Why Apple is probably in the clear over Foxconn’s bribery scandal

January 10, 2013
January 10, 2013

Foxconn, a Taiwanese company and one of Apple’s biggest manufacturers, is looking into allegations that at least one of its mainland Chinese staff accepted bribes from suppliers.

The controversy certainly will not be welcomed at Apple. But according to expert lawyers, under America’s Foreign Corrupt Practices Act (FCPA), which reaches a long arm of law into the foreign dealings of US companies, Apple does not have a legal problem here.

The FCPA, which was enacted in 1977 by the Carter Administration to stop US companies bribing foreign governments to win business, does have rules that mean US multinationals have to be very aware of potential criminality going on at their suppliers. As Jacob Frenkel, head of the securities enforcement and white-collar crime unit at Washington law firm Shulman Rogers, told Quartz:

“Although most bribes may not necessarily be paid by the corporation at the top of the food chain, there is potential liability for corrupt conduct in the supply chain.”

(Frenkel was not talking directly about Apple and Foxconn, as he is not involved in the case.)

Joseph Covington, another FCPA expert at law firm Jenner and Block, also not involved in the case, explains further that the US Justice Department can look at the behavior of an American company’s suppliers, not just of the company itself, because otherwise you may get multinationals “paying an intermediary in the knowledge that they will be paying someone off.” But if a supplier accepted bribes, rather than paying them, Apple is probably in the clear. The FCPA also only covers bribes made to foreign countries’ government officials.

“The FCPA addresses the payment of bribes to “foreign officials” and not the receipt of bribes by a Foxconn employee as is alleged,” says Mike Koehler, a law professor at Southern Illinois University who runs the website FCPA Professor (emphasis mine). “Thus, given what has been publicly reported, there would not appear to be any FCPA issues for any Foxconn customer that may be subject to the FCPA.”
The bribery allegations at Foxconn may taint Apple’s reputation, but that’s all. And the damage is probably slight compared with the bad press both companies got for Foxconn’s allegedly harsh labor practices and a spate of worker suicides and threatened suicides.
An Apple spokesman did not return an email seeking comment by press time.

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