FCPA: Distinguishing Bribes and Illegal Gratuities

From the perspective of FCPA compliance, for attorneys and in-house counsel seeking to determine whether a certain set of facts or circumstances constitutes a bribe under the FCPA, the Court of Appeals for the Fourth Circuit’s recent decision in United States v. Jefferson provides helpful guidance in distinguishing a bribe from an illegal gratuity. Though the opinion did not focus on the FCPA, it did address in considerable detail the bribery and illegal gratuity portion of the domestic bribery statute, 18 U.S.C. § 201.  As is generally known, the FCPA’s anti-bribery provisions are premised on the bribery portion of the domestic bribery statute.  18 U.S.C. § 201(a).

Understanding the difference between a bribe and an illegal gratuity can be critical in determining whether a payment constitutes a violation of the anti-bribery provisions of the FCPA. Under the anti-bribery provisions, illegal gratuities are not prohibited. Only bribes similar in terms of criminal intent to those prohibited by the domestic bribery statute are prohibited.

Frequently, payments to foreign officials lack the quid pro quo element as is required for a FCPA violation. But relying upon an illegal gratuity analysis to determine an absence of the quid pro quo element can be dangerous. Reasonable differences can arise as to whether there is a quid pro quo element which, in turn, lead to a slippery slope of problems.

As a result, it is critical that care be exercised in making a determination as to what might constitute an illegal gratuity. For this reason, the recent Jefferson opinion can be helpful in making that determination.  In distinguishing between bribery and an illegal gratuity, the Fourth Circuit explained:

Although both the bribery and illegal gratuity statutes related to giving a thing of value to a public official, or a public official accepting a thing of value, the illegal gratuity statute, on its face, is one-sided. That is, an illegal gratuity does not require an intent to influence or be influenced. The gratuity is a reward for an action that a public official has already taken, or for an action that the public official has committed to take in the future. The bribery statute, however, requires proof of a quid pro quo, that is, an intent on the part of the public official to perform acts on his payor’s behalf. In other words, the public official’s intent to perform acts for the payor – required for a bribery offense – is the exchange, or quid pro quo, missing from the illegal gratuity scenario.

The Fourth Circuit went on to further clarify what constitutes a quid pro quo payment. In quoting from its decision in United States v. Quinn, 359 F.3d 666, 673 (4th Cir. 2004)(quoting United States v. Jennings, 160 F.3d 1006, 1014 (4th Cir. 1998), it stated that “‘”[the quid pro quo requirement is satisfied so long as the evidence shows a course of conduct of favors and gifts flowing to a public official in exchange for a pattern of official actions favorable to the donor.”‘” In addition, the Fourth Circuit stated:

“[In] order to establish the quid pro quo essential to proving bribery, the government need not show that the defendant intended for his payments to be tied to specific official acts (or omissions).” [United States v. Granim, 510 F.3d 134 (2d Cir. 2007). Rather, “bribery can be accomplished through an ongoing course of conduct.”Id. at 149 (citing Jennings, 160 F.3d at 1014); see also United States v. White, 665 F.3d 560, 568 (3d Cir. 2012) (explaining that “[t]he bribery theory does not require that each quid, or item of value, be linked to a specific quo, or official act. Rather, a bribery may come in the form of a stream of benefits” . . . ).

Even in situations where the facts and circumstances suggest an absence of the quid pro quo element that is required for a violation of the anti-bribery provisions, the payments to foreign officials may still be a violation of local law. For issuers, a failure to accurately record the payments may also constitute a violation of the accounting and record-keeping provisions of the FCPA.

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