DON’T BE AN OSTRICH: LIABILITY UNDER THE FCPA FOR IGNORING INDICATIONS OF POSSIBLE BRIBERY

When the US Congress enacted the Foreign Corrupt Practices Act (FCPA) in 1977, the public record revealed a debate over what should constitute ‘knowledge’ of an improper payment under the anti-bribery provisions of the FCPA. There was no controversy over ‘actual knowledge’ since it was clear that a company or individual could be culpable if he or she actually knew about a bribe scheme. However, Congress extended this concept to include what is known as ‘constructive’ knowledge. According to the statute, knowledge exists when a person is aware that a “result is substantially certain to occur” or a person has a “firm belief that such circumstance exists”. The term ‘knowing’ includes conscious disregard, deliberate ignorance and willful blindness. Think of the ostrich who intentionally puts its head into the sand to avoid, in this case, learning the true facts.

Setting aside the legal concepts, what this means is that a company, or one of its executives, could face criminal liability under the FCPA if indications of potential bribery, or ‘red flags’, are reasonably evident in a transaction‎ and nothing is done to resolve those red flags. If at some point in the future it is learned that a bribe actually occurred, liability could arise even if no one at the company actually knew a bribe had been paid or intended that any such bribe be paid. Merely failing to address the red flags may allow US authorities to allege that the company or one of its executives has violated the FCPA.

Jul-Sep 2014 Issue

Baker & McKenzie LLP