FCPA Guide by DOJ, SEC Is a Must-Read for Corporate America

The U.S. Department of Justice and the U.S. Securities and Exchange Commission just issued a long-awaited guidance document intended to inform businesses about how to comply with the Foreign Corrupt Practices Act (FCPA), the federal law against foreign bribery.

The 130-page document goes into considerable detail regarding what practices the U.S. government believes may violate the FCPA. Its purpose is to respond to widespread concern in the corporate community that FCPA strictures have hamstrung U.S. businesses’ efforts to gain business abroad.

Clearly, it’s impossible to summarize the whole document in a single blog post or two. But it is interesting to us that the “Resource Guide” takes such careful steps to distinguish illegal bribes of foreign government officials, on the one hand, from legitimate promotional, advertising, and training expenses.

“It is appropriate to provide reasonable gifts to foreign officials as tokens of esteem or gratitude,” the document states. “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.”

In response to a hypothetical situation in which a company hosted the officials of a foreign country in the United States to review a training program, the guidance document says, “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’s 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.”

On the other hand, the guidance document referred to a clear case of an FCPA violation: a New Jersey company that had spent millions of dollars on about 315 trips for Chinese officials, ostensibly to inspect factories and train the officials in using the company’s equipment. “In reality, during many of these trips, the officials spent little or no time visiting the company’s facilities, but instead visited tourist destinations such as Hawaii, Las Vegas, the Grand Canyon, Niagara Falls, Disney World, Universal Studios, and New York City. . . . In some instances, the company gave the government officials $500 to $1,000 per day in spending money and paid all lodging, transportation, food and entertainment expenses.”

Under these circumstances, the government wrote, there was an FCPA violation.

There are a great many murky aspects of FCPA law, and any time that the government chooses to illuminate its enforcement policies and priorities under that statute, companies are well advised to take a careful look.

As always, when it comes to the FCPA, it is better to be safe than sorry. Companies doing business abroad should put into place FCPA compliance procedures and should use this new guidance document as a starting point for what may and may not be a violation of the law.

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