In terms of global anti-bribery compliance, one seemingly innocuous area of special attention should be the use of discounts in conjunction with the sales of products or services. In a surprising number of FCPA cases, the use of discounts has been the mechanism by which improper inducements are facilitated. Typically, the situation is one in which the amount of the difference between sales price and the discount is siphoned off to serve as the funding source for the improper inducement to the foreign official. But the ways in which discounts have been used to fund improper inducements are limitless.
In the SEC’s settlement with Vincinte E. Garcia, a sales official of one of the entities of SAE SE, a German corporation with ADRs registered with the SEC, the cease-and-desist order found there to be violations of the FCPA’s anti-bribery and accounting record-keeping provisions.1 Garcia was found to have used a variety of circuitous means of circumventing the internal controls of SAP, an issuer, to facilitate the payment of bribes to foreign officials. Among these various means was the prompting of substantial discounts that were, in turn, used to generate profits to be used to fund bribes to Panamanian officials in order to secure business for SAP.2
Regardless of setting or what anti-bribery law may be implicated, including the FCPA, the UK Bribery Act, Canada’s Corruption of Foreign Public Officials Act or Brazil’s Clean Companies Act, global anti-bribery compliance requires that care be exercised in determining why discounts are being sought and the mechanics associated with the discounts. The query should not be limited to concerns over improper inducements to foreign officials as the improper use of discounts may extend to kickbacks or other forms of private or commercial bribery prohibited by the Travel Act, the UK Bribery Act, or Canada’s Secret Commissions Act.
1Order Instituting Cease and Desist Proceedings, at ¶¶ 22-24, In the Matter of Vincente E. Garcia, SEC Admin. Proceeding No. 3-16750 (Aug. 12, 2015). Mr. Garcia also entered into a plea to an information charging him with conspiring to violate the FCPA. Information, United States v. Garcia, No. 15-cr-00366 (N.D. Ca., filed July 13, 2015), ECF No. 1.