Skip to content

Why not all mooncakes are created equal

… and other considerations when offering gifts and services abroad
|Written By Jennifer Brown
Why not all mooncakes are created equal

It can be tricky to navigate the rocky road that is doing business in corruption-prone countries, but in-house counsel can learn to spot red flags and ask the right questions to help keep their company out of hot water.

The first rule is to understand that foreign corruption doesn’t just take the form of exchanging money for much needed permits or favours from officials on the ground — it can be transactions or gifts much more difficult to track and more complex from an ethical perspective.

“It’s exceedingly rare these days that a bribe paid or offered or promised takes the form of cold hard cash. It is more likely a favour in the form of travel or employment for the minister’s nephew,” says Kris Robidoux, a partner with Gowling Lafleur Henderson LLP.

Robidoux was moderating a session during the Association of Corporate Counsel’s annual meeting in Orlando last week called “Doing Business in Difficult Countries: What Would You Advise in this Scenario?”

The panel was presented with a variety of scenarios to consider in terms of whether a company would be in violation of the Foreign Corrupt Practices Act. In one situation, they were asked what they would do if a foreign language newspaper ran a story saying their company — a telecommunications firm dual listed in Canada and the U.S. — is accused of bribing the former telecommunications minister in a country they are new to operating in to obtain a key licence. Would they ignore the piece or investigate?

“You can’t ignore it. Where there is smoke there’s fire,” says Jane Fedoretz, vice president and general counsel with industrial services provider CEDA International Ltd. based in Calgary. “The authorities don’t ignore the foreign press and neither should you.”

Jay Martin, vice president, chief compliance officer, and senior deputy general counsel with oilfield services company Baker Hughes, which has operations around the world including Calgary, says the best policy is to investigate immediately and limit who speaks to the press.

Steps should include checking into the level of entertainment activity taking place with the country manager and any recent bids there.

Ignoring reports in the media can be extremely damaging, he says, as demonstrated in the recent Wal-Mart bribery case in Mexico. “It was tried in the New York Times before the investigation was complete,” says Martin.

“If the story is in the New York Times or Wall Street Journal, it represents a sea change. In 72 hours, the Wal-Mart stock fell $10 billion in value. Once it hits CNN, your ability to maintain control of events may be very limited,” says Martin. “The speed at which these things take flight is breath-taking in a 24/7 news cycle.”

The panel also tackled the sticky issue of gift giving in countries such as China. They considered an example of a sales team at a medical device company working in China. The team has had a slow year and was asking to provide certain gifts to doctors and distributors in the country during the two festival seasons including mooncakes, vouchers, envelopes with cash, and watches.

The panel advised against allowing any of the gifts, unless the mooncakes were from a modest local bakery rather than a luxury hotel. While doing business in China is different — it is rude to not provide or accept a gift — there is a fine line between relationship building and influence peddling.

“A doctor in a state-owned hospital is going to fall under the category of public official,” says Suzanne Rich Folsom, chief regulatory and compliance officer and deputy general counsel with ACADEMI LLC (formerly Blackwater). “A distributor is a link to the doctor and therefore the company would still be liable under FCAP.”

So how would you explain to the sales employees that they couldn’t offer these gifts?

“Tell them your company is committed to good governance, even if it means loss of business. It’s a hard message but the bottom line is your company can’t afford not to comply,” says Rich Folsom. “All of those gifts listed are going to be found to be in violation, except maybe a mooncake.”

Even at that, the panel advised not giving a mooncake originating from the Mandarin Oriental Hotel, which come in elaborate gift boxes and can carry a price over $200.

“In order for there to be a bribe taken there has to be a bribe given. You can still give a gift — such as something with the company logo on it. Educate your employees about the difference,” says Rich Folsom.

Canada’s most famous foreign corruption case is Niko Resources, in which a natural gas company was investigated and charged by the RCMP. In June last year, Niko was hit with a $9.5-million fine for its actions in Bangladesh. In that case travel provided by Niko to officials came into question.

“It often comes down to understanding and making a defensible business case. Side trips to New York City from Calgary were not defensible. That looked more like a boondoggle than a business trip,” says Fedoretz.

The panel also discussed whether it would be advisable to consult the Department of Justice if concerned about wrongdoing.

“In Canada, the whole question of volunteer disclosure is a live and thorny issue,” says Robidoux. “There is no process in place to contract or settle out of the criminal justice system. Either they charge you or they don’t. You can’t settle a foreign corruption charge out of court unless you plead guilty.”


SPECIAL REPORTS



Save

PROFESSIONAL DEVELOPMENT