Wednesday, September 16, 2009

FCPA Goes Hollywood

Here is a little something for those of you out there trying to convince management that compliance is worthwhile. Some folks in Hollywood were apparently not paying attention to the Foreign Corrupt Practices Act. It seems they decided that the best way to get the contract to run the Bangkok Film Festival was to bride the relevant governmental official to the tune of $1.8 million.

Under the FCPA, with very limited exceptions, it is illegal for a U.S. person to make a corrupt bribe a foreign governmental official to secure or retain business. There are very limited exceptions for what are often called "grease payments." A grease payment is made to expedite a ministerial task that is certainly going to happen. The difference has to do with whether the bribe is to get someone to exercise discretion in your favor as opposed to just do their job. Still, if your theory is that you are making grease payments so it is all good, you are treading on some very thin legal ice.

The second part of FCPA has to do with recordkeeping in the U.S. There is a lot to this part but it is tougher to explain. The bottom line is that your books and records better properly report your corrupt and non-corrupt bribes. If the SEC or DOJ finds your books are hiding payments, that is a separate violation. It is kind of like getting a drug dealer on tax evasion.

The other thing people don't realize about the FCPA is that the penalty can be disgorgement of the proceeds. So, if your sale team gave the Minister of Aviation of Whocaresastan a bottle of scotch while showing off your cool new ATC system, and failed to properly record the gift, your company might have to give back the $1 billions it earned on the airport construction contract.

That can hurt. Oh, and people can also go to jail.

So, FCPA compliance should not be under the radar. Get some training for your management and sales staff. It will save you a lot of grief later.

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