Which of the following transactions violates the 1977 US Foreign Corrupt Practices Act (FCPA)?
A. Paying a Bloomberg employee’s taxi fare to JFK Airport
B. Offering cash to a Czech Republic government official to expedite processing for a business permit
C. Buying lunch for a senior logistics manager at General Motors
The correct answer, all of these*, underscores an emerging problem: the FCPA has become the legislative equivalent of the Ford Pinto. Useful, but burdened with obvious flaws that get worse with age.
“C’mon! The Feds would never prosecute anyone for something as trivial as paying for a client’s cab fare!” you exclaim. Pause for my sarcastic expression. According to Mark Mendelsohn, who was responsible for recent growth in FCPA enforcement during his time working for the Fraud Section of the US Department of Justice, “If you look at who we’re prosecuting, we’re prosecuting mid-level to senior level corporate officers and employees, CEO’s, CFO’s, heads of international sales.”
And, I might add, earning more than chump change for Uncle Sam. The top ten FCPA settlements total $2.8 billion. In 2010, over half of the civil and criminal penalties the US Government collected were from the FCPA. That’s ahead of a lot of better-known, oft-reviled consumerist, environmentalist, protectionist legislation that collapse into three- and four-letter acronyms like OSHA, FDCA, CWA, and EPA.
Why should anyone reading this care? Because regardless whether your title is CEO, VP Sales or Marketing Rep, the government has unleashed its flying monkeys, and they’re looking for you! According to the US Chamber Institute for Legal Reform, “Five of the top ten FCPA settlements occurred in 2010 alone. The remaining five have all occurred since 2007. An added sign of increased enforcement is that there are currently more open FCPA investigations pending resolution than at any other time since its inception. ” Before you complete the PowerPoint deck for your upcoming sales meeting, I suggest including a slide with the jocular title, FCPA Regs. It will help settle everyone down after the morning coffee.
But before I jump into my Indiana-built Subaru and head out to a big-government-bashing tea party rally, let’s be fair. Without the FCPA, we’d have chaos. Corruption undermines everything we do as marketers, brand managers, and salespeople. Our foundational assumptions include that a major part of the value of our products and services are derived from quality and unique benefits. A payment-with-wink here, an expedite fee there, and that no longer applies. And although it’s hard to believe in today’s litigious and protectionist world, before 1977 there wasn’t a government on the planet that made it a crime to bribe officials of a foreign country. We’re not talking suitcases filled with cash left at arranged drop points. Just fees that were buried on financial statements as a cost of doing business.
But in the thirty-four years post-FCPA legislation, the sales and buying landscape has buckled, shifted, and changed dramatically. What worked in 1977, doesn’t today.
These forces have sharpened the need for FCPA reform:
Globalization. The importance of international trade has increased significantly since 1977. Today, nearly one third of our economy—over $3 trillion—comes from offshore. At the same time, the line between foreign government and foreign business has become hard to discern. Where to begin, where to begin? Did I hear anyone mention Airbus or OAO Gazprom? Require your sales executive to look up the ownership status of his prospect’s company on his iPad before he pays for business lunch.
Demands for economic growth. According to a recent Deloitte survey of companies in the financial services industry, 63% of respondents reported that FCPA issues caused their companies to renegotiate or abort planned business contracts, mergers, and acquisitions in the last three years.
Increasing legislative complexity. According to the US Chamber for Legislative Reform, “American companies seeking to sell their goods and services overseas need straightforward, reasonable guidelines so that they know what the standards are and can communicate them clearly to employees and foreign workers. The FCPA in its current form does not provide such guidelines.”
Not to throw another selling risk on the already-large pile that includes “no decision,” and “competitive pricing,” but FCPA compliance has earned a rightful place among the usual suspects. If you sell internationally, the macho adages “do whatever it takes to close the deal,” and “I don’t care how you make your number, as long as you make it,” should be replaced with the meeker “better run this past Steve in Legal . . .”
Yes, it’s less fun, less “shoot from the hip.” But whether you work for an offshore company that sells in the US, or a US company that sells worldwide, understanding your sales risks is just as important as knowing your opportunities.
* Bloomberg is a company owned by the mayor of New York City, Michael Bloomberg; the United States Government is the primary shareholder in General Motors
