Recently a criminal investigation has been initiated against several senior executives of a renowned multinational pharmaceutical company on suspected commercial briberies. The case features highly covert operation of bribery, large amount of bribes and considerable dimension, thereby having made a big splash in the sphere of multinational companies doing businesses in China. More noticeably, four of its senior executives including two Vice Presidents, a legal affair Director and a business development Manager have already been detained on the same charge, which to some extent denotes that the company has lost control over the criminal risks management of corporate crime.
A wide variety of wrongdoings, which are in essence commercial briberies, are usually perceived by senior officers of multinationals as common commercial practices following “unwritten rules of doing business” or as mere administrative violations ending up with administrative penalties at most. As a result, people so wrongly perceived tend to turn a blind eye to the underlying legal risks of severe criminal liabilities. There may be two reasons that result in such perceptions. One is the lack of legal assistance and advice from legal professionals and the other is willingness to take chances under the pressure of market competition.
Aside from kickbacks and rebates, some concerned companies offer bribes to business partners or their employees in a variety of concealed forms enumerated as follows:
- Sponsorship for any project/program or academic seminar;
- Fabricated conference or exaggerated conference scale through assistance of travel agency;
- Offering bribes to relevant public media through outside public relation professionals, in order to boost propaganda for the company by virtue of special coverage;
- Complimentary conference or banquet or party serving luxury accommodation and/or dinner;
- Sponsored traveling in homeland or abroad;
- Unreasonable amount of gift money on occasions of marriage and funeral;
- Membership card and prepaid card functioned as payment vehicle, or vouchers;
- Luxury products such as designer’s handbags, cases, or watches;
- Antiques and celebrities’ calligraphies and paintings.
This list is in no cases all-inclusive. Nevertheless, no matter in whatsoever means, all such practices that are against fair competition and involve offering or accepting money or other benefits, in return for providing or obtaining business opportunities or other economic benefits, are deemed as commercial bribery. Once such commercial bribery involves a large amount of money or some other serious practices, it will probably lead to criminal liabilities.
The multinational companies doing business in China may often face some legal issues relating to commercial bribery, which are hereby presented as follows:
- Is it true that Chinese law enforcements were more inclined to offer leniency to bribery-givers than to bribery-takers?
A wrong belief, which is not uncommon in practice, is that generally the judicial authorities of China deal with bribery-takers only and bribery-givers are rarely charged as long as they are willing to identify the counterparts; moreover, they also believe that even if the bribery crime involves a large sum of money, the punishment would normally end up with probation at most. Consequently, even having perceived what they committed are crimes of commercial bribery, many don’t even bother to give it a second thought. However, the “Interpretation on Several Issues Concerning Application of Law in Active Bribery Cases” implemented as of 1 January 2013 (“Judicial Interpretation”) gives further construction about active bribery crimes, making it clear that the threshold amount of bribe triggering a criminal investigation is as low as RMB 10,000.00. This Judicial Interpretation has delivered a message that the Chinese judicial authorities have made up their minds to abstain from offering undue leniencies to active bribery and to prevent corruption by tracing all the way back to its very sources - the bribery-givers. As such, it is highly advisable to be well aware of this trend and act more cautiously rather than take chances.
- Are any financial benefits counted as the bribe?
With the increasingly intensive enforcement of anti-corruption laws in China, the commercial bribery has become more and more diversified and covert in terms of manifesting forms. Despite the bribers provide benefits for bribe-takers in more covert and indirect methods so as to circumvent criminal penalties, these loopholes have been inviable now that a new Supreme Court interpretation specified in that the forms of bribe include not only money and in kind, but also the financial benefits that may be valued in money, such as house repair and decor, membership card, vouchers and sponsored travel at homeland and abroad.
In addition, some may commit crimes of bribery in such a way that renders it difficult to assess the value of bribes or to detect the crime itself. For instance, it is believed that designer’s handbags are not so easily detectable. Actually, law enforcement may readily trace to the purchase book and payment records through the unique code born with each luxury handbag, and make it imperative to warn those that are still committing this kind of hypothetical safe-harbor actions.
- No act of bribery, no risks?
A belief lingers around senior officers of multinational companies that they would take no risks at all as long as they are able to avoid participating in the bribery personally, which unfortunately is wrong. According to Article 31 of P.R.C. Criminal Law, where a company is charged with corporate crime, employee including principals and those who are of direct responsibility for the endorsement and enforcement of the crime will be held guilty as well. “Principals and those with direct responsibility” refer to those who make decisions, give permission and/or instructions, indulge the wrongdoing or take the lead in the crime by the company. As such, even if the senior executives with direct responsibility did not participate in the crime personally, they might be held guilty on account of their knowingly giving permission or instructions or even indulging the wrongdoing. In the meantime, FCPA also provides that the senior executives, directors and employees who know the fact that the bribery is committed by any third party for the sake of the company shall take the liabilities as well. As such, it is inviable to escape criminal liabilities merely by means of abstain from personal commitment of the bribery.
Therefore, in order to stay away from the administrative and criminal investigation in connection with commercial bribery, it is highly advisable that the senior executives in high-risk departments build up criminal compliance system according to China’s anti-bribery laws and regulations, streamline a “Prevention-Supervision-Responding/Punishment” compliance mechanism, and identify boundary-line between legitimate commercial activities and illegitimate commercial bribery, i.e., commission and kickbacks, gifts and bribery.
Pragmatic protocols to prevent corporate crime should be based on the assumption that relevant business practices may stand the criminal investigation rather than on the assumption that these practices would have not been found. The multinational companies doing business in China and employees thereof are advised to (1) in terms of compliance risks, seek legal advice from commercial lawyer with experience in dealing with criminal cases; (2) abstain from taking chances, realizing that even the indirect intent of bribery through a third party will constitute intent of crime; and (3) conduct internal training on legal risks of corporate crime, with a view to avoid corporate intention to commit crime and in turn protect the company they are serving, as well as the senior officers themselves.