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NDTO News Article

Bribery or “Facilitating Payment?”

The Foreign Corrupt Practices Act (FCPA) is in place in order to fight corruption and bribery abroad. A challenge for many companies is when doing business abroad demands the use of “grease money” – small payments to complete routine tasks. These types of payments fall under the “facilitating or expediting payment” category and are an exception to the FCPA’s rules. However, companies should be very careful when using this narrow exception.

The FCPA says a business and their entities may not pay foreign government officials for the purpose of obtaining or retaining business.  To note, a recent ruling in the federal courts by Judge Paul Diamond earlier this month determined that public international organizations are also considered to be foreign government agencies under the FCPA.

Payment to a foreign government or public organization is considered a facilitating payment only when it is intended to further a non-discretionary, “routine governmental action”. Actions must be “ordinarily and commonly performed by a foreign official” such as obtaining permits, licenses, processing governmental papers, providing police protection, ensuring mail pickup/delivery, turning on/off water or power supply, and other similar tasks.

The line between bribery and facilitation can be hazy. In essence, a company is only allowed to pay the government extra in order to speed up what they were going to do anyway. The situation becomes confusing when it’s unclear what you’re paying for – expediting the action or the action itself? For instance, Dyncorp International is a Virginia-based private military contractor that was subjected to a 3-year investigation by the Department of Justice after the company discovered and self-reported an estimated $300,000 in payments made by subcontractors to foreign officials on undisclosed projects. The payments were to “expedite the issuance of a limited number of visas and licenses from foreign government agencies.” This language sounds very similar to the facilitating payment exception, so what was the problem?

The crux is in the “routine governmental action” clause. If Dyncorp’s licenses weren’t already pending or set to be issued, then they could not have been expedited, and thus would not fall under the facilitating payment exception. It would seem the Justice Department questioned the subcontractors’ intent, and timing of payment. Dyncorp managed to avoid prosecution due to its voluntary disclosure, subsequent internal investigation, and strong efforts to enhance its compliance program (including terminating their chief compliance officer.)

The FCPA’s facilitation exception requires meticulous recordkeeping. All facilitating payments should be labeled as such within company accounting records in order to remain compliant. That being said, clearly labeling facilitating payments could get you into trouble. Grease payments are illegal in many countries. Enforcement of those laws is a different story.

If you’re interested in learning more, attend the Bribery, Corruption & the Foreign Practices Act breakout session during the Global Business Conference on March 31st.