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Harry Cassin
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Julie DiMauro
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Thomas Fox
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Bill Waite
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Prosecuting Private Overseas Corruption

Hold on. When did the United States criminalize commercial overseas bribery? We’re not talking about bribes to foreign officials under the Foreign Corrupt Practices Act.* But bribes overseas to private parties. When did that become a federal offense? Well, it happened this year when the Justice Department indicted California valve-maker Control Components Inc. (CCI) and six of its former employees. Here’s how.

They were all charged under both the FCPA and the Travel Act (18 U.S. C. §1952). The latter prohibits traveling between states or countries or using an interstate facility in aid of any crime, and carries a 5-year jail sentence for most offenses. Here’s the thing. The underlying crime doesn’t have to be a federal offense. Traveling around or using the mails to violate a state law can also trigger a Travel Act violation.

In the cases of CCI and the six ex-employees, the federal government alleged they violated or conspired to violate California’s anti-bribery law (California Penal Code section 641.3). It bans corrupt payments anywhere of more than $1,000 between any two persons, including private commercial parties. In the federal indictments, the Travel Act charges relied on alleged violations of California’s anti-corruption law. CCI pleaded guilty to its three-count indictment; the six ex-employees have pleaded not guilty and are presumed innocent unless convicted at trial.

When it announced CCI’s guilty plea, the DOJ talked about the company’s private overseas bribery. It said:

According to the information and plea agreement, from 1998 through 2007, CCI violated the FCPA and the Travel Act by making corrupt payments to numerous officers and employees of state-owned and privately-owned customers around the world, including in China, Korea, Malaysia and the United Arab Emirates, for the purpose of obtaining or retaining business for CCI. Specifically, from 2003 through 2007, CCI paid approximately $4.9 million in bribes, in violation of the FCPA, to officials of various foreign state-owned companies and approximately $1.95 million in bribes, in violation of the Travel Act, to officers and employees of foreign and domestic privately-owned companies.

We’ve seen references to private bribery in other FCPA enforcement actions. Schnitzer Steel is one example. The DOJ said its employees had bribed people not only at government-owned enterprises but also at private companies abroad. But Schnitzer was charged only under the books and records and internal controls provisions of the FCPA and not the Travel Act, so specific allegations about private bribery weren’t part of the actual charges.

In CCI’s case, however, its private overseas bribery violated California law. That’s what formed the basis of the Travel Act charge in the indictment. And in its plea agreement, one of CCI’s undertakings was directed specifically at private bribery that fell outside the scope of the FCPA. The plea agreement said:

CCI shall truthfully disclose . . . all matters relating to corrupt payments to foreign public officials or to employees of private customers . . . about which CCI has any knowledge . . . .

What does it all mean? That the DOJ is now prosecuting (and monitoring) not just bribes to foreign officials that violate the Foreign Corrupt Practices Act but also corrupt payments to private overseas parties that violate state law. Is this a massive expansion of the DOJ’s battle against foreign corruption by U.S. companies and their employees? Oh yes.

What’s next? All of a sudden, it seems like a very good time to re-evaluate compliance programs — and make sure they cover both public and private overseas bribery.

We’re grateful to an extremely astute reader in Asia for helping us understand the importance of the Travel Act charges in the CCI-related indictments.

* Foreign official is defined in the FCPA at 15 U.S.C. §78dd-1(f)(1)(A), §78dd-2(h)(2)(A) and §78dd-3(f)(2)(A). “The term ‘foreign official’ means any officer or employee of a foreign government or any department, agency, or instrumentality thereof, or of a public international organization, or any person acting in an official capacity for or on behalf of any such government or department, agency, or instrumentality, or for or on behalf of any such public international organization.”

Download the DOJ’s July 31, 2009 release about CCI’s guilty plea here.

Download a copy of CCI’s July 22, 2009 plea agreement here.

Download the July 22, 2009 criminal information against CCI here.

Download the indictment of the six former executives of CCI here.

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  1. The Travel Act has shown up in overseas bribery cases for a number of years, as far back as the Mead case, at least. It's nothing new.

  2. The Travel Act charges aren't new. What's new is the predicate or underlying offence for the Travel Act charge.

  3. I don't think so, actually – Mead was a state commercial bribery statute, and so were others.

  4. OK, new to us. Here's a DOJ summary of the Mead case: "Defendant Mead was convicted following a jury trial of conspiracy to violate the FCPA and the Travel Act (incorporating New Jersey's commercial bribery statute) and two counts each of substantive violations of the FCPA and the Travel Act. Defendant Mead was sentenced, after a departure from the Guidelines, to four months imprisonment, four months home detention, three years supervised release, and a $20,000 fine."

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