In an article entitled "Many Of The Bribery
Allegations Against Wal-Mart May Not Be Illegal" Forbes reporter Nathan
Vardi wrote that "many of the allegations reported in the New York Times could
reasonably be interpreted as falling under the so-called "facilitating
payments" exception." I wondered what defense might be available to Wal-Mart
where bribes of up to $244,000 could be construed as an exception to prosecution
for bribery of foreign government official under the Foreign Corrupt Practices
Act (FCPA). In this post we will visit the text of the FCPA and other
Department of Justice (DOJ) commentary, look at some enforcement actions; one
open investigation involving alleged facilitation payments and offer some
guidance to the compliance practitioner on what may or may not constitute a
facilitation payment under the FCPA.
The Statute and Other Guidance
Interestingly, when the FCPA was initially passed in
1977, the facilitating payment exception was found under the definition of
foreign official. However, with the 1988 Amendments, a more explicit exception
was written into the statute making it clear that the anti-bribery provisions
"shall not apply to any facilitating or expediting payment to a foreign
official, political party, or party official the purpose of which is to
expedite or to secure the performance of a routine governmental action . . ."
The statute itself provided a list of examples of facilitation payments in the
definition of routine governmental actions. It included the following:
It is important to note that the language of the FCPA
makes it clear that a facilitation payment is not an affirmative defense but an
exception to the general FCPA proscription against bribery and corruption.
Unfortunately for the FCPA Practitioner there is no dollar limit articulated in
the FCPA regarding facilitation payments. Even this limited exception has come
under increasing criticism. The Organization for Economic Cooperation and
Development (OECD) studied the issue and, in November 2009, recommended that
member countries encourage their corporations to not allow the making of
2. Lay Person's Guide to the FCPA
In the Lay Person's Guide to the FCPA is a brochure by
the DOJ which is their "general explanation of the FCPA." Within in this
guidance the DOJ states:
FACILITATING PAYMENTS FOR ROUTINE GOVERNMENTAL ACTIONS
There is an exception to the anti-bribery prohibition for
payments to facilitate or expedite performance of a "routine governmental
action." The statute lists the following examples: obtaining permits, licenses,
or other official documents; processing governmental papers, such as visas and
work orders; providing police protection, mail pick-up and delivery; providing
phone service, power and water supply, loading and unloading cargo, or
protecting perishable products; and scheduling inspections associated with
contract performance or transit of goods across country.
Actions "similar" to these are also covered by this
exception. If you have a question about whether a payment falls within the
exception, you should consult with counsel. You should also consider whether to
utilize the Justice Department's Foreign Corrupt Practices Opinion Procedure,
described in the guide on p. 10 and below:
"Routine governmental action" does not include any
decision by a foreign official to award new business or to continue business
with a particular party.
The FCPA landscape is littered with companies who
sustained FCPA violations due to payments which did not fall into the
facilitation payment exception. In 2008, Con-way, a global freight forwarder,
paid a $300,000 penalty for making hundreds of relatively small payments to
Customs Officials in the Philippines. The value of the payments Con-way was
fined for making totaled $244,000 and were made to induce the officials to
violate customs regulations, settle customs disputes, and reduce or not enforce
otherwise legitimate fines for administrative violations.
b. Helmerich and Payne
In 2009, Helmerich and Payne paid a penalty and
disgorgement fee of $1.3 million for payments which were made to secure customs
clearances in Argentina and Venezuela. The payments ranged from $2,000 to
$5,000 but were not properly recorded and were made to import/export goods that
were not within the respective country's regulations; to import goods that
could not lawfully be imported; and to evade higher duties and taxes on the
Finally, there is the Panalpina enforcement action. As
reported in the FCPA Blog, this matter was partly resolved last year with the
payment by Panalpina and six of its customers of over $257 million in fines and
penalties. Panalpina, acting as freight forwarder for its customers, made
payments to circumvent import laws, reduce customs duties and tax assessments
and to obtain preferential treatment for importing certain equipment into
various countries but primarily in West Africa.
Then there is the DynCorp investigation matter. As
reported in the FCPA Blog and others, it is related to some $300,000 in
payments made by subcontractors who wished to speed up their visa processing
and expedite receipt of certain licenses on behalf of DynCorp. This
investigation has been going on for several years and there is no anticipated
conclusion date at this time.
So what does the DOJ look at when it reviews a company's
FCPA compliance program with regards to facilitation payments? Initially, if
there is a pattern of such small payments, it would raise a Red Flag and cause
additional investigation, but this would not be the end of the inquiry. There
are several other factors which the DOJ could look towards in making a final
determination on this issue. The line of inquiry the DOJ would take is as
So we return to the question
of when does a grease payment become a bribe? There is no clear line of
demarcation. The test seems to turn on the amount of money involved, to whom it
is paid and the frequency of the payments. Do Wal-Mart's alleged payments to
speed up the process qualify as facilitation payments or does an aggregate of
over $24 million paid constitute something else?
Additionally, accurate books and records are a must. At
this point it is not apparent if Wal-Mart accurately recorded these payments.
If Wal-Mart really believed they were facilitation payments, why didn't they
just record them as such?
Also remember that the defense of facilitation payments
is an exception to the FCPA prohibition against bribery. Any defendant which
wishes to avail itself of this exception at trial would have to proffer
credible evidence to support its position, but at the end of the day, it would
be the trier of fact which would decide. So much like any compliance defense,
the exception is only available if you use it at trial and it would be
difficult to imagine that Wal-Mart will want this matter to ever see the light
of a courtroom.
Visit the FCPA Compliance and Ethics Blog,
hosted by Thomas Fox, for more commentary on FCPA compliance, indemnities and
other forms of risk management for a worldwide energy practice, tax issues
faced by multi-national US companies, insurance coverage issues and protection
of trade secrets.
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© Thomas R. Fox, 2012
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