Opinion Releases can provide valuable information for the compliance practitioner. I agree with the statement found in the 2012 FCPA Guidance that “DOJ’s opinion procedure is a valuable mechanism for companies and individuals to determine whether proposed conduct would be prosecuted by DOJ under the FCPA. Generally speaking, under the opinion procedure process, parties submit information to DOJ, after which DOJ issues an opinion about whether the proposed conduct falls within its enforcement policy.”
In the areas of charitable donations, the DOJ has provided several Opinion Releases which give solid guidance on this tricky issue. There have been four Opinion Releases in the area of charitable donations under the FCPA. In each Opinion Release, the DOJ indicated that it would not initiate prosecutions based upon the fact scenarios presented to it.
This request was from a US based energy company that planned to operate a plant in
South Asia, in an area where was no medical facilities available. The energy company planned to donate $10 million for equipment and other costs to a medical complex that was under construction nearby. The donation would be made through a US charitable organization and a South Asian LLC.
The energy company stated it would do three things with respect to this donation.
- Before releasing funds, the energy company said it would require certifications from the officers of all entities involved that none of the funds would be used in violation of the FCPA.
- It would ensure that none of the persons employed by the charity or the LLC were affiliated with the foreign government.
- The energy company would require audited financial reports detailing the disposition of the funds.
This request was from a US based utility company that planned to operate a plant in
Asia, in an area where there was no primary-level school. The utility company planned to donate $100,000 for construction and other costs to a government entity that proposed to build an elementary school nearby. Before releasing funds, the utility company said it would require certain guarantees from the government entity regarding the project, including that the funds would be used exclusively for the school.
This request was from a Delaware company doing business in Africa. The company desired to initiate a pilot project under which it would contribute $25,000 to the Ministry of Finance in the country to improve local enforcement of anti-counterfeiting laws. The contribution would fund incentive awards to local customs officials, which was needed because this African country was a major transit point for illicit trade and the local customs officials have no incentive to prevent the contraband.
The company said that along with the contribution, it would execute an agreement with the Ministry to encourage exchange of information and establish procedures and criteria for incentive awards. The company said that if the program is successful, the awards would continue to be funded as needed, and the company will seek the participation of its competitors in this program.
The company would implement at least five safeguards to ensure the funds would be used as intended, including:
- Payments to a valid government account, subject to internal audits.
- Payments only upon the confirmation that goods seized were in fact counterfeit.
- The Ministry would identify award candidates without input from the company and would provide evidence that funds were used properly.
- The company would monitor the program’s effectiveness.
- Records will be required to be kept and be available for inspection for a period of time.
A US Company desired to move from a charitable entity model to a for profit model in the area of micro-financing. To do so it was required to make a large cash donation to a charity in the country in question. The company engaged in three rounds of due diligence in which it determined that the most favorable candidate had a government official on its Board of Directors but that under the laws of the country in question, the government official could not receive compensation to sit as a Board member. After initially listing the 3 levels of due diligence in which the company had engaged prior to finalizing its choice of local entity to receive the donation; the DOJ noted that the donation ‘requested’ of the US Company would be subject to the following controls:
- Payments of the donations would be staggered over a period of eight quarters rather than in one lump sum.
- Ongoing monitoring and auditing of the funds use for a period of five years.
- The donations would be specifically utilized for the building of infrastructure.
- The funds could not be transferred to either the charities parent or any other affiliated entity.
- The funds would not be paid to the parent of the organization receiving the grant and there was an absolute prohibition on compensating Board Members.
- The proposed grant agreement under which the funds would be donated had significant anti-corruption provisions which included a requirement that the local organization receiving the funds adopt an anti-corruption policy and that company making the donation shall receive full access to the local organization’s books and records.
- Right to terminate the agreement and recall the funds if evidence was found that “reasonably suggests” a breach of compliance provisions.
Dick Cassin, writing in the FCPA Blog, in a posting entitled “When is Charity a Bribe?”, cited to the then Deputy Chief of the Criminal Division’s Fraud Section at the DOJ Mark Mendelsohn. Mendelsohn was asked about the guidelines regarding requests for charitable giving and the FCPA and said that any such request must be evaluated on its own merits. He advocated a “common sense” approach in identifying and clearing Red Flags. Some of the areas of inquiry would include answers to the following questions.
- Is there a nexus between the charity and any government entity from which the company is seeking a decision?
- If the governmental decision-maker holds a position at the charity, that’s a red flag.
- Is the donation consistent with the company’s overall pattern of charitable donations?
- If one donation or a series of them is more than the company has made to any other charity in the past five years, that would also be a red flag.
- Who made the request for the donation and how was that request made?
Three Key Takeaways
- You can utilize the Opinion Release process for a wide variety of issue.
- You must manage your charitable donations program even after the money has been donated.
- Never forget the Mendelsohn common sense approach to charitable donations.
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