S&W penalized $2M by US Govt for overseas sales "bribes"

[Sevens]

http://money.cnn.com/2014/07/28/news/companies/smith-wesson-bribe/
The article doesn't really say a whole lot, at least that I really understand. Basically says that Smith & Wesson gave a bunch of guns to some foreign agencies to which they were trying to sell larger contracts.

I'm no business man, that's for sure. But I don't understand how this is outside of typical business? Doesn't this sort of tactic occur when chasing many or most sales contracts? Is it always illegal?

I can see how things should or would need to be more transparent when dealing with an American agency or the US Military, where the goal is to secure the "best" equipment and not necessarily the best package of schmoozing on the taxpayer dollar.

I don't know, tell me what I've missed.

Is it different to give some Pakistani agency $11,000 worth of guns before signing a contract for sale than it is to give them $11,000 worth of guns as a "thank you for doing business with us!" after the fact?

 

[Doyle]

I'm no expert (but I have stayed in a Holiday Inn Express). I think the difference between a legal giving of $11,000 in guns to an agency and an illegal giving of guns to members of the agency is simply based on intent and benefit.

1. If you give a pre-sale sample to the buyer then nobody personally has benefited (even though those sample guns may well wind up in the hands of individuals who keep them for personal gain). The obvious intent of the gift is "product evaluation"

2. If you give a post-sale gift then it is obviously going to benefit individuals personally and it smacks of "payment".

I think of it the same way I did 30 years ago when I was a Navy Supply Officer. If a food vendor came in to sell me candy for my store, I could not have accepted packs of candy personally as a thank you for ordering. That would have been illegal as a "personal" benefit to me. However, if that same vendor came in expecting to sell me something he knew that if he didn't bring samples for me and other crewmembers to try and evaluate then he didn't have much hope of making the sale.

The end result is the same - I ate candy. However, the timing and reasononing for me getting the candy was different.

 

[TXAZ]

There has to be a lot more than the story says.
i lived in / did international biz in Asia for some time. My understanding is any sizable award, particularly in the countries mentioned, has a measurable "local accommodation" component.

Here is an interesting related map.
http://www.transparency.org/cpi2013/results

In my experience, there is truth in the graphic.
After a US Commercial Attaché described how the US Gov did business in (countries in the Middle East) it smacks of hypocrisy.

 

[MTT TL]

If it was in violation of the host nation laws to give those guns away then it is a violation of US Law as well.

 

[lamarw]

I doubt S&W will fight it since the cost to do so would exceed the penalty. Two Mil is not that huge of a penalty. It is more like a slap on the wrist.

 

[TXAZ]

MTT TL noted a legality:

If it was in violation of the host nation laws to give those guns away then it is a violation of US Law as well.

The practical fallacy is many countries have anti bribery laws: Try going through Customs and Immigration in (specific Asian and African nations deleted) with 3 bags or more or something that looks vaguely like non-personal property without paying a "local gratuity": Pay the local gratuity, lose the property and pay an exorbitant fine, or go to the most horrific jail you can imagine on trumped up trafficking charges.

Your choice. By the way, the USG pays the local gratuity as diplomatic privileges are not consistently recognized. Sounds like selective enforcement, again, and no USG personnel went to jail.

 

[Jim Watson]

A suspicious person might wonder if a penalty to a gun company with a strong US citizen customer base might not be entirely about dealings with foreigners.

 

[James K]

That map makes the U.S. look bad. Who does the administration have to pay off to get a better rating?

Jim

 

[TXAZ]

Interesting thought Jim. But S&W had to get and the US State Department had to grant an export license with specific names on it. And they can be picky on who they approve.