Bank of New York Mellon recently learned the hard way that doing a favor for a client can run afoul of the Foreign Corrupt Practices Act (“FCPA”). How hard was the lesson? The SEC entered an Order that imposed, among other sanctions, a 14.8 million dollar fine merely for the bank hiring three interns who were relatives of foreign officials. In a nut shell, two unnamed officials of a foreign wealth fund put pressure on BNY Mellon to hire three interns who were not otherwise qualified for the BNY Mellon intern program. The bank understood that if they failed to hire these interns, the fund’s investments with the bank would be at risk. It apparently did not matter that the interns did not otherwise meet the requirements for the internship or that they were paid more than the other more qualified interns.
While this may be common practice stateside to grant a favor to a valuable customer by employing his son or daughter, to do so when a foreign official is involved violates the FCPA. The FCPA does not allow a company to influence a foreign official by giving the official “anything of value”. Value is broadly defined and includes cash, gifts, favors and apparently, internships too. While at first blush, this may seem to be a “small favor”. However, the FCPA does not distinguish between “small” or “large” favors only that anything of value were given. In addition, the broadly written FCPA covers any “department, agency or instrumentality” of a foreign government. The foreign wealth fund identified above fell under the “agency or instrumentality” rubric because it was controlled by a foreign government notwithstanding that it operated like any other investment company.
Once again this shows the importance that it is not enough just to have Code of Conduct Policy or an Anti-Corruption Policy without the proper training of the right people in your organization. Training needs to focus not only on the basics but also on the hidden dangers. For example, do changes to the employment application process need to be made? Should an applicant certify that he or she has not been employed as a foreign official or that they do not have a relative or a close personal friend who is a foreign official? If the answer to the foregoing is yes, a strong anti-corruption policy will flag the applicant for further in house review (or legal department) to make the correct determination. This is not a question of discrimination against certain applicants but rather that the correct questions or sensitivities are being looked into so your company does not run afoul of the FCPA. In any event, the point is that your employees need to be trained to look between the trees and make the right determinations when a more nuanced review is needed. The cost of failing to do this is too high and the SEC is bringing the heat.
If you have any questions regarding this entry or the FCPA in general, please feel free to contact Doug Leavitt and the attorneys at Danziger Shapiro & Leavitt. We will be happy to discuss your concerns and assist you with this or any other matter affecting your business.
This entry is presented for informational purposes only and is not intended to constitute legal advice.