Facilitation Payments: Are They Legal Bribery?
One of the more frequent questions I hear during webinars and at seminars centers on the issue of facilitation payments. Often the question is “Do you really believe that companies can comply with a flat-out ban on facilitation payments?”
The UK Bribery Act, which continues its dormant existence, prohibits all facilitation payments. This is in keeping with all the do-gooders who urge an international prohibition on facilitation payments. No one can argue against such an idealistic goal.
Facilitation payments are legal bribes – I mean it walks like a bribe, it talks like a bribe and it quacks like a bribe. Calling it something else does not mean it is not a bribe. So, we can all agree with Howard Sklar, Tom Fox and others that a facilitation payment is a legalized form of bribery, akin to “medicinal” marijuana.
Now, lets move on to the real world. You work in a business and you need to secure routine, non-discretionary services from a foreign government in order to conduct business in the foreign country. You need a license to open a business, a visa for an employee, or permits to build a new office.
You are asked to pay a “fee” to “expedite” the particular service. What do you do?
(a) reject any attempt to pay a legal bribe by referring to your OCED mantra against facilitation payments; or
(b) asses the cost, the benefit and the risk and decide to go forward.
I say (b). Howard Sklar and Tom Fox say (a).
What is the risk? Under the FCPA’s exception for facilitation payments, can you in good faith reach a decision to pay the “fee.” In most cases “yes;” but in some cases, you may say “no” where the decision is “discretionary.” The difference between a discretionary and a non-discretionary decision is almost impossible to define. By definition, every decision is “discretionary.” What, in fact, is non-discretionary? Someone at some point makes a decision about how to handle a request and how much to charge for it.
My questions and hyper-ventilating are meant to underscore a point – the facilitation payment exception is almost unenforceable. If the government builds a case resting entirely on violations of the exception – meaning the defendant’s conduct does not fall within the exception, even though the individual reached a good faith, plausible decision that his conduct fell within the exception, the government will lose the case. Assuming they can persuade a judge that the case is meritorious, the government will never persuade a jury. That does not mean that every defendant who relies on the exception will win their case; it only means that those defendants who can demonstrate through documentation that a careful and deliberate decision was reached in good faith that the facilitation payment exception applies should not be prosecuted.
But what about the UK Bribery Act? Don’t you run the risk that you could be prosecuted under the UK Bribery Act? Under the typical scenario of facilitation payments, my answer is “don’t’ worry, be happy,” no one will get prosecuted. While the UK Bribery Act includes a flat prohibition, the “Prosecution Guidance” states that while a “single small payment” may weigh against bringing charges or result in “only a nominal penalty,” significant consequences will result where there have been “large or repeated payments.” Given the moribund state of UK Bribery Act enforcement, the realities that face business these days, and the US exception for facilitation payments, it is hard to argue that companies should “never” pay a facilitation payment.
A more persuasive argument for avoiding facilitation payments is that it can send the wrong signal within a company. By allowing this legalized form of bribery, compliance officers may be unleashing a force which could undermine compliance efforts on more significant payment questions. It creates risks that will allow business people to justify improper payments under the guise of “we will never be prosecuted.” This is a persuasive point which must be factored in to the equation. Making small, routine payments may be justified but not if it breeds a corporate compliance attitude which undermines the company’s overall compliance message.