On an airplane flying back from Washington D.C., where I was a panelist at the Dow Jones Global Compliance Symposium. My panel was on Making Sense of China’s New Bribery Crackdown.

At one point during our panel discussion, I talked about how so often when our China lawyers are working on a China deal, the due diligence reveals that the China company of interest (be it for a buy-out or a joint venture or even just a product buy-sell relationship) has been operating in a way that would be unethical/illegal/impossible/unwise for an American company and how this oftentimes kills the deal. We wrote about this in Buying A Chinese Company? Why China Deals DON’T Get Done

One of my co-panelists, Nathaniel Edmonds, a lawyer at Paul Hastings in D.C., then said that “just because there is corruption in a deal doesn’t mean it shouldn’t go through. Understand that risk, do the due diligence, and discount the price.”

I agree 100%.

If you are doing business with China, you must 1) do your due diligence, 2) analyze the results of your due diligence so that you can understand the risks, and then, 3) price the risks (and the rewards) into the deal.

’nuff said.

  • bystander

    um. how do you price a jail sentence under FCPA into a deal?

  • Ward Chartier

    In the past, when I’ve gotten close to negotiating a deal with a new supplier in certain Asian countries, I’ve spelled out in detail what it means for me and my employer to always act in a legal and ethical way. This includes listing what I and my staff will not do, and what I expect my suppliers to not do. Using my parent company’s written policies helped me to remember every point. Setting explicit expectations and requirements from the very first day of doing business is very helpful. Not once have I experienced a supplier that pushed back and refused to operate as my employer required.