A friend of The FCPA Blog who bunked in Singapore awhile and has since returned to Washington, D.C. asks: In a communist country, is everyone a government official?
The question is important because the U.S. Foreign Corrupt Practices Act prohibits corrupt payments to “foreign officials” for the purpose of obtaining or retaining work or gaining any unfair advantage. If, as our questioner suspects, everyone in a communist country is a foreign official, then compliance risks multiply. In China, for example, there will be 1.3 billion chances to violate the FCPA every day.
Duly frightened, we believe the prudent approach in a communist state or any country where the government dominates the economy is to consider everyone a foreign official, until proven otherwise. There are no cases or FCPA Opinion Procedure Releases we know of that answer the question definitively. But foreign officials for the FCPA include officers, employees or representatives of any government, at any level. They also include officials of foreign political parties.
In the communist states we’re familiar with, especially the really Big One, most people work for government-owned or controlled enterprises — hospitals, shipyards, oil companies, airlines, banks, insurance companies, media firms, sports teams, real estate developers, investment funds, the 2008 Olympics Committee, you name it. Even when ultimate ownership is obscure, which can be the case with listed companies, control may still rest with the government or its alter ego, the Chinese Communist Party. The CCP appoints only its own members to be directors of state-owned enterprises. And any CCP member important enough to nab a directorship at a state-owned enterprise or international joint venture probably holds some kind of party title and should therefore be deemed an “official of a foreign political party” for the FCPA.
Some practitioners are also guided by local laws. Using again the example of China, the legal definition of a “public official” in a number of statutes and regulations is broad and apparently covers all Chinese Communist Party members. The U.S. Department of Justice has said in another context that it is not bound by local statutory definitions or legal opinions. But for this question, the DOJ is unlikely to interpret “public officials” much different than the host country does. Mark Mendelsohn, the Deputy Chief of the DOJ’s Criminal Division, Fraud Section (the group that prosecutes FCPA cases), noted in 2006 that many companies now assume that everyone in China is a government official, because “Chinese regulators are involved in any business enterprise.” He warned against an FCPA defense based on claims that “you thought you were paying a kickback to a private individual.” (SEC Today, Volume 2006-57, Friday, March 24, 2006).
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