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FEDERAL BRIBERY LAWS: WHAT YOU NEED TO KNOW
All too often, people looking to gain the favor of a government official or private commercial partner offer gifts or money in exchange for faster results or better outcomes. In some countries and some industries, bribery is an accepted cost of doing business. But not so in the United States.
The decisions of public officials and corporate officers should always protect the interests of their constituents and employers. To that end, public officials or private company officers cannot:
- accept something of value in exchange for influencing their decisions;
- enable fraud; or
- violate their lawful duties.
In the US, the bribery of public officials makes news headlines often. Indeed, public corruption is the FBI’s top criminal investigative priority. That is because people’s confidence in government suffers when public officials fall prey to bribery or other forms of corruption. Plus, public corruption costs the US government and the public billions of dollars each year.
However, bribery is also illegal in the private sector.
Private bribery works just as bribery of a public official. Instead of bribing a public official, the bribe goes to a private company employee to obtain an advantage in a commercial transaction. For example, commercial bribery occurs when a supplier pays cash or expenses to someone in a position to make sure that the supplier’s bid wins the contract.
Significantly, in bribery cases, both the person offering the bribe and the person who solicits or accepts the bribe are subject to federal criminal charges.
*Pro-Tip: Remember to consult legal counsel regarding any federal criminal court case or investigation.
Federal laws make it a crime to bribe either foreign or domestic public officials. Like the federal government, states have passed laws criminalizing the bribery of state government officials. Also, states have enacted laws criminalizing bribery between private sector commercial entities. While no federal statute prohibits explicitly commercial bribery, prosecutors can use a handful of other federal statutes to prosecute commercial bribery cases.
WHO IS A “PUBLIC OFFICIAL?”
States and the federal government have laws specifically against bribing public officials, defining “public officials” very broadly.
Generally, a public official for these purposes is anyone who works for the federal (or state) government. That includes members of Congress, delegates, resident commissioners, any officer, employee, or person acting on behalf of the United States or any department, agency, or branch of U. S. government, including the District of Columbia. It even applies to people who will become public officials once they are nominated or appointed.
FEDERAL BRIBERY OFFENSES: GRAFT & BRIBERY
Generally, bribery is the practice of offering, giving, receiving, or soliciting something of value to influence another person’s official actions in the discharge of their public or legal duties.
Federal statutes refer to two classes of federal offenses: graft and bribery: See 18 US Code CHAPTER 11—BRIBERY, GRAFT, AND CONFLICTS OF INTEREST, SECTION 201 et seq.
Appointed or elected government officials tasked with allocating public funds must act in the public’s best interest, including awarding contracts to the most competitive bidders in a fair and honest procurement process.
Graft is associated with political corruption and involves misdirecting public funds by a government official to benefit private interests. Graft often involves private companies owned by public officials or friends who will pay kickbacks or bribes for preferential treatment.
Specifically, political grafting can occur when a public official selects suppliers for products or services to a local community. Another example is selecting who will participate in the bidding for government contracts and selecting the winning bid.
We often see public officials selecting a friend and agreeing to pay above-market prices. Winners in these situations often return the favor with gifts, vacations, etc., which prosecutors will undoubtedly characterize as illegal bribes or kickbacks.
One well-known example took place in 1972 when the Maryland District Attorney investigated political leaders in Baltimore for a grafting scheme involving construction projects. The investigation revealed that public officers awarded government contracts to preferred engineering companies, contractors, and architects for financial kickbacks.
Other examples of grafts include no-bid contracts.
Graft violates the general federal bribery statute, and grafting almost always includes a violation of general anti-corruption laws. Prosecutors also charge those guilty of the graft with defrauding the government.
In short, federal law enforcement will come knocking when a public official accepts kickbacks from private companies in exchange for contracts.
Bribery occurs when someone offers something of value to a corporate or public official in exchange for their cooperation in influencing a decision-making process, committing or allowing fraud against the official’s organization, or otherwise violating their official duties.
In the US, the General Federal Bribery Act (18 USC § 201) bans the bribing of public officials.
There is no explicit federal prohibition or regulation against bribery in the private sector. Still, prosecutors charge corporate officers involved in bribery schemes under laws such as honest services fraud or state bans against commercial bribery.
Honest services fraud is part of the federal mail and wire fraud statutes (18 USC § 1346). The statutes cover fraudulent schemes that deprive another of honest services through bribes or kickbacks from a cooperating third party. Prosecutors often use these statutes to charge persons involved in private sector commercial bribery.
Indeed, prosecutors included federal bribery and honest services fraud among the criminal charges in Operation Varsity Blues, the college admissions scandal.
Thirty-three parents of kids applying to college paid a total of $25 million to William (Rick) Singer–a college admissions consultant. Singer used part of that $25 million to bribe college officials and athletic coaches to provide preferential admissions treatment for his clients’ kids.
Prosecutors charged Singer with racketeering conspiracy, money laundering conspiracy, conspiracy to defraud the US, and obstruction of justice. (Singer pleaded guilty and is awaiting sentencing.)
Prosecutors charged most parents with honest services fraud. And they charged Gordon Ernst, the former head coach of men’s and women’s tennis at Georgetown University, with soliciting and accepting $3.4 million in bribes. Ernst will soon plead guilty to bribery and federal income tax evasion, and he will face a prison sentence of one to four years, plus two years of supervised release and forfeiture of $3.4 million.
OTHER BRIBERY LAWS
There are other special bribery statutes in addition to the federal bribery statute discussed above. For example, there are statutes prohibiting bribery of a bank examiner, bribery incident to appointment to a public office, bribery incident to various loan and bank transactions, and bribery in connection with the sale or distribution of alcoholic beverages.
There is also the Travel Act, a federal statute that prohibits travel in interstate commerce with the intent to engage in unlawful activity. Bribery is an unlawful activity under state laws. So bribing a private person in a state where “commercial bribery” is prohibited by law allows federal prosecutors to bring federal charges under the Travel Act.
*Pro-Tip: Many state laws define commercial bribery as “the giving or offering to give, directly or indirectly, anything of value to any private agent, employee, or fiduciary, without the knowledge and consent of the principal or employer, with the intent to influence such agent’s, employee’s, or fiduciary’s action concerning the principal’s or employer’s affairs.”
Read the detailed story of a veteran who landed in prison on federal bribery charges from our partners at White Collar Advice: Click here.
The statutory penalties for bribery of a public official include a fine of up to three times the value of the bribe and imprisonment for up to 15 years in federal prison.
A conviction can also disqualify the individual from holding any office of honor, trust, or profit under the auspices of the United States government.
In commercial bribery cases, prosecutors typically seek imprisonment, supervised release, fines, and forfeiture, as they did in the Ernst case mentioned above.
The Foreign Corrupt Practices Act (“FCPA”) provides for federal criminal charges involving the bribery of foreign officials. Paying foreign government officials to help with obtaining or retaining business is illegal. This includes offers or promises to pay any money, gift, or promises to a foreign official to influence their official acts or decisions.
The FCPA can be a significant challenge for anyone who works in international business. As we noted above, in some countries, bribery is just a cost of doing business. Countries like Russia, China, or Mexico are notorious for the bribery that is part and parcel of international business deals. Walmart is an example of a company that faced FCPA bribery charges for paying $24 million in “facilitation expenses” in Mexico to obtain licenses to expand its Mexican operations.
Penalties for violations of the FCPA are severe, including up to $2 million in fines for US companies. US company officers, directors, employees, stockholders, or agents can also face fines of up to $100,000 and up to 5 years in prison.
CORRUPTION & BRIBERY
Bribery is one form of corruption, and there are others.
Corruption is a broad category that includes any unlawful, unethical, or improper action or breach of trust undertaken for personal, commercial, or financial gain. Corruption generally includes:
- Antitrust Violations
- Influence Peddling
Any of these forms of corruption can subject a person to significant prison time and financial penalties under federal law.
*Pro-Tip: Remember to consult legal counsel in connection with any federal investigation or criminal court case. Prison Professors, an Earning Freedom company, regularly helps clients locate and vet experienced criminal counsel.
Every act of bribery involves two parties: the person who pays the bribe and the person who solicits or receives it. Bribery charges can engulf anyone who offers, pays, agrees to pay, or attempts to pay a bribe OR anyone who requests, receives, agrees to receive, or attempts to receive a bribe.
Federal bribery laws are extensive and cover situations involving both public officials and private sector officers.
People looking to gain the favor of a government official or private commercial partner are sometimes prone to offer gifts or money in exchange for faster results or better outcomes. This is a bad idea.
Especially in some countries and in some industries, bribery is an accepted cost of doing business. Again, bribery is always illegal under US federal laws, whether the bribes or kickbacks involve public officials or private sector officers or take place domestically or internationally.
While no federal statute explicitly prohibits commercial bribery as such, prosecutors can use a handful of other federal statutes to prosecute commercial bribery cases. In Operation Varsity Blues, they used laws governing honest services fraud, as discussed above.
Everyone involved in a bribery scheme stands to lose. The people offering the bribe and those who solicit or accept the bribe are subject to federal criminal charges.
Penalties are severe and almost always involve incarceration.
Prison Professors, an Earning Freedom company, works alongside (not in place of) civil and criminal defense counsel to help clients proactively navigate through investigations and prosecutions. Our team also helps clients prepare mitigation and compliance strategies.
If you have any questions or are uncertain about any of the issues discussed in this post, schedule a call with our risk mitigation team to receive additional guidance.
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