article is the first in a series of articles detailing the risk assessment,
evaluation and management of a foreign business partner under the Foreign
Corrupt Practices Act (FCPA). This article sets out the parameters of the
problem and suggests a format for risk assessment, suggesting an approach based
upon Release Opinion 08-02 that recommend dividing foreign business partners
into categories of "High Risk, Medium Risk and Low Risk."
Mr. Fox writes: US companies have long utilized
foreign business partner relationships to leverage their global reach and
assist in the growth and development of overseas business relationships. When a
US company enters into this type of business relationship it enables the
company to expand their commercial reach in a cost effective manner. One key
component of this foreign business relationship is that the US company must
manage compliance under the FCPA by the foreign business partner.
While the FCPA itself does not speak directly to the foreign business partner
issue, the Federal Sentencing Guidelines for FCPA violations, and related US
government commentary, make clear that US based companies bear the same legal
responsibility for the actions of foreign business partners as they do for the
actions of their own employees. In the "Report of Investigation Pursuant to
Section 21(a) of the Securities Exchange Act of 1934 and Commission Statement
on the Relationship of Cooperation to Agency Enforcement Decisions, Release No.
34-44969 (Oct. 23, 2001)"[i] and "Principles of Federal
Prosecution of Business Organizations (Dec. 12, 2006)"[ii] the
Securities Exchange Commission (SEC) and Department of Justice (DOJ) Deputy
Attorney General Paul McNulty each confirmed that the quality of a company's
due diligence on foreign business partners will be considered when fashioning
penalties for companies whose business partners violate the FCPA.
In spite of these clear statements by the SEC and DOJ, the relationships of US
companies with foreign business partners remains one of the greatest areas of
consternation for US companies. In its "2008 Anti-Bribery and Anti-Corruption
Survey" KPMG Forensic reported, based on responses from 103 US multinational
company executives, that eighty-five percent of the respondents said their
company has a formal FCPA or anti-corruption compliance program, however, even
with this high level of commitment to the FCPA, many respondents still feel
uneasy about third party due diligence. The survey reported:
Access the full version of "Foreign Business Partner under
the FCPA: The Problem and Managing It" with your lexis.com ID
If you do not have a lexis.com ID,
you can purchase the Emerging Issues Analysis content through our lexisONE Research Packages
Corporate & Securities Law Community Blog posts by Thomas Fox:
Is the Cost of FCPA Compliance? Or What Is the Cost of Non-Compliance?
Committee and Management of Foreign Business Partners
Changes Coming:US Sentencing
Guidelines, UK Bribery Act and the OECD on Facilitation Payments-Part III
Coming: US Sentencing Guidelines, UK Bribery Billand the OECD on Facilitation
Who Will Have the Better Season?
Changes Coming: US Sentencing
Guidelines, UK Bribery Bill & OECD on Facilitation Payments-Part I