Tag Archives: FCPA

Democracy that Delivers Podcast #21: After Serving Time for Violating the FCPA, Richard Bistrong Counsels Others on How to Avoid the Same Fate

Podcast hosts Julie Johnson (left) and Ken Jaques (center) with guest Richard Bistrong.

Podcast hosts Julie Johnson (left) and Ken Jaques (center) with guest Richard Bistrong.

Former FCPA violator and current anti-bribery consultant Richard Bistrong (@richardbistrong) was convicted of violating the Foreign Corrupt Practices Act, cooperated with the FBI, and served time in prison. Today he works with companies to help them deal with anti-bribery and compliance issues around the world. He discusses what led to his conviction, and what he learned about corruption risks and the incentive structures that make bribery more likely. He also shares the advice he would give his younger self before he embarked on that first international sales trip overseas that started it all.

Learn more about his work at www.RichardBistrong.com.

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How Does Corruption Affect the Alibaba IPO?


Last week Chinese e-commerce giant Alibaba filed paperwork with the U.S. Securities and Exchange Commission for an initial public offering (IPO). As one of the largest companies in the world’s second largest economy, Alibaba represents an enormous opportunity for investors. They are expected to raise between $15 and $20 billion, making this IPO potentially bigger than Facebook’s.

While Alibaba already handles more sales volume than eBay and Amazon combined, there is added room for growth as internet penetration in China is only around 45 percent. Online shopping is projected to increase at a rate of 27 percent per year as the still-poor country grows richer and more connected.

Regardless of the perceived opportunities, foreign investors are not entirely convinced that Alibaba will be a good buy. The attitude toward Chinese companies in general is one of skepticism and uncertainty — perpetuated most recently by concerns about the transparency in auditing practices. Alibaba’s complex network of businesses and a lack of details surrounding partnerships with domestic logistics companies also raise some questions for potential investors.

In all the buzz surrounding Alibaba’a IPO, however, there is a missing element that could be cause for additional concern. By selling shares in the U.S., Alibaba opens itself to more exposure to the Foreign Corrupt Practices Act (FCPA), a piece of legislation that makes it illegal for companies to bribe officials of foreign governments. A number of multinational companies from around the world have already been ensnared in FCPA investigations as a result of corruption in China and the idea that Alibaba has grown within a market rife with corrupt acts could be cause for increased suspicion. Compounding this risk is the fact that the company has been the subject of investigations by domestic authorities in the past.

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The higher purpose of FCPA compliance

Compliance officers and corporate anti-corruption lawyers can become quite versed in anti-corruption tools, laws, regulations, and resources. They can talk for hours about setting up hotlines for employees half way across the world, developing proper training programs on how to resist bribes, conducting due diligence, or defining what constitutes a foreign official under Foreign Corrupt Practices Act (FCPA).

Yet, in the midst of all these technical details and hundreds of pages of documents and forms, I often find that they are missing the bigger picture – why what they do actually matters. Why it matters not just for their companies and not just for complying with the law, but for the millions and millions of victims of corruption.

I was reminded of this late last year at Transparency International-USA Integrity Awards dinner. There, Mark Mendelsohn, one of the chief architects of increased FCPA enforcement in recent years, spoke of the need for the corporate anti-corruption professionals to keep in mind the real costs of corruption and why what they do actually matters, even thought most of the time they are “not confronted directly” by the tragedies of corruption. Check out his remarks, something you don’t often hear often from FCPA compliance specialists:

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Facilitation Payments No More

Facilitation payments – small payments to government officials to facilitate action on their part – are the grey area of corruption.  In the eys of some they are a bribe, in the eyes of others they are not. Foreign Corrupt Practices Act has long made an exception on facilitation payments, allowing companies to make small payments to government officials as long as such payments are properly recorded and reported.

I remember working on TI Business Principles for Countering Bribery, which took a tough stance on facilitation payments, and the fascinating discussions that would take place in working group meetings over the issue.  Eventually, the working group drafting the principles took a tough stance of recommending not accepting facilitation payments (only in extreme cases of a threat to a person’s life).

But the tide is changing. As the WSJ notes, the new OECD recommendations call for banning facilitation payments.

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Bribery Abroad Doesn’t Pay

Until recently, paying bribes to foreign government officials was considered an acceptable business practice, or even a “necessary” expense eligible for a tax write-off. Those days are over. As the Economist points out, countries are becoming more and more stringent on how they view – and punish – bribery abroad. It is not just America’s Foreign Corrupt Practices Act (FCPA), originally passed in 1977, that is much more strictly enforced. Britain, Germany and other countries whose companies do business all around the world are now paying attention, too, after a string of high-profile cases of questionable business practices abroad. And the issue is not just what the company itself does since the courts increasingly hold multinationals responsible for the conduct of their local suppliers and distributors.

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