A government official sets up a foundation to aid local organizations. It is funded by business entities that often turn to the government official for help – and usually succeed in getting such help.
Over a six week period, a company sends at least $45,000 in donations to four charitable programs founded by government officials – just as the companies were seeking approval of favorable legislation.
Another company supports a fundraiser for the scholarship fund of a government official.
Another company sponsors a sport competition to help the favorite food bank of a government official.
Another company subsidizes a spa outing in a popular tourist destination to aid the charity of a government official.
Another company helps sponsor a golf tournament benefiting the foundation of a government official.
Another company acknowledges that it participates in government officials’ charitable events to get access to the officials to push the company’s agenda.
“Google” Foreign Corrupt Practices Act and charitable giving and you will have enough reading material to keep you busy the rest of the day.
This material will likely reference the 2004 FCPA enforcement action against Schering-Plough (see here).
In that action, the SEC alleged (here) that Schering-Plough violated the FCPA when its wholly-owned Polish subsidiary (“S-P Poland”) improperly recorded a bona fide charitable donation to a Polish foundation where the founder/president of the foundation was also the director of a government health fund (the “Director”) that provided money to hospitals throughout Poland for the purchase of pharmaceutical products.
Although the SEC and Schering-Plough ultimately resolved the matter based only on violations of the FCPA’s books and records and internal control provisions, the enforcement action is commonly viewed as broadening the “anything of value” element of an FCPA anti-bribery violation. (See here).
The SEC’s tacit interpretation of the “anything of value” element in the Schering-Plough matter is significant because there was no allegation or indication that any tangible monetary benefit accrued to the Director, an individual deemed by the SEC to be a “foreign official” under the FCPA.
Rather, the SEC brought the enforcement action on the basis of its apparent conclusion that S-P Poland’s bona fide charitable donations constituted a “thing of value” to the “foreign official” because the donations were subjectively valued by the official and provided him with an intangible benefit of enhanced self-worth or
So will the above donations to government official charities result in FCPA scrutiny?
Because the government officials are U.S. government officials. See here for the recent New York Times story.
The U.S. has a domestic bribery statute (18 USC 201) (see here) which has similar elements to the FCPA. Yet, I would not hold your breath waiting for domestic bribery prosecutions.
This all begs the question – is there a double standard?
Will a U.S. company’s interaction with a “foreign official” (however that term is interpreted) be subject to more scrutiny and different standards than its interaction with a U.S. official?
Do we reflexively label a “foreign official” who receives “things of value” from private business interests as corrupt, yet when a U.S. official similarly receives “things of value” from private business interests we merely say “well, no one said our system is perfect”?