FCPA - US cracks down on corporate bribes

A bit apart from customs and trade matters, but getting important for companies which operate globally, it is enforcement of FCPA (Foreign Corrupt Practice Act).

The FCPA prohibit US companies from paying or offering to pay, foreign-government officials or employees of state-owned companies to gain a business advantage. It covers non-monetary gifts or offers in addition to cash payments. The gray area of the law sometimes apply to actions, for example, the giving of seasonal gifts that is common in Japan or some other Asian countries.

This law applies not only US nationals but also for other foreign nationals working for US companies, or foreign companies which issue ADR (American Depository Receipts) in US. For example, a Japanese manager in Bridgestone Corporation was accused of violation of FCPA, allegedly involved indirectly bribe-related activity of marketing in South America.

Recently, the crackdown under the FCPA now extend across world-wide and penetrates entire industries. The Justice Department is increasing its prosecutions of alleged acts of foreign bribery by US corporations, forcing them to take costly steps to defend against scrutiny.

Here is examples of Lucent Technologies Inc. In 2007, the Justice Department settled charges against Lucent for failing to properly record millions of dollars in travel to Disney World, Las Vegas and other sightseeing destinations for about 1,000 Chinese Foreign officials who worked for state-controlled telecom companies. Lucent had characterized the trips as factory tours, but admitted to the conduct and paid $2.5 millions in fines.

Another example of non-US company, Siemens AG, German industrial conglomerate. Siemens agreed in December 2008 to pay $800 millions in US fines to settle bribery investigations involving alleged payments to government officials around the world to win infrastructure contracts. This fine amount is the largest foreign-bribery fine ever. Also, the cost of addressing its own corrupting allegations was nearly as much as its total fine of $1.7 billions, including the fines to the German government. Siemens is spending more money now on compliance programs and a government-mandated monitor.

Among the companies currently under Justice Department review, Sun Microsystems, which is in the midst of a potential $7.4 billions purchase by Oracle Corp., said in a regulatory filing that it might have violated bribery laws in an unnamed country. Both Sun and Oracle declined to elaborate on whether the potential violations would affect the merger deal. Oracle has said in an SEC filing that Sun informed it out the matter.

The conclusion: It is absolutely wiser and less costly to have an adequate compliance system in place and a corporate culture that stands for clean business.