Does the new Joint Resources Guide to the US Foreign Corrupt Practices Act (FCPA) offer any new information?
Zachary Fardon: I can’t tell you that it answers all of your questions or creates crystal clarity in terms of the ambiguity and questions that all of us in this space have struggled with. But it does provide some useful guideposts, both in terms of the government’s articulation of its views and priorities as well as some of the hypotheticals, which resonate in the sense that they are recurring issues and themes that you might see in your business. They might give you true comfort for some of those situations where your comfort in the past has been reliant upon your use of common sense and hoping that your outside counsel knows what they are doing.
The other general impression I had of the guide is that it is a strong primer on FCPA issues and pitfalls. This is a nice collection of issue spotting and talking about some of the principles that you have to consider on those issues. It is not a deep dive in any area, but it is a soup-to-nuts recitation of key areas including anti-bribery, FCPA accounting provisions, compliance programs and expectations, and successor liability in an M&A context. It also addresses other applicable laws complementary to the FCPA like the Travel Act, the money laundering statute, and the mail and wire fraud statute. It talks about penalties and statutes of limitations, options for resolving cases, the whistleblower laws that are now on the books, and the Department of Justice opinion procedures.
What are some of concerns that are specific to the Hospitality Industry when it comes to the FCPA?
Matthew Kutcher: Hospitality is at the center of many FCPA investigations. That is because a “thing of value” as defined in the FCPA includes things like hotel rooms, vacations, trips, entertainment and meals — all things that are at the heart of the hospitality industry.
One of the questions that is raised when a hospitality company provides a hotel room or a stay at a resort is whether or not that qualifies as a promotional expense, which is a defense under the FCPA. In other industries it is relatively clear when a company is trying to promote its own product, but in the hospitality industry it can be unclear where to draw the line between promoting a product (a hotel room) and giving something of value (a three-night stay in a luxury resort) in exchange for business.
In addition, the DOJ and SEC guidance has a very prominent section on aiding and abetting and conspiracy liability, which does not always come up when you think about the FCPA. But there is aiding and abetting liability and conspiracy liability for others’ FCPA violations, and the DOJ guidance says in particular that for civil liability the standard is recklessness, not even actual knowledge, so putting your head in the sand when someone else is doing something that would run afoul of the FCPA could create civil liability under the FCPA. Where that comes into play for the hospitality industry is when hospitality is used by someone else to gain a business advantage, and that becomes clear to the hospitality provider. Does that trigger aiding and abetting liability on the part of the hospitality company? So far, there have been no cases that extend liability that broadly, but it cannot be ruled out.
What advice would you give hospitality companies in terms of implementing compliance programs?
David Blasi: In the hospitality industry you may have a separate chief compliance officer or it may be part of the general counsel’s office, like it is at Hyatt. It is really up to each company to determine what the appropriate structure is and how integrated it should be within your operational unit. I think there is a lot to be said for making sure operational folks feel responsible for compliance. That appears to be working for us.
We involved our internal audit group in asking a lot of the questions regarding compliance, which saves some of our resources. Each hospitality company should consider how they can leverage the resources they have. You can get your general managers (GMs) involved; the GMs are the gatekeepers at hotels. You can set up a control process where at least you know everything will be reaching that control point where the GMs will say, “Do I need to take this up the ladder and get some additional resources?” It’s also important to make sure your GMs feel comfortable reaching out to the appropriate individuals, that they understand that when they reach out it is not a problem, that we appreciate them reaching out.
Ultimately, when you have to go in and conduct an investigation, if you do the groundwork, they are going to be more receptive and hopefully understand that you are just trying to help them do their job.
What are some of the recent developments in the UK in the area of bribery?
Daniel Smith: The Serious Fraud Office (SFO), which is one of the UK authorities responsible for enforcing the Bribery Act, has seen a new “tone from the top” this year. There is a new SFO Director, David Green QC, who was appointed in April 2012. He has let it be known in interviews and in speeches that he will renew the SFO’s focus on investigations and prosecutions as core responsibilities and will not focus on offering guidance to companies about anti-bribery procedures. He has also indicated that the SFO will be focusing on “top-end” fraud. Hand in hand with that, a few months ago the SFO published revised guidance on how people can expect the SFO to respond to investigations.
The key change to that guidance is the reduced likelihood of “civil settlements” being offered. These settlements were made using a power created under the Proceeds of Crime Act 2002, which allows the SFO to recover the proceeds of crime either from perpetrators or from subsequent recipients. This does not involve imposing fines or prosecuting, but is a civil action, which is easier to prove and is also capable of settlement. It was seen as a relatively easy option for the SFO and it has done that in the last few years quite a lot, often following self-reporting. The prospect of settlement following self-reporting has now been removed from the guidance and is now significantly reduced, although it is still part of the SFO’s armory. Companies are now relatively more likely to face formal investigations and prosecutions.