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CHAPTER XXVIII FOREIGN CORRUPT PRACTICES ACT & ANTIBOYCOTT LAWS

Foreign Corrupt Practices Act (FCPA) Antiboycott Laws

Copyright(c) 2012 Dr. Chase C. Rhee

Foreign Corrupt Practices Act (FCPA)


Prohibits bribery of a foreign government official, a foreign political party or a candidate for political office in order to obtain or retain a business Omnibus Trade and Competitiveness Act of 1988 changed "having reason to know" to "know of or authorize" illegal payments. In mid-1970s, Lockheed Corporations bribery to Kakuei Tanaka, then prime minister of Japan, to sell airplanes to Japan Airlines.

Copyright(c) 2012 Dr. Chase C. Rhee

Foreign Corrupt Practices Act Five Elements


1) Who:
U.S. firms. employees, directors, stockholders, and foreign agents of U.S. firms An intent to wrongfully influence recipient to benefit payer, whether succeeded or not Offering, paying, promising to pay or authorizing to offer or to pay money or anything of value

2) Corrupt Intent:

3) Payment:

Copyright(c) 2012 Dr. Chase C. Rhee

Foreign Corrupt Practices Act Five Elements


4)

Recipient:
Foreign official, political party, party official, candidate for political office Not only those of foreign governments & public international organizations, but also foreign government-controlled entities

5)

Business Purpose:
To assist the firm in obtaining or retaining business
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Foreign Corrupt Practices Act Penalties


Criminal penalties: For a firm, max. $2 million and for a individual, 5 years imprisonment or $100,000 or both per violation Civil penalties for a firm and an individual: $10,000 per violation

Copyright(c) 2012 Dr. Chase C. Rhee

Foreign Corrupt Practices Act Penalties


Stock Exchange Commission(SEC)'s Fines:
Greater of gross amount of pecuniary gain or specified dollar limitation, $5,000 to $100,000 for individual and $50,000 to $500,000 for corporation

Barred from doing business with Federal Government Ineligible to receive export licenses Illegal payments are not tax-deductible expenses
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Foreign Corrupt Practices Act Facilitating Payment


Grease or Lubrication Payment
Allowed, if the payment is: (1) Permitted under the written laws of the host country or for demonstrating a product or performing a contractual obligation (2) To speed up routine government actions such as processing papers, stamping visas, scheduling inspections, securing permits or licenses and obtaining adequate police protection
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Foreign Corrupt Practices Act International Cooperation


1970s: Lockheed-Kakuei Tanaka 1977: U.S. Foreign Corrupt Practices Act In 1996, Organization of American States (OAS)
Inter-American Convention Against Corruption adopted by 35 member states

In 1997, Organization for Economic Cooperation and Development (OECD)


OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions signed by 34 member countries

Copyright(c) 2012 Dr. Chase C. Rhee

Foreign Corrupt Practices Act Violators


In 1989, Goodyear Intl Corp. paid $250,000 fine for bribing an official of Iraqi state-owned trading firm to get the tire business with commission. In 1989, Napco International paid a $1 million fine for bribing officials in Niger. In 1995, Lockheed Martin paid $24 million in fines, more than twice the profits for paying a $1 million bribe to Egyptian parliament. In 2007, Baker Hughes Services International paid a $44 million fine for bribing officials of Kazakhstans national oil company to win an oil field services contract. In 2008, Siemens paid a $800 million fine ($450 M to USDJ & $350 M to the SEC) for many foreign briberies from 2000 to 2006.
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Foreign Corrupt Practices Act Violators


In 2009, Control Components, Inc. paid a $18.2 M fine for bribing officials and employees of state-owned companies in 30 countries In 2009, Avery Dennison Corp. paid $200,000 for bribing Chinese officials. In 2010, GE paid a $23.4 M fine to the SEC for bribing Iraqi officials under the U.N. oil-for-food program. On May 10, 2011, a jury convicted Lindsay Mfg Company, two of its executives, a Mexican sales agent for bribing officials of Mexican state-owned utilities company. First conviction for 34-year history of the FCPA of 1977. Conviction overturned due to repeated prosecutorial misconduct.
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Antiboycott Laws
Two antiboycott laws
Ribicoff Amendment to the 1976 Tax Reform Act (TRA): Does not prohibit conduct but denies tax benefits-foreign tax credit: Not covered here 1977 Amendment to Export Administration Act (EAA): Does prohibit some conducts of exporters and facilitators
Only EAA Antiboycott law is covered in this chapter
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EAA Antiboycott Law


EAA Antiboycott covers U.S. exports and imports, financing, forwarding and shipping, and banking

Copyright(c) 2012 Dr. Chase C. Rhee

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EAA Antiboycott Law


Prohibits U.S. exporters from
Refusing or agreeing to refuse to do business with others because of unsanctioned foreign boycott Furnishing information about business relationships with boycotted countries and blacklisted companies (prohibited information)

Prohibits Banks from Implementing letters of credit which contain prohibited boycott terms and conditions
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EAA Antiboycott Law


Required to report receipt of boycott requests to the Office of Antiboycott Compliance, Bureau of Industry and Security (BIS), USDC on a quarterly basis The scope of the EAR is limited to actions taken with intent to comply with, further, or support an unsanctioned foreign boycott Also illegal to include any statement "comply with or support an unsanctioned foreign boycott" in commercial invoice or in any document.
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EAA Antiboycott Law


Example of Prohibited Statement
"We are neither blacklisted by the Arab boycott of Israel, nor are we a boycotted company, no Israel capital is invested in our firm, no company capital or capital of its owners is invested in any Israel company, our products are not of Israel origin and do not contain Israel raw material or labor."

Most members of Arab League, except Egypt and Jordan, boycott goods and service from Israel.
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EAA Antiboycott Law


Voluntary Self-Disclosure of Antiboycott Violations
Voluntary Self Disclosure of violations of the antiboycott provisions of the Export Administration Regulations (EAR) To the Office of Antiboycott Compliance (OAC), Bureau of Industry and Security, U.S. Dept of Commerce (www.bis.doc.gov) according to the procedures provided for in Part 764.8 of the Regulations.

Copyright(c) 2012 Dr. Chase C. Rhee

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EAA Antiboycott Law Penalties


Violations of EAA Antiboycott

Administrative (Civil) penalty:

Denial or suspension of export privileges Fines of up to $11,000 per violation, and/or Exclusion from practice Up to$50,000 or 5 times the value of exports
involved, which is greater 5 years imprisonment or both
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Criminal penalty:

EAA Antiboycott Law Violators


Rosement, Inc.: Fined $10,000 Brooks Instruments: Fined $7,000 Panalpina,Inc.: Fined $20,000 BDP Intl: Fined $4,000 Best Power Technology: Fined $4,000 Itochu Project Management: Fine $4,000 Kenclaire Electrical Agencies, Inc.: Fine $104,000 Bailey Intl, Inc.: Fine $4,000 GM Daewoo Auto: $88,000 fine for 59 violations 2000-2006
Copyright(c) 2012 Dr. Chase C. Rhee 18

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