Private Claims Under the Foreign Corrupt Practices Act - Part 1 Chapter 11 - The Practice of International Litigation - 2nd Edition

Lawrence W. Newman has been a partner in the New York office of Baker & McKenzie since 1971, when, together with the late Professor Henry deVries, he founded the litigation department in that office. He is the author/editor of 4 works on international litigation/arbitration.

Michael Burrows, Formerly, Of Counsel, Baker & McKenzie, New York.

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Among the few federal statutes governing the conduct of U.S. businesses abroad is the Foreign Corrupt Practices Act (“FCPA”). Because extraterritorial acts which violate the FCPA can cause damage to individuals and businesses in the United States, the issue of whether a private right of action exists under the FCPA is significant. A recent case in the United States District Court for the Southern District of New York is one of a small number of cases that have examined this point.

During the mid-1970’s the investigations conducted by the Office of the Watergate Special Prosecutor revealed a widespread practice by U.S. companies of secretly using corporate funds to make illicit domestic political contributions or bribing foreign officials to obtain business abroad. From this discovery came increased concern that the bribery of foreign officials and related scandals would impact negatively upon United States foreign policy and reduce the credibility of U.S. corporations in the world marketplace.

Consequently, in December 1977 Congress enacted the FCPA, making it a crime for U.S. businesses, their officers, director’s, employees, agents or stockholders to bribe, directly or indirectly, foreign officials for the purpose of obtaining, retaining or directing business. The FCPA also imposed upon U.S. businesses that issue securities registered with the Securities and Exchange Commission certain record-keeping requirements and internal accounting controls designed to prevent undisclosed payoffs.

In 1988 Congress amended the FCPA to make clearer the scope of the statute's prohibitions, thereby preventing unnecessary loss of national competitiveness, to provide guidance to corporations and their employees regarding compliance and to increase penalties for violations.

Under the FCPA U.S. corporations can be fined a maximum of $2,000,000 for violations of the anti-bribery provisions. Individuals such as officers, directors, employees or stockholders of U.S. corporations can be fined up to $100,000 or imprisoned for not more than five years, or both, for FCPA violations. Civil penalties of $10,000 per violation can also be imposed on corporations and individuals.