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Eric Newman, Esq.
HCCA/SCCE
Social Media Manager
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(WALL STREET JOURNAL)

Then you get this report during due diligence: Our Indian friends have been paying bribes to local officials to the tune of $750,000 a year. If we buy this company and this carries on, you could go to jail under the Foreign Corrupt Practices Act, a U.S. law - strictly enforced by the Justice Department - that makes it a criminal offense to pay bribes abroad.

Oops.

Your next call is likely to be to someone like Ken Springer or Ashish Sonal. Mr. Springer, based in New York, is a former FBI agent and founder and chief executive of Corporate Resolutions Inc. Mr. Sonal, based in Gurgaon, is the founder and chief executive of Orkash Services Pvt. Ltd. (Orkash means "nothing is impossible" in Sanskrit, he notes.)

Both are corporate intelligence experts and part of their job is to be the Mr. Fixits in situations like this. In short, it is their job to tell the bribe recipient that the gusher of cash is being turned off.

The key, says Mr. Sonal, is to "understand the personalities and access what needs to change and how they need to be convinced." In the case of government officials, he would carry the message - and help management carry the message - that the bribery has to cease. He also helps companies craft internal and external communications to "show a line is being drawn."

"We minimize the risk of confrontation, clash of ego, anything like that," Mr. Sonal says. "The market knows foreign companies have to comply with this kind of thing and the people who have received bribes come to realize this can't happen any longer."

In April alone three Fitch-rated companies, Avon Products Inc, Hewlett-Packard Co and BHP Billiton, were in the news because of FCPA-related actions, and enforcement activity is set to increase, Fitch said in a report.

"Companies that violate FCPA or other anti-bribery conventions have committed a criminal act that makes them potentially subject to indictment," Fitch said. "Criminal indictment can be hazardous to the financial health and existence of corporations."

Indictment alone can trigger onerous reporting requirements, civil lawsuits, business losses and reputational risks, Fitch said. Violations of the act can also become a sticking point in acquisitions or dispositions of businesses, Fitch added.

The FCPA, passed in 1977, makes it a crime to bribe foreign officials to obtain or keep business abroad. The law has long lain dormant, but in the last three years the Justice Department and U.S. Securities and Exchange Commission have brought more cases under it, heralding a more aggressive approach to rooting out corruption.

Emerging markets have been a key engine of growth for many companies, but bribery and corruption can be commonplace and viewed as a cost of doing business, Fitch said.

More: http://www.reuters.com/article/idUSTRE6504MX20100601