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Monday
Jan302017

Matt Kelly: Why should I give a %$#@! about overseas bribery?

The ethics & compliance community already knows we’re going to hear lots of chatter in coming months about easing the burden of compliance with the Foreign Corrupt Practices Act.

We’ll probably see a new attitude at the Justice Department, shifting away from prosecuting organizations in favor of prosecuting individuals. We may see changes in the size of monetary penalties, or the use of deferred-prosecution agreements.

All that is fine; it comes with the territory of new political leadership. But what should set compliance officers on fire is the inevitable new round of talk about how overseas bribery isn’t a crime worth prosecuting at all.

This is on my mind thanks to a recent column in the legal blog Above the Law, “Is Trump the End of FCPA Enforcement?” The author, a white-collar defense lawyer, speculated about the need for all this attention to corporate bribery and FCPA enforcement. The killer paragraph was this:

If GE wants to bribe folks in Poland, why is that our problem and not Poland’s? Why should we care about corruption in Poland if Poland doesn’t? Indeed, if a Polish company can bribe but an American country can’t, doesn’t that put us at an unfair disadvantage? At the very least, why should U.S. taxpayers fund cleaning up Poland’s government?

In fairness to the author, I can’t quite tell from his column whether he truly believes those words. But many other people now in political ascendancy in the Trump Administration do believe those words. They see overseas bribery as somebody else’s problem, nothing that law enforcement or the corporate compliance community should bother with here.

That’s the sort of sentiment that should make ethics & compliance officers’ blood boil. So let’s take a deep breath and start dismantling these asinine ideas one at a time.

First, try visiting Poland and asking the Polish people whether they don’t care about corruption. I have asked that question, of people in India, China, Nepal, Bolivia, Tanzania, and other countries I’ve visited that are impoverished by corruption. They never don’t care about corruption. They struggle with it all the time, every day.

People with the above attitude seem to believe that corrupt societies can collectively wave a magic wand, and suddenly start behaving properly. That’s not how the world works. That’s not how our country worked, which spent most of its history mired in poverty and political corruption. Some parts of our country still do. Escaping from poverty and corruption is long, painstaking, frustrating work, with setbacks all the time, over many years.
I can’t understand how some people fail to grasp that point. Anyone who has been poor knows it. They know that the tentacles of circumstance can pin you down over and over, in one way or another.

Second, U.S. taxpayers aren’t cleaning up Poland’s government. They are cleaning up U.S. businesses, or overseas businesses that rely on our capital markets for liquidity and investment dollars. If corruption in Poland (or some other developing country) then starves for lack of illegal payments, that is a public good for everyone, regardless of where they live.

Third, the idea that corruption in Poland is Poland’s problem -- where do people think that desperate and miserable people in impoverished countries will go? To the unemployment line or job retraining center? They will come to the West, legally or not. They will join extremist organizations that will offer them the false promise of a better life by hating someone else and blowing that person up. That other person will be us.

Walls don’t deter the desperate. Security lines don’t deter the desperate. Extreme vetting doesn’t deter the desperate. Prosperity deters the desperate. And if they can’t achieve that on their own, there is no smarter investment than for people in prosperous nations to help them.

Fourth, where should the disregard for corruption end? We could play out the above paragraph to its logical conclusion: “If companies wants to murder business competitors in Poland, why is that our problem and not Poland’s?”

That’s not a facetious exercise. In Russia, for example, this is what corrupt organizations do. So why not allow U.S. companies to do the same? What’s the difference between one offense and another in the quest for profit? If it’s OK to win business illegally, why create a distinction about the type of crime involved?

Nobody would say that murder in the name of profit is acceptable. Neither is bribery. But it’s an easier crime to commit, so it requires more discipline to prevent and police. And that’s the naked logic, here—compliance with anti-bribery statutes is hard work, which we don’t like to do, and the harm affects some distant, vague third party, so why can’t we say it’s not worth the bother?

This is the attitude that emerges when you conflate FCPA compliance, which is hard, with FCPA enforcement, which is good. Yes, the two are deeply interlaced. And compliance itself is a frustrating task -- more frustrating than it needs to be, for an abuse that often doesn’t happen at your specific organization. So you end up reaching the conclusion that anti-corruption enforcement is a fool’s errand.

It isn’t. I often say that anyone who wants to complain about zealous anti-bribery laws should go live in an impoverished country for a year first. Then see whether you still don’t care about the corrosive effect of corruption.

If we want to believe that America is a city on a hill, and a beacon of solace for more desperate parts of the world, this is the price. This is what we have to do, to believe in that idea. We have to believe we should do better simply because we can do better, even if doing better is a pain in the ass.

Lyndon Johnson once said, “What convinces people is conviction. Believe the argument you’re advancing. If you don’t you’re as good as dead.”

Johnson was right. Yes, compliance with the FCPA can be a challenging technical exercise. We should work to ease and improve the burden. But fundamentally, the FCPA is a good law that helps make this world better.

I believe most ethics & compliance officers feel the same way. (If you don’t, you should find a new line of work.) And anytime you hear someone else dismiss the menace of overseas bribery, feel free to print out this column and staple it to his forehead. He deserves it.

___

Matt Kelly is the founder of Radical Compliance, which provides consulting and commentary on corporate compliance, audit, governance, and risk management. He was the long time editor and publisher of Compliance Week until he stepped down at the end of 2015. He writes and speaks frequently on corporate compliance, audit, and governance, and now works with various private clients to understand the those fields and to develop go-to-market strategies or provide other assistance in reaching audiences of compliance professionals. He can be contacted here.

A version of this post first appeared on the Radical Compliance blog and is published here with permission.

Reader Comments (12)

Matt Kelly is right. Those who see the U.S. as an island in the planet show little gray matter. Isolationism is absurd, today more than ever and ethical relativism even more so. His reference to Matt Kayser's article on the incoming Trump administration shows that the new president might be in a disastrous course, surrounded by yes-men
January 30, 2017 | Unregistered CommenterGustavo Coronel
Hi, Matt - Here is another simple point that I believe some in Europe discovered and that helped motivate them to support the OECD treaty. When your people learn to bribe overseas, they come home with that newly-developed “skill.” They are comfortable with it and have seen it work. Where do they practice it next? At home. If you have been corrupted outside the country, why would you suddenly become a saint when you return? Cheers, Joe
January 30, 2017 | Unregistered CommenterJoseph Murphy
Poignant points indeed. It is a matter of fighting the good fight.
January 30, 2017 | Unregistered CommenterRenee
Matt is absolutely right, and in spades! I say much the same, at some length, in a forthcoming book:The Corruption Cure: How Leaders and Citizens Can Combat Graft (Princeton,2017)
January 30, 2017 | Unregistered CommenterProf Robert I. Rotberg
As someone living and grapling with combating corruption in Mexico, I could not be in more of an agreement with Matt and his sentiments. Great article.
January 30, 2017 | Unregistered CommenterJose Trevino
Amen. The view of corruption as the host country's problem is as antiquated as bleeding is to cure disease. We live in a global society and the oppression of those who live under corruption is our problem. Either we fight it now, or we suffer the consequences of failed / marginal states and the crime problems (including terrorism) that are natural by products of such states. Well stated!
January 30, 2017 | Unregistered CommenterEd H
Is US a signatory to UNCAC and has ratified it? Check whether the country US companies deal with is also in UNCAC compliant country? India is. Kelly's off-the-cuff remark that India is one of the countries where people do not bother about MNCs from abroad can come and bribe their way through, is indeed ridiculous. Kelly should check with GE or Walmart as to the government's attitude towards corruption. Not the people. India is very strict about corruption. If US does not follow FCPA strictly then US business is at peril.
January 30, 2017 | Unregistered CommenterJayaraman Rajah Iyer
In my view America should not back away from it's traditional leadership role. The FCPA was enacted in response to the Lockheed bribery scandal, at a time when many other countries including America's competitors allowed the tax deductibiltiy of bribes and kickbacks. It is reasonable that this did put America at a competitive disadvantage. America paid a price for its leadership role, now is not the time to quit, now is the time for some pay back.
January 31, 2017 | Unregistered Commenterlameslave 13
I agree with Matt Kelly too. I don't want to pick on GE - I used to work there. But it's convenient to continue using them as the example.

If GE wants to bribe folks in Poland $1,000 but to beat its competitors (you know, from Europe or Asia or Australia, etc.), GE has to bribe folks in Poland $20,000, shouldn't Americans care?

The writer misses the point in saying that GE is at an unfair advantage if it can't bribe and a Polish company can. It's not the Polish company bribe that's the problem for GE. It's all GE's competitor's bribes that are the problem for GE. The FCPA at least attempts to level the playing field vis-a-vis GE and its competitors.
January 31, 2017 | Unregistered CommenterLyn Boxall
Excellent article.
People often see anti-corruption enforcement as something that serves only the regulators, but the key to understand the FCPA and other regulatory frameworks is the price we all often unknowingly pay for corruption, each and every day.
January 31, 2017 | Unregistered CommenterTomer Carucci
I agree with the sentiments of the author and those who have commented. My frustration with the FCPA is that it targets only the supply side of the bribery equation, I believe that until those that receive the bribes are prosecuted the problem will never go away.
January 31, 2017 | Unregistered CommenterColin Stansfield
FCPA was enacted in response to the US defense MNCs misdemeanor in their own backyards.It has gone several far reaching changes since 1977.Applied internationally,it has resulted in varying outcomes in different countries.Today for example,Indian political leadership will not yield to the pressure from business lobbies etc.Anyway most of the corruption cases happen due to unholy sales/commercial tricks by these MNCs and the native professionals working in these subs get victimized! Vishnu Goel T&M+919810101238
February 2, 2017 | Unregistered CommenterVishnu Goel T&M
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