DOJ/SEC FCPA cases illustrate how foreign‑government‑controlled entities are deemed instrumentality for bribery prosecutions

21 Mexican national oil company. ?! And in the early 1980s, DOJ and SEC brought cases involving a $1 million bribe to the chairman of Trinidad and Tobago’s racing authority.'” DOJ and SEC continue to regularly bring FCPA cases involving bribes paid to employees of agencies and instrumentalities of foreign governments. In one such case, the subsidiary of a Swiss engineering company paid bribes to officials of a state-owned and controlled electric- ity commission. The commission was created by, owned by, and controlled by the Mexican government, and it had a monopoly on the transmission and distribution of elec- tricity in Mexico. Many of the commission’s board mem- bers were cabinet-level government officials, and the direc- tor was appointed by Mexico's president.’ Similarly, in another recent case, Miami telecommunications executives were charged with paying bribes to employees of Haiti’s state-owned and controlled telecommunications company. The telecommunications company was 97% owned and 100% controlled by the Haitian government, and its direc- tor was appointed by Haiti’s president. While no one factor is dispositive or necessarily more important than another, as a practical matter, an entity is unlikely to qualify as an instrumentality if a government does not own or control a majority of its shares. However, there are circumstances in which an entity would qualify as an instrumentality absent 50% or greater foreign gov- ernment ownership, which is reflected in the limited num- ber of DOJ or SEC enforcement actions brought in such situations. For example, in addition to being convicted of funneling millions of dollars in bribes to two sitting presi- dents in two different countries, a French issuer’s three subsidiaries were convicted of paying bribes to employees of a Malaysian telecommunications company that was 43% owned by Malaysia’s Ministry of Finance. There, notwith- standing its minority ownership stake in the company, the Ministry held the status of a “special shareholder; had veto power over all major expenditures, and controlled impor- tant operational decisions.!” In addition, most senior company officers were political appointees, including the Chairman and Director, the Chairman of the Board of the Tender Committee, and the Executive Director.'** Thus, despite the Malaysian government having a minority share- holder position, the company was an instrumentality of the Malaysian government as the government nevertheless had substantial control over the company. Companies and individuals should also remember that, whether an entity is an instrumentality of a foreign government or a private entity, commercial (ie. private- to-private) bribery may still violate the FCPA’s accounting provisions, the Travel Act, anti-money laundering laws, and other federal or foreign laws. Any type of corrupt payment thus carries a risk of prosecution. Public International Organizations In 1998, the FCPA was amended to expand the defini- tion of “foreign official” to include employees and representa- tives of public international organizations.'”’ A “public inter- national organization” is any organization designated as such by Executive Order under the International Organizations Immunities Act, 22 U.S.C. § 288, or any other organization that the President so designates.’ Currently, public interna- tional organizations include entities such as the World Bank, the International Monetary Fund, the World Intellectual Property Organization, the World Trade Organization, the OECD, the Organization of American States, and numer- ous others. A comprehensive list of organizations designated as “public international organizations” is contained in 22 US.C. § 288 and can also be found on the U.S. Government Printing Office website at http://www.gpo.gov/fdsys/. How Are Payments to Third Parties Treated? The FCPA expressly prohibits corrupt payments made through third parties or intermediaries.'” Specifically, it covers payments made to “any person, while knowing that all or a portion of such money or thing of value will be offered, given, or promised, directly or indirectly,” toa foreign official. Many companies doing business in a foreign country retain a local individual or company to help them conduct business. Although these foreign agents may pro- vide entirely legitimate advice regarding local customs and procedures and may help facilitate business transactions, HOUSE_OVERSIGHT_022523