Walk a Straight Line — Even if All Roads Are Crooked

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The person who said "When in Rome, do as the Romans do" did not have to contend with the U.S. Foreign Corrupt Practices Act (FCPA). Although bribery is an integral part of daily life in many countries and can seem a prerequisite to obtaining or advancing any project, the perils awaiting foreigners who adapt to corrupt cultural norms are substantial.

China is a case in point. Its business culture appears to be relatively corrupt. On a scale of one 1 to 100, with 100 being the least corrupt, China scored a 40, ranking it 80th among the 177 countries in Transparency International's 2013 Corruption Perceptions Index. Another survey found that Chinese companies were the least transparent and most prone to corruption of 100 multinationals in 16 nations, including India, Russia and Brazil. "There’s not a single straight road in China; they were all built with kickbacks," one Chinese observer noted.

However, companies need to remember that the FCPA extends to all U.S.-based entities operating anywhere in the world, including China. China has its own anti-corruption law that is similar to the FCPA and makes bribery a criminal offense. Chinese leader Xi Jinping has vowed to end official corruption, and officials say they have deployed teams of inspectors to sweep the country in an attempt to stanch the spread of corruption.

Other events bear witness to the risk:

  • Since the FCPA's enactment in 1977, 42 defendants have faced actions involving conduct in China.
  • Last year, Chinese police detained four employees of GlaxoSmithKline and accused the drugmaker of funneling up to 3 billion Yuan ($489.92 million) to travel agencies to facilitate bribes to doctors. GSK's top officer subsequently declared GSK's commitment to ending the decades-long standard practice of paying doctors to promote its drugs.
  • In December 2013, the U.S. Department of Justice (DOJ) opened an investigation into whether JPMorgan Chase violated the FCPA by using its "Sons and Daughters" hiring program to trade job offers for business with state-owned Chinese companies.
  • A Morgan Stanley & Co. real estate executive received nine months in prison after DOJ discovered that he had transferred a multi-million dollar interest in a Shanghai building to himself and a Chinese public official.

The list goes on. All told, it's probably safest to forget the advice and instead follow the example of the person widely believed to have coined the phrase "When in Rome . . ." That would be St. Augustine.

Topics:  Anti-Bribery, Anti-Corruption, Bribery, FCPA

Published In: General Business 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.

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