In the previous installment of PARCEL Counsel we took a first look at the Foreign Corrupt Practices Act (FCPA). In this issue we will look at a few of the Act’s nuances.
Generally speaking, the purpose of the Act is to deter US nationals from bribing foreign officials for business purposes. Although the Act has been broadly interpreted and applied by the courts, there are certain narrow exceptions.
These exceptions include “facilitating payments,” which were discussed in the last issue. Also referenced in the last issue was “A Resource Guide to the U.S. Foreign Corrupt Practices Act” (http://www.justice.gov/criminal/fraud/fcpa/guidance/guide.pdf) which provides examples of permitted or not permitted payments. The Guide provides the following examples of “routine governmental action:”
• obtaining permits, licenses, or other official documents to qualify a person to do business in a foreign country;
• processing governmental papers, such as visas and work orders;
• providing police protection, mail pickup and delivery, or scheduling inspections associated with contract performance or inspections related to transit of goods across country;
• providing phone service, power and water supply, loading and unloading cargo, or protecting perishable products or commodities from deterioration;
While facilitating payments may be made to a government official, it is critical that the payment only relates to “routine governmental actions”, not acts where the official is being paid in order to make a decision in favor of the paying party. The Guide lists examples of payments made with the intent to influence an official in an unpermitted manner:
• Winning a contract
• Influencing the procurement process
• Circumventing the rules for importation of products
• Gaining access to non-public bid tender information
• Evading taxes or penalties
• Influencing the adjudication of lawsuits or enforcement actions
• Obtaining exceptions to regulations
• Avoiding contract termination
Another category of exempted payments would be charitable contributions. But, again, the charitable contributions cannot be in the nature of a disguised prohibited payment.
Another class of payments which would not violate the FCPA would be those made under extortion or duress. “Businesses operating in high-risk countries may face real threats of violence or harm to their employees, and payments made in response to imminent threats to health or safety do not violate the FCPA.”
A more mundane class of expenditures are those relating to the promotion of a company’s products and services. From time to time the Department of Justice has issued opinion letters opining that the following would not warrant an enforcement action:
• travel and expenses to visit company facilities or
operations
• travel and expenses for training
• product demonstration or promotional activities
However, it must be noted that these opinions are based on an analysis of a very specific set of facts. If other facts are added, for instance, the reimbursement of travel expenses plus payment in cash of a $1,000 per diem, an otherwise permissible payment becomes a prohibited bribe. And, if the payment is mislabeled in the company’s books and records, the company has also violated the accounting portions of the Act.
So, how does one navigate in such a sea of gray? I would suggest that the starting point of a company policy be “Thou shall not make payments to government officials”. To the extent that a company felt a compelling need to make permissible, but risky, facilitating or other exempt payments, they should only be made pursuant to a well thought out company policy…drafted by an attorney knowledgeable in FCPA matters…and then strictly enforced.
All for now!
Brent Wm. Primus, J.D., is the CEO of Primus Law Office, P.A. and the Senior Editor of transportlawtexts, inc. Previous columns, including those of William J. Augello, may be found in the “Content Library” on the PARCEL website (www.PARCELindustry.com). Your questions are welcome at brent@primuslawoffice.com.
Generally speaking, the purpose of the Act is to deter US nationals from bribing foreign officials for business purposes. Although the Act has been broadly interpreted and applied by the courts, there are certain narrow exceptions.
These exceptions include “facilitating payments,” which were discussed in the last issue. Also referenced in the last issue was “A Resource Guide to the U.S. Foreign Corrupt Practices Act” (http://www.justice.gov/criminal/fraud/fcpa/guidance/guide.pdf) which provides examples of permitted or not permitted payments. The Guide provides the following examples of “routine governmental action:”
• obtaining permits, licenses, or other official documents to qualify a person to do business in a foreign country;
• processing governmental papers, such as visas and work orders;
• providing police protection, mail pickup and delivery, or scheduling inspections associated with contract performance or inspections related to transit of goods across country;
• providing phone service, power and water supply, loading and unloading cargo, or protecting perishable products or commodities from deterioration;
While facilitating payments may be made to a government official, it is critical that the payment only relates to “routine governmental actions”, not acts where the official is being paid in order to make a decision in favor of the paying party. The Guide lists examples of payments made with the intent to influence an official in an unpermitted manner:
• Winning a contract
• Influencing the procurement process
• Circumventing the rules for importation of products
• Gaining access to non-public bid tender information
• Evading taxes or penalties
• Influencing the adjudication of lawsuits or enforcement actions
• Obtaining exceptions to regulations
• Avoiding contract termination
Another category of exempted payments would be charitable contributions. But, again, the charitable contributions cannot be in the nature of a disguised prohibited payment.
Another class of payments which would not violate the FCPA would be those made under extortion or duress. “Businesses operating in high-risk countries may face real threats of violence or harm to their employees, and payments made in response to imminent threats to health or safety do not violate the FCPA.”
A more mundane class of expenditures are those relating to the promotion of a company’s products and services. From time to time the Department of Justice has issued opinion letters opining that the following would not warrant an enforcement action:
• travel and expenses to visit company facilities or
operations
• travel and expenses for training
• product demonstration or promotional activities
However, it must be noted that these opinions are based on an analysis of a very specific set of facts. If other facts are added, for instance, the reimbursement of travel expenses plus payment in cash of a $1,000 per diem, an otherwise permissible payment becomes a prohibited bribe. And, if the payment is mislabeled in the company’s books and records, the company has also violated the accounting portions of the Act.
So, how does one navigate in such a sea of gray? I would suggest that the starting point of a company policy be “Thou shall not make payments to government officials”. To the extent that a company felt a compelling need to make permissible, but risky, facilitating or other exempt payments, they should only be made pursuant to a well thought out company policy…drafted by an attorney knowledgeable in FCPA matters…and then strictly enforced.
All for now!
Brent Wm. Primus, J.D., is the CEO of Primus Law Office, P.A. and the Senior Editor of transportlawtexts, inc. Previous columns, including those of William J. Augello, may be found in the “Content Library” on the PARCEL website (www.PARCELindustry.com). Your questions are welcome at brent@primuslawoffice.com.
