The Legal Obligation to Maintain Accurate Books and Records in U.S. and Non-U.S. Operations.

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The Legal Obligation to Maintain Accurate Books and Records in U.S. and Non-U.S. Operations.

The Foreign Corrupt Practices Act ("FCPA" or "the Act") is usually associated with its prohibitions against foreign bribery. The provisions of the Act relating to bookkeeping and internal controls (collectively, the "accounting provisions") receive less publicity but are much more likely to form the basis of a government proceeding against companies subject to the Act. The most common FCPA enforcement mechanism is a civil action by the Securities and Exchange Commission ("SEC") under the accounting provisions and not a criminal charge by the Department of Justice ("DOJ") or even a civil action by the SEC under the antibribery provision. In fact, a study conducted in 2003 found that of 604 enforcement actions brought by the SEC since the FCPA was enacted in 1977, only 7 percent related to foreign bribery.1 Compare this to the 38 criminal bribery charges brought by the DOJ under the FCPA through 2003.2

This overwhelming disparity is due to the fact that the accounting provisions create civil and criminal penalties for practices that are in no way "foreign" and no more "corrupt" than deliberately sloppy accounting. The SEC staff has expressed the view that the FCPA's internal-controls provisions, although originally viewed as a det...

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