Certain Foreign Corrupt Practices Act enforcement actions have involved “foreign officials” attending seminars or other educational events in desirable locations. (See here, here, here, here, here), While at the event, the “foreign officials” are treated to fancy dinners, alcohol and other fun things.
The above makes this recent New York Times article titled “Big Tech Funds a Think Tank Pushing for Fewer Rules. For Big Tech” interesting.
According to the article:
“A year ago, antitrust officials from Australia, Brazil, China, Japan and eight other countries enjoyed $110-a-plate steak dinners and unlimited pours from $70 bottles of wine at a beachfront hotel surrounded by panoramic views of the sun setting over the Pacific Ocean.
The opulent meal was the culmination of a weeklong conference in scenic Huntington Beach, Calif., for 30 foreign government officials who enforce competition laws. The trip was organized and mostly paid for by the Global Antitrust Institute, a part of the Antonin Scalia Law School at George Mason University in Fairfax, Va.
Regulators spent the days in classes with the institute’s staff, which included a senior federal judge and a former commissioner at the Federal Trade Commission. The program was presented as continuing education for antitrust regulators — a way to learn more about the economic underpinnings of competition law.
But critics and past attendees of similar conferences run by the institute said the sessions were more about delivering a clear message to international officials that benefited the companies paying for the event: The best way to foster competition is to maintain a hands-off approach to antitrust law.
The Global Antitrust Institute is bankrolled in large part by tech companies — corporate donors like Google, Amazon and Qualcomm — that are facing antitrust scrutiny from some of the regulators who attended its programs, according to hundreds of pages of emails and documents obtained through open records laws, interviews with four past conference participants, and observation of a conference last year in Huntington Beach.
The documents included donation checks for hundreds of thousands of dollars from Google and Amazon, as well as a three-year, multimillion-dollar donation agreement from Qualcomm. Those checks were a key component of the institute’s $2.1 million budget in the year that ended in June 2019.
[…]
The gap between the deep pockets of the institute’s corporate donors and the overseas regulatory agencies is especially stark in a country like Brazil, where the annual budget for Brazil’s antitrust regulator is about $15 million.
Brazil’s competition authority, the Administrative Council for Economic Defense, better known as CADE, is clear about its financial constraints. So when the institute invited CADE officials to attend a conference in 2016, Alexandre Cordeiro Macedo, the agency’s general superintendent, who oversees its antitrust investigations, said that they were eager to participate, but that it would be difficult to afford sending staff.
“I must let you know, however, that we are facing severe budgetary restraints and unless the expenses are covered, we cannot unfortunately assure we will be able to send a representative,” said Mr. Cordeiro.
The institute offered to pay for up to six CADE officials to attend the conference in Washington. Since then, other CADE staff have attended institute conferences in Oahu, Santa Monica and Tokyo. In each case, the institute has covered travel, hotel, transportation and most meals — even allowing some officials to spend an extra night at a resort to recover from jet lag.
Since 2015, 27 CADE officials have attended the group’s conferences, according to the agency. Last year, the institute paid for 10 Brazilian judges to fly business class to attend a conference at a Four Seasons hotel in Lisbon, Portugal. Mr. Cordeiro was also a visiting scholar at the institute, spending two months there in 2017.
It’s created a close working relationship. When CADE received an invitation for the Huntington Beach conference, the agency could barely contain its excitement.
“I just want to let you know that among all the other training opportunities that we offer along the year, the one from GAI is without a doubt the most appealing to our staff,” wrote a CADE official in an April 2019 email.
CADE has allowed the institute to handpick attendees. After 24 agency candidates applied for the six spots at the 2016 conference in Washington, the institute selected the six candidates it wanted. A year later, for a conference in Dubai, G.A.I. selected from a pool of eight CADE candidates for two attendees and two wait-list spots.”
Based on the above, the analysis under the FCPA’s anti-bribery provisions would generally go something like this.
Foreign government antitrust officials would certainly be considered “foreign officials.”
Getting educated / receiving information / attending an event in a desirable location / partaking in meals and beverages would certain be considered something of value.
Although the tech companies did not directly provide these things of value to the foreign officials, under the third-party payment provisions the Global Antitrust Institute at George Mason would seem to qualify as “any person.” The third-party payment provisions generally capture providing something of value (the tech companies contributions to the Global Antitrust Institute certainly qualify) to “any person, while knowing that all or a portion of such money or thing of value will be offered, given, or promised, directly or indirectly, to any foreign official.” Thus, did the tech companies know that by contributing to the Global Antitrust Institute that it would in turn provide various things of value to foreign officials?
In terms of “obtain or retain business,” the FCPA’s legislative history is clear that Congress intended to capture things of value to foreign officials to influence foreign laws or regulations.
Even if all of the core elements of an FCPA anti-bribery have been met (including corrupt intent – which seems to be inferred in most corporate enforcement actions), the FCPA’s affirmative defense for reasonable and bona fide expenditures directly related to a business purpose may come into play. The FCPA states that it shall be an affirmative defense to an FCPA anti-bribery violation if the thing of value was:
“a reasonable and bona fide expenditure, such as travel and lodging expenses, incurred by or on behalf of a foreign official … and was directly related to: (a) the promotion, demonstration, or explanation of products or services; or (b) the execution or performance of a contract with a foreign government or agency thereof.”
It is the directly related prong of the affirmative defense that may not be met.
Regardless of whether the tech companies contributions to the Global Antitrust Institute, which were then used to provide things of value to foreign officials, raise issues under the anti-bribery provisions, what about the FCPA’s book and records and internal controls provisions? How did the tech companies book the contributions to the Global Antitrust Institute? In certain instances, the SEC has taken issue with a company booking a charitable contribution as a charitable contribution because the company had ulterior motives. Is making a contribution to the Global Antitrust Institute without knowing how it spends the money an issue under the internal controls provisions which generally require issuers to “devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances” that certain financial objectives are met?
All interesting questions to ponder.
Strategies For Minimizing Risk Under The FCPA
A compliance guide with issue-spotting scenarios, skills exercises and model answers. "This book is a prime example of why corporate compliance professionals and practitioners alike continue to listen to Professor Koehler."
Order Your Copy
