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Business Litigation Alert: "Testing the Boundaries of the Foreign Corrupt Practices Act"

Overseas Hiring Practices Come Under Fire

Recent headlines have revealed that JP Morgan is under investigation by the SEC concerning its overseas hiring practices and possible violations of the Foreign Corrupt Practices Act (FCPA). The company is accused of employing the children of powerful Chinese officials to help the bank win business and other contracts.

These allegations serve as a serious reminder of the risks that businesses face when operating overseas, and of the many forms that “corruption” can take under the FCPA.

The FCPA defines “corruption” in very broad terms, prohibiting companies from giving “anything of value” to a foreign official. But “value” is a vague and subjective term. In addition to the obvious items such as gifts or money, hiring a family member to gain favor could fall within the scope of “value,” particularly since there is no minimum amount necessary for a violation of the FCPA.

Of course this does not mean that a company could never hire a family member of a foreign official, but it must be clear that the hire would have no impact on securing a business advantage from government officials. If there is an obvious pattern of this kind of hiring, or if an employee has a direct familial link to an official impacting your business, it could send up red flags and prompt an investigation.

Due to the broad nature of the FCPA, it is critical that every company doing business overseas have strict policies and procedures in place to ensure compliance, and, as the JP Morgan investigation shows, that includes policies governing hiring overseas.

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