Generic FCPA Guidance on Legitimate vs. Improper Expenditures

disclose bribe payments to the authorities of criminal liabil- ity did not make the bribes legal.“ Reasonable and Bona Fide Expenditures The FCPA allows companies to provide reasonable and bona fide travel and lodging expenses to a foreign official, and it is an affirmative defense where expenses are directly related to the promotion, demonstration, or explanation of a company’s products or services, or are related to a company’s execution or performance of a con- tract with a foreign government or agency.'“ Trips that are primarily for personal entertainment purposes, how- ever, are not bona fide business expenses and may violate the FCPA’s anti-bribery provisions.'* Moreover, when expenditures, bona fide or not, are mischaracterized in a company’s books and records, or where unauthorized or improper expenditures occur due to a failure to imple- ment adequate internal controls, they may also violate the FCPA’s accounting provisions. Purposeful mischarac- terization of expenditures may also, of course, indicate a corrupt intent. DOJ and SEC have consistently recognized that busi- nesses, both foreign and domestic, are permitted to pay for reasonable expenses associated with the promotion of their products and services or the execution of existing contracts. In addition, DOJ has frequently provided guidance about legitimate promotional and contract-related expenses— addressing travel and lodging expenses in particular— through several opinion procedure releases. Under the cir- cumstances presented in those releases,'“ DOJ opined that the following types of expenditures on behalf of foreign officials did not warrant FCPA enforcement action: e travel and expenses to visit company facilities or operations; e travel and expenses for training; and e product demonstration or promotional activities, including travel and expenses for meetings. Whether any particular payment is a bona fide expen- diture necessarily requires a fact-specific analysis. But the following non-exhaustive list of safeguards, compiled from several releases, may be helpful to businesses in evaluating The FCPA: Anti-Bribery Provisions whether a particular expenditure is appropriate or may risk violating the FCPA: ¢ Donot select the particular officials who will par- ticipate in the party's proposed trip or program'” or else select them based on pre-determined, merit- based criteria. e Pay all costs directly to travel and lodging vendors and/or reimburse costs only upon presentation of a receipt. ¢ Donot advance funds or pay for reimbursements in cash,!*° e Ensure that any stipends are reasonable approxima- tions of costs likely to be incurred’! and/or that expenses are limited to those that are necessary and reasonable.'? e Ensure the expenditures are transparent, both within the company and to the foreign government.'® ¢ Donot condition payment of expenses on any action by the foreign official.!*4 e Obtain written confirmation that payment of the expenses is not contrary to local law.’ e Provide no additional compensation, stipends, or spending money beyond what is necessary to pay for actual expenses incurred.'*6 e Ensure that costs and expenses on behalf of the foreign officials will be accurately recorded in the company’s books and records.!*” In sum, while certain expenditures are more likely to raise red flags, they will not give rise to prosecution if they are (1) reasonable, (2) bona fide, and (3) directly related to (4) the promotion, demonstration, or explanation of products or services or the execution or performance of a contract.) HOUSE_OVERSIGHT_022526