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A Delicious Fact Pattern

The facts would make a delicious exam question.

A company subject to the FCPA engages foreign police officers to protect its local production facility.  The company spends millions to, among other things,  feed the police officers.  Analyze the company’s FCPA exposure.

The fact pattern is very much real world.

According to various media reports Freeport Indonesia, a subsidiary of Phoenix based mining company Freeport McMoRan Cooper & Gold,  has paid police officials in Papua New Guinea over $14 million in security related allowances, food and other in-kind necessities.

In this Jakarta Post article, the company claims that the  funds given to security personnel guarding project sites in Papua are allowed under a multi-national pact initiated in 2000 (the Voluntary Principles on Security and Human Rights – see here) by the U.S. and U.K. government which allows companies to contribute or reimburse the costs of protecting their facilities and personnel.  A Freeport spokesperson says that the company “uses the voluntary principles as guidelines to disburse the security funds” and that the money was “given voluntarily and without any intention of bribing state officials.”  The Jakarta Post article says Freeport’s spending on government-provided security measures has increased from $8 million in 2008 to $14 million in 2010.  A company spokesperson is quoted as saying that “about 80 percent of the funds were spent to support facilities and infrastructure, including meals for officers, and rest of the funds were transferred to the bank accounts of military units.”

As indicated by this 2006 New York Times article, the Freeport payments discussed above have been in the public domain for some time.

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