The ongoing Wal-Mart investigation is reminding us that the FCPA, in effect, is trade policy toward developing countries.
The company said today in an SEC filing that its investigation has expanded to include several countries beyond Mexico. These countries include Brazil, India, and China. The common thread here is obvious enough: there are flagship developing countries.
Developing countries such as these present the perfect storm for FCPA violations — they're economically dynamic enough to attract significant foreign investment, but their legal systems are not yet sophisticated enough to deter bribery. Empirical research has demonstrated that of those countries that have become hosts to alleged FCPA violations, over 90% have been developing countries. The developed world? In the 5-7% range. (See this paper for the numbers).
And what is that policy? What impact do we think we're having on the legal, social, and economic development of these countries? What impact are we trying to have? Are these questions our enforcement agencies are asking?
When Wal-Mart erupted on the scene in April, it was immediately clear that this case would be the poster-child for FCPA enforcement. That now seems to be true in more ways than one. Yes, we appear to have the quintessential U.S.-based multinational corporation, with a very aggressive growth strategy, paying systemic bribes. That's the first component. But the second component concerns where the bribes are being paid. And the answer is developing countries.
Let's recognize the fact: the FCPA is trade policy toward developing countries.
Andy Spalding is a senior editor of the FCPA Blog.