- FCPAméricas - http://fcpamericas.com -

Corruption Risk and the 2016 Rio Olympics: Raising the Bar for Hospitality Compliance

RioOlympics [1]This post is authored by Carlos Ayres, along with Senior Associate Geoff Martin and Associate Jean-Paul Theroux in Baker & McKenzie LLP’s Compliance, Investigations and Government Enforcement practice in Washington D.C.

The Olympic Games open in Rio de Janeiro on August 5, 2016. The Games are seen as an opportunity for hosts to show themselves to the world, and are generally lavish affairs. With the world’s attention comes high-profile and highly sought-after corporate hospitality. Such hospitality at the Olympics and other high-profile events can provide a bona fide relationship-building opportunity for companies. They are also a reminder of the risk that, when handled improperly, corporate hospitality can result in bribery or related improprieties.

In this post we consider briefly the relevant legislation and guidance applicable to corporate hospitality in Brazil, the United States and the United Kingdom.

Brazil’s Clean Company Act, which came into force in 2014, prohibits bribery of Brazilian public officials through the giving of an “undue advantage.” Guidelines issued by the Brazilian Office of the Comptroller General (CGU) specifically state that “[o]ffering hospitalities, freebies (‘brindes’) and gifts as courtesy to public agents or people related to them may constitute the granting of an undue advantage.” Although neither the Act nor the CGU Guidelines define the term “undue advantage” in the context of corporate hospitality, federal authorities in Brazil have issued several regulations suggesting that providing hospitalities at major sporting events would constitute a violation if given to a public official. The most recent of these regulations, issued by the CGU on May 6, 2016, prohibits public officials in most circumstances from accepting invitations to entertainment events such as “concerts, performances and sports.”

For hospitality to constitute a bribe under the U.S. Foreign Corrupt Practices Act (“FCPA”), the giver must have corrupt intent. According to the Resource Guide to the FCPA, released jointly in 2012 by the U.S. Department of Justice and Securities and Exchange Commission, this requirement “protects companies that engage in the ordinary and legitimate promotion of their businesses while targeting conduct that seeks to improperly induce officials into misusing their positions.” In contrast, the Resource Guide indicates that lavish gifts and/or entertainment expenses are “more likely” to indicate an improper purpose and, thus, create potential FCPA liability. Recent FCPA enforcement indicates that Olympics and other high-profile hospitality is capable of falling into this second category. If the hospitality is not subject to adequate internal controls and recorded properly in the company’s books and records, it can also violate the FCPA’s accounting provisions.

In general, under the U.K. Bribery Act, in order for hospitality to constitute a bribe, the giver must intend for the hospitality to bring about the improper performance of a duty by the recipient, or to reward such improper performance. Alternatively, for the receiver to be prosecuted they must intend to be so influenced or actually breach their duty. The U.K.’s Guidance goes on to state that the more lavish the hospitality then, generally, the greater the inference that it is intended to improperly influence the recipient.

We hope that the focus of the world during the Games will be on international harmony and sporting achievement, rather than on the problem of corruption. Companies, both domestic and international, can play their parts in ensuring this by implementing and enforcing effective internal hospitality and anti-corruption compliance programs, including (but not limited to):

This post is abridged from a longer Baker & McKenzie Client Alert, which can be read in full here [2].

The opinions expressed in this post are those of the author in his or her individual capacity, and do not necessarily represent the views of anyone else, including the entities with which the author is affiliated, the author`s employers, other contributors, FCPAméricas, or its advertisers. The information in the FCPAméricas blog is intended for public discussion and educational purposes only. It is not intended to provide legal advice to its readers and does not create an attorney-client relationship. It does not seek to describe or convey the quality of legal services. FCPAméricas encourages readers to seek qualified legal counsel regarding anti-corruption laws or any other legal issue. FCPAméricas gives permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author and to FCPAméricas LLC.

© 2015 FCPAméricas, LLC