- FCPA Professor - http://fcpaprofessor.com -

What’s The Difference?

It was not my intent to publish a third-straight post on double standard issues, let alone a post with the same headline as yesterday (see posts here [1] and here [2] from earlier this week).

However, in writing on the double standard topic (that is how business interactions with alleged “foreign officials” seem to be subject to different standards than business interactions with similarly situated U.S. parties) numerous examples abound that are hard to ignore.

Consider the following.

A Foreign Corrupt Practices Act enforcement action [3] included allegations that a company paid royalties to Argentine physicians and for travel of Chinese physicians.

Another FCPA enforcement action [4] included allegations that a company provided various gifts such as vacation packages, televisions, and laptops to Mexican healthcare workers.

Another FCPA enforcement action [5] included allegations that a company provided various gifts such as meals, wine, visits to bath houses, card games, specialty foods,  door prizes, spa treatments, cigarettes and visits to karaoke bars to Chinese physicians.

Another FCPA enforcement action [6] included allegations that a company provided travel benefits to Polish and Romanian physicians.

Another FCPA enforcement action [7] included allegations that a company provided travel benefits to Croatian physicians; hospitality, gifts, and support for international travel for Chinese physicians; international travel and recreational opportunities for Czech physicians; and gifts, and support for domestic and international travel for Italian physicians.

Another FCPA enforcement action [8] included allegations that a company provided travel to medical conventions for Polish physicians as well as travel and other gifts for Romanian physicians.

Other examples could also be cited, but by now you should get the point – numerous FCPA enforcement actions have included allegations that a company subject to the FCPA provided various things of value to foreign physicians or other foreign healthcare workers.

Against this backdrop, this [9] recent Wall Street Journal article titled “Drug and Medical-Device Makers Paid $6.49 Billion to Doctors, Hospitals in 2014” notes:

“Drug and medical-device makers paid $6.49 billion to U.S. doctors and teaching hospitals during 2014, according to the federal government’s first full-year accounting of the breadth of industry financial ties with medical providers.

The tally comprises company payments to more than 600,000 doctors and 1,100 hospitals for services such as consulting, research and promotional speeches about drugs, as well as the value of free meals provided to doctors by sales reps pitching products.

[…]

Payments for food, beverages, travel and lodging amounted to $403.64 million, the vast majority of it in in-kind payments. Details of some payments for miscellaneous “entertainment” included a $65 massage at an airport, Alcatraz tickets and a $2,000 payment for a training seminar in the Cayman Islands.”

So what’s the difference between this conduct and the conduct alleged in FCPA enforcement actions?

If your answer is that the FCPA enforcement actions involved “foreign officials” you are correct to the extent the DOJ/SEC alleged that physicians and other healthcare workers of the above healthcare systems were “foreign officials’ even though there is no legal support for this position.

Even if there was,  given that approximately 20% of U.S. hospitals are owned by state or local governments (see here [10]) and an additional 150 or so medical centers are run by the Veterans Health Administration (see here [11]), one can presume that portions of the $6.49 billion in 2014 was given to U.S. officials – if the enforcement theory is to be applied in an intellectually consistent manner.

Yet, one should not hold their breath waiting for enforcement actions under 18 U.S.C 201, the U.S. domestic bribery statute with very similar elements to the FCPA’s anti-bribery provisions.  Nor should one hold their breath as to any books and records or internal controls enforcement actions regarding such payments by issuer companies.

But the question is why?

Assuming that foreign physicians and healthcare personnel are indeed “foreign officials” under the FCPA, why should corporate interaction with a “foreign official” be subject to greater scrutiny and different standards of enforcement than corporate interaction with a U.S. official?  Why do we reflexively label a “foreign official” who receives “things of value” from private business interests as corrupt, yet generally turn a blind eye when it happens here at home?

For additional posts on the specific double standard highlighted above, see here [12] and here [13].