Justice Department cracking down on foreign bribes

The government's new less tolerant attitude toward corporate corruption, it seems, doesn't stop at America's shores. The Wall Street Journal is reporting that the U.S. Justice Department has stepped up its prosecution of American companies for foreign bribery. In response, many have had to take "costly steps" to defend themselves against the allegations. The prosecutions fall under the Foreign Corrupt Practices Act (FCPA), a little-used post-Watergate law. The crackdown spans five continents and a wide range of industries, including energy and medical devices.

According to company disclosures, Lucent Technologies, Sun Microsystems, Royal Dutch Shell and Titan Corp. are among the 120 companies under investigation. The stepped-up effort started thanks to scandals surrounding the likes of Enron earlier this decade. American companies are currently scurrying to find out if they are at risk or not. In some cases, companies have contacted the Justice Department to confess -- hoping that the honesty leads to leniency.

What exactly is the law? American companies are prohibited from paying, or offering to pay, foreign government officials or employees of state-owned companies to gain a business advantage. The law covers non-monetary gifts (sometimes even including holiday gifts) as well as direct payment, and has broad enough wording to need "an army of consultants." Alexandra Wrage, president of Trace International, a Washington-based nonprofit specializing in antibribery compliance, noted, "When you have a law that can result in criminal sanctions and jail time and that you can violate without actually realizing you're violating it, that's terrifying." In 2007, Lucent Technologies was hit for $2.5 million in fines because it did not properly record millions of dollars in travel to Disney World, Las Vegas and other destinations for roughly 1,000 Chinese officials who worked for state-controlled telecom companies. Lucent called the trips "factory tours."

What does this mean for business? Don't do anything, anything at all, that can be construed as a bribe -- including taking a group of businessmen out for a lavish dinner. While cracking down on steak dinners may seem a bit ridiculous, let's not forget some of the abuses that got us to this point. American companies doing business overseas have relied for too long on the quality of their gifts instead of the quality of their products to win contracts. With the playing field leveled, corporations may even find they save money ... after the initial flurry of legal defenses and mea culpas is finished, that is.

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