FCPA Record-Keeping Provisions: Diebold and Private Bribery

In terms of the FCPA record-keeping provisions and their application to private bribery, especially significant is the recent resolution by Diebold, Inc. with the U.S. Department of Justice and the Securities and Exchange Commission (“SEC”). Diebold is an issuer engaged in the manufacture and sale of ATMs through its foreign subsidiaries, including in China and Indonesia as well as Russia.  Diebold is alleged to have conspired to bribe foreign public officials in China and Indonesia. Records of the Chinese and Indonesian subsidiaries associated with the bribes were alleged to have been falsified to conceal the bribes to foreign public officials. Records of the Russian subsidiary were alleged to have been falsified to conceal bribes to officials of privately-held banks.

In the information filed by the Justice Department as part of the deferred prosecution agreement, conspiracy to violate the anti-bribery and record-keeping provisions was alleged. The record-keeping violation related to records of subsidiaries associated with the bribery of foreign public officials as well as officials of private banks. The SEC’s complaint alleged violations of the anti-bribery and the accounting and record-keeping provisions. The record-keeping and internal controls violations related to both the bribery of foreign public officials and the bribery of officials of the private banks.

The allegations of violating the record-keeping violation associated with the bribery of private banks in Russia is extremely significant. They relate to private or commercial bribery, which is not addressed by the FCPA’s anti-bribery provisions. This significant development reaffirms and further signals that the Justice Department and the SEC will not limit their foreign bribery investigations to instances in which foreign public officials are involved.

The Justice Department has at times relied upon the Travel Act in situations where it was unclear whether the intended recipient was a foreign public official. Certainly, the record-keeping provisions are applicable, and have been applied, in other contexts, both foreign and domestic, where inaccurate record-keeping was involved.  But here there is specific reference to the bribery of officials of a foreign private bank.  Indeed, the SEC’s compliant alleges a violation of the internal controls provisions for the absence of adequate internal controls relative to the bribery of the officials of the private bank.

No different than the general bribery offense under section 1 of the UK Bribery Act, Canada’s secret commission offense, similar offenses under the laws of other foreign jurisdictions, and the Travel Act and the laws of many states, private bribery can and will be addressed by the Justice Department and SEC in foreign settings.  As a result, an entity’s anti-bribery compliance program, as well as its internal controls, must be vigilant in also addressing situations involving the prospect of private or commercial bribery.