Foreign Corrupt Practices Act & How it May Affect Your Hotel
By Matthew Grosack Associate, DLA Piper | September 15, 2013
As an increasingly globalized and interconnected world economy continues to emerge and as United States ("U.S.") companies continue to expand abroad, what constitutes legally acceptable business practices in the U.S. is often in direct conflict with incongruent foreign business practices and customs. These issues are especially prominent when they concern dealings between U.S. companies operating abroad and foreign officials who act as the gatekeepers to market entrance. Another complexity to this paradigm is the U.S. government's increasing reliance on the Foreign Corrupt Practices Act ("FCPA") as a means to combat bribery, global corruption and impose unitary accounting standards on U.S. companies operating abroad.
Given these complexities, the question then becomes what is a multinational hotel company supposed to do when foreign officials are open and even welcome bribery as an acceptable facet of business or in a country where gift giving, even to foreign officials, is culturally acceptable and expected? The easiest answer is that understanding the complexities of FCPA restrictions and the particular nuances applicable to the hospitality industry is a prerequisite to avoiding substantial penalties (both monetary and criminal) and successfully (and legally) competing abroad.
An Overview of the FCPA
The FCPA was enacted with the goal of curbing the spread of bribery and corrupt practices in foreign countries and prohibits the payment of anything of value to a foreign official with a corrupt intent to influence the official in the exercise of his or her official duties to assist the payor in obtaining or retaining business. The government must prove the five (5) following elements to establish an FCPA violation:
- a payment, offer, or promise to pay money or anything of value;
- to a foreign governmental official or others with the knowledge that it will be passed onto a foreign official;
- with a corrupt motive;
- for the purpose of influencing any act or decision, inducting one to act in violation of his lawful duties, securing an improper advantage, or inducing such person to use his influence to affect a decision;
- in order to assist in or retaining business.
The FCPA applies broadly to persons and/or companies that: (a) maintain some formal tie to the United States, or (b) commits an act in the United States which furthers a violation. This includes all companies doing business in the U.S. or listed on a U.S. stock exchange and their employees, all U.S. citizens and nationals, all non-U.S. nationals who perform acts in the U.S., as well as others. In short, if a person or company has even a peripheral connection to the U.S. and has contacts with foreign officials, the FCPA applies.
Regulators construe the definitions of the FCPA broadly. For example, the definition of "payment" is broad enough to cover any type of benefit that is conferred on a person or representative that is in a position to affect a company's business relationship with a foreign government. Likewise, there is no value threshold as to what constitutes "value" under the FCPA, meaning that even the most miniscule gift or payment can be construed as a bribe and result in a violation. Further, "value" under the FCPA is construed broadly to include non-monetary (or non-cash) benefits such as travel, entertainment, or meals.