Last week, Credit Suisse settled a Foreign Corrupt Practices Act enforcement action for approximately $77 million for illegally hiring family members and close personal friends of Chinese government employees and employees in Chinese state-owned enterprises. This case follows a straight line of enforcement actions involving Bank of New York Mellon, Qualcomm, and most recently JPMorgan.
Some commentators have claimed that the practice of hiring family members of customers is not only long and time honored but a standard business practice, across the globe and one employed here in the United States. What these commentators fail to understand, however, is that under the FCPA if the intent in the hiring of a family member or close personal friend is to influence a decision maker at a foreign government or state-owned enterprise to confer a benefit, then the FCPA has been impacted. That benefit can be a new contract, contract renewal, tax benefit, confidential inside information, or the wide variety of other conduct that constitutes a benefit under the FCPA.
Moreover, there is nothing in the FCPA that makes it illegal or prevents the hiring of a family member or close personal friend of a foreign government official or employee of a state-owned enterprise. Admittedly, such a hiring may be more high risk and require greater risk management but it is still an acceptable practice, just as long as the hiring goes through the regular hiring process.
It all starts with the hiring criteria. If a candidate does not meet the company’s educational or professional standards for hiring, they should not be considered—full stop. There should not be any waivers or exceptions granted unless it is for a technical position that the candidate is uniquely suited for, all of which must be documented. If such a candidate is hired then he must be ring-fenced off from working on any matter related to any family member who is a foreign government official or employee of a state-owned enterprise.
The Credit Suisse FCPA enforcement action reminds us all again that it is not the hiring of family members or close friends of a foreign government official or employee of a state-owned enterprise that is illegal under the FCPA, only those hires made with corrupt intent.
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