Gibson Dunn Partners Weigh in on Coerced Corporate Social Responsibility and the FCPA

A corporation wants to do the right thing and donate to a community charity. It’s called corporate social responsibility.

Joel Cohen

Joel Cohen

But what about coerced corporate social responsibility — where a corporation is operating in a corrupt country and government officials coerce corporate executives to make charitable contributions?

Daniel Harris

Daniel Harris

Gibson Dunn partners Joel Cohen and Daniel Harris are out with a piece titled Coerced Corporate Social Responsibility and the FCPA (The International Comparative Legal Guide to: Business Crime, Global Legal Group Ltd, London, 2016).

“Can CSR run afoul of the law?” Cohen and Harris ask. “As several commentators noted following two United States Securities & Exchange Commission enforcement actions — announced in 2004 and 2012, each based on the donation of funds to the same Polish charity — CSR and other charitable ‘contributions can fall within the U.S. Foreign Corrupt Practice Act’s prohibitions. Companies face practical challenges to ensure such contributions do not lead to FCPA liability.’”

Cohen and Harris write that “at the head of the comet of potential FCPA liability is naked bribery, a plainly corrupt request from an individual foreign official for the proverbial (or literal) big bag of cash in exchange for a clear business nexus.”

“But streaming away from that head for a seemingly ever-increasing distance is a tail of potential anti-bribery liability, propelled by enforcement authorities’ interpretations of the FCPA. This tail might reach different types of coerced social responsibility contributions, from a thin veneer over the common bribe through a range of well-intentioned conduct. How far does it stretch?”

They conclude that “enforcement authorities have put companies subject to the FCPA on notice that donations to foreign charities will come under the same rigorous scrutiny as any other non-U.S. payment.”

“Despite the alarm sounded by anti-corruption specialists following the announcement of the Schering-Plough settlement and its involvement of a bona fide charity, the cases brought so far relating to donations have not involved any donation-specific risks — instead, they involve fairly obvious bribery schemes that happen to include donations. Nevertheless, companies should take advantage of the available guidance and tighten their anti-corruption compliance programs
to defend against risks posed by foreign charitable contributions.”

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