The Foreign Corrupt Practices Act, or FCPA, is an act that was put into place in 1977 to control the dealings US persons or entities would have with foreign officials. The act make it unlawful for any US party to pay, whether it is directly or indirectly, with money or anything else of value, to a foreign official in exchange for obtaining or retaining a business (FCPA Enforcement). In addition to this, any company that trades securities in the US is required to file periodic report to the Securities and Exchange Commission to have record of any business transactions in order to maintain effective internal controls (Department of Justice). In the US, most contracts are formed privately allowing entities to control their business effectively preventing the problem the FCPA tries to resolve. No party is going to take a bribe that is not in their benefit and most of entities do not have jurisdiction over the contracts of others to be able to take any control. In many other countries, however, it is quite the opposite. It is the government that controls the contracts for major construction and manufacturing. Because of this, many entities in these countries will pay or bribe officials in order to get business contracts in their favor. Since this type of policy also applies to foreign entities doing business in these countries, many US businesses would follow this practice even though in the US this was not the norm (Miller & Hollowell, 2011, p. 22). For this reason the FCPA was created. It allowed the US to keep entities from using foreign business as a way to pay their way into beneficial contracts which they could not in the US. It also prevents foreign entities from having this advantage if doing business in the US. The r... ... middle of paper ... ...mber 15, 2011, from FindLaw: http://library.findlaw.com/1997/Jan/1/126234.html Miller, R. L., & Hollowell, W. E. (2011). Business Law: Text & Exercises 6th Edition. In R. L. Miller, & W. E. Hollowell, Business Law: Text & Exercises 6th Edition (pp. 22-23). Mason: South-Western Cengage Learning. Smith, Gambrell& Russell, LLP. (n.d.). The Foreign Corrupt Practices Act. Retrieved September 15, 2011, from Smith, Gambrell& Russell, LLP: http://www.sgrlaw.com/resources/trust_the_leaders/leaders_issues/ttl15/836/ Stackhouse, D. (1993, April 21). Retrieved September 13, 2011, from IceMiller LLP: http://www.icemiller.com/publication_detail/id/45/index.aspx Steskal, C. J. (2008, January 29). United States: The Foreign Corrupt Practices Act: The Next Corporate Scandal? Retrieved September 16, 2011, from mondaq: http://www.mondaq.com/unitedstates/article.asp?articleid=56616
The Sarbanes-Oxley Act was drafted to encourage and protect whistleblowers from retaliation after the fraud scandal that cause the collapse of Enron in 2001. In a 2010 Senate Report found that “external auditors detected only 4.1 percent of uncovered fraud schemes, “whistleblower tips detected 54.1% of uncovered fraud schemes in public companies” and were thirteen times more effective than external audits” (Turpan, 2016). Whistleblowers serve an important service to the public and are more effective than external audits. The CFAA has been used to by employers to retaliate against employees who act as informants for agencies like Internal Revenue Service or Security Exchange Commission to expose fraud. There employees, not to their financial gain, gather information as evidence of fraud by the company. With a broad interpretation of CFAA, the employee would "exceed their authority" and was "unauthorized" to access the information, therefore allowing the company to hide their illegal
The pro argument for saying the Foreign Corrupt Practices Act is obsolete is highlighted in the article Prosecute Wal-Mart, but get rid of anti-bribery law by Jeffrey Miron. In this article Jeffrey Miron argues that Foreign Corrupt Practices Act was designed with good intentions but has failed to stop corruption. Foreign Corrupt Practices Act has had a minimal impact on bribes but has allowed the least honest companies to profit. In many countries around the world bribes are a common practice in doing business. Foreign Companies are able to circumvent the law and pay off officials with minimal risk of exposure. This puts pressure on ethical American companies restricted by the FCPA to lower their standards or risk losing business. This discourages American companies from doing business overseas because of threat of prosecution under the FCPA.
Las Vegas Sands, an American casino and resort located in Nevada, has to pay $9 million in a penalty fine for neglecting to appropriately authorize and document millions of dollars paid overseas. After a six-year investigation by the Securities and Exchange Commission, and with the aid of the United States Foreign Corrupt Practices Act, they provide no evidence of corruption or bribery of foreign government officials by the company; which, is the main concern of the United States Foreign Corrupt Practices Act. Nonetheless, Sands is required to hire an independent consultant for business in China and Macau, were the majority of the money was sent, a settlement put in place by the SEC.
Webb, P. (2005). The United Nations Convention Against Corruption: Global achievement or missed opportunity? Journal of International Economic Law, 8(1), 191-229.
Bribery has always been a controversial issue, especially in the business world. Many argue that bribes are a necessary cost of doing business while others view them with distain, claiming that they are antiquated and create an unfair advantage. In the late 90’s, the problem reached a boiling point. Although laws such as the Foreign Corrupt Practices Act made bribery illegal in the United States, it still remained an international issue. Numerous skeptics claimed that violators of the act slipped through loopholes and that the law was not properly enforced. This law only applied to the United States, but bribery had become a worldwide concern. In 1998, the International Anti-Bribery and Fair Competition Act was enacted. The Act became law on November 10, 1998, however; it did not take effect until May 1, 1999.
Sabino, Anthony Michael, and Michael A. Sabino. "From Chiarella to Cuban: The Continuing Evolution of the Law of Insider Trading." 2011.Web.
The FCPA applies to any person who has a certain degree of connection to the United States and involves in foreign corrupt practices. The Act also applies to any act by U.S. businesses, foreign corporations trading securities in the United States, American nationals, citizens, and residents acting in furtherance of a foreign corrupt practice whether or not they are physically present in the United States. In the case of foreign natural and legal persons the Act covers their actions if they are in the United States at the time of the corrupt conduct. The Act governs not only payments to foreign officials, candidates, and parties, but any other receiver if part of the bribe is ultimately attributable to a foreign official, candidate, or party. These payments are not restricted to just monetary forms and may include anything of value.
The major provision to the FECA that resulted from the misuse of money and Watergate scandal is the prohibition of donations directly from corporations, labor organizations, and national banks. There were also prohibitions against donations from government contractors, foreign nationals, ca...
Despite the longstanding acceptance and promotion for the crime-fraud exception, it appears that the use of the exception to report fraud has been relatively scant and use of ethical rules to sanction lawyers is similarly rare. For those that may favor private regulation or the ability of the market to dictate its own terms it seems that the equilibrium reached was one without lawyers disclosing of their own accord. This could be just viewed as an information failure problem—even if the ability to report fraud up the ladder was technically already available, lack of knowledge may have prevented lawyers from reporting fraud when they otherwise would have done so.
Often times, Americans do not realize the corruption that surrounds them in their nation. Capitalism is an economic and political system in which the country’s trade and industry is controlled by private owners for profit, rather than by the state. Business owners, CEO’s, corporations, and large businesses have the propensity of taking extreme advantage of the power capitalism brings. For decades companies and corporations have been taking unexplainable benefit of the power they have. Capitalism in the Unites States leads to corruption.
This was the question asked in the case Mathews v. United States in 1988. The defendant, an employee of the Small Business Administration (SBA), was the contact for James DeShazer, the president of a company, which participated in the SBA (“Mathews v. United States”). DeShazer believed that he was not being provided with all of the benefits of the program, so he worked together with the FBI to request a loan from the defendant, attached to a bribe. The defendant agreed to these conditions and met up with DeShazer to exchange the money. The defendant was immediately arrested on a federal offense for accepting a bribe in exchange for an official act (“Mathews v. United States”). The defendant asked for an entrapment defense but the Court struck down his motion because the defendant would not agree to all the elements, and the Judged ruled that the jury would not hear an instruction of
The need to create a law to correct the corruption and accounting fraud is a sign of a market failure. Fike and Gwartney (2015) define market failure as “situations where there is a systematic conflict between personal self-interest and getting the most out of the available resources” (p. 208). In a market, there are sellers and buyers that are competing for a limited amount of resources. When a market is running efficiently, the number of goods and services produces match the demand of the public. That is a state of equilibrium. A market failure occurs when equilibrium is disturbed. In Enron’s case, those who were a part of the scandal had greed and desires that their salaries couldn’t satisfy. Their personal interest urged them to take what is not theirs, which is not only illegal but it creates a resource deficit as well. Enron, being a big and influential company, has a great impact in society; therefore, when it fails, it creates a chain reaction that affects other businesses, investors, and the general public. People start selling their stocks and stop investing. The failure of Enron is a negative externality. The decisions that the executives made that were a part of the scandal negatively affect investors and the general public. As a result, when a company as significant as Enron failures, it creates a market
While some of this bribery can simply expedite decisions and actions, other situations may involve a distortion of business outcomes. Meanwhile, government officials in positions to alter the firm’s overall profitability may receive substantial payments. Funds that rightfully belong to the public may be diverted into private hands. Firms that would have paid fees to the government may be able to reduce their financial obligations. Corruption distorts free market outcomes, resulting in business and government decisions that reduce efficiency and so reduce a nation’s aggregate production. Some investors may reject potential business dealings in certain cultures because of the presence of corruption. Recent years have witnessed global attempts to reduce corruption, and many nations now treat corruption as a crime. In this context, management encounters issues that challenge ethical positions and that involve risks of legal prosecution, as well as impacting potential
Corruption is a cancer that spreads rapidly all over the body. It’s a big hurdle in the prosperity of the nations. Due to concrete measures in Australia, Canada and few European countries corruption has dropped extensively, nevertheless in developing and underdeveloped countries (especially Afghanistan and Somalia) it is still a critical problem. According to the Global Corruption Barometer 2013 released by Transparency international, a worldwide survey conducted with 114,000 people that analyze bribery and political corruption in 107 countries. It was found in the report that, bribery and corruption are widespread across both developed and underdeveloped countries. More than 50 percent of the respondents from survey said that the corruption had worsened in the recent past, and 27 percent of them admitted to offering bribes in order to get their work done in public services and institutions (Wills 2013).
The existence of bribery and unethical behavior is rampant in the world market and may not change overnight. The question of bribery has been distilled in business literature as a question of ethics. In this situation at the airport with the customs officer, it is important to distinguish between business ethics and personal ethics. In a business ethics situation, the Foreign Corruption Practices Act would prohibit offering any bribe to the custom office – for example to free a shipment of goods that was lost in red tape (Pitman & Sanford, 2006). Most companies also have policies against bribery as well. In this situation, however the main issue at hand is that of personal ethics. When in a situation where your company is unknown and there is no business being conducted, normal business ethics and laws (including FCPA) do not apply only personal ethical standards.