China Compliance Digest recently reported that Deutsche Bank is the latest bank to be caught up in an ongoing investigation relating to whether U.S. banks hired the children of Chinese officials to steer business to them. (Click here for my recent post on this issue.) Morgan Stanley, Goldman Sachs, Citigroup, UBS, Credit Suisse, and Bank of America Merrill Lynch have also come under scrutiny. Reuters reported in April that the DOJ and SEC have expanded the hiring probe from the banking industry to other fields such as oil and gas, telecommunications and consumer-products. Qualcomm Inc. reportedly faces a civil action from U.S. authorities over alleged bribery of officials associated with state-owned companies in China. The Justice Department and the Securities and Exchange Commission have reportedly been asking global companies in a range of industries including oil and gas, telecommunications and consumer products for information about their hiring practices to determine if they could amount to bribery, Reuters reported. According to Reuters, "it was not clear how many companies were involved in the expanded probes and the people, who declined to be named because details of the investigations are not public, did not name specific firms."
As discussed in my recent blog post, these practices could constitute an FCPA violation if investigators can show that businesses provided "anything of value" to "foreign officials" for the purpose of "influencing official acts" in order to assist businesses from "obtaining or retaining business" or to "secure an improper advantage." In the absence of an upfront agreement, it appears to be a difficult case for regulators to win. While a job could certainly be a "thing of value" under the FCPA, experts say the challenge would be proving a quid pro quo. As in almost all white collar cases, it therefore will likely boil down to the businesses' intent. So I'll offer the same advice I did last month: Businesses should be aware that hiring family members of foreign officials could open them up to potential liability under the FCPA. Before taking such action, businesses should take steps to comprehensively document that the rationale for the hire constitutes a legitimate business purpose and is unrelated to influencing official acts to secure an improper advantage or obtain or retain business. Stay tuned for more developments.