July 13, 2012; Source: Corporate Counsel

Recently, there have been many charges of corporate bribery of foreign government officials, which is a violation of the U.S. Foreign Corrupt Practices Act (FCPA). Such allegations have been leveled at Orthofix International and Sheldon Adelson’s Las Vegas Sands, and there are reports of as many as 87 active FCPA investigations of corporations such as Avon and Walt Disney. But have nonprofits considered what they have to do regarding anti-bribery compliance?

Writing for Corporate Counsel, Alexandra Wrage, the head of TRACE, an anti-bribery compliance organization, issues a heads-up for nonprofit organizations with overseas operations. She says that some nonprofits dismiss the relevance of this issue, perhaps “arguing that their mission is important enough to justify the payment of bribes” and others contending that nonprofits are exempt from FCPA compliance. Wrage doesn’t buy either argument, suggesting that nonprofits that turn a blind eye to bribery or actually participate in bribery “feed…the same cycle of corruption, in the same manner, as the (corporate) payment of bribes to move oil rigs into a country.” She contends that nonprofits are subject to the FCPA. She further contends that, in addition to the FCPA, nonprofits are also covered by the United Nations Convention Against Corruption and the Organization for Economic Cooperation and Development’s Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

Wrage adds that even without hauling nonprofits into court for FCPA violations, the U.S. government is paying more attention to those nonprofits with potentially corrupt overseas operations, citing the USAID suspension of the Academy for Educational Development (AED) as a USAID contractor due to “serious corporate misconduct (and) mismanagement.” AED, a large and well-respected NGO, is now out of business.

Wrage’s advice? “In order to respond to growing scrutiny and the risk of reputational damage, nonprofit organizations should be taking steps to ensure that they are in full compliance with anti-bribery laws. At a minimum, charitable organizations should implement anti-bribery compliance policies, train staff on the importance of anti-bribery compliance and strategies for resisting extortionate demands, and conduct due diligence on their third parties.”

The “F” in FCPA stands for “Foreign,” but we would suggest that Wrage’s admonition should apply to nonprofit operations in the U.S. as well. Let’s not fall prey to the misguided exceptionalism of thinking that there isn’t corruption in U.S. government circles or that the problem is only in developing nations such as India, which is currently engaged in a contentious public campaign to excise corruption from its bureaucracy. In a 2011 Transparency International ranking of 183 countries regarding their perceived corruption, New Zealand was ranked as the least corrupt nation, followed by Denmark, Finland, and Sweden. It may surprise readers to know that the U.S. ranked 24th, behind the Bahamas and Chile and just ahead of St. Lucia, Uruguay, and the United Arab Emirates (at the very bottom were Afghanistan, Burma/Myanmar, North Korea, and, ranking last, Somalia).

Corruption isn’t good for any society, and nonprofits shouldn’t be participating in practices that tolerate corruption and bribery, whether overseas or here at home. –Rick Cohen