The dog days of summer. A time for reflection, a time to think.
I posed the question “what’s on your mind” to the following FCPA practitioners and below are their responses.
Philip Rohlik (Debevoise & Plimpton – Hong Kong)
“While I have been working on Asian related FCPA matters for more than seven years, I moved to the region two years ago. Living here and interacting with local employees in situations other than investigations has given me a different perspective of the cost and difficulties associated with compliance.
Facilitating payments and transnational legal regimes that seek to bar them are on my mind. While it is correct and easy to say that ethical multinational corporations should not give in to the petty extortion that characterizes facilitation payments, the issue is not so simple when looked at from the reality of an employee in a high-risk jurisdiction — the kind of employee who recently asked me for advice on “how do I make the police go away?” when they visit the second or third week of every month (about the time their last month’s paycheck runs out). It is easy for a compliance officer or lawyer who encounters random government officials on his or her way to or from the airport to make full use of the ICC’s Resist handbook. Local (and, let’s face it, not that well paid) employees who must deal with specific officials on a regular basis are in a different situation especially if they have no desire to test the limits of “imminent physical harm.”
When laws impose vicarious or respondeat superior liability, situations to which the law applies should not be determined from the abstract perspective of a corporation but from the realities faced by the company’s employees. Is the fight against corruption really furthered by having zero tolerance policies for facilitation payments at the corporate level, but local employees very rationally believing that such grand pronouncements leave them in a situation that will either (i) make their life very difficult or (ii) force them to circumvent internal controls in order to make the payment (thereby creating a potential mechanism for more nefarious payments)? In this respect, the U.S. law that exempts facilitating payments from the anti-bribery provisions of the FCPA may be less anachronistic than it is often made out to be.
Also often on my mind is third party due diligence. Right now, one of our concerns is attending to our clients’ needs for right-sizing third party due diligence. Businesses are concerned that the continued lack of clarity from regulators as to the required steps results in excessive cost and a misallocation of compliance resources. While some third parties deserve thorough diligence, how much diligence is due other third-parties? Is a basic questionnaire and (the often-not-inexpensive) outsourcing of a public records check sufficient? What if such checks are almost always inconclusive in countries with limited public records? Do they just become inefficient box ticking? We are actively working with both clients as well as due diligence firms providing cloud-based and world-wide investigative services to help get these costs under control. Among the solutions we are working on are greater use of in-house information. If there are adequate internal controls on the evaluation of in-house experience with a third party, we believe that the greater use of on-hand information to evaluate third parties can be a real cost-saver. Doing so would free up resources for other compliance tasks as well as improve the client’s bottom line.”
John Rupp (Covington & Burling – London)
“As we continue to struggle on behalf of clients with demands for bribes, large and small, by government officials in a depressing number of countries, I have become ever more convinced that a new approach to the campaign against bribery – in particular, by western countries – is needed. The approach that western countries have taken thus far to the bribery of foreign government officials is to punish the bribe giver. The premise appears to be that international companies, including those subject to the US Foreign Corrupt Practices Act and the UK Bribery Act 2010, rather like bribing foreign government officials, seeing it as a convenient way to win business without having to compete fairly with other companies operating in the same space.
A completely different picture emerges, of course, when one spends a good part of each working day developing strategies to enable clients to operate in countries where official corruption is endemic. The international company employee who wakes up in the morning, steadies himself or herself in the mirror and then looks forward to winning business through bribery is an exceedingly rare bird in my experience. Overwhelming, the reflected image of the vast majority of employees of international companies grappling with bribery demands is of consternation – how does one continue to operate in Country X when everyone on the government payroll in the country is demanding a bribe for everything?
A fully developed, and maximally effective, anti-bribery program by a western country would involve, I believe, much more attention than has been paid in the past to assisting international companies when they are confronting demands for bribes by foreign government officials. The US State and Commerce Departments, UK and German Foreign Ministries, World Bank – and many others – should put much more emphasis in the future than they have in the past on assisting companies fend off official demands for bribes. In many, many cases, they have the resources – and the leverage – to do so.
I’m not suggesting that western countries consider repealing statutes punishing the bribery of foreign government officials. What I am suggesting is that they balance that approach with an equally concerted effort to deal with the demand side of the bribery equation.“
Thomas Fox (Solo Practitioner, Founder and Editor of the FCPA Compliance and Ethics Blog)
“The Securities and Exchange Commission (SEC) is investigating JPMorgan Chase regarding its hiring practices in China. It appears that JP Morgan Chase hired children of Chinese government officials or heads of state owned enterprises. While such hirings do not violate the FCPA per se, they do raise red flags. The FCPA Professor was quoted in the New York Times, “While the hire of a son or daughter itself is not illegal, red flags would be raised if the person hired was not qualified for the position, or, for example, if a firm never received business before and then lo and behold, the hire brought in business.” Such a hire may be a FCPA noteworthy event if the timing of the alleged hiring is closely connected to important business victories and awards of government business.
While the questions of corrupt intent will be paramount I think that this episode emphasizes the continuing key concept of the three most important things in any FCPA compliance program; that being: Document, Document, Document. If your compliance program does not document its successes there is simply no evidence that it has succeeded. In addition to providing to your company support to put forward to the DOJ, it is the only manner in which to gauge the overall effectiveness of your compliance program. To negate corrupt intent, JP Morgan Chase will have to dis-link any hiring with the obtaining of business. It will be the documentary efforts of the company in answering this query that may well decide the question of whether the SEC will consider the matter a FCPA violation or not.”