Gifts, Travel, Lodging, And Entertainment

• Author: Robert W. Tarun
• Profession: Former Executive Assistant U.S. Attorney in Chicago
• Pages: 179-208

CHAPTER 6

Gifts, Travel, Lodging,

and Entertainment

I. INTRODUCTION

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

common and frequent Foreign Corrupt Practices Act1 issues for multinational com-

panies and their counsel. If a company has clear written policies and procedures 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 antibribery, books-and-records, and internal controls violations;

establish sound guidance for managers; and deter many potential wrongdoers. 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.

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

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

three-paragraph summary of the FCPA or anticorruption laws in their code of com-

pany conduct to guide employees. Still others that operate in challenging countries

provide specific written FCPA guidance to employees utilizing a reasonableness

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

entertainment—and have automated gift-giving or entertainment clearance pro-

cesses. 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 multinational compa-

nies conduct regular FCPA or anticorruption 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 corrup-

tion, risks, and scenarios they are likely to encounter in such sponsorships. Adverse

publicity from an arrest or an investigation can completely defeat the goodwill

intended by a major sponsorship.

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

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180 CHAPTER 6

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 appropri-

ate way to display respect in a business setting. Accordingly, reasonable meals and

entertainment 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

highlights several extravagant gifts, for example, sports cars, as improper and con-

versely offers multinationals comfort with respect to small gifts of nominal value;

it, however, leaves a wide spectrum uncertain in the middle. The guidance below is

intended to address that gulf. Not surprisingly, side trips, discussed infra, to tour-

ist 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:

• Is the gift extravagant (e.g., sports car, fur coat, and other luxury items) and

likely to be interpreted as able to influence the recipient?

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