The United States and Britain may be leading the way on anti-corruption law, but the BRIC nations—Brazil, Russia, India, and China—are making fresh efforts of their own, creating a potential briar patch of worldwide regimes for companies to navigate.
China enacted anti-bribery legislation in February in the form of an amendment inserted into the Criminal Law of the People's Republic of China. The law, which took effect on May 1, brings China in line with the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act by prohibiting the bribery of foreign officials.
“The level of enforcement activity in the United States and globally has never been higher, and it is not going to diminish,” says Jamie Parkinson, a partner with law firm BuckleySandler. “Because of this, legal and compliance professionals should be reviewing corruption risks facing their companies and making the necessary enhancements. No company wants to be the example for what not to do.”
Under China's new law, both individuals and corporations are barred from providing “money or property to any foreign party performing official duties or an official of international public organizations” for the purpose of “seeking illegitimate business benefits.” Punishment in these cases is serious to say the least; sentences can range from years in prison to, in extreme cases, death.
In typical Chinese style, however, the law does not define what constitutes a “bribe” or who qualifies as a “foreign official.” Such lack of clarity in the regulation “affords prosecutors a significant amount of discretion, and the government's enforcement priorities will determine the types of conduct that are likely to result in liability under the new law,” a client alert from law firm White & Case states.
Meanwhile, Russia enacted anti-bribery legislation in May. The law specifically prohibits commercial bribery and both receiving and offering corrupt payments to foreign government officials. The law also significantly increases penalties for bribery of all forms. In a speech made in March at an anti-corruption summit in Russia, U.S. Assistant Attorney General Lanny Breuer hailed the legislation as a “unique moment of opportunity” in the struggle to fight corruption.
Then again, Russia has a dismal record of stamping out corruption. Transparency International, a non-profit anti-corruption group, ranked Russia 154out of 178 countries in its annual 2010 Corruption Perceptions Index. “Corruption is a very sensitive issue in Russia and a challenging one,” Parkinson says.
Indeed, bribery and corruption have become endemic in Russian culture; low-ranking officials even bribe their superiors simply so they can keep their own jobs, and keep collecting their own bribes. “It is very difficult to do anything in Russia at any level without bribe demands,” says Alexandra Wrage, president of TRACE International, a non-profit association that provides anti-bribery compliance solutions. “It's really fairly rampant there.”
“Legal and compliance professionals should be reviewing corruption risks facing their companies and making the necessary enhancements. No company wants to be the example for what not to do.”
—Jamie Parkinson,
Partner,
BuckleySandler
India also has recently jumped aboard the anti-bribery bandwagon. It introduced the “Prevention of Bribery of Foreign Public Officials and Officials of Public International Organizations” bill in March, which for the first time would prohibit bribery involving foreign public officials.
Under the proposed law, any person “holding a legislative, executive, administrative, or judicial office of a foreign country” who accepts or gives a bribe to secure a contract in India could face fines and up to seven years in prison. The law additionally would criminalize the offense of abetting bribery.
And an anti-bribery measure is also in the works in Brazil. Legislation was introduced last year addressing civil and administrative liability for corporations for corrupt acts relating to Brazil's national and foreign public administration. If enacted, all companies may be held liable for corrupt acts committed by their representatives, potentially signaling an increase in enforcement efforts in Brazil. Currently, the legislation is still under discussion in the Chamber of Representatives.
The BRIC nations are not the only jurisdictions with an eye on anti-corruption provisions. Other countries that have passed or are considering laws to ban overseas bribery by corporate officials include the Czech Republic, Indonesia, the Netherlands, and Spain. Additionally, Transparency International is now pressing for Egypt to tackle corruption, either by introducing new laws or closing loopholes in existing ones. And Canada, which has long had its own version of the FCPA on its books, the Corruption of Foreign Public Officials Act, announced its most significant settlement under that law against a Canadian company just last month.
Get It Together
BREUER BATTLES CORRUPTION
Below is an excerpt from Assistant Attorney General Lanny Breuer's speech before the 3rd Russia and Commonwealth of Independent States Summit on anti-corruption:
We are not immune from corruption in the United States. Far from it. In fact, the Justice Department's Criminal Division has a dedicated group of prosecutors—in the Public Integrity Section—whose sole task is to prosecute corruption cases involving federal, state, and local officials in the United States. The Public Integrity Section works in close partnership with the Federal Bureau of Investigation and other law enforcement agencies, as well as with federal prosecutors in each of the nation's 94 U.S. Attorneys' Offices. To give you a sense of the kinds of cases that the Public Integrity Section prosecutes: last week, prosecutors in the Public Integrity Section obtained jury convictions against a senator from Puerto Rico and a local business owner for engaging in a bribery scheme involving the exchange of cash and lavish trips for votes on specific pieces of legislation and other official acts. On March 1, Public Integrity Section prosecutors obtained jury convictions against a former U.S. Army major stationed in Iraq, and his spouse, for taking bribes in exchange for official contracting action on behalf of the Army. These individuals corruptly used their positions to pocket millions of dollars for their own personal benefit.
On Feb. 10, prosecutors in the Public Integrity Section secured a jury conviction against a former staff member in the U.S. House of Representatives on corruption charges relating to his acceptance of an all-expenses paid trip to the first game of the 2003 World Series in baseball. And on Feb. 1, Public Integrity Section prosecutors obtained a jury conviction against former U.S. Senator Edward Kennedy's office manager in connection with a scheme to pay himself $75,000 in unauthorized bonuses.
As you can see from this recent slice of the Public Integrity Section's work, we are waging an ongoing battle against all forms of corruption in the United States.
In addition to our prosecution efforts at home, we have also devoted significant resources to helping foreign countries build up their criminal justice institutions. Since 1991, in partnership with the U.S. Department of State, the Criminal Division has, at the request of host nations, placed legal advisors in dozens of countries around the world—including Russia—to participate in developing and sustaining these institutions. For example, we have recently been partnering with Indonesia's Attorney General's Office to establish and support the work of a 50-prosecutor anti-corruption task force. And right here in Russia, we have been assisting Russian authorities with their efforts to amend the Criminal Procedure Code. Indeed, I want to recognize the two Resident Legal Advisors who are currently stationed in Moscow: Tom Firestone, an experienced federal prosecutor from New York City; and Luke Dembosky, who comes from the federal prosecutor's office in Pittsburgh. Thank you Tom and Luke for all of your excellent hard work and dedication.
Since 1986, the Criminal Division has also focused on improving policing and law enforcement capacity abroad. Our police training program is staffed by law enforcement professionals with decades of police experience at the federal, state and local levels, and has programs in dozens of countries, including Iraq, Colombia and Rwanda, among many others. Anti-corruption work is an important part of these police programs. As one example, in Peru last year, we assisted the national Congress with the revision of an outdated police conduct law. The revised law includes new penalties for corrupt and unethical behavior; standards for the investigation and discipline of police misconduct; and requirements for the annual evaluation of officers ...
Source: Lanny Breuer Speech on Anti-Corruption, March 16, 2011.
Not only are multinational companies under more scrutiny from more countries than ever before, but cross-border cooperation is strengthening the enforcement of anti-corruption laws. BRIC governments are increasingly willing to piggyback off U.S. enforcement actions. “This decade will be dominated by parallel actions,” says Joseph Warin, a partner with law firm Gibson Dunn. “If you're a global company and you have an FCPA problem in the United States, no longer is that problem going to be contained in the United States.”
Before passing its own legislation, for example, China has relied on U.S. and U.K. enforcement actions against companies that are accused of bribing Chinese officials, such as Lucent, Rio Tinto, and Siemens—each of which paid millions of dollars to resolve FCPA allegations with U.S. regulators. From 2005 through 2010, the Chinese recovered $4.62 billion in anti-bribery and graft prosecutions, with 119,000 corruption cases investigated in 2010 alone.
In China, several recent cases highlight the need for strong controls and policies around gifts, travel, and entertainment. Bribery can come in the form of theater tickets, trips, loans, expensive meals, education, political or charitable donations, club memberships, and other goodies. For example, Daimler and its Chinese subsidiary got in trouble for allegedly providing internships to a Chinese official's son and letters to German officials to help the son obtain a student visa.
As the global anti-corruption picture continues to change, multinational companies doing business in BRIC countries must tailor their policies and practices to the various global bribery risks of each jurisdiction, Wrage says. “Having good local counsel to help you understand the climate and understand where the risks are is so important,” she says.
Different training approaches are also required for employees in different countries. “You have to prepare employees differently,” says Wrage.
In India, junior employees routinely encounter low-level police or customs officials looking for bribes; in China, senior executives are more likely to be hit up for a bribe because deals are generally done with government officials higher up the chain of command, she says. “Making sure your people on the front lines know how to respond is important,” she adds. “Role play. Help people understand what is happening and how to respond to it.”
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