Hiring foreign officials: How do you justify it?
Tuesday, May 31, 2016 at 9:18AM
Keith Korenchuk, Samuel Witten and Arthur Luk in Due Diligence, Foreign Official, consultant

One of the threshold questions for a company considering the engagement of a government official is whether the engagement is needed for legitimate purposes. If the company cannot articulate an adequate and appropriate business justification, there is a risk that the engagement may be sought or undertaken for a corrupt purpose.

In our e-book on navigating anti-corruption compliance in emerging markets, we provide examples of what some companies require require before the engagement of a government official proceeds. These include a written needs assessment and evaluation of the government official’s qualifications, as part of the process of obtaining pre-approval from the legal or compliance department. 

The written needs assessment should document compliance with the following criteria:

A. Consultants or speakers may be engaged or compensated only if they provide advice, information, or services for which the company has a legitimate business need.

B. While the company may provide information to a consultant or speaker, the interaction between the company and the consultant or speaker must consist, in substantial part, of the consultant providing advice, information, or services to the company.

C. The number of consultants or speakers used in any project must not exceed the number reasonably needed to obtain the desired advice, information, or services.

Typically, a company employee who proposes a consultant or speaker engagement is responsible for ensuring that the engagement is carried out in accordance with the applicable needs assessment(s), approvals, and company policies.

Another way to reduce compliance risks is to demonstrate and document that the government official being retained is qualified to perform the engagement.

The decision on the selection and retention of consultants or speakers should therefore be based on objectively defined criteria that are directly related to the purpose of the engagement, including:

A. The reputation and standing of the speaker or consultant in the area of expertise needed,

B. The knowledge and experience of the speaker or consultant regarding the particular topic on which the
person is to be engaged,

C. The past record of the speaker or consultant for objectivity, and

D. Whether the person or persons proposing the engagement have complied in the past with company policies and procedures.

The individual’s written or oral communication skills are also a relevant consideration in deciding whether he or she is appropriate for engagement.

For speakers, another relevant consideration is the topic of the speech. For example, it generally would not be appropriate for compensation to be paid on a topic directly related to government policies or procedures
that could impact the company’s operations, or that describe processes that are otherwise part of the official’s
ordinary duties.

It may be appropriate, though, to compensate some speakers on professional or technical topics such as engineering or medicine. For example, a respected physician could be compensated for speaking on new developments in the treatment of a particular disease, or a researcher could talk about the development of a chemical process and its impact upon a particular manufacturing practice.

Finally, company employees proposing or evaluating a consultant or speaker must have the relevant expertise to evaluate whether the particular government official under consideration meets the above criteria.

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In the next post, we'll discuss written agreements with foreign officials for their engagements, and their compensation.

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Our e-book, Anti-Corruption Compliance in Emerging Markets: A Resource Guide, is available here.

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Keith Korenchuk is a partner in Arnold & Porter’s Washington, DC office. He counsels and advises global companies on regulatory and compliance matters worldwide, with a focus on compliance program effectiveness, compliance program implementation, operations and evaluation, and related regulatory counseling and advice.

Samuel Witten is counsel in Arnold & Porter’s Washington, DC office. He helps companies develop and implement FCPA compliance programs. He also represents clients in arbitrations at the International Center for Settlement of Investment Disputes. He joined Arnold & Porter in 2010 after serving for 22 years in legal and policy positions at the U.S. Department of State.

Arthur Luk is a partner in Arnold & Porter’s Washington, DC office. He represents corporations, directors, officers, and executives, and "Big 4" accounting firms and individual auditors in investigations conducted by the DOJ, SEC, and Public Company Accounting Oversight Board, and in securities class actions and shareholder derivative suits.

Article originally appeared on The FCPA Blog (http://www.fcpablog.com/).
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