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Can a peasant community leader be considered a “government official” under the FCPA?

Despite a slow-down in the global mining industry, Latin America remains a key destination for mining investment because of the sizeable wealth of its mineral resources, reduced operating costs and incentive-based policies. Corruption, however, is a key concern when it comes to doing business in Latin America. Despite a couple of notable exceptions such as Chile and Uruguay, most countries in Latin America score relatively low in the latest ranking of the Corruption Perceptions Index published by Transparency International. It is arguable that the most crucial corruption risk of doing business in Latin America is the lack of knowledge by business people, executives and local employees of the reach and application of anti-bribery and anti-corruption legislation at their country level and internationally. More importantly, a large majority of them is either not aware or has a blatant disregard for the reach and application of the United States’ Foreign Corruption Practices Act (known by its English acronym ‘FCPA’), the most widely enforced anti-corruption legislation of the moment.

Of critical importance is the increasing intertwine of the FCPA with other US laws that can establish corruption-related offenses where FCPA offenses are not present, thereby expanding the reach of the FCPA and prosecution of overseas activity that other laws do not reach, such as travel, commerce, mail and wire statutes, anti-money laundering, whistle-blower, fraud, data privacy and other laws. Further, there are several recent developments that should arguably send a strong sign of caution to mining investors doing business internationally, such as the open investigations and hefty penalties involving mining and engineering companies in the last three years. In addition, close attention should be paid to an important legal ruling that may have particular implications to mining operations in Latin America, owing to its large peasant and indigenous population. In the 2014 ground-breaking decision United States v Joel Esquenazi and Carlos Rodriguez, the Eleventh Circuit Court of Appeals was the first to review what is an ‘instrumentality’ under the FCPA, setting a precedent for the inclusion of non-traditional persons within the reach of the FCPA when these are deemed to perform a function that the government of the foreign country may treat as its own.

The interpretation of what is an ‘instrumentality’ under the FCPA appears to be broad enough to encompass a wide spectrum of entities with varying degrees of government ownership or control, or both. While this issue is likely to be ultimately addressed as a question of fact using a totality of the circumstances test with no single dispositive factor, Esquenazi nonetheless brings a new outlook when analyzing FCPA compliance matters in Latin America from a mining industry perspective. Given the historical problems of cultural and social integration of its diverse population, various Latin American governments have not only formally designated and recognized, but also transferred traditional government functions to certain groups in their population who often receive government subsidies and have varying degrees of government control. The probable classification of a community leader as a government official under the FCPA would have enormous implications for any mining investor operating in the region.  Please see the complete article and legal analysis at: https://www.orihuelalegal.com/wp-content/uploads/2015/03/Anti-corruption-developments-affecting-Latin-America¹s-mining-industry.pdf

Sandra Orihuela

Can a peasant community leader be considered a “government official” under the FCPA?

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