This article initially appeared on The FCPA Blog, here and is reposted with the permission from the editor and publisher.
Dick Cassin warned in a post that we shouldn’t expect agents to keep quiet about the bribes they pay, to which I would also add, if there’s trouble, don’t expect them to stick around either. They’ll abandon you in a flash.
We all know from FCPA history that some agents don’t conduct themselves within ethics and compliance frameworks, and that they can be “notorious blabbermouths,” as Cassin put it. That kind of puffery can really take hold when intermediaries are trying to impress their prospective or current multinational principals. My first two years of international sales were often marked by business partners inflating their successes, bragging about their connections, and touting their business wins, most of which couldn’t be verified.
During my sales experience, I came to appreciate that there’s not only competition among multinationals for market share, but those same rivalries exist among intermediaries. They compete for the status and the potential rewards of representing world-class brands and companies.
Beyond that, most intermediaries depend on success fees, so without representation agreements in place, it’s hard for them to stay in business. That precarious existence, I think, pushes many of them into the bragging mode, and using one high profile representation agreement as leverage to land others. That’s apparently how Unaoil came to represent so many leading companies in the oil and gas services sector.
Dick Cassin’s post sparked another particular memory for me, when he wrote that intermediaries often need their success fees to pay for expensive lifestyles. That’s yet another enticing element in how principal-agent relationships can go from innocent to illegal. After all, who doesn’t want to cruise out of Miami Harbor in a go-fast boat, or fly by chopper to a lovely country lunch outside Lisbon, or pick a Ferrari from an agent’s collection and take it for an afternoon spin? Those are some of the perks that came my way, courtesy of agents and other third parties.
As Cassin pointed out, “many intermediaries like and admire their corporate clients and identify closely with them.” And that admiration goes both ways. I thought of my agents and other intermediaries, hundreds of them all over the world, as my colleagues and friends. We had so much in common, or so I thought.
Relationships with them grew over time. I enjoyed their company, and I think they enjoyed mine. When business is based on responsible and ethical practices, there’s nothing inherently wrong with wanting to get close to high performing third parties, be they suppliers, agents, distributors, joint venture partners, or even end-users. It’s natural to want to know each other better in order to deepen those partnerships.
But the catch to all this, as Dick Cassin said, is that when the music stops, “no intermediary wants to be left holding the bag.” As I learned the hard way, at any sign of trouble, all those intermediaries you thought were your friends, allies, and colleagues will abandon you.
When I was caught on the wrong side of the FCPA, and I mean within days, I was thinking, where did everyone go? And that’s another tough lesson I won’t forget. When you do the right thing each and every day, and there’s a problem (after all, even ethical practices aren’t always trouble free), that it’s not your third parties who have your back, it’s the people from your own organization who will be there for you.
So, my advice for anyone dealing with agents and other third parties is to remember your role as an ambassador of your organization, including its code and its values. That way, when there’s a bump in the road, big or small, your real friends will answer the call when you need them the most.