1011 - U.S. Foreign Corrupt Practices Act (FCPA) Policy

The law most relevant to University international activities is the U.S. Foreign Corrupt Practices Act (“FCPA”), but many countries and jurisdictions also have their own anti-bribery laws, which may be more restrictive than the FCPA. You should be aware of any applicable local antibribery laws before engaging in these activities with individuals or entities located overseas (even if you remain within the U.S. while conducting such activities). Anti-bribery laws of the jurisdictions in which the University conducts activities include but are not limited to: (i) U.K. Bribery Act; (ii) the Prevention of Bribery Ordinance of Hong Kong; (iii) the Criminal Law and Anti-Unfair Competition Law of the People’s Republic of China; (iv) the Prevention of Corruption Acts of each of India and Bangladesh; and (v) the Egyptian Penal Code. Contact the Office of Legal Counsel for more information about the respective anti-bribery and corruption laws of foreign jurisdictions that may apply to University activities.

The FCPA is a federal law, enforced by the U.S. Department of Justice, which prohibits payments, gifts, or even offers of “anything of value” to a “foreign official” for the purpose of influencing the official or otherwise “securing any improper advantage” in obtaining, retaining or directing business.

Certain provisions of the FCPA apply to all “domestic concerns” (e.g., U.S.-based non-profits, NGOs, and educational institutions) and their officers, employees and agents. Thus, the FCPA applies to the University, its employees, and all third parties working on the University’s behalf, such as vendors and consultants.

No. The FCPA prohibits direct and indirect payments. Therefore, one cannot make a payment to a third party if he or she knows (or should know) that some or all of that payment will be used in a way that violates the FCPA.

The FCPA permits “facilitation payments” to a foreign official for purposes of facilitating or expediting or securing the performance of routine, nondiscretionary government action. However, because applicable local anti-bribery laws may not include such an exception and given the difficulty in determining when this exception is available under the FCPA, the University Policy prohibits the making of facilitation payments unless the Office of Legal Counsel has determined the payment is permissible or where necessary to prevent personal injury or harm (e.g., if a colleague requires emergency medical care and a payment will expedite the dispatch of an ambulance).

University members should consult the FCPA Policy when engaging in activities comparable to the examples below or other activities involving foreign officials.

• Collaborations with foreign institutions where the partner institution is owned or run by its government; · Events hosted by the University (on campus or overseas) that include foreign officials;

• Projects, sponsored or otherwise, that involve interactions with foreign officials (e.g., projects requiring government-issued licenses, approvals or permits);

• Activities that require the hiring of agents or consultants who will interact with foreign officials; or

• University educational programs (on campus or overseas) in which foreign officials may enroll.

A “foreign official” is defined very broadly under the FCPA. It includes employees and agents, at all levels, of a foreign government, state owned or controlled company or instrumentality (i.e., public utility or hospital), foreign political party or public international organization (e.g., the World Bank) as well as a candidate for foreign political office. The following are deemed “Foreign Officials” for purposes of the University’s FCPA Policy:

• Administrators and faculty at foreign state universities;

• Advisors to ministries, government agencies or government officials;

• Members of government committees or panels;

• Healthcare professionals at government-owned or controlled hospitals/health care facilities;

• Members of a royal family;

• Police officers; and

• Customs officials.

Yes, payments for legitimate services are acceptable. But care should be given to avoid payments that could be construed as having a corrupt purpose. To that end, each payment for goods or services should follow the University’s Procurement policies and processes and be documented with the appropriate detail such that it is clear that the transaction was bona fide in all respects.

Anything of value can serve as the basis of a bribe. Examples of common forms of payments or benefits that may constitute a bribe if coupled with an intent to improperly influence or reward the beneficiary include, but are not limited to:

• Unreasonable gifts, meals, entertainment, travel expenses or other hospitality; · Unwarranted rebates or excessive commissions;

• Unwarranted allowances or expense reimbursements;

• Charitable contributions to organizations owned or recommended by a foreign official or owned by his or her family members;

• Contributions to a foreign political party or candidate for political office at the request of a third party;

• Uncompensated use of University services or facilities; and

• Promises of admission or acceptance to the University with respect to the foreign official or his or her family member.

A payment or benefit may be deemed unreasonable, unwarranted or inappropriate under the FCPA and the University’s Policy if (i) the arrangement violates other applicable University policies and/or (ii) a third party could reasonably perceive that the purpose of the arrangement is to influence a foreign official’s decision or reward the improper performance of his or her duties.

When hosting a foreign official, it may be appropriate to pay for the official’s reasonable lodging and dining expenses so long as these payments are not being done to improperly influence the official. Activities such as giving a lavish meal or a gift that does not have a University connection (e.g., expensive theater tickets) or providing benefits to family members of an official (e.g., travel costs) may not be considered reasonable, and, therefore, may be more likely to be construed as having a corrupt purpose. When presenting a gift, be sure to refer to the University’s Policy on Gifts to Non-Employees and consider presenting the gift publicly, making clear that it is an expression of University hospitality and/or token of its appreciation.

Gifts beyond a modest value (i.e., $100 or less) may not be given under the University’s Policy on Gifts to Non-Employees. Check with your supervisor and/or the Office of Legal Counsel before giving larger gifts to persons who might be considered foreign officials.

Example 1: You would like to enter into a collaborative research agreement with a foreign statecontrolled institution. The foreign officials have not yet agreed to enter into the collaboration but would like to visit you at the University to discuss it further. You advise them that you have made reservations and arranged payment for them and their spouses (who are not affiliated with the institution) at a luxury hotel in Chicago, a driver and limousine to transport them to campus, and tickets for them to attend a Chicago sports event while in town.

In determining whether the arrangements you have made may violate the FCPA and University Policy, you should consider whether: (1) a payment or something of value is offered, promised, or given (2) to a foreign official (3) for a corrupt or improper purpose. In this case, (1) and (2) appear to have been satisfied. Even if you did not have a corrupt intent, the same may be determined from a consideration of the circumstances. Specifically, someone could reasonably conclude that the luxury hotel accommodations, limousine service and tickets were extravagant and not reasonably related to the purpose of the visit and therefore must have been offered in order to improperly induce the foreign officials to enter into the agreement. Covering the 8 expenses for the officials’ spouses, whose presence is unrelated to the business purpose of the trip, is also suggestive of improper motive.

Example 2: As part of your planning to conduct field research next month in a foreign country, you learn that the research team must obtain a research permit from the foreign government. You have completed the application process, submitted the required documents and paid the necessary fees. However, as a result of a backlog at the permitting office, you learn that your permit will not be issued for several months. A local agent in the foreign country advises you that he can make a one-time cash payment to a clerk in the permitting office to ensure that the clerk files and stamps the research permit applications for expeditious review. The clerk has no discretion with respect to filing and stamping the research permit application once the filing fees have been paid. A week later, the agent informs you that the application is being reviewed, and the government officials have concerns about the research in light of its subject matter. The agent says he is a friend of the director of the permitting office and can “make the problem go away” with a modest cash payment to the director. You authorize the agent to pay the director and the research permit is then promptly issued.

Was the indirect payment to the clerk a violation of the FCPA? Under these circumstances, this payment would likely qualify as a “facilitating payment” under the FCPA, since it is a one-time, small payment to obtain a routine, non-discretionary governmental service that you are entitled to receive (i.e., the stamping and filing of the permit application). However, this payment may violate local laws of the foreign jurisdiction and may only be made if payment is consistent with the University’s FCPA Policy, including prior consultation with the Office of Legal Counsel.

Was the payment to the director a violation of the FCPA and University Policy? Yes. Since the payment was designed to corruptly influence a foreign official into improperly approving a permit, the payment to the director violates the FCPA and University Policy. Issuance of the research permit was a discretionary act, and one that the government had expressed concerns about granting.

There are several risk mitigation strategies that you should consider when engaging in University activities involving foreign officials and foreign entities, including the following:

• Refer to the relevant Financial Services and Procurement policies before engaging in purchasing or payment activity with foreign officials or foreign entities;

• Maintain accurate and current financial records of any payments to foreign officials, including detailed invoices and receipts;

• Consult with the Office of Legal Counsel when considering presenting a gift to a foreign official, noting that gifts to foreign officials must not be extraordinary and should solely be motivated to express esteem or gratitude (and not corrupt intent). Gifts should be presented openly with transparency, and they should not be in the form of cash;

• When providing reasonable lodging or meals for a foreign official, pay the costs directly to vendors and do not give cash directly to the foreign official;

• Ensure that stipends are reasonable estimates of expected costs and do not provide any additional compensation or money to foreign officials;

• Do not condition payments on any specific action by a foreign official; and

• Before engaging third parties that will interact with foreign officials and entities on behalf of the University, conduct due diligence to determine the third-party’s awareness and compliance with provisions of the FCPA and similar laws. Provide them with a copy of the University’s FCPA Policy and consider adding provisions to contracts stating (1) that the contractor understands the prohibitions of the applicable antibribery laws and will ensure compliance with them, and (2) that any payments to foreign officials on behalf of the University must be expressly authorized by the University.

For questions related to purchasing and payment related policies and procedures, contact the Financial Services at 773-702-1944 or finserv-help@lists.uchicago.edu. For general questions, contact the Office of Legal Counsel at (773) 702-7237.