Corporate Gift-Giving and Avoiding Incarceration
Many holidays and celebrations involve the exchange of gifts. Gift-giving traditions are an equally important part of the business landscape across the world. Unfortunately, the solicitation and payment of bribes is also a tradition that goes back for centuries. That is what makes gift-giving traditions and practices fraught with risk. Gifts are “something of value” – the broad way that bribes are defined in the U.S. Foreign Corrupt Practices Act (FCPA). When “something of value” is given to someone who meets the definition of a “foreign official”, this brings the gift giver one step closer to having violated the FCPA. All that remains for the trifecta of FCPA liability is for the gift recipient to provide an “improper advantage” or “assist … in obtaining or retaining business …or directing business to, any person.”
Given the risks, why give gifts in a commercial setting at all? In fact, some companies either prohibit or severely limit the types of gifts that can be given and prohibit their employees from accepting any gifts whatsoever. I once gave a gift of a pen inscribed with my company’s logo on it to the chief compliance officer of a client as a thank you for speaking at a conference that I had organized. I subsequently received a warmly worded, extremely gracious handwritten note from him thanking me for the gift but returning the pen along with the explanation that he had authored the gift-giving policy as a zero-tolerance policy so he couldn’t accept it.
Outbound gifts to clients and business contacts are less straightforward. Companies that do business internationally should have a gifts, travel and entertainment policy that provides guidance to employees on how best to navigate corporate gift-giving. At a minimum, they should put a monetary threshold on the value of a gift that can be given, a maximum number of gifts that can be given over the course of the year and an approval process before any gifts whatsoever can be given to someone who meets the definition of a foreign official. For those of you who’s daily life doesn’t entail compliance matters, a foreign official is an employee of a foreign government, state-owned company or public international organization which itself can give rise to confusion especially the “state-owned company” and “public international organization” parts of that definition. In many parts of the world, the line between governmental administration and commerce is murky and the government controls certain sectors of the economy. That control may extend to airlines, airports, ports, public utilities, oil and gas, mining, other natural resources such as timber and agricultural products, real estate, power generation and banking. When a foreign government has majority control over a commercial entity, they are referred to as “state-owned companies” or “instrumentalities of a foreign government”. It is very important to understand the various companies with which your organization is interacting and whether they are state-owned since if they are, their employees meet the definition of “foreign officials”. Public international organization is a term that is not self-explanatory. A public international organization (PIO) is a quasi-governmental agency that takes funding from two or more countries. Examples of such PIOs include the United Nations, the World Bank and the European Bank for Reconstruction and Development.
In developing, implementing and operationalizing any anti-bribery corruption policies or procedures including those related to gifts, in order for them to be at all effective, there must first be a detailed inventory of sorts which identifies each governmental touchpoint between the organization and the patchwork of government agencies, state-owned companies and public international organizations with which the organization interacts. This is often the biggest challenge in operationalizing an effective anti-bribery and corruption compliance program for a few reasons including knowing where to look. There are the obvious places such as customers and government regulators. There are less obvious places such as vendors, joint venture partners and within routine operational activities such as licensing, permitting, product registration, taxation and environmental compliance. Often overlooked is your employees and officers who themselves may be foreign officials, former foreign officials or family members or close associates.
Once you have amassed your inventory of government touchpoints, there then needs to be a dynamic list of pending sales, target customers, RFP responses, public tenders, government approval and ongoing lobbying activity that must be factored into the company’s assessment of its FCPA risk. This information must be readily accessible to business leaders and compliance personnel who are being asked to review requests to give gifts to foreign officials so that they can factor those pending situations into their decision-making. As a general rule, it is not a good idea to give a gift to a foreign official when there is a decision pending. One way to mitigate the risks that gifts may pose under the FCPA is to limit the dollar amount to a small amount such as $50 or even $25 dollars. Gifts bearing the company logo such as pens, mugs, or golf balls are unlikely to trigger liability. World Cup or Formula One junkets, Rolexes, use of the company jet or paying for someone’s tuition or medical bills are far less defensible and don’t pass the optics test.
The biggest issue that can give rise to FCPA liability in gift giving is a lack of awareness. Most often, a lack of awareness stems from poor communications, insufficient training and internal controls. If there is a high awareness that gift-giving can cause problems, particularly when it comes to foreign officials AND employees and officials are clear in their understanding of what a foreign officials is, your gifts policy and the controls underlying it will probably shield the organization from having a big problem. If this statement doesn’t describe your organization, there are few steps your should take.
Take an “inventory” of your government touchpoints.
Implement a gift policy that includes an approval process and monetary thresholds
Provide recurring training and communication to raise awareness about the potential risks of gift-giving and the guardrails that are in place.
Designate a point of contact where people can get advice on how to avoid violating the gift policy.
Global organizations must strike a balance between honoring and respecting the gift-giving cultures in the various countries in which they do business while still avoiding situations that put the organization and its employees at risk. One additional way to do that is through open communication with the company’s business partners, customers and other institutions and individuals that are important to the company’s ability to do business. By explaining the company’s obligations under the FCPA and other anti-bribery laws as the reason why they either are not giving gifts or they are very modest gifts but emphasizing how valued the relationship is, you are setting a tone while still honoring and respecting their traditions.