Qualcomm Incorporated agreed to pay a fine of US $7.5 million to the Securities and Exchange Commission to resolve charges that, from 2002 through 2012, it provided “things of value” to foreign officials to encourage use of the company’s technology in China, in violation of the Foreign Corrupt Practices Act. According to the SEC, during this time, Qualcomm hired three relatives of officers of state-owned enterprises in China and provided other benefits, including frequent meals, gifts and entertainment, to foreign officials and their family members in order to gain a business advantage. Qualcomm is an issuer of SEC-registered securities that designs and sells wireless telecommunication products. Under the FCPA, no issuer of SEC-registered securities may give “anything of value to any foreign official for the purposes of influencing the official or inducing the official … to induce a foreign official to use his influence with a foreign governmental instrumentality to influence any act or decision of such government or instrumentality” (emphasis added). Last year, The Bank of New York Mellon Corporation also agreed to pay sanctions of almost US $15 million to resolve SEC allegations that its retention of three interns during 2010 and 2011 constituted FCPA violations. The SEC claimed that, in order to maintain and expand business with an unidentified Middle Eastern sovereign wealth fund, BNY agreed to retain three family members of two government officials who were both senior officials affiliated with the sovereign wealth fund. None of the interns, claimed the SEC, met the “rigorous criteria” of the internship program ordinarily administered by BNY. (Click here for details on the BNY decision in the article, “Student Internships Result in Bank’s Settlement With SEC Over Alleged FCPA Violations” in the August 23, 2015 edition of Bridging the Week.)

Compliance Weeds: Firms conducting business abroad often struggle with how to adhere to local custom that incorporates gift giving as a means to demonstrate respect and collegiality while at the same time complying with the strict prohibitions imposed by the FCPA. Unfortunately, under the FCPA, there is not a threshold that provides a safe harbor for gift giving or any other payment (whether in cash or in kind) if the intent is to improperly influence a government official. However, staff of the US Department of Justice and the SEC have jointly published a helpful guide that notes that “[i]tems of nominal value, such as cab fare, reasonable meals and entertainment expenses, or company promotional items, are unlikely to improperly influence an official, and, as a result, are not, without more, items that have resulted in enforcement action by DOJ or SEC.” It’s not a bright line test, but it’s something. Also keep in mind, the FCPA applies not only to issuers of SEC-registered securities, but also all US “domestic concerns” (e.g., all US citizens, nationals, residents and incorporated entities) and certain foreign nationals or entities too. (Click here to access A Resource Guide to the U.S. Foreign Corrupt Practices Act by staff of the DOJ and SEC.)