How to Determine whether a Payment to a Foreign Government Official is a Bribe or a Grease Payment under the Foreign Corrupt Practices Act

“The Foreign Corrupt Practices Act (FCPA) prohibits offering to pay, paying, promising to pay or authorizing the payment of money or anything of value to a foreign official in order to influence any act or decision of the foreign official in his or her official capacity or to secure any other improper advantage in order to obtain or retain business.” (A Guide to the U.S. Foreign Corrupt Practices Act.  SEC / DOJ 2012) At issue is whether the payment described herein falls under §78dd-2(b), “Exception for routine governmental action.”

§78dd-2(b) of the FCPA states that “Subsections (a) and (i) of this section shall not apply to any facilitating or expediting payment to a foreign official, political party, or party official the purpose of which is to expedite or to secure the performance of a routine governmental action by a foreign official, political party, or party official.”
§78(h) of the FCPA (“Definitions”) provides guidance as to what Congress intended to be included as “routine governmental action.”  §78(h)(4)(A) states that “The term ‘routine governmental action’ means only an action which is ordinarily and commonly performed by a foreign official in –
 

1. Obtaining permits, licenses, or other documents to qualify a person to business in a foreign country;
2. Processing governmental papers, such as visas and work orders;
3. Providing police protection, mail pick-up and delivery, or scheduling inspections associated with contract performance or inspections related to transit of goods across county;
4. Providing phone service, power and water supply, loading and unloading cargo, or protecting perishable products or commodities from deterioration; or
5. Actions of a similar nature.

 
§78(h)(4)(B) of the FCPA specifies that “[T]he term ‘routine governmental action’ does not include any decision by a foreign official whether, or on what terms, to award new business or to continue business with a particular party, or any action taken by a foreign official involved in the decision-making process to encourage a decision to award new business to or continue business with a particular party.”
 
INTERPRETATION OF THE FCPA

Case Law
 
A case which addressed the issue of facilitative payments for routine governmental action is United States v. Jean Rene Duperval, 12-13009 (11th Cir. 2015)  Duperval was the Assistant Director General and Director of International Affairs for Teleco, an “instrumentality” of Haiti.  In that role Duperval managed contracts with foreign telecommunication companies.  In one scheme Duperval received one-half the amount by which moneys owed to Teleco by another company were reduced, plus ten-thousand dollars and a Rolex watch.  In a second scheme Duperval received sixty percent of an individual’s consulting fee who worked for the company who Duperval extended the contract of in addition to two cents for each minute added to the telephone contract, which totaled $150,000.00.

On appeal Duperval contended that the jury should have been instructed as to a possible defense in the form of the facilitative payment for routine governmental action exception to the FCPA.  The Court of Appeal rejected this argument.  The court cited a Fifth Circuit case in impressing that “[a] brief review of the types of routine governmental actions enumerated by Congress show how limited Congress wanted to make the… exception.”  United States v. Kay, 359 F.3d 738, 750 (5th Cir. 2004)  The actions contemplated by Congress to be encompassed by the exception are “largely non-discretionary, ministerial activities performed by mid or low level foreign functionaries.” (Id. at 751)  Allowable payments under the exception are “grease” payments to expedite the receipt of routine services.  Id. at 747
           
The Duperval court found that the overseeing, awarding and renewal of multi-million dollar telecommunications contracts is not an “action of a similar nature” to the actions enumerated in the Act. 15 U.S.C. § 78dd-2(h)(4)(A)(v).  Furthermore, Duperval was not a low nor mid-level official, but a high-ranking official. The circumstances of this case fall squarely within what the FCPA defines as not being a routine governmental action in § 78dd-2(h)(4)(B):  “The term ‘routine governmental action’ does not include any decision by a foreign official whether, or on what terms, to award new business to or to continue business with a particular party, or any action taken by a foreign official involved in the decision-making process to encourage a decision to award new business to or continue business with a particular party.”
 
There are further cases which illustrate payments which fall beyond the scope of the facilitative payment for routine governmental action exceptions.  For example, an Oklahoma based corporation violated the FCPA when its subsidiary made payments to Argentine customs officials around $166,000 to secure customs clearance for equipment and materials that lacked required certifications or whose importation violated local law and to pay a lower than applicable duty rate.  These payments violated the FCPA because their purpose was to not have to comply with local law and receive favorable financial treatment.  In re Helmerich & Payne, Inc. ( July 29, 2009)

In this case, the company’s Venezuelan subsidiary also paid Venezuelan customs officials around $7,000.00 to permit the importation and exportation of equipment and materials not in compliance with local regulations and to avoid a full inspection of the imported goods.  Again, this payment violated the FCPA because its purpose was to be permitted to import goods which were not in compliance with local law and avoid inspection of the goods, thereby undermining local quality control standards.  Id.
           
Another case involved a global supplier of oil drilling products making 378 payments totaling $2.1 million to Nigerian Customs Service officials for the purpose of receiving preferential treatment during the customs process, including the reduction or elimination of customs duties.  Vetco Gray Controls Inc., et al., No. 07- Dept. of Justice, FCPA Op. Release 04-01 ( Jan. 6, 2004). cr-4 No. (S.D. Tex. Jan. 5, 2007)  The payments reflected a corrupt intent to cause the customs officials to deviate from the normal customs process for the benefit of the payor in receiving less stringent inspection and lower duties.  Accordingly, the payments did not constitute facilitative payments, but bribes.
 
 
ANALYSIS FOR DETERMINING WHETHER  A PAYMENT IS A BRIBE OR A FACILITATIVE PAYMENT  FOR ROUTINE GOVERNMENTAL ACTION
 
Determining whether a payment falls within the facilitative payment exception boils down to the answers to several key questions:
 

• What was the purpose in making the payments? 

A determinative factor in whether payment to a foreign governmental official is a bribe or a facilitative payment for routine governmental action is the purpose for which the payment is made.  If the purpose has a corrupt intent to alter policy, achieve favoritism or cause an official to neglect to enforce policy, then the payment is a bribe.  If the payment is for the purpose of hastening a non-discretionary act, then it is a facilitative payment

• What was received in return for the payment? 

Were the services received in return for the payment(s) the same or of a similar nature as those ordinarily and commonly performed by a government official as enumerated in §78dd-2(h)(4)?
 

1. Obtaining permits, licenses, or other documents to qualify a person to business in a foreign country;
2. Processing governmental papers, such as visas and work orders;
3. Providing police protection, mail pick-up and delivery, or scheduling inspections associated with contract performance or inspections related to transit of goods across county;
4. Providing phone service, power and water supply, loading and unloading cargo, or protecting perishable products or commodities from deterioration; or
5. Actions of a similar nature.

 
If the services received in consideration for the payment fall into any of the above categories or are actions of a similar nature, then they satisfy this element of the facilitative payment for routine governmental action exception.  However, if what was received in return for the payment was the gaining of an advantage by being awarded a contract or the renewal of a contract or other special treatment achieved by undermining local law, such as diminished inspections or the lowering of duty owed, those results would indicate a bribe.

• To Whom were the payments made? 

1.  Was the payment made to an official who was low-level, mid-level or high-level?
2. Did the official have any discretion in decision making regarding the status of the payor?

 
The position and rank of the government official who received the payment is an important indicator of whether a payment is a facilitative payment for routine governmental action or a bribe because it reflects the degree of discretion the official has over the present or future circumstances of the payor.  If the payment is made to a low-level official who lacks the power to affect the circumstances of the payor, then the payment is likely facilitative.  If the payment is made to a high-level official with the power and ability to benefit the position of the payor, such as by renewing a contract or reducing moneys owed, that is indicative of a bribe. 
 

• What was the size of the payment? 

The size of a payment made is not determinative as to whether the payment is a bribe or a facilitative payment, though it can be a factor in determining corruptive intent. 

That application of the foregoing factors provide a framework by which to analyze and interpret whether a payment to a foreign official is a bribe or a grease payment under the FCPA.