Page 20 - U.S. FOREIGN CORRUPT PRACTICES ACT

A Resource Guide to the U.S. Foreign Corrupt Practices Act. Second Edition.

Accordingly, Kay held that payments to obtain
favorable tax treatment can, under appropriate
Examples of Actions Taken
to Obtain or Retain Business circumstances, violate the FCPA:
Avoiding or lowering taxes reduces operating costs
• Winning a contract and thus increases profit margins, thereby freeing up
• Influencing the procurement process funds that the business is otherwise legally obligated
to expend. And this, in turn, enables it to take any
• Circumventing the rules for importation of
products number of actions to the disadvantage of competitors.
Bribing foreign officials to lower taxes and customs
• Gaining access to non-public bid tender duties certainly can provide an unfair advantage
information over competitors and thereby be of assistance to the
• Evading taxes or penalties payor in obtaining or retaining business.
• Influencing the adjudication of lawsuits or * * *
enforcement actions [W]e hold that Congress intended for the FCPA to
• Obtaining exceptions to regulations apply broadly to payments intended to assist the
payor, either directly or indirectly, in obtaining or
• Avoiding contract termination
retaining business for some person, and that bribes
paid to foreign tax officials to secure illegally reduced
customs and tax liability constitute a type of payment
that can fall within this broad coverage. 72
In 2004, the U.S. Court of Appeals for the
Fifth Circuit addressed the business purpose test
in United States v. Kay and held that bribes paid to Paying Bribes to Customs Officials
obtain favorable tax treatment—which reduced In 2010, a global freight forwarding company

a company’s customs duties and sales taxes on and six of its corporate customers in the oil and
gas industry resolved charges that they paid bribes
imports—could constitute payments made to
to customs officials. The companies bribed customs
“obtain or retain” business within the meaning of officials in more than ten countries in exchange for
the FCPA. such benefits as:
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The court explained that in enacting the FCPA, • evading customs duties on imported goods
“Congress meant to prohibit a range of payments • improperly expediting the importation of
wider than only those that directly influence the goods and equipment
acquisition or retention of government contracts or • extending drilling contracts and lowering
tax assessments
similar commercial or industrial arrangements.”
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• obtaining false documentation related to
The Kay court found that “[t]he congressional temporary import permits for drilling rigs
target was bribery paid to engender assistance in • enabling the release of drilling rigs and
other equipment from customs officials
improving the business opportunities of the payor
or his beneficiary, irrespective of whether that In many instances, the improper payments at
assistance be direct or indirect, and irrespective issue allowed the company to carry out its existing
business, which fell within the FCPA’s prohibition
of whether it be related to administering the law, on corrupt payments made for the purpose of

awarding, extending, or renewing a contract, or “retaining” business. The seven companies paid a
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executing or preserving an agreement.” total of more than $235 million in civil and criminal
sanctions and disgorgement.

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