31 Franchise L.J. 140 (2011-2012)
Implications of the Foreign Corrupt Practices Act for International Franchising

handle is hein.journals/fchlj31 and id is 140 raw text is: Implications of the Foreign Corrupt Practices
Act for nternatona Franchising
VICTOR VITAL AND JESSICA L. PARKER-BATTLE

lobalization and expan-
sion    have    become
mainstays that various
U.S.-based  franchises  employ
in their operations. It is there-
fore important to be aware of
the various risks and potential
responsibilities that come with
such   expansion.   Specifically,
companies interested in or cur-
rently involved in international
franchising must be aware of              Victo a
potential liability and respon-
sibility under the Foreign Cor-
rupt Practices Act (FCPA). This
article will address the FCPA
in the context of international
franchising, recent developments
in this area, and suggested best
practices to employ while operat-
ing internationally.
erview of h          FCPA
In 1977, the Securities and
Lxchange    Commission    (SEC)      Jessica L. Parker-Battle
conducted a series of investiga-
tions based on information that there was widespread corpo-
rate corruption after the Watergate scandal.' After a nunber
of these investigations showed some form of bribery or ques-
tionable payments to foreign officials, Congress passed the
f CPA. Generally, the FCPA prohibits payments made with
a corrupt intent or inducements to foreign officials for the
purpose of obtaining or keeping business. From its incep-
tion, the FCPA has been a tool to decrease and ideally elimi-
nate corruption between companies and individuals doing
business in or with the United States and foreign officials in
.matters of trade and conunerce. However, in recent years the
Department of Justice (DOJ) and the SEC have increasingly
used this tool in their proclaimed international fight against
corruption, most notably against businesses that have not
traditionally been thought of as being at risk for a FCPA vio-
lation (e.g., foreign companies with minimal contacts with the
United States). In 2009, DOJ officials stated, enforcement
of the FCPA is second only to fighting terrorisn in terms of
priority, and the number of cases opened were at least triple
the number four years prior.,
Victor Vital is a shareholder at Greenberg Traurig LLP in Dallas.
Jessica L. Parker-Battle is an attorney at Greenberg Traurig LLP
and practices in Boston and Texas.

Because the DOJ and SEC are unabashedly using the Act
to indict and convict companies and individuals domestically
and internationally in various industries, franchisors seeking
to move into international markets must be aware of and edu-
cate themselves about the FCPA and other antibribery laws.
Primary Provisions Under the FCPA
The DOJ is the chief FCPA enforcement agency, and it
coordinates its efforts with the SEC. The Office of General
Counsel of the Department of Commerce also answers gen-
eral questions concerning the FCPA's basic requirements
and restrictions from U.S. exporters. Under the FCPA, there
are two primary components: the antibribery provisions4
and the accounting provisions,' which include requirements
to (1) make and keep books, records, and accounts that
accurately and fairly reflect the transactions of a company
and (2) devise and maintain sufficient internal accounting
controls. The DOJ primarily handles the enforcement of the
antibribery provisions, while the SEC primarily handles the
accounting and books and records provisions.
Antibribery Provisions
Under the FCPA, it is unlawful to bribe a foreign official
(any officer or employee of a foreign government or any
department, agency, or instrumentality thereof, . . . or any
person acting in an official capacity for or on behalf of any
such government, department, agency, or instrumentality6)
to obtain or retain business.' The FCPA potentially applies
to any individual, firm, company, officer, director, employee,
agent of a company, or stockholder acting on behalf of a
firm.' Individuals and firms can also be penalized if they
order, authorize, influence, induce, or assist someone else
to violate the antibribery provisions or if they conspire to
violate those provisions.) The DOJ has interpreted its juris-
diction over corrupt payments to foreign officials based on
whether a violator is an issuer, a domestic concern, or a
foreign national or business.'
Who Falls Under the FCPA
An issuer is a corporation that has issued securities or pro-
poses to issue securities registered with the United States or
is required to file reports with the SEC. A domestic con-
cern is any individual who is a citizen, national, or resident
of the United States, or any corporation, partnership, asso-
ciation, joint-stock company, business trust, unincorporated
organization, or sole proprietorship that has its principal
place of business in the United States, or that is organized
under the laws of a state of the United States or a territory,
possession, or commonwealth of the United States.2
Issuers and domestic concerns are held liable under the

140    Franchise Law journal  N  Winter 2012

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