Genesis Of The Foreign Corrupt Practices Actedited

Running head: FOREIGN CORRUPT PRACTICES ACT 1

Genesis of the Foreign Corrupt Practices Act

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FOREIGN CORRUPT PRACTICES ACT 2

The Foreign Corrupt Practices Act (FCPA) was first developed in 1977 to primarily deal

with two main factors which include: addressing accounting transparency as outlined in the

Securities Exchange Act of the US of 1934 and addressing the issue of bribery that was observed

especially regarding to bribery cases involving most foreign officials (Pitman & Sanford, 1994).

The law has gone through various amendments with the first amendment happening eleven years,

1988 after it was taken in by the US government. Ten years, the law was amended again to add to

it new provisions that would ensure corruption at the immigration offices and port docks would be

dealt with significantly. Over the years, there has been a congressional debate resulting from this

act in which they argue out whether the provisions added to the law during the first and second

amendments have had a helping hand in limiting or inhibiting US-based companies from exploring

investment options in other countries out of the United States of America.

Initially, the FCPA was enacted in 1977 to ensure that it was provided that giving money

to foreign government officials in order to receive favors in the form of maintaining businesses or

getting licensed to carry out activities in some states((Pitman & Sanford, 1994). However, this law

was not enacted for all the citizens in the USA. Rather, it was enacted for certain classes of people

and entities who wanted to benefit from the effort put together by other common citizens.

However, with time, FCPA has applied to all bribery provision as stated in the act.

In matters to do with accounting, the act requires that all the transparency requirement

listed in the Securities Exchange Act of 1943 are fully met and approved. Therefore, every

individual is expected to comply with the requirements of the Securities Exchange Act. In 1988,

the FCPA was changed from international offenders to local firms living within the US boundaries

(Pitman & Sanford, 1994). Therefore, there is a law determining the nature of the relationship

citizens will have with the non-citizens.

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The main features of the Act include its protective principle which requires that if an individual

is reported for the corruption case involving the foreign government officials are in the US; they

are protected from arrest. It does not directly aim at direct transactions between an individual and

the government official but also works well with ensuring that there are no second party

transactions with the ultimate aim of reaching the official.

Some of the most famous cases which have been ruled as a result of the violation of the

Foreign Corrupt Practices Act include the Siemens AG case, KBR and Halliburton case, BAE

System case and the Total S.A case. Siemens AG, a Germany-based manufacturer in 2008, pleaded

guilty to cases involving bribery and violation of the Securities Exchange Act of the US of 1934

requiring that accounting should be done in a transparent manner. Like charge, the company agreed

to pay $450 million to the US Department of Justice and Criminal affairs and $350 million to SEC;

all this was in the form of fines. According to SEC, Siemens had violated the rule of bribery by

involving members from all over the continents to take part in illegal business in America. As a

result, they were sued by SEC for violation of the FCPA 1998 amended law.

KBR and Halliburton cases are different cases but which reflect a violation of the FCPA

1977 act which requires that no bribery to maintain or obtain businesses should be done. Through

thorough investigation form concerned parties like SEC, US Department for Justice and Legal

Affairs, agents in Africa and the FBI, KBR Inc. was found guilty of paying bribes in Nigeria to

obtain contracts. There was also some accounting incompetency recovered from an analysis of the

books provided for investigation belonging to KBR Inc. and Halliburton. As a result of this

incompetence, the companies were charged in fines amounting to $200 million to both high

ranking and low ranking Nigerian government officials. Disgorgement charges for this case

amounted to $200 million payable to the SEC and $400 million which was paid to the US

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Department for Justice and Legal Systems for the criminal charges raised about the two companies

(Dodds, 2015).

Of all the cases ever judged through the FCPA 1977 act, that involving BAE is considered

the most adverse case so far in the history of America with fines ranging as high as up to $400

million payable to the SEC for the criminal report it delivered to the US Department of Justice and

Legal Systems. In 2010, BAE was charged with a falsification of the legal requirements of the

FCPA 1977 act among other criminal offences recorded in the act, as a result, it was ruled that the

company should pay up to $800 million in fines for a violation of all the rules outlined in the FCPA

act of 1977 (Dodds, 2015). The Total SA case was a minor case involving bribery of $60 million

to Iranian officials to mediate their tender acquisition process for supplying gas and oil to some

companies based in Iran. As such, it was charged to pay up to $153 million as disgorgement fee to

the SEC (Dodds, 2015).

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References

Dodds, M. A. (2015). Foreign Corrupt Practices Act cases impact sport marketing strategies. Sport

Marketing Quarterly, 24(4), 258-261.

Pitman, G. A., & Sanford, J. P. (1994). The Foreign Corrupt Practices Act Revisited: Attempting

to regulate" ethical bribes" in global business. Journal of Supply Chain

Management, 30(3), 15.

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