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    FCPA and Subprime Lending

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    Many of you may be aware of the Foreign Corrupt Practices Act (as amended). Most folks assume it applies to bribing foreign officials. It does (with some exceptions), but it also has a provision that makes fraudulent accounting entries a crime and that provision, although commonly applied in cases where bribes have been hidden through other classifications, also applies to the records of any company that has publicly traded securities in the US. To be a crime under this part of the act the entries must be fraudulent (have an intent to deceive in order to attain monetary gain), be material, and be intentional. Accounting errors that do not meet these criteria are not a crime under the FCPA, although they may violate SEC regulations.

    The sub-prime crises has now engendered an investigation for possible criminal action. See http://www.bloomberg.com/apps/news?pid=20601087&sid=aJAqV8MEwnes&refer=home for an article on this.

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    Basically the FCPA classifies accounting entries that are fraudulent with an intent to deceive in order to attain monetary gain a crime. These entries have to be material and intention. The Subprime lending crisis involves large loans, usually on real estate, given to people who do not qualify for them. These are very ...