FCPA Compliance in China and the Gifts and Hospitality Challenge

January 28, 2011

Few criminal law issues loom as large for multinational corporations as does compliance with the U.S. Foreign Corrupt Practices Act (FCPA). And few countries pose as great a challenge to FCPA compliance as does the People’s Republic of China. China is the location of more alleged FCPA violations than almost any other country, with nearly 40 enforcement actions since 2002 based on business activities there. Most recently, in December 2010, RAE Systems Inc. settled a high-profile case with the U.S. Department of Justice and the U.S. Securities and Exchange Commission for conduct in China. In light of ever-increasing international investment in China and extensive governmental involvement in the Chinese market, there is little reason to believe that the flow of China-related enforcement actions will slow in the coming years.

One particular FCPA-compliance challenge confronted by multinationals operating in China is a business culture that values gift giving and relationship building. Compounding general corruption problems typically experienced by developing countries is the value that Chinese business culture places on providing gifts, entertainment, and travel as a way to build relationships. A number of FCPA enforcement actions in China, including the RAE case, are based at least in part on business courtesies provided to Chinese government officials or employees of state-owned corporations.

To help multinational corporations address this compliance challenge, Joe Warin, Michael Diamant, and Jill Pfenning of Gibson Dunn authored the article, "FCPA Compliance in China and the Gifts and Hospitality Challenge," which analyzes these risks through the lens of the FCPA’s anti-bribery provisions, focusing on the gift and hospitality expenditures that often accompany business in China. The article also offers suggestions for implementing a corporate compliance program to address these challenges.

Gibson Dunn lawyers are available to assist in addressing any questions you may have regarding these issues. We have more than 65 attorneys with FCPA experience, including a number of former federal prosecutors, spread throughout the firm’s domestic and international offices, including our newest office, in Hong Kong. Joe Warin, a former Assistant U.S. Attorney, currently serves as FCPA counsel to the first non-U.S. compliance monitor and was recently appointed compliance monitor for another company that settled FCPA charges during 2010. In 2009, he completed his compliance consultancy for Statoil ASA pursuant to its DOJ and SEC FCPA settlements. Please contact the Gibson Dunn attorney with whom you work, or any of the following:

New York
Joel M. Cohen (212-351-2664, [email protected])
Lee G. Dunst (212-351-3824, [email protected])
Mark A. Kirsch (212-351-2662, [email protected])
Jim Walden (212-351-2300, [email protected])
Alexander H. Southwell (212-351-3981, [email protected])
Lawrence J. Zweifach (212-351-2625, [email protected])
Adam P. Wolf (212-351-3956, [email protected])

Dallas
Evan S. Tilton (214-698-3156, [email protected])

Denver
Robert C. Blume (303-298-5758, [email protected])
Jessica H. Sanderson (303-298-5928, [email protected])
Laura M. Sturges (303-298-5929, [email protected])

Los Angeles
Debra Wong Yang (213-229-7472, [email protected]),
the former United States Attorney for the Central District of California,
Michael M. Farhang (213-229-7005, [email protected])
Douglas M. Fuchs (213-229-7605, [email protected])
Marcellus A. McRae (213-229-7675, [email protected])

Orange County
Nicola T. Hanna (949-451-4270, [email protected])
J. Scot Kennedy (949-451-3805, [email protected])
Eric Raines (949-451-4050, [email protected])
Bryan E. Smith (949-451-4055, [email protected])

Hong Kong
Kelly Austin (+852 2214 3788, [email protected])
Kate Yin (+852 2214 3988, [email protected])

London
Charlie Falconer (+44 20 7071 4270, [email protected])
Philip Rocher (+44 20 7071 4202, [email protected])
Barbara Davidson (+44 20 7071 4216, [email protected])
Tim Vogel (+44 20 7071 4271, [email protected])

Munich
Benno Schwarz (+49 89 189 33-110, [email protected])
Michael Walther (+49 89 189 33-180, [email protected])
Mark Zimmer (+49 89 189 33-130, [email protected])

Attorney Advertising: The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.