Chapter 4: The FCPA's books and records and internal controls provisions
The FCPA has always been a law much broader than its name suggests. The anti-bribery provisions that were the focus of Chapter 3 are just one prong of the FCPA. Indeed, most FCPA enforcement actions do not involve foreign bribery. A DOJ enforcement action against FalconStor Software is an example. In the enforcement action, the DOJ alleged that the company conspired to pay bribes to U.S. bank executives to obtain lucrative electronic storage licensing contracts. FalconStor was also charged with conspiring to falsify its corporate books and records to cover up the bribery scheme. According to the DOJ, the bribes, including the grants of the stock options and restricted shares, were recognized in FalconStor's books and records, but were falsely recorded as 'compensation to an advisor' or as 'employment bonuses.' An SEC enforcement action against Gold Standard Mining is another example of an FCPA enforcement action not involving foreign bribery. In the enforcement action, the SEC alleged that the company filed numerous reports about its purported Russian gold mining operations that were materially false and misleading. Among other things, the SEC alleged that the company: failed to devise and maintain a system of internal accounting controls; did not have a means to verify the amount of gold produced; did not have a means to determine the costs of producing the gold that was sold; and did not maintain records of inventory.
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