The Foreign Corrupt Practices Act (FCPA) and the Importance of Caring SRS Guidelines

Hilali Noordeen, MD
Ethics and Professionalism Committee

Hilali Noordeen, MD, a member of the Ethics and Professionalism Committee wrote the following article to draw members’ attention to this law which might affect all who work in the US and internationally as well.

As the costs of healthcare soar worldwide, doctors are a soft target for governments and for institutions, in terms of the reimbursement received for their services.  The drive to reduce these reimbursements can be couched in different forms but one of the most commonly used weapons is the idea that doctors are corrupt.  The drive for this is the public perception that being a doctor is sufficient (in itself) reward for the work they do.  It is therefore of paramount importance that doctors or organizations act to ensure that there is no hint of corruption, as part of the forefront of their governance, and are seen to be doing so.  If they do not, it will be imposed on them and used as a weapon against them.

It is extremely unlikely that there are any surgeons, particularly members of SRS, involved in any type of these activities.  This is because SRS inculcates the values of good governance in all aspects of the clinicians’ practice.  However, clinicians

1. Have to frequently interact with the industry partners of SRS.
2. Will need to use implants themselves.
3. Many who operate outside US jurisdiction, but often will operate with the use of the industry partners of SRS.
4. These industry partners will often be based in the United States.

Overview

The Foreign Corrupt Practices Act (FCPA) of 1977 was enacted for the purpose of making it unlawful for certain types of persons and entities to make payments to government officials to assist in obtaining or retaining business.  The anti-bribery provisions of the FCPA prohibited the wilful use of mail or any means of interstate commerce corruptly in the furtherance of any offer, payment, promise to pay or authorization of the repayment of money, or anything of value, to any person, whilst knowing that all or a portion of such money, or things of value would be offered, given or promised, directly or indirectly to foreign officials, to influence the foreign official in his or her official capacity.  To induce the foreign official to do or omit to do an act in violation of this or his lawful duty, or to secure any improper advantage in order to assist in obtaining or retaining business for or with, or direct business to any person.

Since 1977, this has applied to all US persons and certain foreign issues of security.  However, with the enactment of certain amendments in 1998, this anti-bribery provision now applies to foreign firms and persons who cause, directly or through agents, to act in furtherance of such corrupt payments to take place within the territory of the United States.  This essentially means

1. That it is absolutely essential to make and keep books and records which accurately and fairly reflect the transactions and corporation.
2. Devise and maintain an adequate system of internal accounting controls.

With reference to this, it would be worth visiting the Department of Justice website that summarizes the situation extremely well (Steven Claydon).  In a sense, the FCPA has two provisions.

1. Anti-bribery.
2. Accounting.

These provisions make it a crime for any US individual (business or employee of a US business entity) to offer or provide, directly or indirectly, anything of value to foreign government officials in order to gain an unfair advantage.

The accounting part of it makes it illegal for a company that purports to the Federal Communications Commission (FCC) to have false or inaccurate books.  Therefore there are some basic things that companies and individuals need to know in order to ensure that they remain compliant.

1. Corruption in international business is common and frequently prosecuted.
2. Investigation, prosecution and punishment under the FCPA is common.
3. To understand your company’s risk of being involved in international bribery.
4. The program requires a stand-alone international anti-corruption compliance policy with an accountable executive.
5. That all staff are trained in this.
6. Proper due diligence of all third parties used by the company.
7. A set of internal controls over the company’s expenditure and assets. 
8. Do not in any way permit or precipitate payments.
9. Plan for the likelihood that you may be involved in an international internal investigation.
10. Include the FCPA Terms in your international contracts. 

Officials in most companies wish to believe that they work for a clean and honest organization that hires law abiding employees. In 2010 alone, fifty two individual business people were indicted and sentenced, or were convicted and awaiting sentencing for FCPA violation. Companies must therefore assess the risk of FCPA violations in their international business. Therefore, any company that is doing international business should enact a standard of FCPA compliance policy. Having done this, it needs to ensure that its employees are trained in this compliance.

It is also essential to use due diligence with all the party companies when business is done outside of the United States.  There has to be a very robust way of controlling company expenditure assets to reflect compliance. 

It is important however to realize that if the FCPA contains an exception to ‘facilitating permits’.  However, these have to be recorded accurately on the company’s books and records, and astonishingly, written proof that a company intentionally violated the law of the country where you made the payment!  It is interesting however to note that the facilitating payment exception has never been used in an important case. 

It is also important for these companies, who have little experience in conducting international investigations, to plan for the possibility of these investigations.  The best protection for this would, of course, be to include the FCPA Terms in every international contract. 

If a company is unwilling to put in place an adequate FCPS program, then it should refrain from doing business in high risk environments, as in doing so they may have personal responsibility and may be subject to prosecution for failure to put in place a system of controls.

Please see for further information: http://www.acc.com/legalresources/publications/topten/SLD-FCPA-Compliance.cfm