Companies frequently ignore the reality of FCPA enforcement and risks. In the quest to ensure compliance, companies sometimes focus too much on the minutiae of compliance policies. It is a mistake to devote the time and resources to answering these types of questions instead of focusing on some of the more significant issues facing compliance officers and in-house counsel.
The best illustration of this point is how a company handles gifts, meals, entertainment and travel expenses. It is not worth focusing on some of the more minute questions in this area; it is better to focus on the overall structure.
I heard of one company compliance officer asking whether his or her company should lower its limit for gifts without approval from $40 to $30 because the officer heard another company was adopting a $30 limit. That is a waste of time and effort. It is a question to which there is no right answer.
My prescription for gifts, meals, entertainment and travel policy is designed to avoid hand-wringing decisions over specific gift practices but to create proper controls, procedures and policies. The most important principle is to establish a prospective policy which establishes specific rules.
A gifts, meals, entertainment and travel policy should include the following:
1. A specific procedure to seek approval before giving a gift or incurring an expense for a meal, entertainment or trip. A limit should be set for giving company gifts below which no prior approval is needed (e.g. pens, hats, logos, t-shirts). Above this limit, approval should be required. The level of approval should depend on the amount of the gift, meal, entertainment or travel expense – a local, company counsel or compliance officer could sign off on a gift request; a higher level, corporate attorney or compliance attorney could sign off on a higher expense. It is not as important where the specific limits are set but that there is an established policy which the company follows to handle expenses in these areas.
2. A specific requirement for documentation of the review and approval process. While I am not always in favor of creating bureaucracies, it is important to prepare and preserve documents of the review and approval process. A brief legal memo should be included in any case in which there are judgment calls in applying the policy. Such a memo will establish the good faith of the company actors to comply with the law.
3. Coordination with internal auditors to make sure that expenses are properly recorded on the company books. To ensure transparency and lack of any inference of corrupt intent, it is important to record all expenses accurately.
4. Maintaining adequate control of expenses. It is important for a company to pay expenses directly to the provider (airline, hotel) for travel or events rather than to reimburse or give money directly to the foreign officials for such expenses. No foreign official should ever be given “walk around” money or any other kind of loosely controlled cash.
Common sense is the guiding principle for gifts, meals, entertainment and travel expenses. The context is critical for each expense since there are infinite factual permutations. One rule of thumb I sometimes ask is — “Would the company be embarrassed if the expense and surrounding circumstances were publicly disclosed?” If the answer is “yes,” then the expense may be something the company may want to carefully consider and apply the key principle – common sense.