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New York Fed GC squeamish about grease payments

Thomas C. Baxter, General Counsel, Federal Reserve Bank of New YorkThomas C. Baxter, executive vice president and general counsel at the Federal Reserve Bank of New York, said the FCPA’s exception for facilitating payments makes him uncomfortable.

Baxter said an organizational policy that allows some types of official corruption — including facilitating payments — “diminishes the efficacy of compliance rules that are directed toward stopping official corruption.”

The facilitating payments exception applies only when a payment is
made to further “routine governmental action” that involves non-discretionary acts.

“Routine governmental action” includes processing visas, providing police protection or mail service, and supplying utilities like phone
service, power, and water. Routine governmental action doesn’t include a decision to award new business or to continue business with a particular party. And it doesn’t include acts within an official’s discretion or that would constitute misuse of an official’s office.

In a talk at a conference Thursday, Baxter said the grease payments exception in the FCPA “might give rise to conflict between organizational values and FCPA compliance.”

While I understand that the exception is grounded in a practical reality, I feel that zero tolerance for official corruption would have been a better choice. To any public servant with an extended hand, I would say in a loud and clear voice, “pull it back and do your job.” And, let me note the OECD Working Group on Bribery recommends that all countries encourage companies to prohibit or discourage facilitating payments.

Baxter said the best compliance cultures are formed “when the rules and the organizational value system are in perfect harmony.”

But if you tolerate a little corruption, he said, “watch out!”

Baxter’s full remarks are here.

Julie DiMauro is the executive editor of FCPA Blog and can be reached here.

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1 Comment

  1. Tolerating corruption at any level is not a good idea and can lead to serious problems down the road. When a business or a government allows corruption, it opens the door to more and more corruption. Ultimately this can lead to a breakdown in trust and a collapse of the whole system. Having zero tolerance for corruption is the best policy, and this should be implemented by a company or the government whenever possible.

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