One of the biggest questions asked by white collar criminal attorneys and corporate counsel in analyzing the Foreign Corrupt Practices Act to determine if their clients will be accused of bribery is – what constitutes “anything of value” for FCPA purposes? The FCPA guidance recently issued by the DOJ and SEC clarifies this question in acknowledging that bribes don’t always consist of cash hidden in an envelope.
Specifically, the FCPA prohibits the corrupt offer, payment, promise to pay, or authorization of the payment of any money, or offer, gift, promise to give, or authorization of the giving of “anything of value” to a foreign official.
In determining what is meant by “anything of value”, the guidance indicates that the term is closely tied to “corrupt intent.” In other words, in determining whether to prosecute a company based on a gift or payment to a foreign official, the DOJ and SEC will look at the specific item provided the foreign official. If it is of very little value to the foreign official, then corrupt intent necessary to suggest bribery will be difficult to glean from this transaction. Examples given by the DOJ include “cups of coffee, taxi fare, or company promotional items of nominal value.” The guidance continued by warning that even these “small payments or gifts, when they comprise part of a systemic or long standing course of conduct that evidences a scheme to corruptly pay foreign officials to obtain or retain business” can be used to substantiate bribery. In other words, even small gifts, if they are repeated over and over, can evidence corrupt intent, and subject a company to prosecution for bribery under the FCPA.
The DOJ and SEC recognize that giving a gift is a courteous way that people in business show admiration or respect for each other. In these instances, such gifts are not considered bribes. These gifts are less suspicious when they are given openly and not secretively, when they are recorded in the giver’s books and records as a gift to the beneficiary, when the gift is only to reflect “esteem or gratitude”, and most importantly when the gift is permitted under local law. The guidance suggests that the bigger and more expensive the gift, the more likely it was provided corruptly – i.e. fur coats, expensive cars, country club membership dues, and limousine services.
Payment of entertainment and travel expenses of a foreign official by a domestic company has been held to be a “thing of value” in violation of the FCPA. The guidance cites two specific examples where flight and hotel expenses were paid for foreign officials to visit popular tourist destinations in the United States. The companies in question said these trips were made for legitimate training purposes, but the government was able to show that now training was taking place, and these travel and entertainment costs were illicit benefits to gain a competitive advantage.
The FCPA guidance also addresses when charitable contributions are considered “anything of value” for bribery purposes. It is common for businesses to give to charities as part of community outreach. Such activity is not illegal. The DOJ and SEC will, however, scrutinize such giving to ensure these payments are not disguised bribes to government officials.
In making this determination, the DOJ and SEC are likely to see who is involved in the charity. If a government official, or someone connected to a government official, that is responsible for making some determination that could affect the company’s business, the contribution is more likely to be scrutinized. Enforcement officials would also look at the size of the donation in relation to the total charitable giving budget of the company, and also what percentage of revenue of the charity the gift comprises.
The guidance clearly suggests that companies institute a due diligence procedure for charitable gift giving, particularly when such a gift has been solicited. Among the due diligence checklist suggested are the following items:
1. Requiring the recipient to certify compliance with FCPA
2. Confirmation that none of the recipient’s officers are foreign officials at issue
3. Requiring the recipient’s audited financials
4. A written agreement from the recipient restricting the use of funds
5. Ensuring the funds are sent to a legitimate bank account
6. Confirmation charitable commitments are met prior to sending funds
7. Continued monitoring of the charitable program
Instituting such a due diligence program should be considered a requirement for any company engaged is significant charitable giving in a foreign country as even charitable contributions can constitute a “thing of value” in violation of the FCPA.