Chapter 6. Gifts, Travel, Lodging, and Entertainment

• Author: Robert W. Tarun
• Pages: 1-20

CHAPTER 6

Gifts, Travel, Lodging,

and Entertainment

I. INTRODUCTION

Gifts, travel, lodging, and entertainment for non–U.S. government officials pres-

ent and common frequent Foreign Corrupt Practices Act1 issues for multinational

companies and their counsel. The Resource Guide to U.S. Foreign Corrupt Practices Act2

confirms that the Department of Justice (DOJ) and the Securities and Exchange

Commission (SEC) do not intend to pursue modest gift, travel, lodging, and

entertainment expenditures. If a company has clear written policies and proce-

dures for such requests, most of the issues will resolve themselves without any

substantial risk. Thoughtful, customized written policies and internal controls can

greatly reduce the risk of FCPA anti-bribery, books-and-records, and internal con-

trols violations; establish sound guidance for managers; and deter many potential

wrongdoers.

Some multinational companies (MNCs) prohibit all forms of gifts, hospital-

ity, or entertainment, but they are clearly a minority. Many rely largely on a two-

or three-paragraph summary of the FCPA or anti-corruption laws in their code

of company conduct to guide employees. Still others that operate in challenging

countries provide specific written FCPA guidance to employees utilizing a reason-

ableness and proportionality standard—often tied to the value or size of the gift,

travel, or entertainment—and have automated gift-giving or entertainment clear-

ance processes. Because the FCPA has no de minimis exclusion for gifts, travel,

lodging, or entertainment expenditures, the analysis routinely reverts to the Act’s

use of the word “corruptly” (see Chapter 1 at I.C.4). Most well-managed multi-

national companies conduct regular FCPA or anti-corruption training—live, or at

least online—that addresses gifts, travel, lodging, and entertainment, among other

topics. MNCs that sponsor special sporting events like the Olympics or the World

Cup prepare and train their employees, temporary employees, and agents on the

specific corruption, risks, and scenarios they are likely to encounter in such spon-

sorships. Adverse publicity from an arrest or an investigation can completely defeat

the goodwill intended by a major sponsorship.

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2 CHAPTER 6

For many gift, travel, lodging, and entertainment issues, it is often helpful to,

in addition to considering the value of the gift or related thing of value, consider

the simple question: How would the host officer or employee feel about being pic-

tured with the donee or beneficiary in the local newspaper, and the gift, travel, or

entertainment and supporting invoice(s) were next featured in a front-page story

of The New York Times? In essence, one must ascertain whether under the particular

travel, lodging, and entertainment facts and circumstances, there is a quid pro quo.

Thoughtful, stand-alone written company travel and entertainment policies with

examples are more likely to provide a safe haven for a company and its employees

alike. In such policies, “reasonableness” (borrowing from the FCPA’s travel and

entertainment language relating to certain marketing and contracting activities) or

“reasonable and proportionate” (borrowing from the U.K. Bribery Act Guidance3)

should be the governing standard and is best met and assured under policies where

prior written approval is required.

Because the FCPA expressly affords protection for certain types of travel and

lodging, but does not directly address gifts anywhere, the topics are next addressed

separately.4

II. GIFTS

Most business gifts are simply that: gifts designed to promote products or ser-

vices and thus business and business relationships. Under the FCPA, the term

“corruptly” connotes an evil motive or purpose, and only a gift with an intent to

wrongfully influence the recipient in awarding or retaining business or gaining an

improper business advantage should provide the basis for an FCPA bribery charge.

The FCPA does not state a minimum dollar threshold for corrupt gifts. A gift or

entertainment that is provided to create a favorable business climate with only a

generalized hope or expectation of ultimate benefit to the donor lacks the benefit

of a quid pro quo for the award of business.5

A. The Gift Spectrum and the Resource Guide

Gifts can range from modest to extravagant, and the more extravagant the gift, the

more likely it was given with an improper purpose. The DOJ and SEC Resource Guide

recognizes that a small gift or token of esteem or gratitude is an appropriate way to

display respect in a business setting. Accordingly, reasonable meals and entertain-

ment expenses or company promotional items (free pens, hats, t-shirts) are unlikely

to draw FCPA enforcement action.6 On the other hand, the Resource Guide points out

that gifts of sports cars and fur coats as well as widespread gifts of smaller items as

part of a pattern of bribes cross the line.7 The Resource Guide highli ghts several ext rav-

agant gifts, for example, sports cars, as improper and conversely offers multinationals

comfort with respect to small gifts of nominal value; it, however, leaves a wide spec-

trum uncertain in the middle. The guidance below is intended to address that gulf.

Not surprisingly, side trips, discussed infra, to tourist attractions such as Las Vegas,

Disney World, Universal Studios, Napa, and the Grand Canyon can be very risky.

The following value questions may be relevant:

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