Page 50 - U.S. FOREIGN CORRUPT PRACTICES ACT

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

commercial bribery, 243 export controls violations, 244 false invoices to claim false offsets to its value-
and embezzlement or self-dealing by company added tax obligations. The scheme resulted in
employees. 245 material overstatements of the company’s net
income in the company’s financial statements,
Potential Reporting and Anti-Fraud which violated the Exchange Act’s anti-fraud and
Violations reporting provisions. Both schemes also violated
Issuers have reporting obligations under the books and records and internal controls
Section 13(a) of the Exchange Act, which requires provisions.

issuers to file an annual report that contains
comprehensive information about the issuer. What Are Management’s Other
Failure to properly disclose material information Obligations?
about the issuer’s business, including material
Sarbanes-Oxley Act of 2002
revenue, expenses, profits, assets, or liabilities
In 2002, in response to a series of accounting
related to bribery of foreign government officials,
scandals involving U.S. companies, Congress
may give rise to anti-fraud and reporting violations
enacted the Sarbanes-Oxley Act (Sarbanes-Oxley
under Sections 10(b) and 13(a) of the Exchange Act.
or SOX), 248 which strengthened the accounting
For example, a California-based technology
requirements for issuers. All issuers must comply
company was charged with reporting violations, in
with Sarbanes-Oxley’s requirements, several of
addition to violations of the FCPA’s anti-bribery and
which have FCPA implications.
accounting provisions, when its bribery scheme led
to material misstatements in its SEC filings. 246 The SOX Section 302 (15 U.S.C. § 7241)—Responsibility
company was awarded contracts procured through of Corporate Officers for the Accuracy and Validity
bribery of Chinese officials that generated material of Corporate Financial Reports
revenue and profits. The revenue and profits helped Section 302 of Sarbanes-Oxley requires that
the company offset losses incurred to develop new a company’s “principal officers” (typically the

products expected to become the company’s future Chief Executive Officer (CEO) and Chief Financial
source of revenue growth. The company improperly Officer (CFO)) take responsibility for and certify the
recorded the bribe payments as sales commission integrity of their company’s financial reports on a
expenses in its books and records. quarterly basis. Under Exchange Act Rule 13a-14,
Companies engaged in bribery may also be which is commonly called the “SOX certification”

involved in activity that violates the anti-fraud and rule, each periodic report filed by an issuer must
reporting provisions. For example, an oil and gas include a certification signed by the issuer’s
pipeline company and its employees perpetrated principal executive officer and principal financial
a long-running scheme to use the company’s petty officer stating, among other things, that: (i) based
cash accounts in Nigeria to make a variety of corrupt on the officer’s knowledge, the report contains no
payments to Nigerian tax and court officials using material misstatements or omissions; (ii) based

false invoices. 247 The company and its employees on the officer’s knowledge, the relevant financial
also engaged in a fraudulent scheme to minimize statements are accurate in all material respects;
the company’s tax obligations in Bolivia by using (iii) internal controls are properly designed; and

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