When It's Legal to Grease the Wheels
from July/August 2007
How do you get business done legally in a foreign country where bribery is widespread and customary? Sometimes the answer is that you can’t. “There are companies that pull out of projects and decline to go forward if that’s the situation,” says Lucinda Low, partner in charge of the Foreign Corrupt Practices Act practice at Steptoe & Johnson in Washington, D.C. “Having said that,” she goes on, “companies find sometimes that even in countries with endemic corruption, they can come up with strategies that work to deflect these bribery requests.”
While not minimizing the difficulty of doing that, especially for smaller companies without much negotiating leverage, Low says these strategies typically center on standing firm against corrupt officials who extort bribes. “Companies do develop reputations for how they operate,” she says, “and most companies when they go into a country will be tested initially. If they succumb, they will develop a reputation and they’ll always get hit up. If they don’t succumb, they may not be hit up nearly as much. So how a company postures itself can be very significant in terms of how it’s viewed. Of course, it may take them more time to get their deals through.”
Sometimes greasing the wheels is legal. While the Foreign Corrupt Practices Act makes it unlawful to bribe a foreign official to obtain or retain business, it does, in a nod to reality, allow companies to make so-called “grease payments” to expedite performance of a “routine government action” by a foreign official. Such payments must be made solely to induce the recipient to perform a function or duty he was already legally obliged to perform. Attorney George Terwilliger, partner and head of the corporate defense and special litigation group at White & Case’s Washington, D.C., office, warns, though, that just because a grease payment is legal under the FCPA does not mean it will be legal under local law in the country in question.
Companies unsure of whether a particular project or undertaking would violate the FCPA’s anti-bribery provisions can turn to the Department of Justice for advance advice through a process called opinion procedure. Attorneys say it’s a viable option under some circumstances, but often too limiting. “The problem is one of responsiveness: How quickly are you going to get an answer?” says Jeffrey Stone, a Chicago-based partner with McDermott Will & Emery. “Also, the devil is in the details. You can get an answer that says you can do something the following way. Then, if you change one little fact, the government can say, ‘We never really approved what you actually did.’ The key is to make sure you ask the right hypothetical questions and get a timely response that fits with your plans.” To help expedite and safely phrase your request, Fred Shaheen, national chairman of Greenberg Traurig’s government contracts and export controls practices, has simple advice: Seek the opinion of an attorney who has overseen numerous transactions similar to yours.
