In 2007, the DOJ issued two Foreign Corrupt Practices Act (FCPA) Opinion Releases which offered guidance to companies considering whether to, and if so how to, incur travel and lodging expenses for government officials. Both Opinion Releases laid out the specific representations made to the DOJ, which led to the Department approving the travel to the US by the foreign governmental officials. These facts provided strong guidance to any company which seeks to bring such governmental officials to the US for a legitimate business purpose. In this podcast I discuss Opinion Release 07-01. In the next episode, I will take up 07-02.
In Opinion Release 07-01, the Company was desired to cover the domestic expenses for a trip to the US for a six-person delegation of the government of an Asian country for an educational and promotional tour of one of the requestor’s US operations sites. The purpose of the visit was to familiarize the delegates with the nature and extent of the requestor’s operations and capabilities and to help establish the requestor’s business credibility. The requestor desired to participate in future business opportunities in the foreign country similar to those it conducts in the U.S. The visit was scheduled to last for four days and will be limited to domestic economy class travel to one U.S. operations site only. The requestor paid for the domestic lodging, local transport, and meals for the six officials. The foreign government plans to pay the costs of the international airfare.
In Opinion Release 07-01 the representations made to the DOJ were as follows:
- A legal opinion from an established US law firm, with offices in the foreign country, stating that the payment of expenses by the US Company for the travel of the foreign governmental representatives did not violate the laws of the country involved;
- The US Company did not select the foreign governmental officials who would come to the US for the training program;
- The delegates who came to the US did not have direct authority over the decisions relating to the US Company’s products or services;
- The US Company would not pay the expenses of anyone other than the selected official;
- The officials would not receive any entertainment, other than room and board from the US Company;
- All expenses incurred by the US Company would be accurately reflected in this Company’s books and records.
The DOJ stated: “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 proposal 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.”
What can one glean from this Opinion Release? First, 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 this Opinions Release, 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.
Incorporation of these concepts into a compliance program is a good first step towards preventing any FCPA violations from arising, but it must be emphasized that they are only a first step. These guidelines must be coupled with active training of all personnel, not only on the Compliance Policy, but also on the corporate and individual consequences that may arise if the FCPA is violated regarding gifts and entertainment. Lastly, it is imperative that all such gifts and entertainment are properly recorded, as required by the books and records component of the FCPA.