Anti-Corruptions Laws

Extracted 19SEP2011 from

BRIBING foreign officials is wrong, but not everything governments do to prevent it is wise or proportional. Firms are increasingly fed up with the way America’s Foreign Corrupt Practices Act (FCPA) is written (confusingly) and applied (vigorously). The law was passed in 1977, but recent years have seen a spike in enforcement, from five actions in 2004 to 74 in 2010....

An FCPA action is an ordeal. Few firms dare risk going to court—only two cases against corporations have ever resulted in completed trials. The vast majority of cases are settled, which can take years. Listed companies must satisfy not only the Department of Justice, but also the Securities and Exchange Commission, which enforces the FCPA provisions requiring accurate records of all business dealings (to deter or detect illicit payments). Before the department and the commission will sign off on a settlement, the company must satisfy them that the rest of its operations are squeaky clean. Narrow investigations can mutate into broad ones that cost tens of millions of dollars.

And bosses can be sent to prison for up to 20 years if their companies fall foul of the FCPA. In theory, they could be jailed because a staff member at a foreign subsidiary bribed an official without their knowledge. In some cases, the law insists that directors ought to know about dodgy goings-on, even if they do not.

This is a hefty deterrent to doing business in poor countries, some studies have found... The US Chamber of Commerce, a business lobby, says the FCPA also deters foreign mergers and acquisitions. A firm inherits the sins of a company it buys, even if it has done reasonable due diligence, the chamber says. To avoid this risk, it must conduct the equivalent of a “vast internal investigation”, says the chamber.