China is hotbed for violations of the Foreign Corrupt
Practices Act. The real estate industry is not immune from the dangers. In
February of 2009 Morgan Stanley's real estate group reported an employee based in China in an overseas real
estate subsidiary that appeared to have violated the Foreign Corrupt Practices
My company has significant business relationships with CB
Richard Ellis so it saddens me that they are the latest to report a problem
under the FCPA.
As a result of an internal investigation that began in
the first quarter of 2010, the Company determined that some of its employees in
certain of its offices in China made payments in violation of Company policy to
local governmental officials, including payments for non-business entertainment
and in the form of gifts. The payments the Company discovered are minor in
amount and the Company believes relate to only a few discrete transactions
involving immaterial revenues. Nonetheless, the Company believes that the
payments may have been in violation of the U.S. Foreign Corrupt Practices Act
or other applicable laws. Consequently, the Company voluntarily disclosed these
events to the U.S. Department of Justice (the "DOJ") and the Securities and
Exchange Commission (the "SEC") on February 27, 2010 and has continued to
cooperate with both the DOJ and the SEC in connection with this investigation.
The Company engaged outside counsel to investigate these events and has implemented
thorough remedial measures.
In addition, in the third quarter of 2010, the Company
began another internal investigation, with the assistance of outside counsel,
involving the use of a third party agent in connection with a purchase in 2008
of an investment property in China for one of the funds the Company manages
through its Global Investment Management business. This investigation is
ongoing and at this point the Company is unable to predict the duration, scope
or results thereof. In light of the Company's cooperation with the DOJ and the
SEC as described above, the Company voluntarily notified both agencies of this
separate internal investigation and will report back to them when the Company
has more information.
The real estate industry should be just as concerned
about bribery of foreign officials as any other industry. Perhaps even more so.
Real estate is inherently local and you undoubtedly need to deal with
government officials to get building permits, occupancy permits, zoning
approvals and a myriad of other interactions.
additional commentary on developments in compliance and ethics, visit Compliance Building,
a blog hosted by Doug Cornelius.