For all its many benefits and demands on corporations, the FCPA tackles only one side of the bribery and corruption equation: the offer or payment of a bribe. A new law seeks to address that by giving American authorities the ability to criminally charge foreign officials who solicit or accept bribes. A trio of experts from Holland & Knight explore the Foreign Extortion Prevention Act.
Wifredo Ferrer, Marcelo Ovejero and Gary Klubok of Holland & Knight co-authored this article.
In December 2023, President Joe Biden signed into law the Foreign Extortion Prevention Act (FEPA), criminalizing foreign officials who solicit or accept bribes from U.S. companies and individuals in exchange for providing them business advantages. FEPA mirrors the Foreign Corrupt Practices Act (FCPA) by penalizing the foreign official who solicits or receives a bribe, whereas the FCPA affected only the party who offered or paid the bribe.
Before FEPA, the DOJ could not go after foreign officials who solicited or accepted bribes without finding evidence of other, related crimes, such as laundering the bribes through U.S. bank accounts. Now the DOJ can prosecute them without having to establish the elements of other crimes.
Additionally, FEPA’s criminal penalties carry far more weight than the FCPA’s, as the highest possible prison penalty is three times higher than the FCPA’s maximum. Taken together, these factors give U.S. companies an extra layer of protection to reject pressure from foreign officials to pay bribes, helping them avoid FCPA charges.
Background
FEPA outlaws demand-side bribery by foreign officials — those who solicit or accept bribes from a U.S. company, citizen, issuer or anyone within the U.S. FEPA fills the gap the FCPA left open.
In 1976, the SEC published its investigation into unlawful contributions to political campaigns, finding that U.S. corporations kept slush funds to bribe foreign officials. Indeed, hundreds of U.S. companies had spent hundreds of millions of dollars bribing foreign officials to obtain and retain business abroad. This level of bribery and the monetary amounts involved worried the SEC about whether accounting disclosures in SEC filings were accurate. The FCPA was the solution to quell this worry.
When Congress was drafting the FCPA, however, U.S. politicians were concerned that prosecuting foreign officials could negatively impact U.S. diplomatic relations. To alleviate this concern, the FCPA penalized only the party who bribed the foreign official, not the foreign official, creating the gap in the FCPA that FEPA is now filling.
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Read moreDetailsWhat does FEPA prohibit?
FEPA makes it unlawful for:
- any foreign official or person selected to be a foreign official
- to corruptly demand, seek, receive, accept, or agree to receive or accept, directly or indirectly, anything of value personally or for any other person or nongovernmental entity
- from any U.S. citizen, company, issuer, or person located within the United States
- in return for either
- being influenced in the performance of any official act
- being induced to do or omit any act in violation of the official duty of such foreign official or person
- Or conferring any improper advantage
- in connection with obtaining or retaining business for or with, or directing business to, any person.
Let’s look at an example to show how FEPA could be used. In December 2023, the DOJ charged Francisco Roberto Cosenza Centeno, the former executive of a Honduran governmental entity that procured goods for the Honduran National Police, with money laundering. The DOJ alleged that Cosenza received bribes in exchange for awarding contracts for the sale of uniforms and other goods for the Honduran National Police and ensuring payment to the bribe payors on those contracts.
As a foreign official, Cosenza could not be charged with FCPA violations; he was only charged in the U.S. because he laundered bribe-related money through U.S. bank accounts. If he conducted his banking outside the U.S., it is possible the DOJ would not have been able to prosecute him. The two individuals who paid him bribes (a Georgia businessman and a Florida resident), indeed, were charged with FCPA violations. If this bribery scheme occurred while FEPA was in effect, the DOJ could have charged Cosenza with violating FEPA, regardless of whether he laundered the bribes through U.S. banks. In other words, in FCPA matters, FEPA now enables the DOJ to incriminate the foreign official who solicited or received bribes. Before FEPA, the DOJ had to find evidence of other crimes within the DOJ’s jurisdictional purview to bring charges against the foreign official.
What is the takeaway for companies doing business abroad?
U.S. companies that operate abroad may use FEPA as a shield. FEPA provides an extra layer of protection against foreign bribery and corruption because there is criminal liability for both parties in a bribery scheme. Before FEPA, foreign officials may not have been deterred from soliciting or accepting bribes from U.S. companies because they lived in countries that did not have or failed to enforce anti-bribery laws. Now, foreign officials who solicit or receive bribes from U.S. companies are putting their freedom on the line — the U.S. can bring charges against them, and FEPA’s maximum penalty is 15 years in jail, while the FCPA’s maximum penalty is five years in jail).
