The textbook example of a Foreign Corrupt Practices Act (FCPA) violation involves a company employee directly giving a bribe to a foreign official. But in many, if not most, of the FCPA cases prosecuted today, a third-party intermediary such as an in-country agent or consultant is the party who made the improper payment. In these cases, the company that engaged the third party’s services cannot plead ignorance and escape FCPA liability: The statutory text makes clear that a company violates the Act if it gives a payment to a third party and is “aware” that the third party will, or is “substantially certain” to, use that payment to bribe a foreign official. Caution should therefore be the watchword for any company operating through an intermediary in a foreign country.
The recently-announced $108 million FCPA settlement between Hewlett-Packard (HP), the Justice Department, and the SEC was a timely reminder of the risks a company runs when it does business in a foreign jurisdiction through a third party. The government’s case against HP included charges that HP Mexico — an HP subsidiary — hired a third-party consultant with close ties to Pemex, the Mexican state-owned petroleum company, to help HP secure a $6 million contract through improper means. According to the Justice Department, HP used a “channel partner” to funnel a $1.41 million commission to the consultant, who then paid $125,000 of that money to a Pemex employee.