6

In the USA, anti-bribery laws prohibit a company from offering bribes or kickbacks to government officials.

If a channel partner of U.S. company X offers a bribe, would X be held liable if it knew about the bribe, even though it didn't participate nor authorize the bribe?

1

The law that you are asking about is the Foreign Corrupt Practices Act of 1977 (FCPA) (15 U.S.C. § 78dd-1, et seq.).

Under that law, knowledge or willful blindness to the fact that third-party with whom the U.S. linked person does business is engaged in corrupt practices like bribery can give rise to liability.

As one memorandum of the topic explains the relevant law:

The FCPA defines “knowing” as either:

  • Awareness that a third party is engaging in misconduct or substantially certain that the third party will engage in misconduct.

  • A firm belief that a third party is engaging in misconduct or substantially certain that the third party will engage in misconduct. (15 U.S.C. § 78dd-2(h)(3)(A)(i), (ii).)

The government may establish knowledge by showing that the defendant was aware of a “high probability of the existence” of that conduct, unless the defendant “actually believe[d]” the conduct was not occurring (15 U.S.C. § 78dd-2(h)(3)(B)).

The government contends that the FCPA not only imposes liability on those with actual knowledge of wrongdoing but also on those who purposefully avoid actual knowledge (FCPA Resource Guide, at 22). Courts have agreed and construed knowing to include deliberate ignorance (also referred to as willful blindness or conscious avoidance) (see United States v. King, 351 F.3d 859, 867 (8th Cir. 2003) (approving a deliberate ignorance jury instruction in an FCPA prosecution)).

For example, in United States v. Kozeny, the US Court of Appeals for the Second Circuit affirmed Frederic Bourke’s conviction for conspiring to violate the FCPA. Bourke’s business partner, Viktor Kozeny, allegedly channeled millions of dollars to Azeri officials to persuade them to privatize Azerbaijan’s state-owned oil company and sell the entity to Bourke and his investors. Bourke denied any knowledge of Kozeny’s payments, and the district court instructed the jury that Bourke had the requisite knowledge of payments under the FCPA if he was aware of a high probability that corrupt payments were being made but consciously and intentionally avoided confirming that fact.

On appeal, the court concluded that the government presented sufficient evidence of Bourke’s conscious avoidance. The government established that Bourke:

  • Knew that Kozeny, the scheme’s mastermind, had a reputation for corrupt business conduct and that Azeri officials would ultimately receive an ownership stake in the oil company if it were privatized.

  • Contacted his attorneys to discuss ways to limit his potential FCPA liability.

  • Formed American advisory companies to shield him and other American investors from potential liability for improper payments under the FCPA.

(United States v. Kozeny, 667 F.3d 122, 127-133 (2d Cir. 2011).)

The government also uses these theories against corporate entities. For example, in 2014, the DOJ and the SEC announced FCPA resolutions with California-based medical device company Bio-Rad Laboratories, Inc. to settle charges that its foreign agents paid bribes to secure government contracts. In recognition of, among other things, Bio-Rad’s voluntary disclosure and cooperation, the DOJ entered into a non-prosecution agreement (NPA) with Bio-Rad (DOJ Non-prosecution Agreement, Bio-Rad Laboratories, Inc. (Nov. 3, 2014)).

According to the SEC, between 2005 and 2010, a Bio-Rad subsidiary paid third parties 15% to 30% commissions on its Russian sales knowing that the third parties likely did not have the capability to perform the services described in their contracts. The Bio-Rad subsidiary paid the third parties $4.6 million on sales of $38.6 million.

The SEC asserted that executives at the parent company ignored red flags that allowed the scheme to continue for years, including that:

  • The third parties were not located in Russia.

  • The third parties did not have the resources to perform the contracted-for services.

  • The subsidiary paid excessive commissions to banks in Latvia and Lithuania.

  • The third parties made efforts to keep the payments secret.

  • The services were not necessary to the company’s business.

(In re: Bio-Rad Labs., Inc., Admin. Proc. File No. 3-16231 (Nov. 3, 2014) and Press Release, DOJ, Bio-Rad Laboratories Resolves Foreign Corrupt Practices Act Investigation and Agrees to Pay $14.35 Million Penalty (Nov. 3, 2014).)

0

Because this is a very boring answer if the offeree of the bribe declines, let's proceed on the assumption that they accept the bribe from company x in exchange for some kind of benefit that is conferred upon company X and its channel partner (let's call them company y).

While company x is reasonably clearly guilty of commercial bribery (which is only specifically illegal in 36 US States - the others have different methods for obtaining justice for those unfairly disadvantaged by the effects of commercial bribery), the position that company y is in is less clear.

It is possible that a court may find that company y should have been aware, regardless of whether or not they actually did; it is possible that there is evidence that proves constructive knowledge of the crime; in these cases, they may be found equally culpable.

It is possible that a court may find that company y has been the beneficiary of unjust enrichment, and in the absence of specific statutory remedy or criminal punishment, order some equitable remedy.

So it is possible that company y could be liable for company x's bribery, regardless of whether they actively participate or not - liability is a tad too broad of a brush to paint it with.

In answer to the question whether they would be liable, it would be highly fact-specific and I wouldn't hazard a guess - it would turn on the circumstances and the evidence.

  • 1
    Interesting. In the UK (and I suspect, the rest of Europe), the answer is "Yes, X is guilty." In fact, it is not enough to show they didn't know to avoid guilt. They have to show they are taking all reasonable steps to prevent bribery happening. (Source: I used to work for Thales. They got fined a substantial amount, and we all had to do "ethics training".) – Martin Bonner Dec 18 '16 at 17:40
-5

With respect to the public office holders. Any "knowledge" of a bribe either offered, accepted or declined, that is not reported falls under misprision of treason.

In the United States, misprision of treason is a federal offense, committed where someone who has knowledge of the commission of any treason against the United States, conceals such knowledge and does not inform the President, a federal judge or State Governor or State judge 18 U.S.C. § 2382.

The circumstances that make bribery treasonous in fact is found under the High Crimes and Misdemeanor phrase in the Constitution at Art. II Sec. 4, "Treason, Bribery, or other high Crimes and Misdemeanors".

The Constitution sets specific grounds for impeachment. They are “treason, bribery, and other high crimes and misdemeanors.” To be impeached and removed from office, the House and Senate must find that the official committed one of these acts.

The Constitution defines treason in Article 3, Section 3, Clause 1:

Treason against the United States, shall consist only in levying War against them, or in adhering to their Enemies, giving them Aid and Comfort. No Person shall be convicted of Treason unless on the Testimony of two Witnesses to the same overt Act, or on Confession in open Court.

The Constitution does not define bribery. It is a crime that has long existed in English and American common law. It takes place when a person gives an official money, gifts, a privilege or benefit (all emoluments), that may tend to influence the official’s behavior in office.

emolument (n.) mid-15c., from Old French émolument "advantage, gain, benefit; income, revenue" (13c.) and directly from Latin emolumentum "profit, gain, advantage, benefit,"...

Emoluments Clause. "No Title of Nobility shall be granted by the United States: And no Person holding any Office of Profit or Trust under them, shall, without the Consent of the Congress, accept of any present, Emolument, Office, or Title, of any kind whatever, from any King, Prince, or foreign State."

The Title of Nobility Clause is a provision in Article I, Section 9, Clause 8 of the United States Constitution, that prohibits the federal government from granting titles of nobility, and restricts members of the government from receiving gifts, emoluments, offices or titles from foreign states without the consent of the United States Congress. Also known as the Emoluments Clause, it was designed to shield the republican character of the United States against so-called "corrupting foreign influences". This shield is reinforced by the corresponding prohibition on state titles of nobility in Article I, Section 104, and more generally by the Republican Guarantee Clause in Article IV, Section 45.

Unfortunately lobbying gets a customary pass even though it lawfully qualifies as an emolument.

  • Lobbying "lawfully qualifies as an emolument?" That's an awfully bold claim. Perhaps you mean "literally?" – feetwet Mar 16 '17 at 1:13
  • It's not the term in itself, but the effect. Lobbying involves a financial gain weather direct or collateral. And it is the primary reason why they put the prohibition on emoluments in the Constitution TWICE. Call it whatever you prefer. But it's still a pig with lipstick on. – American Native Mar 16 '17 at 2:02
  • Lobbyists often assist congresspersons with campaign finance by arranging fundraisers, assembling PACs, and seeking donations from other clients. Many lobbyists become campaign treasurers and fundraisers for congresspersons. en.wikipedia.org/wiki/… – American Native Mar 16 '17 at 2:13
  • It distracts from what appears to be an otherwise excellent answer to the present question to include a polemic statement like that. I would recommend you remove that here and, if you like, post a separate question and self-answer explaining why lobbying has not been found to violate the constitution. I'm pretty sure there is ample case law on the question. – feetwet Mar 16 '17 at 12:50
  • 2
    This is a Stack Exchange about law. So we encourage people to be precise when describing what the law is. There's a difference between offering your opinion that something is unlawful and stating the same as a fact (and apparently in contradiction of existing law). The former is generally tolerated on this Stack Exchange, even though this isn't a "forum" for debate. The latter is considered "unhelpful," because answers are supposed to be correct in their facts. – feetwet Mar 16 '17 at 16:48

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.