“I don’t want to accept liability for those guys. I don’t know what they are up to. So I can’t have that Foreign Corrupt Practices Act (“FCPA”) language in our contract.” These comments were received from a U.S. financial institution executive while negotiating a contract with another U.S. company. The objection raised was from an effort to avoid the liabilities that could arise from the institution’s own employees operating in foreign branch offices.
Wouldn’t it be great if there were some “Sneaky, Hidden, Secret Trick” to avoid FCPA liability by deleting the language in the contract? When working with companies in international settings it is important to occasionally remind people of the basics.
It’s better that they be annoyed with you for bringing up simplicities than annoyed you didn’t protect them. In the situation with the financial institution we had to remind them of some basics. Deleting language in a contract relating to compliance with laws:
- Does not negate responsibility for criminal liabilities, and
- Specifically including contract language relating the FCPA begins to provide the first layers of a defense if their employees do something that later raises FCPA problems for the institution.
Upon raising this very basic issue, it was easily addressed. Of course, both companies are subject to the FCPA regardless of whether the language is included in their contract. Similarly, inclusion of the language does not change that fact. However, inclusion of the language is the first stepping-stone in establishing a commitment by both companies to ensure that the profits of their endeavors flow as intended, and are not forfeited to the U.S. Government.
The learning point here is that even experienced corporate executives will sometimes make serious errors in judgment on FCPA matters. Ensuring that the gravity of these matters stays in the forefront of people’s minds is an excellent first step in preventing the damage that can arise from a criminal investigation and defense.
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