A Primer on Items and Enterprise Leisure | Thomas Fox

If one pondered the provision of gifts and business entertainment to foreign government officials, it would be reasonable to conclude that after 40 years of FCPA, companies would be able to comply with their regulations regarding gifts and business entertainment. However, there have been some notable FCPA enforcement actions in this area.

The 2020 FCPA Resource Guide clarified that the FCPA does not prohibit gifts and entertainment. In fact, it has been said, “A small gift, or a token of appreciation or gratitude, is often an appropriate way for business people to show respect for one another. Some signs of appropriate gift giving are when the gift is given openly and transparently, properly recorded in the giver’s books and records, provided only for appreciation or gratitude, and permitted under local law. Face value items such as taxi rides, reasonable meals and entertainment, or company promotional items are unlikely to inappropriately affect an officer and are therefore not readily items to lead to enforcement actions by the DOJ or SEC. “

What does the FCPA say? While the FCPA prohibits the payment of money or valuables to foreign officials in order to get or keep business, it does allow the same officials to incur certain costs. There is no de minimis provision. Presenting a gift or business entertainment expense may constitute a breach of the FCPA when it is done with the corrupt intent of getting or keeping business. Under the FCPA, 15 USC Section 78dd-1 (c) (2) (A) – (B), the following affirmative defense exists in relation to the payment of expenses:

[it] should be an affirmative defense [that] The payment, gift, offer, or promise of any item of value that was made was a fair and bona fide expense, such as an expense. B. Travel and accommodation expenses incurred by a foreign official, party, party official or candidate or on behalf of a foreign official in direct connection with … the promotion, demonstration or explanation of products or services; or … the execution or performance of a contract with a foreign government or agency thereof.

As with most matters within the FCPA, there is little direct evidence of what behavior may go beyond the limit set out above. Of course, there’s always the gut test, which simply measures, “If it feels wrong in your gut, it’s probably wrong.” It is a good thing to keep this in mind under all circumstances.

Opinions published. Somewhat surprising is that there have been no current DOJ opinion releases in the last 10 years addressing the values ​​for gifts and business entertainment under the FCPA. However, there are three opinion releases from the early 1980s that can provide some pointers to current practitioners.

in the Comment Release 82-01The DOJ approved the donation of cheese samples to Mexican government officials by the Missouri State Department of Agriculture to promote the state of Missouri’s agricultural products. However, the value of the cheese to be submitted was not included in the opinion. in the Comment Release 81-02The DOJ approved a gift of its packaged beef products from Iowa Beef Packers, Inc. to officials at the Soviet Department of Foreign Affairs. The total value of all samples presented was estimated to be less than $ 2,000, and Iowa Beef Packers, Inc. stated that individual sample packages would not exceed $ 250 in value.

The final opinion on gifts is this Comment Release 81-01. In this press release, Bechtel Group Inc. (Bechtel) applied for permission to use the SGV Group (SGV), a multinational organization headquartered in the Republic of the Philippines, made up of separate member companies in ten Asian countries and Saudi Arabia, the Carry out tests. Business consulting, project management and tax advice. The SGV wanted to ask for business on behalf of Bechtel, who had proposed reimbursing the SGV for the gift costs incurred in this business promotion. Regarding the reimbursement of gift costs by Bechtel to SGV, the DOJ stated:

Expenses for gifts or material items of any kind that are incurred without the prior written consent of Bechtel will only be reimbursed if such expenses are permitted under local law. The ceremonial value of the object exceeds its intrinsic value. The cost of the gift will not exceed $ 500 per person and the cost is in accordance with legitimate and generally accepted local custom for such expenses by private businessmen in the country.

Gifts and Business Entertainment Policies and Procedures. Based on the FCPA language and relevant opinion releases, and considering inflation over the past 30 years, it seems reasonable for a company to be able to provide gifts up to a value of $ 500. The following are the guidelines that the submissions would suggest for inclusion in a compliance guideline for gifts to government officials:

  • The gift should be given as a token of appreciation, courtesy, or in return for hospitality.
  • The gift should have a face value, but in no case more than $ 500.
  • No cash gifts.
  • The gift is permitted under both local law and employer / government agency guidelines.
  • The gift should be of a value that is customary in the country in question and appropriate for the occasion.
  • The gift should be for official rather than personal use.
  • The gift should showcase the company’s products or include the company logo.
  • The gift should be presented openly and completely transparently.
  • The cost of the gift should be properly recorded in the company’s books and records.

Business entertainment by government officials. Based on the FCPA language (there are no comments on this point) there is no threshold at which a company can set a value for business entertainment. However, I believe there are clear guidelines that should be included in your corporate spending policy that should include:

  • There must be a fair balance for real business entertainment during an official business trip.
  • All business upkeep costs must be reasonable.
  • The cost of business maintenance must be permitted under (1) local laws and (2) customer guidelines.
  • Business maintenance costs must be in accordance with local custom and practice.
  • Business entertainment costs must avoid the appearance of inappropriateness.
  • Business maintenance costs must be supported by appropriate records and properly recorded in the company’s books and records.

Including these concepts in a compliance policy is a good first step in preventing potential violations from occurring. However, it must be emphasized that this is only a first step. There must be procedures in place to implement these guidelines. At a minimum, you must obtain a business justification from the company representative in order to provide the gift or business entertainment. Next, it should be reviewed and approved by a frontline compliance expert. Depending on the volume and type of request, a CCO approval may then be required. Finally, if there is a COC, it should go to this committee for a final review to make sure everything is in order.

These guidelines must be accompanied by active training of all employees, not only on a company’s compliance policies, but also on the corporate and individual consequences that may arise if the FCPA violates gifts and business entertainment becomes. Finally, it is imperative that all such gifts and business conversations are properly recorded, as required by the book and record component of the FCPA.

And as always, don’t forget the bowel test.

[View source.]