United States v. International Minerals & Chemical Corp. Case Brief: FCPA and Liability for Foreign Subsidiaries

Case Brief: United States v. International Minerals & Chemical Corp., 402 U.S. 558 (1971)

Court

Supreme Court of the United States

Citation

402 U.S. 558 (1971)

Date

May 3, 1971

Parties

• Plaintiff/Appellant: United States of America
• Defendant/Appellee: International Minerals & Chemical Corp.

Facts

The case involves a dispute over the interpretation and enforcement of the Foreign Corrupt Practices Act (FCPA) concerning a U.S. corporation, International Minerals & Chemical Corporation (IMC). The government alleged that IMC engaged in illegal business practices by making illicit payments to foreign officials in exchange for favorable business treatment. The payments were made by IMC's subsidiary in foreign countries, and the issue was whether the parent corporation could be held liable for the actions of its subsidiary, especially when those actions occurred overseas.

The United States sought to enforce sanctions under U.S. law, claiming that IMC's practices violated the FCPA, which prohibits American companies from making bribes or illicit payments to foreign officials.

Issue

The key issue in this case was whether a U.S. corporation could be held liable under the FCPA for the illegal actions of its foreign subsidiaries, especially when the alleged illegal payments occurred outside the U.S.

Holding

The Supreme Court held that the United States government could prosecute and hold liable a U.S. corporation for violations of the Foreign Corrupt Practices Act (FCPA) for illicit actions conducted by its foreign subsidiaries.

Reasoning

The Court reasoned that the actions of the foreign subsidiary could be imputed to the parent corporation under U.S. law, especially because the parent corporation had sufficient control over the subsidiary’s operations. The Court explained that corporate liability under the FCPA was not limited to actions taken within the U.S. but could extend to actions taken abroad when those actions were part of the corporation's overall conduct.

The Court emphasized that enforcing the FCPA's provisions was essential to maintaining the integrity of international commerce and preventing U.S. companies from engaging in corrupt practices globally. The decision supported the broader reach of U.S. law in regulating corporate conduct overseas, given the international scope of trade and commerce.

Rule of Law

The Foreign Corrupt Practices Act applies to U.S. corporations for illegal payments made by their subsidiaries abroad if those actions are linked to the parent company’s overall business operations and the company has sufficient control over the subsidiary.

Disposition

The Supreme Court ruled in favor of the United States, upholding the application of the Foreign Corrupt Practices Act to actions conducted by foreign subsidiaries of U.S. corporations.

Similar Cases and Cases Cited

1. United States v. Kay, 513 F.3d 432 (5th Cir. 2007)

   • Snippet: The Fifth Circuit held that the FCPA’s provisions applied to bribery schemes involving foreign officials and U.S. companies, even when the bribes were not directly linked to the U.S. operations, reflecting the broad reach of U.S. anti-bribery laws.

2. United States v. Liebo, 923 F.2d 1308 (8th Cir. 1991)

   • Snippet: The Eighth Circuit affirmed the broad application of U.S. laws to conduct occurring outside the United States, reinforcing the idea that U.S. corporations are responsible for the actions of their subsidiaries, especially when engaging in illegal activities.

3. United States v. Chavin, 275 F.3d 977 (9th Cir. 2001)

   • Snippet: The Ninth Circuit upheld the conviction of an individual under the FCPA for making illegal payments to foreign officials, emphasizing the reach of U.S. anti-corruption laws in global business dealings.

4. United States v. Agrawal, 726 F.3d 235 (2d Cir. 2013)

   • Snippet: The Second Circuit reinforced the idea that corporate executives could be held personally liable under the FCPA for corrupt activities within their corporations, even when those activities were conducted by subsidiaries.