Is U.S. Anti-corruption Enforcement Too Tough?

0 Comment

No, seriously. There’s a very good New York Times article on the subject that is highly recommended. For those of you who either work overseas or work for a company that has international operations, you are probably quite familiar with the U.S. Foreign Corrupt Practices Act (FCPA) and the stepped-up enforcement efforts of the Department of Justice in the past few years.

Seems like the private sector is starting to push back:

[T]he crackdown, which began in earnest three years ago, has made it harder for companies to win legitimate business and that it has needlessly instilled fear among executives. Many companies would rather make any charges brought under the act go away with a quick settlement than try to fight them in court.

“We are seeing companies getting scooped up in aggressive enforcement actions and investigations,” said Lisa A. Rickard, president of the United States Chamber of Commerce’s Institute for Legal Reform, which is pushing to modify the law. “A culture of overzealousness has grabbed the Justice Department.”

“The last time I checked,” Ms. Rickard added, “we were not living in a police state.”

I’ve seen many foreign companies over the years engage in blatantly corrupt behavior over here in China that they justify with the old “everyone does it” excuse. Sure. But if the company is American, has operations in the U.S., is listed there, etc., then you have to abide by those rules. That’s eminently fair, and if the U.S. wants to prioritize anti-corruption, even if it means that some U.S. firms are less competitive, well, why not?

I do realize how difficult it is to run a business over here (or even worse, to buy one) without running afoul of the FCPA. In some industry sectors, it’s literally impossible. But you know, a lot of these situations can be avoided by implementing tough internal programs with good staff training, adopting zero tolerance policies, and (in some cases) self reporting. The problem is that all this costs money and sometimes leads to bad PR.

I’ve also had some clients that basically tell me that they will continue to engage in these activities notwithstanding my advice. My normal response is that if they are going to go against the advice of counsel and engage in such behavior, they had better be prepared for a FCPA problem somewhere down the line (or similar trouble with China, the EU, or UK). If you insist on being corrupt, you have to accept the consequences.

I’m sympathetic to those companies that try hard and yet run into trouble. But I’ve seen many “victims” who complain about the aggressive DOJ and say “It wasn’t our fault! We have an internal program!” When you dig deeper, you find that some of these “internal programs” consist of nothing more than having employees sign some vague language about bribes and kickbacks when they are hired. No training, no follow up, no audits. Not good enough, folks.

I don’t think FCPA enforcement is turning the U.S. into a police state. (Other policies of the DOJ are doing that!) Obviously the Chamber of Commerce is not happy, but that’s to be expected. But unless we see a clear pattern over time of prosecutorial misconduct or the like, I’m not going to lose too much sleep over this.