Foreign Corrupt Practices Act Protocol
Berklee is subject to numerous laws and regulations that govern many activities of the college, both as an institution of higher education and as an entity operating globally. All members of the college community are expected to familiarize themselves with the federal, state, and local laws and regulations that apply to the activities in which they are involved, and to conduct themselves in compliance with such laws and regulations. Noncompliance, even when inadvertent, can have severe consequences for the people involved and for the college, including civil liability, loss of funding, reputational harm, and, in extreme cases, criminal prosecution or sanctions. The college expects all members of the community to maintain the highest ethical and professional standards in all interactions and relationships involving the college or college business; special attention and diligence is required when those interactions involve international activities.
To assist members of the community and further their understanding of laws applicable to Berklee activity globally, the general counsel provides the following guidance on complying with the U.S. Foreign Corrupt Practices Act (FCPA).
FCPA Applicability and Overview
The FCPA applies primarily to interactions between U.S. persons and foreign officials. It also applies when engaging with a third party with ties to foreign officials or governments. If you are engaged in activities like the examples below or otherwise involving foreign officials, you must consider the FCPA:
- Collaborations with foreign institutions where the partner institution is owned or run by its government
- Events hosted by Berklee, on campus or overseas, that include foreign officials
- Activities that require the hiring of foreign companies, agents, or consultants
- Other projects that involve interactions with foreign officials
Depending upon the activity and its location, other countries’ laws may also be relevant. Some, such as the U.K. Bribery Act, are stricter than their U.S. counterpart and may extend to transactions with private persons as well as foreign officials.
As a general matter, the anti-bribery provisions of the FCPA make it unlawful to bribe a foreign official for the purpose of obtaining or retaining business for or with, or directing business to, any person, or for the purpose of otherwise securing an improper advantage. Although this seems simple to comply with, the FCPA extends well beyond what many people would consider a typical “bribe” (e.g., cash in an envelope slipped furtively to an official in a dark alley).
Violations of the FCPA contain three main elements: (1) payment or anything of value is offered, promised, or given (2) to a foreign official, political party, party official, or candidate (3) for a corrupt purpose.
- “Anything of value” is broadly construed and may include cash payments, non-cash gifts, or other benefits, including the following:
- Travel, meals, entertainment, or gifts, including for friends or relatives of a foreign official
- Training, scholarships, or internships
- Employment (e.g., paid internships for the child of an official)
- A promise to use certain vendors or intermediaries (e.g., a vendor owned or selected by a foreign official)
- Conference and event scholarships
- Charitable donations
- A “foreign official” is also defined very broadly under the FCPA. The official can be an employee or agents of a foreign government. An official need not be high-ranking. The following persons would likely qualify as foreign officials:
- Administrators and faculty at foreign state universities
- Advisors to ministries, government agencies, or government officials
- Members of government committees or panels
- Employees of a public international organization (such as the World Bank)
- Members of a royal family
The FCPA also extends to bribery of a “foreign political party or official thereof, or any candidate for foreign political office.”
- Acting with a “corrupt purpose” includes offering, promising, or providing something of value to a foreign official, directly or indirectly, to improperly influence the foreign official in order to obtain, retain, or direct business, or to secure any improper business advantage.
Note that the FCPA may be violated even if:
- the effort does not work out (e.g., something of value is given for a license that is denied, or the offer to provide something of value is rejected by the foreign official);
- the activity is not tied to a foreign government directly; or
- the attempt to improperly influence is carried out through a third party (even if you did not have direct knowledge of the third party’s actions, but there is reason to conclude you should have known about it).
See examples and red flags below for things to look out for concerning FCPA compliance when involved in any international activity.
Reducing the Risk That Acts May Be Viewed as Having a Corrupt Purpose
When hosting a foreign official, it may be appropriate to pay for the official’s reasonable lodging and dining expenses, so long as these payments are not being done to improperly influence the foreign official. (Activities such as giving a lavish meal or a gift that does not have a Berklee connection—e.g., tickets to the Grammys—or providing benefits to family members of an official—e.g., travel costs—may not be considered reasonable and, therefore, may be more likely to be construed as having a corrupt purpose.)
It's important to note that the FCPA applies to any and all "things of value," including gifts. Whether giving a gift may be seen as a violation of the FCPA requires a factual analysis of the circumstances under which the gift is given. It is prudent to check with your supervisor and appropriate college offices before giving gifts to persons who might be considered foreign officials.
Certain Payments to Foreign Officials That Do Fall outside the FCPA
There are certain limited situations where payments to foreign officials may be acceptable under the FCPA. One of those exceptions is referred to as “facilitation payments”; these are payments to a foreign official for purposes of facilitating, expediting, or securing the performance of routine government action. For example, it may not be a violation of the FCPA to make a payment to a foreign official to expedite the granting of a permit or license that you are otherwise entitled to receive. These payments are for nondiscretionary, ministerial government actions. In addition, payment to a foreign official may be acceptable when it is necessary to prevent imminent personal injury or harm—for instance, if a colleague requires emergency medical care and a payment will expedite the dispatch of an ambulance. Extreme caution should be used when determining whether a payment fits within these exceptions, and you should consult with your supervisor and the general counsel.
Penalties for Violating the FCPA
The penalties for FCPA violations are stiff, and enforcement activity by the U.S. government is on the rise. Individuals who violate the FCPA’s anti-bribery provisions face penalties up to a $100,000 fine per violation, and up to a five-year prison sentence per violation. Note that wherever the government pursues criminal charges, it may seek additional fines under the Alternative Fines Act (AFA). Accordingly, pursuant to the AFA, all criminal fines imposed under the FCPA may be increased to twice the improper gain obtained, or twice the loss incurred by another person.
You need help locating performance space for a teaching program and auditions in Country X. In the course of a conversation with a colleague from that country, he recommends you hire Company Y. To assess whether there is any risk in this scenario, consider these questions:
- Does your colleague qualify as a foreign official?
- Does he work for a foreign state-owned institution or company; serve as an advisor to a ministry, government agency, or government official; or otherwise qualify under the FCPA’s definition of a foreign official?
- Does Berklee have any business (existing, pending, or planned) in Country X, over which your colleague may have influence or decision-making power?
- For example, will you need a government license or permit, and does this colleague have any influence over whether that license or permit is granted?
- Are you trying to get a government-owned or -controlled institution to sign on as a BIN member, and does your colleague have any sway in that decision?
- Who is Company Y?
- Is it substantially owned or controlled by your colleague or another foreign official?
- Is it qualified to perform the service, and are its rates comparable to others in the field?
It is important to know the answers to these questions before acting on your colleague’s recommendation. If your colleague does qualify as a foreign official, is in a position to exert influence in your favor with respect to a business opportunity in Country X, and/or can be shown to benefit by your hiring of Company Y, the scenario qualifies as a possible violation of the FCPA.
The college is hosting an event concerning music from Country X and has invited officials from a peer entity in Country X to present at the event, and musicians from Country X to perform. To assess potential risks involved in this scenario, consider the following questions:
- Are the officials from the peer entity in Country X foreign officials?
- Is the peer entity state owned or controlled?
- Do the peer entity officials hold a government position (e.g., as an advisor or in a professional capacity within a ministry)?
- Are the performers from the peer entity in Country X foreign officials?
- For instance, are any of them members of the royal family of Country X?
- What types and amount of gifts, lodging, meals, etc. is the college providing?
- Is the college planning, trying, or hoping to engage in some activity in Country X, over which the officials or performers may have some influence or control?
Note that all gifts and similar expenses are not prohibited or necessarily rise to the level of an FCPA violation. College officials planning such events or visits should, however, remain vigilant to FCPA considerations when engaging in such activities.
While the existence of red flags raise potential FCPA compliance concerns that should be addressed before proceeding with a transaction, they do not necessarily mean that the transaction violates the FCPA. Look out for the following red flags and exercise extreme diligence in assessing and handling any such scenarios. Contact college counsel for further guidance in addressing any red flags.
Common red flags associated with third parties, including vendors and consultants, include the following:
- Recommended by a foreign official
- Close relationship with a foreign official
- Apparent lack of qualifications or resources to perform the desired task
- Reputation for unethical or suspicious business practices, or there is evidence of past violations of local law or policy
- Demands unusually high commissions or fees
- Requests false invoices or other documentation
- Demands payment in cash, or requests payment to offshore bank accounts
- Politically active
- Provides incomplete or inaccurate information
- Unwilling to enter into a written agreement, or demands use of an overly vague agreement
- Refuses to certify compliance with applicable anti-corruptions laws
- Fails to create transparency in expenses and records, or allow audits of such records
Questions about this protocol or the FCPA generally should be addressed the general counsel at firstname.lastname@example.org.
The following resources contain additional information and guidance:
- Yale University International Toolkit (includes section on anti-bribery laws)
- Carnegie Mellon University Foreign Corrupt Practices Act Protocol
- A Resource Guide to the U.S. Foreign Corrupt Practices Act, developed by the U.S. Department of Justice and U.S. Securities and Exchange Commission
- Good Practice Guidance on Internal Controls, Ethics, and Compliance, developed by the Organisation for Economic Cooperation and Development (OECD)
- U.S. Department of Justice FCPA website
- Guidance on the U.K. Bribery Act
- Transparency International’s Corruption Perceptions Index