The U.S. government is looking at a prominent bank for possible violations of the Foreign Corrupt Practices Act (FCPA) – which is an anti-bribery statute that has become more widely enforced in recent years.
On Friday, Goldman Sachs released in a 10-Q quarterly filing that its hiring practices are being reviewed by regulators. It appears the inquiry relates to hiring practices in Asia.
In addition, Goldman Sachs is being sued in a class-action lawsuit that relates to high-frequency trading, news reports said. Goldman Sachs did not release details on the investigations, but it was reported that the bank is cooperating with these investigations and reviews.
The announcement comes shortly after news reports that the Securities and Exchange Commission (SEC) contacted Goldman Sachs, Credit Suisse, Morgan Stanley, Citigroup and UBS AG to find out more about their hiring practices. In 2013, there were several news reports how Wall Street banks hired relatives of Chinese government officials – in an apparent effort to curry favor when getting business deals. One example was JPMorgan allegedly hiring Wen Ruchun, the daughter of Wen Jiabao, a former Chinese prime minister. She allegedly was paid $75,000 a month by JPMorgan via Fullmark Consultants.
Last year, The New York Times also interviewed bankers and lawyers, about China, who “said the practice of hiring the children of government officials was so widespread that banks competed to see who could hire the most politically connected recent college graduates.”
Last year, InsideCounsel additionally reported companies can get into trouble in China because of the involvement of “third parties.”
“Companies doing business in China are likely to be large, and any large organization must, at times, contract with third parties to manage some aspect of their supply chain or provide a valuable service,” the report said. “But these third parties are responsible for the vast majority of FCPA violations of companies doing business in China.”
Overall, the cost of companies investigating compliance with the FCPA is high. Even the well-known retailer Walmart has spent more than $400 million in legal fees and compliance costs in connection with allegations. According to a company statement in February, Walmart expects to spend an additional $200 million and $240 million in legal fees and compliance costs, InsideCounsel reported. Fines are high, too. HP ended up paying $108 million in fines for bribery allegations in Mexico, Russia and Poland.
Costs could increase with many nations enacting their own new anti-bribery laws – such as Brazil.Under that nation’s Clean Company Act, fines range between 0.1 percent and 20 percent of a company’s gross revenue from the prior year. If gross revenue is not known, fines are between $3,000 and $30 million. Guidelines for a new anti-bribery law are supposed to become effective in July in the United Kingdom, as well.
In addition to finance, other sectors globally being reviewed for possible violations of the FCPA are oil and gas, telecom and consumer products, according to the International Business Times.