Question

I’m the lead salesperson in trying to sell new HP computers in China. I don’t have many contacts, so I hire a local facilitator to arrange meetings with key buyers. In order to get in contact with the minister of Education and discuss sales of computers to Chinese schools, the facilitator says it would cost $10,000 for us to be able meet next week due to the Ministers extremely busy schedule. Would a payment such as this violate the FCPA? What about if I paid the $10,000 to get to meet with the CEO of China’s largest independent manufacturing firm? Explain your answers.

Answer 1

The Foreign Corrupt Practices Act (FCPA) is a United States law passed in 1977 that prohibits U.S. firms and individuals from paying bribes to foreign officials in furtherance of a business deal. Also with the introduction of certain amendments in 1998, the anti-bribery provisions of the FCPA now also apply to foreign firms and persons who cause, directly or through agents, an act in furtherance of such a corrupt payment to take place within the territory of the United States.

Under The Foreign Corrupt Practices Act (FCPA), there are two primary provisions:

1. An anti-bribery provision which makes it unlawful for a U.S. company or citizen, and certain foreign issuers of securities, to make a corrupt payment to a foreign official for the purpose of obtaining or retaining business .

2. An accounting provision which requires companies with securities listed on stock exchanges in the United States to make and keep books and records that accurately and fairly reflect the transactions of the corporation and to devise and maintain an adequate system of internal accounting controls.

In above case where the lead salesperson in trying to sell new HP computers in China and in order to get in contact with the minister of Education and discuss sales of computers to Chinese schools, the cost of $10,000 to be able meet him next week due to the Ministers extremely busy schedule,  would certainly be violation of FCPA , as this type of facilitation fee is actually a sort of bribe to an official, political party or candidate.  

The FCPA creates an exception for facilitation payments – or those payments meant to facilitate the performance of a “routine governmental action” by an official, political party or candidate. Routine governmental action also includes: providing police protection, transporting mail, scheduling inspections associated with contract performance, inspections related to transit of goods across the country, providing phone service, power and water supply, loading and unloading cargo or protecting products from deterioration.

As far as paying such facilitation fee to get to meet with the CEO of China’s largest independent manufacturing firm is concerned, nothing is mentioned in the FCPA about its legality or otherwise.