Payment of monies or favors to government or business people to obtain favors is a common event throughout the world and, indeed, is considered an acceptable if not necessarily acknowledged part of business or governmental activity in at least a third of the world and perhaps half of the developing world. Sorely underpaid, many middle and lower governmental officers in Africa and South America routinely must make ends meet by such transfers and gifts in Asia are considered polite as well as necessary for one engaged in business.
The Foreign Corrupt Practices Act, (“FCPA”) is a unique law of the Untied States in that it seeks to impose criminal liability for acts in other jurisdictions that may not even be illegal in other nations, and is perhaps the best example of the American response to such activity. Commercial bribery is not only discouraged: it is illegal. And the punishment, both under the FCPA and the other Federal and California laws, is both severe and often imposed.
This Article shall assume that the reader has already reviewed our web article on the Federal Corrupt Practices Act and will concentrate on Federal and California law prohibiting and punishing those who engage in bribery…whether offering it or receiving same…in the commercial setting.
THE BASIC LAW:
Both California and the Federal government have powerful statutes that prohibit and punish bribery in the commercial setting. (This is usually considered a separate and different crime than bribing a governmental official.) In the commercial setting, which can roughly be defined as business and trade in all its various aspects, the amount of the penalty depends largely on the amount of the sums offered and/or accepted as the bribe.
The reader should review our article on Criminal Law in the United States to obtain both the basic criminal procedure of a trial and the burden of proof imposed upon the United States federal and state governments to obtain a criminal conviction.
Assuming monies are either offered or received to perform favors in a commercial setting, in California the accused can be alleged to have committed the crime of commercial bribery pursuant to California Penal Code section 641.3. Commercial bribery involving bribes in an amount exceeding more than one thousand dollars ($1,000.00) is punishable by imprisonment in the county jail or state prison for 16 months, two, or three years. In addition restitution of the sums lost due to the criminal violation can be ordered. The accused could also be alleged to have to have committed grand theft under California Penal Code section 484 with penalties of imprisonment and restitution.
California criminal law divides offenses into three major categories: felonies, misdemeanors and infractions. Felonies include most violent crimes against persons such as murder as well crimes against property such as burglary and theft depending on the value of the property involved and other nonviolent crimes such as bribery, embezzlement, fraud or computer crime often termed “white collar crime”. Felonies are crimes for which a person may be sentenced to imprisonment in state prison (usually for more than one year.) Misdemeanors are lesser crimes for which the penalty may be imprisonment in a county jail (usually for one year or less) and infractions are offenses generally not punished by imprisonment at all.
“White collar crime” is a common term involving crimes that are nonviolent, have cheating or “dishonesty” as a common basis and are often committed by persons who are professionals or entrepreneurs under cover of or as part of legitimate business activities.
1. Commercial Bribery by Employees
California Penal Code section 641.3 was enacted in 1989 and according to California White Collar Crimes Criminal Sanctions And Civil Remedies, 2004, Matthew Bender & Co, Inc. at section 8.200 contains a broadly worded commercial bribery prohibition.
Section 641.3 (a) provides that “[A]ny employee who solicits, accepts, or agrees to accept money or anything of value from a person other than his or her employer , other than in trust for the employer, corruptly and without the knowledge or consent of the employer, in return for using or agreeing to use his or her position for the benefit of that other person, and any person who offers or gives an employee money or anything of value under those circumstances , is guilty of commercial bribery.”
The elements of the offense of employee commercial bribery are (1) employee solicits, accepts, or agrees to accept a thing of value from another a person other than his/her employer agreeing in turn to use his/her position for the benefit of that person (2) the thing of value solicited, received, offered or given must be an amount of money or have a monetary value of more than $100 or the section does not apply (3) the violation must occur without the knowledge or consent of the employer and (4) the act must be entered into “corruptly” requiring a specific intent to injure or defraud the employer (Penal Code section 641.3(d)(3).
This commercial bribery statute is based on the notion of fiduciary duty between a business entity and its employees. The breach of that duty to the injury of the employer based on the acceptance of a thing of value is unlawful.
Section 641.3( c) provides that “[C]ommercial bribery is punishable by imprisonment in the county jail for not more than one year if the amount of the bribe is one thousand ($1,000) or less, or by imprisonment in the county jail, or in the state prison for 16 months, or two or three years if the amount of the bribe exceeds one thousand dollars ($1,000.00).”
This is a “wobbler criminal offense” as it is chargeable as a misdemeanor or felony with the later penalty providing for a determinate sentence of 16 months or 2 or 3 years. The punishment is restricted to a misdemeanor penalty (1 year in local custody) where the thing of value given as a bribe has a market value of one thousand dollars ($1,000.00) or less.
In addition to the misdemeanor or felony sentence, possible civil damage provisions of Civil Code section 3281 allowing damage to person injured by unlawful act may also apply. Essentially, this allows the person damaged to seek damages by filing suit in the civil court. See our web article on Embezzlement.
Additionally, as with all criminal violations, victims have a right to restitution of sums lost (Cal.Const.) Art. 1, section 28(b). Such restitution must be ordered in every case of victim loss from criminal activity (Penal Code section 1202.4(a) and (f)).
California Penal Code section 484 is California’s present theft statute and is a generic prohibition that integrates into one single consolidated crime the previously separate offenses of larceny, embezzlement, obtaining money by false pretenses and kindred offenses involving the unpermitted taking of property of another with the intent of permanently depriving the victim of it. The definition of theft is the felonious stealing, taking, carrying, leading, or driving away of the personal property of another, or fraudulently appropriating property that has been entrusted by the other. This integration of the previously separate forms of theft did not merge their somewhat disparate elements but proof of theft by either simple taking, false pretenses, trick or device, or embezzlement independently constitutes a violation of section 484 and gives rise to its sanctions.
The distinction between petty theft and grand theft is important since petty theft is a misdemeanor and grand theft is a felony. In petty theft the value of the property taken must not exceed $400. The taking by any means of property with a value over $400 constitutes grand theft.
Calculation of the amount taken or lost does not require proof that the defendant profited by that amount. It is the market value of the property taken that is used to determine the amount. The elements for either grand theft or petty theft are identical except for the value of the property.
The punishment for grand theft is set forth in California Penal Code section 789 which provides that when the grand theft involves the theft of a firearm there is imprisonment in the state prison for 16 months,2, or 3 years and in all other cases imprisonment in a county jail not exceeding one year or in the state prison.
1. If the crime occurs across State lines or involved any type of federal or federally licensed institution, it can be alleged that, additionally, federal criminal law would apply. Typical instances are bribes affecting international or interstate commerce or such institutions as Banks who are members of the federal reserve banking system or federal savings and loan institutions. The accused can be alleged to have committed an act constituting a violation of conflict of interest or bribery affecting a personal financial interest pursuant to United States Code, Chapter 11, Section 208. The penalty for violation of section 208 is up to five years in prison, and/or a fine of $50,000 or the amount that the person received, whichever is greater.
In terms of commercial bribery involving banks, the relevant statute is United States Code, Chapter 11- Bribery, Graft and Conflicts of Interest Section 208, Acts Affecting a personal financial interest
Section 208 provides that, “whoever, being…a Federal Reserve bank director, officer, or employee…through decision, approval, disapproval, investigation, or otherwise in a judicial or other proceeding application, request for a ruling or other determination, contract, claim, controversy, charge, accusation, arrest or other particular matter in which, to his knowledge, he, his spouse, minor child, general partner or employee, or any person or organization with whom he is negotiating or has any arrangement concerning prospective employment, has a financial interest, shall be subject to the penalties set forth in Section 216 of this title.”
According to Section 216 of the United States Code, the penalty for a violation of Section 208 is up to five years in prison, and/or a fine of $50,000 for each violation or the amount that the person received, whichever amount is greater.
2. United States Code, Title 18-Crimes and Criminal Procedure, Part I-Crimes, Chapter 47- Fraud and False Statements, Section 1005- Bank entries, reports and transactions
Section 1005 provides that, “whoever with intent to defraud the United States or any agency thereof, or any financial institution referred to in this section, participates or shares in or receives (directly or indirectly) any money, profit, property or benefits through any transaction, loan, commission, contract, or any other act of any such financial institution, shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both.” Note the very broad nature of the involvement which would be subsumed under this Statute: “participates or shares in or receives directly or indirectly….(from) any act” would have the law applying to those even remotely connected to the actual acts alleged.
Most bribery situations, in our experience, begin with small “presents” that are on the borderline between acceptable tokens of courtesy. Instead of merely paying for business lunches or dinners, or perhaps tickets to a ball game, a potential vendor or contract partner pays for a weekend trip to a sporting event or golf tournament. A short time late, the recipient is giving a short vacation trip or season tickets and then “spending money” on the trip, etc, etc.
Some dishonest employees actively seek bribery and make broad hints that some “favors” are required. Others find themselves sliding into acceptance of favors that, only a few months before, would have been shocking to them.
One factor is constant, however: once one begins to accept such favors one is “locked” into the relationship and feels a mixture of shame and guilt coupled with enjoyment of the fringe benefit of such bribes and the comfort that “others must be doing it.”
For employers, such bribery not only distorts the market and the profit margins, but is like a cancer within the business, eating away at the ethical underpinnings of the company and making it impossible for the honest vendors (and employees) to prosper with the company.
For that reason, a seasoned business man known to this writer would commit substantial time and resources in educating his employees as to their ethical requirements and would be brutal in reprisals when any wrongdoing was discovered. “I do it to protect myself,” he would comment. “I need to know my own people are honest and will not let my reputation as a company be sullied by a few bad apples. My company is an honest one and will stay that way.”
I well remember one of his managers who was caught taking a small bribe…a vacation trip…and who saw his promising career shattered and begged for some “understanding” of his position. Our client, calmly but coldly, told him that in accepting the bribe he had forfeited any right to be other than an example to all the other employees and had the district attorney called. The manager looked at the owner and commented that it had not seemed “a big thing” when it began, merely a favor from a friend.
And the owner told him what I firmly believe: “Friends don’t bribe friends. Criminals do.”
When in the United States, bribery is a crime and enforcement of the prohibition against it is a common occurrence. The business methods used in the United States may not be akin to those abroad but that simply means that those engaging in business in the United States will have to adjust or face dire consequences in many instances.