Page 28 - U.S. FOREIGN CORRUPT PRACTICES ACT

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

Department, Agency, or Instrumentality • whether the government has a
majority interest in the entity;
of a Foreign Government
• the government’s ability to hire and
Foreign officials under the FCPA include fire the entity’s principals;

officers or employees of a department, agency, • the extent to which the entity’s profits, if
any, go directly into the governmental fiscal
or instrumentality of a foreign government. When
accounts, and, by the same token, the extent
a foreign government is organized in a fashion to which the government funds the entity if it
similar to the U.S. system, what constitutes a fails to break even; and
• the length of time these indicia
government department or agency is typically
have existed. 122
clear (e.g., a ministry of energy, national security
To determine whether the entity performs a
agency, or transportation authority). 116 However,
function that the government treats as its own, the
governments can be organized in very different
Eleventh Circuit listed the following non-exhaustive
ways. 117 Many operate through state-owned and
factors:
state-controlled entities, particularly in such areas

as aerospace and defense manufacturing, banking • whether the entity has a monopoly over the
function it exists to carry out;
and finance, healthcare and life sciences, energy
• whether the government subsidizes the costs
and extractive industries, telecommunications, associated with the entity providing services;
and transportation. 118 By including officers or • whether the entity provides services to the
employees of agencies and instrumentalities within public at large in the foreign country; and
• whether the public and the government of that
the definition of “foreign official,” the FCPA accounts
foreign country generally perceive the entity to
for this variability. be performing a governmental function. 123
The term “instrumentality” is broad and In addition, a number of courts in other
can include state-owned or state-controlled circuits have approved final jury instructions
entities. Whether a particular entity constitutes an providing a similar non-exclusive list of factors to be
“instrumentality” under the FCPA requires a fact- considered. 124

specific analysis of an entity’s ownership, control, Companies should consider these factors
status, and function. 119 The Eleventh Circuit when evaluating the risk of FCPA violations and
addressed the definition of “instrumentality” in designing compliance programs.
United States v. Esquenazi, a case involving the DOJ and SEC have pursued cases involving
state-owned and controlled telecommunications instrumentalities since the time of the FCPA’s
company of Haiti. 120 The Eleventh Circuit concluded enactment and have long used an analysis

that an “instrumentality” under the FCPA is “an of ownership, control, status, and function to
entity controlled by the government of a foreign determine whether a particular entity is an agency
country that performs a function the controlling or instrumentality of a foreign government. For
government treats as its own.” 121 Although the example, the second-ever FCPA case charged by
court noted that this test is a fact-bound inquiry, it DOJ involved a California company that paid bribes

provided the following non-exhaustive list of factors through a Mexican corporation to two executives
to determine whether the government “controls” of a state-owned Mexican national oil company. 125
an entity: And in the early 1980s, DOJ and SEC brought cases
• the foreign government’s formal designation
of that entity;
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