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Entries in Guidelines (4)

Monday
Oct082007

Compliance Guidelines

Many come to The FCPA Blog seeking compliance guidelines. That's good, because our aim is to help people comply with the U.S. Foreign Corrupt Practices Act. Some seekers, however, have noticed that our posts and resources don't include any out-of-the-box compliance programs, at least not yet. A number of specimens are available on the Internet, of course, and a Google search will turn up at least a half dozen programs already used by well-known companies.

But The FCPA Blog doesn't want to mislead anyone into thinking that a model program always equals model compliance. It doesn't. Compliance is a matter of substance, not form, and springs from management's commitment to obey the law. A compliance culture protects against FCPA disasters; model programs adopted for their good looks do not. Camouflaging a cultural bald spot with a compliance toupee broadcasts that the effort is a cover-up and a sham. It can do more harm than good. But we digress.

We meant to say that those seeking compliance guidelines often arrive here from small private companies, doing business internationally for the first time. Where should they start? A good place is the "Lay Person's Guide to FCPA." It's a plain-English explanation of the FCPA's anti-bribery provisions from the U.S. Department of Justice. And it's written especially for "potential exporters and small businesses that are unable to obtain specialized counsel on issues related to the FCPA." Another good resource -- although a bit more technical -- is Chapter 8, Part B of the U.S. Federal Sentencing Guidelines. It describes what it takes to have an effective compliance and ethics program, and how small companies can leverage the tools on hand to meet the requirements. Finally, visitors are always welcome to contact The FCPA Blog and our sponsor for more help.

View the "Lay Person's Guide to FCPA" Here.

View Chapter 8, Part B of the U.S. Federal Sentencing Guidelines Here.

View the Post "FCPA Compliance For Small Companies" Here.

Thursday
Sep202007

Best Intentions: The Problem of Promotional Expenses

The affirmative defense for promotional expenses has always been a riddle, which explains why it appears so often among the Justice Department's Opinion Procedure Releases, including both Releases so far this year. Congress added it to the U.S. Foreign Corrupt Practices Act in 1988, to allow businesses to pay travel expenses of foreign officials. The expenses, the law says, must be “reasonable and bona fide” and related directly to “the promotion, demonstration, or explanation of products or services." 15 U.S.C. §§ 78dd-1(c)(2)(A) and 78dd-2(c)(2)(A).

That sounds simple enough, but there's a problem. If an expenditure is reasonable and bona fide, it is not a corrupt payment. If it is not a corrupt payment, it is not prohibited by the FCPA. In that case, what's the purpose of the affirmative defense? Congress itself created this conundrum with its eyes wide open. The notes to the 1988 House and Senate Conference agreement say in relation to promotional expenses: “If a payment or gift is corruptly made, in return for an official act or omission, then it cannot be a bona fide, good-faith payment, and this defense would not be available.” In other words, if the payment violates the FCPA to begin with, this affirmative defense doesn’t work, period.

So when is it safe to pay for a foreign official’s trip? Only when there is no corrupt intent -- that is, no expectation that in return for the trip, the foreign official will misuse his or her authority to obtain or retain business or gain an unfair advantage for any party. To be practical, proving the absence of a corrupt intent in this scenario is difficult. Why invite foreign officials for a visit unless they have some connection with the company's business in the first place? But if they have the power to help the business, inviting them on the trip implies an expectation that they will use their power corruptly. That implication has to be refuted by the weight of the evidence.

That's why prudent companies and their lawyers produce long lists of facts showing the host's innocent state of mind concerning the visit. No role in selecting the guests. No company-related new matters in their ministry. No advance funds or reimbursements in cash. No expenses for spouses, family, or other guests. No funding or organizing of any entertainment or leisure activities. No side trips. No stipends or spending money. No souvenirs unless they carry the host’s name and/or logo and are of nominal value, e.g., shirts or tote bags. It all sounds less like hospitality and more like a stay in the hospital.

True, the affirmative defense for promotional expenses was never intended to be a blank check to buy influence from foreign officials. But at least it should give Americans a chance to invite guests home, show them some basic hospitality, and brag a bit about the goods and services on offer. That cannot happen, however, as long as the law is tied up in knots and American businesses are caught in the tangle. The question is whether Congress, the DOJ or the courts will ever come to the rescue?

View Other Posts Dealing With Promotional Expenses Here.

Wednesday
Sep122007

An Expenses-Paid Training Program For Foreign Officials Is OK

In its second Opinion Procedure Release of 2007, the Department of Justice again looked at promotional expenses. An affirmative defense in the U.S. Foreign Corrupt Practices Act allows payment or reimbursement of expenses of foreign officials that are directly related to “the promotion, demonstration, or explanation of products or services." 15 U.S.C. §§ 78dd-1(c)(2)(A) and 78dd-2(c)(2)(A).

The DOJ said it would take no action against a requestor proposing to cover some U.S. domestic travel and accommodation expenses for six foreign officials. The officials, selected by the foreign government, are attending an annual six-week long internship program for foreign insurance regulators sponsored by the National Association of Insurance Commissioners ("NAIC"). After the NAIC program concludes, the requestor will host the foreign officials for a five-day educational program at the requestor's U.S. headquarters "to familiarize them with the operation of a United States insurance company."

The requestor will reimburse air fares (domestic economy class), domestic lodging, local transport, meals and incidental expenses (up to a modest set amount per day upon presentation of a receipt), and "a modest four-hour city sightseeing tour" for the six officials.

"Based on the Requestor's representations," the DOJ said, "consistent with the FCPA's promotional expenses affirmative defense, the expenses contemplated are reasonable under the circumstances and directly relate to 'the promotion, demonstration, or explanation of [the Requestor's] products or services.' 15 U.S.C. § 78dd-2(c)(2)(A)."

The requestor distanced itself from the foreign officials' influence, and made clear the strict limits of its largess. It represented, among other things, that:

-- It will not pay any expenses related to the foreign officials' travel to or from the United States, or their participation in the NAIC internship program.

-- It has no non-routine business under consideration by the relevant foreign government agency.

-- Its routine business before the relevant foreign government agency consists primarily of reporting of operational statistics, reviewing the qualifications of additional agents, and onsite inspections of operations. Such routine business is guided by administrative rules with identified standards.

-- Its only work with other entities within the foreign government consists of collaboration on insurance-related research, studies, and training.

-- It will not select the particular officials who will travel. That decision will be made solely by the foreign government.

-- It will host only the designated officials, and not their spouses or family members.

-- It intends to pay all costs directly to the providers; in the event that an expense requires reimbursement, the requestor will only do so, up to a modest daily minimum, upon presentation of a written receipt.

-- Any souvenirs that it gives the visiting officials would reflect its business and/or logo and would be of nominal value, e.g., shirts or tote bags.

-- Apart from the expenses identified above, it will not compensate the foreign government or the officials for their visit, nor will it fund, organize, or host any other entertainment, side trips, or leisure activities for the officials, or provide the officials with any stipend or spending money.

-- The training visit will be for a six-day period (five days of training plus travel time), and costs and expenses will be only those necessary and reasonable to educate the visiting officials about the operation of a U.S. company in the requestor's industry.

View DOJ Opinion Procedure Release No.: 07-02 (September 11, 2007) Here.

Tuesday
Aug072007

Guidelines for Promotional Expenses Under FCPA Affirmative Defense

In its first Opinion Procedure Release of 2007, the Department of Justice said it would take no action against a requestor proposing to cover some expenses for a U.S. trip by six officials of an Asian government. The DOJ based its opinion on the requestor's representations, consistent with the FCPA's promotional expenses affirmative defense, that the expenses contemplated are reasonable under the circumstances and directly relate to "the promotion, demonstration, or explanation of [the requestor's] products or services." 15 U.S.C. §§ 78dd-1(c)(2)(A) and 78dd-2(c)(2)(A). The requestor's representations set out in the Release reflect the now familiar guidelines for the promotional expenses affirmative defense as developed in prior Opinion Procedure Releases.


View Opinion Procedure Release No.: 07-01 here.