In November 2012 the U.S. Department of Justice and the Securities and Exchange Commission issued a joint report entitled FCPA: A Resource Guide to the Foreign Corrupt Practices Act. This 120-page work provides a wealth of information about this important anticorruption law and its enforcement and also serves as a useful tool for engineers seeking practical advice in meeting their ethical obligations in the global marketplace. This month’s column is based on examples presented in that guide.
A U.S.-based engineering firm seeking to expand its presence in the global marketplace learns of a potential multimillion-dollar contract with the ministry of transportation in a small Eurasian country. Not only would the contract represent a profitable opportunity in itself; it would also hold promise for establishing a relationship that might lead to additional opportunities for the firm. The company’s principal, who is a civil engineer and an ASCE member, receives a proposal from a local agent in that country who claims to have strong ties with the government’s political leaders. The agent offers to use his best efforts to help the company win the contract in exchange for a monthly retainer and a contingency fee equal to 3 percent of any contract awarded.
The same firm has recently been contacted by a government official in a second Eurasian country. The official believes that the firm’s many years of experience with pavement engineering in a particular climate and under certain conditions makes it a preferred choice to undertake work on a badly needed transportation project in his country. However, he explains that, under his country’s laws, foreign companies are ineligible to receive no-bid public works projects unless they partner with a local entity. The official recommends that the firm seek a suitable partner for a joint venture and strongly recommends a particular local contractor.
Meanwhile, the firm has encountered problems on a project that is already under way in a South American country. Already behind schedule and over budget, the project, which could affect a protected wetland, is on hold pending receipt of a required environmental permit from the country’s natural resources department. A clerk in the department advises the firm’s project manager that applications for such permits can frequently take six months to process but that the process can be expedited by payment of a routine “facilitation fee.”
Each of the three countries in question has been listed as presenting a high risk for government corruption.
What steps should the engineering firm and its employees take to ensure that they do not fall foul of their legal obligations or of ASCE’s Code of Ethics?
In 2006, ASCE’s Board of Direction approved revisions to canon 6 of the Code of Ethics; the revised canon now reads as follows: “Engineers shall act in such manner as to uphold and enhance the honor, integrity, and dignity of the engineering profession and shall act with zero tolerance for bribery, fraud, and corruption.” The use of the phrase “zero tolerance” conveys an understanding that ethical behavior means more than simply avoiding an obvious act of bribery; it requires an engineer to be vigilant in recognizing and averting situations in which an individual might seek to derive personal benefit through an improper payment or a corrupt transaction.
While each of the scenarios described above may be a legitimate transaction, each also has the potential for facilitating corrupt activity. The local agent might be serving as a conduit for an improper payment to government officials, a portion of his substantial “contingency” fee being paid to the persons awarding the contract. The official recommending a joint venture partner might be attempting to steer the firm to a company in which he holds an ownership stake or has some other financial interest. And the “facilitation fee” might be an unlawful attempt by the clerk in the natural resources department to secure a bribe in exchange for his or her services.
Further complications include a lack of knowledge of the personal or financial relationships between the parties involved, the vague nature of the services to be provided in exchange for payment, and concerns about the countries’ reputations for systemic corruption. In view of these factors, an ASCE member who makes a payment to advance his or her business interests while ignoring the warning signs of corruption may be playing fast and loose with canon 6’s requirement of “zero tolerance for bribery, fraud, and corruption”
What is more, each of these scenarios represents a situation in which misguided action could pose a risk of legal action under the Foreign Corrupt Practices Act, the federal law that prohibits covered businesses and individuals from making payments or bestowing gifts to a foreign official in order to influence that person in his or her official capacity or to secure an unfair advantage. This law has seen a substantial increase in enforcement actions in recent years, and both the firm and its employees could be subject to civil and criminal penalties if they were deemed to have violated the law.
Given the potential consequences of a legal misstep, as well as the ethical principles set forth in canon 6, it is essential for the ASCE member and the other employees of the U.S.-based engineering company to take steps to ensure the validity of the transactions in question before making any payments. Such steps could include background checks on the companies or individuals involved; documentation of the particular services to be provided by the proposed consultant or partner; and independent, expert advice on the legality of the transaction in all applicable jurisdictions.
Taking zero tolerance a step further, ASCE members holding leadership roles in their companies can help their employees make the right decisions. One way for corporate leaders to help employees meet their legal and ethical responsibilities is to adopt and implement an anticorruption compliance policy. The FCPA report (available at www.justice.gov/criminal/fraud/fcpa/guide.pdf) provides the following recommendations for an effective corporate compliance program:
- A clearly articulated policy against corruption supported by the words and acts of senior managers to ensure a culture of compliance;
- A code of conduct and compliance policies and procedures, including specific limits and approval processes for expenditures involving foreign officials;
- A designated compliance officer with sufficient autonomy and resources to ensure the program is being implemented effectively;
- Risk assessment of transactions, along with heightened scrutiny of transactions with higher dollar values, lower oversight, or other risk factors;
Periodic training of relevant officers and employees;
Internal incentives and disciplinary action that are reflected in bonuses, performance evaluations, and promotions;
Review and monitoring of third parties acting on the company’s behalf (agents, consultants, et cetera);
Mechanisms for confidential reporting and internal investigations of alleged misconduct;
- Periodic review of the compliance program, with improvements and adjustments as needed.
As noted in the report, “If designed carefully, implemented earnestly, and enforced fairly, a company’s compliance program—no matter how large or small the organization—will allow the company generally to prevent violations, detect those that do occur, and remediate them promptly and appropriately.” Once implemented, such a well-designed policy enables the company and its leadership and staff to demonstrate an unyielding commitment to ethical conduct at home and abroad, for such a policy acknowledges that “zero tolerance” requires vigilance in managing financial transactions to ensure that funds are not being used to pay a public official for illegal acts. —TARA HOKE
Members who have an ethics question or would like to file a complaint
with the Committee on Professional Conduct may call ASCE’s hotline at
(703) 295-6061 or (800) 548-ASCE (2723), extension 6061. The attorneys staffing this line can provide advice on how to handle an ethics issue or file a complaint. Please note that individual facts and circumstances vary from case to case, that some details may have been altered for purposes of illustration or confidentiality, and that the general summary information contained in these case studies is not to be construed as a precedent binding upon the Society.
Tara Hoke is ASCE’s assistant general counsel and a contributing editor to Civil Engineering.
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