Yesterday, I posted a short primer on facilitation payments. Today, I want to take up another issue which embroils compliance officers from time to time; that being extortion payments. For compliance officers’ purposes, extortion payments are not illegal under the Foreign Corrupt Practices Act (FCPA). Extortion payments are made for any action which threatens or demands payment for life, liberty, or health. These should be exempted out from your facilitation payments and your compliance program through specific language. You need to do this for a variety of reasons. First and foremost, your employees must understand that the company will support them if they are in any way threatened with harm, arrest or physical detention and/or their health/safety is threatened. As a compliance professional, you need to make sure your employees understand they need to do whatever they have to do to get themselves out of such a situation.
The FCPA Resource Guide, 2nd edition stated, “Situations involving extortion or duress will not give rise to FCPA liability because a payment made in response to true extortionate demands under imminent threat of physical harm cannot be said to have been made with corrupt intent or for the purpose of obtaining or retaining business. In enacting the FCPA, Congress recognized that real- world situations might arise in which a business is compelled to pay an official in order to avoid threats to health and safety. As Congress explained, “a payment to an official to keep an oil rig from being dynamited should not be held to be made with the requisite corrupt purpose.””
However, the FCPA Resource Guide, 2nd edition cautioned “Mere economic coercion, however, does not amount to extortion. As Congress noted when it enacted the FCPA: “The defense that the payment was demanded on the part of a government official as a price for gaining entry into a market or to obtain a contract would not suffice since at some point the U.S. company would make a conscious decision whether or not to pay a bribe.” The fact that the payment was “first proposed by the recipient … does not alter the corrupt purpose on the part of the person paying the bribe.””
The FCPA Resource Guide, 2nd edition went on to point to the decision in United States v. Kozeny for the distinction between extortion and economic coercion. The “court concluded that although an individual who makes a payment under duress (i.e., upon threat of physical harm) will not be criminally liable under the FCPA, a bribe payor who claims payment was demanded as a price for gaining market entry or obtaining a contract “cannot argue that he lacked the intent to bribe the official because he made the ‘conscious decision’ to pay the official.” While the bribe payor in this situation “could have turned his back and walked away,” in the oil rig example, “he could not.”
Some of the situations your employees might face are along the lines of the following:
- Employees are stopped by police, military or paramilitary personnel, or militia (uniformed or not) at designated or other checkpoints or other places and a payment is demanded as a condition of passage of persons or property;
- Employees are stopped at the airport by customs or passport control personnel or military personnel and a payment is demanded for entry or exit of persons or property; or
- Employees are asked by persons claiming to be security personnel, immigration control, or health inspectors to pay for an allegedly required inoculation or other similar procedure.
I once had a situation where an employee was threatened with receiving a vaccination for yellow fever when he was departing a west African country. The employee paid some $85 to get out of that situation. I instructed him to submit it as a travel expense, writing out in a four-sentence paragraph, attached to his expense report. The documentation proved that payment was not a facilitation payment. It was clearly an extortion payment.
The key though is that it be properly documented. But more than simply the documentation is that you must specifically list extortion payments in your books and records, so you will not be suspected with hiding them by describing them as something else. The key is to train your employees specifically on the actions to take. In your policy, you should clearly state that if there is a threat to health, safety or liberty, it is not a facilitation payment but an extortion payment. Make sure that they understand what their rights are and what their obligations are to report it when they return to their office. Always remember, an extortion payment is not a FCPA violation.
Finally, the FCPA Resource Guide, 2nd edition ends its section with the following advice, “Businesses operating in high-risk environments may face real threats of violence or harm to their employees, and payments made in response to imminent threats to health or safety do not violate the FCPA. If such a situation arises, and to ensure the safety of its employees, companies should immediately contact the appropriate U.S. embassy for assistance.”
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