Earlier this month, six former employees of Tencent Holdings
(Tencent), including Liu Chunning, a now high-level executive of
Alibaba Group, were detained by Chinese authorities as part of a
bribery investigation relating to payments made by online video
content providers to employees of Tencent, including Liu. In
addition to showcasing the continued fight against graft in China,
this case should remind companies that anticorruption compliance
involves more than just mitigating the risk of official bribery.
That includes in particular U.S. companies with international
operations, who often focus anticorruption compliance efforts
primarily on interactions with government officials, while
neglecting that commercial bribery can result in liability under
the accounting provisions of the Foreign Corrupt Practices Act (FCPA).
According to one report, Tencent recently performed a
routine internal audit during which it identified the payments at
issue. Despite company policies and procedures that prohibited such
payments and other "improper commercial competition with the
company," the employees involved allegedly conspired to
circumvent internal controls in order to accept the kickbacks.
Tencent decided to voluntarily disclose the wrongdoing to and
cooperate with China's Public Security Bureau. Liu, who
previously worked for Tencent in high-level positions, currently
serves as Alibaba's vice president in charge of its digital
entertainment business and its affiliate, Alibaba Pictures. Alibaba
publicly expressed its surprise over the news, but stated that it
supported Tencent's anticorruption efforts.
The Tencent matter continues a steady trend of Chinese companies
demonstrating a commitment to proactive compliance programs in the
face of an aggressive multifaceted anticorruption enforcement push
by Beijing. The Chinese government's effort to combat graft
among "tigers and flies" includes a focus
on enforcing China's Anti-Unfair Competition Law, which
prohibits bribery between private entities or individuals. Without
a compliance program designed to detect and mitigate commercial
bribery issues, Tencent would not have been able to voluntarily
disclose the issue to the Chinese government (and potentially take
advantage of any leniency available for doing so). Other companies
have showcased similarly proactive compliance programs, including
Baidu and Qihoo 360 Technology, which operate in the same industry
as Tencent. They both previously disclosed instances of employee
misconduct to and are cooperating with Chinese authorities in
This begs the question of whether U.S. companies with operations
in China (and other high-risk markets) are sufficiently focused on
commercial bribery. Many companies have appropriately implemented
compliance programs that deal with risks associated with government
official interactions, especially in high-risk countries such as
China. Many companies also prohibit any and all kinds of bribery in
their codes of conduct and policies and procedures. However,
companies often lose sight of the risks associated with commercial
bribery when it comes to their compliance programs and associated
activities like training, audits and red flag reviews. That blind
spot could cause a collision with U.S. enforcement authorities
under the FCPA.
previously highlighted for you on this blog, U.S. authorities
are eager to use the FCPA's accounting provisions to penalize
companies for acts of commercial bribery if those acts result in
maintenance of inaccurate books and records or otherwise undermine
a company's system of internal controls. Notwithstanding the
threat of foreign laws prohibiting commercial bribery − as is
increasingly the norm for non-U.S. anticorruption enforcement
regimes − the prospect of U.S. authorities scrutinizing
private transactions in search of FCPA violations should
incentivize companies to enhance internal controls to adequately
account for commercial bribery risks.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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In a criminal trial the charge is the foundation of the accusation & every care must be taken to see that it is not only properly framed but evidence is only tampered with respect to matters put in the charge and not the other matters.
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