06 November 2006

Foreign Corrupt Practices: Oil, Corruption & Borat...

Global commerce is on an upward curve of growth as the planet becomes flat or smaller based upon the increasing speed of business. Transportation, Technology and Telecommunications has spawned the reach for many U.S.-based enterprises who desire to trade products or services overseas. The Gas & Oil Industry and Energy sector have been the most scrutinized public companies for their business practices over the past three years.

Operational Risk in the Energy Sector and others could be blind-sided by the Foreign Corrupt Practices Act (FCPA) in the years to come as they race to do business in Kazakhstan and China. Here is a lesson for aggressive marketeers and business developers who will need to be wary of their business protocols and procedures when engaging in international commerce.

"So you think it's easy to stay out of jail? John MacLellan doesn't. The regional finance director of Microsoft Corp. in Asia, MacLellan is responsible for ensuring compliance with the U.S. Foreign Corrupt Practices Act (FCPA), a law that exacts strict penalties for giving or taking bribes at overseas operations. While the software giant boasts a robust internal-compliance program, recent FCPA enforcements (including actions against Titan Corp. and InVision Technologies) suggest a new urgency in the U.S. government's enforcement of the law.

Complicating MacLellan's job: in the People's Republic, it's not always clear who you're dealing with. A U.S. executive might treat a customer to a business dinner without ever knowing that one of the guests is a low-level ministry official. "We face a large number of very complex deals in China," MacLellan says. "Because of the size and influence of the government, we're exposed [to the FCPA] from the start."

The Kazakh government is getting plenty of publicity this week due to a new movie launched this past weekend named "Borat: Cultural Learnings of America for Make Benefit Glorious Nation of Kazakhstan". Simultaneosly, the country is the focus of an oil, cash and corruption probe.

"In February, the United States attorney’s office in Manhattan is scheduled to go to trial in the largest foreign bribery case brought against an American citizen. It involves a labyrinthine trail of international financial transfers, suspected money laundering and a dizzying array of domestic and overseas shell corporations. The criminal case names Mr. Nazarbayev as an unindicted co-conspirator. The defendant, James H. Giffen, a wealthy American merchant banker and a consultant to the Kazakh government, is accused of channeling more than $78 million in bribes to Mr. Nazarbayev and the head of the country’s oil ministry. The money, doled out by American companies seeking access to Kazakhstan’s vast oil reserves, went toward the Kazakh leadership’s personal use, including the purchase of expensive jewelry, speedboats, snowmobiles and fur coats, federal prosecutors say."

As American companies seek partnerships, acquisitions and IPO deals they must comply with FCPA or suffer the financial or political consequences. Even in the middle of all of the movie hype and the legal depositions the country of Kazakhstan has been elected to join the UN Economic and Social Council:

Kazakhstan says it has become the first Central Asian country to be elected a member of the UN's Economic and Social Council (ECOSOC).

The Kazakh Foreign Ministry says in a statement the vote took place at the UN General Assembly on November 2.

Kazakhstan will represent Central Asia in the 54-member UN body for the next three years. ECOSOC is the UN's central forum for discussing international economic and social issues.

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