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About Those Internship And Hiring Practices Enforcement Actions …


The most recent edition of the always informative FCPA Update from Debevoise & Plimpton has a lead article titled “Hiring a Foreign Official’s Family and Friends: The “Thing of Value” Under the FCPA.”

The article does a nice job summarizing the key points of the six internship and hiring practices enforcement actions since 2015 (BNY Mellon, Qualcomm, JP Morgan, Credit Suisse, Deutsche Bank and Barclays).

The article begins:

“In these hiring cases, the SEC and DOJ have long taken the position that providing a job or even an unpaid internship to a third party – such as a relative or friend of a foreign official – in order to obtain business, constitutes providing a “thing of value” to the official.

This theory underlies each of the hiring practices settlements. But what is the “thing of value” that has been provided to the foreign official in such cases? Is it the third-party payment itself or a more nebulous, intangible benefit separate from that payment? […] [T]he SEC and DOJ have suggested that the benefit is largely psychological.

The government’s third-party benefits theory may be tested soon in court. As DOJ increasingly brings individual FCPA prosecutions, the body of FCPA case law – historically quite limited – is slowly growing. It likely is only a matter of time before a court squarely considers whether a defendant has provided a “thing of value” to a foreign official when providing pecuniary or other benefits only to a third-party.”

As detailed in this prior post, I also have concerns about the government’s theory of enforcement in the internship and hiring practices cases. However, I am less confident that the government’s theory of enforcement “may be tested soon in court.”

None of the six corporate cases to date have involved related FCPA charges against company employees and the best way for the government to “protect” a lucrative corporate enforcement theory is … well … not to charge individuals (who are more inclined to put the government to its burden of proof) using the enforcement theory.

The FCPA landscape has seen this tactic at play for years in connection with the approximately 25 corporate enforcement actions against the pharmaceutical and medical device industries based on the enforcement theory that certain employees of foreign health care systems (such as physicians, lab personnel, etc) are “foreign officials” under the FCPA. Not one corporate enforcement has involved related FCPA charges against company employees. 

Back to the FCPA Update, it does a nice job summarizing potentially analogous case law and concludes as follows:

“Past decisions in the domestic bribery context may foreshadow how courts in the future approach the theory underlying the SEC’s and DOJ’s hiring practices cases. At the same time, one should not simply assume, without analysis, that a company has provided a “thing of value” to a foreign official when it has hired or provided some other benefit to the official’s relatives or friends.

When a company hires a relative or friend of an official, the value paid to the hiree is not merely “imputed” to the official. That is, a $200,000 salary paid to an official’s son does not necessarily constitute a $200,000 “thing of value” provided to the official. Rather, in any given case, the benefit to the official may be intangible – such as psychological satisfaction, pride, or enhanced social standing – or may be pecuniary – such as a reduced need to cover the expenses of his child – depending on the specific facts of the case.

Key factors for consideration include the extent to which the evidence shows that the official subjectively valued the benefit that was paid to the third-party, how the payment in fact inured to the official’s tangible or intangible benefit, and what relationship the official had with the third-party payee. And of course, as in every FCPA case, the payor’s intentions and understanding will also be critical, including whether the payor expected the third-party payment to influence the official to misuse his position for the payor’s benefit.”

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