BUSINESS, FINANCE, POLITICS—AND THE LAW
BUSINESS, FINANCE, POLITICS—AND THE LAW
While the stimulus plan has been touted as bringing America’s infrastructure into the 21st century, a portion will bring some Native American communities out of the 19th.
Large swaths of Indian country don’t have adequate access to telecommunications, electricity, clean drinking water or modern roads, says Larry Roberts, Of Counsel at Patton Boggs. The more than $5 billion targeted for Native American affairs represents a big step toward remedying that. “Throughout the U.S., tribal communities suffer under the worst living conditions, and that was true even before the recession,” says Roberts, an enrolled member of the Oneida Nation of Wisconsin.
About a third of Native American households lack telephone service, according to the most recent Census. About 14 percent have no electricity, and nearly 12 percent lack complete plumbing. The stimulus plan includes money for housing block grants, reservation roads programs, and health facilities as well as tribal public safety, telecommunications, economic development, education and environmental projects.
Many Americans believe tribes have gotten rich from gaming operations, Roberts says. But roughly only half of the 562 federally recognized tribes host gaming, and only about 30 of those operations bring in significant profits. “This money will be a real lifeline,” he says.
Protesters build fires at the riots during protests against the Icelandic government’s handling of the economy on January 21, 2009.
In February, President Obama began receiving a daily economic intelligence briefing from the CIA to keep him informed about how the global recession is affecting national security interests. Staying on top of current events might not be a bad idea for today’s business leaders, says Patton Boggs international affairs advisor Frank Wisner. Financial crises can spawn political unrest, which can in turn threaten international business interests. “Political and economic risk are heavily intertwined,” says Wisner, a former ambassador to India, Egypt, the Philippines and Zambia. “People who run international businesses would be wise to stay even closer to their information flow right now.”
The economy’s impact on political stability can be hard to predict, and the recession’s effect so far has been uneven across the globe, Wisner says. Assuming forecasts of a 2010 turnaround are correct, Wisner expects political order in countries such as India, China, Brazil and Egypt to continue to hold up relatively well. But he sees trouble ahead in areas of Africa and Latin America where the price of exports has fallen even as food costs have increased. That combination could be enough to crush already fragile political structures, resulting in chaos, he warns.
Wisner contrasts that peril with the situations in Latvia and Iceland, two countries where economic crisis has resulted in political upheaval but not a complete breakdown of order. “In those cases, the impact of the unrest has been absorbed by their existing democratic institutions,” he says.
Business leaders can keep abreast of overseas events in a variety of ways, from tapping an economic intelligence subscription service to keeping people on the ground. But even when the intelligence sounds scary, Wisner says, U.S. businesses should resist the urge to pull up stakes. “The last decade has taught us that a business that wants to grow and prosper has to go international—and that includes the non-Western world,” he says. “Smart business leaders will use this period of difficulty to tighten up their ships, get their businesses organized and be ready to come back strongly when the recovery occurs.”
Christina Sarchio, Partner
CEOs are accustomed to answering to shareholders and customers, but if their companies benefit from the federal stimulus plan they should also be prepared to answer to Congress, says Patton Boggs partner Christina Sarchio. “It’s a very sensitive issue,” she says. “The public and the media are really paying attention to this right now, and if somebody gets a hold of a story about something that just doesn’t look right—even if there isn’t clear abuse—then all of a sudden you could find yourself called before Congress.”
Sarchio suggests that business leaders whose companies are paid stimulus money make sure their employees are aware that their entire organization will be under a microscope.
Now is also a good time to beef up internal compliance programs to ensure employees are following all relevant regulations, she says. However, if a potential problem is unearthed, company executives need to proceed cautiously with any investigation, Sarchio says. That’s because in a congressional hearing—unlike in a judicial proceeding—company officials can’t claim the attorney-client privilege to shield documents or avoid testifying about an internal investigation.
“You’ve got to weigh your options carefully, because there are so many potential pitfalls here,” she says. “Whatever you do could be subject to intense scrutiny.”
By Jennifer Pilla Taylor
After freezing up last year, the venture capital sector could take some time to reboot, says Douglas Boggs, managing partner of Patton Boggs’ Northern Virginia office. In the meantime, Boggs has suggestions for entrepreneurs seeking venture funding:
While there is still interest in funding online gaming and social networking ventures, Boggs notes that the stimulus plan has shifted attention to green energy solutions, health care IT and infrastructure technology. Businesses in other areas may want to look to more conventional sources for now.
Those who manage to land VC money should be prepared for more hands-on investors, says Boggs. VCs may ask for two seats on your board or an operating partner on-site to monitor operations.
Exactly zero venture-backed companies went public in the last quarter of 2008 and the first quarter of 2009, the research firm VentureSource reports. Boggs says he doesn’t expect the IPO market to recover until late 2010 or early 2011. Instead, he predicts an uptick in M&A activity later this year, followed by a pause as investors wait to see if government stimulus programs are working.
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