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Growth Strategies

Illicit Affairs?

If you do business overseas, be certain your "administrative fees" aren't really illegal bribes.
Magazine Contributor
3 min read

This story appears in the September 2004 issue of Entrepreneur. Subscribe »

Suppose you've decided to move part of your business overseas. You want to open a manufacturing plant in Southeast Asia, but you need a permit from the local government. A government agent there offers to get you the permit within a week-and, by the way, his commission will be $1,000.

Watch your step. In many countries, kickbacks and bribes have long been an expected cost of doing business. But the Foreign Corrupt Practice Act (FCPA), enacted by Congress in 1977, prohibits bribery of officials in other countries. It's illegal to make payments, promises or offers of anything of value to foreign officials to obtain or retain business, or to get an improper advantage. It's also illegal to make such payments to a third party (say, a government official's brother), knowing he's just an intermediary.

For 20 years, the United States was the only country to try prohibiting bribery of foreign officials, says San Diego attorney John W. Brooks of Luce, Forward, Hamilton & Scripps. "U.S. companies complained they faced either bribing foreign officials and risking FCPA prosecution or refusing to engage in bribery and losing the contract," says Brooks.

Since then, with urging from the United States, international organizations have enacted treaties and conventions aimed at stamping out corruption. The European Union, the United Nations and the World Bank have also adopted resolutions and policies against corruption, all of which help level the playing field.

It's clear you don't want to get tangled up in bribery. The problem is it's rarely easy to tell whether a proposed payment is actually a bribe. For instance, the FCPA doesn't prohibit "grease payments," which are fees paid to foreign officials to expedite actions the government should do eventually anyway, such as issuing a routine permit. (Some of the other conventions forbid even these.)

But suppose you need a permit to build an oil pipeline, and a government agent asks for a few thousand dollars for advising you on environmental compliance and making sure you get the needed permit. Would that be a "grease payment," or would it be paying officials to look the other way?

In light of these new conventions and laws, people of authority rarely ask for bribes. But they might ask for a commission or a small payment for advice on doing business there. (In general, if a government agency asks your company to build a park or pave a road in exchange for approval, that wouldn't count as a bribe.)

This is further complicated by the layers of people it might take to get a job done. So if you hire an agent to work with an agent abroad, how do you know your agent isn't paying a bribe and implicating your business in corruption? Know what the deal should cost, so you can tell if money is leaking out.

And because complying with the many overlapping laws is tricky, don't try it alone. Hire a lawyer with experience in international business to help you through the minefield.

Jane Easter Bahls is a writer in Rock Island, Illinois, specializing in business and legal topics.

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