Have you ever helped organize an international event like this? Senior executives at an American company recently acquired a state-owned Asian company. They want to integrate the work forces of both companies spread across five continents, the sooner the better. The bosses call a meeting to introduce new colleagues to one another, create new work groups, and jump-start the integration process. For their location they pick an elegant hotel in California. The execs book a block of rooms from Friday through Thursday, slate a few casual programs for Saturday, and schedule the welcoming banquet for Sunday. Participants, including a coterie of government officials who used to run the company, begin arriving Friday anticipating complimentary spa treatments, golf games, onsite horseback riding and delightful cuisine. It’s all waiting for them, courtesy of the American host.
Sound unexceptional? Business as usual? If you describe the above (fictitious) scenario that way, you’re in good company.
You also could be investigated by the U.S. government, had you participated. Under the Foreign Corrupt Practices Act (FCPA), the American hosts — and their employees and contractors — would be subject to investigation on charges of attempted bribery. The fact that no business was scheduled until Monday in my scenario makes the gifted weekend stays suspect.
“But,” I hear the meeting planner protest, “I never tried to bribe anyone! Nobody asked for a bribe! The company always pays T & E expenses at major meetings; why the fuss this time? Besides, the merger deal is signed! Who the dickens could I bribe?”
None of these arguments carries weight with the Department of Justice, which handles most FCPA investigations. The FCPA makes it a federal crime to buy or attempt to buy special treatment from foreign officials, or from family members of foreign officials; or to fail to put a system in place designed to identify and thwart corruption in foreign markets.
Federal enforcement of FCPA is on the rise. In 2010, the Department of Justice is believed to have conducted more than 150 investigations into U.S. companies on corruption charges, collecting $2.1 billion in fines, including seized profits. This summer, newspaper headlines trumpeted federal investigations into Walmart and Pfizer. Dozens of other companies have been probed, from giants such as Walmart to micro-enterprises such as the film festival management company operated by a Hollywood couple Gerald and Patricia Green. (The Greens were convicted and served prison time last year.)
The law has its champions as well as its critics. Advocates call it a major advance in reducing global corruption. Who would argue in support of graft or bribery?
Unfortunately, gray areas abound. Federal prosecutors have never codified the actions that they now prosecute under FCPA. As a result, those involved in organizing international programs — whether it’s a sit-down with a single trade minister to discuss foreign investment, or an enterprise-level meeting involving hundreds of professionals and managers — face the need to proceed cautiously. Exacerbating the problem are thorny questions of cultural relativism. In many cultures, gift-giving is an essential business ritual. When exactly does a routine gift become a bribe? When does a friendly request between business people amount to attempted government coercion?
Good intentions offer no protection at all. Companies have been fined for paying fees they believed were both mandatory and standard; it turned out they were neither. Paying extra for a government service — say, certification — to be delivered quickly is generally acceptable; paying extra for a service not available to your competitors is not. Other potential overseas no-nos including renting space in a building owned by someone related to someone in government; helping an official’s son or daughter overseas get a U.S. internship or job; or failing to report a vendor who submits a large unexplained invoice.
Compliance goes beyond official dealings. Anyone doing business overseas will routinely purchase services from any number of vendors, contractors and professional firms. Increasingly, U.S. organizations ask all overseas contractors to sign affidavits indicating familiarity with the statute and intention to comply. While adding paperwork is somewhat onerous, taking this step sends the message to vendors you know what our government expects from you, and have already begun to comply. In the event of a probe, being able to cull such documents from your files demonstrates that you’ve emphasized compliance to your vendors.
Another important sphere of compliance is Accounts Payable. In years past, many companies entered new markets — especially industrializing states — seeking well-connected local partners. The ideal candidates “knew the territory,” had “friends in high places,” “knew who to shake hands with” and so on. The euphemisms added up to an elaborate wink and nod, the none-too-subtle message being one of willful ignorance.
I’m here to tell you those days are over. The invoices you pay had better be detailed and fully documented or you may be asked to explain why to prosecutors.
Learn more about how U.S. companies successfully comply with the FCPA; ask your corporate counsel for guidance; exercise caution when exchanging gifts or paying questionable fees; keep good records; scrutinize your payables and submitted invoices; and, especially, don’t fear asking tough questions should doubts arise. No statute should deter you from doing business anywhere in the world. C&IT