US and EU businesses operating in or solicing clients in any foreign country should take note of several recent developments in the laws intended to combat fraud and corruption by US and EU companies.
In the last several months, there have been significant developments surrounding a little-known statute called the Foreign Corrupt Practices Act (FCPA), which is a law intended to punish corrupt activity engaged in by US companies that takes place outside the borders of the US.
A violation of the FCPA can occur when a person acting on behalf of a US company offers a bribe or kickback in order to obtain something of value, such as a government contract or favorable treatment among competitors. Most importantly, in many cases a violation occurs even if that payment was legal under the laws of the country in which it was made.
Last year, Siemens AG agreed to pay a massive $1.3BN fine (that’s Billion with a B) to the Justice Department to settle allegations that its employees had paid bribes to a number of foreign governments in order to secure contracts ranging from a mass transit project in Venezuela to a cell phone contract with the government of Bangladesh.
US and EU companies now must closely scrutinize their policies and procedures regarding how they conduct business overseas, especially if they do any business in lesser developed nations where bribery may be seen as a normal component of doing business.
It has been argued that such a law places US and EU companies at a competitive disadvantage when it comes to conducting business overseas, especially if they have competitors domiciled in a nation that has no such law. Today, it is still the case that the US is the only nation to seriously enforce such legislation, but the EU is quickly following suit. It is too early to tell whether pressure from the Obama administration on foreign governments to keep pace by adopting and enforcing similar laws is working, but one thing is for certain: The Justice Department is committed to expanding the number of prosecutions and the severity of punishments under this previously unknown law.
Many legal commentators have complained of the highly technical nature of this statute. They have also decried the statute’s sweeping breadth, as the FCPA prohibits not just clearly corrupt payments, but also criminalizes what many regard as innocuous conduct. A literal reading of the statute would prohibit for example the paying a bribe to a Zimbabwean Customs Official for a smooth passage through customs, even though such a payment is legal and expected in Zimbabwe.
It has become clear to most business leaders that the increase in prosecutions and the serious penalties facing both management and employees means that US and EU companies who do any business overseas need to consult with knowledgeable sources in order to review and implement new policies to prevent violations of the FCPA.
Note: Thank you to RvH for inviting me to contribute to this site. I look forward to providing more commentary in the future.
D. Mays Dickey, Esq.
und viele Grüße aus Charlotte
Reinhard von Hennigs