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“Firearms manufacturer Smith & Wesson has agreed to pay $2 million to settle U.S. government charges over bribes the company allegedly paid out to foreign officials between 2007 and 2010.” So reports fortune.com. The payment stems from accusations that Smith reps bribed military and police brass in India and Pakistan as long ago as 2007. “Smith & Wesson’s alleged actions violated the Foreign Corrupt Practices Act (FCPA), the SEC said Monday, adding that the company ‘profited by more than $100,000’ from the one contract to be completed before the authorities caught wind of the activities.” While admitting no wrongdoing, Smith’s canned its entire foreign sales staff so draw your own conclusions. 

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46 COMMENTS

  1. were they really “foreign sales staff” or were they consultants? Big difference, esp if S&W only had to settle without admitting wrongdoing under FCPA. I also think that $2M fine is tax deductible.

    • Really? My understanding, albeit as a nonlawyer and nonaccountant, was that fines and penalties for illegal acts were neither insurable nor tax deductible. “ex turpi causa non oritur actio” I think the lawyers call it, as with section 162(f) of the IRS Code.

        • I guess that makes sense. There usually are more nuances to the law than many people realize. It’s as though lawyers are paid by the word and their favorite word is “depends.”

      • You’re right, which means the company just passes the cost along to consumers. Two million isn’t even a blip on the radar.

        • That’s a common economic fallacy, that companies can just pass along costs to consumers without any negative impact on themselves. If the company could simply “pass along” the cost, recover the $2 million, without any negative impact on their sales volume, market share or total profit, then why wouldn’t they just do that on their own?

          That is, why even wait for an occasion of the government fining them, then raising prices to “pass along” the expense to the consumer, only to turn around and hand those excess $2 million in proceeds to the government? Why not just raise prices before, prior to this even having become an issue, if it could be done without negative impact, and then just pocket the extra profit?

  2. That is non-sense…. that is how business is done in those countries.

    You think any of the goods coming to the US from China move on or off their docks without out cash being handed over with a handshake.

    Any why is the US Govt getting involved in how companies do business outside the US. This smells like Obama trying to hurt American Gun Manufacturers any way he can.

    • it is the law and it has been around for a while. other countries have anti-bribery statutes. no different and perfectly acceptable, esp when a US Company has to report to the SEC that they have proper internal and external controls.

      • Agreed. The FCPA has been around a long time. Yes – it is kind of a questionable law for the reasons outlined and actually complying with it while doing business is tricky. Has nothing to do with Obama.

    • It would not surprise me if Obama directed DOJ to prosecute in this case due to firearm involvement (how many no-firearm cases are currently being pursued?), but he didn’t make the law. Still the law is stupid. There are several countries which to my direct knowledge and experience are completely overrun with corruption, you won’t even meet the guy you NEED to bribe until you’ve bribed 20 other people. This kind of prosecution (never mind the law) puts America at an enormous disadvantage, handing over more jobs to foreign competitors. Such a law within the US is fine, outside is not our government’s business.

  4. Why would the US gov take the fine for bribes to a foreign country? Wouldn’t our gov be happy a domestic entity made a profit from another country, regardless of how it was made?

    • One would think so. But, we must remember that governments don’t like competition. That is to say, that it’s only okay if the government does it… according to the government.

  6. Sounds to me like S&W bribed the US govt. to look the other way on their previous bribes. Funny how calling it a fine suddenly changes the nature of the act in peoples’ minds.

    • I saw that. Yahoo is drifting farther and father into the subjective quagmire of leftist thought. They make articles not based on facts but emotions.

  8. Anyone who’s held any management position or anything in supply chain or sales in a larger, publicly traded company is going to be familiar with the FCPA. All employees remotely relevant to a company’s foreign trade will undergo initial training and annual recertification on compliance. With all the red flags and admonitions to seek guidance from the company’s legal and compliance departments, I’d say it’s nearly impossible to violate this law accidentally or marginally.

    Given that, for any given case, one would expect the case to be so strong as to warrant individual criminal prosecution in addition to corporate civil liability. Even if only the latter, $2 million seems light, as FCPA violations often can lead to crippling civil liability.

    Don’t ever fall for the “everybody’s doing it” line. You may or may not get caught, but if you do, expect to become personally, professionally and financially ruined as a result. It’s not worth it to make a sales commission or to receive a purchasing kickback, especially for the company, which will certainly fire you and label you a rogue employee.

  10. Sorry I ragged on you earlier. Where does any fine go-into the eternal ether…or some slush fund LOL

  11. So the US Gov say “Smith & Wesson, we have evidence you gave money to foreign government officials in the course of doing business. In light of this, you need to give us $2,000,000 or face some of your employees going to prison.” Sounds about right.

  12. The law is insane. Christ, S&W greased a few palms and some third world hell hole got some pretty good sidearms. Win, win. Anyone who has any idea of how the non-Western world works will realize that bribery is just par for the course Why? My take: no nuclear families. Some guy in Africa gets a government job – he ain’t taking care of just the wife and, increasingly, 1 (at least amongst the non-Idiocracy crowd) kid as here in the ‘Murica. Nope, he has an entire extended family, clan if you will, to take care of. I always find it amazing that American politicians get nailed for such piddling amounts – 50K or, here in CT – a damn hot-tub. I remember reading about some politician in Turkey who had millions in cash stashed in his apartment.

    Anyway – think hard about the $2M “win” for the .gov in this case; U.S. Attorney (making, say, 125K a year) and his legal team: A.U.S. Attorney (50K), Paralegal (75K), Legal Secretary X2 (50K) and all the assorted filing fees, expenses, etc – over, what – a three or four year period. Heck , that does not include the cost of, I assume, a FBI investigation. Guess what – it all evens out and only if we’re lucky. And the sad thing? Our tax money goes to support all this and the U.S. Attorney probably thinks he is a “good guy” and not, say, what he really is: a parasite living on increasing hard earned tax on income and, of course, money that supports a company this is *literally* keeping Springfield, MA afloat.

    Honestly – this cannot go on forever. Things fall apart and the center *will*not hold.

    • That and palm greasing is the official, formal business practice over there. It is officially how things are done. US oil companies do it all the time for sheiks and princes daily.

      • Oh, but WE are ‘better’ than that! We NEVER meddle in other countries’ affairs, we NEVER launch unjust wars, OUR government has lily-white hands covered in white kid gloves at ALL times, our enemies are ALWAYS shot manfully and cleanly in the thorax only to wound whilst THEY shoot first from behind innocent women and children with bullets outlawed by the Hague Convention of 1899, always aiming for the back and/or naughty bits. OUR businessmen are ALWAYS honest and forthright, just like our bureaucrats, who NEVER get into bed with dictators and tin-pot ‘democracies’ run by gibbering morons and reformed terrorists. OUR elections are fair and above-board, with NARY a HINT of corruption–not even a SMIDGEN.

        NEVER! PERish the thought!

  14. Government scandals: they stay in office for years after being called out.
    S&W scandal, probably related to rogue staff: Fired immediately. Who knows the details, but I don’t think there is any more appropriate way to react to this.

  15. I am not sure, other than business wrongdoing, what the problem is here. This has nothing to do with guns other than the business in question sells them. Had this been a t shirt company doing this, it wouldn’t even be news. About all I can see is one brand of gun trying to be favored over others. What is the big deal here?

  16. They were most likely fired not for bribery or anything related to corrupt practices but for being sloppy and leaving evidence that got them caught. That’s just how business is done there…

  17. This is a good example of why the Chinese out compete us in developing countries. They operate how we used to operate, no one cares as long as the company makes money. In most of the world paying “fees” is the normal way of doing business.

    Its a silly law that should have never been made.

    Don’t think for one second a Russian, Chinese, French, or IMI wouldn’t pay a few bucks to get a lucrative contract in another country.

  18. Ask Gibson guitar how it worked out with .gov. Of course after the raids.
    While other co’s like Martin and Ovation used the same materials.

    Same sh•• different day. The grubby hands have to find revenue streams somewhere. What,… Were s&w sales lacking? I think not. Check market share and trends for the last 5 years of American gun makers. Pay the 2 mil and give the devil it’s due. Capitalism with a criminal govt. how the game is played.

  19. So conduct business in an ethical manner. Including in the US. That point of morality is not hard to understand. Still plenty of BS graft in some/many parts of the US.

    Now that Herr Holder has this business cleaned up perhaps he can work on “Fast and Furious”.

  20. Who’s the criminal, the person offering the money or the one who takes it? Just because it’s offered doesn’t mean you have to take it. Just another stupid law and hypocritical practice by a government who does that all the time. Who doesn’t the government bribe?

  22. Foreign Countries my sweet behind, try doing business in NYC without spreading around a little “Teamster grease”.

  23. Interesting. Since the company I work for says brides are illegal but sometimes legal and necessary (depending on the situation), I’m curious how this one fits in.

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