The Department of Justice has made tremendous strides to combat corrupt business dealings of U.S. companies in foreign countries. Indeed, it has become somewhat cliché to expound upon the DOJ's success in enforcing the Foreign Corrupt Practices Act (FCPA) (15 U.S.C. §§ 78dd-17-8ff), which outlaws bribery of public officials overseas.
Lately, however, the DOJ's fraud section has gone even further in its enforcement efforts by seizing upon corrupt business dealings in foreign jurisdictions that do not involve government officials.
Federal prosecutors have repeatedly warned U.S. businesses participating in foreign commerce that the DOJ will use every tool in its vast arsenal to fight corrupt business dealings. Though many corporations have focused on complying with the FCPA, a good number have overlooked the federal government's ability to utilize state commercial bribery statutes under the Travel Act (18 U.S.C. § 1952) to prosecute corruption involving private
parties. Indeed, businesses operating overseas must not only steer clear of an FCPA violation; they must also worry about employees engaging in other corrupt activity - including payoffs to foreign corporations - that could trigger a government investigation.
The Travel Act makes it a federal offense to travel or utilize facilities in interstate or foreign commerce (including the mail) with the intent to engage in unlawful activities. These include any bribery that violates the laws of the state in which it is committed (see 18 U.S.C. § 1952 (b)(2)).
California's Bribery Statute
If a state statute makes it a crime to engage in commercial (nongovernmental) bribery, that statute may be invoked as the predicate for a Travel Act violation. California has one such statute: section 641.3 of the state Penal Code, which prohibits private corruption in business. In general terms, the section prohibits commercial bribery by making it illegal for an employee to solicit or accept money (or anything of value) - corruptly and without the knowledge or consent of his or her employer - in return for using or agreeing to use his or her position for the benefit of the person or firm paying the money.
This statute was the anchor for the DOJ's prosecution of Control Components Inc. (CCI), a global company with headquarters in Rancho Santa Margarita. Federal prosecutors alleged not only that CCI employees paid bribes to foreign officials, but also that they bribed employees in private corporations who were responsible for making business decisions (United States v. Control Components, Inc.,
No. 8:09-Cr-00162 (C.D. Cal. information filed July 22, 2009)). The result of the defendant's conduct, prosecutors argued, was to cause harm to a private entity, which under most circumstances would not be subject to DOJ jurisdiction. However, by relying upon Penal Code section 641.3 and the Travel Act, the DOJ was able to establish that CCI's entire business development enterprise was corrupt. The strategy worked: CCI pleaded guilty last year (www.usdoj.gov/usao/cac/pressroom/pr2009/091.html).
Though the initial reaction to the guilty plea was one of shock (see fcpablog.blogspot.com/search?updated-max=2009-08-13T08:28:00%2B08:00 &max-results=9), the fact is that this is not the first time that the Department of Justice has utilized the Travel Act in an FCPA prosecution (see United States v. Mead, et al.,
No. 3:98-Cr-00240 (D.N.J. indictment filed Apr. 17, 1998)).
This is not just a California issue. At least 34 other states have similar commercial bribery statutes on the books. But even in states without such a statute, individuals whose commercial bribery crosses state lines into a jurisdiction that does have a protective law akin to Penal Code section 641.3 may be subject to prosecution.
At the thought of foreign corrupt practices, the image of a devious corporate representative paying off a sleazy government official readily comes to mind. But as these recent developments indicate, the prosecution can cast a net over a much wider arc, ensnaring those who bribe private business people as well.
As CCI learned, the DOJ can weave itself a case by stitching together the Travel Act and a state commercial bribery statute to punish payments between private parties that never touch the hands of a public official. The DOJ has a potent weapon against private corruption overseas, and it's not afraid to use it.
Jeffrey J. Ansley is a white-collar attorney practicing in Dallas. Don R. Berthiaume and Joshua C. Zive practice in the Washington, D.C., office of international law firm Bracewell & Giuliani.