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A Double Standard? Part II

A government official has over $7,000 of expenses paid for by an organization hoping to establish a personal connection with the official and seeking access to the official to educate him on a multibillion dollar program favored by the organization.

The same organization spends over $20,000 for baggage-handling tips, alcohol, snacks, refreshments, and other “trip supplies” for another government official.

Sounds like the organization has some FCPA issues, right?

Wrong.

Why?

Because the government officials involved are not “foreign officials,” but rather U.S. government officials and the organization is the U.S. military. (See here for the recent story from the Wall Street Journal).

According to the article, members of Congress are not required to be disclose such expenses and the information is from military expense records obtained through a Freedom of Information Act request.

While not a perfect parallel to an FCPA enforcement action, the above, as well as “A Double Standard Part I” (see here) raise the question of whether there is a double standard.

Will a U.S. company’s interaction with a “foreign official” 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 an organization with a business interest as corrupt, yet when a U.S. official similarly receives “things of value” from an organization with a business interest we merely say “well, no one said our system is perfect”?

Is there any difference between the bottles of wine given to the Thai “foreign officials” in the UTStarcom, Inc. matter (see here para. 23 of the complaint) and the bottles of wine and alcohol given to the U.S. officials by an organization with a business interest pending before the U.S. officials? Is there any difference between the sightseeing trips provided to the Chinese “foreign officials” in the UTStarcom matter and the corporate funded sightseeing trip by the U.S. official discussed in Part I?

One is a crime and the other is … well what is it, just the way things get done?

As always, your comments are welcome.

A Double Standard?

A government official (and his wife) tour a foreign vineyard and castle and spend an afternoon at a ski resort in the Alps. A company can’t foot the bill directly, so it funds a group that then picks up the tab.

Another government official is flown across the world to help close a business deal for a large corporate financial backer (and friend).

Sounds like some potential FCPA issues, right?

Wrong.

Why?

Because the government officials involved are not “foreign officials,” but rather U.S. government officials. (See here for the recent story in the NY Times. The WSJ also recently ran a similar story here – although less focused on privately funded travel).

For those interested in other examples, you will want to visit LegiStorm.com (here) a web site that allows one to search such trips by U.S. official, sponsor, most active sponsor, most expensive trips, etc.

This raises the question of whether there is 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”?

The U.S. has a domestic bribery statute (18 USC 201) (see here) which has similar (yet not identical) elements to the FCPA. Should not there at least be some level of intellectual and enforcement consistency with these statutes?

No doubt many of the trips identified by LegiStorm had a core, legitimate purpose. However, often times payment of a “foreign official’s” travel expenses also have a core, legitimate purpose. The FCPA enforcement action most “on-point” is the 2007 action against Lucent (see here and here).

It’s just not payment of a “foreign official’s” travel expenses which seem to be subject to a double standard, but also corporate donations as well. It’s common knowledge in this country that corporate interests donate, either directly or indirectly, to political campaigns, political action groups, or other causes to curry favor with politicians (or shall I say “participate in the political process”).

Yet, if a company makes even a bona fide charitable contribution abroad, they will be subject to FCPA scrutiny. The FCPA enforcement action most “on-point” is the 2004 action against Schering-Plough (see here) involving a donation to a legitimate Polish castle restoration foundation where the founder/president of the foundation was also the director of a government health fund which provided money to hospitals throughout Poland for the purchase of pharmaceutical products.

All interesting issues/questions to ponder in what seems to be another example of how FCPA enforcement has indeed because the unique creature that it is. (See here for a prior post on this issue).

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