Self-Reporting is Ethical Conduct 15:34, June 12, 2016

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Self-Reporting is Ethical Conduct

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When faced with a difficult decision, an employee may understand ethical decision-making, but both internal and external pressures can push them to rationalize or make the wrong choice.

According to a Securities and Exchange Commission (SEC) news release, employees at two US companies paid bribes to Chinese officials in violation of the Foreign Corrupt Practices Act (FCPA). Akamai Technologies arranged $40,000 in payments to induce government-owned entities to purchase unnecessary services. The company also provided gifts, meals, and entertainment to Chinese officials to “build business relationships.” Another company, Nortek, Inc., paid approximately $290,000 worth of gifts and improper payments in exchange for relaxed regulatory oversight and preferential treatment in business dealings.

The SEC did not find out about the improper payments through an investigation. Rather, both companies self-reported these payments to the SEC through their own initiatives. These initiatives included an internal investigation, witness interviews, termination of employees responsible for the improper payments and mandatory anti-corruption training for all employees. The companies also made their investigation transparent to the SEC with updates, making witnesses available for questioning, and translating Chinese-language documents into English.

This post explores why companies should care about both the legal and ethical implications of their actions.

The Legal and Enforcement Framework

The FCPA is a federal law that makes it illegal to offer bribes to foreign officials, which can involve giving money to influence favorable business relationships or preferential treatment outside of established procedures. Individuals who violate the FCPA may face criminal fines, prison sentences, civil penalties and ineligibility for future activities such as doing business with the federal government or within the securities business. In the case of Nortek and Akamai, their self-reporting made non-prosecution agreements a sensible option to “get the money back and save the government substantial time and resources while crediting extensive cooperation,” according to the SEC.

Companies that do not self-report can face harsher scrutiny. For example, the SEC slapped Qualcomm Inc. with a cease and desist order and ordered it to pay $7.5 million for bribing Chinese officials to influence regulatory decisions.

The Ethical Framework

Behind the legal curtain, however, there’s another lesson to be learned. “The payment of bribes to influence the acts or decisions of foreign officials, foreign political parties or candidates for foreign political office is unethical. It is counter to the moral expectations and values of the American public. But not only is it unethical, it is bad business as well. It erodes public confidence in the integrity of the free market system,” explained Congress when reporting on the FCPA.

Violating the FCPA is necessarily unethical. Often, however, ethical conduct is imminent before the law comes into play. It is possible that employees at Akamai and Nortek responsible for the bribes knew they were making the wrong choice, but faced pressure from other sources to violate the law.

The SEC was impressed with Akamai and Nortek’s swift self-reporting. “Akamai and Nortek each promptly tightened their internal controls after discovering the bribes and took swift remedial measures to eliminate the problems. They handled it the right way and got expeditious resolutions as a result,” said Kara Brockmeyer, Chief of the SEC Enforcement Division’s FCPA Unit. To be sure, there’s a rational benefit to self-reporting — it can stave off an official investigation as well as civil and criminal prosecution. But this is a reactionary approach that misses the point. Companies should make a deeper inquiry into their mission, business goals, practices, and company culture to evaluate how their compliance is affected by the decisions of their employees and subsidiaries, especially when informed by ethics in the workplace.


Training is a hallmark of an effective compliance program. It helps reinforce an organization’s values, distribute its anti-corruption policies, inform the organization’s workers of the relevant laws and best practices, and ensure that workers understand how to act on ethical values, policies and practices.

LawRoom offers online training programs that focus on overcoming the barriers to doing what is right in areas like sexual harassmentethics, the FCPA, and data security. To learn more about fostering an ethical workplace, visit us here:

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Douglas Kelly
Douglas Kelly is EverFi's lead legal editor. He writes on corporate compliance and culture, analyzing new case law, legislation and regulations affecting US companies. Before joining EverFi, he litigated federal and state employment cases and wrote about legal trends. He earned his JD from Berkeley Law and BBA from Emory University.

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