DOJ/SEC's Resource Guide To The U.S. Foreign Corrupt Practices Act: Jones Day Summary And Analysis

For many years, Jones Day has advised multinational corporations and their boards and executives regarding compliance with the U.S. Foreign Corrupt Practices Act. Jones Day has led, and is leading, international investigations regarding suspected violations of the FCPA. Our experienced attorneys have appeared and are currently appearing before the U.S. Department of Justice, the U.S. Securities and Exchange Commission, and other federal, state, and foreign government entities on behalf of clients regarding anti-corruption matters. Jones Day's broad experience across a wide variety of industries makes us well positioned to understand the particular problems companies face. Moreover, our experienced team of former government attorneys and experienced trial attorneys, our 37 offices around the world, and our One Firm approach provide clients with a wealth of experience in handling global anti-corruption matters and compliance efforts. This publication provides our collective thoughts and observations on the DOJ's and SEC's recent FCPA guidance document. Jones Day also regularly assists multinational companies in avoiding problems before they arise by helping them to design and implement effective corporate compliance programs that include best-in-class anti-corruption measures. We advise corporations on how to conduct effective anti-corruption due diligence in corporate transactions, and we defend the company, the board of directors and individual employees against allegations of wrongdoing by the government or private plaintiffs. The Jones Day attorneys who work on these global anti-corruption measures and responses reviewed with great interest the recently released guidance from the DOJ and SEC regarding the FCPA. Much of what we see in the document echoes the conversations that we have on a daily and weekly basis with our colleagues in the U.S. enforcement community, and captures some of the most frequent questions posed to us by our clients. Other pieces of information in the guidance are newer and, we hope, will clarify and make more consistent the positions taken by prosecutors and regulators in FCPA cases. Enclosed for our clients and friends are our summary observations regarding the guidance and our thoughts about where we go from here. Also enclosed, at the back of this publication, is a short "crib sheet" for clients that summarizes the main points in the guidance and provides page numbers for ease of reference, as many clients have expressed to us that they find the 120-page document too long to digest. We hope that you will find these materials helpful, and that you will call one of the many experienced Jones Day practitioners listed at the back of this piece if you wish to discuss further.

Charles Carberry Richard Deane, Jr.

Jones Day Corporate Criminal Investigations Practice Leaders

Peter Romatowski Robert Gaffey

Jones Day Securities Enforcement and Litigation Practice Leaders

DOJ/SEC's RESOURCE GUIDE TO THE FOREIGN CORRUPT PRACTICES ACT: Jones Day Summary and Analysis

A full year after promising written guidance regarding enforcement of and compliance with the Foreign Corrupt Practices Act, the U.S. Department of Justice and the Securities and Exchange Commission issued on November 14, 2012, A Resource Guide to the U.S. Foreign Corrupt Practices Act (the "Guidance"). The 120-page document has been rightly criticized for offering little new by way of substance. Instead, the Guidance is primarily a compilation of restated policy pronouncements issued by enforcement authorities in other contexts. While it addresses "big picture" FCPA issues, the Guidance is notable primarily for what it does not say, belying the assertion by the Assistant Attorney General that the publication constitutes "perhaps the boldest manifestation of [the government's] transparent approach to enforcement."

The Guidance: What It Says

The Guidance does not break new ground by offering any new policy pronouncements, but it does contain useful guidance for companies seeking to comply with the FCPA. The Guidance provides a comprehensive and easily read summary of government policy on the FCPA. It also pulls together into a single location guidelines that had not previously been stated clearly by U.S. enforcement authorities and guidelines that had only been stated orally. And, in certain respects, the Guidance provides a vehicle for the DOJ and SEC to state explicitly certain policies that otherwise must be teased out of anecdotal information arising from corporate prosecutions. Permissible Business Courtesies. Corporate compliance departments often spend enormous amounts of time and effort on defining the proper limits to and approving expenditures on travel, entertainment, and gift-giving involving putative foreign officials. When a company is doing business in a foreign country with substantial government involvement in the private economy, the FCPA provides little statutory basis for distinguishing between prohibited corrupt payments and legitimate corporate hospitality (all of which is intended to influence the recipient foreign official). Although the amounts at issue tend to be small, the frequency with which the issue arises is high, and the available government guidance on the issue has been scant. While the Guidance does not answer all of the nagging questions relating to business courtesies, it does for the first time provide a government-sanctioned framework for evaluating corporate hospitality. To start, the Guidance explicitly recognizes the legitimacy of the practice, stating that "[a] small gift or token of esteem or gratitude is often an appropriate way for business people to display respect for each other." (pg. 15) On the other end of the spectrum, the Guidance states obviously that improper benefits include such things as "a $12,000 birthday trip for a government decision-maker" and a "trip to Italy for eight" officials consisting "primarily of sightseeing" and including "$1,000 in 'pocket money' for each official." (pg. 16) Most helpfully, the Guidance identifies the specific "hallmarks of appropriate gift-giving" as being that the gift is:

"[G]iven openly and transparently," "[P]roperly recorded in the giver's books and records," "[P]rovided only to reflect esteem or gratitude, and" "[P]ermitted under local law." (pg. 15) In addition, the Guidance specifically suggests that organizations, particularly large ones, use automated systems "with clear monetary limits and annual limitations" in implementing compliance programs related to "routine gifts, travel and entertainment." (pg. 58) Together, these aspects of the Guidance provide a road map to companies seeking to avoid "[d]evoting a disproportionate amount of time to policing modest entertainment and gift-giving," thereby freeing the compliance department to focus on more significant expenditures and risk areas. (pg. 58)

Likewise with respect to travel, the Guidance provides useful advice to companies seeking to comply with the FCPA's affirmative defense for "reasonable and bona fide travel and lodging expenses ... related to the promotion, demonstration, or explanation of a company's products or services." (pg. 24) As with gifts, this is an area where companies have been hard-pressed to set limits that will withstand government scrutiny. The Guidance therefore gathers together and clearly states the safeguards that it has deemed in the past to be appropriate in relation to travel expenditures:

Do not select the particular officials who will participate in the party's proposed trip or program or else select them based on pre-determined, merit-based criteria. Pay all costs directly to travel and lodging vendors and/or reimburse costs only upon presentation of a receipt. Do not advance funds or pay for reimbursements in cash. Ensure that any stipends are reasonable approximations of costs likely to be incurredand/or that expenses are limited to those that are necessary and reasonable. Ensure the expenditures are transparent, both within the company and to the foreign government. Do not condition payment of expenses on any action by the foreign official. Obtain written confirmation that payment of the expenses is not contrary to local law. Provide no additional compensation, stipends, or spending money beyond what is necessary to pay for actual expenses incurred. Ensure that costs and expenses on behalf of the foreign officials will be accurately recorded in the company's books and records. (pg. 24 (footnotes omitted)). The examples that the Guidance provides regarding gifts, travel, and entertainment are equally instructive. In the form of hypotheticals, the Guidance advises readers that the FCPA is not violated when representatives of a U.S. company:

Pay for a "moderate bar tab" for customers, including government officials at an industry trade show. Present "a moderately priced crystal vase" to the General Manager of a government-owned customer "as a wedding gift and token of esteem." Cover business class airfare for employees of a government customer to inspect company facilities in the United States, consistent with internal company guidelines for reimbursing the cost of lengthy international flights. (pgs. 17-18) By contrast, the Guidance states that the FCPA obviously would not permit first-class airfare for the officials to travel, with spouses, to Las Vegas on a vacation. All of the above is consistent with prior guidance from DOJ and SEC but is nonetheless helpful in its specificity. In particular, the Guidance's use of internal policies as a yardstick for the reasonableness of travel...