FCPA risks in China discussed at Fordham Law event

Fordham Law School in The FCPA Blog, January 31, 2014

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Business opportunities in China abound. But as anyone who reads the FCPA Blog knows, compliance there can be particularly challenging. Understanding how the FCPA has tripped up others and knowing recent enforcement trends are critical first steps.

That was the warning from panelists at an event sponsored by the Chinese Business Lawyers Association and Fordham Law School Wednesday.

In China, many companies are state-owned enterprises (SOEs), and their employees can be "foreign officials" under the FCPA.

For example, doctors at state-owned hospitals can be foreign officials, said Daniel Chow, a law professor at Ohio State University, and U.S. companies (especially pharmaceuticals) need to keep that in mind.

Chow said China companies supplying services for oil and gas, steel, telecommunications, water, banking and finance may be SOEs. And even the most low-ranking employees within an SOE can be foreign officials and covered by the FCPA's prohitibition against "giving them anything of value" in return for business.

Although there's a pending appeal on the issue of whether all SOE employees are foreign officials, Professor Chow counsels caution.

The DOJ and SEC have long considered SOE employees to be foreign officials, and courts that have ruled on the issue have so far upheld the fed's so-called expansive view.

Chow said any recommendation about suppliers or partners in China from the government or an SOE should be carefully scrutinized. Is the person making the recommendation connected in any way to the company or person being recommended? If so, that's an FCPA red flag.

Chow said China today is more focused on going after bribe payors than bribe takers. That has likely led to more information sharing between U.S. and Chinese authorities when multinationals with U.S. operations are suspected of paying bribes in China.