The Foreign Corrupt Practices Act
The Foreign Corrupt Practices Act is a law that was enacted in 1977. It makes it illegal for US citizens to give bribes to foreign government officials to facilitate a business deal. Basically, if a businessman gives the Juárez mayor, for example, a bribe to allow a store to be opened in the city, he could be prosecuted under US law. As you likely know, although illegal, most of you understand that to get a government official in Mexico to process an application, most times it requires some type of bribe. This is not limited to Mexico, as a matter of fact, most recent prosecutions involve countries like China and others in the Middle East.
Most of you reading this today have probably heard about the Foreign Corrupt Practices Act in terms of large companies ensnarled bribery controversies in other countries. For example, in October, the pharmaceutical company, Bristol-Myers Squibb agreed to pay $14 million to settle charges that some of its employees made improper payments for larger sales in China.
The Federal Bureau of Investigation (FBI) through the Department of Justice and the Securities and Exchange Commission (SEC) predominantly investigate allegations under this act. Although bribery can be prosecuted in the United States under various laws, there are issues of jurisdiction that created the need to prosecute bribery by US citizens who bribed outside of the jurisdiction of the US laws. Although criminal penalties are included in the law, almost all of the cases are settled through fines, because most of the companies implicated reach settlement agreements with the government.
One aspect of the law that is not largely understood is that it is not only a violation of the law to bribe foreign government officials directly, but it is also a violation to knowingly allow an underling or consultant to bribe on your behalf. For example, a company hires a Mexican realty consultant to acquire warehouse space and the consultant bribes an official for the proper land use permissions. Although the US citizen was not involved directly with the bribery, their benefit of the rental agreement may expose them to charges under the anti-corruption law.
There have been business owners that have been sentenced to jail for bribing government officials. Like most laws that require a substantial investment in resources to investigate and prosecute the violations of the law, there is a threshold that allows some violations to remain unprosecuted.
So those of you that pay a bribe to a traffic officer in Juárez to get out of receiving a traffic ticket can rest easy knowing that it is unlikely that the FBI will put handcuffs on you anytime soon. To be clear, I am advocating that you bribe the Juárez traffic cops. I am just letting you know that bribing a Juárez traffic cop is something the FBI probably wouldn’t bother to investigate.
Because El Paso sits on the border with Mexico and much of the business activity involves cross border trade it is likely that bribery is part of the business environment. We already know that a culture of corruption exists on both sides of the border – Cd. Juárez and El Paso.
I have been documenting corruption in El Paso and have begun to create linkages between questionable activities in El Paso and families connected to powerful Mexican politicians. As you are likely well aware, there have been recent controversies with land acquisitions on both sides of the border.
Much of this has to do with the Maquila industry.
Since NAFTA was implemented, Mexico has been taking giant strides to open up its markets to the rest of the world. As a result, many governmental owned utility and infrastructure entities are being privatized. Much corruption has been documented in the privatization of these assets under both PAN and PRI governments. Some of these assets are linked to individuals directly linked to various El Paso controversies.
As you probably know already, I’ll start to connect those dots for you on my blog. However, it is important that you understand the underlining topics so that the “dots” I’ll be developing make better sense to you.
As a reminder, although corruption is generally defined legally as an exchange of money or valuables in return for special treatment, it has also been my contention that corrupt behavior is also a government official not doing their job because it might make an important individual uncomfortable or because it might expose someone to criminal penalties. It is my belief that the selective enforcement of the laws is also a corrupt behavior.