Many Israeli companies seek to engage in business transactions overseas. This can be directly, or through subsidiaries, affiliated companies, joint ventures, third party consultants, or outside sales agents. If virtually any aspect of the Israeli company, including its employees and agents, or its business transactions touches the United States, even something like a dormant Delaware shell corporation, a simple meeting in New York, or perhaps even funds clearing through New York, the Israeli company and its management can find itself subject to the United States Foreign Corrupt Practices Act (FCPA). The FCPA is not new, but in recent years it has become the focus of extremely aggressive enforcement by the United States Department of Justice (DOJ). If a public company is involved, the FCPA is also enforced by the United States Securities and Exchange Commission (SEC).
In general, the FCPA prohibits offering to pay, paying, promising to pay, or authorizing the payment of money or anything of value to a foreign official in order to influence any act or decision of the foreign official in his or her official capacity or to secure any other improper advantage in order to obtain or retain business. This is enforced extremely broadly. No actual payment is required—offers and attempts to bribe are sufficient. Anything of value counts and can include not only cash, but gifts, charitable contributions, travel and entertainment or anything else of value if made with corrupt intent; which essentially means, trying to influence.
A state-owned or state-controlled enterprise can also be far broader than may appear on the surface. In some countries, China being a prime example, many companies that appear purely private when looking at the immediate ownership list are in fact remotely owned by the government or government officials through an upstream chain of ownership. Management executives who are rotating between official government positions and company positions are another source of concern. A company where 99% of the common stock is owned by private individuals and 1% is owned by a governmental authority, may well be a state-controlled enterprise if that 1% is a form of preferred stock where the actual voting control and liquidation rights are in the 1%. Knowing with whom you are dealing is a critical aspect of avoiding legal violations.
There are already cases reported where the DOJ has effected arrests outside of the United States and extradited people to the U.S. and held them in jail for years, even when the matter had virtually no connection with the United States. Crippling investigation costs and fines (frequently reaching to tens and hundreds of millions of US dollars) have been levied against companies, especially those who had no meaningful FCPA compliance and training program in place and functioning properly. And, while this article focuses on the FCPA, other countries have their own anti-corruption laws too. And, for those companies who believe they will not come to the attention of the DOJ, the FCPA has a lucrative whistleblower program in place.
Because of the likely devastating effect of an FCPA violation, the most cost-effective and prudent course of action is to have an appropriately robust compliance and training program in place. In fact, DOJ has declined to prosecute a number of companies, even when bribes were actually paid, in large measure because they had robust compliance policies, procedures, and training programs that were conscientiously implemented from top to bottom in those organizations.