Corruption in China: Words of Caution for U.S. Companies

“If your company operates in China, I have one piece of ‘free’ advice,” writes white-collar crime and compliance lawyer Mike Volkov, “conduct an anti-corruption audit and do it now.” 

“Almost one-third of the FCPA criminal cases involve bribery in China… Bribery is built into the Chinese economy. It is a remnant of the communist system in which bribery or the ‘black’ market was a way of life. Government employees expected and demanded bribery to provide basic services and/or products. That same mentality pervades the Chinese economy. Foreign companies are attracted to China for lucrative profits. But entrance and operation in the Chinese economy requires bribery of government officials.” (China: The Corruption Problem Child by Michael Volkov) 

With Volkov’s advice in mind, we’ve compiled for your reference a roundup of recent on-topic updates and advisories from leading lawyers and law firms in the field:

Anti-bribery Enforcement with Chinese Characteristics: Not All Official (K&L Gates LLP)

“Arguably, in terms of PRC anti-corruption enforcement risk, the primary hazard for foreign-invested enterprises operating in China comes instead from commercial bribery. Unlike the U.S. FCPA, but more similar to the UK Bribery Act, China’s anti-bribery laws extend beyond offenses involving official bribery and cover commercial bribery as well. Read more»

Watts Water: Don’t Get Caught on the (FCPA) Slow Boat to China (Thomas Fox)

“[Watts Valve (Changsha) Co. (CWV)] made payments directly to employees of a Chinese Design Institute. According to the FCPA Professor, Chinese Design Institutes are ‘typically state-owned enterprises that provided design engineering and technical integration services that can influence contract awards by end-user state-owned customers.’ These direct payments were made to influence design institutes to recommend CWV be awarded the sale of products for Chinese state enterprises.” Read more»

Global Retailers and Corruption Risks (Michael Volkov)

“Global retailers are expanding into markets where consumer demand is growing. The usual suspects lead the pack – China, Russia, and India… Retailers are responding to that demand and expanding into these high-risk countries where the payoffs are going to be big. The corruption risks, as we know, are significant. Proactive compliance programs are a must for retailers.” Read more»

DOJ’s Recent Trend of Prosecuting Individuals for FCPA Violations Continues with Longer Prison Sentences and Increased Fines (Foley Hoag LLP)

“Six former executives of Control Components, a California based company that makes valves used in the energy industry, were charged in April 2009 with making corrupt payments to secure business in China, Malaysia, South Korea, and the United Arab Emirates.” Read more»

Foreign Corrupt Practices Act/Anti-corruption: What to Expect in 2012 (K&L Gates LLP)

“… during 2011 there were highly publicized initiatives in Russia and China to upgrade their laws against bribery of foreign offi cials, and while enforcement of these laws remains uneven, when enforcement does occur it may be exceptionally severe.” Read more»

10 Global Compliance Trends for 2012 (Thomas Fox)

“More countries are implementing new anti-corruption laws and more resources are being dedicated to enforcement… [T]he BRIC countries have passed, or are considering, significant anti-corruption laws. The US is starting to coordinate and share more information with these countries — China being the most significant.” Read more»


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