“It is illegal for any
U.S. business, large
or small, to bribe
in order to get contracts or obtain commercial advantages.”
the FCPA now exist in many countries.
As an example, last year the U.K. began to
enforce its new strict Anti-Bribery Act.
In the U. S., the FCPA has been vigorously
enforced by both the Department of Justice
and, for companies subject to SEC regulation, by the SEC. Under the FCPA, virtually
all U.S. business entities, acting directly or
through an agent, subsidiary, partner, or
any other means, are forbidden from making significant payments to foreign officials.
Large fines have been imposed on major corporations and corporate officials have been
sentenced to hard time in jail.
Companies that do business abroad need
to take affirmative steps to implement
compliance programs designed to educate
company employees about FCPA; make risk
assessments of potential areas of exposure,
and take affirmative action to make sure
that agents and joint-venture partners are
not making illegal payments. Many U.S.
companies now include language in contracts with foreign agents, partners, and
joint-venture participants wherein the U. S.
corporate anti-corruption policy is spelled
out and the agent, partner, or joint-venture
participants must affirmatively agree to
comply with the policy.
Are there irregularities that cannot be
explained in country C? As an international player, you can’t put your head in the
sand and plead that you didn’t know. U.S.
prosecutors often will take the position
that even if your agent or partner made the
illegal payments without your knowledge,
you are responsible.
If the possibility of large fines and jail
sentences are not enough to induce compli-
ance, let’s add another real concern. Assume
that you own or control a family business
and you have succeeded in expanding in
certain foreign markets using the assis-
tance of local agents. As a smaller com-
pany, you have been able to move quickly
and you have picked foreign agents who are
well connected. Some of these agents have
required very high commissions but you
have adopted a “don’t ask, don’t tell” policy
and know that you have made big profits in
certain markets where some of your com-
petitors have not been able to get a business
license. Your company has been so success-
ful that you have been approached by a
Fortune 100 company and offered a truly
fabulous amount to buy your company.
You accept the offer and the “due diligence”
investigation begins. When the buyer dis-
covers that your local agent has been mak-
ing illegal payment to government officials
in several foreign countries, they walk away
from the deal and disclose to you the prob-
lems that were discovered. Further, you are
advised that now that you have knowledge
of these illegal payments, you must stop
them and disclose the illegal payments to
the Department of Justice. Failure to dis-
close will increase your potential liability.
Steve Fellman is a part-
ner in GKG Law P.C., a
law firm. Fellman has served
as A.R.E.’s legal counsel
for many years.
WHY A “DON’T ASK, DON’T TELL”
APPROACH IS A BAD IDEA
Such compliance procedures are a good
start, but they also must be followed by
evaluations of what is happening in the
markets in which you do business. Are
your costs of operations in country A significantly higher than costs in comparable
countries? Does your agent in country B
require an unusually high commission?
1/28/09 2: 26 PM