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Corruption case could mean more scrutiny of US-China business

Could the operational environment for cooperative business ventures between Chinese and U.S. companies be in for some closer scrutiny? That's what some legal experts are predicting in the wake of charges filed in a high profile case under the U.S. Foreign Corrupt Practices Act.

At the center of the matter are two individuals – Patrick Ho Chi-ping, a former home affairs secretary for Hong Kong and Cheikh Gadio, the former foreign minister of Senegal. Both were arrested by U.S. authorities last month and are now charged in connection with an alleged scheme to funnel millions of dollars from a Shanghai energy company to officials in Chad, Uganda and Senegal in return for oil rights. The experts say such probes are likely to increase in the days ahead as part of U.S. and Chinese anti-corruption efforts.

The implications

The predictions are based on the growth of cross-investment going on between China and the U.S. and the existing track record of regulatory actions by the U.S. In addition to the arrests of Ho and Gadio, the Securities and Exchange Commission reports it went after 26 companies last year for violations of the Foreign Corrupt Practices Act. Half of those cases had China links.

The experts say that even though President Trump has trashed the FCPA as a bad law, they don't expect that to lead to reduced enforcement efforts by the U.S. At the same time, they say that Chinese businesses – perhaps especially those listed on U.S. stock exchanges – are becoming more aware of the pressure and are self-reporting problems as they discover them. All this leads observers to say investigations will become more common.

If true, this would suggest that individuals in the U.S. seeking to do business in China or partner with Chinese entities in ventures here will want to exercise the greatest diligence possible to make sure they do not run afoul of the laws in either country.

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