Coping with Corruption in Trading with China

1. List all the different types of bribes, payments, or favors represented in this case under
(a) FCPA, (b) Criminal Law of PRC, and (c) Law Against Unfair Competition of the PRC.
Why is each either legal or illegal?
a) Business Trips
i. Legal: When foreign officials are invited to a companys headquarters in order
to help gain knowledge about a companys product or other official company business. Some
trips are expenditures directly related to the promotion, demonstration, or explanation of
products and services or the execution of a contract with a foreign government agency.
ii. Illegal: When a company pays for a foreign officials trip that has no
connection to the company (ex.- trips to Paris, Rome, etc. for vacation) or when foreign travel is
extorted (ex.- Case where PRC bank branch refused to issues a letter of credit until foreign travel
was offered).
b) Cash Payments
i. Illegal: the payment of kickbacks, funding of college expenses for a trading
officials child, or any direct requests for cash payments are illegal.
c) Black Markets
i. Illegal- the act of engaging in transactions within the black market to gain
import/export licenses, inspection certificates, etc. is illegal.
d) Gifts
i. illegal under the Criminal Law of PRC- Gifts valued over $600, anyone who
demands or accepts money or property in return for benefits
ii. Legal under the Criminal Law of PRC Gifts valued under $600 (the law is
vague)
iii. Illegal under Laws against Unfair Competition of the PRC- when a business
gives money or property to customers to sell or purchase products
Examples in Case
i. Business/foreign trip to see company
ii. Purchase of black market licenses and certificates
iii. Travel abroad that is unrelated to the company and/or business transaction (ex.
Chinese banking officials and family members vacations to Hong Kong, Paris,
Rome, Las Vegas, and Pebble Beach)
iv. Gifts of Sony cameras, luxury Versace/Burberry outfits
v. Payment for a $330,000 Shanghai apartment
vi. Funding of the chairmans sons tennis club and golf fees
vii. Funding of a CIOs daughters European trip
viii. Payment of kickbacks to PRC officials Honduran/US/Swiss bank accounts
e) FCPA
i. grease payments and bribes to low-ranking officials to expedite jobs that they
would normally complete is not illegal
f) Criminal Law of PRC
i. Applies to anyone who demands or accepts money or property in return for
benefits is guilty of bribery

ii. No punishment for gifts and benefits less than $600 (though the law is vague
and doesnt explicitly state this). This put things like sporting tickets and wining and dining of
executives in a gray area
iii. Prohibits members from accepting gifts exceeding $500, but doesnt mean
gifts under $500 wont be considered a violation of the law
g) Laws against Unfair Competition of the PRC
i. Law is aimed towards commercial bribery
ii. Prohibits businesses from giving money or property to customers to sell or
purchase products
2. For those practices that you listed as illegal, classify each as lubrication, extortion, or
subornation, and explain your reasoning.
Lubrication: a small payment, gift, or service given to a low-ranking official in a
country where such offerings are not prohibited by law
Subornation: involves giving large sums of money- frequently not accounted fordesigned to entice an official to commit an illegal act on behalf of the one offering the bribe
Extortion: payments are extracted under duress by someone in authority from a person
seeking only what he or she is lawfully entitled to
a) Foreign trips: Extortion for example in which the official withheld a letter of credict,
lubrication for the other example
b) Cash payments: Subornation. Payment was needed to secure contracts
c) Black Markets: Subornation. Payment given to possess illegal documents
d) Gifts (tennis club membership, cameras, etc). Lubrication
3. Which of the payments, favors, or bribes are illegal under the Foreign Corrupt Practices
Act (FCPA)?
a) Luxury vacations given to officials and family (Rome, Paris, etc)
b) Gifts unrelated to the company/business: tennis, golf memberhips
c) Kickbacks
d) Utilizing the Black Market to attain illegal documents
4. Assuming that the FCPA did not exist, what is the ethical response to each of the
payments, favors, or bribes you have identied?
I believe people/government should know the difference between right and wrong. person in
power should know that what is good for its people and what is bad for them .In some countries
where the corruption runs the country its so difficult for them to change as they are so used to
that work ethics that is already being used . It is up to the people in authority and society together
to eliminate this factor and give every business every person there due share.
5. In your view, which of the expenses detailed in the lawsuit could be in violation of the
FCPA, and which could be legitimate business expenses as the American Company
contends? Discuss.
Firstly, I think the most suitable aspect of the lawsuit evidence against the American
company paying Chinese government officials billions of dollars.
Secondary, American company arranged for two Chinese banking officials and their
families vacations around the world and many more facilities
6. Discuss the legal/ethical issues raised by the comments by the retired Foreign Service
agent and the consultant.

From his perspective I can understand that he is trying to help U.S. Companys compete in a
foreign market that is corrupt, but on the other hand he is just as bad as the people of that country
that are corrupt. He is corrupt himself and not standing behind the law for which he works for
and stands for.
7. List alternatives to paying bribes in international markets and discuss the plusses and
minuses of each.
If I had to choose another method rather than paying a bribe, then I would have to
choose compromising on an agreement that is beneficial to both parties. Both
parties have to agree (the host country government and the MNC) and lock into the
binding contract that will be beneficial and fair to both sides.

Advantage:
If countries want to do business in a productive and ethical way, then both parties need to leave
out the offering or demand of briberies.
Disadvantage
Disadvantage to this scenario would be a business or host country not complying with the
universal law implemented