by Charles Ray

Created on: May 18, 2009

The Foreign Corrupt Practices Act (FPCA), passed by Congress in 1977, makes it illegal for an American company official to bribe a foreign official, foreign political party, or foreign candidate for a political office, for the purpose of influencing the performance of duty of that official, or to gain an unfair advantage in the pursuit of business.

The FPCA grew out of US Securities and Exchange Commission investigations in the mid-1970s, when U.S. companies admitted to making illegal payments to foreign officials, to get favorable treatment for their products or services, or to influence the officials to perform their duties (a procedure known as facilitating payments). It was signed into law by President Jimmy Carter on December 19, 1977. In 1998, the FPCA was amended to implement OECD anti-bribery conventions.

Attitudes toward bribery and facilitation payments vary widely between countries and cultures. For many years, German businessmen were allowed to deduct the cost of bribes paid abroad on their federal income tax. Why then is it fair to force American businesses to adhere to a much higher standard when they compete in such an environment? Would it not make more sense to adopt the view, when in Rome do what the Romans do?

If one stops and thinks beyond the immediate profit potential of such behavior, it becomes clear that out system of ethical and legal behavior should be the same, at home and abroad.

Companies and officials who develop a reputation of paying bribes are not truly trusted. It might win them the immediate contract, but repeat, long term business can be a problem. Further, whether business people like it or not, intend it or not - they represent their society when they travel and do business abroad. Executives who operate to a high standard of conduct might not always get the contract, but they will in the long run have the respect of those who observe them.

In today's age of globalization, public confidence and long term respect are assets that are difficult to measure, but they make a tremendous impact when they are lacking. Like the air we breathe, we take them for granted until they are no longer there, and then just as happens when the air is sucked out of our environment, we gasp for breath, and if it is not replaced, we die. A company that allows its executives to go abroad and make illegal payments not only develops an unsavory reputation for itself, it puts a stain on the reputation of its home country.

The FPCA is a good piece of legislation, and has served its intended purpose exceptionally well. American business executives who go abroad should learn the local culture and a few words of the local language. One word they must know, when asked for a bribe or facilitation payment - "no." For more information on the FPCA, check the Department of Justice website section that is devoted specifically to the subject of fraud in business, or email FCPA.Fraud@usdoj.gov.

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