Legal Problems Facing a Local Business Remind Companies That Do Business Abroad to Pay Attention to Foreign Corrupt Practices Act

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A recent article in the Star Tribune served as a salient reminder to companies that do business abroad. The article spoke about Digi International, Inc., a Minnetonka-based corporation whose CFO recently resigned after an audit revealed that there had been “possible violations of our gifts, travel and entertainment policy in the Asia-Pacific region by a few employees.”

Most concerning for the company, and the true reminder for other companies that do business abroad, is that these “violations” were not only against company policy but also against the Foreign Corrupt Practices Act, a federal law that prohibits making

an offer or payment of anything of value to a foreign official, foreign political party, or candidate for political office, for the purpose of influencing any act of that foreign official in violation of the duty of that official, or to secure any improper advantage in order to obtain or retain business.

“Offers” or “payments” that violate the FCPA may include bribes, “grease payments” to facilitate business abroad and even non-monetary items like gifts and dinner invitations. This means that any US person may violate the Act if he makes a payment to a foreign official for the purpose of obtaining, retaining or directing business to that person.

In countries where such practices are common-place (for an interesting perspective on corruption around the world, go to Transparency International’s website) and where it is difficult to carry out business without such payments or offers, it is of extreme importance that companies train and educate their employees who go abroad to conduct business about the FCPA and about what can be considered a violation of the Act. If the ulterior motive behind the box of expensive Italian wine or the front-row tickets to La Scala that are given to a foreign officer is to obtain or retain business, rather than a simple thank you (which not be easy to prove), a company might have some serious legal problems on their hands.

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