The Supreme Court of India recently issued a landmark ruling
that may significantly expand the risk companies face under the
U.S. Foreign Corrupt Practices Act ("FCPA") and similar
anti-bribery statutes across the world. On February 23, 2016, the
Supreme Court held that employees of all banking companies, foreign
and domestic, are "public servants" under India's
Prevention of Corruption Act, 1988 ("POCA").1
This definitional expansion could have far-reaching implications
for companies interacting with India's financial sector, who
may now face risk of prosecution under both the FCPA and the POCA
for issues of corruption involving private banks.
The decision stems from a fraud case against Global Trust Bank
("GTB"), a private sector bank that was central to the
2001 Indian stock market manipulation scam. The government sought
to hold two GTB executives liable as public servants under the
POCA. Lower courts dismissed the charges, reasoning that the POCA
applies only to public employees. The India Supreme Court reversed
and held that private bank employees fall within the POCA's
definition of public servant because the legislation was enacted to
broaden the purview of the country's anti-corruption laws.
For companies doing business in India's financial sector,
the ruling could signal increased compliance risk in at least two
respects. First, the Court's broad definition of public servant
may extend to employees of both domestic and foreign private banks,
which are allowed to operate in India under a license issued by the
Reserve Bank of India ("RBI"). In expanding the
definition of public servant to enforce the POCA, the Court's
decision may apply to any employee of an RBI-licensed bank,
including employees of foreign banks.
Second, by labeling the GTB executives public servants for
purposes of the POCA, the Court also may open the door to private
bankers in India being deemed foreign officials under the FCPA. The
FCPA defines a foreign official as "any person acting in an
official capacity for or on behalf of any [foreign] government,
department, agency, or instrumentality."2 U.S.
regulators have taken an expansive view of who qualifies as a
foreign official under the FCPA, and, as a result, prosecuted an
increasingly wider range of entities and individuals. Now, U.S.
prosecutors may use the India Supreme Court's recent ruling to
bring similar charges against companies and individuals in the U.S.
and abroad for improper dealings with private bank employees
operating in India.
In a criminal trial the charge is the foundation of the accusation & every care must be taken to see that it is not only properly framed but evidence is only tampered with respect to matters put in the charge and not the other matters.
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