Greased Lightning Rods: Corporate FCPA Policies Draw New Scrutiny

The Foreign Corrupt Practices Act (FCPA) prohibits payments or offers to foreign officials in order to obtain, direct or retain business. However, the FCPA allows so-called “grease payments” to foreign officials or agencies that help expedite routine processing and paperwork.

A recent review of Fortune 500 companies’ public codes of conduct found that 68 of them allow these grease payments – usually requiring prior approval – while 48 prohibit or strongly discourage them. Fully 373 fail to mention them altogether, suggesting that such payments are at least tacitly allowed.

It's increasingly clear that these grease payments are a key part of stepped-up enforcement efforts by the FBI, SEC and DOJ. Corruption investigators suspect that grease payments are being used by many companies as a pretext for actual bribery.  At the same time, companies complain that U.S. authorities are flagging grease payments as an excuse to probe a company for more serious FCPA violations. International trade groups are pressuring countries to treat grease payments as a form of bribery, and the U.K. recently banned them entirely in the U.K. Bribery Act. The DOJ is developing guidance on facilitation issues, and many believe that it will strictly curtail when and how companies can use grease payments.

A company that greases foreign officials – or fails to make clear to its employees what payments are and are not allowable – risks finding itself on the sharp end of an FCPA probe.  Companies that keep their employees updated on their Global Anti-Corruption and FCPA Compliance policies regarding grease payments can save themselves from unwanted – and expensive – regulatory and investigative scrutiny. 

Posted by Patrick McRee on November 21, 2011 Patrick McRee is a Legal Editor at WeComply, where he develops interactive compliance training content and courses. Before joining WeComply, Patrick was a civil litigator and business law attorney for individuals, businesses and public entity clients in California. Patrick received his J.D. from the University of Richmond School of Law.