The latest hub-bub about hiring of relatives of foreign officials under the FCPA has raised a number of interesting questions. JP Morgan’s recent disclosure of its hiring practices, the existence of a list of such hires which are apparently tied to foreign government contracts, raise serious questions about compliance with the FCPA.
It is important to take a step back and analyze the issue under the law. On its face, a company hiring a relative of a foreign official is not a violation unless the company acted with “corrupt intent.” The talismanic significance of this requirement should never be underestimated. It is one thing for a company to hire a relative in the hope of improving a legitimate business relationship with a foreign official. In such a situation, the hiring may not be “corrupt.”
However, if the hiring of a relative is done with the understanding with the foreign official of a benefit to the company which violates the foreign official’s duty of care to the foreign government agency or function for which he or she is responsible, that would cross the line into corrupt territory.
As always, when dealing with an issue of “corrupt” intent, there are a lot of nuances. In these situations, the context and the justification for the actions are particularly important.
Another legal issue under the FCPA is whether or not the hiring of a relative of a foreign official constitutes payment of “money or anything of value” to the foreign official. If the relative keeps the salary earned during employment and does not transfer any of the money to the foreign official, the question boils down to whether or not the foreign official has received “anything of value” from the hiring.
This is an interesting metaphysical question – does the hiring of the relative, without any pecuniary benefit to the hiring official, constitute some type of psychic benefit or is there perhaps a benefit from the elimination of an economic opportunity cost?
In every case, the situation boils down to the facts – it is easy to conjure up facts where the hiring would not be prohibited by the FCPA and conversely it is easy to come up with facts where the hiring would be prohibited under the FCPA.
To avoid this mess and the need for a metaphysical inquiry, there are certain basic practices which can be implemented to reduce the risk of an FCPA violation.
These include policies which:
. Ensure that all relatives of foreign officials who are hired are qualified for the position for which they may be hired;
. Require all hires, including relatives of foreign officials, to be conducted under a consistent policy and set of guidelines;
. Include a due diligence inquiry as to any relationships between the relative and any foreign officials; and
. Require a compliance officer to review any potential hire who is related to a foreign official to ensure that the hiring is not being done in exchange for a government official action to benefit the company.