May 19 2008
foreign corrupt practices act being enforced in the US
I’ve posted on various FCPA conferences here from time to time, and of course, have been meaning to post something about this for some time now. (much of it due to Jeff Brauer’s blog, which is pretty derogatory, but highlights the FCPA in many of his posts) Ironically, here in America, it isn’t something I hear too much about aside from conferences here and there. The Foreign Corrupt Practices Act makes it illegal for a person or company to make a payment to a foreign official for the purpose of obtaining or retaining business. And yes, it also applies to foreign firms and persons who take any act in furtherance of such a corrupt payment while in the U.S.
Well, the Recorder ran an article ( here, login required) last week entitled, “Seven Awaiting Sentencing for Foreign Bribes”:
Self is one of seven defendants across the country who have pleaded guilty and await sentencing for violations of the [FCPA] . . . . The last individual defendant to be sentences was Steven Lynwood Head in California’s Southern District last September; he got six month in prison. In Self’s case, the government agreed to a guideline range that would put his prison sentence at eight months.
The government’s FCPA unit began by targeting companies, and now has focused on individuals to obtain tougher penalties . . . . “It raises the profile of the enforcement program, and it’s the kind of thing that executives around the world read about, and react to . . .” The Justice Department brought 10 actions against individuals last year, which is the same number it brought in 2005 and 2006 combined . . . .
So what is it that Martin Self, a British defense official, did?
The former president of Pacific Consolidated Industries, Self admitted that he approved a marketing contract for the relative of an employee with the [UK] Ministry of Defence, which results in more than $70,000 in payments. But the relative did no work. Instead, the money was meant to procure contracts for Pacific.
Self “failed to make a reasonable investigation of the true facts and deliberately avoided learning the true facts.”
He made small bribes totaling $70k and the government is going after him? That sounds like small fries compared to horror stories I’ve heard about for businesses that have gone into China and approved much more than that. Thankfully, my Chinese clients have never done such a thing. Nor should any attorney advise his or her client to approve of using bribes. It is bad business, it is asking for the Chinese government to crack down on your client’s business (if it is a foreign company, given China’s propensity to enforce laws against foreigners), and you may be asking for jailtime here in the U.S.
Dan Harris some time back thought along the same lines,
A covered company can be held liable for payments made on its behalf by agents or distributors.
In countries like China, where so many of the largest companies are state-owned, the chance of a “business” payment violating the FCPA is great.
One of the things I have always found troubling about Westerners doing business in emerging market countries is that they sometimes take an almost perverse pride in discussing payoffs to government officials. It is as though their having paid a bribe is a symbol of their international sophistication and insider knowledge. Yet, countless times when I am told of the bribe, I know the very same thing could almost certainly have been accomplished without a bribe.
I had another post a few months back about cheating and bribing because “everybody else does it” entitled, “ What do American Steroids Have to Do with Business? Everything.”
Yes, I recognize the reality that sometimes a bribe to a certain local official would make your process easier. You might get your approvals for real estate faster, or whatever else. Heck, you may even bribe the judge in your case to get a favorable ruling. Don’t do it. Your (or your client’s) integrity in doing international business is not worth taking shortcuts… especially you have to do jail time for it.
Perhaps he has, perhaps he hasn’t. That is Dan’s business.
But what is my business is to warn people that a $100 bill can end up leading folks to do some nice U.S. jail time. That’s what the FCPA is about.
And so is this a preachy tone in that sense? Sure. If being a preacher means that I am warning people of consequences, then absolutely. My job as a lawyer is to warn. Even if Dan said nothing, I would have the same view and the same message because that is my job. If you disregard that advice, fine, there is nothing I can do really do about it. But I am not going to the reckless attorney who tells clients, “it’s fine, bribe all you want”. If you want that sort of attorney, there are plenty of those. I just happen to think those attorneys ought to lose their bar cards for moral turpitude.