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Foreign Corrupt Practices Act

Public firms usually settle foreign bribery charges


USA Today

You’re the CEO of a global, publicly traded corporation. You’ve just learned that some employees may have bribed foreign government officials to help your business get contracts.

Now federal prosecutors and regulators want to see company records as part of an investigation under a law called the Foreign Corrupt Practices Act.

What do you do? In many cases, negotiate a settlement, pay a fine, and get back to business.

The scenario is a hot topic in corporate boardrooms in the wake of allegations by a former Wal-Mart official that company executives in Mexico paid millions of dollars to government officials there in a successful effort to speed the opening of new stores. The allegations, now under review by the company and federal investigators, were disclosed last month by The New York Times.

It’s not yet clear what, if anything, will come of the review. But records of Foreign Corrupt Practices Act cases show publicly traded companies are leery about going to trial against the government.

“The companies that actually fight the Justice Department or the Securities and Exchange Commission are pretty few and far between,” said Amy Conway-Hatcher, a former federal prosecutor who heads the Internal Investigation practice for the Kaye Scholer law firm in Washington, D.C. “You usually see corporate settlements arise out of this.” Read more.

Wal-Mart scandal intensifies focus on foreign bribery


The Kansas City Star

By Mark Davis

April 24, 2012

U.S. government in recent years has sought to crack down on crooked tactics abroad.

Foreign bribery. Internal investigations. Public scandal. Hefty fines. Prison.

Doing business in a global economy isn’t supposed to be like this.

But recently-published allegations that Wal-Mart Stores Inc. covered up bribes in Mexico add to the considerable evidence that simple corruption is ingrained in the international business world.

Wal-Mart said Tuesday it was taking “a deep look” at its policies and procedures, and would name a global compliance officer to oversee five regional officials charged with meeting the terms of the U.S. Foreign Corrupt Practices Act.

The Wal-Mart case brings renewed attention to the 1977 law that grew out of a discovery that hundreds of U.S. companies had paid bribes and made questionable payments overseas. The law forbids individuals or companies from winning or keeping business through bribery.

But it clearly happens.

“It’s difficult to do business in many countries,” said Linda Tiller, international business law attorney at Husch Blackwell in Kansas City. “The officials expect to have a perk — cash or trips or other things of value — for access to government contracts or approvals. Frankly, in many countries they simply don’t understand U.S. law.”

Perhaps some distant workers don’t either — but companies are liable just the same.

Locally, Layne Christensen Co., based in Mission Woods, continues to deal with its September 2010 discovery of questionable payments to agents and others interacting with government officials in some countries in Africa. The latest news is that the $3.7 million that Layne Christensen, a mining and drilling services company, set aside to cover its exposure under the Foreign Corrupt Practices Act may not be enough.

The weight of the law on any company depends a great deal on how quickly it acts and cooperates with federal officials about what it learns. The Securities and Exchange Commission made that written promise in a 2001 document informally called the Seaboard Report.

Seaboard Corp., the Merriam-based agriculture and shipping conglomerate, avoided SEC sanction under a different law by acting quickly and openly when it learned of problems with its financial reports traced back to an employee. The report outlines 13 factors that could work to a company’s credit in SEC cases.

It matters, for example, whether senior personnel turned “a blind eye toward” obvious signs of a problem, the Seaboard Report said.

Civil cases brought by the SEC under the act have jumped sharply since 2006, as have criminal prosecutions by the U.S. Justice Department.

It’s not that foreign corruption suddenly began five years ago. It’s that it began to get a lot more attention.

Several schemes alleged by the SEC in recent years have targeted corrupt practices that had persisted for a decade — for example, bribing doctors in South America or government officials in Nigeria.

Increased government action seemed to begin with a 2007 case against Baker Hughes Inc., said Russ Berland, a lawyer at Stinson Morrison Hecker in Kansas City who helps companies comply with the act. The fine was the largest at the time, and it was the second time that Houston-based Baker Hughes, an oilfield services business, was sanctioned, he said.

A New York Times article Sunday said Wal-Mart failed to tell law enforcement about its own 2005 discovery of possible bribery in its Mexico business.

The Times said a Wal-Mart investigation found details of $24 million in suspect payments to help expand the retailer’s presence in Mexico. But according to The Times, the inquiry was shut down despite a report from the lead investigator that Mexican and U.S. laws probably were violated.

Wal-Mart, in a statement by spokesman Dave Tovar, has since said that it is “committed to getting to the bottom of this matter.” The statement said the alleged bribery “occurred more than six years ago” and was “not a reflection of who we are or what we stand for.”

Tovar also has said the company’s effort includes “developing and implementing recommendations” for training about the Foreign Corrupt Practices Act, anti-corruption safeguards and other controls.

The U.S. law grew out of a mid-1970s SEC investigation in which more than 400 U.S. companies told the agency about making more than $300 million in illegal or questionable payments to foreign officials and others. Similar laws spread to 33 other nations in the 1990s.

In 2010, Britain adopted a tougher version than the U.S. law, which allows payments to “facilitate or expedite” a “routine governmental action” such as obtaining a permit, processing government papers, providing police protection and similar actions.

Still, some in the American business community have called for relaxing the U.S. law, saying some provisions make competing for business overseas too difficult. But no proposals have reached Congress.

Attention to corruption also has become a part of business routine. Companies that list their stock for public trading warn investors that their employees or foreign subsidiaries might expose the company to anti-corruption prosecution in the United States and abroad. Others formally vow in the paperwork tied to mergers or bond deals that they, their employees and subsidiaries have not violated the Foreign Corrupt Practices Act.

Corruption has even become part of not doing business.

“In some countries, there is a culture of having to pay officials to get things done,” said Chip Breitweiser, a vice president in international operations at Lenexa-based CST Industries Inc. “Where that is customary, we choose not to participate in those countries.”

CST Industries, which makes storage tanks, domed covers and related products, has offices in Brazil, Britain, India, Singapore, Vietnam and Dubai, and does business in 125 countries.

Breitweiser said many of the trouble spots are in Africa and former Soviet republics.

Transparency International would second that notion. It surveys businesses and makes other assessments of the perceived corruption among the public sectors of 183 nations. Its worst scores pepper Africa, Asia and South America.

The scores it assigns rely on perceptions about bribery of public officials, kickbacks in public procurement, embezzlement of public funds and the like, because this behavior typically remains hidden.

Wal-Mart’s brush with the foreign bribery ban could in the end put it on a long list of companies that have run afoul of the law. Several large and well-known companies have faced federal action in the last three years, including Johnson & Johnson, Siemens, IBM, Tyson Foods, Alcatel-Lucent, GE and DaimlerChrysler.

The Associated Press contributed to this report.

Source: Transparency International

Zimbabwe: Corporate Governance – An Antidote to Corruption


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The Herald (Harare)
Published by the government of Zimbabwe

By Gertrude R. Takawira

12 September 2011

opinion

It has rendered to naught brilliant economic reforms. Most people hate it. A few benefit from it. Yet corruption is strong enough to have replaced traditional economic ethos of capital and production. No wonder the economic crises.

Like economics there is a supply-side and demand-side for corruption. The supply-side or the giver resides in businesses. Businesses pay the bribes. The demand side or taker is predominantly government officials.

In a survey carried out by the African Capital Markets Forum in Ghana during the year 2000, it was reported that 86 percent of households saw corruption as a major problem in the public sector, whereas 59 percent of households saw corruption as a major problem in the private sector.

It was also found that many firms in Ghana made unofficial payments (44 percent) to public officials with over a quarter (27 percent) frequently or always making such payments. Unofficial payments constituted a regular feature of transactions between business firms and public service agencies. 56 percent of firms reported that service was frequently delivered once they made an unofficial payment… Why then do corporations with good corporate governance systems pay bribes? First there has to be a conducive atmosphere for the supply and demand of bribery. This can take place in broad ranges of business activities over which some government officials hold discretionary powers.

Common among these are; where firms bribe public officials to avoid or reduce tax, to secure public procurement contracts, to bypass laws and regulations, or to block the entry of potential competitors.

On the surface bribery seems to be cost-effective for businesses because bribe payment is often a fraction of the monetary value of the services rendered by the corrupt officials.

The reason to bribe becomes even more compelling when public officials hold the power to punish the firms for not paying the bribe, such as revoking business licenses. Corporates are often duped to believe that the only cost of bribery is paying the government officials… Read more.

Oracle’s Africa dealings come under FBI scrutiny


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Guardian

August 31, 2011

By Dominic Rushe

Allegations of bribery are understood to centre around software sales to government agencies in Western and Central Africa

US authorities are investigating allegations that executives working for software group Oracle paid African officials in violation of anti-bribery laws.

Agents at the Federal Bureau of Investigation (FBI) and the justice department had been investigating the claims for at least a year, the Wall Street Journal reported.

US financial watchdog the securities and exchange commission (SEC) is also looking at possible civil violations. The allegations are understood to centre on software sales to government agencies in western and central Africa. Law enforcement agencies are investigating whether Oracle or people working for the company made payments to government officials to secure contracts. Oracle did not return calls for comment.

Such payments would violate the foreign corrupt practices act (FCPA), which makes it a crime for US companies and their employees to offer or pay bribes to foreign government officials or employees of state-owned companies…Read more.

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