Two recent opinions released by the Department of Justice (DOJ) serve as a reminder that even under the strictly enforced Foreign Corrupt Practices Act (FCPA), payments to government officials are permissible in certain situations. Given how rarely DOJ issues such opinions and because each provides insight into DOJ's current view of enforcement in particular scenarios, it is worth considering what can be learned from each opinion.
Background on FCPA, Opinion Procedure Process
The FCPA is the primary U.S. law prohibiting bribery of foreign government officials. A little-used tool under the law is to petition DOJ for a written opinion on whether specific activities could trigger enforcement action. The process for requesting an opinion is spelled out in DOJ regulations. Once issued, an opinion creates a rebuttable presumption that the specific conduct does not violate the FCPA, though each opinion is only binding as to the party that requested it. In addition, DOJ allows itself an out if there is any change in the facts presented by the requesting party.
Adoption Service Provider Seeking to Pay Travel Expenses for Government Officials
On August 14, the DOJ issued an opinion in which it stated that it would not take enforcement action against a U.S. adoption agency seeking to pay expenses for 18 foreign government officials to travel to the United States. According to the requesting party, the trip was required under a foreign country law mandating that officials periodically visit adopting families to assess the success of the adoptions. The adoption agency presented a plan to DOJ for making the payments, including economy-class airfare, lodging at a mid-range hotel, local transportation and meals. The agency also indicated that the cost of any additional recreation would not exceed $100, any souvenirs would be of nominal value and include the agency's logo, and the payments were made to providers, not the foreign government officials themselves. In addition, the agency asserted that it had no non-routine business in front of the foreign officials.
In its opinion, the DOJ stated that it would not take enforcement action against the adoption agency because there was no corrupt intent, and the expenses appeared to be "reasonable and bona fide." The DOJ ruled out corrupt intent based on the adoption agency's explanation that the trip was to do both of the following:
- Educate the foreign officials about the agency's services, and
- Introduce the officials to adopting families in furtherance of a legal requirement.
The DOJ also noted that because the expenses would be reasonable and bona fide and directly related to "the promotion, demonstration, or explanation of [the agency's] products or services," the expenses would fall within the FCPA's affirmative defenses.
Logistics Support Contractor Intending to Pay Benefits to Foreign Officials
On October 25, the DOJ issued another opinion related to the payment of foreign officials in response to a request from a U.S. government contractor required to provide logistical support for foreign officials to attend training events. The contractor was awarded the contract by a U.S. government agency and the contract required the contractor to pay stipends to foreign officials attending the training. The stipend amounts were between $8 and $40 per day, depending on the location of the training event and based on a determination made by the U.S. government. In addition, the contractor was instructed to make payment in the first instance to a U.S. government official, who then delivered the payment to the foreign official.
The DOJ notified the contractor that it did not intend to take enforcement action. For one, the DOJ noted that there was no corrupt intent because the contractor was making payments as instructed by a U.S. government agency in accordance with federal law. The DOJ also observed that because the stipends were "called-for and ultimately delivered by agencies and/or personnel of the United States government," the payments were not made for the purpose of obtaining or retaining business.
Payments May Be Permissible, But Analysis is Fact-Specific
While the FCPA broadly prohibits providing anything of value to a foreign official, as made clear in these recent opinions, there are instances in which payments can be made. The important takeaway is that determining permissibility must be done carefully and with close attention to the facts.
For example, it is implicit from the August opinion that the adoption agency would be paying a significant amount of money for the benefit of foreign officials. Yet the payments – for economy-class airfare and modest accommodation and meals – were deemed reasonable. In addition, the fact that payments would be made directly to service providers ameliorated DOJ concerns about funds being diverted for improper use.
Arguably, the second opinion would have been an easier case for DOJ to address, given the role of U.S. government personnel as intermediaries between the requesting party and the foreign officials. But simply making a payment to a foreign official through a third party, even a U.S. government official, would not by itself relieve the payor of liability if there were corrupt intent in order to obtain or retain business or an improper advantage.
Hand in hand with conducting analysis of whether a payment is permissible is documentation of the analysis. Crafting clear, written instructions is also recommended to ensure that personnel fully understand what is allowed, e.g., giving an official a souvenir with the company logo, and what is not, e.g., providing an official with lavish hospitality after an approved, modest meal.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.