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Harry Cassin
Publisher and Editor

Andy Spalding
Senior Editor

Jessica Tillipman
Senior Editor

Bill Steinman
Senior Editor

Richard L. Cassin
Editor at Large

Elizabeth K. Spahn
Editor Emeritus

Cody Worthington
Contributing Editor

Julie DiMauro
Contributing Editor

Thomas Fox
Contributing Editor

Marc Alain Bohn
Contributing Editor

Bill Waite
Contributing Editor

Shruti J. Shah
Contributing Editor

Russell A. Stamets
Contributing Editor

Richard Bistrong
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Eric Carlson
Contributing Editor

U.S. training company warns about graft risk in . . . . Hong Kong!

It’s typical for issuers to warn about corruption risks in Russia and China, and parts of Africa. But Hong Kong?

So, does Legacy Education Alliance Inc. know something the rest of us don’t?

Legacy said in a securities filing this week that Hong Kong is “recognized as having governmental and commercial corruption.”

The Florida-based company warned that in Hong Kong and other corrupt countries, “strict compliance with anti-bribery laws may conflict with local customs and practices.”


South Africa, where Legacy also does business, ranks 71 on TI’s Corruption Perception Index. The United States, the company’s biggest market, ranks 16. Hong Kong, meanwhile, ranks better than both, at 13.

So why did Legacy highlight to investors the corruption risk in Hong Kong?

We looked for a reason in Legacy’s Form 10-K filed with the SEC Monday.

Legacy, which runs seminars based on Robert Kiyosaki’s book Rich Dad Poor Dad, among others, said in the 10-K it is subject to the FCPA, the UKBA, and similar anti-bribery laws.

The disclosure explained what those laws require (internal controls) and what they prohibit (bribing foreign officials).

Then it said,

We operate and/or conduct business in some parts of the world, such as Hong Kong1, that are recognized as having governmental and commercial corruption and in such countries, strict compliance with anti-bribery laws may conflict with local customs and practices.

That footnote 1 for Hong Kong is a phantom. We didn’t find it in the 10-K. If it was there, it was well hidden.

But why warn about corruption risks in Hong Kong, one of the cleanest countries anywhere, according to the Corruption Perceptions Index?

Corruption can happen anywhere, and does. But why the shout out for Hong Kong?

Further down in Legacy’s risk disclosure, the company said this about compliance:

Under some circumstances, a parent company may be civilly and criminally liable for bribes paid by a subsidiary. We cannot assure you that our internal control policies and procedures have protected us, or will protect us, from unlawful conduct of our employees, agents, consultants and other business partners.

Third-party compliance is always tricky. It’s what keeps CEOs awake at night.

And business in Hong Kong moves at light speed.

So maybe in Hong Kong, there are special reasons to be concerned about those third parties?


Richard L. Cassin is the publisher and editor of the FCPA Blog.

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  1. I would be curious to see if Legacy's observations are about local HK corruption or HK being a notorious corporate formation and banking center in which and through which corrupt public and political officials and businesses throughout the world conduct and conceal their illicit affairs.

  2. More of a caveat-emptor esp it is their first venture outside their home turf

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