The Foreign Corrupt Practices Act: A Minefield for US Companies in China

By Patrick M. Norton, Partner, O'Melveny & Myers, Beijing

The United States Foreign Corrupt Practices Act (FCPA) imposes severe civil and criminal penalties on US companies and individuals who bribe or offer to bribe foreign government officials to obtain business.¹ Compliance with the FCPA is challenging in many developing countries. It is especially challenging in China, where corruption is widespread and the government continues to own and manage many of the country's largest companies. Until recently, US law enforcement authorities gave little attention to these problems. Earlier this year, however, Lucent Technologies announced that it was terminating three of its senior executives in connection with an internal FCPA investigation of Lucent's business in China.² The Lucent announcement and disclosures of similar problems by other US companies have put FCPA problems in China in the spotlight for the first time.

FCPA issues in China may also no longer be confined to companies and individuals conventionally thought of as "American". In recent years, dozens of Chinese companies have brought themselves within the ambit of the FCPA by listing on US stock exchanges. Thousands of smaller businesses engaged in trade with China may also qualify as "US persons" under the statute - some perhaps unknowingly. Many of these listed Chinese companies and smaller trading companies are accustomed to Chinese business practices and may find it difficult to adjust their own practices to comply with the FCPA.