Same but New: Fresh Tests for Anti-Bribery Provisions of the FCPA

Same but New: Fresh Tests for Anti-Bribery Provisions of the FCPA

 Law frequently requires an understanding of Latin. So, too, does the Foreign Corrupt Practices Act (FCPA), inasmuch as it affords an infinite number of opportunities to invoke the adage avaritia facit bardus (“greed makes you stupid”).

At the very least, the FCPA can expose companies to accusations of substantial wrongdoing. Those that violate anti-bribery provisions of the act are particularly at risk.

For example, Wal-Mart has reportedly spent a “whopping” $300 million on matters related to an ongoing FCPA investigation into bribery allegations in Mexico and that figure is climbing, according to FCPA Blog.

In another notable case from 2010, Daimler AG and three of its subsidiaries with strong American ties (putting them under FCPA jurisdiction) settled an investigation by paying more than $93 million in fines and penalties. That wasn’t the end of the financial pain the companies felt. Forfeited profits, plus legal fees and expenses, reportedly ran that figure to well over $500 million.

Of course, there have been other high-profile investigations and headline-grabbing settlements under the FCPA, and many more are likely to occur. Indeed, several recent developments related to anti-bribery provisions of the act have resulted in many companies examining their own practices to ensure that they can withstand close scrutiny.

Friends in High Places

In August 2013, The New York Times reported that federal authorities had opened an investigation into whether JPMorgan Chase had committed a form of bribery by hiring the children of prominent Chinese officials for the purpose of winning lucrative business contracts.

“In one instance, the bank hired the son of a former Chinese banking regulator who is now the chairman of the China Everbright Group, a state-controlled financial conglomerate,” the Times declared, citing a confidential U.S. government document the newspaper had obtained, as well as public records. “After the chairman’s son came on board, JPMorgan secured multiple coveted assignments from the Chinese conglomerate, including advising a subsidiary of the company on a stock offering, records show.”

The newspaper also alleged that the Hong Kong office of JPMorgan hired the daughter of a railway official at a time when a state-controlled construction company that builds railways for the Chinese government “was in the process of selecting JPMorgan to advise on its plans to become a public company.”

That story quickly drew the attention of other news media. “What makes the investigation a little bit shocking,” observed The Washington Post, “is that JPMorgan seems to have done what every company seeking to do business in China (and many other markets, for that matter) do: hire politically connected people to help ensure that you will be able to [conduct] business unimpeded.”

“It’s been happening for the past 20 years,” said a university professor and former banker quoted in a related story on The Huffington Post. He was referring to the hiring of offspring who are known as “princelings.”

The Times story stressed that the civil investigation by the anti-bribery unit of the Securities and Exchange Commission (SEC) did not definitely link JPMorgan’s hiring practices to an ability to win business, and for its part the bank indicated it had disclosed the matter in a filing while fully cooperating with the agency’s investigators.

Still, the news was enough to rattle many in the financial markets and legal community.

Then, within days, The Wall Street Journal added a new twist.

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