Certainty in Coming Clean: Establishing an FCPA Safe Harbor for Self-Reporting Companies

27 Pages Posted: 8 Sep 2014

Date Written: September 5, 2014

Abstract

The Foreign Corrupt Practices Act (“FCPA”) is a wide-reaching rule designed to ensure accountability and deter companies and individuals from making corrupt payments (i.e. bribes) to foreign officials. The FCPA’s grasp is far-reaching: covering any American citizen, resident, or national and any issuers and their officers, directors, employees, agents, or stockholders. It even covers foreign nationals or companies who “engage in any act in furtherance of a corrupt payment while in the territory of the United States.” Even if someone never steps foot in the US, they may still be accountable if they are found to be aiding and abetting or conspiring with someone who is found liable under FCPA. FCPA liability attaches to a parent company when its subsidiary is found to have participated in corrupt payments, and companies are also liable under a theory of successor liability.

Because of the wide reach of liability, the millions of dollars in potential fines, and the small likelihood of getting caught, companies are incentivized to not self-report FCPA violations. While it is true that companies who self-report and have demonstrated a “culture of compliance” may be given some leniency, they still face heavy penalties and no certainty of any tangible benefits. Because FCPA liability attaches at both the company and individual level, individuals within companies often turn on each other as they are incentivized to shift the blame from themselves. This is even rewarded by the U.S. Securities and Exchange Commission (“SEC”) under the Dodd-Frank Act’s FCPA Whistleblower Provision allowing a monetary reward for turning a company or an individual in.

This Article argues that companies and individuals should be granted a safe harbor when they self-report FCPA violations under certain circumstances. This safe harbor should be explicitly clear in order to properly incentivize self-reporting — unlike the current standard that allows the SEC unfettered discretion in whether to reward self-reporters, and companies can never be sure ex ante whether they will receive any benefit.

Keywords: FCPA, Self-Reporting, Safe Harbor, Foreign Corrupt Practices Act, Bribery, Accounting, Securities and Exchange Commission (SEC), Dodd-Frank, Sarbanes-Oxley, Seaboard Report, Ralph Lauren, Environmental Protection Agency (EPA), Antitrust, Municipal Bonds

Suggested Citation

Lee, Larissa, Certainty in Coming Clean: Establishing an FCPA Safe Harbor for Self-Reporting Companies (September 5, 2014). Available at SSRN: https://ssrn.com/abstract=2492307 or http://dx.doi.org/10.2139/ssrn.2492307

Larissa Lee (Contact Author)

Jones Waldo ( email )

170 S. Main St., Suite 1500
Salt Lake City, UT 84101
United States
8015213200 (Phone)

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