Franchsing and the FCPA

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The Foreign Corrupt Practices Act (FCPA) applies to all US companies and individuals which conduct business overseas. FPCA practitioners recognize there are two components: (1) the anti-bribery component, handled by the Department of Justice (DOJ) and (2) the books and records components, handled by the Securities and Exchange Commission (SEC). None of this is new information and indeed, has been present it the FCPA since it was enacted in 1977. This breadth and scope of the FCPA make it mandatory that any business or person which conducts business overseas does so in compliance with the FCPA. One of the lessons learned from 2010 is that a business not traditionally thought of as high risk for FCPA compliance can still run afoul of the FCPA. In October, CB Richard Ellis, a global real estate firm, disclosed possible FCPA violations in China. As reported by the FCPA Blog, the Company reported in a SEC filing that its employees made payments for entertainment and gifts to Chinese government officials, which were discovered during an internal investigation. This article will look at the franchising industry and explore its possible FCPA exposure.

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