 1993) (a quasi- commercial entity wholly owned and supervised by a foreign government); Release 96-02 (November 26, 1996) (state-owned enterprise). 18 . 15 U.S.C. §§ 78dd-1(f)(1)(B); 78dd-2(h)(2)(B); 78dd-3(f)(2)(B). 19 . 22 U.S.C. 288 B34

Official capacity vs. public function

The FCPA does not use the term “public function”; rather it uses, without defining it, the term of “official capacity”. While the Commentaries to the Convention offer guidance to companies and individuals seeking to determine when an individual may exercise a public function for purposes of the antibribery prohibitions, U.S. laws do not provide extensive guidance on when a private individual may be acting in an official capacity. However, the U.S. explains that that the term “official capacity” is intended to distinguish between acts that an official does or is able to do because he holds a position as a public official as opposed to acts that he may do as a private person.

1.1.7 for that official or for a third party

The FCPA focuses strictly on offers, payments, etc. to foreign public officials. However, the U.S. confirms that the benefit does not have to be paid directly into the hands of the foreign public official. For instance, if the government official agrees to award a contract to a company in exchange for the conferring of a benefit by that company on a third person, the foreign public official is considered to have received a benefit. The ability to designate a third party as the beneficiary of the benefit, however intangible that benefit might be, is also a benefit to the foreign public official and is sufficient for the purpose of the FCPA.

1.1.8 in order that the official act or refrain from acting in relation to the performance of official duties

The FCPA prohibits payments that are intended to “influenc[e] any act or decision of [a] foreign official in his official capacity, or [to] induc[e] such foreign official to do or omit to do any act in violation of the lawful duty of such official, or [to] induc[e] such foreign official to use his influence with a foreign government or instrumentality thereof to affect or influence any act or decision of such government or instrumentality.”20. The 1998 amendments added “or to secure any improper advantage”. The FCPA includes payments to induce a foreign public official to use his influence, whether or not the award of specific business is within his authorised duties.

1.1.9 in order to obtain or retain business or other improper advantage

The Convention prohibits bribes to foreign officials not only to “obtain or retain business” but also to secure any “other improper advantage”. The Commentaries define “improper advantage” as “something to which the company concerned was not clearly entitled, for example, an operating permit for a factory which fails to meet the statutory requirements.” The 1998 amendments to the FCPA add the element of “improper advantage” to the three other objectives that were already set forth. This formulation differs from the one in the Convention, because in the Convention this element is part of the final element of the offence (i.e. “to obtain or retain business or other improper advantage…”). The U.S. explains that the rational for its formulation was to avoid doing anything by virtue of the amendment that would take away from the historic broad interpretation of the offence. If this element had been placed at the end there would have been the possibility of an adverse retrospective effect. Defendants in older cases that predated the amendment might have argued that, by amending the statute to add “any improper advantage” to the overall element of “obtaining or retaining business”, the statute must necessarily prior to the amendment have been unclear or not applicable to payments to secure improper advantages. 20 15 U.S.C. §§ 78dd-1(a); 78dd-2(a); 78dd-3(a). B35 Under the FCPA, gratuities given to foreign public officials are allowed under the FCPA as long as they are used to expedite the processing of non-discretionary permits or licenses or other routine documentation21. The FCPA provides an illustrative list of what qualifies as “routine governmental action.”22 Case law does not exist to illustrate the operation of the provisions on routine governmental actions. However, in a recent case23, the U.S. prosecuted a company under the theory that payment to Panamanian officials to obtain a permit to lease a facility was intended to obtain or retain business. The U.S. did not, in that case, consider the awarding of the permit a routine governmental action, because it took the position that the payment for the permit, which was $50,000, was far beyond any kind of acceptable payment for a routine governmental action. Furthermore, in 1988, the Conference Report on the proposed amendments to the 1977 FCPA noted that “ordinarily and commonly performed” actions with respect to permits or licenses would not include those governmental approvals involving an exercise of discretion by a government official where the actions are the functional equivalent of “obtaining or retaining business for or with, or directing business to, any person.”24 The U.S. authorities explain that, contrary to Commentary 9 on the Convention, the “routine governmental action” exception was not limited to “small facilitation payments” because due to the problem of aggregation (the practice of attributing one large expenditure to several smaller ones) U.S. prosecutors prefer to not have a lower limit in terms of what constitutes a violation of the FCPA. Additionally, the U.S. authorities confirm that a routine governmental action could be rendered corrupt where the size of the payment thereof is inappropriately large, such as in the Panamanian example above. Moreover, the U.S. authorities explain that the “routine governmental action” clause only applies where there is entitlement to the action in question. Therefore, for instance, the exception would not cover a payment for a permit to operate a factory that fails to meet statutory requirements.

1.1.10 in the conduct of international business

The FCPA is limited to payments to obtain or retain business. Such payments, when made to foreign public officials by U.S. nationals or business entities, necessarily involve “international” business.

1.2. Complicity

Article 1(2) of the Convention requires Parties to take the steps necessary to criminalise complicity, including incitement, aiding and abetting, or authorisation of an act of bribery of a foreign public official. As regards “authorisation”, the FCPA contains an explicit prohibition on the “authorisation of the payment of any money, or... authorisation of the giving of anything of value.”25 The crime is complete under U.S. law upon the authorisation of the bribe, regardless of whether the bribe is actually offered or paid and regardless of whether it is successful, provided that the jurisdictional element is satisfied. 21 15 U.S.C. §§ 78dd-1(b), 78dd-2(b), 78dd-3(b). 22 The FCPA states that “routine governmental action” does not include “any decision . . . to award new business to or to continue business with a particular party, or any action taken by a foreign official involved in the decision-making process to encourage a decision to award new business to or continue business with a particular party.” See 15 U.S.C. §§ 78dd-1(f)(3)(B), 78dd-2(h)(4)(B), 78dd-3(f)(4)(B). 23 . U.S. v. Saybolt, Inc. (D. Mass. 1998) 24 H. Conf. Rep. 576, 100th Cong. 2nd Sess. 921 (1988). 25 15 U.S.C. §§ 78dd-1(a), 78dd-2(a), 78dd-3(a). B36 Although the FCPA does not itself contain an explicit complicity provision, the federal Criminal Code contains a general provision on complicity, incitement and conspiracy that applies to offences prescribed in other criminal statutes,

1.3. Attempt and Conspiracy

The Convention requires Parties to criminalise attempt and conspiracy. Attempt and conspiracy to bribe a foreign public official shall be criminal offences to the same extent as attempt and conspiracy to bribe a public official of that Party. U.S. laws prohibit and punish conspiracy to violate the FCPA28. The United States has repeatedly brought conspiracy prosecutions for conspiracies to violate the FCPA29. As regards attempts, there is no general “attempt offence” under either the FCPA or other U.S. laws. However, neither a completed payment nor a successful result is a requirement under the FCPA30. The FCPA prohibits an offer or promise as well as a payment (i.e. Under the Act a corrupt offer is sufficient.). This is the same approach as is contained in the United States’ laws concerning bribery of a domestic official31.

2. ARTICLE

2. RESPONSIBILITY OF LEGAL PERSONS

Article 2 of the Convention requires each Party to take the steps necessary to establish, in accordance with its legal principles, the liability of legal persons for the bribery of a foreign public official.

2.1.1 Legal Entities

Under general legal principles, the United States holds legal persons criminally responsible for the bribery of a foreign public official, as it does for any other crime. The United States Code provides that the “the words ‘person’ and ‘whoever’ include corporations, companies, associations, firms, partnerships, societies, and joint stock companies, as well as individuals.”32 Prior to the 1998 amendments, the FCPA applied only to “issuers” and “domestic concerns”. The 1998 amendments expand the FCPA’s coverage to any legal person that is organised under the laws of a foreign country, 26 See 18 U.S.C. § 2 (aiding and abetting). 27 Ibid. 28 18 U.S.C § 371. 29 See, most recently, United States v. Mead , Cr. 98-250-01 (D.N.J. 1998); United States v. Crites, Cr. 3-98- 073 (S.D. Ohio 1998). 30 See Senate Report No. 114, 95th Cong., 1st Sess. 10, reprinted in 1977 U.S. CODE CONG. & AD. NEWS 4098, 4108 (The FCPA “does not require that the act be fully consummated, or succeed in producing the desired result.”). 31 See 18 U.S.C. § 201. 32 1 U.S.C. §

1. B37 that takes any act in furtherance of an unlawful bribe within the territory of the United States. Under these provisions, state-owned and statecontrolled companies are subject to criminal responsibility: if a government-owned enterprise is organised as a corporate identity according to the laws of the state of incorporation and thus falls within the definition of a “domestic concern,” “issuer,” or “person” under the FCPA, the Department of Justice could bring a criminal prosecution against such an enterprise.

2.1.2 Standard of Liability

With limited exceptions, the criminal responsibility of the legal person is not based on a strict liability concept under U.S. law. A corporation is held accountable for the unlawful acts of its officers, employees, and agents under a respondeat superior theory, when the employee acts (i) within the scope of his/her duties, and (ii) for the benefit of the corporation. In both instances, these elements are interpreted broadly. Thus, a corporation is generally liable for the acts of its employees with the limited exception of acts that are truly outside the employee’s assigned duties or which are contrary to the corporation’s interests (e.g., where the corporation is the victim rather than the beneficiary of the employee’s unlawful conduct). Whether the corporate management condoned or condemned the employee’s conduct is irrelevant to the issue of corporate liability. The criminal responsibility of the legal person is engaged by the act of any corporate employee, not merely high-level executives. Participation, acquiescence, knowledge, or authorisation by higher level employees or officers is relevant to the determination of the appropriate sanction. Additionally, under the applicable sentencing guidelines, the sanction could be mitigated if an “effective” compliance program had been in place.33 This principle recognises that a corporation is liable for the acts of its employees although it cannot always control them. Thus if a company has in place a compliance program that is effective and supported by management, and an employee still violates the law, the court can recognise the corporation’s efforts as a mitigating factor in determining the level of the sanction.

3. ARTICLE

3. SANCTIONS

The Convention requires Parties to institute “effective, proportionate and dissuasive criminal penalties” comparable to those applicable to bribery of the Party’s own domestic officials. Where a Party’s domestic law does not subject nonnatural persons (e.g. corporations) to criminal responsibility, the Convention requires the Party to ensure that legal persons are “subject to effective, proportionate, and dissuasive noncriminal sanctions, including monetary sanctions.” The Convention also mandates that for natural persons, criminal penalties include the “deprivation of liberty” sufficient to enable mutual legal assistance and extradition. In any case, the Convention requires each party to take such measures as necessary to ensure that the bribe and the proceeds of the bribery of the foreign public official are subject to seizure and confiscation or that monetary sanctions of “comparable effect” are applicable. Finally, the Convention requires each Party to consider the imposition of additional civil or administrative sanctions. The FCPA prescribes substantial civil and criminal penalties and imposes additional administrative sanctions. Although the maximum sentence of imprisonment under the FCPA is less than that available (but not mandatory) under the domestic bribery statute (see Table), the fiscal penalties are substantially equivalent. The FCPA does not directly provide for seizure and confiscation of the bribe, or the proceeds of the bribery of a foreign public official, or the property the value of which corresponds to that of such proceeds. The Act only applies monetary sanctions which may have, in some instances, a comparable effect. 33 This guideline applies to all federal crimes, including domestic and foreign bribery. B38

3.1 Criminal Penalties for Bribery of a Domestic Official

The criminal violation of the antibribery provisions of the U.S. law concerning bribery of a domestic official may result in a fine of “not more than three times the monetary equivalent of the thing of value [offered or given to the public official] or imprisonment for not more than fifteen years, or both34.

3.2 Criminal Penalties for Bribery of a Foreign Official

The FCPA provides that a natural person may be sentenced to pay a fine of not more than $100,000 and imprisoned not more than five years, or both. A legal person charged for bribery of foreign public officials may be sentenced to pay a fine of not more than $2,000,00035. Furthermore, as with bribery of domestic public officials, if the criminal offence causes a pecuniary gain or loss, the penalties provisions of the U.S. Code authorise alternative maximum fines equal to the greater of twice the gross gain or twice the gross loss. Individuals may be fined on this basis, or in the alternative up to $250,000 for an individual, and/or may be imprisoned for up to five years. Legal persons may also be fined on this basis, or in the alternative up to $500,00036. According to the Department of Justice, defendants in FCPA cases have often been fined in excess of the amounts specified in the FCPA itself. With respect to the discrepancy between the term of imprisonment for domestic bribery (maximum term of 15 years) and foreign bribery (maximum term of 5 years), the U.S. indicates that under its Sentencing Guidelines, which apply to all federal judges, in order to exceed a 5 year sentence of imprisonment for domestic bribery, the bribe or the proceeds of the bribery has to have been in excess of 20 million dollars. In order to reach the maximum sentence of 15 years, the bribe or the proceeds has to have been in excess of 80 million dollars. The U.S. acknowledges that it is conceivable that these amounts might be seen some day in relation to the offences under the FCPA, but so far this has not 34 18 U.S.C. § 201 35 15 U.S.C. §§ 78dd-2(g), 78dd-3(e), 78ff- (c). 36 18 U.S.C. § 3571 B39

BRIBERY OF DOMESTIC OFFICIALS UNDER U.S. CODE BRIBERY OF FOREIGN OFFICIALS UNDER FCPA BRIBERY OF DOMESTIC & FOREIGN OFFICIALS UNDER US CODE ALTERNATIVE PENALTIES PROVISIONS

Fine Imprisonment Fine Imprisonment Fine Imprisonment

Legal person Natural person

Up to three times the monetary equivalent of the thing of value offered or given to the public official Not available – Up to 15 years Up to US$ 2,000,000 Up to US$ 100,000 – Up to five years Up to twice the gross gain or twice the gross loss or up to US$ 500,000 Up to twice the gross gain or twice the gross loss or up to US$ 250,000 – Up to five years been the experience. The U.S. authorities also indicate that, if through the evaluation process it becomes evident that the maximum term is comparatively low, this might form a basis on which Congress could be asked to reconsider it.

3.3 Penalties and Mutual Legal Assistance

The penalties under the FCPA include imprisonment of natural persons for up to five years. FCPA offences are, therefore,

3.4 Penalties and Extradition

The penalties under the FCPA include imprisonment of natural persons for up to five years. FCPA offences are, therefore, serious offences under the U.S. legal system, and the United States government will seek extradition from other countries. Generally, U.S. extradition treaties provide for extradition for any offence that is punishable under the laws of both the requesting and requested State by a maximum term of imprisonment exceeding one year. The penalty for a violation of the FCPA is well in excess of one year. Accordingly, even prior to the U.S. becoming a Party to the Convention, if the foreign State requesting extradition under such a treaty had also penalised foreign commercial bribery by a maximum term of imprisonment exceeding one year, extradition would be have been possible, subject to the other terms of the treaty. In any event, now that the United States is a party to the Convention, pursuant to Article 10(1) of the Convention, all of its extradition treaties with parties to the Convention are automatically deemed to incorporate the offences criminalized in Article 1 of the Convention.

3.6 Seizure and Confiscation of the Bribe and of Its Proceeds

The FCPA does not provide for seizure and confiscation of the bribe, the proceeds of the bribery, or the property the value of which corresponds to that of such proceeds. Instead, under the alternative fine provisions of the U.S. Code, “any person” may be fined not more than the greater of twice the pecuniary gain of the offence or twice the loss to a person other than the defendant. The U.S. states that this enables it to impose very substantial fines, and it believes that this satisfies the alternative to seizure and confiscation available under article 3 of the Convention (i.e. to impose fines of comparable effect). The U.S. adds that it does not believe that the absence of a provision on search and seizure would provide a hindrance in relation to requests for mutual legal assistance from other Parties that have provided for search and seizure. Confiscation/forfeiture may, however, be available under other provisions. As violations of the FCPA are predicate offences for the money laundering offence, forfeiture is available under that provision. In addition, under certain circumstances, there are U.S. statutes, agreements and treaties that permit the sharing of forfeited or seized property or proceeds with a foreign country that participated in the seizure or forfeiture of the property. And where no standing agreement exists, the U.S. typically negotiates casespecific agreements that permit the transfer of such property.

3.8 Civil Penalties and Administrative Sanctions

In addition to criminal penalties, the FCPA provides for civil penalties of up to $10,000 against enterprises and individuals for violations of the antibribery provisions. The Securities and Exchange Commission (“SEC”) or the Department of Justice (depending on whether the violation is committed by an issuer) may also seek injunctive relief to enjoin any act of an enterprise or individuals acting on behalf of an enterprise which violates or may violate the FCPA37. 37 15 U.S.C. §§ 78u(c); 78dd-2(d) & (g); 78dd-3(d) & (e); 78ff(c). B40 FCPA violations may also trigger costly collateral sanctions. For example, the mere indictment of a company for violation of the FCPA may trigger debarment from U.S. Government contracting, ineligibility for government benefits (such as financing), and/or suspension of export licensing for defence goods and services38. With respect to victims, there have been several private civil cases brought by parties under the Racketeer Influenced and Corrupt Organizations Act (RICO)39. However, the courts have not uniformly recognised a private right of action under RICO.

4. ARTICLE

4. JURISDICTION

The Convention’s basic offence of the bribery of a foreign public official applies to any person. Article 4 then requires states to establish jurisdiction over offences committed in whole or in part within their territory, whether or not by nationals, and requires states that have jurisdiction to prosecute their nationals for offences committed abroad to establish jurisdiction in respect of the offence of the bribery of a foreign public official, according to the same principles. The Commentaries clarify that the territorial nexus required for jurisdiction is to be interpreted broadly so as not to require an “extensive physical connection”. Prior to its amendment in 1998, the FCPA asserted only territorial jurisdiction. In light of the requirements of the Convention, the FCPA has added a jurisdiction basis for acts committed abroad by U.S. nationals and businesses (nationality jurisdiction). It has also extended the territorial basis of jurisdiction to cover acts in furtherance of a bribe committed within the territory of the U.S. by foreign nationals and foreign businesses.

4.1 Territorial Jurisdiction

The FCPA, as amended, asserts territorial jurisdiction over offences committed in whole or in part within the territory of the United States, whether or not by nationals. In asserting territorial jurisdiction, the Act reaches all “issuers” and other businesses (“domestic concerns”) “organised under the laws of the U.S., or a State, territory, possession, or commonwealth of the United States or a political subdivision thereof ”, all businesses organised under the law of a foreign country, as well as U.S. and non-U.S. nationals. There is, however, a different treatment for the acts committed, on the one hand, by non-U.S. nationals and businesses and, on the other hand, by U.S. nationals and businesses organised under the laws of the U.S. For issuers, domestic concerns and U.S. nationals, the FCPA requires that some acts “in furtherance of ” the corrupt activity have a connection to the mails or any means of interstate commerce. Under this provision, it is not necessary that the payment, gift, offer, or authorisation take place in the United States: the Act only requires that an act in furtherance take place (see

4.4, below). 38 See 10 U.S.C. §2408 (prohibiting defence-related employment by individuals convicted of procurementrelated felony); 48 C.F.R. Subpt.

9.4 (debarment of any company convicted of crime involving fraud or indicating lack of business integrity); and from participation in various government programs, e.g., overseas investment guarantees. See, e.g., Foreign Assistance Act of 1961 § 237(1) (Overseas Private Investment Corporation); 7 C.F.R. § 1493.270 (Commodity Credit Corporation). 39 18 U.S.C. chapter 96. B41 For non-U.S. businesses and non-U.S. nationals, the FCPA does not require a connection to mails or any means of interstate commerce. The Act asserts jurisdiction over non-U.S. companies and nationals who take any acts in furtherance of a bribe of a foreign public official while within the U.S. (See

4.4, below)

4.2 Nationality Jurisdiction

As amended in 1998, the FCPA asserts nationality jurisdiction in cases of bribery of foreign government officials. The Act reaches all “issuers” and other businesses (“domestic concerns”) “organised under the laws of the United States, or a State, territory, possession, or commonwealth of the United States or a political subdivision thereof ” and all U.S. nationals (as defined in section 101 of the immigration and Nationality Act) who “corruptly do any act outside the United States in furtherance of (an unlawful payment, gift, or offer, or authorisation thereof).”40 The United States, under its constitutional principles, has jurisdiction to prosecute its nationals for offences committed abroad. So far, this jurisdiction has been rarely invoked and the U.S. does not expect that the addition of the nationality jurisdiction will have a significant impact on the volume of prosecutions, because since 1977 it has been able to prosecute where only some act in furtherance takes place in the U.S. However, the U.S. states that the addition of the nationality jurisdiction eases the government’s burden by enabling a prosecution to proceed on that basis alone without the need to prove an act was committed within U.S. territory.

4.3 Consultation Procedures

There are no legal instruments requiring the U.S. to consult regarding the eventual transfer of a criminal case covered by the FCPA to another Party for investigation or prosecution. However, the U.S. consults regularly on such matters through the Department of Justice’s Office of International Affairs, which is the Central Authority for the U.S. on mutual legal assistance matters

4.4 Effectiveness of Jurisdiction

As a result of the 1998 amendment, a significantly larger universe of persons is subject to criminal penalties under the FCPA than was the case previously. However, when nationality jurisdiction applies, the nature of the requisite act in furtherance of an offer, etc. is broader than when territorial jurisdiction applies to U.S. companies and nationals, and is the same as when territorial jurisdiction applies to foreign companies and nationals. The following table illustrates this point: The U.S. explains that the difference in treatment is due to federal constitutional principles and the requirement that a federal crime have a federal nexus, here the use of means or an instrumentality of interstate commerce. The United States does not believe that this will result in an uneven application of the legislation. It would be a rare case in which a business in the United States succeeded in authorising or paying a bribe without making use of the mails or

Persons Covered Territorial Jurisdiction Nationality Jurisdiction “Issuers” and “domestic concerns” organised under U.S. laws and “any U.S. person” “Any person” (i.e. non-national person or business)

Act in furtherance has to involve “use of mails or any means or instrumentality of interstate commerce”. Act in furtherance does not require use of an instrumentality of interstate commerce. The requirement is that this act takes place within the U.S. Act in furtherance does not require a connection to use of mails or U.S. interstate commerce. other means or instrumentalities of interstate commerce. For example, such means and instrumentalities include phone lines, thus encompassing all phone calls, fax transmissions, telexes, and email messages, air, sea, rail, and auto travel, as well as interstate and international bank wire transfers. Moreover, the communication or travel need not actually cross interstate or international boundaries; it is sufficient if the defendant made use of interstate instrumentalities even for intrastate communication or travel41.

5. ARTICLE

5. ENFORCEMENT

5.1 Rules and Principles That Govern Investigation and Prosecution Enforcement Generally There is no written enforcement policy specifically applicable to the FCPA. However, the general policy that applies to federal prosecutions of all federal criminal statutes, including the FCPA, is set forth in the Principles of Federal Prosecution.42 A prosecutor is required, as always, to make an initial assessment of the merits of the cases, the likelihood of obtaining sufficient evidence to obtain a conviction, and the availability of sufficient investigative and prosecutive resources. More specifically, the decision whether to initiate or decline charges in a particular cases is governed by the following factors: (i) Federal law enforcement priorities; (ii) the nature and seriousness of the offence;(iii) the deterrent effect of prosecution; (iv) the person’s culpability in connection with the offence; (v) the person’s history with respect to criminal activity; (vi) the person’s willingness to cooperate in the investigation or prosecution of others; and (vii) the probable sentence or other consequences if the person is convicted43. The Department’s decision not to prosecute generally is not made public. The Department, however, may notify a target individual or company that an investigation has been concluded, and the company may choose to release that information. According to the U.S. Department of Justice, political or economic interests are not relevant to this decision. To ensure that uniform and consistent prosecutive decisions are made in this particular area, all criminal FCPA investigations are supervised by the Criminal Division of the U.S. Department of Justice. According to U.S. authorities, political or economic interests are not relevant to the Security and Exchange Commission’s (SEC) decisions to investigate or bring cases to enforce the civil provisions of the FCPA against issuers.

Guidelines and Opinions of the Attorney General Pursuant to the FCPA44, the Attorney General is required, in consultation with other interested agencies of the U.S. Government, to decide whether specific guidelines for compliance with the FCPA are necessary and appropriate. This process was undertaken, and involved publishing in the federal register an invitation to interested parties to provide their views on whether guidelines were necessary or appropriate. Only 5 responses were received, and 3 of the responses were to the effect that guidelines were unnecessary. Thus the decision was taken by the Attorney General to not issue guidelines. However, in compliance with another provision under the FCPA45, there is an opinion procedure, whereby a person that has a real but prospective transaction may submit to the Department of Justice a request for an opinion based 41 See 15 U.S.C. §§ 78c(a)(17), 78dd-2(h(5), 78dd-2(f)(5). 42 . U.S. Attorney’s Manual 9-27.230. 43 Principles of Federal Prosecution, U.S. Attorney’s Manual §9-27.230. 44 . 15 U.S.C. §§ 78dd-1(d), 78dd-2(e). 45 . 15 U.S.C. §§ 78dd-1(e), 78dd-2(f). B43 on an outline of the relevant facts of the prospective transaction. These opinions are formal opinions of the Department, and the opinion can be relied upon only to the extent that the representations of the requesting party remain unchanged. To date most requests for opinions concerned whether or not a person was a public official and under what circumstances the services of an agent could have been retained.

Plea Bargaining The U.S. authorities explain that the exercise of prosecutorial discretion in the manner described as “plea bargaining” has not resulted in the imposition of lighter penalties or fewer prosecutions in relation to prosecutions under the FCPA. In fact, the U.S. authorities believe that the fines in relation to corporations have been much greater in those cases that have resulted in convictions because of plea agreements. It is the unofficial policy to seek the maximum criminal fine in situations involving corporate violations, and to advocate the maximum fine for natural persons, to the extent that they are capable of paying them.

5.2 Political or Economic Considerations

FCPA prosecution decisions are based on the merits of the case, not political or economic considerations. Political bodies and non-criminal government bodies have no influence on the investigation and prosecution of cases involving bribery of foreign public officials. Criminal FCPA investigations and prosecutions are handled by career prosecutors and supervised by the Criminal Division of the U.S. Department of Justice. There is no requirement that any other agency within the U.S. Government be consulted before bringing charges. The SEC, which enforces the civil provisions of the FCPA against issuers, is an independent, nonpartisan agency.

6. ARTICLE

6. STATUTE OF LIMITATIONS

6.1 Term of Statute

The statute of limitations for criminal violations of the FCPA is five years from the date that the potential offence was committed; this derives from the general federal criminal statute of limitations46. The statute of limitations for civil violations is also five years. Both periods can be extended for up to three years, upon a request by a prosecutor and a finding by a court that additional time is needed to gather evidence located abroad47.

7. ARTICLE

7. MONEY LAUNDERING

The Convention requires that any party that has made domestic bribery a predicate offence for the application of its money laundering legislation shall do so for foreign bribery, without regard to the place where the bribery occurred.

7.1/

7.2 Bribery of a Domestic and Foreign Public Official

Under the Money Laundering Control Act, which applies to active bribery, bribery of a domestic public official is a predicate offence; bribery of a foreign public official has been a predicate offence under the same Act since 199248. 46 See 18 U.S.C. § 3282. 47 See 18 U.S.C. § 3292. 48 18 U.S.C. § 1956(c)(7)(a) (incorporating 18 U.S.C. § 1961(1), which lists 18 U.S.C. § 201 as a predicate offence), and 18 U.S.C. § 1956(c)(7)(D). B44 According to the U.S. Department of Justice, both with respect to the FCPA and the Money Laundering Control Act, where the bribe takes place is irrelevant. In addition, the Money Laundering Control Act explicitly provides for extraterritorial jurisdiction over U.S. nationals and, provided that some conduct occurred within the U.S., over non-U.S. nationals49. The U.S. authorities explain that forfeiture is possible under the Act in relation to the bribe itself where it is laundered during the course of delivery to the foreign public official, and to the profit of the person who gives the bribe. However, they indicate that the Money Laundering Act is not always the best way to reach profits that have been obtained through bribery. For instance, the money laundering provisions cannot reach savings. In situations such as these, the U.S. authorities find that it is much more effective to fine a corporation to such an extent that the proceeds from bribery have been stripped away. This is accomplished through the alternative fine provisions in the U.S. Code (discussed above under

3.2 and

3.6). The U.S. finds that these 2 tools (i.e. the Money Laundering Control Act and the alternative fine provisions) give it the flexibility it needs to meet the various factual situations that it encounters.

8. ARTICLE

8.ACCOUNTING

8.1 Maintenance of Books and Records and Internal Controls Requirements

In addition to the antibribery provisions of the FCPA, the statute also contains books and records and internal control provisions. Companies are required to keep accurate books and records and to establish and maintain a system of internal controls adequate to ensure accountability for assets. Following the enactment of the FCPA in 1977, the SEC adopted two rules under Section 13 of the Exchange Act to implement the books and records and internal controls provisions, Rules 13b2-1 and 13b2-2. Rule 13b2-1 prohibits any person from “directly or indirectly, falsif[ying] or caus[ing] to be falsified, any book, record or account subject to section 13(b)(2)(a)” of the Exchange Act. That is, the rule prohibits any falsification of an issuer’s books and records. Rule 13b2-2 makes it unlawful for directors or officers of an issuer to lie to the issuer’s independent auditors. The rule specifically provides that no director or officer of an issuer shall, directly or indirectly, make or cause to be made, a materially false or misleading statement, or to omit to state, or cause another person to omit to state, any material fact necessary to make the statements made not misleading to an accountant in connection with the (1) audit or examination of the financial statements of an issuer, or (2) the preparation or filing of any document or report filed with the SEC.

8.2 Companies Subject to these Laws and Regulations

8.3 Penalties for Omissions and Falsifications

Like the antibribery provisions, the books and records and internal control provisions of the FCPA are enforced by the Department of Justice and the SEC. The SEC may impose civil penalties under its general enforcement authority over all reporting companies. The Department of Justice has enforcement authority over criminal violations of these provisions. Under the Act, individuals found to have committed a “wilful” violation of the accounting provisions of the FCPA may be fined up to $1 million and/or imprisoned up to ten years; enterprises found to have “wilfully” violated the accounting requirements may be fined up to $2.5 million. 49 18 U.S.C. § 1956(f). B45

9. ARTICLE

9. MUTUAL LEGAL ASSISTANCE

The OECD Convention obliges parties, “to the fullest extent possible”, to provide “prompt and effective legal assistance” to each other in connection with both criminal and non-criminal proceedings, and criminal investigations that relate to any offences within the scope of the Convention. It also establishes dual criminality where its existence is a requirement for a country to provide mutual assistance. Finally, it mandates that countries not decline to provide mutual assistance on the grounds of bank secrecy.

9.1 Laws, Treaties and Arrangements Enabling Mutual Legal Assistance

In the U.S., the primary legal vehicles for prompt and effective mutual legal assistance are the bilateral mutual legal assistance treaties (MLATs) in force between the United States and the other Parties to the Convention. The U.S. is party to MLATs with the following signatories to this Convention: Argentina, Canada, Hungary, Italy, Korea, Mexico, the Netherlands, Spain, Switzerland, the United Kingdom, and Turkey. The Congress has approved additional MLATs with Brazil, the Czech Republic, Luxembourg, and Poland, but they are not yet in force. The treaties generally provide for assistance in locating persons, serving documents, producing and authenticating government documents, and producing and authenticating some business records and other non-government documents, conducting searches, and obtaining testimony of witnesses. All of these functions are however subject to U.S. constitutional limitations, and most permit the government to refuse to render assistance on a variety of grounds. Mutual legal assistance is also possible without reliance on treaty procedures in some cases. For example, under Title 28, U.S. Code, Section 1782, U.S. courts may, but are not required to, order the production of documents or testimony of witness in connection with foreign criminal proceedings. Various U.S. law enforcement agencies administer individual statutes that provide for co-operation between the agency and its foreign counterparts. The U.S. asserts that its law and practice permit and encourage informal cooperation.

9.2 Dual Criminality

Mutual legal assistance is generally not conditional on dual criminality under U.S. law, unless such a condition is contained in the mutual legal assistance treaty between the U.S. and the Requesting State. For example, the MLAT between the U.S. and Switzerland requires dual criminality for any assistance that requires compulsory measures. However, seeking legal assistance for an offence established pursuant to the Convention will satisfy any dual criminality requirement imposed under the U.S. laws or treaties.

9.3 Bank Secrecy

U.S. law generally does not require the denial of mutual legal assistance on the ground of bank secrecy. When seeking court orders on behalf of foreign States that seek mutual legal assistance, the United States has taken the position before its courts that assistance may not be declined as a result of privacy provisions of U.S. banking law. Moreover, it is the policy of the United States that where a domestic law provides for executive discretion in denying assistance, the executive branch does not decline assistance on that basis. Pursuant to the Right to Financial Privacy Act50, the Government may obtain access to the financial records of any customer from a financial institution by obtaining an administrative subpoena, a search warrant, a judicial subpoena or by 50 . 12 U.S.C. chapter 35. B46 making a formal request.51 Search warrants must be obtained pursuant to the Federal Rules of Criminal Procedure52. In the other cases the customer may challenge a request for financial information before a court, and the court may deny access to the financial records where “there is not a demonstrable reason to believe that the law enforcement inquiry is legitimate and a reasonable belief that the records sought are relevant to that inquiry”.53

10. ARTICLE

10. EXTRADITION

10.1 Extradition for Bribery of a Foreign Public Official

Whether the bribery of a foreign public official is an extraditable offence depends on the terms of the bilateral extradition treaty in force between the U.S. and the requesting state. In the U.S., extraditable offences are those prescribed by treaty. The offence described in Article 10(1) of the Convention will be an extraditable offence under every extradition treaty in force between the U.S. and another Party to this Convention.

10.2 Convention as a Legal Basis for Extradition

The Convention asks countries that make extradition conditional on the existence of an extradition treaty, to consider this Convention as a legal basis for extradition in respect of the offence of bribery of a foreign public official. Under U.S. law, extradition can only take place pursuant to extradition treaties. Generally, these treaties provide that extradition can take place where the offence in question is punishable under the laws of both the requesting state and the U.S. by a maximum prison term of more than one year. Thus, even before the advent of the Convention, extradition for these offences would have normally been possible, subject to the other terms of the treaty. Now that the U.S. has become a party to the Convention, extradition treaties with countries that have ratified the Convention are automatically deemed to incorporate the offences criminalised in Article 1 of the Convention. The United States already has bilateral extradition treaties in force with 31 countries that signed the Convention: Argentina, Austria, Belgium, Brazil, Bulgaria, Canada, Chile, the Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal, the Slovak Republic, Spain, Switzerland, Sweden, Turkey, and the U.K. In addition, the U.S. has signed an extradition treaty with Korea, but it is not yet in force.

10.3 Extradition of Nationals

The U.S. can extradite its nationals. It is the policy of the United States not to decline extradition on the ground of nationality. Moreover, under Title 18, United States Code, Section 3196, the extradition of U.S. nationals is authorised (subject to the other requirements of the applicable treaty) even where the applicable extradition treaty does not obligate the United States to do so. 51 . 12 U.S.C. § 3402. 52 . 12 U.S.C. § 3406 53 . 12 U.S.C. § 3410. B47

10.4 Dual Criminality

Dual criminality is not constitutionally required before the United States can extradite. Dual criminality as a condition for extradition may however exist under an applicable extradition treaty between the U.S. and another Party to the Convention. In that case, the U.S. would deem that condition to be fulfilled if the offence for which extradition is requested is within the scope of Article 1 of the Convention.

11. ARTICLE

11. RESPONSIBLE AUTHORITIES

The Convention requires Parties to designate an authority or authorities to serve as a channel of communication for requests in connection with the mutual assistance and extradition provisions of the Convention. In the case of the United States, the Department of Justice is the authority responsible for making and receiving requests for mutual legal assistance under Article 9 of the Convention and requests for consultation under Article

4.3. The Department of State is the authority responsible for making and receiving requests for extradition under Article

10.

B. IMPLEMENTATION OF THE REVISED RECOMMENDATION

3. TAX DEDUCTIBILITY

The Revised Recommendation urges the prompt implementation by Member countries of the 1996 Recommendation on Tax Deductibility of Bribes to Foreign Officials, which states that the Council “recommends that those Member countries which do not disallow the deductibility of bribes to foreign public officials re-examine such treatment with the intention of denying this tax deductibility.” Similarly the Commentaries on the Convention state that “in addition to accepting the Revised Recommendation of the Council on Combating Bribery, a full participant also accepts the Recommendation on the Tax deductibility of Bribes of Foreign Public Officials, adopted on 11 April, C(96)27/FINAL”. The United States’ prohibition on the tax deductibility of foreign bribes preceded the FCPA. Under section 162(a) of the Internal Revenue Code (“IRC”), U.S. tax payers may deduct all “ordinary and necessary” expenses paid or incurred in carrying on a trade or business. In 1958, Congress amended the IRC to add section 162(c), which denies tax deductibility under section 162(a) for any payment that is an illegal kickback or a bribe. Section 162(c) also precludes deducting any payment that is unlawful under the Foreign Corrupt Practices Act. B48

EVALUATION OF THE UNITED STATES General Remarks

The Working Group thanks the United States’ authorities for the comprehensive and informative nature of their responses, which significantly assisted in the evaluation process. The relevant U.S. legislation, namely the Foreign

Specific Issues

1. The offence of bribery of foreign public officials

1.1 Interstate nexus requirement

As a result of the 1998 amendment, a significantly larger range of persons is subject to criminal penalties under the FCPA than was the case previously. However, the net is cast wider when the offence occurs outside the U.S. territory, and when carried out by a foreign person or business in U.S. territory, in terms of one element of the offence (use of interstate means or instrumentality for US. companies and nationals while in the U.S. vs. any act in the U.S. for foreign companies and nationals). The U.S. authorities explained that the difference in treatment is due to the limited legislative power granted to the federal government under the Constitution. As a result, the primary basis for most criminal statutes is the interstate federal commerce clause (i.e. the power to “regulate commerce with foreign Nations and among the several states”.) This interstate commerce nexus is satisfied for non-U.S. nationals and businesses when they enter the U.S. to take an action in furtherance of a bribe overseas, because they are necessarily acting in international commerce. Although the United States does not believe that this will result in an uneven application of the legislation due to its expansive interpretation of the interstate commerce nexus, the Working Group noted that the interstate nexus requirement might create a problem of evidence when a bribe is offered in person.

1.2 To a foreign official, for that official, or for a third party

The FCPA prohibits payments of “anything of value” to foreign public officials. The United States has explained that “anything of value” encompasses both tangible and intangible benefits. The ability to designate a third party as the beneficiary of the benefit, however intangible that benefit might be, is also considered a benefit to the foreign public official and is sufficient for the purpose of the FCPA. The Working Group is however concerned that the FCPA does not specifically state that a payment to a third party at the foreign official’s direction is prohibited by the statute and would like to re-examine this issue in Phase 2 of the evaluation process. B49

1.3 Affirmative defence and routine governmental action

Under Article 78dd-1(c), 78dd-2(c) and 78dd-3(c), an affirmative defence may be asserted where a payment was a “reasonable and bona fide expenditure, such as travel and lodging expenses”, incurred by or on behalf of a foreign official and “directly related” to the “promotion, demonstration, or explanation of products or services” or “the execution or performance of a contract with a foreign government or agency thereof ”. Such provision has no equivalent in the Convention. The Working Group expressed some doubts about the effectiveness and necessity of these provisions. According to the commentaries to the Convention, small “facilitation” payments do not constitute payments made to “obtain or retain business or other improper advantage”. The FCPA’s provision concerning “routine governmental action” contains a list of such exceptions qualified by the requirement that the payment may not be made to obtain or retain business. The Working Group is concerned, however, that the list of payments is not sufficiently qualified, for example by reference to the size of the payment, and the discretionary nature and the legality of the reciprocal act, and is therefore potentially subject to misuse. The U.S. believes that these provisions are consistent with the requirements of the Convention because in both cases a payment that seeks a “quid pro quo” is prohibited.

1.4 Obtaining or retaining business or other improper advantage

The Convention prohibits bribes to foreign officials not only to “obtain or retain business” but also to secure any “other improper advantage”. In the FCPA formulation, the language relating to an improper advantage is placed before that in respect of obtaining or retaining business. The U.S explained that the rational for its formulation was to avoid doing anything by virtue of the amendment that would take away from the historic broad interpretation of the offence. The U.S. had, prior to the amendment, interpreted the three pre-existing elements of the FCPA to encompass payments “to secure any improper advantage”. Whilst the insertion of this language in the statute does clarify and reinforce this interpretation, the Working Group considered that the prospect of the chosen formulation causing problems in the prosecution of offences could not be entirely dismissed.

2. Sanctions

The Convention requires Parties to institute “effective, proportionate, and dissuasive criminal penalties” comparable to those applicable to bribery of the Party’s own domestic officials. Although the FCPA prescribes substantial criminal penalties and imposes additional civil and administrative sanctions, the Working Group noted the discrepancy between the maximum imprisonment for bribery of domestic public officials (15 years) and foreign public officials (5 years). The Working Group noted that although the United States criminal fine provisions provide full compliance with Article

3.3 of the Convention, the FCPA does not expressly provide for seizure and confiscation of the proceeds of the bribery of foreign public officials (the U.S. is, however, able at the present time to seize and confiscate the bribe itself). This may have ramifications in applications for mutual legal assistance. The Working Group agrees this is a general issue for a comparative analysis of the legal situation in Member countries, and that it should therefore be taken up again at a later stage.

3. Statute of limitations

The statute of limitations for criminal violations of the FCPA is five years from the date that the potential offence was limited. This period can be extended for three more years, upon a request by a prosecutor and a finding by a court that additional time is needed to gather evidence located abroad. Article 6 of the Convention requires an adequate period of time for investigation and prosecution. The Working Group agreed that this is a general issue for a comparative analysis of the legal situation in Member countries, and that it should therefore be taken up again at a later stage.

4. Accounting

The Working Group noted that the FCPA’s books and records and internal controls provisions apply only to publicly held corporations. B50

UNITED STATES: PHASE II REVIEW REPORT ON APPLICATION OF THE CONVENTION ON COMBATING BRIBERY OF FOREIGN PUBLIC OFFICIALS IN INTERNATIONAL BUSINESS TRANSACTIONS AND THE 1997 RECOMMENDATION ON COMBATING BRIBERY IN INTERNATIONAL BUSINESS TRANSACTIONS TABLE OF CONTENTS

A. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B53 a) Nature of the On-Site Visit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B53 b) Methodology and Structure of the Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B54 c) General Observations about the On-Site Visit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B54 d) The Maturity of Foreign Bribery Legislation in the United States . . . . . . . . . . . . . . . . . . . . . . . . . . B55 e) The Liability of Corporations under the FCPA and under U.S. Law Generally . . . . . . . . . . . . . . . . B56 B. DOES THE UNITED STATES HAVE EFFECTIVE MEASURES FOR PREVENTING AND . . . . . . . DETECTING THE BRIBERY OF FOREIGN PUBLIC OFFICIALS? . . . . . . . . . . . . . . . . . . . . . . . . . . . B57 a) The Role of the DOJ Fraud Section and the SEC in Deterrence and Prevention . . . . . . . . . . . . . . . B57 The DOJ Opinion Procedure and the Need for Further Guidance. . . . . . . . . . . . . . . . . . . . . . . B58 b) Detection and Investigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B59 Sources of allegations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B59 Investigations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B60 c) Importance of the Accounting Requirements of the FCPA and the Auditing Requirements of the Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B62 General observations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B62 Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B62 Auditing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B62 d) Sanctions and the ‘collateral deterrent’ effect. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B64

A INTRODUCTION a) Nature of the On-Site Visit 1. In March 2002, the United States became the second Party to the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions to undergo the Phase 2 on-site visit by a team from the OECD Working Group on Bribery in International Business Transactions.

2. The team from the OECD Working Group was composed of lead examiners from France and the United Kingdom as well as representatives of the OECD Secretariat1. The meetings took place over the course of five days mostly at Department of Justice offices in Washington DC, and brought together officials from the following United States government departments and agencies: Department of Justice Criminal Division Fraud Section, Department of Justice Criminal Division Asset Forfeiture and Money Laundering Section, Department of Justice Public Integrity Section and Office of International Affairs, Department of State, Department of Commerce, Department of Defense, Federal Bureau of Investigation, U.S. Sentencing Commission, Securities and Exchange Commission, Internal Revenue Service, U.S. Agency for International Development, Overseas Private Investment Corporation and Export-Import Bank. Part of the team visited the Financial Crimes Enforcement Network of the Department of Treasury. Briefings were held with senior members of the Senate Foreign Relations Committee and with staff of the House International Relations Committee.

3. The OECD team met with representatives of the American Bar Association, the American Federation of Labor- Congress of Industrial Organisations (AFL-CIO), the American Institute of Certified Public Accountants, the Auditing Standards Board, the Compliance Systems Legal Group, the Conference Board, the Financial Executives Institute, Global Corporate Citizenship, the International Forum on Accountancy Development, the Institute of Internal Auditors, the Tax Executives Institute and Transparency International USA. Part of the team visited the World Bank. The team also met with senior representatives of the following corporations: the Boeing Company, DuPont, Lockheed Martin, Motorola, Raytheon International, and Schering-Plough Corporation. The examining team met with representatives of the following law and accounting firms: Clifford Chance; Covington & Burling; Dechert, Price & Rhoads; Dickinson Landmeier LLP; Foley & Lardner; KPMG; Miller & Chevalier Chartered; Shearman & Sterling; Troutman Sanders; Weil, Gotshal & Manges; and Wilmer, Cutler & Pickering.

4. Pursuant to the procedure agreed to by the Working Group for the Phase 2 self and mutual evaluation of the implementation of the Convention and the Revised Recommendation, the purpose of the on-site visit was to study the structures in place in the United States to enforce the laws and regulations implementing the Convention and to assess their application in practice, as well as to monitor the United States’ compliance in practice 1 . France was represented by Mr. Noel Claudon, Directeur Départemental de la Direction Générale des Impôts, Ministère de l’Economie, des Finances et de l’Industrie (Director, General Tax Directorate, Ministry of Economy, Finances and Trade); Mr. Alexandre Draznieks, Adjoint du Chef de bureau, Système Monétaire et Finances Internationales, Ministère de l’Economie, des Finances et de l’Industrie (Deputy Head, Monetary System and International Finances Office, Ministry of Economy, Finances and Trade); and Mr. Jean-Claude Marin, Avocat Général à la Cour de Cassation, Ministère de la Justice, (Magistrate, Ministry of Justice). The United Kingdom was represented by Mrs. Claire Entwistle, Investigator, Companies Investigation Branch, Department of Trade and Industry; and Mr. John Ringguth, Head of Prosecution Policy, Crown Prosecution Service . The OECD Secretariat was represented by Mr. Rainer Geiger, Deputy Director, Directorate for Financial, Fiscal and Enterprise Affairs; Mr. Nicola Bonucci, Deputy Director, Directorate for Legal Affairs; Mr. Frédéric Wehrlé, Principal Administrator, Anti-Corruption Division, Directorate for Financial, Fiscal and Enterprise Affairs; Mrs. Martine Milliet-Einbinder, Head of Unit, International Co-operation, Exchange of Information and Harmful Tax Practices Division, Centre for Tax Policy Administration; and Ms. Frances Meadows, Consultant, Anti-Corruption Division, Directorate for Financial, Fiscal and Enterprise Affairs. B53 with the 1997 Recommendation. In preparation for the on-site visit, the United States provided the Working Group with answers to the Phase 2 questionnaire together with documentary appendices, which were reviewed and analysed by the visiting team in advance. Both during and after the on-site visit the United States authorities continued to provide the visiting team with followup information.

b) Methodology and Structure of the Report 5. The Phase 2 Review reflects an assessment of information obtained from the United States’ responses to the Phase 2 questionnaire, the consultations with the United States government and civil society during the on-site visit, a review of all the relevant legislation and known case law, and independent research undertaken by the lead examiners and the Secretariat.

6. Since the purpose of Phase 2 of the monitoring process is to assess the implementation of the Convention and Revised Recommendation in practice, and most of the assessment is derived from the onsite visit, the Phase 2 Report is fact based and evaluative, identifying not only those features that work well, but also potential problems in the effective prevention, detection and prosecution of foreign bribery cases. It is therefore organised

c) General Observations about the On-Site Visit

8. The on-site visit was characterised in particular by the commitment and dedication of those officials of the United States Government, notably the Department of Justice (hereafter: the DOJ), with responsibility for enforcement of the Foreign Corrupt Practices Act. Their readiness to explain the legal and constitutional background against which the FCPA is implemented proved to be of great assistance to the lead examiners. It became clear in the course of the on-site visit that any objective assessment of the working of the FCPA requires an understanding of certain features inherent in the U.S. legal system. In seeking to demonstrate why, taken in context, most features of the FCPA appear to function efficiently, as well as pointing up those areas which could be improved upon, the lead examiners hope that the present review will promote such understanding. B54

d) The Maturity of Foreign Bribery Legislation in the United States

9. The enactment of the Foreign Corrupt Practices Act (FCPA) in 1977 was a landmark in the effort to combat foreign bribery and attests to the pioneering role of the United States in this field. Now, with a history of substantive amendments in 1988 and 1998, and twenty-five years of practice built up around it, the Act can be evaluated as a mature piece of legislation. There is available not only a body of case-law (albeit mostly consisting of cases where the court has approved a negotiated plea agreement) but also a wealth of business practice, a cadre of experienced prosecutors and a developed specialist Bar, all contributing to an increasing level of public awareness.

10. Although, as will be seen, the number of prosecutions and civil enforcement actions for FCPA violations has not been great, the enforcement history demonstrates a willingness to prosecute large and medium-sized companies, and often high-level officers of those companies, alleged to have been involved in violations of the FCPA throughout the world. Those cases have arisen out of activities in over twenty different countries such as Argentina, Brazil, Canada, Colombia, the Cook Islands, Costa Rica, the Dominican Republic, Egypt, Germany, Haiti, Iraq, Israel, Italy, Jamaica, Mexico, Niger, Nigeria, Panama, Russia, Saudi Arabia, Trinidad and Tobago, and Venezuela. The illegal payments alleged have ranged from US$ 22,000 to US$ 10 million. These illegal payments represent varying percentages of up to 40 per cent of the business obtained. In most if not all prosecuted cases, the payments have taken the form of money, most often paid into third-country bank accounts.

11. Most of the criminal cases brought have involved direct and overtly corrupt payments to foreign government officials. The DOJ has prosecuted a variety of schemes, companies and individuals under the FCPA. Cases have involved industries such as the aircraft industry, the automotive industry, the construction industry, the energy industry, and the food and agriculture industry. For example, in one group of cases, the DOJ prosecuted a company and its high-level officers for bribing the officials of Pemex, the national oil company of Mexico, in order to gain several multimillion dollar contracts with Pemex. In another case, the DOJ prosecuted employees of a bus company for bribing officials of a provincial government in Canada to secure a contract to provide buses to the transit authority. Major companies like General Electric, Goodyear, IBM and Lockheed Corporation and their high-level employees have been the subject of criminal FCPA prosecution for various bribery schemes. 12. Over the years, there have been advances in the sophistication of the mechanisms used in bribery itself as well as in the techniques of enforcement. Generally, the pattern has changed from the classic suitcase filled with cash to more subtle scenarios involving intermediaries, complex transactions with government entities, and misstatements of business or promotional expenses. This has multiplied the suspicious indicators or so-called ‘red flags’ companies need to look for – especially in the joint venture context and in foreign mergers and acquisitions – and has led to the need for an increasingly broad array of safeguards to be deployed. 13. The ongoing monitoring process provides an opportunity to take stock of the FCPA in the light of the OECD Convention and also of the changes that have occurred in the international legal and business environment. Foremost among these is the extensive and growing exposure of U.S. corporations and their foreign subsidiaries to sensitive business environments world-wide. U.S. trade with developing countries, while significantly smaller than trade with industrialised countries, is continuously increasing both in absolute value and as a proportion of total U.S. global trade. Growing at an average annual rate of

9.1per cent between 1988 and 1998, U.S. trade with developing countries accounted for more than 30 per cent of total U.S. trade by 1998, with the Asia and Near East region and the region of Latin America and the Caribbean accounting respectively for 70 per cent and 23 per cent of total U.S. trade with developing countries. U.S. trade with OECD members accounted for 68 per cent of total U.S. trade as compared with 71 per cent in 1988. These figures do not include sales by foreign affiliates of U.S. companies, which play a determinant role in U.S. global business activities. Foreign direct investment (FDI) has become an integral part of U.S. corporate strategies, making the U.S. the most prominent home country of international investment; the recent trend owes much to major cross-border mergers and acquisitions (M&As), estimated to account for 80 per cent of U.S. FDI in late 1990. B55 14. In an era of increasing globalised trade, the Securities and Exchange Commission (hereafter: SEC) and Department of Justice investigations, prosecutions and civil enforcement actions for FCPA violations are expected to increase. Going forward, the lead examiners would encourage the United States to continue to build on the undoubted strengths of the FCPA which appear from this Report. At the same time, work could be done in order to make the FCPA a sharper and more focused instrument, better attuned to fighting foreign bribery on more and more fronts.

e) The Liability of Corporations under the FCPA and under U.S. Law Generally 15. As a matter of background, one important factor when assessing the effectiveness of the FCPA is the nature of corporate liability under U.S. law. According to the applicable theory, a company is liable for the acts of its directors, officers or employees whenever they act within the scope of their duties and for the benefit of the company. There is no additional requirement for a ‘mental element’ such as the involvement or approval of a certain level of management. The resulting standard, as acknowledged by panellists during the on-site visit, is virtually one of strict corporate liability. This feature of U.S. law is general, and not confined to the FCPA. Its effect is not only to reinforce the effectiveness of the FCPA but also – without distinction between issuers and non-issuers as defined by the Act — to encourage corporations to implement measures of deterrence throughout their organisations. 16. The FCPA also imposes liability for foreign bribery committed by third parties acting as agents. It is this everpresent threat of vicarious liability (liability for the acts of others) which, perhaps more than any other feature, has prompted the introduction of stringent ‘due diligence’ practices among many large multinationals in selecting their local agents, business partners and sales representatives, and in screening potential joint venture partners who might bring with them the risk of possible hidden exposures. The lead examiners heard from a senior in-house counsel of one major U.S. defence contractor whose policy was to interview, in person, prospective sales representatives in foreign locations in order to assess their level of understanding of, and compliance with, required standards of corporate conduct, principally based on the FCPA. 17. The potential for liability for the acts of foreign subsidiaries is also significant in this context. A foreign subsidiary of a U.S. corporation is a foreign legal person, having the nationality of its country of incorporation, and is thus not technically subject to the FCPA antibribery provisions except in respect of acts done by it within

B DOES THE UNITED STATES HAVE EFFECTIVE MEASURES FOR PREVENTING AND DETECTING THE BRIBERY OF FOREIGN PUBLIC OFFICIALS? a) The Role of the DOJ Fraud Section and the SEC in Deterrence and Prevention 18. The Fraud Section of the Department of Justice’s Criminal Division has had, since 1994, sole control over the criminal enforcement of the FCPA. The commonly-held view among the members of the Bar who met with the examiners was that the reputation for aggressive pursuit that the Fraud Section of the Department of Justice has developed over the years has been a major factor in deterring companies from bribery. The business community, or at least the large companies, view the Department of Justice as committed to deterring foreign bribery. In spite of the fact that over the past twenty-five years there have been relatively few prosecutions, the record of steady effort spread over the years clearly demonstrates continuing serious commitment and dedication on the part of the Department of Justice to detect, investigate and prosecute bribery cases. Resources have been consistently assigned to deal with allegations of FCPA violations. Prosecutorial expertise has been developed and applied. 19. The SEC, too, is perceived by the business community as committed in its enforcement policy. Historically, the SEC has targeted the sort of accounting practices that would make it easier to conceal bribery in violation of the FCPA, enforcing the laws under its jurisdiction, including those requiring companies to file appropriate proxy statements and make appropriate disclosures. 20. Despite the abundance of articles and commentaries on the subject, there is only a limited amount of authoritative or official guidance available on compliance with the twenty five-year old statute. There are few litigated cases – civil or criminal — which test the outer limits of the FCPA or deal with the difficult questions raised by the “business purpose” test, payments to third party beneficiaries, the exercise of nationality jurisdiction, the scope of the definition of a foreign official, and other areas of uncertainty. Much of the authority or guidance regarding the Act comes from speeches from DOJ and SEC officials, DOJ opinions, DOJ and SEC complaints, settlements that have been filed, and informal discussions of issues between companies’ counsel and the DOJ or the SEC. Some general publications are also available. There is an anti-corruption brochure issued by the Department of State and a brochure offering guidance on the FCPA published by the Departments of Justice and Commerce, as well as annual reports to Congress made by the Departments of Commerce and State, that also include a summary and analysis of laws, by country, that have been passed to implement the OECD Convention. These publications are produced in consultation and co-operation with the other agencies involved. There is also information on the tax deductibility of bribes. Lawyers and trade experts of the U.S. Departments of Justice, State and Commerce, as well as websites maintained by each Department, are also available to assist U.S. companies under the FCPA. The status of these various sources of information is however not always clear: there could be merit in regrouping and consolidating them in a single guidance document. The DOJ Opinion Procedure and the Need for Further Guidance 21. The Department of Justice has long maintained an FCPA review mechanism (previously Review Letters, now Opinions) through which a company that is about to engage in a transaction which might potentially give rise to issues under the FCPA may ask the DOJ about its enforcement intentions. The DOJ will, if requested, issue an opinion stating whether, on the facts as presented, it would take enforcement action. These opinions do not have any value as binding precedent and are strictly limited to the facts of the particular proposed transaction, and the DOJ rarely explains its reasoning. B57 22. In practice, the procedure has been infrequently used. Since the procedure was started in 1980, the DOJ has averaged fewer than two of these opinions per year. As one might expect, the DOJ has been somewhat conservative in providing “no action” assurances, although recent opinions have shown a readiness to adopt a practical approach in reviewing increasingly complex international transactions, even suggesting acceptable alternatives. In the absence of a significant body of case law or of any guidelines, Counsel with a specialist FCPA practice have regularly looked to the DOJ opinions for guidance, and their function and usefulness was the subject of much discussion during the on-site visit. 23. From the discussion with the large corporations and in-house counsel who addressed the examining team, it appears that companies evaluate benefits, costs and risks when filing an opinion request. First, if the transaction is not cleared, the requestor must, in all likelihood, decline to go forward with the proposed course of conduct: proceeding under these circumstances could be tantamount to admitting that the party had the requisite “knowledge” that a corrupt payment would be made. Hence a company is unlikely to request an opinion if it is not ready to refrain from the envisaged action in case of a “negative” indication. Second, DOJ rulings are technically not binding on other federal agencies (although the SEC has publicly stated that it will refrain from prosecuting issuers that have obtained a positive DOJ opinion, i.e. an indication that DOJ would not take enforcement action with respect to the matter raised in the opinion2). Third, in today’s fast-paced commercial world, the thirty days within which the DOJ must render an opinion may be, in some circumstances, too long to make this a practical alternative; in fact, the opinion procedure can take longer than thirty days as the DOJ may request additional information after the initial request is filed. It is acknowledged that the DOJ has shown itself sensitive to the time constraints of a commercial transaction and has accelerated its review when appropriate, on one occasion taking only five days. Fourth, although the materials submitted are exempted from disclosure under the Freedom of Information Act, confidentiality cannot be assured because the DOJ retains the right to release a summary indicating, in general terms, the nature of the requestor’s business and the foreign country in which the proposed conduct is to take place, and the general nature and circumstances of the proposed conduct. Fifth, the facts submitted, if acted upon, may raise the possibility of a DOJ investigation. Prosecution is still possible even after the issuance of a positive opinion, as obtaining clearance only establishes “a rebuttable presumption that a requestor’s conduct… is in compliance with those provisions of the FCPA”. The risk is greater if the facts change, and the transaction goes ahead in a form which does not correspond exactly with the description supplied to the DOJ and on which the opinion was based. 24. It is no surprise that few of the proposed transactions that have led to the DOJ giving an opinion that it does not intend to take enforcement action have been obvious “borderline” cases. As indicated to the examining team, no company will approach the DOJ to seek a review of a transaction that might clearly involve an illegal payment. As a result, the DOJ opinion procedure probably does not contribute greatly to the overall deterrent effort. The procedure was innovative at the time it was introduced, but deterrence as such was never its intended goal. Despite these considerations, experience with the procedure among large companies and their counsel is generally positive. Furthermore, anecdotal evidence suggests that officials in the Fraud Section are prepared to discuss issues and alternatives informally with counsel and company representatives in situations that involve grey areas, in order to provide a higher degree of comfort to companies facing questions under the FCPA. This factor, along with the desire of a growing number of companies to seek guidance in structuring international mergers, acquisitions and joint ventures in such a way as to minimise the risk of “inheriting” liability, may well encourage the broader use of the opinion process in the future. The emphasis placed by the DOJ on devising and implementing compliance programs, often set out in quite specific terms as a condition for a positive opinion, could be of great assistance in structuring prospective international partnerships. One would also expect the procedure to be popular with counsel in truly risky areas, as a ‘negative’ indication from the DOJ could relieve counsel 2 . A 1980 interpretative release (No. 34-17099, Aug. 28, 1980) stated that the SEC would take no enforcement action with respect to which an issuer had obtained a Release Letter from the Department of Justice prior to May 31, 1981. A subsequent interpretative release (No. 34-18255, Nov. 12, 1981) extended

Commentary In the view of the lead examiners, the time has come to explore the need for further forms of guidance, mainly to assist new players (SMEs) on the international scene, and to provide a valuable risk management tool to guide companies through some of the pitfalls which might arise in structuring international transactions involving potential FCPA exposures. Also, consideration should be given to issuing guidelines in areas where a clear policy or position has emerged so to ensure that the DOJ’s existing expertise can thus be captured for the future. b) Detection and Investigation Sources of allegations 26. Across the board over the last 25 years, allegations of FCPA violations have come to the attention of the U.S. authorities by a number of routes. No central mechanism exists for recording, tracking or compiling statistics about the initial complaints or who makes them. Sources of allegations include competitors, former employees, companies that have an internal audit process and have discovered suspicious payments, subcontractors, joint venture partners, agents, foreign government officials or party representatives, overseas representatives of the United States including FBI agents posted overseas, and newspapers and journalists. The very first FCPA case came about in the wake of a very short article in the Los Angeles Times about the Prime Minister of the Cook Islands, who was alleged to have received funding for his re-election campaign from an American businessman. Allegations are made in person, by telephone, facsimile transmission, mail, or through the bribery hotlines of the Departments of Justice and Commerce (although the Commerce hotline is primarily intended as a means for U.S. companies to report allegations of bribery by foreign companies), or the SEC Complaint Centre. Each federal agency’s Inspector General also maintains confidential hotlines to report suspected fraud and abuse. 27. Anonymous complaints have been an increasing source of allegations of FCPA violations in recent years. Where the identity of the complainant is known, enforcement authorities cannot guarantee that it will not be disclosed during the course of an investigation or prosecution. Whistleblowers have brought their allegations directly to the DOJ Fraud Section, to the FBI, to the SEC or to other agencies. B59 28. According to a trade union representative who addressed the examining team, whistleblowers are however discouraged from reporting FCPA violations by the lack of protection inherent in U.S. employment law. The degree of protection afforded to an employee is at best a contractual matter and will depend upon whether the employee is covered by a collective bargaining agreement that provides for grievance procedures or whether she or he has an individual contract providing for termination with or without cause. In the vast majority of cases, however, the employment can be terminated at will and protection is minimal. By contrast, for federal employees, the Whistleblower Protection Act and the Inspector General Act of 1978 provide for civil protections against any reprisals for reporting conduct that “they reasonably believe evidences a violation of any law”. Some states have passed similar laws to protect state employees. 29. FCPA allegations may arise in many other contexts, including federal agency audits such as those conducted by the Department of Defense, and by the Inspectors General of other agencies. For example, cases of FCPA violations involving foreign government procurement were brought to the attention of the DOJ by the Defense Contract Audit Agency in the course of the performance of routine audits on defence procurement contracts. Often, FCPA investigations also develop in the course of criminal investigations focusing on other matters such as antitrust violations. 30. It became clear during the course of the on-site visit that the sources of allegations of FCPA violations are many and varied. It also became clear that, because the sources of allegations are so numerous, the government potentially confronts problems of follow-up in the absence of any formal process centralising information or collating statistics about FCPA violation allegations, their number, their origin and actions taken if any. The Department of Justice acknowledged this in its Attorney’s Manual, which requires that any information relating to a possible violation of the antibribery or record keeping provisions of the FCPA “should be brought immediately to the attention of the Fraud Section of the Criminal Division” (Dep’t of Justice, United States Attorney’s Manual, Policy Concerning Criminal Investigations and Prosecutions of the Foreign Corrupt Practices Act, 9-47.110 (2000)). Developing and maintaining statistics about FCPA violation allegations could help in the detection of emerging or recurrent patterns or techniques of bribery, and the identification of vulnerable countries or industry sectors, and this in turn could assist in targeting investigative effort and resources to maximum effect.

Commentary It is difficult to assess how effective the existing mechanisms have been in uncovering foreign bribery. The lead examiners believe that the investigation of foreign bribery cases would be enhanced by developing and maintaining statistics as to the origins of information about allegations of FCPA violations and what is done with it. In addition the lead examiners recognise that the issue of whistleblower protection is inextricably connected to the broader issue of witness protection and is not specific to the FCPA. Investigations 31. The FCPA divides enforcement responsibilities between the Department of Justice and the SEC. However, because the FCPA casts such a wide net, FCPA violations may arise in a number of contexts. As a result, different agencies may get involved in the investigation of FCPA violations, in addition to the DOJ and the SEC. 32. Allegations of criminal violations of the FCPA are generally investigated by the Federal Bureau of Investigation (FBI), under the supervision of the Fraud Section of the DOJ Criminal Division. Located within the DOJ and required by its internal regulations to bring any allegation of a violation of the FCPA to the Criminal Division, the FBI is by far the most powerful of the federal law enforcement agencies, with broad powers to enforce the FCPA and an overall annual budget exceeding two billion dollars. The FBI currently employs nearly 25,000 people, including more than 12,000 special agents spread out over 50 field offices in the U.S. and 20 foreign offices. FBI agents are trained and experienced in complex fraud investigations and use the most sophisticated methods B60 of investigation in the form of witness protection programmes, informants and surveillance techniques. For example, in the Tannenbaum case (S.D.N.Y. 1998), the government used an undercover investigation to catch the defendant after it became aware that the defendant was likely to engage in actions to bribe foreign officials: the FBI and DOJ prosecutors obtained permission from the Argentine Ministry of Justice to permit an FBI agent to pose as an Argentine government official. 33. Allegations of civil violations of the FCPA antibribery provisions by non-issuers are also investigated by the DOJ3; allegations of civil violations of the record keeping and antibribery provisions of the FCPA by issuers are, on the other hand, investigated by the SEC. SEC investigations against issuers are conducted by attorneys assigned to the Division of Enforcement in Washington D.C. and by enforcement attorneys in SEC regional offices. By contrast to the DOJ Criminal Division which can rely on the greater evidence-gathering tools available to its criminal prosecutors, the examining team was told by SEC representatives that, in the light of other priorities, FCPA investigations by the SEC have until now been constrained by limited enforcement resources and, as a result, the SEC has pursued relatively few investigations of violations of the FCPA antibribery provisions. 34. Other investigative agencies than the FBI and the SEC Enforcement Division have participated or have taken the lead in some investigations, often when the FCPA allegation arose during a pending investigation. For example, the USAID Inspector General participated in the investigation of Metcalf & Eddy’s bribing of an Egyptian official

c) Importance of the Accounting Requirements of the FCPA and the Auditing Requirements of the Exchange Act General observations 36. The requirements of the FCPA as to accounting (the ‘books and records’ provisions), which exist alongside the antibribery provisions, are an important complement in that they provide a powerful tool serving both as a deterrent to foreign bribery and a mechanism for its detection. The need for issuers to maintain records which accurately reflect transactions and the disposition of corporate assets, as well as the existence of mandatory internal accounting controls, appears to operate as a strong disincentive to the payment of bribes because it makes it less likely that they can be successfully disguised or concealed. Further, liability for failure to maintain books and records is independent of the bribery offence, does not require proof of intent and is punishable per se. It has been suggested that the deterrent effect could be strengthened by making it a formal requirement on management to report on internal controls in a report accompanying the financial statements, though the Financial Executives Institute indicated that many of their members already do this. 37. There are different rules regarding the applicability of the FCPA’s record-keeping requirements to foreign subsidiaries of U.S. issuers. An issuer will be liable for enforcement of these requirements with regard to a subsidiary if it controls that subsidiary. As clarified by the then SEC Chairman Harold Williams in a formal statement of policy given in January 1981 and codified in section 78m(b) (6) in the 1988 amendments to the FCPA, the SEC applies practical tests in determining whether the issuer controls the subsidiary and is thereby bound to enforce the accounting provisions : “where the issuer controls more than 50 per cent of the voting securities of its subsidiary, compliance is expected. Compliance would also be expected if there is between 20 and 50 per cent ownership, subject to some demonstration by the issuer that this does not amount to control. If there is less than 20 per cent ownership, we will shoulder the burden to affirmatively demonstrate control.” 38. Books and records violations are an invaluable source of information leading to the detection of foreign bribery, as well as providing an independent basis for liability in cases where the antibribery provisions cannot be invoked. In SEC v International Business Machines Inc., a penalty was imposed on a parent corporation for having consolidated into its financial statements an item appearing on the books of its Argentine subsidiary, described as a subcontract payment, which was revealed to be a bribe. Parallel investigations by the SEC and the Department of Justice had revealed no evidence of knowledge on the part of the U.S. parent (i.e. that it authorised, directed or controlled the illegal act) that would have been necessary to found a charge under the antibribery provisions. The lead examiners were told of two other cases in which consolidation had opened the path to an action against a U.S. parent corporation. Accounting 39. It appeared to the lead examiners that there is relatively little focus among the accounting profession on the FCPA. The vast majority of accountants in the U.S. (some 340,000) are bound by the Code of Ethics of Certified Public Accountants (AICPA), but this refers in general terms to ‘integrity’ and ‘objectivity’ and makes no specific mention either of bribery or of the FCPA. There are mandatory training programs on ethics and independence carried out by the Certified Public Accountants’ societies in the different states, but training about fraud is voluntary. In cases where serious sanctions are imposed on individual accountants for breach of professional rules, their publication –already widespread — should be standard practice so as to raise awareness within the profession. B62 40. An encouraging development is the progress being made in professional bodies which are working towards harmonisation of international accounting standards. Almost all speakers on the subject of accounting and auditing also commented on the longer-term implications of the unfolding history of the collapse of Enron: as the profession comes to terms with the lessons to be learned, the most likely outcome will be a tendency towards increased scrutiny and stringency in professional standards. Auditing 41. The requirement that U.S. public listed companies undergo independent auditing builds a further safeguard into the system of detection and deterrence of FCPA violations. The effectiveness of this is, however, subject to certain caveats. Audits must be conducted in accordance with applicable SEC rules and with Generally Accepted Auditing Standards (GAAS). However, there is a proliferation of standards, statements and guidelines emanating from the AICPA which have created confusion in the minds of the profession as to exactly which standards apply. The recent Statement on Auditing Standards (SAS 95) developed by the AICPA’s Auditing Standards Board expressly requires the exercise of professional judgement on the part of the auditor in applying them. One encouraging development is the AICPA’s recent issue of an Exposure Draft, ‘Proposed Statement on Auditing Standards Consideration of Fraud in a Financial Audit’, which specifically includes guidance on the detection of material misstatements arising from fraud, and it is hoped that, if adopted, this will prove helpful. 42. Under the Securities Exchange Act an auditor has an obligation to report suspected illegal acts to the management of the company, to escalate the matter to the board of directors if appropriate action is not taken, and to report his or her conclusions to the SEC only in the event that the board fails to act and that the illegality is material to the financial statement of the company and would result in a modification to the auditor’s report. The lead examiners were concerned that the reporting requirement on auditors is both complicated and subjective. As to materiality, many bribe payments, illegal under the FCPA, might go undetected as the relatively small amounts involved would not be considered ‘material’ to the financial statements of a listed company. Whether or not they are caught will depend on how the audit program is designed. Informal guidance issued by the SEC staff offers some assistance in this respect. Staff Accounting Bulletin No. 99 issued in August 1999 expresses the views of SEC staff that exclusive reliance on quantitative benchmarks is inappropriate, and that materiality must be assessed by reference to all the surrounding circumstances. It states: ‘Among the considerations that may well render material a quantitatively small misstatement of a financial statement are…. whether the misstatement involves concealment of an unlawful transaction.’ 43. Further, the requirement for an auditor to report to the SEC only arises if no ‘appropriate remedial action’ has been taken by the board of directors, a test which could be open to a variety of interpretations. There may be

Commentary The lead examiners are mindful of the vital role played by the accounting and auditing requirements in deterring and detecting violations of the FCPA among issuers, as well as in providing alternative legal remedies. This could be enhanced by taking steps to increase the focus on the FCPA among the accounting profession, and by the introduction of clearer auditing standards and more stringent controls over auditors. The lead examiners also invite the United States to consider placing independent auditors under a clear obligation, irrespective of materiality or actions taken by the board of directors, to report to the SEC any finding during an audit which indicates a possible illegal act of bribery, in line with Part V of the 1997 Revised Recommendation on Combating Bribery in International Business Transactions. Most importantly, and despite concerns being raised about which would be the appropriate body to undertake enforcement, due consideration should be given to extending the FCPA books and records provisions, at least to those categories of non-issuers whose international business exceeds a certain level. d) Sanctions and the ‘collateral deterrent’ effect 46. Another deterrent feature of the FCPA is that it prescribes criminal sanctions that can be potentially stiff4. For criminal violations of the FCPA’s antibribery provisions, corporations and other business entities are subject to a fine of up to US$ 2 million per violation; officers, directors, stockholders, employees, and agents are subject to fine of up to US$ 100,000 and/or to imprisonment for up to five years. Furthermore, if the criminal offence causes a pecuniary gain or loss, U.S. law authorises alternative maximum fines equal to the greater of twice the gross gain or twice the gross loss, and fines for individual violators may be increased.

4. Civil penalties in SEC enforcement proceedings show a somewhat different pattern and different considerations apply. See Section C as well as the Annex to this report which contains a table showing sanctions imposed in criminal and civil cases brought under the FCPA in relation to bribery of foreign public officials. B64 47. Applicable sentencing guidelines allow courts to increase the criminal penalties for FCPA violations, opening the way to heavy fines and the potential for mandatory incarceration. A point system is used to calculate the penalties under the guidelines, with certain mitigating factors serving to reduce the total number of points. Prior criminal history, efforts to obstruct justice, voluntary co-operation with the investigation, pleading guilty (accepting responsibility), and the size of the company can all affect the potential sanction on a company or an individual one way or the other. In the 1995 Lockheed case, the application of these provisions resulted in a combined fine totalling US$21.8 million. To date, this is the largest fine ever imposed under the FCPA. 48. A brief survey of the FCPA criminal prosecutions brought to date and that resulted in convictions under the FCPA or related charges indicates however that most of them have resulted in rather moderate fines for both corporations and individuals, and probation or confinement instead of imprisonment. Between 1977 and 2001, twentyone companies and twenty-six individuals were convicted for criminal violations of the FCPA. Corporate fines have ranged from US$ 1,500 to US$

3.5 million (the agreement by Lockheed in January 1995 to pay a record fine of US$ 21.8 million being the only instance in which this range was exceeded). Fines imposed on individuals have ranged from US$ 2,500 to US$ 309,000. Before the 1994 sentencing of a Lockheed executive and of a General Electric international sales manager to, respectively, 18 and 84 months of imprisonment, no director, officer or employee of a company had gone to jail for an FCPA violation. Since then, two individuals have been sentenced to jail, in U.S. vs. David H. Mead and Frerik Pluimers (four months of imprisonment) and in U.S. vs. Herbert Tannebaum (one year of imprisonment), both in 1998. The current proposal by the U.S. Sentencing Commission to raise the base level offence to correspond to that of domestic bribery is expected to have an impact in future prosecutions: fines will most probably increase and it is likely that more directors and officers will receive mandatory prison terms for their involvement in bribery. The new base level offence will take effect on 1 November 2002 unless Congress raises objections before that date. 49. In the view of the examiners, however, there is another factor — the collateral consequences of an FCPA investigation or conviction – that should be taken into account in drawing conclusions from the penalties that have actually been imposed in FCPA cases. For businesses, adverse publicity, investigation, indictment and prosecution may be a more important deterrent than fines or imprisonment. News of an investigation can affect the ability of a company to do business and can prove embarrassing or damaging to relationships in the country where the alleged bribery has occurred. From a public relations standpoint, an allegation of bribery can be disastrous for a company once it emerges in the news media that an FCPA investigation is under way. The potential consequences of any criminal indictment are well illustrated by the ongoing action against Arthur Andersen LLP arising out of the criminal investigation into the affairs of Enron. 50. Beyond the public relations concerns, the costs in terms of legal fees and management time of having to defend an action are themselves far from negligible. Worse still, in the view of large private companies and their counsel, is the threat of suspension of export privileges, as happened to the Lockheed Corporation in 1994, or the withdrawal of eligibility to bid for government contracts or apply for government programs. A mere indictment for an FCPA violation is grounds for suspension, as happened to the Harris Corporation which was tried – and acquitted – on FCPA charges in 1991. Once an agency bars or suspends a company from federal non-procurement or procurement activities, other agencies in turn are required by the Code of Federal Regulations under its Title 48: “Federal Acquisition Regulations System” to exclude the company. Furthermore, the United States will not provide advocacy assistance unless the company certifies that it and its affiliates have not engaged in bribery of foreign public officials in connection with the matter, and maintain a policy prohibiting such bribery. Corporate violators of the FCPA may also be excluded from participating in trade missions. B65 51. Conduct that violates the bribery provisions of the FCPA may also give rise to a private cause of action for treble damages under the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C.§§ 1962-1968 (1998), or to actions under other federal or state laws. For example, an action might be brought under RICO by

Commentary The lead examiners are mindful of the deterrent effect of the collateral consequences of an FCPA investigation or conviction. They take the view that it would be misleading to look only at the levels of fines and other sanctions available on the statute book. e) The Role and Utility of Corporate Compliance Programs 53. An important effect of the FCPA is that it encourages the development of compliance programs. According to one member of the Bar with a specialist FCPA practice, corporate compliance programs are the single most important measure contributing to prevention and deterrence. The lead examiners noted the wealth of material available on the subject, both in print and on the internet, and the emphasis placed on promoting the use of compliance programs not only by in-house counsel and the private Bar, but also by the Department of Justice in its Opinions, the Department of Commerce in its publications, and in the caselaw. A relatively recent practice has been the frequent imposition of a compliance program on the defendant corporation as a condition of a plea agreement. Beginning in the Metcalf & Eddy matter, the government has required annual certifications directed to the DOJ, and has also required the company itself to conduct a periodic review of its compliance program to ensure that it took into account any changes in the company’s organisation and lines of business. In a case involving a violation of the FCPA, the existence of an effective corporate compliance programme is, according to the sentencing guidelines, a mitigating factor. 5 . In a plea agreement, the defendant agrees to plead guilty, often in exchange for an agreement on sentencing factors which provides greater certainty as to the ultimate sanction and/or a promise by the prosecutor not to seek the maximum penalty allowed by the law. Plea agreements take place within a range prescribed by the sentencing guidelines and are subject to the approval of the trial court. In most instances, the agreement is arranged by experienced and knowledgeable counsel on both sides and is readily approved by the court and the result is a formal finding against the defendant. The practice of plea agreements is widespread among American jurisdictions and seen by the Supreme Court as an essential component of the administration of justice. B66 54. As described to the lead examiners, the main features of a successful compliance program are strong commitment from senior management in creating and communicating a ‘compliance culture’, regular and thorough training, and consistent enforcement. The components of a compliance program might include internal controls coupled with review by an internal audit committee, implementation of a policy prohibiting discretionary payments, training and familiarisation of employees with the main provisions of the FCPA, a requirement that all employees regularly sign an undertaking to be bound by the corporate conduct policy, and the systematic screening (‘due diligence’) of the technical capability, background, connections, reputation and financial stability of any potential foreign business partner in order to reduce the likelihood of bribery by an agent for which the company would be liable. Among larger U.S. corporations it is common for the FCPA compliance program to form part of an overall corporate compliance policy which also addresses insider dealing, antitrust and export regulations. 55. Compliance programs are by now well-developed and well-understood among large public companies, especially those operating in risk-averse industry sectors such as defence procurement, and others involved in government contracting for which there are stringent standards of eligibility and the risk of disbarment. The indirect or collateral damage that would be inflicted on such companies by an indictment for violation of the FCPA of itself operates as a powerful incentive to enforce compliance throughout the entire organisation. Indeed, the lead examiners were told that many larger companies insist on a single world-wide policy which they apply equally to their foreign subsidiaries and their U.S. operations. 56. The lead examiners were struck by the fact that all the private industry representatives who addressed them on this issue came from major multinational corporations in the defence or telecommunications sectors, where the practice of compliance programs is well-established and there is no shortage of resources – including lawyers – devoted to their implementation. FCPA compliance is an active, and growing, area of practice for the private Bar specialists. Members of law firms who had experience of representing smaller corporate clients commented that resources were less critical than management commitment, and that the instrument was capable of almost infinite adaptation to suit the needs and budget of a variety of businesses. However, the concern remains that such policies are more extensively and intensively taught, understood and implemented within the U.S. than internationally, where the problem of bribery is most likely to arise: one member of the private Bar spoke of the ‘enormous gap’ between enforcement in the U.S. and commitment outside it. A survey by Transparency International of leading practices in corporate governance revealed that companies generally performed less, not more, monitoring activity in their overseas operations than at home. It also found that only 52 per cent of respondents who had codes of conduct had multilingual versions available, and that only 19 per cent rated their code of conduct as extremely effective. 57. More important, in the view of the lead examiners, is the significant number of small companies operating in the international market – the large majority of SMEs, in the estimation of one Washington lawyer – who do business without a compliance program. The same speaker characterised this situation as ‘an accident waiting to happen’. A lawyer from USAID who addressed the examiners explained that USAID did not deal with contractors who were not conversant with the FCPA, but that he was ‘amazed’ at the number of potential suppliers with no active compliance program. USAID had found it necessary to provide its own training to over 3000 such companies, who were operating in an environment of ‘incredible vulnerability’. This scenario is viewed by the lead examiners as, at the very least, a risk factor which could undermine the effectiveness of the FCPA. B67

Commentary The challenge of widening the use of compliance programs in those areas where they are most needed is only one aspect of the issues relating to SMEs and start-ups which will be addressed below. The lead examiners would welcome the commitment of the United States to developing and promoting compliance programs, or guidelines for their design and implementation, specifically tailored to a wider, international, corporate population. Also, in cases where compliance programs are prescribed as a condition of a courtordered settlement, the inclusion of formal procedures for periodic follow-up or monitoring, such as those recently put in place, is to be welcomed. f) The FCPA, Small and Medium Sized Enterprises (SMEs) and Start-Ups 58. As the lead examiners built up an overall picture during the Phase 2 review of how the FCPA is implemented, a concern emerged with regard to small and medium sized U.S. enterprises (SMEs) and startups. For present purposes it is not useful to attempt a precise definition of this term; nor is it possible to estimate their numbers. These companies might be issuers or non-issuers within the meaning of the FCPA; their size makes it likely that most SMEs will fall into the category of non-issuers. The particular problems they face came into sharper focus as a result of the discussions that took place during the on-site visit, which tended to confirm the impression that SMEs are a particularly vulnerable business category whose needs are not adequately addressed by the existing pattern of implementation. Many of the factors discussed in this report which contribute to the effective detection and deterrence of FCPA violations by larger organisations do not have the same impact on SMEs. Their very size – especially in the case of a start-up with severely limited resources — will render them vulnerable. Yet such companies are engaging on an increasing scale in international business, sometimes in countries where bribery is an acknowledged risk. As an illustration of this problem, eighty-two percent of all U.S. exporters to China in 1997 were SMEs according to U.S. official statistics.

Commentary The lead examiners invite the United States to consider ways in which the FCPA books and records provisions, currently binding only on issuers, could be extended to apply to those nonissuers whose international business activities exceeds a certain level. Further, the lead examiners would encourage the United States to pursue and reinforce the valuable “outreach” efforts undertaken by the Department of State and Department of Commerce to promote better levels of awareness of the FCPA and the Convention, targeting in particular smaller U.S. enterprises doing business abroad. The Department of Justice has a major role to play here, by exploring what additional forms of guidance it could make available in order to ensure that SMEs and start-ups have access to its wealth of expertise. Those law firms with a significant FCPA practice in the U.S. should ensure that lawyers in their foreign offices are thoroughly versed in the FCPA and able to give direct and relevant advice at local level. Those firms with an existing client base of SMEs are encouraged to extend their ongoing efforts to devise and publicise compliance programs suitably tailored to the needs of smaller companies. g) The role of measures to prevent and detect the tax deductibility of bribes 62. The U.S. regime designed to prevent the tax deductibility of bribes, which exists alongside the FCPA, complements the FCPA in that it provides an additional tool serving both as a deterrent to foreign bribery and a mechanism for its detection. The U.S. has for many years had extensive tax provisions to deal with bribes paid by U.S. companies as well as foreign subsidiaries of U.S. companies. The principle of nondeductibility is found in Section 162(c)(1) of the Internal Revenue Code, disallowing deductions for illegal payments to officials or employees of any government. There are two exceptions: facilitation payments and payments that are legal under the local law of a foreign jurisdiction may be deducted for tax purposes. The Treasury has the burden of proving by clear and convincing evidence that a payment is unlawful under the FCPA. However in case the taxpayer claims that the payment is a facilitation payment or is legal under the laws of the foreign country the burden of proof is shifted to the taxpayer. 63. With respect to foreign subsidiaries, under the subpart F provisions of the Internal Revenue Code, the antideferral rules apply to subpart F income, which includes any illegal bribes, kickbacks, or other payments (for which a tax deduction would be denied under provisions relating to illegal payments) paid by or on behalf of a Controlled Foreign Corporation to an official, employee, or “agent in fact” of a government (Internal Revenue Code §952(a)(4)). In addition, the earnings and profits of any corporation paying a foreign bribe that is not deductible (such as payments that would be unlawful under the Foreign Corrupt Practices Act if paid to a U.S. person) are not to be reduced by the amount paid as a bribe. Pursuant to Section 941 IRC, “qualifying foreign trade income” is subject to favourable tax treatment. Under regulations prescribed by the Secretary of Treasury the “qualifying foreign trade income” does not include any illegal bribe kickback or other payment within the meaning of section 162 (c) paid by or on behalf of the taxpayer directly or indirectly to an official, employee, or “agent in fact” of a government. B69 64. Overall the lead examiners found that the United States has comprehensive tax provisions concerning the non tax deductibility of bribes to foreign public officials. It also addresses the issue of the payment of bribes by Controlled Foreign Corporations. Specific Issue Related to Bribes Detected when a Taxpayer Has Requested an Advance Pricing Agreement 65. An Advance Pricing Agreement (APA) is an arrangement that allows for the determination in advance of the methodology to be used in setting inter-company transfer pricing in transactions between related parties. It requires negotiations between the taxpayer and one or more tax administrations. The taxpayer has to submit documentation to support the methodology presented to the tax administration. The examiners typically involved in an APA case are familiar with those issues and have received training, although no specific training on the subject of illegal bribes. If the APA group within the IRS has information that indicates an illegal bribe (or any criminal act) may have occurred, it will refer the information to the appropriate division. APA will not treat information regarding a criminal act in the same way that it treats other non-factual information received, i.e., the information regarding a criminal act would be referred internally, and APA would not seek to protect its use in non- APA proceedings. Specific Issues Related to Bribes paid by Controlled Foreign Corporations 66. Turning to Controlled Foreign Corporations (CFC) legislation, both the IRS and the private sector indicated that it was difficult in practice to identify bribes paid by CFCs. Examiners basically rely on risk analysis and they have the possibility to request headquarters to perform a tax examination abroad which also makes it easier to get information on the foreign tax treatment of bribes. The representatives from the private sector stressed the importance of the internal policies and codes of conduct of companies as a deterrent to bribery, especially where local managers in subsidiaries are bound to the same standards as managers of the parent company.

h) The role of measures to prevent money laundering 67. The U.S. regime designed to prevent money laundering, which exists alongside the FCPA, is a further complement in that it, too, provides an additional tool serving both as a deterrent to foreign bribery and a mechanism for its detection. Several changes have taken place to reinforce the existing legislation with the enactment of the Patriot Act on 26 October 2001 in response to the events of 11 September 2001. Significantly, provision is now made for Regulations prescribing the minimum standards for customer identification at the opening of an account by ‘financial institutions’, which term is understood to be broadly defined. Money transmitting agencies are now covered by anti-money laundering obligations. Additionally, securities companies and broker dealers will be made subject to anti-money laundering obligations during 2002. Casinos will be brought within the scope of the anti-money laundering regime, but it is understood that this will not take place before 2003. Insurance companies are understood not to be covered by suspicious activity reporting obligations.

Commentary The examiners encourage the U.S. authorities, in appropriate cases, to consider bringing more criminal prosecutions for failure to report suspicious activity, in order to underline the importance of complying with the reporting regime. Further consideration might also be given to criminalising negligent failure to report, given that the present “willful” “mens rea” standard places a high evidentiary burden on the prosecutor. The lead examiners further encourage the U.S. authorities to compile the relevant statistical information for the purpose of a future assessment. B71

C DOES THE UNITED STATES HAVE ADEQUATE MECHANISMS FOR THE EFFECTIVE PROSECUTION OF FOREIGN BRIBERY OFFENCES AND THE RELATED ACCOUNTING AND MONEY LAUNDERING OFFENCES?

1. PROSECUTION OF FOREIGN BRIBERY a) Working of the main enforcement agencies: the SEC and DOJ Enforcement by the SEC 72. Enforcement responsibilities of the FCPA are divided between the Department of Justice and the SEC. The Department of Justice is responsible for all criminal enforcement of the FCPA provisions and for civil enforcement of the antibribery provisions with respect to domestic concerns and foreign companies and nationals. The SEC is responsible for civil enforcement of both the antibribery and accounting provisions with respect to issuers. Generally speaking, it is the SEC that enforces the record-keeping and accounting provisions of the FCPA, while the DOJ enforces the antibribery part. In practice, the SEC enforces the laws against entities under its jurisdiction, including those requiring companies to file appropriate proxy statements and make appropriate disclosures. If, in the course of that enforcement, the SEC considers that the company has done something that amounts to an FCPA violation, it will add that count as an additional ground upon which to prosecute the company. 73. When the FCPA was enacted in 1977, the accounting and record-keeping provisions of the FCPA were incorporated into the Securities Exchange Act of 1934, thus making these standards part of the law applicable to all issuers, whether or not they have involvement with any transnational deals or with any foreign officials that could possibly be bribed. As a result, the majority of cases involving the FCPA accounting and record-keeping standards as incorporated into the Securities Exchange Act of 1934 do not have a transnational bribery component. They instead frequently involve various other schemes by which corporate employees or senior executives commit accounting fraud. However, after a hiatus of nearly ten years during which almost none of the cases brought under the accounting and record-keeping provisions of the FCPA involved bribery, the SEC prosecuted four such cases with a bribery component in relatively quick succession in 2000-20016. Considering that there had been only seven such cases prior to 2000, many of the leading practitioners in the white-collar crime field stated during the on-site visit that they expect the pressure to continue as the U.S. seeks international implementation of the OECD Convention. 74. As indicated above, the SEC does have authority, which it has used on occasion, to take civil action against a company solely on the basis of a violation of the antibribery provisions of the FCPA. These cases are quite rare: the SEC had sought injunctions under section 30A, the antibribery provision of the Securities Exchange Act, on five occasions by 20027. For example, in the Katy Industries case (1978), although there were some books-andrecords elements, the SEC’s primary focus was on the allegations that Katy, who employed a consultant in connection with an oil-production sharing contract who was a close friend of an Indonesian government official, knew or had reason to know that payments made to the consultant would be passed on to the official. 6 . See SEC v. International Business Machines. Corp. (D.D.C. 2000); In the Matter of American Bank Note Holographics, Inc. (2001); United States and SEC v. KPMG-Siddharta Siddharta & Harsono and Sonny Harsono (1999); SEC v. Chiquita Brands International, Inc. (D.D.C. 2001). 7 . See SEC v. Katy Indus., Inc (N.D. 1978), SEC v. Sam P. Wallace Co., Inc., (D.D.C. 1981), SEC v. Ashland Oil, Inc. (D.D.C. 1986), SEC v. Triton Energy Corp., (D.D.C. 1997) and United States and SEC v. KPMG-Siddharta Siddharta & Harsono and Sonny Harsono (1999). B72 75. The relevant standard for SEC enforcement is set forth in the authoritative speech made in 1981 by then Chairman Harold Williams of the SEC. Seeking to defuse business concerns that the accounting provisions of the FCPA could result in inadvertent violations, the Chairman stated that “The goal [of the Commission] is to allow a business, acting in good faith, to comply with the Act’s accounting provisions in an innovative and cost effective way and with a better sense of its legal responsibilities… No system of adequate records and controls –no matter how effectively devised or conscientiously applied- could be expected to prevent all mistaken and improper dispositions of assets”. He concluded that penalising inadvertent record-keeping violations is not the primary goal of the SEC. When the SEC encounters accounting problems that do not involve improper payments, it typically seeks an injunction that orders the company to comply with the accounting and record-keeping requirements of the federal securities laws.

Commentary The lead examiners were encouraged by the stronger degree of focus now placed by the SEC on prosecuting substantive violations of the FCPA. However, in the absence of any recent definitive statements, there is a certain lack of transparency surrounding the prosecution policy and priorities applied within the

Commentary The lead examiners invite the United States to state publicly its current enforcement priorities with regard to the FCPA in the light of the OECD Convention. The examiners also invite the United States to consider what techniques, whether in the form of policy statements, internal practice guidelines, statistics or otherwise, might be used in order to capture, secure and maintain, in a suitably objective and visible form, the wealth of institutional memory and expertise with regard to FCPA prosecution that is currently available in the team of Fraud Section prosecutors, in order to reinforce the organisational infrastructure necessary to carry on the fight against corruption, and to ensure continuity. Inter-Agency co-operation 85. The prosecution of the antibribery and record-keeping provisions of FCPA depends in large measure on communication, co-operation and exchange of information between the different government agencies. Because the FCPA covers such a broad spectrum of activities, the government potentially confronts complex enforcement problems and issues of jurisdiction. As noted earlier, the FCPA divides enforcement responsibilities between the Department of Justice and the SEC. 86. The DOJ and SEC, as a result of their overlapping jurisdiction, co-operate and share information where possible. The SEC routinely passes any information to the DOJ that is not actual work product generated in the course of an investigation. The DOJ does likewise. In fact, in SEC v. Dresser Industries, Inc. (D.C. Cir. 1980), the U.S. Court of Appeals for the District of Columbia Circuit held that the SEC and the Department of Justice were

Commentary The lead examiners noted that there are no clear, documented, formal processes between agencies to underpin the vital exchange of information and reporting of suspected violations, and a corresponding absence of statistics. This results in a lack of transparency and of data, which, if captured, could serve useful analytical purposes in reviewing the workings of the FCPA. It is suggested that the efficiency of interagency co-operation might be enhanced by the introduction of clearer processes, while acknowledging that the U.S. does not favour the use of formal guidelines for this purpose. Further, the overall system might benefit from the creation of a mechanism to periodically review the process of FCPA enforcement from prevention to prosecution. Such mechanism, without forming part of the decision-making function, could provide the means to identify criteria for demonstrating objectively that the system is working, and to identify where in the enforcement system there is a need for meaningful statistics to be kept. B76

b) Mechanisms for gathering evidence located abroad 90. FCPA investigations and proceedings on both the criminal and the civil side often depend on evidence that is located overseas. In almost every situation that the Department of Justice has examined, it has found that much, if not almost all, the critical evidence lay outside the jurisdiction of the United States. This means that effective co-operation with foreign prosecutors and foreign authorities is crucial. 91. Although the DOJ and the SEC appear to be well-practised in availing themselves of mutual legal assistance under existing bilateral treaties, SEC Formal Information Sharing Agreements, memoranda of understanding and enforcement contacts overseas, the chief difficulty in investigating and prosecuting foreign bribery cases has until now been the lack of co-operation in obtaining evidence located outside the United States. In some instances, to overcome a perceived lack of mutuality or the absence of a Mutual Legal Assistance Treaty, the Department of Justice has developed so-called “Lockheed Agreements”, or Mutual Legal Assistance Agreements (MLAAs), which are case-specific. Nevertheless, although some countries, e.g. Niger and Syria, have provided access to witnesses and extradited defendants, other countries have not provided evidence for use in FCPA prosecutions, citing lack of mutuality. The United States has also encountered problems of dual criminality when attempting to obtain evidence from foreign financial institutions. For instance, in the U.S. v. General Electric Company case (Cr. No. 1-92-87, S.D. Ohio 1992), the Swiss government, which at the time had no foreign bribery law, declined to provide evidence, citing the lack of dual criminality; the United States revised its request and its grounds of prosecution to focus on a related fraud upon the U.S. Government involving the non-disclosure of “commissions” paid by the company, and the Swiss government provided the evidence for use in a prosecution of that offence. Since the signing and subsequent ratification of the OECD Convention by some of these countries, mutuality has become less of an issue, although it is clearly still relevant when seeking evidence from countries which are not Parties to the Convention. 92. The Convention is indeed seen as opening up new sources of evidence to both the U.S. Department of Justice and the Securities and Exchange Commission in their efforts to enforce the FCPA, as the Convention requires signatories to provide “prompt and effective legal assistance” to each other for the purpose of criminal and civil proceedings (Article 9). As law enforcement co-operation under the OECD Convention is now expanding, the ability to gather evidence from abroad is increasing. According to the DOJ authorities, the result of the adoption of the OECD Convention by 35 countries is an increasing ability of U.S. prosecutors to obtain from foreign authorities business records, bank records, and testimonies from companies and individuals located overseas. With Parties to the Convention, the United States will likely be able to extradite those who are wanted for violations of the FCPA, any requirement of dual criminality will be satisfied, and it will be able to obtain evidence without much impediment. 93. The U.S. Government is also increasingly willing to bring bribes to the attention of other Parties to the Convention. Not only is the United States exerting substantial pressure to encourage other Parties to bring antibribery cases, but the Department of Justice is now increasingly using Article 9 of the Convention to provide evidence to law enforcement authorities of other Parties to the Convention regarding the bribery of foreign officials. When the Department of Justice becomes aware of credible information indicating that a foreign company has violated another country’s foreign bribery law, it will usually provide that information to foreign law enforcement agencies. This is done through a variety of channels, including spontaneous transmissions under bilateral or multilateral assistance treaties or through law enforcement contacts overseas. The Government has established for this purpose a working group consisting of representatives from the Departments of State, Commerce and Justice, and other agencies, to ensure that all complaints of misconduct by foreign companies, regardless of which agency initially receives the report, are passed to the Department of Justice for possible referral to foreign law enforcement agencies. B77

c) Statute of Limitations 94. The FCPA’s antibribery provisions contain no period of limitations for criminal actions. As a result, the general five-year federal limitation period provided by 18 U.S.C para. 3282 applies for the filing of an indictment. The

Commentary The length and modalities of statutes of limitations have been identified in Phase 1 as a generic problem for many signatories of the Convention. The lead examiners noted the DOJ assurances that the relatively short limitation period for the filing of an indictment has not, to date, presented problems in practice in the U.S. However, there is no basis on which this situation can be monitored or verified in the absence of any statistical data about how prosecution cases under the FCPA are prepared, and of what types of evidentiary difficulty most commonly arise. With the increased sophistication of the techniques deployed in paying and concealing bribes, the possibility that evidence might remain concealed for several years is obvious, and this could impact the effectiveness of enforcement of the legislation. d) Elements of the Offence 97. As noted earlier, there are few litigated cases – civil or criminal – which test the outer limits of the FCPA or resolve questions about the relationship between “improper advantage” and “obtaining or retaining business”, the treatment of payments to third party beneficiaries, the exercise of nationality jurisdiction, the interstate nexus requirement, or the scope of the definition of a “foreign public official”. Many of these were explored in the Phase 1 Review but continue to give rise to uncertainty, mostly because their effect has not yet been tested in court decisions, with the exception of the FCPA language concerning “obtaining or retaining business”. B78 “Obtaining or Retaining Business” 98. Influencing governmental decisions raises potential FCPA issues. For example, if a U.S. company pays foreign officials in order to obtain a reduction in customs duties or taxes, is there an FCPA violation? This question implicates one of the key elements of an FCPA violation, the business purpose test. Under the statute, the ultimate objective of a corrupt payment must be to obtain, retain or direct business to any person. It has been argued among the Bar that an attempt to influence general governmental decisions is too removed from the obtaining of business to be covered by the FCPA. 99. Congress focused on this ambiguity in its debate on the 1988 FCPA amendments. The final language specifically rejected a House proposal that would have prohibited payments to procure “legislative, judicial, regulatory or other action in seeking more favourable treatment by a foreign government”, although the conference report stated that the FCPA prohibits corrupt payments for the “carrying out of existing business, such as for… obtaining more favourable tax treatment. See, e.g., the United Brands case”. (In the pre-FCPA United Brands case, there had been bribery of a Honduran minister to obtain a reduction in a general export tax that would benefit the US. company. The SEC obtained a consent injunction based on failure to disclose the bribes in the company’s reports, and the case was an important factor leading to the enactment of the FCPA.) The 1998 Amendments to comply with the OECD Convention did little to clarify the issue. Article 1 of the Convention prohibits bribery of a foreign public official “in order to obtain or retain business or other improper advantage in the conduct of international business”. But Congress did not insert the “improper advantage” language of the Convention as an alternative to the “obtain or retain business” provision of the FCPA; instead Congress added the “improper advantage” language into the clause of the statute setting out the alternative types of quid pro quo covered by the FCPA. In other words, the law prohibits the making of payments to a foreign official for purposes of: “… (i) influencing any act or decision of such foreign official in his official capacity, (ii) inducing such foreign official to do or omit to do any act in violation of the lawful duty of such official, or (iii) securing any improper advantage… in order to assist [such person] in obtaining or retaining business for or with, or directing business to, any person”. 100. Congress inserted the “any improper advantage” language in the quid pro quo element apparently because U.S. enforcement officials were reluctant to modify the “obtaining or retaining business” element of the FCPA, which they have always contended is to be construed broadly, as indicated, for example, by the Complaint and Undertakings in Sec v. Triton Energy Corp. (D.D.C. Feb. 27, 1997) or by the government’s arguments in U.S. v David Kay and Douglas Murphy (Ap. 16, 2002). 101. The risk that the language of the FCPA might prove ambiguous, and that it could be interpreted to produce an offence narrower in scope than that envisaged by the Convention, was raised at the time of the Phase 1 Review and has been confirmed by the decision of 16 April 2002 in U.S. v David Kay and Douglas Murphy, in which the U.S. District Court of the Southern District of Texas favoured the narrower interpretation. That court — whose decision is not binding on any other court in the United States — ordered the dismissal of criminal charges under the FCPA on the grounds that payments made by the defendants to a customs official in Haiti in order to obtain a reduction in customs duties did not constitute payments made for the purpose of “obtaining or retaining business”. The court found – rejecting the prosecution argument in favour of a broad interpretation – that, both in 1988 and at the time of the relevant amendment in 1998, Congress had “considered and rejected statutory language that would broaden the scope of the FCPA to cover the conduct in question.” The United States has filed a Notice of Appeal in this matter, and further developments will be kept under review as the monitoring process goes forward. B79 102. The same issue has arisen in SEC v Mattson, an unrelated civil case pending before the same court. The SEC has alleged that two former officers of Baker Hughes Incorporation violated the antibribery provisions of the FCPA by authorising an Indonesian entity controlled by Baker Hughes to make an illicit payment to a local tax official in exchange for a promise to reduce the Indonesian entity’s tax assessment. The defendants have argued that the expression “obtaining or retaining business” does not encompass payments made to obtain a reduced tax assessment. Whatever the outcome in this second case, the examiners note that the historically broad interpretation favoured by the DOJ and the SEC, which would conform with the requirements of the Convention, has now been called into question by a district court. Interstate Nexus Requirement 103. The Act requires, in the case of “issuers” and “domestic concerns”, or their agents, who bribe within the U.S, that there be an element of interstate commerce. Generally, this includes trade, commerce, transportation, or communication among the states, or between any foreign country and a state or between any state and any place or ship outside of the state. This requirement, which is known as the “interstate nexus” requirement, does not apply to non-U.S. nationals and businesses bribing in the U.S., or to U.S. nationals and businesses bribing abroad, as in such cases there is, by definition, an element of international commerce. The OECD Working Group on Bribery identified the “interstate nexus” requirement in Phase 1 as a potential evidentiary problem in a case where a bribe is offered in person. 104. In the view of the U.S. authorities there is no serious difficulty in meeting the “interstate nexus” requirement: the interstate nexus can be as slight as a single letter, fax, cable, phone call, or airline ticket, in the furtherance

Commentary The present definition of the offence of bribery under the FCPA has been recently interpreted by a court as requiring that the acts be done for the purpose of “obtaining or retaining business”, and that seeking to obtain an improper advantage is not of itself an alternative ground for indictment. That decision is under appeal. If it were upheld, the result would be to exclude from the scope of the offence any illicit payment which is directed to securing some advantage – such as favourable tax or customs treatment – to which a company is not clearly entitled. Such an interpretation would be narrower than that prescribed by the Convention. The DOJ has confirmed that the United States will consider amendments to the FCPA to clarify that it is an offence to offer, promise or give a bribe “in order to obtain or retain business or other improper advantage in the conduct of international business”. As regards the other areas of potential uncertainty identified above in the offences under the FCPA, the lead examiners recommend that these be kept under review as the case law develops. In particular, the need

e) Interpretation of exceptions and defences 113. The FCPA provides one exception that permits “facilitation payments” to foreign public officials and two affirmative defences to possible violations. A great deal of compliance counselling under the FCPA involves the interpretation of these exceptions and defences, which did not appear in the original FCPA but were introduced in 1988. As a result they were discussed at length during the on-site visit. The Facilitation Payments Exception 114. The language in the FCPA, which excludes from the definition of bribery those payments which are necessary to facilitate the performance of routine administrative actions, is not limited to ‘small’ facilitation payments as in the Convention. It should be further noted that this exception is not provided for in the statute governing domestic bribery (18 U.S.C. § 201). To the extent that the exception is open to interpretation, it may be regarded as an area of risk and open to misuse as noted in Phase 1 evaluation of the United States. 115. There is an absence of any clear, published guidance as to what the words mean and where the limits are. The Act contains no per se limit on the size of the payment, focusing instead on the purpose of the payment. No court has interpreted the application of this exception and there are no settled cases to assist in delineating the boundary between acceptable and unacceptable payments. There are also no relevant DOJ Opinions. If a company asks the DOJ for informal advice or reports a payment, the lead examiners were told that the DOJ will sometimes determine straight away, on the basis of judgement and experience, whether it falls within the exception and if so, take no further action. This operates as a sort of informal, undocumented ‘de minimis’ rule. 116. Companies have developed different strategies to deal with facilitation payments. At least one major company interviewed imposes a policy, applicable world-wide, that irrespective of the existence of the exception, no discretionary payments are to be made without express approval, as a way of reducing the scope for misjudgement by local employees. The high level of concern was also demonstrated by another in-house counsel, who said that when teaching the FCPA he carefully omits all reference to the existence of the exception.

Commentary The lead examiners suggest that there may be a case for guidance to be issued by the DOJ to explain the tests it applies in practice to assist in the interpretation of this exception. Alternatively, consideration should be given to amending the wording of the statute to clarify, for the benefit of all, that only minor payments are allowable. The Affirmative Defence of ‘reasonable and bona fide expenditure’ 117. Travel and lodging expenditures on behalf of foreign officials are another recurring difficulty for companies and U.S. nationals dealing with foreign officials. Unlike the OECD Convention, where there is no express provision allowing for the payment of non-excessive expenses, the FCPA permits the payment of reasonable and bona fide expenses to enable foreign officials to learn about the host company or in direct relation to the “execution or performance of a contract”. The view of the DOJ is that the defence neither derogates from the strict requirements of the FCPA nor undermines that statute’s compliance with the Convention: rather, it amplifies the mens rea requirement that is common to all laws implementing the Convention, that of corrupt intent. However, to the extent that the language of the defence is open to interpretation, it is regarded by companies and in-house counsel who spoke to the examining team as an area potentially open to abuse. B83 118. This exception is in a certain sense not a true affirmative defence because it cannot, by definition, apply where the basic elements of the offence of bribery have been met. As suggested by the legislative history of this provision and confirmed by the DOJ to the team of examiners, it only allows reasonable and bona fide promotional payments where no corrupt intent is present. Thus the test is one of distinguishing truly corrupt payments provided to obtain or retain business, from legitimate promotional expenses involving no corrupt intent. In 1981, for example, the DOJ approved a proposal by an American manufacturer of packaged meat to provide samples of its products to officials of the Soviet Government agency responsible for procurement of such products. The DOJ noted that the purpose of the sample was to allow for inspection and testing and that the value of the sample was small relative to the value of the potential contract. 119. Yet, sensitive cases may arise when companies plan promotional tours for visiting foreign officials and include recreational activities in the agenda. Although the DOJ, through its opinion release procedure, has approved promotional trips on several occasions, including payments for the entertainment of a foreign official and his wife, it has not commented on the nature or cost of the entertainment: these opinions suggest only that the DOJ recognises the business purpose of including some entertainment in promotional activities. Nor has any court interpreted the application of the defence. The Metcalf & Eddy case (S.D. Ohio, 1998), in which the Department of Justice interpreted the provision of airfare, travel expenses, and pocket money to an Egyptian official and his family during business trips to the United States as exceeding the legitimate levels for bona fide promotional expenses, suggests only that the DOJ would allow such expenses where the level of the expense is reasonable and the payments are accurately documented and subject to audit. 120. In addition to promotional activities, bona fide expenditures directly related to the “execution or performance of a contract with a foreign government or agency” may also be a difficult issue for companies. DOJ opinions related to this provision include the approval of a proposal by a U.S. business to bring French officials to the United States to show them a plant similar to the one proposed for construction in France, and the approval of a proposal by an American petroleum company to provide training to employees of a foreign government, where that training was required by local law. In neither case, however, does the Opinion Release reveal what tests or standards were applied by the DOJ in deciding not to take any enforcement action. 121. That there is concern as to what the words mean and where the limits are, is demonstrated by the fact that considerable corporate resources are devoted to seeking counsel’s opinion on this issue. In-house and outside counsel have chosen to proceed with caution when interpreting the provision, advising companies to act ‘reasonably’, i.e. to ensure that the provision of airfare, travel expenses, accommodation, per diems, samples, recreational activities, etc. is incidental to the promotional purpose of the activity and is reasonable and not extravagant. As this is not a true affirmative defence — because it does not apply where the mental element of the bribery offence has been established and, as such, is already inherent in the wording of the statute — at least one in-house counsel questioned whether this defence serves any useful purpose.

Commentary The lead examiners are of the view that the defence is not legally necessary and that the scope it allows for interpretation introduces some uncertainty. If it is maintained, the lead examiners suggest that there is a case for guidelines or guidance to be issued by the DOJ to explain in more detail the tests it applies in practice and to assist in the interpretation of the defence. B84 The Affirmative Defence of ‘lawfulness under the written laws of the foreign country’ 122. The FCPA provides that it shall be an affirmative defence that the payment, gift, or offer of payment was ‘lawful under the written laws and regulations of the foreign official’s country’. This seemingly broad defence leaves open the issue of what is “lawful” under the written laws of a country. The defence was introduced into the FCPA when it was amended in 1988, with the intention of “codifying” previous DOJ practice as evidenced by a series of Review Letters issued to companies who had raised the question under the then-existing review procedure. An examination of several of these review releases dating from the 1980s shows that the language most frequently used by the DOJ in explaining its decision not to take enforcement action was that the conduct in question did “not violate” or was “not in violation of ” the local law. This does little to resolve the ambiguity. Nor is the Department of State in a position to provide specific guidance. Its brochure, “Fighting Global Corruption – Business Risk Management”, produced in consultation with the other government departments concerned, says, at page 28 of the current edition, “Whether a payment was lawful under the written laws of a foreign country may be difficult to determine. You should consider seeking the advice of counsel or utilising the Department of Justice’s Foreign Corrupt Practices Act Opinion Procedure when faced with an issue of the legality of such a payment.” 123. In practice, companies and their counsel have avoided using this defence in seeking to escape liability: the DOJ prosecutors were not aware of any FCPA prosecution in which it had been raised. There might be several reasons for this. It would be rare for a country’s law to sanction such payments even where bribery is commonplace. No one who discussed this defence with the examining team could identify a country whose written laws permit

D RECOMMENDATIONS

127. In conclusion, based on the findings of the Working Group with respect to the United States’ application of the Convention and the Revised Recommendation, the Working Group makes the following recommendations to the United States. In addition, the Working Group recommends that certain issues be revisited as the case-law continues to develop.

a) Recommendations Recommendations for Ensuring Effective Measures for Preventing and Detecting Foreign Bribery 128. With respect to awareness raising to promote the implementation of the FCPA, the Working Group recommends that the United States:

1. Enhance existing efforts to reach small and medium sized enterprises doing business internationally, both in order to raise the level of their awareness of the FCPA and to equip them with tools and information which are specifically tailored to their needs and resources. (Revised Recommendation, Article 1)

2. Undertake further public awareness activities for the purpose of increasing the level of awareness of the FCPA in the accounting profession. (Revised Recommendation, Article 1) 129. With respect to other preventive measures, the Working Group recommends that the United States, based on the expertise built up during years of applying and interpreting the FCPA:

3. Consider issuing public guidance, whether as guidelines or otherwise, suitable to assist businesses in complying with the FCPA generally, and in particular to equip them with risk management tools useful in structuring international transactions. (Revised Recommendation, Article 1)

4. Consider developing specific guidance in relation to the facilitation payments exception (Convention, Commentary 9; Phase 1 Evaluation, paragraph

1.3).

5. With respect to the defence of reasonable and bona fide expenditure, there were questions raised concerning the need for this defence. If it is to be maintained, the Working Group recommends that appropriate guidance be provided. (Phase 1 Evaluation, paragraph

1.3). 130. The Working Group further recommends that the United States:

6. Encourage the development and adoption of compliance programs tailored to the needs of SMEs doing business internationally. (Revised Recommendation, Article V. C ( i))

7. Consider making the books and records provisions of the FCPA applicable to certain non-issuers based on the level of foreign business they transact, so as to possibly improve the level of deterrence and detection of FCPA violations. (Convention, Article 8; Revised Recommendation, Article V) 131. With respect to detection, the Working Group recommends that the United States:

8. Advocate clarification of auditing standards especially as to materiality, and strengthen controls over auditors in order to enhance the detection of foreign bribery. (Convention, Article 8; Revised Recommendation, Article V)

9. Undertake to maintain statistics as to the number, sources and subsequent processing of allegations of FCPA violations in order to put in place measures to enhance the capabilities of the United States in detecting foreign bribery. (Revised Recommendation, Article 1; Annex to the Revised Recommendation, paragraph 6) B87 Recommendations for Ensuring Adequate Mechanisms for the Effective Prosecution of Foreign Bribery Offences and the related Accounting and Money Laundering Offences 132. The Working Group recommends that the United States:

10. Make a clear public statement, in the light of the OECD Convention, identifying the criteria applied in determining the priorities both of the Department of Justice and of the Securities and Exchange Commission in prosecuting FCPA cases. (Convention, Article 5)

11. Enhance the existing organisational enforcement infrastructure by setting up a mechanism, including the compilation of relevant statistics, for the periodic review and evaluation of the overall FCPA enforcement effort (Convention, Article 5). 12. Consider whether more focus should be given to criminal prosecutions in the framework of antimoney laundering legislation for failure to report suspicious activity, to enhance the overall effectiveness of the FCPA. (Convention, Article 7) 13. Consider whether the statute of limitations applicable to the offence of bribery of a foreign public official, as well as to other criminal offences involving the obtaining of evidence located abroad, allows for an adequate period of time for the investigation and prosecution of the offence, and if necessary, take steps to secure an appropriate increase in the period. (Convention, Article 6) 14. Consider amendments to the FCPA to clarify that it is an offence to offer, promise or give a bribe “in order to obtain or retain business or other improper advantage in the conduct of international business”. (Convention, Article 1; Phase 1 Evaluation, paragraph

1.4 )

b) Follow-up by the Working Group 133. The Working Group will follow up the issues below, as the case-law continues to develop, to examine: 15. Whether amendments are required to the FCPA to supplement or clarify the existing language defining the elements of the offence of foreign bribery with regard to (i ) cases where a benefit is directed to a third party by a foreign official; and (ii) the scope of the definition of a “foreign public official”, in particular with respect to persons holding judicial office and the directors, officers and employees of state-controlled enterprises or instrumentalities (Convention, Article 1; Phase 1 Evaluation, paragraphs

1.2) 16. Whether the current basis for nationality jurisdiction, as established by the 1998 amendments to the FCPA, is effective in the fight against bribery of foreign public officials (Convention, Article 4) 134. The Working Group will furthermore monitor developments in the following area: 17. Whether, by November 2002, the base level offence classification of foreign bribery for sentencing purposes has been increased so that penalties are comparable to those applicable to domestic bribery (Convention, Article 3; Phase 1 Evaluation, paragraph

2.1). B88 C89

United States Regulations

(b) Form of report; books, records, and internal accounting; directives

* * * (2) Every issuer which has a class of securities registered pursuant to section 78l of this title and every issuer which is required to file reports pursuant to section 78o(d) of this title shall — (A) make and keep books, records, and accounts, which, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the issuer; and (B) devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances that — (i) transactions are executed in accordance with management’s general or specific authorization; C90 (ii) transactions are recorded as necessary (I) to permit preparation of financial statements in conformity with generally accepted accounting principles or any other criteria applicable to such statements, and (II) to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (3) (A) With respect to matters concerning the national security of the United States, no duty or liability under paragraph (2) of this subsection shall be imposed upon any person acting in cooperation with the head of any Federal department or agency responsible for such matters if such act in cooperation with such head of a department or agency was done upon the specific, written directive of the head of such department or agency pursuant to Presidential authority to issue such directives. Each directive issued under this paragraph shall set forth the specific facts and circumstances with respect to which the provisions of this paragraph are to be invoked. Each such directive shall, unless renewed in writing, expire one year after the date of issuance. (B) Each head of a Federal department or agency of the United States who issues such a directive pursuant to this paragraph shall maintain a complete file of all such directives and shall, on October 1 of each year, transmit a summary of matters covered by such directives in force at any time during the previous year to the Permanent Select Committee on Intelligence of the House of Representatives and the Select Committee on Intelligence of the Senate. (4) No criminal liability shall be imposed for failing to comply with the requirements of paragraph (2) of this subsection except as provided in paragraph (5) of this subsection. (5) No person shall knowingly circumvent or knowingly fail to implement a system of internal accounting controls or knowingly falsify any book, record, or account described in paragraph (2). (6) Where an issuer which has a class of securities registered pursuant to section 78l of this title or an issuer which is required to file reports pursuant to section 78o(d) of this title holds 50 per centum or less of the voting power with respect to a domestic or foreign firm, the provisions of paragraph (2) require only that the issuer proceed in good faith to use its influence, to the extent reasonable under the issuer’s circumstances, to cause such domestic or foreign firm to devise and maintain a system of internal accounting controls consistent with paragraph (2). Such circumstances include the relative degree of the issuer’s ownership of the domestic or foreign firm and the laws and practices governing the business operations of the country in which such firm is located. An issuer which demonstrates good faith efforts to use such influence shall be conclusively presumed to have complied with the requirements of paragraph (2). (7) For the purpose of paragraph (2) of this subsection, the terms “reasonable assurances” and “reasonable detail” mean such level of detail and degree of assurance as would satisfy prudent officials in the conduct of their own affairs. * * * C91

§ 78dd-1. Prohibited foreign trade practices by issuers (a) Prohibition

It shall be unlawful for any issuer which has a class of securities registered pursuant to section 78l of this title or which is required to file reports under section 78o(d) of this title, or for any officer, director, employee, or agent of such issuer or any stockholder thereof acting on behalf of such issuer, to make use of the mails or any means or instrumentality of interstate commerce corruptly in furtherance of an offer, payment, promise to pay, or authorization of the payment of any money, or offer, gift, promise to give, or authorization of the giving of anything of value to — (1) any foreign official for purposes of — (A) (i) influencing any act or decision of such foreign official in his official capacity, (ii) inducing such foreign official to do or omit to do any act in violation of the lawful duty of such official, or (iii) securing any improper advantage; or (B) inducing such foreign official to use his influence with a foreign government or instrumentality thereof to affect or influence any act or decision of such government or instrumentality, in order to assist such issuer in obtaining or retaining business for or with, or directing business to, any person; (2) any foreign political party or official thereof or any candidate for foreign political office for purposes of — (A) (i) influencing any act or decision of such party, official, or candidate in its or his official capacity, (ii) inducing such party, official, or candidate to do or omit to do an act in violation of the lawful duty of such party, official, or candidate, or (iii) securing any improper advantage; or (B) inducing such party, official, or candidate to use its or his influence with a foreign government or instrumentality thereof to affect or influence any act or decision of such government or instrumentality. in order to assist such issuer in obtaining or retaining business for or with, or directing business to, any person; or (3) any person, while knowing that all or a portion of such money or thing of value will be offered, given, or promised, directly or indirectly, to any foreign official, to any foreign political party or official thereof, or to any candidate for foreign political office, for purposes of — (A) (i) influencing any act or decision of such foreign official, political party, party official, or candidate in his or its official capacity, (ii) inducing such foreign official, political party, party official, or candidate to do or omit to do any act in violation of the lawful duty of such foreign official, political party, party official, or candidate, or (iii) securing any improper advantage; or (B) inducing such foreign official, political party, party official, or candidate to use his or its influence with a foreign government or instrumentality thereof to affect or influence any act or decision of such government or instrumentality, in order to assist such issuer in obtaining or retaining business for or with, or directing business to, any person. C92

(b) Exception for routine governmental action

Subsections (a) and (g) of this section shall not apply to any facilitating or expediting payment to a foreign official, political party, or party official the purpose of which is to expedite or to secure the performance of a routine governmental action by a foreign official, political party, or party official.

(c) Affirmative defenses

It shall be an affirmative defense to actions under subsection (a) or (g) of this section that — (1) the payment, gift, offer, or promise of anything of value that was made, was lawful under the written laws and regulations of the foreign official’s, political party’s, party official’s, or candidate’s country; or (2) the payment, gift, offer, or promise of anything of value that was made, was a reasonable and bona fide expenditure, such as travel and lodging expenses, incurred by or on behalf of a foreign official, party, party official, or candidate and was directly related to — (A) the promotion, demonstration, or explanation of products or services; or (B) the execution or performance of a contract with a foreign government or agency thereof.

(d) Guidelines by Attorney General

Not later than one year after August 23, 1988, the Attorney General, after consultation with the Commission, the Secretary of Commerce, the United States Trade Representative, the Secretary of State, and the Secretary of the Treasury, and after obtaining the views of all interested persons through public notice and comment procedures, shall determine to what extent compliance with this section would be enhanced and the business community would be assisted by further clarification of the preceding provisions of this section and may, based on such determination and to the extent necessary and appropriate, issue — (1) guidelines describing specific types of conduct, associated with common types of export sales arrangements and business contracts, which for purposes of the Department of Justice’s present enforcement policy, the Attorney

(e) Opinions of Attorney General

(1) The Attorney General, after consultation with appropriate departments and agencies of the United States and after obtaining the views of all interested persons through public notice and comment procedures, shall establish a procedure to provide responses to specific inquiries by issuers concerning conformance of their conduct with the Department of Justice’s present enforcement policy regarding the preceding provisions of this section. The Attorney General shall, within 30 days after receiving such a request, issue an opinion in response to that request. The opinion shall state whether or not certain specified prospective conduct would, for purposes of the Department of Justice’s present enforcement policy, violate the preceding provisions of this section. Additional requests for opinions may be filed with the Attorney General regarding other specified prospective conduct that is beyond the scope of conduct specified in previous requests. In any action brought under the applicable provisions of this section, there shall be a rebuttable presumption that conduct, which is specified in a request by an issuer and for which the Attorney General has issued an opinion that such conduct is in conformity with the Department of Justice’s present enforcement policy, is in compliance with the preceding provisions of this section. Such a presumption may be rebutted by a preponderance of the evidence. In considering the presumption for purposes of this paragraph, a court shall weight all relevant factors, including but not limited to whether the information submitted to the Attorney General was accurate and complete and whether it was within the scope of the conduct specified in any request received by the Attorney General. The Attorney General shall establish the procedure required by this paragraph in accordance with the provisions of subchapter II of chapter 5 of Title 5 and that procedure shall be subject to the provisions of chapter 7 of that title. (2) Any document or other material which is provided to, received by, or prepared in the Department of Justice or any other department or agency of the United States in connection with a request by an issuer under the procedure established under paragraph (1), shall be exempt from disclosure under section 552 of Title 5 and shall not, except with the consent of the issuer, be made publicly available, regardless of whether the Attorney General responds to such a request or the issuer withdraws such request before receiving a response. (3) Any issuer who has made a request to the Attorney General under paragraph (1) may withdraw such request prior to the time the Attorney General issues an opinion in response to such request. Any request so withdrawn shall have no force or effect. (4) The Attorney General shall, to the maximum extent practicable, provide timely guidance concerning the Department of Justice’s present enforcement policy with respect to the preceding provisions of this section to potential exporters and small businesses that are unable to obtain specialized counsel on issues pertaining to such provisions. Such guidance shall be limited to responses to requests under paragraph (1) concerning conformity of specified prospective conduct with the Department of Justice’s present enforcement policy regarding the preceding provisions of this section and general explanations of compliance responsibilities and of potential liabilities under the preceding provisions of this section.

(f) Definitions

For purposes of this section: (1) (A) The term “foreign official” means any officer or employee of a foreign government or any department, agency, or instrumentality thereof, or of a public international organization, or any person acting in an official capacity for or on behalf of any such government or department, agency, or instrumentality, or for or on behalf of any such public international organization. C94 (B) For purposes of subparagraph (A), the term “public international organization” means — (i) an organization that is designated by Executive Order pursuant to section 1 of the International Organizations Immunities Act (22 U.S.C. § 288); or (ii) any other international organization that is designated by the President by Executive order for the purposes of this section, effective as of the date of publication of such order in the Federal Register. (2) (A) A person’s state of mind is “knowing” with respect to conduct, a circumstance, or a result if — (i) such person is aware that such person is engaging in such conduct, that such circumstance exists, or that such result is substantially certain to occur; or (ii) such person has a firm belief that such circumstance exists or that such result is substantially certain to occur. (B) When knowledge of the existence of a particular circumstance is required for an offense, such knowledge is established if a person is aware of a high probability of the existence of such circumstance, unless the person actually believes that such circumstance does not exist. (3) (A) The term “routine governmental action” means only an action which is ordinarily and commonly performed by a foreign official in — (i) obtaining permits, licenses, or other official documents to qualify a person to do business in a foreign country; (ii) processing governmental papers, such as visas and work orders; (iii) providing police protection, mail pick-up and delivery, or scheduling inspections associated with contract performance or inspections related to transit of goods across country; (iv) providing phone service, power and water supply, loading and unloading cargo, or protecting perishable products or commodities from deterioration; or (v) actions of a similar nature. (B) The term “routine governmental action” does not include any decision by a foreign official whether, or on what terms, to award new business to or to continue business with a particular party, or any action taken by a foreign official involved in the decision-making process to encourage a decision to award new business to or continue business with a particular party. C95

(g) Alternative Jurisdiction

(1) It shall also be unlawful for any issuer organized under the laws of the United States, or a State, territory, possession, or commonwealth of the United States or a political subdivision thereof and which has a class of securities registered pursuant to section 12 of this title or which is required to file reports under section 15(d) of this title, or for any United States person that is an officer, director, employee, or agent of such issuer or a stockholder thereof acting on behalf of such issuer, to corruptly do any act outside the United States in furtherance of an offer, payment, promise to pay, or authorization of the payment of any money, or offer, gift, promise to give, or authorization of the giving of anything of value to any of the persons or entities set forth in paragraphs (1), (2), and (3) of this subsection (a) of this section for the purposes set forth therein, irrespective of whether such issuer or such officer, director, employee, agent, or stockholder makes use of the mails or any means or instrumentality of interstate commerce in furtherance of such offer, gift, payment, promise, or authorization. (2) As used in this subsection, the term “United States person” means a national of the United States (as defined in section 101 of the Immigration and Nationality Act (8 U.S.C. § 1101)) or any corporation, partnership, association, joint-stock company, business trust, unincorporated organization, or sole proprietorship organized under the laws of the United States or any State, territory, possession, or commonwealth of the United States, or any political subdivision thereof.

§ 78dd-2. Prohibited foreign trade practices by domestic concerns (a) Prohibition

It shall be unlawful for any domestic concern, other than an issuer which is subject to section 78dd-1 of this title, or for any officer, director, employee, or agent of such domestic concern or any stockholder thereof acting on behalf of such domestic concern, to make use of the mails or any means or instrumentality of interstate commerce corruptly in furtherance of an offer, payment, promise to pay, or authorization of the payment of any money, or offer, gift, promise to give, or authorization of the giving of anything of value to — (1) any foreign official for purposes of — (A) (i) influencing any act or decision of such foreign official in his official capacity, (ii) inducing such foreign official to do or omit to do any act in violation of the lawful duty of such official, or (iii) securing any improper advantage; or (B) inducing such foreign official to use his influence with a foreign government or instrumentality thereof to affect or influence any act or decision of such government or instrumentality, in order to assist such domestic concern in obtaining or retaining business for or with, or directing business to, any person; (2) any foreign political party or official thereof or any candidate for foreign political office for purposes of — (A) (i) influencing any act or decision of such party, official, or candidate in its or his official capacity, (ii) inducing such party, official, or candidate to do or omit to do an act in violation of the lawful duty of such party, official, or candidate, or (iii) securing any improper advantage; or

(b) Exception for routine governmental action

Subsections (a) and (i) of this section shall not apply to any facilitating or expediting payment to a foreign official, political party, or party official the purpose of which is to expedite or to secure the performance of a routine governmental action by a foreign official, political party, or party official.

(c) Affirmative defenses

It shall be an affirmative defense to actions under subsection (a) or (i) of this section that — (1) the payment, gift, offer, or promise of anything of value that was made, was lawful under the written laws and regulations of the foreign official’s, political party’s, party official’s, or candidate’s country; or (2) the payment, gift, offer, or promise of anything of value that was made, was a reasonable and bona fide expenditure, such as travel and lodging expenses, incurred by or on behalf of a foreign official, party, party official, or candidate and was directly related to — (A) the promotion, demonstration, or explanation of products or services; or (B) the execution or performance of a contract with a foreign government or agency thereof. C97

(d) Injunctive relief

(1) When it appears to the Attorney General that any domestic concern to which this section applies, or officer, director, employee, agent, or stockholder thereof, is engaged, or about to engage, in any act or practice constituting a violation of subsection (a) or (i) of this section, the Attorney General may, in his discretion, bring a civil action in an appropriate district court of the United States to enjoin such act or practice, and upon a proper showing, a permanent injunction or a temporary restraining order shall be granted without bond. (2) For the purpose of any civil investigation which, in the opinion of the Attorney General, is necessary and proper to enforce this section, the Attorney General or his designee are empowered to administer oaths and affirmations, subpoena witnesses, take evidence, and require the production of any books, papers, or other documents which the Attorney General deems relevant or material to such investigation. The attendance of witnesses and the production of documentary evidence may be required from any place in the United States, or any territory, possession, or commonwealth of the United States, at any designated place of hearing. (3) In case of contumacy by, or refusal to obey a subpoena issued to, any person, the Attorney General may invoke the aid of any court of the United States within the jurisdiction of which such investigation or proceeding is carried on, or where such person resides or carries on business, in requiring the attendance and testimony of witnesses and the production of books, papers, or other documents. Any such court may issue an order requiring such person to appear before the Attorney General or his designee, there to produce records, if so ordered, or to give testimony touching the matter under investigation. Any failure to obey such order of the court may be punished by such court as a contempt thereof. All process in any such case may be served in the judicial district in which such person resides or may be found. The Attorney General may make such rules relating to civil investigations as may be necessary or appropriate to implement the provisions of this subsection.

(e) Guidelines by Attorney General

Not later than 6 months after August 23, 1988, the Attorney General, after consultation with the Securities and Exchange Commission, the Secretary of Commerce, the United States Trade Representative, the Secretary of State, and the Secretary of the Treasury, and after obtaining the views of all interested persons through public notice and comment procedures, shall determine to what extent compliance with this section would be enhanced and the business community would be assisted by further clarification of the preceding provisions of this section and may, based on such determination and to the extent necessary and appropriate, issue — (1) guidelines describing specific types of conduct, associated with common types of export sales arrangements and business contracts, which for purposes of the Department of Justice’s present enforcement policy, the Attorney General determines would be in conformance with the preceding provisions of this section; and (2) general precautionary procedures which domestic concerns may use on a voluntary basis to conform their conduct to the Department of Justice’s present enforcement policy regarding the preceding provisions of this section. The Attorney General shall issue the guidelines and procedures referred to in the preceding sentence in accordance with the provisions of subchapter II of chapter 5 of Title 5 and those guidelines and procedures shall be subject to the provisions of chapter 7 of that title. C98

(f) Opinions of Attorney General

(1) The Attorney General, after consultation with appropriate departments and agencies of the United States and after obtaining the views of all interested persons through public notice and comment procedures, shall establish a procedure to provide responses to specific inquiries by domestic concerns concerning conformance of their conduct with the Department of Justice’s present enforcement policy regarding the preceding provisions of this section. The Attorney General shall, within 30 days after receiving such a request, issue an opinion in response to that request. The opinion shall state whether or not certain specified prospective conduct would, for purposes of the Department of Justice’s present enforcement policy, violate the preceding provisions of this section. Additional requests for opinions may be filed with the Attorney General regarding other specified prospective conduct that is beyond the scope of conduct specified in previous requests. In any action brought under the applicable provisions of this section, there shall be a rebuttable presumption that conduct, which is specified in a request by a domestic concern and for which the Attorney General has issued an opinion that such conduct is in conformity with the Department of Justice’s present enforcement policy, is in compliance with the preceding provisions of this section. Such a presumption may be rebutted by a preponderance of the evidence. In considering the presumption for purposes of this paragraph, a court shall weigh all relevant factors, including but not limited to whether the information submitted to the Attorney General was accurate and complete and whether it was within the scope of the conduct specified in any request received by the Attorney General. The Attorney General shall establish the procedure required by this paragraph in accordance with the provisions of subchapter II of chapter 5 of Title 5 and that procedure shall be subject to the provisions of chapter 7 of that title. (2) Any document or other material which is provided to, received by, or prepared in the Department of Justice or any other department or agency of the United States in connection with a request by a domestic concern under the procedure established under paragraph (1), shall be exempt from disclosure under section 552 of Title 5 and shall not, except with the consent of the domestic concern, by made publicly available, regardless of whether the Attorney General response to such a request or the domestic concern withdraws such request before receiving a response. (3) Any domestic concern who has made a request to the Attorney General under paragraph (1) may withdraw such request prior to the time the Attorney General issues an opinion in response to such request. Any request so withdrawn shall have no force or effect. (4) The Attorney General shall, to the maximum extent practicable, provide timely guidance concerning the Department of Justice’s present enforcement policy with respect to the preceding provisions of this section to potential exporters and small businesses that are unable to obtain specialized counsel on issues pertaining to such provisions. Such guidance shall be limited to responses to requests under paragraph (1) concerning conformity of specified prospective conduct with the Department of Justice’s present enforcement policy regarding the preceding provisions of this section and general explanations of compliance responsibilities and of potential liabilities under the preceding provisions of this section. C99

(g) Penalties

(1) (A) Any domestic concern that is not a natural person and that violates subsection (a) or (i) of this section shall be fined not more than $2,000,000.

(h) Definitions

For purposes of this section: (1) The term “domestic concern” means — (A) any individual who is a citizen, national, or resident of the United States; and (B) any corporation, partnership, association, joint-stock company, business trust, unincorporated organization, or sole proprietorship which has its principal place of business in the United States, or which is organized under the laws of a State of the United States or a territory, possession, or commonwealth of the United States. (2) (A) The term “foreign official” means any officer or employee of a foreign government or any department, agency, or instrumentality thereof, or of a public international organization, or any person acting in an official capacity for or on behalf of any such government or department, agency, or instrumentality, or for or on behalf of any such public international organization. (B) For purposes of subparagraph (A), the term “public international organization” means — (i) an organization that has been designated by Executive order pursuant to Section 1 of the International Organizations Immunities Act (22 U.S.C. § 288); or (ii) any other international organization that is designated by the President by Executive order for the purposes of this section, effective as of the date of publication of such order in the Federal Register. C100 (3) (A) A person’s state of mind is “knowing” with respect to conduct, a circumstance, or a result if — (i) such person is aware that such person is engaging in such conduct, that such circumstance exists, or that such result is substantially certain to occur; or (ii) such person has a firm belief that such circumstance exists or that such result is substantially certain to occur. (B) When knowledge of the existence of a particular circumstance is required for an offense, such knowledge is established if a person is aware of a high probability of the existence of such circumstance, unless the person actually believes that such circumstance does not exist. (4) (A) The term “routine governmental action” means only an action which is ordinarily and commonly performed by a foreign official in — (i) obtaining permits, licenses, or other official documents to qualify a person to do business in a foreign country; (ii) processing governmental papers, such as visas and work orders; (iii) providing police protection, mail pick-up and delivery, or scheduling inspections associated with contract performance or inspections related to transit of goods across country; (iv) providing phone service, power and water supply, loading and unloading cargo, or protecting perishable products or commodities from deterioration; or (v) actions of a similar nature. (B) The term “routine governmental action” does not include any decision by a foreign official whether, or on what terms, to award new business to or to continue business with a particular party, or any action taken by a foreign official involved in the decision-making process to encourage a decision to award new business to or continue business with a particular party. (5) The term “interstate commerce” means trade, commerce, transportation, or communication among the several States, or between any foreign country and any State or between any State and any place or ship outside thereof, and such term includes the intrastate use of — (A) a telephone or other interstate means of communication, or (B) any other interstate instrumentality. C101

(i) Alternative Jurisdiction

(1) It shall also be unlawful for any United States person to corruptly do any act outside the United States in furtherance of an offer, payment, promise to pay, or authorization of the payment of any money, or offer, gift, promise to give, or authorization of the giving of anything of value to any of the persons or entities set forth in paragraphs (1), (2), and (3) of subsection (a), for the purposes set forth therein, irrespective of whether such United States person makes use of the mails or any means or instrumentality of interstate commerce in furtherance of such offer, gift, payment, promise, or authorization. (2) As used in this subsection, a “United States person” means a national of the United States (as defined in section 101 of the Immigration and Nationality Act (8 U.S.C. § 1101)) or any corporation, partnership, association, jointstock company, business trust, unincorporated organization, or sole proprietorship organized under the laws of the United States or any State, territory, possession, or commonwealth of the United States, or any political subdivision thereof.

§ 78dd-3. Prohibited foreign trade practices by persons other than issuers or domestic concerns (a) Prohibition

It shall be unlawful for any person other than an issuer that is subject to section 30A of the Securities Exchange Act of 1934 or a domestic concern, as defined in section 104 of this Act), or for any officer, director, employee, or agent of such person or any stockholder thereof acting on behalf of such person, while in the territory of the United States, corruptly to make use of the mails or any means or instrumentality of interstate commerce or to do any other act in furtherance of an offer, payment, promise to pay, or authorization of the payment of any money, or offer, gift, promise to give, or authorization of the giving of anything of value to — (1) any foreign official for purposes of — (A) (i) influencing any act or decision of such foreign official in his official capacity, (ii) inducing such foreign official to do or omit to do any act in violation of the lawful duty of such official, or (iii) securing any improper advantage; or (B) inducing such foreign official to use his influence with a foreign government or instrumentality thereof to affect or influence any act or decision of such government or instrumentality, in order to assist such person in obtaining or retaining business for or with, or directing business to, any person; (2) any foreign political party or official thereof or any candidate for foreign political office for purposes of — (A) (i) influencing any act or decision of such party, official, or candidate in its or his official capacity, (ii) inducing such party, official, or candidate to do or omit to do an act in violation of the lawful duty of such party, official, or candidate, or (iii) securing any improper advantage; or (B) inducing such party, official, or candidate to use its or his influence with a foreign government or instrumentality thereof to affect or influence any act or decision of such government or instrumentality. in order to assist such person in obtaining or retaining business for or with, or directing business to, any person; or C102 (3) any person, while knowing that all or a portion of such money or thing of value will be offered, given, or promised, directly or indirectly, to any foreign official, to any foreign political party or official thereof, or to any candidate for foreign political office, for purposes of — (A) (i) influencing any act or decision of such foreign official, political party, party official, or candidate in his or its official capacity, (ii) inducing such foreign official, political party, party official, or candidate to do or omit to do any act in violation of the lawful duty of such foreign official, political party, party official, or candidate, or (iii) securing any improper advantage; or (B) inducing such foreign official, political party, party official, or candidate to use his or its influence with a foreign government or instrumentality thereof to affect or influence any act or decision of such government or instrumentality, in order to assist such person in obtaining or retaining business for or with, or directing business to, any person.

(b) Exception for routine governmental action

Subsection (a) of this section shall not apply to any facilitating or expediting payment to a foreign official, political party, or party official the purpose of which is to expedite or to secure the performance of a routine governmental action by a foreign official, political party, or party official.

(c) Affirmative defenses

It shall be an affirmative defense to actions under subsection (a) of this section that — (1) the payment, gift, offer, or promise of anything of value that was made, was lawful under the written laws and regulations of the foreign official’s, political party’s, party official’s, or candidate’s country; or (2) the payment, gift, offer, or promise of anything of value that was made, was a reasonable and bona fide expenditure, such as travel and lodging expenses, incurred by or on behalf of a foreign official, party, party official, or candidate and was directly related to — (A) the promotion, demonstration, or explanation of products or services; or (B) the execution or performance of a contract with a foreign government or agency thereof.

(d) Injunctive relief

(1) When it appears to the Attorney General that any person to which this section applies, or officer, director,

(e) Penalties

(1) (A) Any juridical person that violates subsection (a) of this section shall be fined not more than $2,000,000. (B) Any juridical person that violates subsection (a) of this section shall be subject to a civil penalty of not more than $10,000 imposed in an action brought by the Attorney General. (2) (A) Any natural person who willfully violates subsection (a) of this section shall be fined not more than $100,000 or imprisoned not more than 5 years, or both. (B) Any natural person who violates subsection (a) of this section shall be subject to a civil penalty of not more than $10,000 imposed in an action brought by the Attorney General. (3) Whenever a fine is imposed under paragraph (2) upon any officer, director, employee, agent, or stockholder of a person, such fine may not be paid, directly or indirectly, by such person.

(f) Definitions

For purposes of this section: (1) The term “person,” when referring to an offender, means any natural person other than a. national of the United States (as defined in 8 U.S.C. § 1101) or any corporation, partnership, association, joint-stock company, business trust, unincorporated organization, or sole proprietorship organized under the law of a foreign nation or a political subdivision thereof. (2) (A) The term “foreign official” means any officer or employee of a foreign government or any department, agency, or instrumentality thereof, or of a public international organization, or any person acting in an official capacity for or on behalf of any such government or department, agency, or instrumentality, or for or on behalf of any such public international organization. (B) For purposes of subparagraph (A), the term “public international organization” means — C104 (i) an organization that has been designated by Executive Order pursuant to Section 1 of the International Organizations Immunities Act (22 U.S.C. § 288); or (ii) any other international organization that is designated by the President by Executive order for the purposes of this section, effective as of the date of publication of such order in the Federal Register. (3) (A) A person’s state of mind is “knowing” with respect to conduct, a circumstance, or a result if — (i) such person is aware that such person is engaging in such conduct, that such circumstance exists, or that such result is substantially certain to occur; or (ii) such person has a firm belief that such circumstance exists or that such result is substantially certain to occur. (B) When knowledge of the existence of a particular circumstance is required for an offense, such knowledge is established if a person is aware of a high probability of the existence of such circumstance, unless the person actually believes that such circumstance does not exist. (4) (A) The term “routine governmental action” means only an action which is ordinarily and commonly performed by a foreign official in — (i) obtaining permits, licenses, or other official documents to qualify a person to do business in a foreign country; (ii) processing governmental papers, such as visas and work orders; (iii) providing police protection, mail pick-up and delivery, or scheduling inspections associated with contract performance or inspections related to transit of goods across country; (iv) providing phone service, power and water supply, loading and unloading cargo, or protecting perishable products or commodities from deterioration; or (v) actions of a similar nature. (B) The term “routine governmental action” does not include any decision by a foreign official whether, or on what terms, to award new business to or to continue business with a particular party, or any action taken by a foreign official involved in the decision-making process to encourage a decision to award new business to or continue business with a particular party. (5) The term “interstate commerce” means trade, commerce, transportation, or communication among the several States, or between any foreign country and any State or between any State and any place or ship outside thereof, and such term includes the intrastate use of — (A) a telephone or other interstate means of communication, or (B) any other interstate instrumentality. C105

§ 78ff. Penalties (a) Willful violations; false and misleading statements

Any person who willfully violates any provision of this chapter (other than section 78dd-1 of this title), or any rule or regulation thereunder the violation of which is made unlawful or the observance of which is required under the terms of this chapter, or any person who willfully and knowingly makes, or causes to be made, any statement in any application, report, or document required to be filed under this chapter or any rule or regulation thereunder or any undertaking contained in a registration statement as provided in subsection (d) of section 78o of this title, or by any self-regulatory organization in connection with an application for membership or participation therein or to become associated with a member thereof, which statement was false or misleading with respect to any material fact, shall upon conviction be fined not more than $1,000,000, or imprisoned not more than 10 years, or both, except that when such person is a person other than a natural person, a fine not exceeding $2,500,000 may be imposed; but no person shall be subject to imprisonment under this section for the violation of any rule or regulation if he proves that he had no knowledge of such rule or regulation.

(b) Failure to file information, documents, or reports

Any issuer which fails to file information, documents, or reports required to be filed under subsection (d) of section 78o of this title or any rule or regulation thereunder shall forfeit to the United States the sum of $100 for each and every day such failure to file shall continue. Such forfeiture, which shall be in lieu of any criminal penalty for such failure to file which might be deemed to arise under subsection (a) of this section, shall be payable into the Treasury of the United States and shall be recoverable in a civil suit in the name of the United States.

(c) Violations by issuers, officers, directors, stockholders, employees, or agents of issuers

(1) (A) Any issuer that violates subsection (a) or (g) of section 30A of this title shall be fined not more than $2,000,000. (B) Any issuer that violates subsection (a) or (g) of section 30A of this title shall be subject to a civil penalty of not more than $10,000 imposed in an action brought by the Commission. (2) (A) Any officer, director, employee, or agent of an issuer, or stockholder acting on behalf of such issuer, who willfully violates subsection (a) or (g) of section 30A of this title shall be fined not more than $100,000, or imprisoned not more than 5 years, or both. (B) Any officer, director, employee, or agent of an issuer, or stockholder acting on behalf of such issuer, who violates subsection (a) or (g) of section 30A of this title shall be subject to a civil penalty of not more than $10,000 imposed in an action brought by the Commission. (3) Whenever a fine is imposed under paragraph (2) upon any officer, director, employee, agent, or stockholder of an issuer, such fine may not be paid, directly or indirectly, by such issuer. C106

FCPA - Opinion Procedure Regulations FOREIGN CORRUPT PRACTICES ACT OPINION PROCEDURE 28 C.F.R. part 80 (current as of July 1, 1999) Sec. 80.1 Purpose.

These procedures enable issuers and domestic concerns to obtain an opinion of the Attorney General as to whether certain specified, prospective--not hypothetical--conduct conforms with the Department’s present enforcement policy regarding the antibribery provisions of the Foreign Corrupt Practices Act of 1977, as amended, 15 U.S.C. 78dd-1 and 78dd-2. An opinion issued pursuant to these procedures is a Foreign Corrupt Practices Act opinion (hereinafter FCPA Opinion).

Sec. 80.2 Submission requirements.

Sec. 80.3 Transaction.

The entire transaction which is the subject of the request must be an actual--not a hypothetical--transaction but need not involve only prospective conduct. However, a request will not be considered unless that portion of the transaction for which an opinion is sought involves only prospective conduct. An executed contract is not a prerequisite and, in most--if not all--instances, an opinion request should be made prior to the requestor’s commitment to proceed with a transaction.

Sec. 80.4 Issuer or domestic concern.

The request must be submitted by an issuer or domestic concern within the meaning of 15 U.S.C. 78dd-1 and 78dd-2, respectively, that is also a party to the transaction which is the subject of the request.

Sec. 80.5 Affected parties.

An FCPA Opinion shall have no application to any party which does not join in the request for the opinion.

Sec. 80.6 General requirements.

Each request shall be specific and must be accompanied by all relevant and material information bearing on the conduct for which an FCPA Opinion is requested and on the circumstances of the prospective conduct, including background information, complete copies of all operative documents, and detailed statements of all collateral or oral understandings, if any. The requesting issuer or domestic concern is under an affirmative obligation to make full and true disclosure with respect to the conduct for which an opinion is requested. Each request on behalf of a requesting issuer C107 or corporate domestic concern must be signed by an appropriate senior officer with operational responsibility for the conduct that is the subject of the request and who has been designated by the requestor’s chief executive officer to sign the opinion request. In appropriate cases, the Department of Justice may require the chief executive officer of each requesting issuer or corporate domestic concern to sign the request. All requests of other domestic concerns must also be signed. The person signing the request must certify that it contains a true, correct and complete disclosure with respect to the proposed conduct and the circumstances of the conduct.

Sec. 80.7 Additional information.

If an issuer’s or domestic concern’s submission does not contain all of the information required by Sec. 80.6, the Department of Justice may request whatever additional information or documents it deems necessary to review the matter. The Department must do so within 30 days of receipt of the opinion request, or, in the case of an incomplete response to a previous request for additional information, within 30 days of receipt of such response. Each issuer or domestic concern requesting an FCPA Opinion must promptly provide the information requested. A request will not be deemed complete until the Department of Justice receives such additional information. Such additional information, if furnished orally, shall be promptly confirmed in writing, signed by the same person or officer who signed the initial request and certified by this person or officer to be a true, correct and complete disclosure of the requested information. In connection with any request for an FCPA Opinion, the Department of Justice may conduct whatever independent investigation it believes appropriate.

Sec. 80.8 Attorney General opinion.

The Attorney General or his designee shall, within 30 days after receiving a request that complies with the foregoing procedure, respond to the request by issuing an opinion that states whether the prospective conduct, would, for purposes of the Department of Justice’s present enforcement policy, violate 15 U.S.C. 78dd-1 and 78dd-2. The Department of Justice may also take such other positions or action as it considers appropriate. Should the Department request additional information, the Department’s response shall be made within 30 days after receipt of such additional information.

Sec. 80.9 No oral opinion.

No oral clearance, release or other statement purporting to limit the enforcement discretion of the Department of Justice may be given. The requesting issuer or domestic concern may rely only upon a written FCPA Opinion letter signed by the Attorney General or his designee.

Sec. 80.10 Rebuttable presumption.

In any action brought under the applicable provisions of 15 U.S.C. 78dd-1 and 78dd-2, there shall be a rebuttable presumption that a requestor’s conduct, which is specified in a request, and for which the Attorney General has issued an opinion that such conduct is in conformity with the Department’s present enforcement policy, is in compliance with those provisions of the FCPA. Such a presumption may be rebutted by a preponderance of the evidence. In considering the presumption, a court, in accordance with the statute, shall weigh all relevant factors, including but not limited to whether information submitted to the Attorney General was accurate and complete and whether the activity was within the scope of the conduct specified in any request received by the Attorney General.

Sec. 80.11 Effect of FCPA Opinion.

Except as specified in Sec. 80.10, an FCPA Opinion will not bind or obligate any agency other than the Department of Justice. It will not affect the requesting issuer’s or domestic concern’s obligations to any other agency, or under any statutory or regulatory provision other than those specifically cited in the particular FCPA Opinion. C108

Sec. 80.12 Accounting requirements.

Neither the submission of a request for an FCPA Opinion, its pendency, nor the issuance of an FCPA Opinion, shall in any way alter the responsibility of an issuer to comply with the accounting requirements of 15 U.S.C. 78m(b)(2) and (3).

Sec. 80.13 Scope of FCPA Opinion.

An FCPA Opinion will state only the Attorney General’s opinion as to whether the prospective conduct would violate the Department’s present enforcement policy under 15 U.S.C. 78dd-1 and 78dd-2. If the conduct for which an FCPA Opinion is requested is subject to approval by any other agency, such FCPA Opinion shall in no way be taken to indicate the Department of Justice’s views on the legal or factual issues that may be raised before that agency, or in an appeal from the agency’s decision.

Sec. 80.14 Disclosure.

(a) Any document or other material which is provided to, received by, or prepared in the Department of Justice or any other department or agency of the United States in connection with a request by an issuer or domestic concern under the foregoing procedure shall be exempt from disclosure under 5 U.S.C. 552 and shall not, except with the consent of the issuer or domestic concern, be made publicly available, regardless of whether the Attorney General responds to such a request or the issuer or domestic concern withdraws such request before receiving a response. (b) Nothing contained in paragraph (a) of this section shall limit the Department of Justice’s right to issue, at its discretion, a release describing the identity of the requesting issuer or domestic concern, the identity of the foreign country in which the proposed conduct is to take place, the general nature and circumstances of the proposed conduct, and the action taken by the Department of Justice in response to the FCPA Opinion request. Such release shall not disclose either the identity of any foreign sales agents or other types of identifying information. The Department of Justice shall index such releases and place them in a file available to the public upon request. (c) A requestor may request that the release not disclose proprietary information.

Sec. 80.15 Withdrawal.

A request submitted under the foregoing procedure may be withdrawn prior to the time the Attorney General issues an opinion in response to such request. Any request so withdrawn shall have no force or effect. The Department of Justice reserves the right to retain any FCPA Opinion request, documents and information submitted to it under this procedure or otherwise and to use them for any governmental purposes, subject to the restrictions on disclosures in Sec. 80.14.

Sec. 80.16 Additional requests.

Additional requests for FCPA Opinions may be filed with the Attorney General under the foregoing procedure regarding other prospective conduct that is beyond the scope of conduct specified in previous requests. C109

FCPA Prosecutions and Civil Enforcement Actions by The Department of Justice and The Securities and Exchange Commission I. Pre-Act Criminal Prosecutions

1. U.S. v. J. Ray McDermott & Co. Inc., E.D. Louisiana, 1978.

2. U.S. v. Bethlehem Steel Corporation, (80 Cr. No. 0431), S.D.N.Y., 1980.

3. U.S. v. The Williams Companies, (Cr. No. 78–00144), D.D.C., 1978 [Currency and Foreign Transactions Reporting Act]. The company paid a fine and civil penalty of $187,000.

4. U.S. v. Control Data Corporation, (Cr. No. 78–00210), D.D.C., 1978 [Mail Fraud and Currency and Foreign Transactions Reporting Act]. The corporation paid a fine and civil penalty of $1,381,000.

5. U.S. v. Westinghouse Electric Company, (Cr. No. 78– 00566), D.D.C., 1978 [False statements to Export- Import Bank and Agency for International Development]. The company paid a fine of $300,000.

6. U.S. v. United Brands Company, (Cr. No. 78-538), S.D.N.Y., 1978 [Mail Fraud]. The company paid a fine of $15,000.

7. U.S. v. United States Lines, Inc., (Cr. No. ), D.D.C., [Conspiracy to defraud the Federal Maritime Administration]. The company paid a fine of $5,000.

8. U.S. v. Sea-Land Services, Inc., (Cr. No. 78–103), D.D.C. 1978 [Conspiracy to defraud the Federal Maritime Administration]. The company paid a fine of $5,000.

9. U.S. v. Seatrain Lines, Inc., (Cr. No. 78–49) [Conspiracy to defraud the Federal Maritime Administration

II. FCPA Criminal Prosecutions:

1. U.S. v. Kenny International Corp., (Cr. No. 79–372), D.D.C., 1979. The company pled to one count of violating the FCPA and consented to an injunction against further FCPA violations. The corporation was fined $50,000 and required to pay restitution to the Cook Islands government in the amount of NZ $337,000. The chairman of Kenny Int’l consented to a civil injunction and agreed to enter a plea of guilty to criminal charges pending in the Cook Islands.

2. U.S. v. Crawford Enterprises, Inc., Donald G. Crawford, William E. Hall, Mario S. Gonzalez, Ricardo G. Beltran, Andres I. Garcia, George S. McLean, Luis A. Uriarte, Al L. Eyster and James R. Smith, (Cr. No. H–82–224), S.D.Tx, Houston Division, 1982. Crawford Ent. Pled no contest Fined $3,450,000 D. Crawford Pled no contest Fined $309,000 W. Hall Pled no contest Fined $150,000 A. Garcia Pled no contest Fined $75,000 A. Eyster Pled no contest Fined $5,000 J. Smith Pled no contest Fined $5,000 G. McLean Acquitted C110

3. U.S. v. C.E. Miller Corporation and Charles E. Miller, (Cr. No. 82–788), C.D. Cal., 1982. The corporation pled guilty and was fined $20,000. The individual defendant pled guilty and was sentenced to three years probation and 500 hours community service. 68 Addressing the Challenges of International Bribery and Fair Competition, 2004

4. U.S. v. Marquis King, (Cr. No. 83–00020), D.D.C., 1983. The defendant pled guilty to violations of Currency and Foreign Transactions Reporting Act and was sentenced to 14 months incarceration and required to pay prosecution costs.

5. U.S. v. Ruston Gas Turbines, Inc., (Cr. No. H–82–207), S.D. Tex., 1982. The corporation pled guilty to a FCPA violation and was fined $750,000.

6. U.S. v. International Harvester Company, (Cr. No. 82–244), S.D. Tex., 1982. The corporation pled guilty to one count of conspiracy to violate the FCPA and was fined $10,000 plus costs of $40,000. An individual defendant also pled guilty to one count and was sentenced to one year incarceration (suspended).

7. U.S. v. Applied Process Products Overseas, Inc., (Cr. No. 83–00004), D.D.C., 1983. The company pled guilty to a FCPA violation and was fined $5,000. In addition it consented to a permanent civil injunction.

8. U.S. v. Gary Bateman, (Cr. No. 83–00005), D.D.C., 1983. The defendant pled guilty to 5 CFTR misdemeanors and was sentenced to three years probation. In addition, he agreed to pay a civil penalty of $229,512, a civil tax payment of $300,000, and costs of prosecution of $5,000.

9. U.S. v. Sam P. Wallace Company, Inc., (Cr. No. 83–0034) (PG), D.P.R., 1983. The corporation pled guilty to three counts of FCPA accounting violations and was fined $30,000. In addition, it also pled guilty to to a CFTR violation and was fined $500,000.

10. U.S. v. Alfonso A. Rodriguez, (Cr. No. 83–0044 (JP)), D.P.R., 1983. The defendant pled guilty to one count of FCPA bribery and was sentenced to three years probation and fined $10,000.

11. U.S. v. Harry G. Carpenter and W.S. Kirkpatrick, Inc., (Cr. No. 85–353), D.N.J., 1985. The corporation pled guilty to a FCPA violation and was fined $75,000. The individual defendant pled guilty to one count FCPA bribery and was sentenced to three years probation, community service, and a fine of $10,000. 12. U.S. v. Silicon Contractors, Inc., Diversified Group, Inc., Herbert D. Hughes, Ronald R. Richardson, Richard L. Noble and John Sherman, (Cr. No. 85–251), E.D. La., 1985. The corporation pled guilty to a FCPA violation, agreed to a permanent civil injunction, and was fined $150,000. Hughes, Richardson, Noble and Sherman agreed to permanent injunctions in a civil case. 13. U.S. v. NAPCO International, Inc. and Venturian Corporation, (Cr. No. 4–89–65), D. Minn., 1989. The defendants pled guilty to three counts of FCPA bribery and were fined $785,000. In addition, they paid $140,000 in a civil settlement and $75,000 to settle tax charges. 14. U.S. v. Richard H. Liebo, (Cr. No. 4–89–76), D. Minn., 1989. The defendant was convicted of FCPA bribery and false statements and was sentenced to 18 months incarceration (suspended) with three years probation. 15. U.S. v. Goodyear International Corp., (Cr. No. 89–0156), D.D.C, 1989. The corporation pled guilty to one count of FCPA bribery and was fined $250,000. 16. United States v. Joaquin Pou, Alfredo G. Duran, and Jose Guasch (S.D. Fla. 1989); U.S. v. Robert Neil Gurin (S.D. Fla. 1989). Guasch and Gurin pled guilty to conspiracy to violate the FCPA; Duran was acquitted at trial; Pou jumped bail. 17. U.S. v. Young Rubicam Inc., Arthur R. Klein, Thomas Spangenberg, Arnold Foote Jr., Eric Anthony Abrahams, and Steven M. McKenna, (Cr. No. N–89–68 (PCD)), D. Conn., 1990. The company pled guilty to one count of conspiracy to violate FCPA and was fined $500,000. 18. U.S. v. George V. Morton, (Cr. No. 3–90–061–H), N.D. Tex. (Dallas Div.), 1990. The defendant pled guilty to one count of conspiracy to violate FCPA and was sentenced to three years probation. 19. U.S. v. John Blondek, Vernon R. Tull, Donald Castle and Darrell W.T. Lowry, (Cr. 741), N.D. Tex. 1990 Two of the defendants were acquitted at trial. The charges were dismissed against the two remaining defendants. In separate cases, the Canadian agent, Morton, pled to conspiracy to violate the FCPA and the company agreed to a Appendix B: FCPA Prosecutions and Civil Enforcement Actions by DOJ and SEC 69 civil injunction enjoining it from future violations of the FCPA. C111 20. U.S. v. F.G. Mason Engineering and Francis G. Mason, (Case No. B–90–29), JAC, D. Conn. 1990. The corporation pled guilty to one count of conspiracy to violate the FCPA, was fined $75,000, and was required to pay restitution of $160,000. The individual defendant also pled guilty to one count of conspiracy to violate the FCPA, was sentenced to 5 years probation, and was fined $75,000 (joint with Company). 21. U.S. v. Harris Corporation, John D. Iacobucci and Ronald L. Schultz, (Cr. No. 90–0456), N.D. Cal., 1990. The court granted a motion for judgment of acquittal at the close of the government’s case. 22.U.S. v. Herbert Steindler, Rami Dotan, and Harold Katz, (Cr. No. 194–29), S.D. Ohio 1994. One defendant pled guilty to three counts of conspiracy, wire fraud and money laundering and was sentenced to 84 months incarceration and required to forfeit $1,741,453. The remaining defendants are fugitives. 23. U.S. v. Vitusa Corporation, (Cr. No. 94–253)(MTB), D.N.J., 1994. The corporation pled guilty to a FCPA violation and was fined $20,000. 24. U.S. v. Denny Herzberg, (Cr. No. 94-254)(MTB), D.N.J., 1994. The defendant pled guilty to a FCPA violation and was sentenced to two years probation and fined $5,000. 25. U.S. v. Lockheed Corporation, Suleiman A. Nassar and Allen R. Love, (Cr. No. 1:94–Cr–22–016), N.D., Ga. Atlanta Div. 1994. The corporation pled guilty to conspiracy to violate the FCPA and was fined $21.8 million. In addition, it had to pay a $3 million civil settlement. Defendant Nassar pled guilty to two counts and was sentenced to 18 months imprisonment. Defendant Love pled guilty to one count in a related case and was fined $20,000. 26. U.S. v. David H. Mead and Frerik Pluimers, (Cr. 98–240–01) D.N.J., Trenton Div. 1998. Defendant Mead was convicted following a jury trial of conspiracy to violate the FCPA and the Travel Act (incorporating New Jersey’s commercial bribery statute) and two counts each of substantive violations of the FCPA and the Travel Act. Defendant Mead was sentenced, after a departure from the Guidelines, to four months imprisonment, four months home detention, three years supervised release, and a $20,000 fine. Defendant Pluimers remains at large. 27. U.S. v. Herbert K. Tannenbaum, (98 Cr. 784) S.D.N.Y. 1998. Defendant pled guilty to conspiracy to violate the FCPA. The defendant was sentenced to one year and a day imprisonment and a $15,000 fine. 28. U.S. v. Saybolt, Inc. & Saybolt North America Inc., (98 Cr 10266 WGY) D. Mass. 1998. Defendant companies pleaded guilty to one count of conspiracy to violate the FCPA and one substantive violation of the FCPA and were sentenced to pay a $1,500,000 fine and five years probation. 29. United States v. Control System Specialist, Inc., and Darrold Richard Crites (Cr.–3–98–073) S.D. Ohio, Dayton Division, 1998 Defendants pled guilty to conspiracy to violate the FCPA and to pay an illegal gratuity to a federal employee and substantive violations of the FCPA and 18 U.S.C. § 201(c)(1)(A). Crites was sentenced to three years probation and 150 hours community service; the company was sentenced to a fine of $1500 and one year probation. 30. United States v. IMS and Donald Qualey (Cr.3–99–008) S.D. Ohio, Dayton Division, 1999 Defendants pled guilty to conspiracy to violate the FCPA and to a substantive count. IMS was defunct at sentencing and was sentenced to a fine of $1,000. Defendant Qualey, after a departure from the Guidelines, was sentenced to a fine of $5,000, home confinement for four months, and 150 hours of community service.

III. FCPA Civil Injunctive Actions:

1. U.S. v. Roy J. Carver and E. Eugene Holley, (Civ. No. 79–1768), S.D. Fl., 1979. Carver and Holley consented to permanent injunctions from future violations of FCPA.

2. U.S. v. Finbar B. Kenny, et al., (Civ. 79–2038), 1979.

3. U.S. v. Dornier GmbH (D. Minn. 1990).

4. U.S. v. Eagle Manufacturing, Inc., (Civil Action No. B– 91–171), S.D. Tex., 1991.

5. U.S. v. American Totalisator Company Inc., 1993. The corporation consented to permanent injunction from future violations of FCPA.

6. U.S. v. Metcalf & Eddy, Inc., (No. 99CV12566–NG), D. Mass. 1999 The corporation consented to a permanent injunction from future violations of the FCPA, agreed to make specific improvements to its compliance program and to submit to periodic audits, agreed to pay a $400,000 civil penalty and $50,000 costs of investigation.

7. U.S. & SEC v. KPMG Siddharta Siddharta & Harsono and Sonny Harsono (Civ. Action No. H–01–3105), S.D. Tex. 2001 In a joint complaint, the SEC & DOJ charged the defendants with violations of the FCPA. Without admitting or denying the allegations, the defendants consented to the entry of a Final Judgment that enjoined them from violating the antibribery and books and records provisions of the FCPA. See SEC Litigation Release 17127. For related SEC actions against Baker Hughes and two of its executives, see SEC Litigation Release 17126 and Administrative Action No. 3-10572.

IV. FCPA Accounting Cases (since January 2000)

1. U.S. v. UNC/Lear Services (No. 3:CR–31–J), W.D. Ky. 2000 In connection with falsely stating to the Defense Department that it had paid no foreign agents in a FMIS contract, the corporation pleaded guilty to violations of the mail fraud, false statement, and FCPA accounting statutes and agreed to pay a $75,000 fine, $768,000 in restitution, and $132,000 in civil penalties.

2. U.S. v. Daniel Ray Rothrock (No. SA01CR343OG), W.D. Tex. 2001 In connection with authorizing the payment and entry on Allied Product’s books of a false invoice to cover payments in Russia, the defendant agreed to plead guilty to a violation of the FCPA’s books and records provision. Sentencing is pending. Appendix B: FCPA Prosecutions and Civil Enforcement Actions by DOJ and SEC 71

V. Independent SEC Enforcement Actions (since January 2000)

1. SEC v. International Business Machines (Litigation Release 16839) Dec. 2000

2. SEC v. Morris Weissman, Joshua Cantor, et al.; In re American Banknote Holographics (Litigation Release 17068) July 2001

3. In re Baker Hughes (Litigation Release 44784); SEC v. Eric L. Mattson and James W. Harris (Litigation Release 17126); U.S. & SEC v. KMPG Siddharta Siddharta & Harsono and Sonny Harsono (Litigation Release 17127) Sep. 2001

4. SEC v. Chiquita Brands International (Litigation Release 17169) Oct. 2001

5. In re BellSouth Corporation (Litigation Release 17310) Jan. 2002

6. SEC v. Douglas Murphy, David Kay, and Lawrence Theriot (Litigation Release 17651) Aug. 2002 (see U.S. v. Kay, supra.) C113

7. SEC v. Syncor International Inc. (Litigation Release 17887) Dec. 2002 (see U.S. v. Syncor Taiwan, Inc., supra.)

8. In re American Rice, Inc., Joseph A. Schwartz, Jr., Joel R. Malebranche and Allen W. Sturdivant (Litigation Release 47286) January 2003

9. In re BJ Services Company (Litigation Release 49390) March 2004

10. SEC v. Schering-Plough Corporation (Litigation Release 18740) June 2004

VI. Other Cases

1. U.S. v. General Electric Company, (Cr. No. 1–92–87), S.D. Ohio 1992.

2. U.S. v. Benjamin Sonnenschein, (Cr. No. 92–680) E.D.N.Y. 1992.

3. U.S. v. Gary S. Klein, (Cr. No. 1–93–52) S.D. Ohio 1993.

4. U.S. v. National Airmotive Corporation, (DKT. No. CD93–377–CAL) N.D. Cal. 1993. 1The SEC, of course, has independent jurisdiction to bring civil enforcement actions against issuers and directors, officers, employees, agents, and shareholders of issuers. C114 C115

Charges against legal persons # Date Case Fines Restitution Probation Other Other crimes or (years) sanctions charged Forfeiture

1 1979 U.S. v. Kenny Int’l $50,000 NZ$337,000 - Permanent - Corp. (R) Injunction against further FCPA violations 2 1982 U.S. v. Crawford $3,450,000 - - - Conspiracy, Aiding, abetting

Position Fines Restitution Imprisonment Probation Other Other crimes or (years) (years) sanctions charged Forfeiture

Chairman - - - - Permanent Injunction against further FCPA violations; cooperation agreement with foreign government (Cook Is.) President + $309,000 - - - - Conspiracy, owner CEI aiding, abetting Exec. Vice $150,000 - - - - ditto President Intermediary $75,000 - - - - ditto Subdirector $5,000 - - - - ditto purchaser Subdirector $5,000 - - - - ditto purchaser Intermediary fugitive - - - - ditto Intermediary fugitive - - - - ditto Vice acquitted - - - - ditto President of of sub- conspiracy contractor of Seller

Charges against natural persons SECTION I: FOREIGN BRIBERY CRIMINAL PROSECUTIONS UNDER THE FCPA

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Charges against legal persons # Date Case Fines Restitution Probation Other Other crimes or (years) sanctions charged Forfeiture

3 1982 U.S. v. C.E. Miller $20,000 - - - Aiding and 1983 Corp.; U.S. v. Abetting Marquis King 4 1982 U.S. v. Crawford $750,000 - - - - 5 1982 U.S. v. Int’l Harvester $10,000 - - $40,000 Conspiracy to 1985 Co. (S.D.Tex. 1982) prosecution violate FCPA 1987 U.S. v. McLean; costs (charges apply McLean v. Int’l to this) Harvester Co.

Position Fines Restitution Imprisonment Probation Other Other crimes or (years) (years) sanctions charged Forfeiture

President, - - - 3 500 hrs - chairman community major service stockholder CEMCO (contractor) Officer, - - -

1.17 Cooperation CFTRA (charges Director agreement, apply to this) CEMCO $5,000 prosecution costs President $5,000 - - - - - Vice-President $5,000 - - - - - Vice President - - - - - conspiracy of division of aiding and seller abetting (charges apply to this), prosecution barred because employer (seller) was not convicted Regional - - 1 (suspended) 1 - Conspiracy Manager of modified to aiding and division of probation abetting seller (charges apply to this)

Charges against natural persons

C117

Charges against legal persons # Date Case Fines Restitution Probation Other Other crimes or (years) sanctions charged Forfeiture Position Fines Restitution Imprisonment Probation Other Other crimes or (years) (years) sanctions charged Forfeiture Charges against natural persons

6 1982 U.S. v. Appl. Process Products Overseas Inc.; U.S. v. Gary Bateman $5,000 - - Cooperation agreement; permanent injunction against further violation of FCPA see individuals CoB, President, sole stockholder - - - 3 Cooperation agreement, permanent injunction against further violations of FCPA, $229,512 civil penalty, $300,000 civil tax payments, $5,000 prosecution costs CFTRA in connection with bribery scheme (charges apply to this) 7 1983 U.S. v. Sam P. Wallace Co.; U.S. v. Alfonson A. Rodriguez $30,000 - - - CFTRA (fines: $500,000); SEC action President $10,000 - - 3 - - 9 1985 U.S. v. Silicon Contractors Inc. $150,000 - - Permanent injunction against further FCPA violations - 3 officers N/A N/A N/A N/A Permanent injunction against further FCPA violations - 8 1985 1990 U.S. v. Harry G. Carpenter and W.S. Kirkpatrick Inc.; U.S. v. Carpenter; Environmental Tectonics Corp Intl. v. W.S. Kirkpatrick & Co. Inc. $75,000 - - - - Former Chairman of Board, Chief Exec. Officer $10,000 - suspended 3 community service work - C118

Charges against legal persons # Date Case Fines Restitution Probation Other Other crimes or (years) sanctions charged Forfeiture Position Fines Restitution Imprisonment Probation Other Other crimes or (years) (years) sanctions charged Forfeiture Charges against natural persons

10 1989 1991 U.S. v. Napco Intl Inc. and Venturian Corp.;

Charges against legal persons # Date Case Fines Restitution Probation Other Other crimes or (years) sanctions charged Forfeiture Position Fines Restitution Imprisonment Probation Other Other crimes or (years) (years) sanctions charged Forfeiture Charges against natural persons

14 1990 1991 U.S. v. Morton; U.S. v. Blondek et al.; U.S. v. Eagle Bus.; U.S. v. Castle et al. - - - Civil action: permanent injunction against further violation of FCPA See individuals Canadian agent of seller 2 Canadian officials: dismissed (FCPA does not apply to foreign officials) 2 company officers: acquitted at trial - - - 3 - Conspiracy to violate FCPA (charges apply to this) 15 1990 U.S. v. F.G. Mason Eng’g Inc. and Francis G. Mason $75,000 (jointly with individual) $160,000 (R) - Co-operation agreement Conspiracy to violate FCPA (charges apply to this) President, sole stockholder $75,000 (jointly with corp.) - - 5 Co-operation agreement Conspiracy to violate FCPA (charges apply to this) 17 1994 U.S. v. Steindler et al. GE: $69,000 (criminal and civil fines) National Airmotive Corp.: $1.25mio. (criminal fines), $1.75 (civil fines) - - - Filing of false claims (fines apply to this) Related charges (fines apply to this) Int’l sales manager of GE Foreign official Intermediary - fugitive fugitive $1,741,453 (F) 7 - - Conspiracy, wire fraud, ML (charges apply to this) Conspiracy to divert U.S. funds; mail fraud; wire fraud; ML ditto 16 1990 U.S. v. Harris Corp. acquitted Conspiracy, false books and records, aiding and abetting Vice President Director Human relations acquitted acquitted Conspiracy, false books and records, aiding and abetting ditto C120

Charges against legal persons # Date Case Fines Restitution Probation Other Other crimes or (years) sanctions charged Forfeiture Position Fines Restitution Imprisonment Probation Other Other crimes or (years) (years) sanctions charged Forfeiture Charges against natural persons

18 1993 1994 U.S. v. Vitusa Corp.; U.S. v. Herzberg $20,000 - - Cooperation agreement - President, Chief Exec. Officer, sole stockholder $5,000 - - 2 - - 21 1998 U.S. v. Herbert Tannebaum no corp. charged President $15,000 - 1 - - Conspiracy to violate FCPA (charges apply to this) 19 1994 U.S. v. Lockheed Corp.; U.S. v. Love; U.S. v. Nassar $21.8mio. (alternative fine provision) - - Cooperation agreement, $3 mio. civil settlement Conspiracy to violate FCPA (charges apply to this), conspiracy to defraud US gov. foreign military funds programs Reg. Vice president Lockheed Int’l Sales director Lockheed Aeronautical IN RELATED CASE - $20,000 - -

1.5 - - - - - - Perjury 20 1998 U.S. v. Saybolt North America Inc.; U.S.Saybolt Inc.; U.S. v. David H. Mead; U.S. v. Frerik Pluimers $1.5mio. - 5 each $800 spec. assessment, compliance programs and co-operation agreement with DoJ etc. Data falsification ($3.4 mio., 5 years prob., $800 spec. assessment), conspiracy to falsify Clean Air Act reports and test results, conspiracy to violate FCPA, wire fraud President, Chief Exec. Officer, Exec. Vice President Chairman of Board of Directors $20,000 Fugitive, extradition request denied, decision on appeal 0.33 3 4-month home detention Conspiracy to violate FCPA, use of facility in foreign commerce in aid of racketeering, aiding and abetting ditto C121

Charges against legal persons # Date Case Fines Restitution Probation Other Other crimes or (years) sanctions charged Forfeiture Position Fines Restitution Imprisonment Probation Other Other crimes or (years) (years) sanctions charged Forfeiture Charges against natural persons

22 1998 U.S. v. Control Systems Specialist Inc.; U.S. v. Darrold Richard Crites $1,500 1 President $50 (Plea agreement) Complete restitution Unspecified, modified into probation 3 $100 for bribery of U.S. pub. off., 150 hrs community service work, cooperation agreement DoJ Conspiracy to violate FCPA, bribery of US pub. off. 23 1999 U.S. v. Int’l Material Solutions Corp. and Donald K. Qualey $1,000 - 1 - Conspiracy to violate FCPA President $5,000 - - 3 4 months home confinement, 150 hrs community service work Conspiracy to violate FCPA 24 2001 U.S. v. Cantor no corp. charged Former Exec. Vice President, GM, later President and Director Pending Pending Pending Pending Pending Pending 25 2001 U.S. v. Daniel Ray Rothrock no corp. charged Vice President - - - 1 $100 spec. assessment - C122

Charges against legal persons # Date Case Fines Restitution Probation Other Other crimes or (years) sanctions charged Forfeiture Position Fines Restitution Imprisonment Probation Other Other crimes or (years) (years) sanctions charged Forfeiture Charges against natural persons

26 2001 U.S. v. R. K. Halford; U.S. v. A.F. Reitz; U.S. v. R.R. King; U.S. v. P.B. Hernandez No corp. charged Stockholder, Chief Financial Officer Vice President, secretary, employee, stockholder Stockholder, Officer Employee pending pending Sentencing on conspiracy and FCPA violation expected in Sept.02 fugitive pending pending Sentencing on conspiracy and FCPA violation expected in Sept.02 pending pending Sentencing on conspiracy and FCPA violation expected in Sept.02 pending pending Sentencing on conspiracy and FCPA violation expected in Sept.02 pending pending Sentencing on conspiracy and FCPA violation expected in Sept.02 Conspiracy to violate FCPA (charges apply to this), Tax evasion Conspiracy to violate the FCPA (charges apply to this), mail fraud, use of fictitious name and address, false and fraudulent statements to invest. agent, fraudulent and false statements on fed. tax return Travel Act (Interstate Travel in Aid of Racketeering) (dismissed), conspiracy to defraud the U.S. ditto 27 2001 U.S. v. David Kay No corp. charges Vice President CEO Charges dismissed on legal grounds [appeal pending] ditto 28 2002 U.S. v. Sengupta Former World Bank employee pending Full restitution of $127,000 pending pending C123

Charges against legal persons # Date Case Fines Other sanctions Other crimes charged Position Sanctions Other crimes charged Charges against natural persons

1 1979 U.S. v. Carver et al. no corp. charged Officer, shareholder Officer, shareholder Permanent injunctions prohibiting future violations of FCPA ditto - - 2 1990 U.S. v. Dornier GmbH - Permanent injunction against future FCPA violations - none 3 1993 U.S. v. American Totalisator Co. - Permanent injunction against future FCPA violations - none 4 1999 U.S. v. Metcalf & Eddy $400,000 $50,000 investigation costs; implement specified compliance program; implement financial and accounting controls; promptly investigate and report alleged FCPA violations in the future; include in future joint venture agreement representation and undertaking by each partner as to FCPA matters; 5 years annual audits and compliance certificates as to FCPA matters; periodic reviews at least every 5 years of its FCPA policies and programs; cooperate with a further investigation, permanently enjoined from FCPA violations

SECTION II: FOREIGN BRIBERY CIVIL ACTIONS INSTITUTED BY THE DEPARTMENT OF JUSTICE UNDER THE FCPA

C124

Charges against legal persons # Date Case Fines Other sanctions Other crimes charged Position Fines Sanctions Charges against natural persons

1 1978 SEC. v. Page Airways Inc. - Permanent injunction prohibiting future violations of FCPA - 6 officers and/or directors Charges dismissed 2 1978 SEC. v. Katy Indus. Inc. - Consent judgements: Permanent injunction prohibiting future violations of FCPA; amendment of filings, establishment of Special Review Committee of outside directors to report to the BoD - 2 directors - Consent judgements: Permanent injunction prohibiting future violations of FCPA 3 1979 SEC. v. Int’l Systems & Controls Corp. - - Permanent injunction against future violations of FCPA; Amendment of filings, appointment of Audit Committee and Special Agent - 2 officers - Permanent injunction against future violations of the FCPA 4 1980 SEC. v. Tesoro Petroleum Corp. - Permanent injunction against future violations of FCPA; appointment of new director; keeping of accurate books and records. - none 5 1981 SEC. v. Sam P. Wallace Co. - Permanent injunction against future violations of FCPA; establishment of independent committee of the BoD to conduct an internal investigation and report to SEC. - none 6 1986 1987 1988 SEC. v. Ashland Oil Inc.; Howes v. Atkins; Williams v. Hall - Permanent injunction prohibiting the corporation from using corporate funds for unlawful pol. contributions or other similar unlawful purposes - Chairman and Chief Exec. Officer - Permanent injunction prohibiting the corporation from using corporate funds for unlawful pol. contributions or other similar unlawful purposes 7 1996 SEC. v. Montedison, S.P.A. N/A N/A Financial Fraud, Violation of corp. reporting, books and records, internal control sections of SEC Act 1934 none

SECTION III: FOREIGN BRIBERY CIVIL ACTIONS BY THE SEC UNDER THE FCPA

C125

Charges against legal persons # Date Case Fines Other sanctions Other crimes charged Position Fines Sanctions Charges against natural persons

8 1997 SEC. v. Triton Energy Corp. $300,000 penalty Injunction against future violations - Former senior officer

United States Government Department of Commerce

• Commerce Home Page: (www.doc.gov). • Market Access and Compliance/Trade Compliance Center: Annual Reports to Congress on Implementation of the OECD Bribery Convention, Trade Complaint Hotline, Trade and Related Agreements Database (TARA), Exporter’s Guides, Market Access Reports, Market Monitor, and “Market Access and Compliance-Rule of Law for Business Initiatives” (www.export.gov/tcc). • Also, Country Commercial reports and guides, trade and export-related information

(www.ita_ doc.gov/ita_home/itacnreg.htm_ doc.gov/ita_home/itacnreg.htm); trade counseling and other services in other countries (1-800-USATRADE); Office of the Chief Counsel for International Commerce, Information on Legal Aspects of International Trade and Investment, The Anti-Corruption Review, the FCPA, and other anticorruption materials (wwwita.doc.gov/ogc/occic). Department of State • Information on the OECD Bribery Convention and First Global Forum on Fighting Corruption Materials; documents related to the OECD Bribery Convention (http://www.state.gov/www/issues/economic/bribery.html ). • First Global Forum on Fighting Corruption and Safeguarding lntegrity,Washington, DC,February 1999 (www.state.gov) and Second Global Forum, The Hague, The Netherlands, May 28-31, 2001 (http://www.gfcorruption.org/). A copy of the First Global Forum Final Conference Report and Guiding Principles for Fighting Corruption and Safeguarding Integrity among Justice and Security Officials can also be purchased from the US. Government Printing Office (ISBN 0-16-050150- 4); Country Reports, Economic Practices and Trade Practices (www.state.gov). Department of Justice, Fraud Section • Comprehensive information on the FCPA, legislative history of FCPA, 1998 amendments, opinion procedures, and international agreements (www.usdoj.gov/criminal/fraud.html). Office of Government Ethics (OGE) • Information on ethics, latest developments in ethics, ethics programs, and informational and educational materials including OECD Public Service Management (PUMA) (www.usogagov/). D127

Websites Relevant to the Convention, Anticorruption, Ethics, Transparency, and Corporate Compliance Programs

Middle East and North Africa (MENA)

• World Bank Group (http://wbln0018.worldbankorg/mna/mena.nsj). • World Bank Institute, Anticorrnption (http://www.worldbank.org/wbi/governance/links.htm). Asia-Pacific Economic Cooperation (APEC) • Information on the Transparency Initiative, investment, government procurement, and customs (www.apecsec.org). Association of Southeast Asian Nations (ASEAN) (www.aseansec.org). United Nations-Centre for International Crime Prevention (CIOP) • Global Program Against Corruption (www.UNCJIN.org/CICP/cicp.html). • UN Development Program (UNDP), Management Development and Governance Division (http://magnet.undp.org/). D128

World Trade Organization (WTO)

• Working Group on Transparency in Government Procurement Practices (www.wto.org). The Global Corporate Governance Forum • An OECD and World Bank initiative to help countries improve corporate governance standards and corporate ethics (www worldbank.org/html/extdr/ extme/2217.htm). • OECD Principles of Corporate Governance (wwwl.oecd.org/daf/governance/principles.htm). World Customs Organization (WCO) (www.wcoomd.org) Please note that the WCO web site has been redesigned. This new version of the site only supports Internet Explorer

5.0 or Netscape

6.0 or later versions of these browsers.

International Financial Institutions The World Bank

• Public Sector Group, World Bank Antieorruption Strategy, information on preventing corruption in WE projects, helping countries reduce corruption, and supporting international efforts (wwwl.world bank.org/publicsector/anticorrupt/). • Economic Development Institute (EDT), World Bank Anticoimption Diagnostic Surveys (www. worldbank.org/wbi/governance). International Monetary Fund (IMF) • Codes of Good Practices in Monetary and Financial Policies (www.imf.org/external/np/mae/ mft/index.htm). Inter-American Development Bank (IDB) (wiw.iadb.org). Asian Development Bank (ADB) (www.adb.org). African Development Bank (AIDB) (www.afdb.org). European Bank for Reconstruction and Development (EBRD) (www.ebrd.com/new/index.htm). Other Organizations U.S. Chamber of Commerce (USCOC) • Center for International Private Enterprise (CIPE), an affiliate of the USCOC, information on corporate governance and anticorruption (www.cipe.org). International Chamber of Commerce (ICC) • Rules of Conduct and Bribery, ICC Commercial Crime Services, and due diligence (www.iccwbo.org). Transparency International (TI) • TI Corruption Index and Bribe Propensity Index; TI Source Book on anticorruption strategies and other international initiatives by governments, NGOs, and the private sector (www.transparency. org) • 10th International Anti-Corruption Conference, Prague 2001 (www.I0iacc.org) • 11th InternationalAnti-Corruption Conference, Seoul 2003 (www.11iacc.org). U.S. International Council for Business (www.uscib.org). The Conference Board • information on corporate ethics (www.confererwe-board.org). D129

American Bar Association (ABA)

• Taskforce on International Standards on Corrupt Practices (www.abanet.org/intlaw/divisions/ public/eorrupt.html). • ABA-Central and East European Law Initiative (CEELI) (www.abanet.org/ceeli/). Ethics Resource Center (www.ethics.org). COSO • The Committee of Sponsoring Organizations of the Treadway Commission (www.coso.org). The COSO (“Treadway Commission”) is a volunteerprivate sector organization consisting of the five major financial professional associations dedicated to improving the quality of financial reporting through business ethics, effective internal controls, and corporate governance. The five associations are: The AmericanAccounting Association (AAA) (http://accounting.rutgers.edu/raw/aaa); The American Institute of Certified Public Accountants (AICPA) (www.aicpa.org/index.htm); The Financial Executives Institute (FEI) (www.fei.org); The Institute of Internal Auditors (IIA) (www.theiia.org); and The Institute of Management Accountants (IMA) (www.imanet.org).

The Carter Center

(www.cartercenter.org). The Asia Foundation (www.asiafoundation.com). The National Endowment for Democracy (NED) (www.ned.org). Websites With Country-Specific Convention-Related Legislation • Implementing legislation of many Parties can be downloaded directly from the OECD website: (www.oecd.org/oecd/pages/home/displaygeneral/ 0,3380,EN-document-86-nodirectorate-no-6- 725231,00.html). • The OECD also provides non-html references to some countries corruption-related legislation at: http://wwwl.oecd.org/daf/nocorruptionweb/ law/index.htm. • Several countries also have posted legislation on their government websites. Legislation andlor other related information of the following countries is available from one or more of these sources.

Argentina

• Ministry of Justice: www.jus.gov.ar. Australia • The government response (tabled in the Senate on March 11, 1999) to the Treaties Committee Report on the OECD Convention and the Draft Implementing Legislation maybe found at: http://www.aph.gov.au/hansard/hanssen.htm (select March 11, 1999, and go to p2,634). • The Criminal Code Amendment (Bribery of Foreign Public Officials) Bill 1999 is at: http://www.aph.gov.au/parlinfo/billsnet/main.htm (open “old bills”). The Bill’s Explanatory Memorandum is also on that site.

Austria

• The Gennan text of the Austrian implementing legislation (Strafrechtsandeningsgesetz 1998 BGBI No. 1153) is available in pdf format on the OECD website, and at the Austrian government website, http://www.ris.bka.gv.at. Belgium • Belgian Ministry of Justice: www.justfgov.be. • The text of the law passed on February 10, 1999, is available in French at: http.//194.7.188.126/justice/index_fr.htm, (to find the text, choose the Moniteur published on 23.03.1999). It is also available in French in pdf format on the OECD website: (http.//www.oecd.org/pdf/M00007000/ M00007659.pdf). Brazil • The English text of two relevant legal documents is available in pdf format on the OECD website: Law no.

9.613, passed on March 3, 1998, —http://www.oecd.org/pdf/M00007000/ M00007660.pdf Decree 1171 of June 1994 —http://www.oecd.org/pdf/M00007000/ M00007662.pdf Bulgaria Council of Ministers: www.government.bg. Canada • Access to the legislation can be obtained through the website for the Department of Justice/ Ministére de la Justice (http://laws.justice.gc.ca/en/index.html). • Alternatively, the Act concerning the Corruption of Foreign Public Officials is located at: http.//www.parl.gc.ca/36/1/parlbus/chambus/ house/bills/government/S-21/S-21_3/ 90062be.html. D131 • The English text is also available in pdf format on the OECD wcbsitc: (http://www.oecd.org/pdf/M00007000/ M00007666.pdf). Czech Republic • Ministry of Justice: www.mvcr.cz/english.html. Denmark • Implementing legislation can be found on the Department of Justice web site (in Danish only) at: http://www.folketinget.dk/Samling/19981/ lovforslag_oversigtsformat/L232.htm. Finland • Implementing legislation can be found on the government website (in Finnish and Swedish) at: http://www.valtioneuvosto.fi/vn/liston/base.lsp?k=en • Excerpts showing amendments to the Finnish Penal Code are also available in pdf format on the OECD website (http://www.oecd.org/pdf/M00007000/ M00007668.pdj). France • The draft law modifying the penal code and the penal procedure code relating to combating bribery and corruption can be found on the website of Legifrance (in French only) at http://wwwlegfrance.gouv.fr/citoyen/index.ow. • The French text of the legislation is also available in pdf format on the OECD web site (http://www.oecd.org/pdf/M00007000/ M00007670.pdf). Germany The following are available in pdf format on the OECD website: • The English (unofficial translation http://www.oecd/org/pdf/M00007000/M0000767. pdf) and German texts (http://www.oecd.org/pdf/ M00007000/M00007674.pdf) of the implementing legislation dated September 10, 1998. • The relevant criminal code (in German http://www.oecd.org/pdf/M00007000/ M00007677.pdf, and in unofficial English translation — http://www.oecd, org/pdf/M00007000/ M00007680.pdf). • The Administrative Offence Act (in German — http://www.oecd.org/pdf/M00007000/M0000761. pdf, and in unofficial English translation — http://www.oecd.org/pdf/M00007000/ M00007682.pdf). Greece • The following are both available in pdf format on the OECD websitc: The unofficial French translated text of the implementing legislation dated November If, 1998, (http://www.oecd.org/pdf/M00007000/ M00007683. pdf); The English text of Greek law No. 2331 on money laundering of August 1995 (http://i/www.oecd.org/ pdf/M00007000/M00007684.pdf). Hungary • The English text of the relevant implementing legislation is available in pdf format the the OECD website (http://www.oecd.org/pdf/M00007000/ M00007685.pdf). Iceland • The following are both available in pdf format on the OECD website: The English text of the Icelandic Prevention of Corruption (Amendment) Act (2001, no. 27 of 2001) (http://www.oecd.org/pdf/M00024000/ M00024024.pdf); The relevant discussions (http:// www.irlgov.iebills28/ bills/2000/0100/default. htm). Ireland • Legislation pending in the Irish parliament can be viewed or tracked at: www.Irlgov. ie/oireachtas. D132

Italy

• Law number 231 which implements the Convention can be found at www.parlamento. it/parlam/leggi/deleghe/0l231d1.htm. • Legislation to ratify the Convention (Law of 29 September n. 300, published in Ordinary Supplement 176-L to the Official Journal of 25 October 2000 n. 250) is available in English in pdf format (http:// www.oecd.org/pdf/M00007000/ M00007688.pdf). • Other relevant legislation can be downloaded on AnCorR web: (http://www.oecd.org/ dafnocorruptionweb). Japan • An unofficial English translation of the Japanese implementing legislation (the amended Unfair Competition Act, adopted on September 18, 1998, is available in pdf format (http://www.oecd.oig/pdf/ M00007000/M00007689.pdf) on the OECD website.

Korea

• An English translation of the Korean implementing legislation (The Act on Preventing Bribery of Foreign Public Officials in International Business Transactions) is available in pdf format on the OECD website: http://www.oecd.org/pdf/ M00007000/ M00007690.pdf. Luxembourg • The implementing legislation of IS January 2001 is available in pdf format (http://www.oecd.org/pdf/ M00007000/M00007692.pdf). (Official title: Loi du 15 janvier 2001 puritan approbation de la Convention del ‘OCDE du 21 novembre 1997 sur la Iuttc contre la con-option d’agents publics crumpets dans les transactions commeiciales intemationales et relatif aux détournements, mix destructions d’actes et de titres, à la concussion, à la prise illégale d’intérêts, à la corruption et portant modification d’autres dispositions légales).

Mexico

• The Mexican Penal Code is available on the Government’s website in Spanish (http:// www.cddhcu.gob.mx/leyinfo/9). • The Mexican Criminal Code is available in English in pdf format (http://www.oecd.org/ pdf/M00024000/ M00024324.pdf). • Secretariat of Public Evaluation (SECODAM) website with general corruption development information: www.secodam.gob.mx. Netherlands • The law ratifying the OECD Bribery Convention (http://www.oecd.org/pdf/M000240001 M00024322.pdj). • The law implementing the OECD Bribery Convention are available inDutch in pdfformat (http://www. o e c d . o rg/pdf/M00024000/ M00024323.pdf). New Zealand • The following are both available in pdf format: The relevant implementing legislation (http://www.oecd.org/pdf/M00007000/M00007753. pdf); The Crimes (Bribery of Foreign Public Officials) Amendment Act 2001 (http://www.oecd.org/pdf/ M00007000/M00007756.pdf). Norway • The implementing legislation (Amendments to the Norwegian Penal Code of May 22, 1902, chapter 2, para. 128) is available in pdf format on the following websites: The OECD website (http://www.oecd.org/pdf/ M00007000/M00007759.pdf); The Norwegian government website (www.lovdata.no/all/). D133

Portugal

• Law no. 13/2001 transposing to national law the OECD Bribery Convention is available in English h t t p : / / w w w. o e c d . o rg/pdf/M00024000/ M00024105.pdf (pdf format). • Furthermore, the law 108/2001 of 28 november- 200 1, amending the rules governing the offense of trading in influence and corruption, is available in the following translations: Portuguese (http://www.oecd.org/pdJM00024000/ M00024111.pdf); and French (http:///www.oecd. org/pdf/M00024000/ M00024112.pdf). Slovak Republic • The main provisions implementing the OECD Bribery Convention can be found in the Criminal Code of the Slovak Republic of which the relevant extracts are available in pdf format (http://www.oecd.org/pdf/M00024000/M0002400• Other relevant provisions are available on AnCorR web (http://wwwl.oecd.org/daf/nocorruptionweb/ Law/oecd.htm#SlovakRepublic). Slovenia • The following are available in Slovenian: The Slovenian Penal Code of 1994 (http://www2.gov.si/zak/Zak_vel.nsf067cd 1 7 6 4 e c 3 8 0 4 2 c 1 2 5 6 5 o ’ a 0 0 2 f 2 7 8 1 / a1675736157f9e0ec1256628002fda68? OpenDocument); The law amending the Penal Code (including on corruption issues) of 1999 (http://www2.gov.si/zak/Zak_vel.nsf/067cd1 7 6 4 e c 3 8 0 4 2 c 1 2 5 6 5 d a 0 0 2 f 2 7 8 1 / c12563a400338836c125673e002de2df?Open Document); • The translation into English of the relevant excerpts of these laws are available in pdf (http://www. o e c d . o rg/pdf/M00024000/ M00024167pdf). • Furthermore, excerpts of the Criminal Procedure Act of Slovenia (as of December 2000) are available in English (http://www.oecd.org/pdf/ M00024000 M00024171.pdf). • The Slovenian version of this law can be found on the legal resource centre of the Slovenian Government (Kratika and ZKP A-D), (http://www.sigov.sidz/ en/akt/aualno/spremljanje_zakonodajesprejeti_ zakoni/sprejeti_zakoni.html). • The Liability of Legal Persons for Criminal Offences Act of 1999 is available in Slovenian (http:// w w w Spain • Implementing legislation accessible via the following websites: Spanish presidency with links to ministries: www.Ia-moncloa.es; Ministry of Justice: www.mju.es; Ministry of Economy: www. mineco.es; Official state bulletins: www boe.es. • The provisions to the Spanish Penal Code, implementing the Convention, is available in pdf fonnat on the OECD website (http://www.oecd.org/pdf/ M00007000/M00007760pd/). Sweden • The Swedish implementing legislation is available in pdf format on the OECD website (http://www.oecd.org/pdf/M00007000/M0000770 .pdf). Switzerland • Swiss laws can be found on Recueil Systématique du Droit Fbdéral (available in French, German and Italian only) at (http://www.admin.ch/ch/ f/rs/rs.html). Search for the Swiss Penal Code of December 21, 1937, which will soon be amended to comply with the Convention. • The following legislation is available in French on the OECD website: Modification of the Swiss Penal Code and the Amendments to the Swiss Penal Code (http:// www.oecd.org/pdf/M0007000/M00007765.pdf); and D134 The Law of April 19, 1999, authorizing the ratification of the Convention (http://www.oecd.org/ pdf/M00007000/ M00007767.pdf). • The Recuel Systématique du Droit Fédéral is available in pdf-format in: French (http://www.admin.ch/ch/f/rs/rs.html); German (http://www.admin.ch/ch/d/sr/sr.html); and Italian (http://www.admin.ch/ch/i/rs/rs.html). United Kingdom • The following are available on the Government’s website: The UK Anti-Terrorism, Crime and Security Act 2001 (2001 Chapter 24) - Part 12: Bribery and Corruption (http://www.uk-legislation.hmso. gov.uk/acts/acts2001/20010024.htn); and The corresponding explanatory notes (http://www. parliament.the-stationery-office.co.uk/pa/ cm200102/cmbills/049/2002049.htm). • The Government’s statement on the consolidation and amendment of the Prevention of Cormption Acts 1889-1996 and the UK whitcpaper on government proposals for the reform of criminal law of corrup-tion in England and Wales are available on the webpage of the UK home office on public life (http://www.homeoffice.gov.uk/new_indexs/ public.htm). D135

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2. gov.si/zak/Zak_vel.nsf/067cd1 764ec38042c12565da102f2781/c12563 a 4 0 0 3 3 8 8 3 6 c 1 2 5 6 7 a 8 0 0 3 5 5 2 b d ? OpenDocument)