Opinion Releases
Prior to the 2012 FCPA Guidance, the Justice Department issued two 2007 Opinion Releases which offered guidance to companies considering whether to, and if so how to, incur travel and lodging expenses for government officials. Both Opinion Releases laid out the specific representations made to the DOJ, which led to the Department to approve the travel to the US by the foreign governmental officials. These facts provided strong guidance to any company which seeks to bring such governmental officials to the US for a legitimate business purpose. In Opinion Release 07-01, the Company was desired to cover the domestic expenses for a trip to the US for a six-person delegation of the government of an Asian country for an educational and promotional tour of one of the requestor's US operations sites. In Opinion Release 07-01 the representations made to the DOJ were as follows:
The response from the DOJ stated: “Based upon all of the facts and circumstances, as represented by the requestor, the Department does not presently intend to take any enforcement action with respect to the proposal described in this request. This is because, based on the requestor's representations, 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."
In Opinion Release 07-02 the Company desired to pay certain domestic expenses for a trip within the US by approximately six junior to mid-level officials of a foreign government for an educational program at the Requestor's US headquarters prior to the delegates attendance at an annual six-week long internship program for foreign insurance regulators sponsored by the National Association of Insurance Commissioners (NAIC).
In Opinion Release 07-02 the representations made to the DOJ were as follows:
As with Opinion Release 07-01, the DOJ ended this Opinion Release by stating, “Based upon all of the facts and circumstances, as represented by the Requestor, the Department does not presently intend to take any enforcement action with respect to the planned educational program and proposed payments described in this request. This is because, based on the Requestor's representations, 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."
Travel and Lodging for Governmental Officials
What can one glean from these two 2007 Opinion Releases? Based upon them, a US company can bring foreign officials into the US for legitimate business purposes. A key component is that the guidelines are clearly articulated in a compliance policy. Based upon Releases Opinions 07-01 and 07-02, the following should be incorporated into a compliance policy regarding travel and lodging:
Incorporation of these concepts into a compliance program is a good first step towards preventing any FCPA violations from arising, but it must be emphasized that they are only a first step. These guidelines must be coupled with active training of all personnel, not only on the compliance policy, but also on the corporate and individual consequences that may arise if the FCPA is violated regarding gifts and entertainment. Lastly, it is imperative that all such gifts and entertainment are properly recorded, as required by the books and records component of the FCPA.
The 2012 FCPA Guidance does specify some types of examples of improper travel and entertainment
$10,000 spent on dinners, drinks, and entertainment for a government official;
However, you can use the matter as a good reason to review not only your company’s procedures but to test to determine if they are being followed or if there are issues which you might need to take a closer look at. When a Wal-Mart, News Corp or GSK is in the news for alleged FCPA violations, it provides you a good reminder to review your compliance program.
Three Key Takeaways
Payment for travel expenses is appropriate it there is a legitimate business purpose.
This month’s sponsor is the Doing Compliance Master Class. In 2018, I am partnering with Jonathan Marks and Marcum LLC to put on training. Look for dates of one of the top compliance related training going forward.