Originally published in Manufacturing.Net, November 2011
Recent Foreign Corrupt Practices Act (FCPA) enforcement actions against Renault, Daimler and Fiat demonstrate the dangers that those in the automotive industry face under the statute, which prohibits the payment of bribes to foreign officials. FCPA risks take different forms depending on the nature, scope and location of a company's international activity. They can arise both when companies seek to sell their products or services directly to foreign governments and state-owned entities and in the form of bribe payments in return for favorable contracting decisions. Such activity triggered the Renault, Daimler and Fiat matters, where the companies admitted to paying bribes to secure contracts to provide vehicles to various foreign countries
FCPA risks can also take other, less obvious forms, such as when companies face shakedowns from customs inspectors and tax assessors during efforts to import or export raw materials or finished products. Additionally, risks can surface when companies operate manufacturing facilities in foreign countries, which requires frequent interaction with hosts of foreign officials ranging from maintaining utility service to paying local taxes and securing police protection. The risks can also arise when foreign subsidiaries violate the statute; in these circumstances, the domestic parent may be deemed to have either encouraged, assisted or willfully turned a blind eye to the conduct. In sum, FCPA risk can occur any time a company's activities -- or those of its joint venture partners, agents, intermediaries or subsidiaries -- intersect with foreign officials.
Those companies which engage in discrete and limited international business endeavors typically find tempering FCPA risks a manageable task. Some may only sell to consumers or privately held entities (and thus avoid the heightened threats that accompany direct solicitation of foreign officials), others may shun the use of agents and consultants operating overseas (thereby minimizing the additional challenge of attempting to train and monitor those outside the company), and still others may have only negligible international connections (and thus avoid the challenges inherent in attempting to monitor activity in various locales operating under different cultural business norms). In those instances, identifying solitary FCPA threats allows the company to devote all compliance efforts to a...