Powerful Enforcement Tool: Efficient Use of the “Books and Records” Provision of the Foreign Corrupt Practices Act

The SEC announced today the settlement of civil charges against El Paso Energy for violating the books and records and internal controls provisions of the Foreign Corrupt Practices Act. The charges involved allegations that the energy company indirectly paid nearly $5.5 million in illegal surcharges to Iraq in connection with its purchases of crude oil from third parties under the United Nations Oil for Food Program between June 2001 and June 2002.

This civil enforcement provision could hold a company strictly liable for failure to record journal entries that accurately describe the nature of payments made to foreign officials. Until five years ago, or just after the passage of the Sarbanes Oxley amendments, the DOJ had been the most active enforcement body under the FCPA.

Perhaps due to the questionable extraterritorial reach of SOX 404, and the difficulty showing criminal intent to bribe a foreign official, this civil enforcement provision has proved to be an effective enforcement tool for the SEC. In addition to establishing effective FCPA compliance programs, companies must educate finance personnel so they can spot questionable journal entries and ensure each entry has a legally valid explanation behind it.

Click here for a copy of the SEC press release.

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