intent.” For example, one would think that giving mooncakes as part of China’s Mid-Autumn Festival seems innocent enough, but the head of a Hong Kong construction company went to prison when his gift of mooncakes was deemed a bribe. (T e construction company head was sentenced under Hong Kong anti-bribery laws, not the FCPA, but the similarity between the two is enough to highlight the risk.) Similarly, Korean rice cakes appear harmless, but Diageo plc ended up paying the SEC more than $16 million to settle FCPA charges arising out of, among other things, its South Korean subsidiary spending over $64,000 on “rice cake payments” to South Korean military offi cers with liquor procurement responsibili- ties. T us, gifts that arguably comply with a country’s cultural mores—and situations that do not obviously evince a “corrupt intent”—may still violate the FCPA. As an example, the Guide states a company’s executives may
present “reasonable gifts” to foreign offi cials “as tokens of esteem or gratitude,” provided that such gifts are made openly and transpar- ently, properly recorded in the company’s books and records, and—importantly—“given only where appropriate under local law, customary where given, and reasonable for the occasion.” People often mistake the last requirement for a loophole.
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Even after over 30 years of the FCPA, some people still operate under the mistaken premise that the prevalence of bribery in a country means that they can bribe offi cials without concern for the FCPA. In Japan, for example, public servants are gener-
items of nominal value would ever evidence corrupt intent.” In addition, the Guide states that although corrupt intent will likely be evidenced by large, extravagant gifts, smaller gifts will not be viewed as corrupt, except when part of a pattern or practice evidencing a corrupt scheme to improperly infl uence offi cials. T us, even though the Guide declines to off er a de minimis exception, a small or moderately priced gift is clearly less likely to draw unwanted inferences from the government than a more extravagant one. T is may seem obvious, but recent FCPA history is littered
with settling companies and defendants who thought otherwise. UTStarcom, Inc. spent nearly $7 million on trips for employees of Chinese state-owned companies to travel to popular U.S. tourist destinations. T e Guide also remarks unfavorably on Lucent, which spent millions of dollars treating Chinese govern- ment offi cials to trips to Las Vegas, Disney World, the Grand Canyon, and other popular destinations. To guard against joining this list, companies do well to
engage in a rigorous, culturally sensitive compliance program. Such a program should address local anti-bribery laws, with an eye toward the FCPA’s local law affi rmative defense. A success- ful program will include the company’s third-party agents, and as such, should be conducted in the agents’ native language. (T e shareholder derivative settlement in the SciClone case made native-language training a requirement.) In this way, a company can eff ect FCPA compliance through cultural
NOT BE VIEWED AS CORRUPT, EXCEPT WHEN PART OF A PATTERN TO INFLUENCE OFFICIALS.
CORRUPT INTENT WILL LIKELY BE EVIDENCED BY LARGE, EXTRAVAGANT GIFTS. SMALLER GIFTS WILL
ally prohibited from receiving gifts, although local law cites specifi c examples of exceptions (e.g., wedding gifts are generally permitted, while farewell gifts are not). T e Guide suggests that the better course of action is to
keep gifts moderately priced. As the Guide states: Items of nominal value, such as cab fare, reasonable meals
and entertainment expenses, or company promotional items, are unlikely to improperly infl uence an offi cial, and, as a result, are not items that have resulted in enforcement action by DOJ or SEC. T e larger or more extravagant the gift, however, the more likely it was given with an improper purpose. DOJ and SEC enforcement cases thus have involved single instances of large, extravagant gift-giving (such as sports cars, fur coats, and other luxury items) as well as widespread gifts of smaller items as part of a pattern of bribes. Although the Guide does not off er a convenient bright line
rule for when gifts and meals are permissible, it does admit that “it is diffi cult to envision any scenario in which the provision of cups of coff ee, taxi fare, or company promotion
DIVERSITY & THE BAR® MARCH/APRIL 2013
sensitivity. Finally, the compliance program should emphasize the importance of keeping thorough and accurate records of any gifts or other payments to foreign governments or offi cials. T e Guide reiterates the importance of internal controls over fi nancial reporting, which should include a tone of integrity and ethics, risk assessments, and policies and procedures. Compliance with both the FCPA and a country’s
cultural gift-giving expectations requires both legal and cultural sophistication. Local custom alone will not insulate a company from a FCPA charge, and there are no bright line rules to distinguish a moderate illegal payment from a corrupt off er. Only through a compliance program that combines cultural awareness with a thorough understanding of the FCPA can a company satisfy its legal obligations while accomplishing its business objectives. D&B
Brigida Benitez, Sean Griffi n, and Biz Scott are attorneys at Steptoe & Johnson LLP.
MCCA.COM
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