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FCPA + Travel Act: Double trouble?

Published on Tue, Apr 03,2012 | 21:19, Updated at Tue, Apr 03 at 22:43Source : Moneycontrol.com 

Michael Diamant-Partner & Brendon Fleming- Associate, Gibson, Dunn & Crutcher

Introduction

It is no secret that in recent years, U.S. law enforcement authorities, specifically the U.S. Department of Justice (“DOJ”) and the Securities and Exchange Commission (“SEC”), have aggressively pursued public sector corruption around the world by companies and individuals subject to the U.S. Foreign Corrupt Practices Act (“FCPA”).  Last year DOJ and the SEC combined initiated nearly 50 FCPA enforcement actions.  Monetary recoveries from companies for FCPA violations topped $500 million in 2011.  These results evidence a continuation in the recent surge in FCPA enforcement, coming on the heels of 2010’s record figures, in which DOJ alone brought almost 50 enforcement actions.

U.S. President Barack Obama’s administration has staked out its position as an aggressive enforcer of the anti-corruption statute, continuing increased enforcement activity that began during the George W. Bush administration.  U.S. Secretary of State Hillary Clinton recently reaffirmed the Obama administration’s commitment to the FCPA, despite several recent setbacks in U.S. prosecutions.  The Obama administration, Clinton said in a recent speech, “like those before us, has taken a strong stand when it comes to American companies bribing foreign officials.  We are unequivocally opposed to weakening the Foreign Corrupt Practices Act.  We don’t need to lower our standards.  We need to work with other countries to raise theirs.”  Yet, the law is clearly under attack, as U.S. business interests, led by the U.S. Chamber of Commerce, have questioned whether it imposes undue burdens on corporations.

Regardless of the FCPA’s future in the U.S. political arena, however, companies potentially subject to U.S. law should know that U.S. law enforcement has other statutes at its disposal to prosecute corruption abroad.  One such law is the Travel Act, a statute that is sometimes overlooked but that can both complement and broaden the FCPA’s scope, and which companies in the United States and abroad should understand and consider when developing anti-corruption compliance programs.

What is the Travel Act?

The Travel Act, 18 U.S.C. § 1952, is a U.S. federal statute prohibiting the use of “any facility in interstate or foreign commerce” with the intent to “distribute the proceeds of any unlawful activity” or “otherwise [to] promote, manage, establish, carry on, or facilitate the promotion, management, establishment, or carrying on, of any unlawful activity.”

Under the broad reach of the Travel Act, a “facility in interstate or foreign commerce” can include not only actual travel between U.S. states or between the United States and a foreign country, but it could also encompass cross-border communications.  In the case of Frederic Bourke, discussed below, the judge instructed the jury about the broad meaning of “facility in interstate or foreign commerce” under the Travel Act, in the context of a charge of conspiracy to violate the Travel Act.  Judge Shira Scheindlin of the U.S. District Court for the Southern District of New York instructed the jury that “[a] facility in interstate commerce is any vehicle or instrument that crosses state lines, or boundaries between a state and foreign country, in the course of commerce,” including phone calls, faxes, e-mail, or wire transfers.

Under the Travel Act, “unlawful activity” includes bribery in violation of U.S. law, including the FCPA, or the laws of any U.S. state where the alleged conduct occurs.  Many U.S. states, including states like New York and California that are home to industry and financial centers, criminalize commercial bribery, in addition to public corruption.  In the Bourke case, the underlying “unlawful activity” was an alleged violation of the FCPA itself.  “Unlawful activity” also includes money laundering and extortion in v

 
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