Foreign Corrupt Practices

The Wall Street Journal today takes note of the Justice Department’s renewed interest in prosecutions of companies via the Foreign Corrupt Practices Act which passed into law in 1977.  As Mark Mendelsohn, a deputy chief in the Justice Department division overseeing the prosecutions says in the article: “If we call them before they call us, it’s not where they want to be.”  While it clearly makes sense to get to the Justice Department before they get to you, the article leaves unanswered the question of whether contacting the Justice Department should trigger any public announcement by the company.  The natural temptation for most companies is to defer public discussion of any “unpleasantness” as long as possible, waiting until a settlement is achieved or some other outcome has to be disclosed.  Allied to this sensitivity is the reasonable feeling that it might be injudicious to describe any potential violation of the act prior to getting a sense of the Justice Department’s view of the case.

Our view is that this perspective obscures a missed opportunity.  Making the public disclosure that information has been submitted to the Justice Department concerning a potential foreign bribery charge — without an exculpatory characterization — sends a strong and confident message that the company will not tolerate unethical behavior and seeks to root out any occasion of  it regardless of where in the organization the problem may lie.  It also makes this statement prior to any finding or settlement when any corporate statement is of little value.  Courageous words about ethical standards and rigorous compliance practices tend to sound rather thin at the other end of the process set alongside the Justice Department’s inevitably muscular press release.

NB: Laying the blame on your affiliate in <name of country> never flies.  It’s your company, ladies and gentlemen.

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