The Boston office of the SEC has just settled charges leveled at Credit Suisse under the US Foreign Corrupt Practices Act by requiring profit disgorgement and interest in the amount of approximately $29 Million. Tack on another $47 Million to the Department of Justice as a criminal penalty.
The offenses were not of the tawdry, bribery-style variety. Rather, managers in the Asia-Pacific hired and promoted relatives of government officials, outside of the firm’s normal hiring processes. Over seven years, over 100 relatives of government officials benefited.
Likely it makes sense to concede the link between the hires and the generation of overseas business. Credit Suisse did settle and accept the criminal penalty And although Credit Suisse is of course a Swiss entity (formed in Zurich in 1856), it conducts substantial business in the US and is subject to US law even with respect to its overseas operations.
While instinctively these FCPA decisions resonate on an ethical level, and certainly level the playing field when competitors seek business in countries where small amounts of grease go a long way and comport with historical lack of fiduciary standards, it is curious that the history of mankind is replete with major “business deals” that were applauded when effected by family “hiring.” How many tribal disputes were resolved by marriage of children? How many modern European countries were shaped and founded on the intermarriage of the heirs of monarchs? And how many similar commercial arrangements, today, slip under the fiduciary radar in domestic US business?
I believe the driver for FCPA was to prevent one US business from bribing its way into winning business in overseas markets, over a competitor, by giving customary foreign bribes. That gave rise to the problem that all US businesses, denied the bribe, were placed at a disadvantage against competitor not based in the US. This in turn, as part of globalization, drove the US to spearhead efforts to cause all commercial players, whether located in countries of bribers or in emerging countries of bribe-ees, to adopt uniform rules for a level playing field. Success in this latter undertaking has been, to my observation, somewhat successful but by no means universal as a matter of law, and perhaps less successful as a matter of practice.
As international business (hopefully) continues to grow, one should anticipate a congruent growth of the law of fair competition. Punctuated with the usual percentage of cheaters. We shall see….