DIVERSITY NEWS
BY BRIGIDA BENITEZ, SEAN GRIFFIN, AND BIZ SCOTT
THE TRUE COST OF MOONCAKES: CULTURAL GUIDANCE TO THE GOVERNMENT’S GUIDANCE
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AROUND THE WORLD, OFFERING SOME- THING OF VALUE TO SECURE A BUSINESS ADVANTAGE IS OFTEN REGARDED AS “DOING BUSINESS” OR “THE WAY THINGS WORK.” For U.S. companies, this is called “a headache for our compliance offi cer,” because, broadly speaking, the Foreign Corrupt Practices Act (FCPA) prohibits off ering foreign offi cials gifts to obtain or retain a business advan- tage. T e FCPA thus requires companies operating overseas to walk a tightrope between what is proper from a legal perspective and what is deemed necessary from a business perspective. Recently, the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) issued guidance to companies trying to harmonize these two con- cepts, but this guidance still requires companies to exercise informed prudence and sophisticated cultural sensitivity. Generally speaking, the FCPA prohibits corruptly off er-
ing anything of value to a foreign offi cial for the purpose of infl uencing the offi cial to confer a business advantage. Since its 1977 enactment, many companies have complained that it fails to recognize the cultural mores of other countries and thus criminalizes behavior that their employees may engage in without any corrupt intent. For example, in Italy, people often give gifts of panettone, a sweet, inexpensive, but labor-intensive bread. Koreans exchange tteok, or rice cakes. In China, people celebrate the Mid-Autumn Festival through gifts of pastries called mooncakes. Such items of minimal value would obviously facilitate a business relation- ship with a foreign offi cial—just as it would constitute an item “of value” that would raise FCPA issues. FCPA compliance was and is complicated by a value that we
hold dear—cultural diversity. Although best practices suggested that companies follow the FCPA to the letter, many companies operating abroad found U.S. law opaque and the rules impractical. Consequently, companies and lawyers criticized the U.S. govern- ment for not recognizing the realities of doing business overseas. In response, Congress amended the FCPA to add the “local law” affi rmative defense in 1988. If a company can
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prove that “the payment, gift or promise . . . was lawful under the written laws and regulations” of the foreign offi cial’s country, the company generally can avoid FCPA liability. At fi rst blush, this would appear to off er some refuge for individuals who give culturally expected gifts. However, the requirement that the laws and regulations be “written laws” is a stumbling block for those who would like to excuse their payment on the ground that it complied with local customs that happened to be understood but not memorialized. In November 2012, the DOJ and SEC issued a Resource
Guide (“Guide”) on their FCPA interpretation and enforce- ment strategy that, among other things, tries to clarify what a company may or may not do in a foreign country as part of its business transactions. T e Guide covers a wide array of topics, including clarifi cation and explanation of how the U.S. government views the provision of gifts and meals that are often the hallmark of business relationships in cities and countries worldwide. Rather than changing government policy, the Guide consolidates in one document the authori- ties’ interpretation of the FCPA, as well as what they consider in their exercise of prosecutorial discretion. T e Guide acknowledges that modest gifts, meals, and
the like given to foreign offi cials can be a legitimate part of conducting business, so long as there is no evidence of “cor- rupt intent.” From the Guide’s statements and hypotheticals, it appears that corrupt intent will be the determining factor as to whether hospitality is proper or improper, and notes that travel and entertainment expenses that “occurred in conjunction with other conduct refl ecting systemic bribery or other clear indicia of corrupt intent” have been the subject of past enforce- ment actions. “Corrupt intent” is the touchstone, because the corrupt intent requirement, in the government’s view, “protects companies that engage in the ordinary and legitimate promo- tion of their businesses while targeting conduct that seeks to improperly induce offi cials into misusing their positions.” T is view of “corrupt intent” seems both optimistic and
unhelpful, as it provides no guidance as to where a cultur- ally expected exchange of gifts suddenly evidences a “corrupt
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