A company learns of potential legislation that will negatively affect its business. A company representative reportedly begs a government official (who heads a key committee that will decide the fate of the legislation) to vote in a way that serves the company's interest and the company otherwise spends millions to seek to influence the legislative body. The government official reverses his prior position and votes in a way that serves the company's interest. One month later, the company's CEO and the government official appear at a event in which the company announces it is making a $30 million charitable donation, $11 million of which will benefit schools in the government official's district, the largest gift ever to the city's schools.
Businesses are prohibited from making campaign contributions to a government official. So businesses give money to a foundation set up by the government official's wife months after the official took office. Even though the charity is named and led by the official's wife, the government official is pictured alongside his wife on the corporate solicitation page of the charity's web site and the official's chief fundraiser is listed as the charity's treasurer.
A prudent FCPA practitioner would immediately see the “red flags;” counsel the companies at issue to conduct a lengthy and expensive internal investigation as to the conduct at issue and related conduct; and – mindful of the enforcement agencies guidance and cognizant of the carrots and sticks they posses – likely suggest voluntarily disclosure of the investigative findings.
But wait.
The government officials in the above real-life scenarios were not “foreign officials” – they were U.S. government officials!
See here for the New York Times story on General Electric's tax exposure and its interactions with Representative Charles Rangel.
See here for the New York Times story on Louisiana governor Bobby Jindal and his wife's charity.
Scrap those internal investigation plans, forget about voluntary disclosure, and slim chance there will be an enforcement action. Nobody said our system was perfect, but that is just how the system works some will say.
But why should corporate interaction with a “foreign official” be subject to greater scrutiny and different standards of enforcement than corporate interaction with a U.S. official? After all, there is a U.S. domestic bribery statute (18 USC 201) with elements very similar to the FCPA.
Why do we reflexively label a “foreign official” who receives “things of value” from private business interests as corrupt, yet generally turn a blind eye when it happens here at home?
Is the FCPA enforced too aggressively or is enforcement of the U.S. domestic bribery statute too lax?
Ought not there be some consistency between these two statutes?
For prior posts on the FCPA's double standard see here, here and here.
Showing posts with label Double Standard. Show all posts
Showing posts with label Double Standard. Show all posts
Thursday, May 12, 2011
Thursday, September 30, 2010
A Double Standard? Part III
A government official sets up a foundation to aid local organizations. It is funded by business entities that often turn to the government official for help - and usually succeed in getting such help.
Over a six week period, a company sends at least $45,000 in donations to four charitable programs founded by government officials - just as the companies were seeking approval of favorable legislation.
Another company supports a fundraiser for the scholarship fund of a government official.
Another company sponsors a sport competition to help the favorite food bank of a government official.
Another company subsidizes a spa outing in a popular tourist destination to aid the charity of a government official.
Another company helps sponsor a golf tournament benefiting the foundation of a government official.
Another company acknowledges that it participates in government officials' charitable events to get access to the officials to push the company's agenda.
*****
"Google" Foreign Corrupt Practices Act and charitable giving and you will have enough reading material to keep you busy the rest of the day.
This material will likely reference the 2004 FCPA enforcement action against Schering-Plough (see here).
In that action, the SEC alleged (here) that Schering-Plough violated the FCPA when its wholly-owned Polish subsidiary (“S-P Poland”) improperly recorded a bona fide charitable donation to a Polish foundation where the founder/president of the foundation was also the director of a government health fund (the “Director”) that provided money to hospitals throughout Poland for the purchase of pharmaceutical products.
Although the SEC and Schering-Plough ultimately resolved the matter based only on violations of the FCPA’s books and records and internal control provisions, the enforcement action is commonly viewed as broadening the “anything of value” element of an FCPA anti-bribery violation. (See here).
The SEC’s tacit interpretation of the “anything of value” element in the Schering-Plough matter is significant because there was no allegation or indication that any tangible monetary benefit accrued to the Director, an individual deemed by the SEC to be a “foreign official” under the FCPA.
Rather, the SEC brought the enforcement action on the basis of its apparent conclusion that S-P Poland’s bona fide charitable donations constituted a “thing of value” to the “foreign official” because the donations were subjectively valued by the official and provided him with an intangible benefit of enhanced self-worth or
prestige.
*****
So will the above donations to government official charities result in FCPA scrutiny?
Nope!
Why not?
Because the government officials are U.S. government officials. See here for the recent New York Times story.
The U.S. has a domestic bribery statute (18 USC 201) (see here) which has similar elements to the FCPA. Yet, I would not hold your breath waiting for domestic bribery prosecutions.
This all begs the question - is there a double standard?
Will a U.S. company's interaction with a "foreign official" (however that term is interpreted) be subject to more scrutiny and different standards than its interaction with a U.S. official?
Do we reflexively label a "foreign official" who receives "things of value" from private business interests as corrupt, yet when a U.S. official similarly receives "things of value" from private business interests we merely say "well, no one said our system is perfect"?
For more on the FCPA's double standard (see here and here).
Over a six week period, a company sends at least $45,000 in donations to four charitable programs founded by government officials - just as the companies were seeking approval of favorable legislation.
Another company supports a fundraiser for the scholarship fund of a government official.
Another company sponsors a sport competition to help the favorite food bank of a government official.
Another company subsidizes a spa outing in a popular tourist destination to aid the charity of a government official.
Another company helps sponsor a golf tournament benefiting the foundation of a government official.
Another company acknowledges that it participates in government officials' charitable events to get access to the officials to push the company's agenda.
*****
"Google" Foreign Corrupt Practices Act and charitable giving and you will have enough reading material to keep you busy the rest of the day.
This material will likely reference the 2004 FCPA enforcement action against Schering-Plough (see here).
In that action, the SEC alleged (here) that Schering-Plough violated the FCPA when its wholly-owned Polish subsidiary (“S-P Poland”) improperly recorded a bona fide charitable donation to a Polish foundation where the founder/president of the foundation was also the director of a government health fund (the “Director”) that provided money to hospitals throughout Poland for the purchase of pharmaceutical products.
Although the SEC and Schering-Plough ultimately resolved the matter based only on violations of the FCPA’s books and records and internal control provisions, the enforcement action is commonly viewed as broadening the “anything of value” element of an FCPA anti-bribery violation. (See here).
The SEC’s tacit interpretation of the “anything of value” element in the Schering-Plough matter is significant because there was no allegation or indication that any tangible monetary benefit accrued to the Director, an individual deemed by the SEC to be a “foreign official” under the FCPA.
Rather, the SEC brought the enforcement action on the basis of its apparent conclusion that S-P Poland’s bona fide charitable donations constituted a “thing of value” to the “foreign official” because the donations were subjectively valued by the official and provided him with an intangible benefit of enhanced self-worth or
prestige.
*****
So will the above donations to government official charities result in FCPA scrutiny?
Nope!
Why not?
Because the government officials are U.S. government officials. See here for the recent New York Times story.
The U.S. has a domestic bribery statute (18 USC 201) (see here) which has similar elements to the FCPA. Yet, I would not hold your breath waiting for domestic bribery prosecutions.
This all begs the question - is there a double standard?
Will a U.S. company's interaction with a "foreign official" (however that term is interpreted) be subject to more scrutiny and different standards than its interaction with a U.S. official?
Do we reflexively label a "foreign official" who receives "things of value" from private business interests as corrupt, yet when a U.S. official similarly receives "things of value" from private business interests we merely say "well, no one said our system is perfect"?
For more on the FCPA's double standard (see here and here).
Thursday, July 22, 2010
Schumer Calls For BP Investigation
Senator Charles Schumer (D-NY) has requested a Department of Justice investigation of BP.
It has nothing to do with the Gulf of Mexico, but rather the Foreign Corrupt Practices Act.
BP is British company, but its ADR shares trade on the New York Stock Exchange and BP is thus subject to the FCPA.
In a letter to Attorney General Eric Holder (see here) Schumer requests that the DOJ investigate whether BP violated any of the provisions of the Foreign Corrupt Practices Act (“FCPA”) in connection with the August 2009 release of Abdel Baset al-Megrahi, the Libyan terrorist convicted of the 1988 bombing of Pan-Am flight 103 that killed 270 people, including 189 Americans. [This post is limited to a discussion of the FCPA, and not the above referenced release.]
Why does Schumer think BP may have violated the FCPA?
Because, according to Schumer's letter - "BP has admitted that it lobbied United Kingdom government officials to wrap up a proposed prisoner transfer agreement (PTA) with the Libyan government amid concerns that a delay in reaching this agreement would harm a deal BP had signed with Libya’s National Oil Company to explore for oil and gas in the Gulf of Sidra and in parts of Libya’s western desert—an agreement which BP estimated could lead to eventual earnings of up to $20 billion."
Hold the phone and stop the presses ... a large corporation has admitted that it lobbied its own government in connection with a business purpose.
This would seem to be yet another example of the FCPA's double standard in that what is routinely done at home suddenly becomes a potential criminal matter when done in connection with international business. For other examples of the double standard see here and here.
Unless there is a finding that something of value went to a foreign official, the FCPA is not implicated because the law does not apply to giving things of value to a foreign government itself. Strange you say, but that is how the FCPA is written - a fact even the DOJ recognizes. See here for DOJ Opinion Procedure Release 09-01 in which the DOJ states that the proposed course of conduct "fall[s] outside the scope of the FCPA in that the [thing of value] will be provided to the foreign government, as opposed to individual government officials ..."
Schumer's letter also states:
"If BP, or its officials, promised the Libyan Government that it would secure al-Megrahi’s release from detention in exchange for oil exploration rights—or even that it would provide lobbying services for such a release on the Libyan Government’s behalf—BP may have been unlawfully authorizing performance of valuable services to the Libyan Government in exchange for profitable oil exploration rights in express violation of the FCPA. Similarly, if BP promised anything of value to United Kingdom government officials to secure al-Megrahi’s release, this would also violate the FCPA."
According to Schumer's press release, he and "Senators Gillibrand, Menendez, and Lautenberg last week requested the British government investigate the circumstances surrounding al-Megrahi’s release and requested that BP and the British government turn over all documents related to the oil companies’ efforts lobbying for a prison-release agreement with Libya. They also called for the US State Department to press the British to investigate BP’s involvement in the incident."
It is unusual for a U.S. politician to call upon DOJ to investigate a foreign-based company (or any company for that matter) for FCPA violations - particularly when the conduct at issue largely centers on conduct between the company and its own government officials.
Although the U.K. Bribery Act is not yet law (see yesterday's post here), when enacted, it is expected to have a broad jurisdictional scope and apply to certain U.S. companies, just as the FCPA applies to certain U.K. companies.
Following Schumer's lead will a British politician request that the U.K. Serious Fraud Office investigate a U.S. company because it lobbied its own government officials in connection with a business purpose? As John Gapper, the associate editor and chief business commentator of the U.K. based Financial Times, stated in an editorial on the subject, "the US has been no stranger to dubious deals with foreign governments that benefit both its strategic interests and US companies."
For more, see here for Christopher Matthew's Main Justice story on the topic.
It has nothing to do with the Gulf of Mexico, but rather the Foreign Corrupt Practices Act.
BP is British company, but its ADR shares trade on the New York Stock Exchange and BP is thus subject to the FCPA.
In a letter to Attorney General Eric Holder (see here) Schumer requests that the DOJ investigate whether BP violated any of the provisions of the Foreign Corrupt Practices Act (“FCPA”) in connection with the August 2009 release of Abdel Baset al-Megrahi, the Libyan terrorist convicted of the 1988 bombing of Pan-Am flight 103 that killed 270 people, including 189 Americans. [This post is limited to a discussion of the FCPA, and not the above referenced release.]
Why does Schumer think BP may have violated the FCPA?
Because, according to Schumer's letter - "BP has admitted that it lobbied United Kingdom government officials to wrap up a proposed prisoner transfer agreement (PTA) with the Libyan government amid concerns that a delay in reaching this agreement would harm a deal BP had signed with Libya’s National Oil Company to explore for oil and gas in the Gulf of Sidra and in parts of Libya’s western desert—an agreement which BP estimated could lead to eventual earnings of up to $20 billion."
Hold the phone and stop the presses ... a large corporation has admitted that it lobbied its own government in connection with a business purpose.
This would seem to be yet another example of the FCPA's double standard in that what is routinely done at home suddenly becomes a potential criminal matter when done in connection with international business. For other examples of the double standard see here and here.
Unless there is a finding that something of value went to a foreign official, the FCPA is not implicated because the law does not apply to giving things of value to a foreign government itself. Strange you say, but that is how the FCPA is written - a fact even the DOJ recognizes. See here for DOJ Opinion Procedure Release 09-01 in which the DOJ states that the proposed course of conduct "fall[s] outside the scope of the FCPA in that the [thing of value] will be provided to the foreign government, as opposed to individual government officials ..."
Schumer's letter also states:
"If BP, or its officials, promised the Libyan Government that it would secure al-Megrahi’s release from detention in exchange for oil exploration rights—or even that it would provide lobbying services for such a release on the Libyan Government’s behalf—BP may have been unlawfully authorizing performance of valuable services to the Libyan Government in exchange for profitable oil exploration rights in express violation of the FCPA. Similarly, if BP promised anything of value to United Kingdom government officials to secure al-Megrahi’s release, this would also violate the FCPA."
According to Schumer's press release, he and "Senators Gillibrand, Menendez, and Lautenberg last week requested the British government investigate the circumstances surrounding al-Megrahi’s release and requested that BP and the British government turn over all documents related to the oil companies’ efforts lobbying for a prison-release agreement with Libya. They also called for the US State Department to press the British to investigate BP’s involvement in the incident."
It is unusual for a U.S. politician to call upon DOJ to investigate a foreign-based company (or any company for that matter) for FCPA violations - particularly when the conduct at issue largely centers on conduct between the company and its own government officials.
Although the U.K. Bribery Act is not yet law (see yesterday's post here), when enacted, it is expected to have a broad jurisdictional scope and apply to certain U.S. companies, just as the FCPA applies to certain U.K. companies.
Following Schumer's lead will a British politician request that the U.K. Serious Fraud Office investigate a U.S. company because it lobbied its own government officials in connection with a business purpose? As John Gapper, the associate editor and chief business commentator of the U.K. based Financial Times, stated in an editorial on the subject, "the US has been no stranger to dubious deals with foreign governments that benefit both its strategic interests and US companies."
For more, see here for Christopher Matthew's Main Justice story on the topic.
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