Who is Affected?

Understand which companies and individuals are affected by the FCPA and its associated penalties. The FCPA is far-reaching and applies to many individuals and companies. Individuals subject to the FCPA include: employees and agents of U.S. companies, regardless of nationality; U.S. persons--that is, citizens, nationals, and residents--who are employees or agents of foreign businesses, including foreign subsidiaries of U.S. parent companies; and in certain circumstances, non-U.S. employees and agents of foreign businesses, including foreign subsidiaries of U.S. parent companies.

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Companies subject to the FCPA include: U.S. companies, for acts taken by their employees (including officers, directors, etc.) or third parties either within or outside the United States and regardless of the nationality of the employee or third party; and non-U.S. companies (including foreign subsidiaries of U.S. companies) for acts of their employees or third parties that occur in the United States or that include the use of interstate facilities, such as mail, telephone, e-mail, etc. Both private companies and public issuers of securities in the United States are subject to the FCPA. Janice, an employee of a U.S. company, works in a European office. A large business deal can be sealed with a payment to a government official. Since she is located in a branch office outside the U.S., are such payments allowed under the FCPA? Select your choice, then select "SUBMIT".

A) B) C)

Yes No Maybe

That is correct. Since Janice is an employee of a U.S. company, it doesn't matter what country she works in--she's still prohibited from making bribes to government officials under the FCPA.
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What if Janice, the employee of an U.S. company who works in a branch office in Europe, is not a U.S. citizen? Does the FCPA still apply to her? Select your choice, then select "SUBMIT". A) B) C) Yes No Maybe

That is correct. The FCPA applies to everyone who works for a U.S. company, even non-U.S. citizens. Non-U.S. citizens have gone to jail in the United States for violating the FCPA.
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The FCPA is strict, with severe punishment for violations. For example, indictment alone can lead to being barred from government contracting. Companies found guilty of violating the FCPA may have their export privileges suspended. The FCPA is enforced vigorously by the U.S. Department of Justice and the U.S. Securities and Exchange Commission, or SEC. Both have initiated scores of investigations over the years. Bribing a foreign government official is a serious offense. The penalties for companies can be severe, as can the penalties for individuals. Select the links to learn more.

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If Janice--the employee described previously--and her company were found to be in violation of the FCPA, could the company, if it chose to, assist Janice in the fine that was levied against her? Select your choice, then select "SUBMIT". A) B) C) Yes No Maybe

That is correct. The FCPA prohibits payment or reimbursement of fines or levies against individuals by their employers. Janice is responsible for paying the fine herself.
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What is a Bribe?
Learn what constitutes a bribe under the FCPA and get definitions of key terms such as "anything of value" and "foreign government official." When you think of a bribe, you may think of a suitcase full of cash. But a bribe can be anything of value, if it's given in order to obtain an improper business advantage. "Anything of value" encompasses intangible as well as tangible benefits and can include a number of things.
Section 2: What is a Bribe?

As you learned, under the FCPA, U.S. persons and those who work for U.S. companies commit a crime if they bribe a foreign government official. But who exactly is a "foreign government official?" The term isn't as straightforward as it sounds. In the FCPA, the term "foreign government official" is very broad. .S. courts and the enforcement agencies read the term "obtaining or retaining business" broadly. In its simplest form, a bribe may be used to influence the awarding of a contract. A payment made for purposes other than obtaining a contract may seem less clear-cut, but it is still a violation of the law. Any type of improper advantage is prohibited. Select the link to learn more.

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Would a cash payment made to avoid customs duties violate the FCPA? Select your choice, then select "SUBMIT". A) B) C) Yes--it provides an improper advantage No--making a payment to avoid taxes can't be considered illegal Maybe--it is a only a small payment

That is not correct. The correct answer is A. U.S courts have considered payments made to avoid customs duties to be a violation of the FCPA on the grounds that lower taxes may enable a company to submit One exception to the FCPA restrictions on payments to government officials is that it is acceptable to make a charitable donation on their behalf--you just can't pay them directly. Select your choice, then select "SUBMIT". A) B) True False

That is not correct. The correct answer is B. Even charitable contributions can be considered a bribe. There is precedent for the SEC and Department of Justice pursuing enforcement action over a payment made by a company to a bona fide charity. The agencies claimed that the contribution was intended to influence the actions of a government official associated with the charity. If you have questions about charitable contributions that could involve government officials, consult someone in the Legal or Compliance departments.

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Don and Komal have agreed to pay a foreign official in order to get a tax break for the company. Eventually, such a savings should help the company compete better by reducing the cost of doing business in the country. Don and Komal believe they are not in a violation of the FCPA because no particular contract was at stake. Are they correct? Select your choice, then select "SUBMIT". A) Yes--the FCPA is restricted to payments used for an unfair advantage in winning a contract B) No--the payment will provide the company with an improper advantage, so it is prohibited by the FCPA Maybe--this part of the law is open to interpretation

C)

That is correct. Any payment that provides an improper advantage, even if it is not linked directly to a proposed or existing business contract, could be a violation of the FCPA. Before giving anything of value to a government official, consult with the Legal or Compliance departments.
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Any payment to a government official that provides an improper advantage, even if not linked directly to the proposed or existing business, could be a violation of the FCPA. Keep in mind, also, that the laws of many other countries consider a payment that results in any improper advantage whatsoever to be illegal.

In the case of Don and Komal, would they still be in trouble if they offered the payment to the government official for the tax break, but didn't actually follow through with the payment? Select your choice, then select "SUBMIT". A) B) C) Yes--the mere offer makes it a violation of the FCPA No--nothing actually happened so it's not a problem Maybe--if it wasn't a serious offer, it would not be considered a violation

That is correct. The mere promise or offer to pay a bribe is a violation of the FCPA.
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What if someone pays a bribe to get a contract but ends up not winning it? Is that a violation of the FCPA? Select your choice, then select "SUBMIT". A) B) Yes--the purpose was to influence a government official No--it's not a violation, since no business advantage was realized

C) Maybe--it depends on the relative size of the payment compared to the contract

That is correct. Even if a bribe does not result in an actual business advantage, the intention of the payment is still improper and a violation of the law.
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Before we leave the topic of bribes, there are two final points that need to be made. The first is that payments to third parties--such as agents, consultants, sales representatives, distributors, contractors, or any other intermediary--are specifically prohibited if you know that the payment will be offered, given, or promised to a foreign government official. In other words, an indirect bribe through a third party is as illegal as a bribe paid directly. The second point is that other antibribery laws exist. For example, countries have their own domestic laws prohibiting bribery of their government officials. Some laws apply to both commercial and government business. Make sure you know the antibribery laws in effect in the country where you are conducting business and comply with them. Additionally, other countries have enacted laws similar to the FCPA pursuant to international treaties. Two of the largest treaties now in effect are: the OECD Antibribery Convention and the United Nations Convention Against Corruption In summary, when it comes to bribery, the FCPA and similar laws in other countries are concerned with the payment of anything of value to a government official in an attempt to assist in obtaining or retaining business. Key points to keep in mind are: "Anything of value" is a term that goes beyond cash to include any number of items, including vacations, stocks, even contributions to a government official's favorite charity. Any payment that provides an improper advantage-even if it is not linked directly to a proposed or existing business contract--could be a violation of the FCPA. The mere promise or offer to pay a bribe is a violation of the FCPA--the transaction doesn't even have to be completed. Payments to a third party are prohibited if you know that the payment will be offered, given, or promised to a foreign government official. Make sure you are aware of all the antibribery laws in effect in the country where you are conducting business and comply with them.

And finally, before giving anything of value to a government official, consult with the Legal or Compliance departments.

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Baker Hughes conducts business in numerous countries around the world. Through a variety of laws, many of these countries prohibit commercial bribery. Commercial bribery is generally defined as making or offering a payment to another company's employee or representative to induce a corrupt action related to that company's business. Our Business Code of Conduct requires us to fully comply with all applicable laws. Therefore, as it is illegal under certain applicable laws, commercial bribery is prohibited by the Baker Hughes Business Code of Conduct. The only safe course of action is to not pay bribes to anyone - neither to public officials nor to representatives of private entities.

Exceptions & Affirmative Defenses

Learn about the two areas where offering something of value to a government official is allowed. Although the restrictions imposed by the FCPA's antibribery provisions are strict, there are certain conditions under which a payment to a government official may not violate the FCPA. An exception to the FCPA allows for facilitating payments, which are considered not to violate the law under certain narrowly defined circumstances. You'll learn more about facilitating payments in another section of the training. There are also two affirmative defenses under the FCPA--cases in which an action that appears to violate the law may be permissible if the company is able to prove that the action fits within the definition of the affirmative defense. The burden of proof is on the company, so making use of an affirmative defense requires input from the Legal department.

The first affirmative defense applies when the payment is legal under local law. This is a rare situation, so always consult Legal first. The second affirmative defense explicitly allows payment for "reasonable and bona fide expenditures" directly related to the promotion, demonstration, or explanation of products or services, or the execution or performance of a contract with a foreign government agency. Consider the second affirmative defense--providing for "reasonable and bona fide expenditures"--in the following scenario.

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If Mr. Darmadi's personal travel expenses did fall under the "reasonable and bona fide" affirmative defense, is Kathryn safe in assuming that she can proceed with the arrangements? Select your choice, then select "SUBMIT". A) B) Yes No

That is not correct. The correct answer is B. Kathryn should not assume that she can proceed with Mr. Darmadi's arrangements. Antibribery and anticorruption laws of Mr. Darmadi's country may restrict or limit payment for expenses or fees, or require other approvals from his supervisor or department head. Always check with the Legal or

Compliance departments before paying for the travel of a government official.

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While paying for a government official's travel is often a "reasonable and bona fide" business expense, the Department of Justice has prosecuted companies when it felt that the official travel was too lavish. Accordingly, side trips while an official is on a business visit generally should be limited. Paying for airfare and lodging so an official can inspect a plant is probably okay. But what happens if the official asks for more? Given Mr. Darmadi's demand that Kathryn's company pay for his family's travel to the United States while he conducts business there, what should Kathryn do? Select your choice, then select "SUBMIT". A) Agree--paying for a government official's family to travel with him/her on an official visit is allowed by the FCPA

B) Because Mr. Darmadi is coming on official business, assure him that she will make it happen, but first class air travel is out of the question C) Inform her manager about the conversation, as this sounds like it would be an FCPA violation

That is correct. Although the FCPA would allow the company to cover Mr. Darmadi's "reasonable and bona fide expenditures," his demands including vacation side trips for his family are clearly beyond what is allowable by law. Kathryn should notify her supervisor (or another appropriate company resource

The exception to the FCPA's antibribery provisions involves facilitating payments-sometimes referred to as "grease" payments. This exception permits small payments to expedite or secure the performance of a "routine governmental action"--for example, providing phone service. Several conditions must be met for a payment to qualify as a facilitating payment: the payment must be nominal in amount, the routine governmental action must be ordinarily and commonly performed by the recipient of the payment, the matter to be facilitated must be legal under written local law, and such routine governmental action must not include any decision or action relating to an award of or continuation of business. In these circumstances, such a payment would not be deemed to be "corrupt" or to violate the FCPA. Suppose you're trying to get a facility operational in a country where the public utility company employee won't turn on the electricity unless you pay him a small fee. Knowing how badly you need the lights turned on, the public utility employee holds out until you make the payment. Is it legal to make a payment in this circumstance? Select your choice, then select "SUBMIT". A) B) Yes--it looks like we have no choice in the matter No--this kind of payment is clearly a bribe under the FCPA and is illegal Maybe--but check with Legal or Compliance before making the payment

C)

That is correct. Although the utility company probably has a legal obligation to switch on the facility's electricity, a facilitating payment may be allowed in this situation. Consult with the Legal or Compliance departments before making any such payment.

Keep in mind that to comply with the accounting provisions of the FCPA, if a facilitating payment is ever made, it must be recorded clearly and accurately in the company's records. (The accounting provisions will be discussed later in the training.) However, under Baker Hughes' Facilitating Payments Policy, the answer to the question on the last slide would have been, "No." Baker Hughes' Facilitating Payments Policy prohibits its employees and its agents from making any facilitating, or "grease," payments to any government official regardless of whether applicable laws cover and prohibit facilitating payments. Baker Hughes generally does not recognize, and prohibits, facilitating payments that may be permitted under the United States' FCPA. However, there is one situation where Baker Hughes does permit facilitating payments. Facilitating payments may be made in situations where there is an imminent threat to the health, safety or welfare of an employee, a member of his or her family or a co-worker. If you have questions about facilitating payments, seek the assistance of the Legal or Compliance departments.

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Unfortunately, the practice of paying facilitating payments is common in some parts of the world. It can occur in the context of police protection, mail pickup, giving routine licenses and permits, inspections, protecting perishable items, and so on. On the other hand, facilitating payments are prohibited in many countries. It is vital, therefore, that you check with the appropriate Legal or Compliance personnel before making any such payments.

In summary, the FCPA defines certain circumstances in which payments to government officials are allowed. An exception to the law allows facilitating payments in order to get routine government services performed. Such facilitating payments are severely restricted. In addition, two affirmative defenses allow companies to make payments in certain narrowly defined situations, provided they can prove that the payments qualify. The first affirmative defense allows payments that are legal under local law--a situation that is rarely the case. The second affirmative defense explicitly allows payment for "reasonable and bona fide expenditures" directly related to the promotion, demonstration, or explanation of products or services, or the execution or performance of a contract with a foreign government agency. In any of these situations, seek the assistance of the Legal or Compliance departments before making a payment.

Books & Records

Find out what the FCPA requires of companies in terms of keeping accurate books and records. What is Patrick proposing to do that violates the FCPA? Select your choice, then select "SUBMIT". A) He is refusing to admit that a facilitating payment was in fact an illegal bribe

B) He, with Laura, are conspiring to avoid reporting all of the company's business expenses C) He is suggesting that Laura create an inaccurate record

That is correct. Even if the "grease payment" received proper review and approval and did not break the law, disguising or mischaracterizing it in the company's records would still violate the FCPA, which requires

accurate books and records.

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In addition to its prohibition against bribery, the FCPA imposes record-keeping requirements, sometimes referred to as the accounting provisions, on certain U.S. companies. These provisions apply to public companies. To comply with the FCPA, companies must make and keep books, records, and accounts that in reasonable detail, accurately and fairly reflect the transactions and dispositions of assets. Companies must also maintain an internal accounting system that will provide "reasonable assurances" that transactions are executed and recorded properly. These requirements of the law are intended to prevent improper payments from being hidden on a company's books. They are a response to cases where companies paid a bribe and labeled it misleadingly as "expenses" or "unrecoverable debt." Under the FCPA's accounting provisions, it's your responsibility to always be truthful, accurate, and clear when recording company transactions. Never mislabel, misrecord, or hide a transaction by calling it something else, or by failing to record it. True or False: if a particular payment falls under the "facilitating payment" exception, it does not need to be documented in the company's books and records. Select your choice, then select "SUBMIT". A) B) True False

That is correct. Even if a particular payment is not a violation of the antibribery provisions of the FCPA--for example, because it falls under the facilitating payment exception--it is

still a violation to omit or misrepresent a transaction In this training, we've explored the basics of the Foreign Corrupt Practices Act, or FCPA: we outlined who is affected by the FCPA; we reviewed the two elements of the law--the antibribery provisions and the accounting provisions; and we covered exceptions and affirmative defenses to the antibribery provisions. We've also examined how the U.S. courts and enforcement agencies interpret various terms, such as "anything of value," "improper advantage," and "foreign government official." In general, keep in mind you should always consult the Legal or Compliance departments before proceeding with payments of any kind that may be linked to a foreign official.