U.S. firms are widely considered to operate with higher ethics than Chinese and Western competitors -- in large part because of stringent laws such as the FCPA, which took effect in 1977, and the Sarbanes-Oxley Act of 2002.
Still, in the last couple of years, Chinese state-run media and court records have identified such U.S. business icons as IBM, McDonald's and Whirlpool as companies connected to bribery cases in China.
Like Avery, more American companies are reporting possible FCPA violations by their own employees. In October, cosmetics company Avon Products Inc. said it had begun an internal investigation to determine whether its China operations had incurred illegal travel, entertainment and other expenses.
Intermediaries
Faced with the choice between bribing officials and losing business, some U.S. firms have turned to middlemen, often from Hong Kong or Taiwan, to grease the wheels for them. And they often set aggressive targets for their Chinese employees without making it clear that certain behavior is prohibited in reaching those goals, said Amy Sommers, a Shanghai-based attorney for Squire, Sanders & Dempsey who has advised clients and conducted workshops on the FCPA.
Avery, best known for making labels and self-adhesive products, entered the Chinese market in 1995, and its pressurized labels became common on consumer goods such as Tsingtao beer and Zest shampoo. But the company had bigger ambitions.
In July 1999, it bought Stimsonite Corp., a Chicago-area maker of highway safety products with a growing operation in China.
China was laying down thousands of miles of roads a year and needed reflective pavement markers and sheeting materials for signs. Millions of new cars were hitting the streets; the license plates needed reflective film.
But Minnesota-based 3M Co. had gotten there first. Avery's effort went nowhere until it hired Ding Yong, a Shanghai native with a round face and easy manner.
One of his first successes was to beat out 3M and NCI of Japan for contracts to put reflective sheets over the seals on the sides of police cars.
The winner was to be decided largely by the Public Security Ministry's Traffic Management Research Institute. In early 2003, Avery's managers in China hired as a marketing rep Dong Qiping, an institute employee whose wife was vice director of the department in charge of the project.
