The accounting provisions in the FCPA require issuers to make and keep records and accounts of the securities registered with the SEC. These records have to have enough detail to accurately and fairly reflect transactions and dispositions of assets. Companies also should devise and maintain a system of internal accounting controls that make sure that records are being kept correctly. If you are under investigation for a potential FCPA violation, our attorneys could assess your record keeping protocols and determine if they comply with the law.
What the accounting provisions require is reasonable detail in describing the transaction. This reasonable standard takes into account that there might be human error and it might be unintentional. As such, the FCPA is meant to protect against fraud, not small unintentional errors.
Still, there are a wide variety of ways in which bribes can be mischaracterized. Typically, a bribe might be mischaracterized as a consulting fee, but there are a host of ways to characterize these costs as a legitimate, permitted expense.
What the government is looking for during an investigation of a company’s books is if there is mischaracterization and/or falsifications of what turns out to be bribes involving a large amount of money, or a consistent pattern and practice of mischaracterizing payments to foreign officials.
There are some examples where companies pay government offices and characterize it as something else and this becomes a part of their business operations overseas. This is when companies run into real problems with books and records.
While everyone who does business overseas should follow the terms of the FCPA, some companies may be more vulnerable to accounting violations than others. In DC, these accounting provisions have mostly been applied to companies that publicly issue securities in the United States rather than private companies. This is because more money is involved in these situations, and also because there could be more people that are affected. Stockholders who invest in these public companies may not fully understand the dealings with the business and become vulnerable. There is a broader potential impact on the market and therefore the public companies who issue stock or securities are typically reviewed more often.
The internal controls provision requires companies to police themselves by creating a system that offensively protects against the type of falsification and mischaracterization that the statute prohibits. Our lawyers could help a company determine if their internal controls meet the standards of these accounting provisions. These are important because they could impact the final outcome of a particular case.
Prosecutors will often look at what internal controls were there to either prevent or remedy an accounting violation according to the FCPA. To determine if a company in DC has violated the accounting provisions of the FCPA, they may investigate how this accounting error occurred, how many employees were involved, did the company know or was it company policy.
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