All In The Family: Enforcement Focus On Hiring Of Relatives Of Foreign Officials

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allinthefamilyCan you imagine being the public relations director for China these days?  Even in the limited world of foreign bribery, the Chinese have had a rough couple of weeks.  Add the latest news to the mix and you have a recipe for a public relations nightmare.

JP Morgan disclosed it may have violated the FCPA in hiring of relatives of Chinese foreign officials.  They are not the first to have an ongoing investigation – Qualcomm recently disclosed that it too is under investigation for the same issue.

What is striking about the JP Morgan disclosure is that the timing of the alleged hiring is closely connected to important business victories and awards of government business.  If true, that could be a very bad set of facts.  There is nothing in the Qualcomm disclosure or surrounding facts which suggests that Qualcomm engaged in similar behavior.

No one should be surprised by this issue becoming a lightning rod for an FCPA inquiry.  Companies which have regular interactions with government officials relating to contract awards are very familiar with such requests.  Many companies have specific policies which govern hiring of relatives of foreign officials.

The issue boils down to corrupt intent – was the hiring made with the intent to improperly influence a government official?  That is not an easy question to answer since no one is a reader but the facts surrounding the hiring can certainly give some insight into what the company’s actor was intending when the relative was hired.allinthefamil3

As always, a specific compliance policy concerning such a hiring is required.  The purpose of the procedures compliance is to protect the integrity of the hiring process, and insulate the hiring process from unethical and improper influence from the business side of the company.  The more the hiring is controlled the lower the risk.

The focus of the hiring inquiry centers on ten key questions:

  1. Who, if anyone, at the company is sponsoring/supporting the applicant?
  2. How did this applicant come to the company’s attention?
  3. What is the applicant’s relationship to the foreign official?
  4. What involvement, if any, has the foreign official had with the company relating to the applicant’s interest?
  5. In which office/division does the foreign official serve?
  6. How important is this specific office/division to the company’s business relationship with the foreign government?
  7. Is the applicant qualified for the position that he/she has applied?
  8. Has the applicant (or will the applicant) be subject to the normal hiring process?
  9. Has the company completed a due diligence review of the applicant and the foreign official to identify any corruption risks?
  10.   Has the company or any representative provided any assurance to the foreign official or the applicant that the applicant will be hired?

For those that do business in China, the latest revelations only confirm my continuing admonition – if you do business in China, chances are you are violating the FCPA.  The only question is the extent to which such violations occur.

Companies should not reexamine their overall compliance strategies for China based on these latest revelations.  An overall approach for compliance should be carefully designed, implemented with care, and monitored assiduously to ensure that risks are minimized.

allintehfamilyThe hiring of foreign government relatives is one of many means by which bribery can be carried out.  It is more important to focus on sources of benefits – most importantly, money, which can be used to conduct elaborate bribery schemes.  Hiring of relatives, which provides valuable benefits in the form of a job is yet another source for companies to carry out bribery schemes in China.

Topics:  China, Compliance, Enforcement, Family Members, FCPA, Foreign Official, Hiring & Firing, JPMorgan Chase

Published In: General Business Updates, Criminal Law Updates, Government Contracting Updates, International Trade Updates, Labor & Employment Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Michael Volkov, The Volkov Group Law Firm | Attorney Advertising

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