Broad Street Capital Group selects Lipman Law to provide due diligence support and General Counsel services.

(December 2, 2019, New York City, NY) In an effort to streamline its legal operations and to manage international due diligence and compliance processes for the $1.2 billion of financing transactions in its pipeline, Broad Street Capital Group announced today that it has retained Alex Lipman of Lipman law PLLC, to provide general counsel services. Alex Lipman has also joined Broad Street as an Advisory Board Member.

Most recently a partner at a major international law firm, Mr. Lipman has almost 30 years of experience both in private practice and government with focus on SEC enforcement matters, anti-corruption investigations, securities litigation, other regulatory and government matters, as well as corporate governance.

Alex’s government experience includes serving as a Special Assistant United States Attorney on the Securities and Commodities Fraud Task Force at the U.S. Attorney’s Office for the Southern District of New York. In that position he prosecuted and tried cases involving accounting fraud, mail and wire fraud, and insider trading. Alex also served as a Branch Chief in the SEC’s Enforcement Division, where he conducted numerous high-profile investigations into securities law violations, including cases stemming from the collapse of Enron.

In private practice,  Alex has successfully represented numerous individuals and entities in high-profile white collar securities cases, including cross-border investigations and international prosecutions.

Mr. Lipman also has been a key driving force in developing a proprietary Grey2White® Due Diligence Program designed to identify and solve complex legacy due diligence issues, as well as to optimize multiparty compliance inquiries, which arise during international financing transactions.

“We are very excited to have Mr. Lipman and his Firm advise our team. As the Broad Street Capital Group is poised to enter its next phase of growth, having a seasoned, internationally renowned legal expert in our corner, will help the firm’s clients not only to successfully navigate through complexities of international financing and M&A transactions, but will also allow them to unlock the value of their companies by putting in place best practices in the areas of financial reporting, anti corruption and corporate governance.” said Alexander Gordin, Managing Director of the Broad Street Capital Group.

“I look forward to working with Mr. Gordin and the Broad Street team on ways to improve and streamline the way due diligence and compliance are managed during international financing and merger transactions involving companies in emerging markets. Rather than engaging in a reactive, expensive and cumbersome process, the Grey2White® program aims to provide deeper due diligence investigations than conventional KYC screenings in advance of potential transaction. This would provide greater transparency from the start, reduce costs and benefit all parties involved in the transaction.” said Alex Lipman

About the Broad Street Capital Group.

Based in the heart of New York City’s Financial District, Broad Street Capital Group (www.broadstreetcap.com) is an international private merchant bank, which since 1988 has served several foreign governments, multiple state-owned companies, as well as SMEs in emerging markets. Through its member companies, the Group focuses on developing project financing in the $100 million to $1 billion range, providing political risk mitigation, export management services and cross-border market development advisory. The Firm has done business in over 35 countries, spanning the emerging markets landscape from Bangladesh to Ukraine.

Currently, the Firm maintains presences in eight countries and works closely with all trade and development agencies of the U.S. Government, as well as with Credit Agencies of several European and North American countries. Since its inception, Broad Street Capital Group has been involved in multiple high-profile cross-border transactions in agriculture IT/telecom, aerospace, healthcare, oil and gas,energy generation, food security, nuclear safety, hospitality and franchising sectors. The firm’s current advisory and financing portfolio is expected to exceed $1.25 billion by January 1st, 2020.

 

Driving through the rain towards brighter economic future of Ukraine

About a month ago, during a Washington round-table on Ukraine hosted by the US-Ukraine Business Council (USUBC), someone asked me what do my colleagues and I expect from the new President of Ukraine and his administration? My answer, which was picked up by the Voice  of America and other publications, was essentially – I have no idea. But since we have been and continue to be bullish on the Ukraine for almost twenty five years, our strategy is to move forward despite the political climates, as we always hope for sunny investment weather, but carry a sturdy umbrella in case it starts to rain. 

Well, it is raining now.  Raining hard and much sooner than expected.

The events of this passed week have created a vicious firestorm with  “Ukraine” being mentioned practically non-stop.  In this post I will not address the politics of the situation, as this has been done by practically every major media outlet in the world ad nauseam. My focus will be on business opportunities and financing tools available to those wishing to invest into the Ukrainian economy, as despite this week’s “torrential downpour” nothing has fundamentally changed to make Ukraine a less attractive place to invest.

First, some basic assumptions under which we have been operating in Ukraine for almost quarter of the century:

• Massive institutionalized corruption exists in Ukraine and it will probably take two-three generations for it to be rooted out;
• Ukraine is a very risky place to do business;
• Many people who accumulated capital in the ’90’s played by the “fast and loose rules” and cut multiple corners;
• As business in the country evolves, most astute business people understand that by playing by the transparent and well-defined rules set out by the western markets they can unlock the value of their holdings, obtain access to low-cost financing and protect their assets for the generational asset transfer;
• Ukraine has fantastic potential for economic growth in multiple sectors;
• Terrific opportunities exist for US, Canadian and European companies to supply goods and services to Ukraine and to bring world-class Ukrainian goods into the Western markets;
• Ukraine has a superb pool of smart and educated labor force;
• Country is of a strategic geopolitical importance and will always be a subject of political pressure and outside influence;

Given the above, it is important to take a long view and not be terribly concerned with current politics, because by definition Presidents, Ministers, Ambassadors and Senators change every few years. Once such long-term philosophy is accepted, then it is necessary to construct one’s proverbial umbrella. Namely, risk mitigation, corruption resistant mechanisms must be incorporated into one’s approach to doing business in the country.  What this means in practice is the following:

• Targeting for investment and financing primarily those sectors where corruption is either low or  non-existent. From our standpoint exports of Ukrainian natural foodstuffs, renewable energy, electro-transport production, IT, nuclear waste containment are some of those.
• Utilizing US Government financing tools, such as those offered by OPIC and US-EXIM  Having these tools part of a business transaction not only provides low-cost, long-term financing, which improves economics of practically any project, but having government-backed financing in a deal, also improves quality of due diligence and acts as fantastic corruption deterrent and protection for investors.
• Obtaining political risk, trade credit, or breach of contract insurance for every significant deal or trade transaction. US  Government and certain well-rated global  insurance companies offer protection to investors from such perils as expropriation, creeping expropriation, currency  inconvertibility, non-payment for goods supplied, or services rendered and for breach of contract.  Such insurance is not terribly expensive, but  de rigueur for anyone looking to invest into the Ukraine, or into any  foreign market, for that matter.
• Creation of a so-called Grey2White® program to allow investment where original capital, or business formation had murky roots, but can be fully re-mediated with application of strict compliance procedures, financial restructuring and accounting oversight.
• Finally, despite of the current rainy weather, we are moving hard to add one more extremely effective tool, which has been missing in Ukraine’s economic development. Creating a safe umbrella for individual American-Ukrainian, Canadian-Ukrainian and members of Ukrainian diasporas in other countries to invest into the future of Ukraine.

What this means is a focused investment platform listed on a stock exchange and subject to a recognized US, or Canadian authority such as Securities Exchange Commission (USA), or Canadian Securities Administration (CSA). Such platform would will further be secured by protection of the political risk insurance and will, for the first time since Ukraine’s independence, allow individual investors with as little as $500! to invest,  to participate in Ukraine’s economic development, while having the umbrella of protection of the western laws, rules and regulations.  We call this platform “Develop UA”™ and expect to formally roll it out to the world in the middle of October, 2019 regardless of whether it is raining, or sunshine in Kyiv and Washington, DC.

relevant links

http://www.usubc.org/site/recent-news/doing-business-in-ukraine-now–usubc-roundtable-in-washington

https://ukrainian.voanews.com/a/amerykanksy-biznes-ukrayina/5051657.html

 

Is It a Bribe…or Not?

 Do you know what violates the Foreign Corrupt Practices Act? Take our quiz and find out.

                   

By  JOE PALAZZOLO WSJ.com

The Foreign Corrupt Practices Act is among the statutes most feared by companies with global operations. It can also be one of the most confusing.

Since 2008, the U.S. Justice Department and Securities and Exchange Commission have extracted billions of dollars in criminal and civil penalties over alleged violations of the 1977 law, which bars U.S.-based or U.S.-listed companies from bribing foreign officials in exchange for business and requires them to keep accurate books and records. 

But the line between legitimate business expense and bribe is sometimes hard to apprehend, and the U.S. government takes an expansive view of the statute’s reach.

How well do you know the FCPA? Take this quiz, adapted from guidance published by the Justice Department and the SEC last year, to find out.

Daniel Hertzberg

1. Gas Corp. is a large energy firm based in New York and listed on the New York Stock Exchange. It enters into a joint venture with a private European company, Euro Gas Ltd., to bid on a contract to develop an oil field in Nigeria.

Senior vice presidents at Gas Corp. and Euro Gas meet in New York and decide to hire a consultant, Middleman Inc., to funnel payments on the joint venture’s behalf to a deputy oil minister with influence over the bidding process. The payments are invoiced as consulting fees, but Middleman Inc. passes most of the money to the deputy minister. The joint venture wins the contract.

Which entities are liable under the FCPA?

A) Gas Corp.

B) Gas Corp. and Euro Gas

C) Middleman Inc.

D) All of the above

READ MORE

FCPA Inc.: The Business of Bribery

Corruption Probes Become Profit Center for Big Law Firms

By JOE PALAZZOLO, The Wall Street Journal, October 2, 2012

Allegations of bribing overseas officials have already cost Avon Products Inc., Weatherford International Ltd.  and Wal-Mart Stores Inc. nearly half a billion dollars. And they haven’t been charged.

Mike Wirth

Under widespread practice, companies often spend millions of dollars investigating themselves for potential violations of the 1977 Foreign Corrupt Practices Act, then turn over the results to the government in the hope of getting lighter penalties or none at all. The combined $456 million spent by those three companies largely went to law firms and other professionals hired to conduct the probes and fortify the companies’ internal antibribery controls.

The post-Watergate law has become big business for the lawyers who delve into the operations of companies in response to an investigation by the Justice Department and the Securities and Exchange Commission—or to avoid one. The result is a mini-industry of investigators and white-collar criminal-law practices.

“It’s one of the few sort of crown-jewel practices right now,” said Dan Binstock, a Washington-based legal recruiter at Garrison & Sisson Inc. Some FCPA lawyers draw more than $1 million a year in compensation, while a select group commands more than $2 million. “Firms want to get the best attorneys and they’re willing to pay,” he said.

The FCPA makes it illegal to offer money or a gift to foreign-government officials or employees to gain a business advantage. The law applies to any company listed on a U.S. stock exchange or based in the U.S.

FCPA probes have resulted in government settlements with several companies, Siemens AG having racked up the biggest so far—$800 million—for paying millions of dollars to foreign officials to win government contracts.

More than a hundred other companies are under investigation, including News Corp., which publishes The Wall Street Journal. The Justice Department has requested information from the company about possible payments made by its U.K. tabloid newspapers to British policemen, people familiar with the matter have said. A News Corp. spokesman declined to comment.

The Justice Department is preparing to issue as early as this week new guidelines on how to comply with the FCPA, after more than a year of lobbying by American corporations.

The U.S. is one of dozens of nations, including Russia and China, banning overseas bribery. But the U.S. has brought far more cases than anyone else. The Justice Department and the SEC have investigated companies in the developing as well the developed world. The U.S. government has also forged alliances with anticorruption authorities overseas, such as those in the U.K., to help speed investigations.

Advocates for the FCPA say the process has led companies to tighten their controls over foreign subsidiaries, which has long-term benefits for their operations and the integrity of world commerce.

Associated PressAssistant Attorney General Lanny Breuer.

• The cost and efforts of conducting internal investigations can seem like punishments themselves. In some cases, the criminal and civil settlements companies pay are dwarfed by their investigative expenses.

“Even the most innocent gesture of kindness, like taking someone to lunch or cocktails, has to be looked at under the microscope of federal law,” said Kevin O’Connor, a consultant in New York who works with companies on anticorruption.

The case of Siemens, a German conglomerate with more than 400,000 employees and operations in 191 countries, offers one of the best illustrations of how quickly costs pile up. The company in 2008 admitted to paying millions of dollars to foreign officials in Argentina, Bangladesh and elsewhere.

Siemens hired more than 300 lawyers, forensic accountants and support staff from law firm Debevoise & Plimpton LLP and accounting firm Deloitte LLP for a two-year internal probe, settlement documents said.

The company estimated that the firms racked up 1.5 million billable hours. The investigation spanned 34 countries and included 1,750 interviews. Of the roughly 100 million documents collected in the investigation, Siemens produced about 24,000 documents for the Justice Department. The document review alone cost the company $100 million.

Law-enforcement officials said internal probes are necessary to police a big marketplace.

“We absolutely need companies through their firms to provide us with their investigations,” said Lanny Breuer, the head of the Justice Department’s Criminal Division. Prosecutors test the information they receive from the companies and conduct parallel investigations. “We’re not simply relying on what the companies give us,” he said.

Mr. Breuer said the Justice Department has paid special attention to operations in countries considered to be high risks for corruption. “We don’t just arbitrarily say, ‘Jump,’ ” he said.

Nevertheless, companies have made the calculation that spending huge sums on an internal FCPA probe is better than being indicted or taking a case to trial.

“When you get these situations and you have a young enforcement attorney…telling you to look under every rock, you do it,” said Amar D. Sarwal, chief legal strategist of the Association of Corporate Counsel, a trade group for in-house lawyers. That means law firms have built FCPA practices around former prosecutors and SEC lawyers.

By The Numbers

$2 million: Annual compensation for top lawyers specializing in Foreign Corrupt Practices Act

$1.5 million: Billable hours by lawyers and other investigators hired by Siemens in FCPA case

Avon, the door-to-door supplier of beauty products, is in the fifth year of an internal investigation into whether employees paid bribes overseas and has spent about $280 million on legal expenses, according to regulatory filings.

The probe began in China in 2008 after a whistleblower told the chief executive that Avon employees were plying Chinese officials with meals, gifts and trips, according to regulatory filings.

The company hired lawyer Claudius Sokenu, now at Arnold & Porter LLP, who quickly moved to preserve electronic and paper documents.

Auditors in China picked through company accounting systems for evidence of bribes, while another contractor copied hard drives and created a searchable database, a person involved with the investigation said.Lawyers interviewed employees. Translators pored through documents.

The company, which voluntarily disclosed its investigation to the Justice Department and the SEC in 2008, repeated the process in more than a dozen countries over the next four years, the person said.

The company in August said it had begun settlement talks with the government. An Avon spokeswoman declined comment.

Steven Tyrrell, former chief of the Justice Department’s criminal-fraud section, estimated that a multinational company spends, on average, about $2 million to investigate its operations in one country and that most investigations span several countries.

“If you get two of these a year as a partner, you’re pretty much set,” said Mr. Tyrrell, a partner at Weil, Gotshal & Manges LLP who represents companies in FCPA matters. “You’re not going to break any records, but you’re doing well.”

Smaller investigations for a “specific, discrete issue,” can cost around $100,000 to $200,000, said Paul McNulty, a partner at Baker & McKenzie LLP. But companies have to be prepared to assure the government that a problem in one country doesn’t exist in others.

Oil-services company Weatherford International has spent more than $125 million on a six-year probe into alleged export violations and bribes in Europe, Iraq and West Africa, according to regulatory filings. The Geneva-based company and the U.S. government have been negotiating a penalty for months but are tens of millions of dollars apart, a lawyer briefed on talks said.

And in less than a year, Wal-Mart has put $51 million into a bribery probe of operations in Mexico and elsewhere, according to company filings. Wal-Mart declined to comment further.

Drug maker Pfizer Inc. agreed this year to pay $60 million to settle bribery allegations, admitting to having bribed doctors, hospital administrators and regulators in several countries to prescribe medicines.

Lawyers who conduct FCPA investigations say the company likely paid more than double the settlement amount in its seven-year investigation to build internal systems to prevent bribery. Pfizer declined to comment.

—Christopher M. Matthews, Emily Glazer, Ashby Jones and Shelly Banjo contributed to this article.

$100 HANDSHAKES

 

How Business Gifts to a Foreign Partner Could Land You In a U.S. Prison 

by: Warren Strugatch, Global Trade Magazine October 2012 issue

Save money. Give better. Walmart execs were investigated under FCPA rules, targeted for bribing Mexican politicos to the tune of $24 million.

The New York Times broke the story this spring: “Vast Mexico Bribery Case Hushed Up by Walmart After Top-Level Struggle.” The world’s largest retailer, and Latin America’s biggest employer, stood accused of handing envelopes stuffed with cash—more than $24 million in total—to a small army of palms-out, provincial bureaucrats, local politicos and fixers. Senior executives covered the mess up, reported the Times. News of these activities, illegal in America under the Foreign Corrupt Practices Act (FCPA), proliferated globally and drained billions from the Arkansas retailer’s market capitalization.

With sales of $422 billion last year, Walmart became the largest whale targeted by federal prosecutors in the FCPA’s history, joining a roster that includes Johnson & Johnson, Avon, Siemens, Olympus and Pfizer. It’s not just big companies. The feds pursued, prosecuted and last year jailed a husband-and-wife Hollywood couple who made improper payments in connection with a Thai film festival. The feds called the payments bribery and the charges stuck. Last year, Gerald and Patricia Green went to jail—she was 56, he 76 at the time of his sentencing, and dependent on an oxygen tank. The Greens served six months in prison, followed by house confinement. Prosecutors originally wanted to put Gerald Green away for life.

To champions of the statute, the feds’ action in the Walmart case exemplifies what’s best in the law, at least theoretically. It levels the playing field and addresses the root causes of corruption, that is, the willingness of rich companies to pay illegal bribes, thus perpetuating inequity and lack of economic mobility. In this view, Washington is the “good cop,” punishing those who cheat and defending those who play fair.

“If the charges are true, Walmart deserves to be punished,” declares Eleanor Eaton, a Russian-born, Texas-based trade consultant. Having emigrated to the U.S. to study management, staying on to become an aerospace executive and then a consumer products marketer with Proctor & Gamble, Eaton still recoils from her homeland’s legacy of corruption. “A company that engages in systemic bribery as a business model then covers it up,” she declares, “is atrocious.”

As a growing number of companies and individuals face criminal and civil penalties, awareness of the statute is rising, along with concern over its expanding footprint. Those certain of their ability to distinguish between a friendly gift to a business partner and an under-the-table bribe to a corrupt official might want to think again. In any case, they should take pains to avoid learning the difference during a Justice Department probe. If one thing is clear, it’s this: Most of the “gray areas” that involve gift giving, special fees, favors, undisclosed payments or cash on the barrel head—any number of activities once defended as “business as usual,” “everybody does it” or “it’s customary here”—are remarkably difficult to pin down. And as far as definitive government guidance in terms of what’s legal versus what’s not, that advice is not yet available.

Surprisingly, even executives who spend months of the year jetting across time zones, hedging currencies and signing cross-border deals cringe to learn activities once dismissed with a wink or a nod—even written off as business expenses—have been criminalized. Take gift giving, for example. Stephen Wolf, executive director of The Capstone Advisory Group in Washington, calls offering gifts “an important, perhaps essential, part of doing business in some foreign cultures. Executives (who) brag about terrific agents and sales representatives and their great contacts abroad” might not realize routine business gift-giving in some countries constitutes bribery here. Adds Wolf: “Those ‘great contacts’ can land them in jail!”

A Vestige of the Watergate Era

The FCPA dates from a period in our history—the post-Watergate years—when the national mood was one of outrage at government dishonesty and systematic deception, accompanied by the particularly American belief that somehow honesty could be legislated and integrity codified. This mood prevailed in 1977 when President Jimmy Carter signed the Foreign Corrupt Practices Act into law. Simple in scope but startling in premise, the FCPA outlawed both the act of bribing a foreign official for commercial advantage, and the failure to put in place a system to prevent, reveal or thwart corrupt activity. In an attempt to legislate honesty and fairness, Washington had suddenly made American business people legally responsible for knowing the history and intentions of other individuals, specifically citizens of other countries, without ready access to such information or legal recourse. Established at a time when some foreign countries actually let companies expense their bribes—so entrenched into custom was the culture of gift-giving—the act seemed designed to claim the moral high ground for a country still climbing out of the moral morass of Watergate. As such, this claim to ethical leadership in the global market must have struck at least some observers as a pipe dream.

If a pipe-dream, this one bared sharp teeth. Violation of the act is a federal offense carrying penalties reaching hundreds of millions of dollars in fines, restitutions and seized assets; sentencing up to 20 years and immeasurable damage to reputations. Under the term “disgorgement of profits,” prosecutors have seized billions of dollars in fines and interest payments; there is talk in Washington of doubling current penalties. The feds took in a record $2.1 billion in fines in 2010, reflecting an escalating pattern of targeting big companies with correspondingly big overseas profits. As for jail, Richard L. Cassin, FCPA analyst, estimates prison terms average two years. “The sentencing range is huge,” he wrote on FCPABlog.com in February. “If there’s a pattern, we don’t see it.”

 

Enforcement Escalates

Early on, enforcement was lax. Investigators probed just several companies during the statute’s first full year on the books, maintaining that unhurried pace over two decades. Then came the string of white collar frauds—Enron, Worldcom, Computer Associates—and battling corruption was back in vogue. Mark Brzezinksi, a partner at McGuireWoods law firm in Washington, recalls Justice operating perhaps 10 probes in 2000. That number ballooned to more than 150 in 2010. Meanwhile, the SEC was investigating another 20 or so firms. Accounts suggest that level of activity continues today.

The escalation of FCPA enforcement troubles a number of export advocates. One is the U.S. Chamber of Commerce, which has questioned the act’s basic fairness and its impact on trade. In February, the chamber’s legal reform division pressed Justice and SEC officials to address questions concerning prosecutorial standards, compliance expectations and training guidelines. In particular, the chamber sought clarification on what’s known as mens rea, a legal term referring to how prosecutors reconstruct an individual’s thinking process at a key moment. The feds’ answer was, in effect, we’ll get back to you.

“To me, the difficulty with this law is the lack of clarity around interpretation,” says Bill Jordan, co-chair of the Litigation and Trial Practice Group of Alston & Bird, the Atlanta and Washington law firm. Ten years ago, Jordan was a senior Justice Department official; today, he defends some of those accused of violating the act. “The government takes a very aggressive interpretation of the ambiguous clauses of the FCPA,” he reflects. “Individuals have had their lives and fortunes taken from them, and their liberty put at risk.” He pauses. “There is a whole series of cases where the jury looks at what the government is doing and says, hey, that isn’t right.”

Homer Moyer, a partner with Miller & Chevalier law firm based in the capital, specializes in international anti-corruption law. Despite the rise in enforcement activity and penalties assessed, Moyer contends prosecutors are not necessarily pursuing corruption cases more aggressively, rather keeping up with the flow. In his view, more business is being done in regions where bribery is rampant; financial reporting requirements heightened under Sarbanes-Oxley, Dodd-Frank and other laws expose considerably more corruption; disgruntled employees trust whistle blower laws will protect them if they turn evidence; and competitors strike back at rivals who played an unfair card. Moyer, who has served as an independent compliance consultant to the SEC and chaired more than 30 national and international anti-corruption conferences, acknowledges investigations come in batches. Probing a company in one industry, he says, tends to produce evidence incriminating others in the field.

 

More Officials, More Bribe Opportunities

Not surprisingly, prosecutors have focused on activities in parts of the world where corruption is perceived as most rampant and where official approvals are required for a broad swath of activities handled without officials’ interference in more open countries. Also, industrializing countries actively seeking western technology transfers, sales of capital equipment, financial savvy or hard-currency funding, and as such are perceived as the most fertile grounds for corruption.

“If I am focused on Northern Europe, and doing business in both Denmark and Russia, I will recognize that Russia carries a much higher risk of corruption than Denmark,” says Moyer.

Logan Robinson, who teaches corporate governance at the Mercy School of Law in Detroit, contends there is increasing federal scrutiny of potentially illegal overseas activities. “We are seeing much more aggressive enforcement, and much more in the way of fines, than occurred initially [in the 1970s],” he says.

What’s a Bribe, What’s Not?

Those looking for clear direction in bribery avoidance will be disappointed. Ambiguity, ambivalence and shades of gray prevail. In general, beware of requests for payments that are not automatically assessed to your competitors, and try to deflect requests for non-cash compensation that involves family members. And keep the clearest possible line drawn between business and pleasure.

“Do you know how vast you were growing?”
As your business expands overseas, be sure to follow these tips to avoid the long arm of the law.

“An official might ask you casually about a job or internship for a son or daughter,” notes Alexandra Wrage, president of Trace International, a best-practices compliance firm in Annapolis, Maryland. Similarly, scheduling a week-long meeting in Las Vegas around a day of business meetings courts trouble—was this a real business meeting, the feds might ask, or a gifted week at a resort?

Wrage warns exporters not to obsess over deals with top officials and overlook possible concerns with distributors, licensees, consultants and customers. At the same time, recognize the law treats an official’s close family members as if they, too, are officials. Under the FCPA, everyone who works for a government—say an air steward employed on a state airline—is an official. Learning who’s related to whom, and how they do business, becomes your legal responsibility.

Ask questions; if your potential partner clams up, or speaks misleadingly, reconsider your relationship.

Good advice for exporters: Check up on the person you’re dealing with, ask for financial records, know their reputation and history, record your investigation and closely monitor expenses and payments. Also, reimburse no one without a detailed expense report.

Sign This, Please

Some compliance advisors suggest going further.

“Get a signed affidavit that says the party has done nothing that would violate either the Foreign Corrupt Practice Act or any local corruption laws,” advises Trip Mackintosh, chairman of the export controls department of Denver law firm Holland & Hart.

“Review your internal accounting controls to ensure all invoices are adequately detailed. Keep careful records. All these steps are designed to demonstrate that your relationship with this person has the appropriate anti-corruption safeguards.”

Alexander Gordin, a Manhattan-based investment banker and Ukraine-born trade consultant, warns exporters to scrutinize invoices, deal terms, contracts and correspondence for evidence of the kind of subtle corruption pervasive in many emerging markets. Are expenses higher than they might have been under similar circumstances, for example, but your distributor won’t explain why? Are you’re getting invoices without cost breakdowns? These could be close-to-the-vest business practices, or evidence to the feds you’re practicing international skullduggery.

“Corruption hasn’t become more controlled,” says Gordin. “Rather, it’s become more pervasive. You can’t do business overseas with your eyes closed. The question is not: Will you be asked to pay a bribe? It’s when they ask you to pay a bribe, what will you do?”

 

A Short List of Gray Areas Under FCPA

Who’s official, who’s not?

Ministers in a capital city are, obviously, officials. So may be the farmer who runs a provincial post office part time. So may be the pilot of a government-owned airplane, the moonlighting professor at a public university and the hospital physician whose family business distributes medical equipment.

Rule of thumb: Anyone on a government payroll is an official.

 

Reasonable fees

You can pay a fee to an official to accelerate a service—for example, to guarantee completing your permit process within seven days. However, you cannot pay a fee to get a permit to sell something prohibited, or to occupy a location ruled off limits. Size of gray area: Vast.

Rule of thumb: Avoid paying “upgrade” fees.

 

Vetting overseas partners

Ignorance of criminal behavior on the part of your partners is an acceptable defense—sometimes. Prosecutors will want to know if you took every possible step to learn your partners’ background before you signed any contracts with them, and that you made real attempts to monitor their activities once they signed with you.

Rule of thumb: Require affidavit attesting to partner’s clean history and knowledge of and commitment to FCPA compliance.

 

Systems in place

Have you trained your employees to recognize unethical or illegal behavior? Do you have anti-corruption compliance programs in place? Protection for whistleblowers? An invoice template that specifies each reimbursement?

Rule of thumb: Purchase a FCPA compliance module, or contract a consultant to create one for you.

 

Hard to Swallow

On August 7, Pfizer became the lates company to settle charges of conspiracy and violations of the Foreign Corrupt Practices Act, stemming from its Wyeth subsidiary’s business activities in Russia, Croatia, Kazakhstan and Bulgaria. The drug company agreed to pay a $15 million Justice Department penalty and more than $26.3 million to the Securities and Exchange Commission to disgorge profits it earned in these countries. “Those that attempt to make these illegal back-room deals to influence contract procurement can expect to be investigated by the FBI and appropriately held responsible for their actions,” thundered James McJunkin, assistant director in charge of the FBI’s Washington Field Office, in a statement.