united-states corporate-law bribery
Liability for knowing about bribe offered by a channel partner
<p>In the USA, anti-bribery laws prohibit a company from offering bribes or kickbacks to government officials.</p>

<p>If a <a href="http://en.wikipedia.org/wiki/Channel_partner" rel="nofollow noreferrer">channel partner</a> of U.S. company X offers a bribe, would X be held liable if it knew about the bribe, even though it didn't participate nor authorize the bribe?</p>

<p>The law that you are asking about is the <a href="https://en.wikipedia.org/wiki/Foreign_Corrupt_Practices_Act" rel="nofollow noreferrer">Foreign Corrupt Practices Act of 1977</a> (FCPA) (15 U.S.C. § 78dd-1, et seq.). </p>

<p>Under that law, knowledge or willful blindness to the fact that third-party with whom the U.S. linked person does business is engaged in corrupt practices like bribery can give rise to liability. </p>

<p>As one <a href="https://www.gibsondunn.com/wp-content/uploads/2017/12/Blume-Partridge-Tafari-Potential-FCPA-Liability-for-Third-Party-Conduct-Reuters.pdf" rel="nofollow noreferrer">memorandum</a> of the topic explains the relevant law:</p>

<blockquote>
  <p>The FCPA defines “knowing” as either:</p>
  
  <ul>
  <li><p>Awareness that a third party is engaging in misconduct or
  substantially certain that the third party will engage in misconduct.</p></li>
  <li><p>A firm belief that a third party is engaging in misconduct or
  substantially certain that the third party will engage in misconduct.
  (15 U.S.C. § 78dd-2(h)(3)(A)(i), (ii).)</p></li>
  </ul>
  
  <p>The government may establish knowledge by showing that the defendant
  was aware of a “high probability of the existence” of that conduct,
  unless the defendant “actually believe[d]” the conduct was not
  occurring (15 U.S.C. § 78dd-2(h)(3)(B)).</p>
  
  <p>The government contends that the FCPA not only imposes liability on
  those with actual knowledge of wrongdoing but also on those who
  purposefully avoid actual knowledge (FCPA Resource Guide, at 22).
  Courts have agreed and construed knowing to include deliberate
  ignorance (also referred to as willful blindness or conscious
  avoidance) (see <em>United States v. King</em>, 351 F.3d 859, 867 (8th Cir.
  2003) (approving a deliberate ignorance jury instruction in an FCPA
  prosecution)).</p>
  
  <p>For example, in <em>United States v. Kozeny</em>, the US Court of Appeals for
  the Second Circuit affirmed Frederic Bourke’s conviction for
  conspiring to violate the FCPA. Bourke’s business partner, Viktor
  Kozeny, allegedly channeled millions of dollars to Azeri officials to
  persuade them to privatize Azerbaijan’s state-owned oil company and
  sell the entity to Bourke and his investors. Bourke denied any
  knowledge of Kozeny’s payments, and the district court instructed the
  jury that Bourke had the requisite knowledge of payments under the
  FCPA if he was aware of a high probability that corrupt payments were
  being made but consciously and intentionally avoided confirming that
  fact.</p>
  
  <p>On appeal, the court concluded that the government presented
  sufficient evidence of Bourke’s conscious avoidance. The government
  established that Bourke:</p>
  
  <ul>
  <li><p>Knew that Kozeny, the scheme’s mastermind, had a reputation for
  corrupt business conduct and that Azeri officials would ultimately
  receive an ownership stake in the oil company if it were privatized.</p></li>
  <li><p>Contacted his attorneys to discuss ways to limit his potential FCPA
  liability.</p></li>
  <li><p>Formed American advisory companies to shield him and other American
  investors from potential liability for improper payments under the
  FCPA.</p></li>
  </ul>
  
  <p>(<em>United States v. Kozeny</em>, 667 F.3d 122, 127-133 (2d Cir. 2011).)</p>
  
  <p>The government also uses these theories against corporate entities.
  For example, in 2014, the DOJ and the SEC announced FCPA resolutions
  with California-based medical device company Bio-Rad Laboratories,
  Inc. to settle charges that its foreign agents paid bribes to secure
  government contracts. In recognition of, among other things, Bio-Rad’s
  voluntary disclosure and cooperation, the DOJ entered into a
  non-prosecution agreement (NPA) with Bio-Rad (DOJ Non-prosecution
  Agreement, Bio-Rad Laboratories, Inc. (Nov. 3, 2014)).</p>
  
  <p>According to the SEC, between 2005 and 2010, a Bio-Rad subsidiary paid
  third parties 15% to 30% commissions on its Russian sales knowing that
  the third parties likely did not have the capability to perform the
  services described in their contracts. The Bio-Rad subsidiary paid the
  third parties $4.6 million on sales of $38.6 million.</p>
  
  <p>The SEC asserted that executives at the parent company ignored red
  flags that allowed the scheme to continue for years, including that:</p>
  
  <ul>
  <li><p>The third parties were not located in Russia.</p></li>
  <li><p>The third parties did not have the resources to perform the
  contracted-for services.</p></li>
  <li><p>The subsidiary paid excessive commissions to banks in Latvia and
  Lithuania.</p></li>
  <li><p>The third parties made efforts to keep the payments secret.</p></li>
  <li><p>The services were not necessary to the company’s business.</p></li>
  </ul>
  
  <p>(<em>In re: Bio-Rad Labs., Inc.</em>, Admin. Proc. File No. 3-16231 (Nov. 3,
  2014) and Press Release, DOJ, Bio-Rad Laboratories Resolves Foreign
  Corrupt Practices Act Investigation and Agrees to Pay $14.35 Million
  Penalty (Nov. 3, 2014).)</p>
</blockquote>

<p>Because this is a very boring answer if the offeree of the bribe declines, let's proceed on the assumption that they accept the bribe from company x in exchange for some kind of benefit that is conferred upon company X and its channel partner (let's call them company y).</p>

<p>While company x is reasonably clearly guilty of commercial bribery (which is only specifically illegal in 36 US States - the others have different methods for obtaining justice for those unfairly disadvantaged by the effects of commercial bribery), the position that company y is in is less clear.</p>

<p>It is possible that a court may find that company y <em>should</em> have been aware, regardless of whether or not they actually did; it is possible that there is evidence that proves constructive knowledge of the crime; in these cases, they may be found equally culpable.</p>

<p>It is possible that a court may find that company y has been the beneficiary of unjust enrichment, and in the absence of specific statutory remedy or criminal punishment, order some equitable remedy.</p>

<p>So it is possible that company y could be liable for company x's bribery, regardless of whether they actively participate or not - liability is a tad too broad of a brush to paint it with.</p>

<p>In answer to the question whether they <em>would</em> be liable, it would be highly fact-specific and I wouldn't hazard a guess - it would turn on the circumstances and the evidence. </p>
