Reprinted with permission from the May 27, 2016 edition of Daily Business Review© 2016 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited. ALMReprints.com – 877-257-3382 - reprints@alm.com.
As anti-corruption sentiment in Latin America has burgeoned over the last five years, so has international consensus on the damage corruption wreaks.
Long the bane of competitive markets and developing economies, corruption is being called a threat to democracy and even an underlying cause of terrorism.
"The extremism that we see in the world today comes in no small degree from the utter exasperation that people have with the sense that the system is rigged," Secretary of State John Kerry said at an Anti-Corruption Summit plenary in London this month.
The argument is that those on the losing side of corruption turn against government and are more likely to align with radicals.
"It really undermines the economic development of nations that are beginning to take off," said Pedro Freyre, chairman of the international practice at Akerman. "It's a fundamentally illegal and unpatriotic thing to do."
Argentina, Brazil, Colombia, Mexico and Peru are just some of the countries that have enacted or enhanced anti-corruption laws in recent years, said Jacqueline Becerra, a shareholder at Greenberg Traurig and a former federal prosecutor.
"Corruption is being taken very seriously in Latin America. The push from the people is incredible. People are just not putting up with it anymore," said Becerra, who has extensive experience in compliance issues in the region.
Yet corruption is still such a common problem in Latin America that experts and attorneys say businesspeople should expect to be solicited for bribes, particularly in industries requiring government licenses and approvals.
Given the hefty fines U.S. companies and their employees face under the Foreign Corrupt Practices Act, it's important to train all employees in contact with government employees to know how to respond to illegal pitches, said Jonathan Adams, a partner with Baker & McKenzie in Mexico City.
When an official threatens to close down operations, employees should contact a compliance officer or counsel immediately, attorneys said.
Inappropriate requests come in all forms — direct, indirect and through intermediaries.
"As a practical matter it's very hard to avoid those situations in business," said Alison Tanchyk, a partner at Morgan, Lewis & Bockius who has investigated or represented companies in dozens of FCPA cases globally.
Here are four in-the-moment tips for avoiding and responding to bribery solicitations.
1. Preempt offers verbally and in writing.
In bids and contracts, note your company must abide by Foreign Corrupt Practices Act rules, explain what that means, present it as a benefit and work it into conversations and sales pitches, Freyre suggested.
Discussing the issue in advance with officials and intermediaries can be less awkward if it is worked into conversation as one of the values your company brings in a scandal-plagued world.
For a talking point, say, "As you know, we're an American company, so we have to abide by worldwide banking regulations, we have to pay taxes on all our income, we have to abide by the Foreign Corrupt Practices Act, which means we would face very heavy fines and can go to jail for paying a bribe."
If officials realize there's no easy payday, they may not bother bringing it up, Adams said.
2. Deflect some offers with psychology.
Officials and intermediaries are less likely to make inappropriate requests when there is a witness, so don't meet one on one, attorneys say.
"If you keep it in the office and you bring someone, you send the message that you intend to keep it professional," Becerra said.
Cultivate healthy, above-board relationships with the officials that you have to deal with regularly. Adams suggests office visits to talk about business and let officials know you appreciate their work. To help prevent improper requests and even after a request is made, try to establish shared values and concerns, Adams said.
Expensive meals, travel and gifts can be a problem — so even if a gift basket is OK in some countries, a gift basket with a bottle of expensive champagne isn't, Becerra said. Keep in mind that donations to preferred nonprofits can be funnels for bribes or vehicles for improper payments.
3. Have the right words at the ready.
It's easy to get flustered in the shock of a solicitation, but agreeing to pay to momentarily appease an official is an FCPA violation, Becerra said. "You need to be very careful that there is no misunderstanding — it cannot be interpreted that you agreed," she said.
Employees should be ready with simple rejections: "No, we don't do that," or "That's not how our company operates."
Adams recommends employees can say the rules "cannot be changed, all of the accounts are strictly monitored, and any payments have to be authorized by two or more people in writing and with a detailed description of the purpose."
4. Call for backup.
Sending in a higher-ranking employee or counsel as a team to talk with the officials to "get to the root of the problem" can help resolve the problem, but take care not to be accusatory, Adams said.
"You want to make sure that they have to look someone in the eye and know that if that person authorizes a payment, that person will lose his job," Adams said.
Legal counsel can help evaluate the company's alternatives on reporting the incident or filing an administrative action. Either way, the illegal pitch needs to be documented.
"When a request is made, the call to legal or compliance should be immediate," Tanchyk said. "There's more that needs to be done beyond saying no if this is a person that the company has had a past relationship with."