Biting the Hands That Feed: Corporate Charity and the U.S. Foreign Corrupt Practices Act

"Doing what's right isn't the problem. It is knowing what's right." Lyndon B. Johnson1I. INTRODUCTION: CORPORATE PHILANTHROPY AND THE FOREIGN CORRUPT PRACTICES ACTU.S. and multinational companies operating in developing countries recognize the importance of contributing to the local communities in which they operate. The importance of donations related to corporate social responsibility ("CSR") to local communities is growing, and today companies and shareholders alike recognize CSR contributions as important and valuable corporate goals.2 In addition, local communities around the world where these companies operate and profit expect these companies to give back to the local communities in some way.3The obligation to contribute to the local communities in which they operate covers companies working in a wide variety of industries around the developing world. Extractive industries (oil, gas, and mining) face unique pressures due to the perceived environmental impact of their operations and the political realities involved in the extraction and export of valuable natural resources,4 but other industries face similar pressures to contribute. Pharmaceutical and medical companies are encouraged to contribute to local community health by donating products or services, and even companies operating in the retail supply chain are encouraged to contribute to, for example, occupational health and safety initiatives in manufacturing countries.5 The collapse of a garment factory in Bangladesh in 2013 and the call thereafter for clothing retailers to contribute more funds to ensure the safety of manufacturing facilities provides a recent example of how failure to respond to local requests to give back to the community can result in damaging and unwanted media attention.6 Pressures to donate to local communities are further enhanced in some countries by existing xenophobic tensions between foreign companies and local governments.7Actual examples of risky donation scenarios companies have recently faced include the following:· the requirement that a company construct an orphanage in one West African country and use a specific contractor or supplier selected by a local official to do so;· a request that a company donate several tons of concrete and trees for the paving and landscaping of a municipal square in Mexico prior to receiving an operational license;· a request by local tribal officials in sub-Saharan Africa that a company contribute to a community fund managed by those tribal officials; and· the requirement that a company donate to a local development fund in Asia in exchange for tangible business support. 8Contributions to local governments and communities are not prohibited by the U.S. Foreign Corrupt Practices Act ("FCPA").9 Nevertheless, some such contributions can fall within the FCPA's prohibitions, and companies face practical challenges to ensure such contributions do not lead to FCPA liability. Identifying connections between recipient charities or communities and local officials can be difficult; additionally, demands that companies donate to specific projects or development funds further exacerbate uncertainty and risk. While in principle the FCPA only applies to payments made to officials and does not apply to payments made to governments, FCPA enforcement trends show that regulators take a broad view of what constitutes a payment to a foreign official, and even intangible, non-financial benefits can be viewed as actionable under the statute.10 Under the current enforcement regime, a fine line separates legitimate CSR contributions from "corrupt" payments, where regulators can view donations as a way to "please" local officials with potential ability to influence the company's business.11Despite the uncertainty, there are practical ways for companies to manage the risk of CSR contribution regimes.12 Nevertheless, lack of clarity on when CSR contributions can lead to FCPA liability remains, despite the publication of the U. …