Charitable giving in foreign countries has always been a thorny issue for companies, since they fear that the giving could give way to allegations of violating the Foreign Corrupt Practices Act. This difficulty can be compounded when a company is designing and implementing a full corporate social responsibility strategy.

The FCPA forbids companies from making charitable contributions directed by foreign officials as a way to win or keep business. Late last year the Department of Justice shed some light on the topic when it issued its only opinion release of the year in which it addressed a scenario where it would not consider an act of charitable giving to raise potential FCPA violations.

In addition to providing significant information to the compliance practitioner for charitable donations going forward, I believe the opinion release will provide guidance to U.S. companies, which desire to have a corporate social responsibility component in a foreign country.

A CSR component can take many forms, including a U.S. company acting as a funding angel for indigenous start-up businesses, and training of locals to be more than simply employees and contractors to a U.S. company, but also training in how to set up and run a business. Clearly if a local workforce is to become skilled it will need specific training. The CSR can also include funding of local charities, organizations, or projects such as buying computers for a local school.

Many U.S. companies, however, fear running afoul of the FCPA by engaging in such activities. For instance, particularly in the energy industry, skilled training is delivered at a much higher level here in the United States than in, say, Africa. This means that officials, employees, or others involved in national oil companies need to come to the United States for training, with all the attendant expenses. Many companies, however, fear such activity will run afoul of the FCPA and draw scrutiny from the Department of Justice. Yet such activity benefits not only the U.S. company that provides it but the U.S. government in general and the overall positive perception of American business. This perception is not something to be discounted.

As set out in a recent Department of Justice opinion release, a partner with a U.S. law firm, who requested the opinion, represents an undisclosed foreign country in various international arbitrations, referred to as “Foreign Country A” in the release. This business relationship has enabled the law firm to bill Foreign Country A more than $2 million throughout the past 18 months; it is further anticipated that in 2014, the fees on matters for Foreign Country A will exceed $2 million. During the course of representation, the lawyer has become a personal friend of a foreign official who works in Foreign Country A's Office of the Attorney General.

I believe that the opinion release demonstrates once again that there is significant room for creative lawyering in the realm of FCPA compliance.

This foreign official's daughter suffers from a severe medical condition that cannot effectively be treated in Foreign Country A or anywhere in the region. The physicians treating the foreign official's daughter have recommended that she receive inpatient care at a specialized facility located in another foreign country. The lawyer who requested the opinion reports that the treatment will cost between $13,500 and $20,500 and that the foreign official lacks financial means to pay for this treatment for his daughter. The requestor has proposed to pay the medical expenses of the daughter of this foreign office.  

The attorney made the following representations in submitting the request for an opinion release.

The requestor's intention in paying for the medical treatment of the foreign official's daughter is purely humanitarian, with no intent to influence the decision of any foreign official in Foreign Country A with regard to engaging the services of the law firm, requestor, or any third person.

The funds used to pay for the medical treatment will come from the requestor's own personal funds. The requestor will neither seek nor receive reimbursement from the law firm for such payments.

The requestor will make all payments directly to the facility where the foreign official's daughter will receive treatment. Her father will pay for the costs of his daughter's related travel.

Foreign Country A is expected to retain the law firm to work on one new matter in the near future. Requestor is presently unaware of any additional, potential matters as to which Foreign Country A might retain his law firm. However, if such a matter develops, the requestor anticipates that Foreign Country A would likely retain the law firm given its successful track record and their strong relationship.

Under the law for Foreign Country A, any government agency, such as the Office of Attorney General, that hires an outside law firm must publicly publish a reasoned decision justifying the engagement. It is a crime punishable by imprisonment under the penal code of Foreign Country A for any civil servant or public employee to engage in corrupt behavior in connection with public contracting.

In addition to the representations made by the lawyer, there was also information presented which showed that the foreign official and requestor have discussed this matter transparently with their respective employers. Both the government of Foreign Country A and the leadership of the law firm have expressly indicated that they have no objection to the proposed payment of medical expenses. Additionally, the attorney has provided a certified letter from the attorney general of Foreign Country A that represents the following:

The decision by the requestor to pay for or not to pay for this medical treatment will have no effect on any current or future decisions of the Office of the Attorney General in deciding on the hiring of international legal counsel.

In the opinion of Foreign Country A's attorney general, the payment of medical expenses for foreign official's daughter under these circumstances would not violate any provision of the laws of Foreign Country A.

In its analysis, the Justice Department noted that “A person may violate the FCPA by making a payment or gift to a foreign official's family member as an indirect way of corruptly influencing that foreign official. However, “the FCPA does not per se prohibit business relationships with, or payments to, foreign officials.” Rather “the department typically looks to determine whether there are any indicia of corrupt intent, whether the arrangement is transparent to the foreign government and the general public, whether the arrangement is in conformity with local law, and whether there are safeguards to prevent the foreign official from improperly using his or her position to steer business to or otherwise assist the company, for example through a policy of recusal.” (Citations omitted.)

While that statement provides insight into the department's thinking, I found the meat of the analysis to be the following line of the opinion release: “The facts represented suggest an absence of corrupt intent and provide adequate assurances that the proposed benefit to foreign official's daughter will have no impact on requestor's or requestor's law firm's present or future business with Foreign Country A.” While the Justice Department had previously recognized that charitable giving does not necessarily violate the FCPA, the opinion release had several factors that are worth highlighting for the compliance practitioner.

No role in obtaining or retaining business: The foreign official involved does not play any role in the decision to award Foreign Country A's legal business to law firm.

Full transparency: Both the requestor and foreign official informed their respective employers of the proposed gift, and neither has objected.

The gift is not illegal under local law: The attorney general of Foreign Country A has expressly stated that the proposed gift is not illegal under Foreign Country A's laws. This is further reinforced by Foreign Country A's public contracting laws, which require transparent reasoning in contracting for legal work and criminally punish corrupt behavior.

Direct payment to third-party provider: The lawyer will pay the medical provider directly, ensuring that the payments will not be improperly diverted to the foreign official.

I believe that the opinion release demonstrates once again that there is significant room for creative lawyering in the realm of FCPA compliance. Obviously the Justice Department responded favorably with its final decision that it would not prosecute under the facts presented to it. For the compliance practitioner, there are several important lessons beyond simply noting that you are limited only by your legal imagination.

First, and foremost, transparency rules the day. The lawyer and foreign official openly discussed this issue with their employers and superiors. One or both of them went to the attorney general of the country in question and sought an opinion on the legality of the payment of medical expenses so there was visibility at the highest levels of the undisclosed foreign country's government in addition to confirmation that the gift was in fact legal under the laws of the country involved. Another important point is that the foreign official in question did not have decision-making authority over the law firm obtaining or retaining business. Finally, the direct payment to the third-party provider is always a critical element that should not be overlooked.

I understand and appreciate that this opinion release is limited to the facts and circumstances of the given case, but it nonetheless gives compliance practitioners excellent continued guidance on how to think through charitable donations under the FCPA.

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