Page 54 - U.S. FOREIGN CORRUPT PRACTICES ACT

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

knowingly and willfully caused its Japanese-parent For example, the subsidiary of a Houston-
issuer to falsify its books and records concerning the based company pleaded guilty both to conspiring to
improper retention of consultants and concealment commit and to aiding and abetting the company’s
of payments to third-party sales agents. As part books and records and anti-bribery violations. 275 The
of its agreement, the company admitted that it subsidiary paid bribes of over $4 million and falsely

retained certain so-called consultants, who did characterized the payments as “commissions,”
little or no actual consulting work, through a third- “fees,” or “legal services,” consequently causing the
party service provider and paid for those services company’s books and records to be inaccurate.
out of a budget over which a senior executive Although the subsidiary was not an issuer and
had complete control and discretion, without therefore could not be charged directly with an
meaningful oversight by anyone at the company or accounting violation, it was criminally liable for its

the parent. By mischaracterizing these payments involvement in the parent company’s accounting
as “consultant payments” on its general ledger, the violation.
company caused its issuer-parent to incorrectly Similarly, a U.S. subsidiary of a Swiss freight
designate those payments as “selling and general forwarding company that was not an issuer was
administrative expenses” on its books, records, and charged with conspiring to commit and with aiding

accounts. In addition, the company admitted that and abetting the books and records violations of
its senior executives provided false or incomplete its customers, who were issuers and therefore
representations about the effectiveness of the subject to the FCPA’s accounting provisions. 276 The
company’s internal controls to the parent on their U.S. subsidiary substantially assisted the issuer-
Sarbanes-Oxley certifications. 273 customers in violating the FCPA’s books and records
Individuals can be held criminally liable for provision by masking the true nature of the bribe

accounting violations. For example, a former payments in the invoices it submitted to the issuer-
managing director of a U.S. bank’s real estate customers. 277 The subsidiary thus faced criminal
business in China pleaded guilty to conspiring liability for its involvement in the issuer-customers’
to evade internal accounting controls in order to FCPA violations even though it was not itself subject

transfer a multi-million dollar ownership interest in to the FCPA’s accounting provisions.
a Shanghai building to himself and a Chinese public Unlike the FCPA anti-bribery provisions,
official with whom he had a personal friendship. the accounting provisions apply to “any
The former managing director repeatedly made person,” and thus are not subject to the
false representations to his employer about the reasoning in the Second Circuit’s decision in
transaction and the ownership interests involved. 274 United States v. Hoskins limiting conspiracy and

aiding and abetting liability under the FCPA
Conspiracy and Aiding and Abetting anti-bribery provisions. 278
Liability
Companies (including subsidiaries of issuers) Auditor Obligations

and individuals may face criminal liability for All public companies in the United States must
conspiring to commit or for aiding and abetting file annual financial statements that have been
violations of the accounting provisions. prepared in conformity with U.S. Generally Accepted

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