This paper seeks to apply the Foreign Corrupt Practices Act (FCPA) in the case of Geletex, Inc. and the concerns of Jed as the company’s director of compliance about the office in Lima, Peru. The paper would discuss whether the situation involving the company would be a violation of FCPA and would make the recommendation on what Jed should do. The case facts provide that Geletex, Inc. has its domestic and international operations, where the countries it operates have cultural, governmental and ethical standards that differ from country to country.
Since the company has its code of ethics for its US operations since 1975, one issue that comes out is whether the said code of ethics should be made applicable to its other country’s operations given the diversity of cultural, governmental and ethical standards among these countries. The issue becomes more relevant in the light of the argument the operation of its office in Lima, Peru involved unusually high payment of commission expense which is a disguise to “kickbacks” in exchange for contracts for the company.
It is clear that the act violates Geletex’s code of ethics but Jed is confronted with the reality the district manager appeared to favor the practice of paying such money or gift if the company wants to have results from its operation in Lima. Since the there is no issue as to the violation of code of ethics in the US which must comply with the US FCPA, it may seem that the practice of giving kickbacks to a foreign must necessarily violate the FCPA. As to whether this is sustained by the provisions from the FCPA requires verification.
The FCPA provides under§ 78dd-1 makes it unlawful for any issuer of securities registered pursuant to relevant section of the US Securities and Exchange Act of 1934 to do any act by offer, payment, promise to pay any money, any money or offer or of anything of value to any foreign official for the purpose of inducing any act or decision of such foreign official in his official capacity, inducing such foreign official to do or omit any act in violation of duty of such official, or securing any improper advantage (US Department of Justice, 2004).
However, an exception for the routine governmental action was where the subsection relating to influencing to do or omit any act of the official in his official capacity or one that would violate the law was provided by the FCPA in case of routine governmental action, provided however that the payment, gift offer or promise of anything of value that was made was lawful under written laws and regulations of the foreign official and that when the same was made, it was reasonable and bona fide expenditure and such expense incurred by the official was directly related to related to the promotion, demonstration or explanation of products or execution of performance of a contract with a foreign government or agency thereof (US Department of Justice, 2004).
Based on the foregoing provision of the FCPA, it can be concluded that the situation may not violate the FCPA if the act of giving money was not a violation the written laws and regulations of the foreign official and is part of routine government action. The act may be considered as part of routine government action based on the case fact that it needed to get things moving. The fact therefore that that situation violates the Geletex’ code of ethics in the US will not affect the validity of the act. Since there is no evidence that the money or promise of money was not unreasonable and that it could be part of the routine government action, then the situation can be considered as not violative of the FCPA.
Jed should therefore have to respect the written law of Lima, Peru if the said practice is allowed and part of routine government action. This should make him to recommend for the enactment of a separate code of ethics for Geletex’s operation in Lima, Peru. He must remember that the company will need to earn profits (Meigs and Meigs, 1995) to survive within the limits allowed by the Peru law.
References:
Case Study -Facilitation or Bribery: Cultural and Ethical Disparities Meigs and Meigs (1995) Financial Accounting, McGraw-Hill, New York, USA US Department of Justice (2004) Anti-Bribery and Books & Records Provisions of The Foreign Corrupt Practices Act, http://www. usdoj. gov/criminal/fraud/docs/statute. html, Accessed February 6, 2009