Abstract
In this assignment, the Foreign Corrupt Practices Act is elucidated and explained. The assignment applies two situations involving Geletex Corporation and Jed Richardson the company’s compliance officer to determine if the Foreign Corrupt Practices Act was violated.
Introduction
The Foreign Corrupt Practices Act is legislation passed in 1977 to deter involvement in corruption by American companies in foreign countries. This law considers bribery of foreign government officials in order to get or maintain business as a violation of the United States law. The FCPA requires American companies to maintain detailed accounting records to allow reviews by auditors to determine whether it complies with the provisions of this act.
Legal Explanation of Foreign Corruption Practices Act
The FCPA law prohibits American companies in making payments to foreign government officials or corporations with the purpose of gaining or maintaining business. However, the Act precludes a gift or payment to a foreign corporation or a corporate officer. Moreover, gifts or payments made to officials who do not have control over a ward or maintenance of business do not amount to a violation of the law. The FCPA law gives United States businesses some degree of exceptions in circumstances where payments to foreign government officials do not contravene local laws, even if the gifts or payments leads to maintain or gain business (Zarin, 1995).
The Foreign Corrupt Practices Act allows companies to facilitate and expedite payments in foreign countries. The intention is to expedite or secure the performance of routine government functions. Payments acceptable include gifts aimed at speeding up the issuance of licenses or permits, and processing of paperwork. This particular exception to the general provisions of the act that deters bribery is provided despite the fact that technically grease payments are regarded as bribes. These bribes are less offensive compared to bribes used in the acquisition and maintenance of business. These inducements assist in facilitating performance of duties that American companies in foreign countries are already obligated to perform (Zarin, 1995).
FCPA and Geletex’s Situation
The FCPA applies to all American Corporations with business operations abroad. Geletex is a Corporation that has expanded its operations internationally. It has to comply with the full provisions of FCPA legislations as it engages in business activities abroad. Geletex’s US operations have code of ethics which complies with FCPA. However, the company’s international code of ethics is unclear as it expands its activities abroad. This is shown in situations met by Jed in his visits to the offices in Lima and Stockholm. In Lima, he discovered unusual high commission expenses which the office official justifies as normal. In Stockholm office, he met a situation where the branch employed relatives of top government officials. These situations seem to amount to payments made in an attempt to acquire and maintain business with government officials, thus a violation of the FCPA.
FCPA and Jed’s Concerns
Jed as a compliance director of Geletex has certain concerns about the company’s branch in Lima, Peru. Specifically, he is concerned with possibility of its branch in Lima in engaging in practices that contravene the Act. This is exemplified when he discovers on review of the branch’s accounting records an unusually high expenses on commission payments. As a compliance director, Jed is aware that many companies pay unusually high commissions to disguise that some sales people are paying bribes in exchange for contracts. He is also concerned with Geletex’s code of ethics which comply with FCPA laws in connection to unusual high expenditure on commissions in the Lima, Peru branch.
Violation Determination and Reasoning
The FCPA has provisions that play significant roles such as; one, barring American organizations in foreign countries in paying commissions which exceed stipulated market rates. Two, making it clear that a United States Corporation cannot escape liability by remaining ignorant of the actions of its representatives or agents. Three, has accounting standards provision with accounting rules and regulations designed to make implementation of bribery provisions possible. Lastly, FCPA has record keeping provision that requires American companies to keep records that show how their assets are used. These roles determine whether a company has contravened the FCPA. Similarly, the concerns of Jed about the Lima office indicate a violation of the FCPA. The discovery of unusually high commissions expenditure is a violation of this act. Differences in culture and ethics from country to country does not shield American corporations from liability under the act for being ignorant of the behavior its representatives abroad (International Business Ethics Institute, (n.d)).
Jed’s Alternatives
As a compliance director of Geletex, Jed knows that all American companies must comply with the FCPA and other laws. Jed has the alternative of ensuring that Geletex affiliates comply with FCPA. Given the company’s office situation in Lima, where Jed found out unusually high expenditure on commissions, he has the option of investigating the payment to ensure compliance with FCPA. FCPA requires payments made on commissions not exceed market rates. If commission expenses made in the Lima office exceeded the market rates, then that amounted to a violation of FCPA and Geletex is subject to litigation. Jed also has the alternative of finding out whether high expenditure was meant to facilitate or expedite performance of routine government actions such as issuance of permits and licenses. The FCPA provides exception to American business in this situation where the payments do not violate the local laws. Finally, Jed has to ensure that he is aware of Geletex’s international operations and ensure full compliance with the law. He has an obligation of ensuring that the company has international code of ethics which does not violate the law. FCPA, in its provisions makes it clear that American Corporations cannot shield themselves from liability by remaining ignorant of the actions of its agents or representatives abroad.
Conclusion
In conclusion, the FCPA law considers a company to have violated its provisions if the company’s accounting system fails to openly show how money is used well. If this is detected, the Securities Exchange Commission will use the act to prosecute the offending company for engaging in bribery.
References
International Business Ethics Institute. (n.d). Bribery in International Business. Web.
Zarin, D. 1995. Doing Business Under Foreign Corrupt Practices Act. New York: Practicing Law Institute.