State Capitalism and the Foreign Corrupt Practices Act

27 Pages Posted: 7 May 2012 Last revised: 1 Dec 2015

Paul Rose

Ohio State University - Moritz College of Law; Bocconi University - BAFFI Center on International Markets, Money, and Regulation; Tufts University - The Fletcher School of Law and Diplomacy; Fundación Instituto de Empresa, S.L. - IE Business School

Date Written: May 7, 2012

Abstract

Who is a “foreign official” under the Foreign Corrupt Practices Act? This question will take on increasing importance in the coming years for two reasons. First, the Department of Justice and the Securities and Exchange Commission are aggressively pursuing FCPA cases and, as a consequence, testing the boundaries of the statute. Second, many foreign governments appear to be returning to the old time religion of state capitalism. Foreign governments act as state capitalists not just through state-owned enterprises, but also through public pension funds and sovereign wealth funds (SWFs); these funds are perhaps the next frontier for FCPA enforcement. Indeed, in 2011 the SEC put certain banks and private equity funds on notice that the agency’s enforcement staff had begun to take a closer look at the banks’ and funds’ dealings with SWFs. This article examines SWFs and other state-controlled funds, including public pension funds, as “instrumentalities” and their employees as “foreign officials” under the FCPA. The article concludes that although in some cases SWF and state pension fund employees would be “foreign officials” for purposes of the FCPA, in most cases the FCPA should not apply to these funds and their employees because there is no link between the employees and the type of foreign policy concern that motivated the creation of the FCPA.

Keywords: sovereign wealth funds pension funds, FCPA, state capitalism

JEL Classification: K14, K2, K20, K29

Suggested Citation

Rose, Paul, State Capitalism and the Foreign Corrupt Practices Act (May 7, 2012). 73 OHIO ST. L. J. 1069 (2013) ; Ohio State Public Law Working Paper No. 167. Available at SSRN: https://ssrn.com/abstract=2053456

Paul Rose (Contact Author)

Ohio State University - Moritz College of Law ( email )

55 West 12th Avenue
Columbus, OH 43210
United States

Bocconi University - BAFFI Center on International Markets, Money, and Regulation ( email )

Milano, 20136
Italy

Tufts University - The Fletcher School of Law and Diplomacy ( email )

Medford, MA 02155
United States

Fundación Instituto de Empresa, S.L. - IE Business School ( email )

Calle Maria de Molina 12, Bajo
Madrid, Madrid 28006
Spain

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