The FCPA (Foreign Corrupt Practices Act) . . . Is It Blunt-Force Trauma to American Business?
The present U.S. economy may be “going south,” but it is also literally going south – across the border. Is this the gloomy new future for our workforce? Or is it the new direction of 21st Century business evolution?
Barack Obama and Mitt Romney may hotly argue about China, about tires, and about the dips and turns of the U.S. economy . . . but to be blunt, the “stay at home” sense of labor-and-work is fading away in a lot of places. And this really isn’t “breaking news.”
For years American companies and entrepreneurs have been trading home-grown manufacturing for south-of-the border Latin American – and Asian, European and Russian – opportunities.
Go ahead, just try and find a pair of Levis made in the U.S.A. these days. You’re better off going to eBay. Why? The usual litany of economic reasons: Cheaper labor, locations and materials costs; less-stringent government restrictions and control: and more certainty of profit.
And this upsurge of foreign investments, acquisition and relocation isn’t going to stop. Distinguished financial analysts see it only expanding. It’s woven into our digital age. The opportunities for diversification and financial progress are part of this new reality. It is global interdependence. But this interdependence is also far from harmonious.
It means more and more American companies are operating – or will be – in foreign arenas, arenas where corruption is the norm, not just the highlight of a nightly news byte. In these places bribery, often, is the first order of “business.” It is not even winked at. In fact, the equation is: Bribery equals good business.
Enter the FCPA (the U.S. Foreign Corrupt Practices Act), the supposed bright sword of enforcement for the DOJ, the FBI, and the SEC. It is a powerful instrument of domestic-foreign U.S. business policy. Purpose-built into law in 1977, the FCPA bars foreign bribery and requires U.S. companies to keep accurate internal books and records.
Ironically, the FCPA had its origin in the Watergate scandal and its subsequent investigation. This investigation – which led to Richard Nixon’s downfall and the prosecution of companies and executives making illegal campaign contributions from secret funds – revealed these same slush funds also illicitly paid off foreign officials, agencies or contacts, in the hope of landing overseas business contracts.
An overseas foothold to financial gain? It is a financial dream quest. But not without hazard. Accountability – accurate book keeping, corporate self-control and transparency, and interaction with the IRS – is the benchmark of the FCPA.
To effect this compliance, U.S. government agencies emphasize charging individuals – CEOs, CFOs, finance, sales and marketing executives, intermediaries or “liaisons,” even foreign officials – with anti-bribery indictments here in the U.S. The perceived mindset: Companies won’t consider fines for FCPA violations – for just “doing business” – if individuals are targeted.
No small wonder that many major corporations are willing to spend millions annually in internal controls and self-compliance – just to avoid potentially billions in fines, as well as international image problems.
But how much of a enforcement weapon is the FCPA? Is it a sharp sword . . . or blunt-force object? Some critics have noted it seems to be wielded unequally, not unlike an arcade mallet in Whac-a-Mole, targeting the obvious and, sometimes, the innocent.
If nothing else, it is a source of big business and income – this week’s cash cow – for many white collar criminal attorneys. More importantly, it is a notorious statute causing increased anxiety for the world’s biggest multinational corporations and for foreign governments . . . if not just a heightened degree of annoyance. But not all foreign countries are impressed by the black & white/good & bad posture of the FCPA.
In Russia, for example, where business civility is a veneer – President Putin may smile demurely regarding this – bribery is a lubricant which greases business wheels. Corruption is a fact of Russian business life, especially when dealing with American corporations eager to expand into the Russian market.
No less can be said of China or India, or any number of Third World countries. The only difference in the corruption food chain may be where corruption thrives: Observers note that in China it’s up top, in India it’s down below, and so on up or down the chain. Diplomatic gestures of international business concern may very well mask internal, endemic corruption. So pick your poison, American businessmen.
Beside which, many foreign countries – Germany and Russia immediately come to mind – point to the FCPA’s roots in Watergate and simply shrug, as if to say “Hey, that’s your problem – not ours.”
Notably, for example, Germany has repeatedly refused U.S. requests to extradite eight executives of the multinational Siemens Corporation, the eight allegedly involved in wide-spread bribery and corruption while doing business in the U.S. German law aside – which has no provision for extradition in this situation – there seems to a real undercurrent of resentment, that the U.S. is simply trying to flex its international “uber” muscle.
Resentment equals a sometimes unexpressed sentiment: “We’re not buying into a U.S. ultimatum.”
So what is an American company to do, to succeed in a ping-pong global economy? On one hand, there’s the FCPA looming overhead like a stern taskmaster; on the other, there’s a world of countries courting the U.S. and doing a thriving business “their own way.” Maybe it is business as usual – only with one U.S. hand tied.
And what of an innocent company? It acquires another business – only to learn that the business had conducted bribery involving foreign agencies. Guess what? The innocent inherits the mess – and according to the FCPA, is responsible. A fat check in fines is paid out to Uncle Sam. And for what? For being responsible and compliant?
Sometimes it seems a regulatrory act, to quote the colloquial, is shutting the barn doors after the horses have left. So is the FCPA playing too close to the vest?
But FCPA is not going away. If anything, it has increased in strength and its umbrella-like scope of authority here in the U.S. The irony may be: As the U.S. swings with full force a “Louisville slugger” FCPA statute – as well as other anti-bribery legislation – it may be doing more harm than good to the American economy it is seeking to regulate.
In 2012, it now seems to be a closed-cell, self-regulatory mindset, based on a 1970s political scandal. Designed with good intent, the FCPA may now need revamping.
Entrepreneurs should be cautioned. The drama, the meeting on the bridge – an exchange of money for “this is what you need” – is over. Like a Cold War 70s movie.
Be wise . . . be wary . . . beware. Even a casual gift, according to the FCPA, can be construed as a bribe, whatever the overseas local customs may be. You are being gauged by FCPA restrictions, not by – however well-meant – your best overseas business intentions.
The Blanch Law Firm knows this all too well. It is well-equipped to navigate the often treacherous waters of international business ventures.
— Stephen Heath-Jones