Ch 7, FCPA International Law

Allowed under FCPA

-Small gifts of expressions of gratitude, provided there is transparency in the giving -small gifts to local charities, provided gift is consistent w company's philanthropic goals and is not too large -Wedding gift to government official (not too large) -Hats, t-shirts, pens that companies offer at trade show booths that gov officials take -Payment of bar tab for gov officials at group meeting -Payment for travel to US for training at a company's facility (can even go to baseball game during the training w/o violation)

Prohibited Under FCPA

-cash -country club memberships -excessive comped travel (travel that doesnt include seminars or presentations.. shopping trips to Paris) -cash donations to political parties -payment of cell phone or utility bills for gov officials -luxury gifts like sports cars, furs, to gov officials or their spouses

Penalties for FCPA

2 mil per violation for corporations. -individuals (officers, directors, shareholders) subject to 250,000 in fines, up to 5 years in prison -corporations 25 mil penalty, fines up to 5 mil, 20 years in prison for individuals (corps not allowed to pay fines for employees) Disgorgement- Justice dept can seek to obtain two times the benefit the bribe attempted to gain (100 mil bribe- 200 mil fine)

OPEC

A cartel that controls oil supplies, production, prices and taxes.

OECD Convention on Combatting Bribery of Foreign Public Officials in International Business Transactions

Agreement signed by countries who agree to criminally penalize bribery of foreign public officials. -covers all US citizens outside of US and all non-citzens inside US

Facilitation/ grease payments

Allowed under FCPA as long as there payments are made only to get officials to do the jobs that they might not do ordinarily or would do slowly w/o some type of payment ----payments can be made for obtaining permits, licenses, prcoessing gov papers (visas, work orders), providing police protection, mail pickup/delivery, providing phone service, power water supply, loading unloading cargo, scheduling inspections associated w contract performance or transit of goods across country

Third parties for bribery

Can be violation if the consulting fees are high, odd payment arrangements occur, or company has reason to know of a potential or actual violation -companies must performed "due diligence" in investigating those agents and consultants hired in foreign countries (can be issued red flag if payment too large, etc)

Officials covered under FCPA (gifts may not be directed to)

Foreign officials, politcal parties, party officials, candidates for office, any NGO (non-governmental org)... also any person who will transit the gift or money to one of the other types of people. NGO- United Nations, olympics (salt lake), IMF (soccer), FIFA world cup

Siemens

German conglomerate company that produces wind turbines, high speed trains, and provides engineering services on all types of construction projects -4 year pattern of bribery to governments -followed the "four-eyed principle"- two ppl must sign but had too many exceptions for it to even count. CEO tried to stop it bc german gov investigating them but they didnt stop. -in order to be on NY stock exchange, must stop practice of off the books accounts for payments of bribery. Didnt take it seriously. Paid fine of 5.8 billion to other countries, 800 mil to US biggest payment by 20 times. -4283 bribes to foreign leaders -Original fine by US was 2.7 billion, reduced to 800 mil

The Kyoto Protocol

International treaty in which the members agree to reduce the output of greenhouse gasses to reduce global warming.

Competitive advantage for those countries who allow bribery?

No. Trade actually increased in 51/56 countries once FCPA went into effect. (competition- if they can bribe, they'll disclose public info about bribes made by any of the companies from other nations)

Foreign Corrupt Practices Act (FCPA)

Passed to curb use of bribery in foreign operations in US companies -prohibits making, authorizing, promising payments or gifts of money or anything of value to government and NGO officials w intent to corrupt for the purpose of obtaining or retaining business for or with or directing business -Covers all US companies registered under the 1934 Securities Exchange Act -contains accounting controls for bribery -passed in 1977 bc of SEC investigation into foreign payments to Japan, Netherlands, Korea by 435 US corporations over 300 mil in large stock issuers

Obtaining, retaining, directing business

Winning contracts, influencing a procurement process, circumventing rules in order to get products imported, gaining access to non-public bid info, evading taxes or fines, influencing the outcome of lawsuits or regulatory actions, obtaining exceptions to regulations, avoiding contract termination, asking regulators or officials to exclude your competitors from their country, evading custom duties, extending drilling contracts

Export Trading Company Act

provides an exemption under the U.S. antitrust laws for joint ventures in international trade

Organization for Economic Cooperation and Development (OECD)

supports FCPA. Member countries have enacted legislation for compliance w international pact against bribery. -Congress act amended that all US citizens outside of US and all non-citizen inside US are covered by FCPA. -International organization of countries committed to developing trade, initially through the elimination of corruption.