Bribery Law Dos and Don’ts
(The Wall Street Journal, November 15, 2012)
In the high-stakes world of international business, sometimes a cup of coffee is just a cup of coffee. This and other bits of wisdom were revealed in long anticipated guidance from the U.S. government about which practices might put corporations in violation of a far-reaching antibribery law. The 130-page document is the most comprehensive effort by the U.S. Justice Department and the Securities and Exchange Commission to respond to complaints from companies that ambiguity in the Foreign Corrupt Practices Act has forced them to abandon business in high-risk countries and spend millions of dollars investigating themselves.
In the last decade, authorities have used the statute to extract billions of dollars in penalties from dozens of major corporations. The U.S. Chamber of Commerce and others have campaigned to amend the FCPA with more protections for companies. The document released in mid November offers pragmatic advice, particularly in one area of major concern for corporate compliance departments, such as gifts, travel and entertainment.
The document states, “It is difficult to envision any scenario in which the provision of cups of coffee, taxi fare, or company promotional items of nominal value would ever evidence corrupt intend. The same goes for “a small gift or token of esteem or gratitude.” On the other hand bankrolling a $12,000 birthday trip for a government official that includes visits to wineries is ill advised. The document recites positions long held by the government and avoids rigid policy pronouncements.
The document says what to do if a company uncovers evidence of potential bribes while conducting due diligence on a company it recently acquired. The short answer is to stop the bribe, report it to the government and institute reforms at the acquired company. The agencies say that an acquiring company that follows such steps is unlikely to face prosecution.
In response to complaints about the murkier parts of the laws, prosecutors and regulators have said the vast majority of cases they have brought included staggering evidence of bribery. Since 2009, prosecutors and regulators have entered into more than 50 settlements and plea deals with companies, yielding more than $2 billion in penalties.
Comment: You can’t satisfy everyone or give examples of every situation but this document is a step forward in clarifying what is considered bribery. Some will say it goes too far, others will say it does go far enough and yet others will say it hits the sweet spot. See the following article as an example of what companies such as Wal-Mart are doing concerning international business.
Wal-Mart Broadens Bribery Inquiry
(The New York Times, republished in The Seattle Times, November 16, 2012)
Wal-Mart disclosed that it has expanded an internal investigation into bribery in Mexico to Brazil, China and India. The company acknowledged the expanded inquiry in an SEC filing that accompanied its third quarter financial results. Wal-Mart had previously reported that the audit committee of its board was examining possible violations of the Foreign Corrupt Practices Act (FCPA) in Mexico.
In the filing with the SEC, the company said, “Inquiries or investigations of potential FCPA violations have been commenced in a number of foreign markets where we operate, including but not limited to Brazil, China and India.” Wal-Mart has had teams of lawyers looking into the Mexico issue and potential violations of the law elsewhere. In the filing, the company said it had “identified or been made aware of” other potential violations. Wal-Mart said, “When such violations are reported or identified, the Audit Committee and the company, together with their third party advisors, conduct inquiries and when warranted based on those inquiries, open investigations.”
The New York Times reported that seven years ago, Wal-Mart had found credible evidence that its Mexican subsidiary had paid bribes, a violation of FPCA. The Times stated that, “an internal investigation into the matter had been suppressed by executives at the company’s Bentonville, Ark., headquarters.”
Wal-Mart spent $99 million in the first nine months of 2012 in expenses related to the matter, including complying with subpoenas, defending itself against shareholder lawsuits and conducting a review.
Comment: This is a difficult issue when you operate in many foreign countries around the world where bribery is accepted as a way of doing business. For huge companies like Wal-Mart with multi-foreign operations, it is expensive to monitor and investigate after the fact. I applaud the SEC for bringing the bribery issue to the table where companies can spend more time up front making sure there are no bribery issues. You can never sit back on your heals after an initial examination but must continue to monitor. This is very expensive but it must be done.
Follow-Up Wal-Mart article
Wal-Mart Bribery Emails Released
(Associated Press, January 11, 2013)
Lawmakers are making public emails that show Wal-Mart Stores, Inc.’s CEO found out in 2005 that the retailer was handing out bribes in Mexico. Congressmen Elijah Cummings and Henry Waxman who are investigation bribery charges at Wal-Mart’s Mexico division, released emails that indicate that Mike Duke and other senior Wal-Mart officials were informed multiple times starting in 2005 about bribes being made in Mexico. United States law forbids American companies from bribing foreign officials.
The emails contradict claims by Wal-Mart senior executives that they had no knowledge of bribes being made by the company in Mexico. The lawmakers shared the documents with Wal-Mart and sent a letter to Duke asking for a meeting to discuss them. “It would be a serious matter if the CEO of one of the nation’s largest companies failed to address allegations of a bribery scheme,” according to the letter by Cummings and Waxman to Duke.
Allegations first surfaced in April when Wal-Mart failed to notify law enforcement that company officials authorized millions of dollars in bribes in Mexico to speed up getting building permits and gain other favors. Wal-Mart has been working with government officials in the United States and Mexico on the investigation.
Comment: Once again, old emails have played a big part in substantiating whether people had knowledge of particular situations in which they were involved. As a very smart attorney once told me, “Always tell the truth and you won’t have to change your story or remember what you told to whom.” The investigation is ongoing and Wal-Mart has been very cooperative with the investigators so we’ll wait until the investigation is complete to draw final conclusions.
By Roger Eigsti
Institute for Business, Technology, and Ethics