Question

In 1997, 35 countries signed the convention of the Organization for Economic Cooperation and Development (OECD) to make it a crime to bribe foreign officials. In May 1999, the OECD issued a series of six principles (updated in 2004) that have since become the basis of the corporate governance position of the World Bank and the International Monetary Fund (IMF). However, in 2015 alone:

• In February 2015, Goodyear Tire and Rubber Co. agreed to pay $16.2 million to settle charges from the SEC under FCPA for the payment of bribes in Kenya and Angola to increase tire sales. Goodyear subsidiaries were accused of paying more than $3.2 million in bribes to employees of state-owned and private companies between 2007 and 2011.

• In May 2015, BHP Billiton paid $25 million to settle SEC charges in relation to FCPA offenses. BHP had been accused of improperly sponsoring foreign government officials as guests at the 2008 Summer Olympics in Beijing, China. The case was settled through an internal administrative order without going to court.

• In July 2015, New Jersey-based construction management company Louis Berger International paid $17.1 million to resolve FCPA criminal offenses. In the resolution, the company admitted paying bribes to foreign officials in India, Indonesia, Kuwait, and Vietnam in order to win contracts. The settlement included a deferred prosecution agreement that will require a compliance monitor for at least three years.

• In September 2015, Hitachi Ltd. paid $19 million to resolve SEC charges. The case was brought in relation to payments made to South Africa’s ruling page 123political party in connection with contracts to build two multimillion-dollar power plants.

American companies operating under increasing federal and regulatory scrutiny face real consequences from trying to do business in a global business environment in which foreign business seems to function on the basis of “gifts” at every stage of the transaction.

• In December 2012, the SEC charged Eli Lilly and Co. with violations of the FCPA for improper payments made by subsidiaries to foreign government officials in Russia, Brazil, China, and Poland; and accepted a settlement in the amount of $29 million for offenses including the following:

  The SEC alleged that the Indianapolis-based pharmaceutical company’s subsidiary in Russia used offshore ‘marketing agreements’ to pay millions of dollars to third parties chosen by government customers or distributors, despite knowing little or nothing about the third parties beyond their offshore address and bank account information.

  Employees at Lilly’s subsidiary in China falsified expense reports in order to provide spa treatments, jewelry, and other improper gifts and cash payments to government-employed physicians.

  Lilly’s subsidiary in Poland made eight improper payments totaling $39,000 to a small charitable foundation that was founded and administered by the head of one of the regional government health authorities in exchange for the official’s support for placing Lilly drugs on the government reimbursement list.

  In November 2012, the Department of Justice issued a 120-page “Resource Guide” to the FCPA, including numerous case studies designed to clarify what actions would and would not be considered to be violations of the law. The guide was written as a resource for DOJ attorneys, but attorneys in private practice are encouraging their clients to become familiar with it.

QUESTIONS

1. Is it ethical for U.S. regulations to put U.S. companies at an apparent disadvantage to their foreign competitors? Explain why or why not.
2. If foreign companies pay bribes, does that make it OK for U.S. companies to do the same? Explain why or why not.
3. If you could prove that new jobs, new construction, and valuable tax revenue would come to the United States if the bribe were paid, would that change your position? Explain your answer.

Answer in your own words

Answer 1

1. It is ethical for the US regulations to place US companies at disadvantage when compared to foreign companies. It has to be noted that in the international market what plays an important role is nothing but the competitiveness. All the companies should be given an equal footage when it comes to competition. In this case, it is just ethical to have US regulations which can at times place the US companies at disadvantage just for the sake of a fairer competition among the companies both domestic and foreign.

2. If foreign companies pay bribes, it is not okay for the US companies to pay bribe just because the foreign companies are paying bribes. This can said so because not paying bribes or kickbacks is good for the business in the long run and doesn't affect it's business either. It is good as long as their honesty pays them well both in the competitive sphere and also on sales of products. Over the years, we have seen that customers usually prefer honest companies to that of a corrupt companies. Corruption in the long run will hinder the development process of the country and also undermine the Democratic setup.

3. I will not change my stand even if corruption will bring in new jobs, new structures and valuable tax revenues. This is because in the long run, the corrupt and dishonest companies will die a sad death. When at a point the corruption is made public, customers would prefer a loyal company in the long run. Same way, corruption or bribery affects the very ethical values of a country and the nation will be in a critical juncture due to rampant corruption. Another thing is that once we adjust with a small type of corruption, at later stages we will have to deal with much more serious kinds of bribery which can affect the very foundation of the country. In order to to control such a situation we have to follow much cleaner ways of business.