Examples of Actions Taken to Obtain or Retain Business
= Winning a contract # Influencing the procurement process
* Circumventing the rules for importation of products
" Gaining access to non-public bid tender information
# Evading taxes or penalties
# Influencing the adjudication of lawsuits or enforcement actions
# Obtaining exceptions to regulations
# Avoiding contract termination
to gain a business advantage.” For example, bribe payments made to secure favorable tax treatment, to reduce or elimi- nate customs duties, to obtain government action to pre- vent competitors from entering a market, or to circumvent a licensing or permit requirement, all satisfy the business purpose test.
In 2004, the U.S. Court of Appeals for the Fifth Circuit addressed the business purpose test in United States v. Kay and held that bribes paid to obtain favorable tax treatment— which reduced a company’s customs duties and sales taxes on imports—could constitute payments made to “obtain or retain” business within the meaning of the FCPA.° The court explained that in enacting the FCPA, “Congress meant to prohibit a range of payments wider than only those that directly influence the acquisition or retention of govern- ment contracts or similar commercial or industrial arrange- ments.” The Kay court found that “[tJhe congressional target was bribery paid to engender assistance in improving the business opportunities of the payor or his beneficiary, irrespective of whether that assistance be direct or indirect, and irrespective of whether it be related to administering the law, awarding, extending, or renewing a contract, or
executing or preserving an agreement.””' Accordingly, Kay
held that payments to obtain favorable tax treatment can,
under appropriate circumstances, violate the FCPA:
Avoiding or lowering taxes reduces operating costs and thus increases profit margins, thereby freeing up funds that the business is otherwise legally obligated to expend. And this, in turn, enables it to take any number of actions to the disadvantage of competi- tors. Bribing foreign officials to lower taxes and cus- toms duties certainly cam provide an unfair advantage over competitors and thereby be of assistance to the
payor in obtaining or retaining business.
ae Kk
[W]e hold that Congress intended for the FCPA to apply broadly to payments intended to assist the payor, either directly or indirectly, in obtaining or retaining business for some person, and that bribes paid to foreign tax officials to secure illegally reduced customs and tax liability constitute a type of payment
that can fall within this broad coverage.”
Paying Bribes to Customs Officials
In 2010, a global freight forwarding company and six of its corporate customers in the oil and gas industry resolved charges that they paid bribes to customs officials. The companies bribed customs officials in more than ten countries in exchange for such benefits as:
" evading customs duties on imported goods
= improperly expediting the importation of goods and equipment
* extending drilling contracts and lowering tax assessments
" obtaining false documentation related to temporary import permits for drilling rigs
"enabling the release of drilling rigs and other equipment from customs officials
In many instances, the improper payments at issue allowed the company to carry out its existing business, which fell within the FCPA’s prohibition on corrupt payments made for the purpose of “retaining” business. The seven companies paid a total of more than $235 million in civil and criminal sanctions and disgorgement.
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