In the second Opinion Release of 2007, 07-02, the Department of Justice (DOJ) considered another scenario where a US company desired to pay for travel to the US of foreign officials and for some business entertainment while these persons were in the US. It had some additional facts beyond those from Opinion Release 07-01 which are important for a compliance program.
In Opinion Release 07-02 the Company desired to pay certain domestic expenses for a trip to the US by approximately six junior to mid-level officials of a foreign government for an educational program at the Requestor’s US headquarters prior to the delegates attendance at an annual six-week long internship program for foreign insurance regulators sponsored by the National Association of Insurance Commissioners (NAIC). The event was held at the Requestor’s US headquarters. The six officials have been selected by the foreign government, without the involvement of the Requestor.
The purpose of the trip was to familiarize the officials with the operation of a United States insurance company. The Requestor has no non-routine business pending before the foreign government agency that employs these officials. The sponsored training program will last for approximately six days (five days of training plus travel time). The Requestor paid the travel expenses where were limited to domestic economy class air travel to the Requestor’s U.S. headquarters. The Requestor paid for the domestic lodging, local transport, meals and incidental expenses (up to a modest set amount per day upon presentation of a receipt), and a modest four-hour city sightseeing tour for the six officials.
In Opinion Release 07-02 the representations made to the DOJ were as follows:
- The US Company would not pay the travel expenses or fees for participation in the NAIC program.
- The US Company had no “non-routine” business in front of the foreign governmental agency.
- The routine business it did have before the foreign governmental agency was guided by administrative rules with identified standards.
- The US Company would not select the delegates for the training program.
- The US Company would only host the delegates and not their families.
- The US Company would pay all costs incurred directly to the US service providers and only a modest daily minimum to the foreign governmental officials based upon a properly presented receipt.
- Any souvenirs presented would be of modest value, with the US Company’s logo.
- There would be one four-hour sightseeing trip in the city where the US Company is located.
- The total expenses of the trip are reasonable for such a trip and the training which would be provided at the home offices of the US Company.
As with Opinion Release 07-01, the DOJ ended this Opinion Release by stating, “Based upon all of the facts and circumstances, as represented by the Requestor, the Department does not presently intend to take any enforcement action with respect to the planned educational program and proposed payments described in this request. This is because, based on the Requestor’s representations, consistent with the FCPA’s promotional expenses affirmative defense, the expenses contemplated are reasonable under the circumstances and directly relate to “the promotion, demonstration, or explanation of [the Requestor’s] products or services.” 15 U.S.C. § 78dd-2(c)(2)(A).
What can one glean from these two 2007 Opinion Releases? Based upon them, it would seem that a US company can bring foreign officials into the US for legitimate business purposes. A key component is that the guidelines are clearly articulated in a Compliance Policy. Based upon Releases Opinions 07-01 and 07-02, the following should be incorporated into a Compliance Policy regarding travel and lodging:
- Any reimbursement for air fare will be for economy class.
- Do not select the particular officials who will travel. That decision will be made solely by the foreign government.
- Only host the designated officials and not their spouses or family members.
- Pay all costs directly to the service providers; in the event that an expense requires reimbursement, you may do so, up to a modest daily minimum (e.g., $35), upon presentation of a written receipt.
- Any souvenirs you provide the visiting officials should reflect the business and/or logo and would be of nominal value, e.g., shirts or tote bags.
- Apart from the expenses identified above, do not compensate the foreign government or the officials for their visit, do not fund, organize, or host any other entertainment, side trips, or leisure activities for the officials, or provide the officials with any stipend or spending money.
- The training costs and expenses will be only those necessary and reasonable to educate the visiting officials about the operation of your company.
Yet these are only the first steps. A company must train its employees not only the specifics of a gift, travel and entertainment program in a compliance program. Pre-travel and entertainment approval by your compliance function book-ended with post monitoring of all expenses should be documented in case the regulators ever come knocking.