FCPAméricas Blog

Hospitality Risks at the 2016 Rio Olympics

Author: Guest Author

RioOlympicsThis guest post is from Eloy Rizzo, a senior attorney with the law firm KLA – Koury Lopes Advogados in São Paulo, Brazil. Mr. Rizzo focuses on anti-corruption and compliance issues, as well as on complex litigation. Mr. Rizzo currently interns at Miller & Chevalier’s anticorruption team in Washington, DC.

We Brazilians are excited that the Summer Olympic games will be held in Rio de Janeiro in August 2016. We also know that the games will bring with them certain corruption risks under laws like the FCPA and the Brazilian Clean Companies Act (BCCA). Most prominent will be risks related to hospitality expenditures.

In particular, the SEC sent a strong warning on May 20, 2015, when it imposed a civil fine of $25 million on the Australian global resources company BHP Billiton (“BHP”) to resolve charges of FCPA books and records violations. According to the SEC, BHP violated the FCPA’s books and records provisions when it sponsored 60 government officials and their relatives at the 2008 Summer Olympic Games in Beijing. The SEC stated that BHP’s guests, mostly from countries in Africa and Asia, were provided with three- and four-day hospitality packages that included event tickets, luxury hotel accommodations, and sightseeing excursions of between $12,000 to $16,000 each.

In a nutshell, the essence of the SEC charges focused on gaps in BHP’s anti-corruption procedures. Although BHP had a compliance program, it failed to implement sufficient internal controls to address the risks associated with its Olympic hospitality program.

Companies that are publicly listed in the United States run similar risks in the upcoming Rio Summer Olympics. If these companies intend to offer hospitality to public officials, they should study the BHP case, take relevant lessons, and avoid similar problems.

In addition, companies must not forget that their actions will be subject to jurisdiction of Brazilian authorities, who have been able to apply the BCCA since January 29, 2014. They will surely be keeping a close eye on activities associated with the Olympics.

It is also worth highlighting that on June 2, 2014, just 10 days before the opening date of the FIFA World Cup 2014 that took place in Brazil, the Brazilian Office of the Comptroller General (“CGU”) issued guidelines with respect to the offering of hospitality to Brazilian federal public officials during the event, discussed here. With few exceptions, the general rule of the guidelines was that Brazilian federal public officials were prohibited from receiving invitations, tickets, transportation or accommodations to watch or participate in any events related to the World Cup.

In fact, during the World Cup, the offering of tickets to Brazilian federal public officials could have been interpreted as the offer of an “undue advantage” to a public official, subjecting individuals involved to the provisions of the Brazilian Penal Code. Penalties for such violations include imprisonment of up to 12 years. Companies offering hospitality to Brazilian federal public officials could have violated the BCCA that, among other sanctions, sets forth fines from 0.1 to 20% of the gross revenues of the last fiscal year.

CGU has still not issued any specific guidelines on hospitality for Brazilian federal public officials for the 2016 Summer Olympics in Rio de Janeiro. But it is likely that the CGU will take the same approach it did during the World Cup. The opening ceremonies will begin in about a year. This is a good time for companies planning to provide hospitality to make sure they are complying with the FCPA, BCCA, and other applicable laws.

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

Post authored by Guest

Categories: Brazil, Enforcement, English, FCPA, Gifts and Entertainment

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