Bribery and Corruption

1
Bribery and Corruption
Why should this issue especially concern us?

• Every Country forbids bribery of its own
  government officials.
• The US forbids bribery of foreign government
  officials
• the US Foreign Corrupt Practices Act is enforced
  
• e.g. Lockheed fines of 25MM and jail sentences
  for Egypt bribes.
• The FCPA will not be repealed
• No reason for double standard domestic vs.
  export
• Most Western European countries allow tax
  deductibility of bribes.

2
Why is Anti-Corruption movement gaining
International momentum?

• Has become a highly publicized issue.
• Distorts competition/free market economies.
• The companies that provide the best products and
  services should win the orders.
• Politically destabilizing.
• European press more willing to expose corruption
  (not wedded to politicians any longer).
• Ruins careers possible criminal penalties.
• Economically destructive.
• Siphons off scarce funding/investment resources.
• Impacts primarily infrastructure projects
  transportation, airports, telecom.
• Risks renegotiation, cancellation of projects.
• Major obstacle to transition to market economies
  in Eastern and Central Europe.

3
Who is working this issue?

• OECD - 25 major trading countries.
• Has issued guidelines, e.g.
• Eliminate tax-deductibility.
• Criminalization of foreign bribes
• More transparent accounting rules
• Transparency International
• German-based Berlin headquarters
• Building coalitions of business, government,
  civil societies.
• Local country chapters U.S., Germany, France,
  Italy, Brussels (EU)
• WTO
• Procurement Code but not mandatory (yet)
• Trans-Atlantic Business Dialogue

• European Parliament Committee
• Endorses OECD Guidelines
• ICC
• Rules of Conduct rewritten deleting enforcement
  (more acceptable)
• Support through National Chapters
• Agreement on Government Procurement
• Transparency requirements (not prohibitions)
• Procedural safeguards
• Voluntary only a few countries have joined,
  e.g., EU, U.S., Japan, Korea, Taiwan, Canada,
  Australia
• World Bank
• Organization of American States (OAS)

4
U.S. Foreign Corrupt Practices Act

• Forbids
• pay, promise to pay or authorize payment
• directly or indirectly
• money or anything of value
• to obtain or retain business or make a buying
  decision
• to obtain favorable treatment
• explicitly or implicitly
• to Foreign government officials or political
  party or official of a political party
• by US person, or anyone acting on behalf of US
  person
• Requires
• accurate and complete financial books and records
• Permits Facilitating Payments but illegal
  under local law

5
How can this affect a Company?

• Our Own Employees
• Third Parties
• Sales Reps
• Distributors
• Traders
• Customs Brokers, Agents
• Consultants

We Need to Be Vigilant
6
Questions
Our Own Employees

• What is a business gift?
• What is business entertainment?
• What is a bribe?

7

• Gift
• Moderate in cost
• Not money
• - e.g. food or flowers
• Items
• - Small
• - With Company logo
• - Not related to order
• To foster good will generally

• Bribe
• Extravagant
• Money (anytime)
• Items
• - Large (color TV, refrigerator)
• - Related to an order
• To get an order, or to reward placement of an
  order

8

• Entertainment
• Reasonable
• Customary
• In your presence
• Decision maker

• Bribe
• Extravagant
• Not customary
• Not in your presence
• Extra troops

Avoid Even the Appearance of Impropriety
9
Third Parties

• What can we do?
• Commission or fees paid only on written
  agreements
• Never in cash
• Only with firms or persons serving as bona fide
  representatives
• Fees reasonable, customary for the industry and
  permitted under local law
• No arrangements with firms where government
  official or employee has an interest
• Watch for Red Flags
• Educate on Companys Policy
• Obtain signed acknowledgment

10
Third Parties

• Red Flags
• have been accused of improper business practices
• has influence on buying decision and reputation
  for bribes
• has a family or other relationship that could
  improperly influence customers decision
• approaches us near aware decision and explains
  that has special arrangement with an official
• insists on receiving commission payment before
  award decision
• requests that commissions or other payments be
  made in a third country or to another name
• asks for unusually large commission or other
  payments
• customer suggests bid be made through a specific
  representative

Resolve Concern Before Proceeding
11
__________ CorporationPolicy Regarding Improper
Use of Corporate Assets

• The following will be considered as imperatives
  of business conduct for all company employees
• No corporate assets will be used for political
  purposes of any kind. We will not make or even
  discuss making corporate contributions to
  political candidates or organizations.
• No bribes, kickbacks, loans, extraordinary
  entertainment, or any other illegal arrangements
  will be employed in pursuit of the company's
  business.
• No separate funds will be established by the
  company, its subsidiaries or affiliates, for
  making political contributions or for the purpose
  of making illegal or improper payments to any
  person, organization, government or other entity.
• These imperatives will apply to all company
  operations, domestic and foreign. Their
  infraction by any company employee will be
  grounds for the employees immediate dismissal.

12
International Distributors Sales
RepresentativesAcknowledgment Business
Practices
I acknowledge that I have been informed of _____
Corporations Policy regarding Improper Use of
Corporate Assets. I understand that my company
and its officers and employees are required to
comply with the principles of that Policy.

• In particular, I acknowledge and affirm that
• 1. In carrying out our responsibility for
  COMPANY, my company shall not pay, offer or
  promise to pay, or authorize the payment directly
  or indirectly through any other person or firm,
  anything of value (in the form of compensation,
  gift, contribution or otherwise) to
• - any person or firm employed by or acting for
  or on behalf of any customer, whether private or
  governmental, for the
• purpose of inducing or rewarding any
  favorable action by the customer in any
  commercial transaction or in any
• governmental matter
• - any government official, political party or
  official of such party, or any candidate for
  political office, for the purpose of
• inducing or rewarding favorable action
  or the exercise of influence by such official,
  party or candidate in any
• commercial transaction or in any
  governmental matter.
• 2. When I have a concern about a possible
  violation of COMPANY policy, I will report the
  concern to a COMPANY manager or COMPANY legal
  counsel.
• Signature of Principal or Authorized
  Representative Date
• Printed Name and Title

13
Case StudyThe Broker

• A customs broker in Egypt for U.S. Clay Company
  (Clayco), a U.S. corporation, in an effort to
  obtain a more favorable tariff classification and
  a lower duty rate on the importation of certain
  products, paid a customs officer 5,000. While
  the customs broker acted without specific
  authorization from Clayco, he believed he was
  acting with authority to assist Clayco in
  lowering its costs. The broker submits an
  invoice to Clayco for this payment, requesting
  reimbursement.
• Question
• 1. What FCPA-related problems, if any, might
  Clayco have for reimbursement of this invoice?
• 2. Does it make any difference that the Broker
  was not instructed by Clayco to make
• the payment?