The Foreign Corrupt Practices Act - Beauty Can Be Corrupt

It's a fact of life that where there is trade and industry there is also likely to be corruption. However, the Foreign Corrupt Practices Act of 1977 (FCPA) has been put into place to serve as a reminder that if you are tempted to grease a foreign official's palm for your own gain, then you could face extremely costly consequences.

The Act was signed into law by President Jimmy Carter on December 19, 1977 and was intended to put an end to the corruption of large businesses in Corporate America by prohibiting individuals to bribe foreign officials. It was intended to protect companies and level the commercial playing field for all concerned. It has been successful to some degree but, unfortunately, there are still cases of corruption and bribery taking place in the business world.

Avon in the firing line

Most of us are familiar with the large cosmetics company Avon and in 2010 the directors and officers were facing a lawsuit filed by an Avon shareholder alleging that overseas bribery had taken place. Specifically it was claimed that shareholders had been suffered by the failure of individual directors to monitor the company's compliance problems under the Foreign Corrupt Practices Act. It was further claimed that Avon had failed to put in place adequate internal controls to prevent representatives in China offering bribes. Avon had previously disclosed that since 2008 it had been investigating possible FCPA violations in China and several other countries.

In the late 1990's China had placed on ban on door-to-door selling which forced Avon to open up stores in which to sell their products. However, Chinese regulators in 2006 allowed Avon to revert back to its standard house call sales strategy because of an alleged bribe given to then deputy director of the foreign fund division, Deng Zhan.

In 2010 it was reported that four employees had been suspended, pending an internal bribery investigation, which was said at that time to involve more than a dozen countries. Avon are currently under investigation as the scale of the alleged bribery grows into several million dollars.

Foreign Corrupt Practices Act - Whistleblower Protection

Contained within the FCPA is an old law known as 'Qui Tam' that entices people to step forward and report violations by offering them financial incentives. Such people are known as relators or whistleblowers. In essence this means that any individual who learns of and exposes fraud against the government will be entitled to a share of the recovery if the case is successful. The share can be between 10-30 percent and the fraud being revealed has to be more than $1 million. You don't need to be a mathematician to see that this could amount to a substantial reward and is known as whistleblower provisions.

In many cases, a person who exposes fraudulent practices under qui tam laws against the government is protected against retaliation from their employer. This means that their employer is not allowed to suspend, terminate, demote, harass or threaten them in any way. If this happens, then the whistleblower may be entitled to file for financial damages that could prove extremely costly to the company.

If you believe that you have sound knowledge of a violation of behavior under the Foreign Corrupt Practices Act, then it is advisable to seek the advice of an experienced attorney in this field, who can ascertain whether there is a case to answer and can set to work building a case, should you decide to go ahead. Most attorneys worth their salt will offer a free consultation and you can rest assured that anything you disclose will remain confidential information.