Under provisions of the US Foreign Corrupt Practices Act (FCPA), several companies that have business interests in the US have been indicted for alleged actions taken by them in bribing public officials in different countries. The FCPA was brought about in 1977 with the objective of bringing to book the questionable activities of foreign companies.
Companies from overseas that do business in the US are open to scrutiny and the FCPA empowers prosecutors to initiate action against those firms also that engage in corruption in other countries. In the context of the Lima office of Geletex it appears that the problem encountered by Jed is in violation of the FCPA, and demands immediate remedial action in order to comply with the requirements of the law. It appears to be a case of giving incentives to clients by way of passing away commissions that would otherwise be due to the company’s agents.
The unusually high commission expenses as reflected in the invoices are a means for the Lima office to account for the expenses by way of providing kickbacks for getting contracts. Such payments would certainly be viewed as commercial bribery amounting to corruption as provided under FCPA in addition to being a violation of the code of ethics in Geletex. Having confronted the district manager of the company in Lima, Jed is surprised to get a rude response from him. He is simply informed that things in Lima are different and to get results his staff has to adopt whatever means that are possible.
The anti bribery provisions of FCPA make it illegal for any company operating within the USA to make any payment to any international organization, party or individual with the objective of influencing them into retaining or getting new business. A company indulging in such practices can be held liable for action for any payments of this kind made by its agents or distributors.
The accounting provisions of FCPA require listed US companies to keep books of accounts and records that substantiate all payments and reflect the transactions in proper detail. The company is also required to maintain a systematic internal accounting procedure for the same. All companies falling under the ambit of the Act have to ensure that its operators and subsidiaries including those that operate in foreign countries comply with the accounting procedures as provided by the FCPA. It is clear that the expenses of Geletex in this regard cannot be accounted in proper perspective and hence are illegal.
The practices adopted by the Lima office of Geletex are not in keeping with the provisions of the FCPA and if the deviations in the procedures as provided are observed by the authorities, Geletex will be answerable for the lapses and liable for penal action. Under the circumstances it is in the interest of the company to put an immediate stop to the illegal practice and Jed must find alternative solutions to the problems as narrated by the district manager of the company in Lima.
The company has to face stiff competition in the communication industry in Peru and make efforts to survive so that the company grows in the region and returns good profits.
The present action of the Lima office are more of an action coming from the survival instinct and if at all, payments have to be made in this way, the ethical code of conduct of Geletex can be made a little flexible by providing for such expenses. A restructuring of the commission structure can surely solve the problem by reducing it to some extent and providing for other expenses under different heads. Certainly an illegal practice cannot be allowed to continue and Jed must put an immediate stop to it even if it entails losses for some time. In due course the company can conduct market research and surveys to ascertain the needs of the market and evolve a different strategy.
Farlex, Kickback backlash, http://www.thefreelibrary.com/Kickback+backlash, Accessed on 12th