Материал: guide
For example, a pharmaceutical company used charitable donations to a small local castle restoration charity headed by a foreign government official to induce the official to direct business to the company. Although the charity was a bona fide charitable organization, internal documents at the pharmaceutical company’s subsidiary established that
the payments were not viewed as charitable contributions but rather as “dues” the subsidiary was required to pay for assistance from the government official. The payments constituted a significant portion of the subsidiary’s total promotional donations budget and were structured to allow the subsidiary to exceed its authorized limits. The payments
Hypothetical: Gifts, Travel, and Entertainment
Company A is a large U.S. engineering company with global operations in more than 50 countries, including a number that have a high risk of corruption, such as Foreign Country. Company A’s stock is listed on a national U.S. stock exchange. In conducting its business internationally, Company A’s officers and employees come into regular contact with foreign officials, including officials in various ministries and state-owned entities. At a trade show, Company A has a booth at which it offers free pens, hats, t-shirts, and other similar promotional items with Company A’s logo. Company A also serves free coffee, other beverages, and snacks at the booth. Some of the visitors to the booth are foreign officials.
Is Company A in violation of the FCPA?
No. These are legitimate, bona fide expenditures made in connection with the promotion, demonstration, or explanation of Company A’s products or services There is nothing to suggest corrupt intent here The FCPA does not prevent companies from promoting their businesses in this way or providing legitimate hospitality, including to foreign officials Providing promotional items with company logos or free snacks as set forth above is an appropriate means of providing hospitality and promoting business Such conduct has never formed the basis for an FCPA enforcement action
At the trade show, Company A invites a dozen current and prospective customers out for drinks, and pays the moderate bar tab. Some of the current and prospective customers are foreign officials under the FCPA. Is Company A in violation of the FCPA?
No. Again, the FCPA was not designed to prohibit all forms of hospitality to foreign officials. While the cost here may be more substantial than the beverages, snacks, and promotional items provided at the booth, and the invitees specifically selected, there is still nothing to suggest corrupt intent.
Two years ago, Company A won a long-term contract to supply goods and services to the state-owned Electricity Commission in Foreign Country. The Electricity Commission is 100% owned, controlled, and operated by the government of Foreign Country, and employees of the Electricity Commission are subject to Foreign Country’s domestic bribery laws. Some Company A executives are in Foreign Country for meetings with officials of the Electricity Commission. The General Manager of the Electricity Commission was recently married, and during the trip Company A executives present a moderately priced crystal vase to the General Manager as a wedding gift and token of esteem. Is Company A in violation of the FCPA?
No. It is appropriate to provide reasonable gifts to foreign officials as tokens of esteem or gratitude. It is important that such gifts be made openly and transparently, properly recorded in a company’s books and records, and given only where appropriate under local law, customary where given, and reasonable for the occasion.
During the course of the contract described above, Company A periodically provides training to Electricity Commission employees at its facilities in Michigan. The training is paid for by the Electricity Commission as part of the contract. Senior officials of the Electricity Commission inform Company A that they want to inspect the facilities and ensure that the training is working well. Company A pays for the airfare, hotel, and transportation for the
(cont’d)
17
chapter 2
The FCPA:
Anti-Bribery Provisions
Electricity Commission senior officials to travel to Michigan to inspect Company A’s facilities. Because it is a lengthy international flight, Company A agrees to pay for business class airfare, to which its own employees are entitled for lengthy flights. The foreign officials visit Michigan for several days, during which the senior officials perform an appropriate inspection. Company A executives take the officials to a moderately priced dinner, a baseball game, and a play. Do any of these actions violate the FCPA?
No Neither the costs associated with training the employees nor the trip for the senior officials to the Company’s facilities in order to inspect them violates the FCPA Reasonable and bona fide promotional expenditures do not violate the FCPA Here, Company A is providing training to the Electricity Commission’s employees and is hosting the Electricity Commission senior officials Their review of the execution and performance of the contract is a legitimate business purpose Even the provision of business class airfare is reasonable under the circumstances, as are the meals and entertainment, which are only a small component of the business trip
Would this analysis be different if Company A instead paid for the senior officials to travel first-class with their spouses for an all-expenses-paid, week-long trip to Las Vegas, where Company A has no facilities?
Yes. This conduct almost certainly violates the FCPA because it evinces a corrupt intent. Here, the trip does not appear to be designed for any legitimate business purpose, is extravagant, includes expenses for the officials’ spouses, and therefore appears to be designed to corruptly curry favor with the foreign government officials. Moreover, if the trip were booked as a legitimate business expense—such as the provision of training at its facilities—Company A would also be in violation of the FCPA’s accounting provisions. Furthermore, this conduct suggests deficiencies in Company A’s internal controls.
Company A’s contract with the Electricity Commission is going to expire, and the Electricity Commission is offering the next contract through its tender process. An employee of the Electricity Commission contacts Company A and offers to provide Company A with confidential, non-public bid information from Company A’s competitors if Company A will pay for a vacation to Paris for him and his girlfriend. Employees of Company A accede to the official’s request, pay for the vacation, receive the confidential bid information, and yet still do not win the contract. Has Company A violated the FCPA?
Yes Company A has provided things of value to a foreign official for the purpose of inducing the official to misuse his office and to gain an improper advantage It does not matter that it was the foreign official who first suggested the illegal conduct or that Company A ultimately was not successful in winning the contract This conduct would also violate the FCPA’s accounting provisions if the trip were booked as a legitimate business expense and suggests deficiencies in Company A’s internal controls
18
also were not in compliance with the company’s internal policies, which provided that charitable donations generally should be made to healthcare institutions and relate to the practice of medicine.102
Proper due diligence and controls are critical for charitable giving. In general, the adequacy of measures taken to prevent misuse of charitable donations will depend on a risk-based analysis and the specific facts at hand. In Opinion Procedure Release No. 10-02, DOJ described the due diligence and controls that can minimize the likelihood of an FCPA violation. In that matter, a Eurasian-based subsidiary of a U.S. non-governmental organization was asked by an agency of a foreign government to make a grant to a local microfinance institution (MFI) as a prerequisite to the subsidiary’s transformation to bank status. The subsidiary proposed contributing $1.42 million to a local MFI to satisfy the request. The subsidiary undertook an extensive, three-stage due diligence process to select the proposed grantee and imposed significant controls on the proposed grant, including ongoing monitoring and auditing, earmarking funds for capacity building, prohibiting compensation of board members, and implementing anti-corrup- tion compliance provisions. DOJ explained that it would not take any enforcement action because the company’s due diligence and the controls it planned to put in place sufficed to prevent an FCPA violation.
Other opinion releases also address charitable-type grants or donations. Under the facts presented in those releases, DOJ approved the proposed grant or donation,103 based on due diligence measures and controls such as:
•certifications by the recipient regarding compliance with the FCPA;104
•due diligence to confirm that none of the recipient’s officers were affiliated with the foreign government at issue;105
•a requirement that the recipient provide audited financial statements;106
•a written agreement with the recipient restricting the use of funds;107
•steps to ensure that the funds were transferred to a valid bank account;108
•confirmation that the charity’s commitments were met before funds were disbursed;109 and
•on-going monitoring of the efficacy of the program.110
Legitimate charitable giving does not violate the FCPA. Compliance with the FCPA merely requires that charitable giving not be used as a vehicle to conceal payments made to corruptly influence foreign officials.
Five Questions to Consider When Making Charitable Payments in a Foreign Country:
1What is the purpose of the payment?
2Is the payment consistent with the company’s internal guidelines on charitable giving?
3Is the payment at the request of a foreign official?
4Is a foreign official associated with the charity and, if so, can the foreign official make decisions regarding your business in that country?
5Is the payment conditioned upon receiving business or other benefits?
Who Is a Foreign Official?
The FCPA’s anti-bribery provisions apply to corrupt payments made to (1) “any foreign official”; (2) “any foreign political party or official thereof ”; (3) “any candidate for foreign political office”; or (4) any person, while knowing that all or a portion of the payment will be offered, given, or promised to an individual falling within one of these three categories.111 Although the statute distinguishes between a “foreign official,” “foreign political party or official thereof,” and “candidate for foreign political office,” the term “foreign official” in this guide generally refers to an individual falling within any of these three categories.
The FCPA defines “foreign official” to include:
any officer or employee of a foreign government or any department, agency, or instrumentality thereof,
19
or of a public international organization, or any person acting in an official capacity for or on behalf of any such government or department, agency, or instrumentality, or for or on behalf of any such public international organization.112
As this language makes clear, the FCPA broadly applies to corrupt payments to “any” officer or employee of a foreign government and to those acting on the foreign government’s behalf.113 The FCPA thus covers corrupt payments to low-ranking employees and high-level officials alike.114
The FCPA prohibits payments to foreign officials, not to foreign governments.115 That said, companies contemplating contributions or donations to foreign governments should take steps to ensure that no monies are used for corrupt purposes, such as the personal benefit of individual foreign officials.
Department, Agency, or Instrumentality of a Foreign Government
Foreign officials under the FCPA include officers or employees of a department, agency, or instrumentality of a foreign government. When a foreign government is organized in a fashion similar to the U.S. system, what constitutes a government department or agency is typically clear (e.g., a ministry of energy, national security agency, or transportation authority).116 However, governments can be organized in very different ways.117 Many operate through state-owned and state-controlled entities, particularly in such areas as aerospace and defense manufacturing, banking and finance, healthcare and life sciences, energy and extractive industries, telecommunications, and transportation.118 By including officers or employees of agencies and instrumentalities within the definition of “foreign official,” the FCPA accounts for this variability.
The term “instrumentality” is broad and can include state-owned or state-controlled entities. Whether a particular entity constitutes an “instrumentality” under the FCPA requires a fact-specific analysis of an entity’s ownership, control, status, and function.119 A number of courts have approved final jury instructions providing a non-exclusive
chapter 2
The FCPA:
Anti-Bribery Provisions
list of factors to be considered:
•the foreign state’s extent of ownership of the entity;
•the foreign state’s degree of control over the entity (including whether key officers and directors of the entity are, or are appointed by, government officials);
•the foreign state’s characterization of the entity and its employees;
•the circumstances surrounding the entity’s creation;
•the purpose of the entity’s activities;
•the entity’s obligations and privileges under the foreign state’s law;
•the exclusive or controlling power vested in the entity to administer its designated functions;
•the level of financial support by the foreign state (including subsidies, special tax treatment, government-mandated fees, and loans);
•the entity’s provision of services to the jurisdiction’s residents;
•whether the governmental end or purpose sought to be achieved is expressed in the policies of the foreign government; and
•the general perception that the entity is performing official or governmental functions.120
Companies should consider these factors when evaluating the risk of FCPA violations and designing compliance programs.
DOJ and SEC have pursued cases involving instrumentalities since the time of the FCPA’s enactment and have long used an analysis of ownership, control, status, and function to determine whether a particular entity is an agency or instrumentality of a foreign government. For example, the second-ever FCPA case charged by DOJ involved a California company that paid bribes through a Mexican corporation to two executives of a state-owned
20
Mexican national oil company. 121 And in the early 1980s, DOJ and SEC brought cases involving a $1 million bribe to the chairman of Trinidad and Tobago’s racing authority.122 DOJ and SEC continue to regularly bring FCPA cases involving bribes paid to employees of agencies and instrumentalities of foreign governments. In one such case, the subsidiary of a Swiss engineering company paid bribes to officials of a state-owned and controlled electricity commission. The commission was created by, owned by, and controlled by the Mexican government, and it had a monopoly on the transmission and distribution of electricity in Mexico. Many of the commission’s board members were cabinet-level government officials, and the director was appointed by Mexico’s president.123 Similarly, in another recent case, Miami telecommunications executives were charged with paying bribes to employees of Haiti’s state-owned and controlled telecommunications company. The telecommunications company was 97% owned and 100% controlled by the Haitian government, and its direc-
tor was appointed by Haiti’s president.124
While no one factor is dispositive or necessarily more important than another, as a practical matter, an entity is unlikely to qualify as an instrumentality if a government does not own or control a majority of its shares. However, there are circumstances in which an entity would qualify as an instrumentality absent 50% or greater foreign government ownership, which is reflected in the limited number of DOJ or SEC enforcement actions brought in such situations. For example, in addition to being convicted of funneling millions of dollars in bribes to two sitting presidents in two different countries, a French issuer’s three subsidiaries were convicted of paying bribes to employees of a Malaysian telecommunications company that was 43% owned by Malaysia’s Ministry of Finance. There, notwithstanding its minority ownership stake in the company, the Ministry held the status of a “special shareholder,” had veto power over all major expenditures, and controlled important operational decisions.125 In addition, most senior company officers were political appointees, including the Chairman and Director, the Chairman of the Board of the Tender Committee, and the Executive Director.126 Thus,
despite the Malaysian government having a minority shareholder position, the company was an instrumentality of the Malaysian government as the government nevertheless had substantial control over the company.
Companies and individuals should also remember that, whether an entity is an instrumentality of a foreign government or a private entity, commercial (i.e., private- to-private) bribery may still violate the FCPA’s accounting provisions, the Travel Act, anti-money laundering laws, and other federal or foreign laws. Any type of corrupt payment thus carries a risk of prosecution.
Public International Organizations
In 1998, the FCPA was amended to expand the definition of “foreign official” to include employees and representatives of public international organizations.127 A “public international organization” is any organization designated as such by Executive Order under the International Organizations Immunities Act, 22 U.S.C. § 288, or any other organization that the President so designates.128 Currently, public international organizations include entities such as the World Bank, the International Monetary Fund, the World Intellectual Property Organization, the World Trade Organization, the OECD, the Organization of American States, and numerous others. A comprehensive list of organizations designated as “public international organizations” is contained in 22 U.S.C. § 288 and can also be found on the U.S. Government Printing Office website at http://www.gpo.gov/fdsys/.
How Are Payments to Third Parties Treated?
The FCPA expressly prohibits corrupt payments made through third parties or intermediaries.129 Specifically, it covers payments made to “any person, while knowing that all or a portion of such money or thing of value will be offered, given, or promised, directly or indirectly,”130 to a foreign official. Many companies doing business in a foreign country retain a local individual or company to help them conduct business. Although these foreign agents may provide entirely legitimate advice regarding local customs and procedures and may help facilitate business transactions,
21