reasonable corporate hospitality expenditures. The Bribery Act provides no such
affirmative defense, which initially made
hospitality expenditures one of corporations’ major concerns about the act.
The SFO has put forth guidance on
how it will determine whether a particular corporate expenditure is reasonable
and proportionate. In a 2011 speech,
Chris Walker, SFO head of policy, outlined five factors the agency may consider:
whether the company has issued a clear
policy on gifts and hospitality; whether
the scale of the expenditure in question is
within the limits set out in the policy and,
if not, whether the person making it asked
a senior colleague for special permission
to make it; whether the expenditure was
proportionate (based on who received
it); whether there is evidence that the
company recorded the expenditure and
whether the recipient was entitled to
receive the hospitality under the law of
the recipient’s country.
In light of the Bribery Act, and in keeping with such guidance, many companies
are taking a fresh look at their policies
and procedures on corporate hospitality and putting tighter controls in place.
For example, Perlman says, a company
may require written preapproval of any
corporate hospitality expenditures and
then, after the expenditure is made, may
require employees to certify that they
abided by the preapproved terms.
Perlman advises that companies
examine the particular facts and circumstances of each situation. Companies face
higher risk, for instance, if they’re taking
a client to the Olympics opening ceremonies around the same time their contract
is about to run out, or if they’re seeking new business from the party they’re
bringing to an event.
“The government is going to have the
benefit of 20/20 hindsight, and they’re
going to see … if you offered someone
Olympics tickets and then a few months
later you got the business,” Perlman says.
“That’s why it’s so important for companies to have tight enough controls in place
to make sure these situations are looked
at on a case-by-case basis to determine
whether and to what extent they could
violate the Bribery Act or the FCPA.”
The U.K. government has stopped short
of setting specific boundaries on corporate hospitality expenditures.
The 2016 Summer OlympicS in riO de JaneirO will preSen T far deeper
compliance challenges for corporations. it will raise u.K. Bribery act and u.S.
foreign corrupt practices act issues that go beyond corporate hospitality concerns to issues surrounding the infrastructure investments that companies will
make leading up to the games.
The risk is smaller in london because corruption is not as widespread
there. But in rio, the risk will be real, says matteson ellis, an anti-corruption
lawyer and the founder of matteson ellis law.
“There will be tons of investment from companies that might not historically have been investing in Brazil. you’ll have government officials at
all different levels who will see this as an opportunity for extraction,” ellis
says. “The message to companies is that in operating environments like
these, you need to go in with your eyes open and your compliance programs
In speeches since the Bribery Act’s
passage, SFO Director Alderman has
given several examples of scenarios that
are and are not acceptable under the law.
Flying prospective clients to Russia to
see operations there is “no problem … if
that is the best way of demonstrating to
those prospective clients what you can
do,” he has said. Reasonable hotels and
meals for those prospective clients would
However, if the prospective client is
then treated to a month-long stay on a
private island and provided with spend-
ing money, “we will be inclined to ask
whether bribery is taking place … It is
clear to me,” Alderman said, “that most
companies clearly understand the differ-
ence between what is permissible here
and what is not permissible.”
But Jonathan Armstrong, a part-
ner at Duane Morris in London, says the
government could have given more spe-
cifics on what is lavish or excessive under
“It would have been relatively easy to
give more clarity in the Ministry of Justice
guidance that accompanies the act,”
says Armstrong. “The difficulty is most
corporations don’t know what ‘lavish’
hospitality is. Is it $50? $250? $2,500?
$25,000? It would have been helpful to
set some sort of a marker down.”
Another gray area in the Olympics
context is whether the government would
look at an event ticket’s face value or
resale value, which could be much higher
in the case of the most in-demand sport-
ing events. In addition, sponsors of the
games will receive tickets and packages.
But just because the companies didn’t
pay for the tickets doesn’t mean they will
be considered free for purposes of the
“Some people think that because the
tickets were free that it’s not a Bribery
Act issue,” Armstrong says. “That’s not
the case. A juror is bound to look at the
‘eBay value’ of those tickets.” n