Page 36 - U.S. FOREIGN CORRUPT PRACTICES ACT

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

was demanded on the part of a government official subsidiary and successor liability in evaluating
as a price for gaining entry into a market or to obtain corporate liability. As described more fully below,
a contract would not suffice since at some point the unlike with most other statutes, DOJ has instituted
U.S. company would make a conscious decision an FCPA Corporate Enforcement Policy that applies
whether or not to pay a bribe.” 176 The fact that the to corporate resolutions in the FCPA context.

payment was “first proposed by the recipient …
does not alter the corrupt purpose on the part of Parent-Subsidiary Liability
the person paying the bribe.” 177 There are two ways in which a parent company
This distinction between extortion and may be liable for bribes paid by its subsidiary.
economic coercion was recognized by the court in First, a parent may have participated sufficiently
United States v. Kozeny. There, the court concluded in the activity to be directly liable for the conduct—

that although an individual who makes a payment as, for example, when it directed its subsidiary’s
under duress (i.e., upon threat of physical harm) misconduct or otherwise directly participated in the
will not be criminally liable under the FCPA, 178 a bribe scheme.
bribe payor who claims payment was demanded Second, a parent may be liable for its subsidiary’s
as a price for gaining market entry or obtaining a conduct under traditional agency principles. The

contract “cannot argue that he lacked the intent to fundamental characteristic of agency is control. 183
bribe the official because he made the ‘conscious Accordingly, DOJ and SEC evaluate the parent’s
decision’ to pay the official.” 179 While the bribe control—including the parent’s knowledge and
payor in this situation “could have turned his back direction of the subsidiary’s actions, both generally
and walked away,” in the oil rig example, “he could and in the context of the specific transaction—
not.” 180 when evaluating whether a subsidiary is an agent

Businesses operating in high-risk environments of the parent. Although the formal relationship
may face real threats of violence or harm to their between the parent and subsidiary is important in
employees, and payments made in response to this analysis, so are the practical realities of how the
imminent threats to health or safety do not violate parent and subsidiary actually interact.

the FCPA. 181 If such a situation arises, and to ensure If an agency relationship exists and the
the safety of its employees, companies should subsidiary is acting within the scope of authority
immediately contact the appropriate U.S. embassy conferred by the parent, a subsidiary’s actions and
for assistance. knowledge are imputed to its parent. 184 Moreover,
under traditional principles of respondeat superior, a
Principles of Corporate Liability for company is liable for the acts of its agents, including
Anti-Bribery Violations its employees, undertaken within the scope of their
General principles of corporate liability apply employment and intended, at least in part, to benefit
to the FCPA. Thus, a company is liable when its the company. 185 Thus, if an agency relationship
directors, officers, employees, or agents, acting exists between a parent and a subsidiary, the

within the scope of their employment, commit parent is liable for bribery committed by the
FCPA violations intended, at least in part, to benefit subsidiary’s employees. For example, SEC brought
the company. 182 Similarly, just as with any other an administrative action against a parent for bribes
statute, DOJ and SEC look to principles of parent- paid by the president of its indirect, wholly owned
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