Relationships with public officials may sometimes become blurred through long-term projects and pressures of prolonging or keeping an engagement. Pei Pei Cheng de Castro and Jennifer Hopkins of Barclay Damon explain how compliance and legal units can spring to action to address these concerns.
The primary legal risks implicated by gifts, gratuities and hospitality may include federal, state and local criminal bribery and gratuities exposure, lobbying gift restrictions, procurement gift restrictions and related conflicts of interest.
Key components of an organization’s gift-giving policy operating under a federal jurisdictional framework should also account for restrictions imposed by state and local jurisdictions. It is critical for in-house counsel and compliance officers to regularly review and ensure corporate policies are up to date, emphasizing prohibitions on quid pro quo, testing preapproval and tracking controls, instilling transparency and accurate records and implementing heightened controls for employees who regularly deal with public officials and compete for public projects.
It is equally important for organizations to train on these topics, especially for those employees interacting with public officials.
The laws and rules
Federal law addresses giving or offering “anything of value” to public officials “for or because of any official act performed or to be performed” and separately addresses corrupt giving with intent. Federal rules for executive branch personnel permit acceptance only pursuant to ethics-office rules but expressly prohibit acceptance “in return for being influenced in the performance of any official act.” Executive branch officials and employees are generally prohibited from soliciting or accepting gifts or items of monetary value from persons or entities seeking official action, doing business with or regulated by the employee’s agency or whose interests may be substantially affected by the employee’s duties.
Contracting officers must identify and evaluate potential conflicts of interest early and avoid, neutralize or mitigate significant potential conflicts before contract award. In addition, the FCPA prohibits giving something of value for the purpose of influencing acts or decisions of a foreign official, inducing unlawful acts or omissions or securing an improper advantage to obtain or retain business.
States and local jurisdictions also have laws prohibiting or restricting the giving of gifts to public officials, including bans on providing “directly or indirectly” gifts, entertainment, food and beverage, lodging, transportation or anything of value. This may include indirect gifts, such as donations to nonprofits made on behalf of or at the recommendation of a public official or their immediate family. In addition, gratuities — different from gifts — may also be prohibited.
Compliance policies
A compliant policy should define “gift and thing of value” broadly to include not only tangible items but also meals, entertainment, travel, lodging, transportation and other benefits, including indirect transfers. This breadth aligns with federal public-official concepts that address “anything of value” given directly or indirectly. It also aligns with the practical reality that state and local ethics laws often prohibit the direct or indirect provision of anything of value to public officials and may treat certain third-party benefits, including charitable donations made on an official’s recommendation, as prohibited gifts. Many policies do not mention or incorporate the concept of gratuities, which under certain jurisdictions may be unlawful.
A gift policy should include a clear prohibition on offering, giving or promising anything of value in exchange for influence or because of influence on an official act. The policy should also make it clear that intent to influence isn’t allowed. This is consistent with federal restrictions addressing giving anything of value “for or because of any official act” and separately addressing corrupt giving with intent. It is also consistent with the executive-branch gift framework that, regardless of ethics-office rules, prohibits accepting gifts “in return for being influenced in the performance of any official act.” Operationally, the policy should require employees to evaluate not only the item’s value but also the surrounding circumstances (timing, pending matters, recipient role and business purpose) to avoid gifts that could be construed as consideration for official action.
Heightened controls in the policies are necessary when dealing with government officials. Because executive-branch employees are generally prohibited from accepting gifts from certain sources (including those seeking official action or doing business with the agency), a company policy should impose heightened controls whenever the recipient is a public official or government employee. The policy should require preapproval or legal/compliance consultation before offering anything of value to any public official at any level of government because state and local jurisdictions may impose additional bans or stricter limits.
Furthermore, the policy should address and provide guidelines for situations when a public official solicits the gift or gratuity. How to address solicitation by the public official is often lacking in an organization’s gift giving policy. A practical control is a mandatory permissibility check before anything of value is offered or given, including meals and event tickets, as well as indirect benefits, such as charitable donations connected to an official.
For entities that compete for or perform government contracts, the policy should emphasize related restricted contracts during blackout periods and implement controls to instill procurement integrity. Contracting officers must identify and avoid or neutralize significant conflicts before and after award. Early escalation to compliance and legal units should be incorporated when gifts, hospitality or relationships could create an appearance of impropriety or risk claims of unequal access. A practical control is a mandatory disclosure form for a vendor to disclose known or potential conflicts of interest.
If the organization interacts with foreign officials, the policy should incorporate FCPA standards: prohibiting giving anything of value to influence a foreign official’s acts or decisions, induce unlawful acts or omissions or secure an improper advantage to obtain or retain business. The policy should also address that certain expenditures, such as travel and lodging, may be defensible only if they are “reasonable and bona fide” and directly related to legitimate purposes as reflected in the statutory language. The policy should require preapproval and documentation for any travel, lodging or hospitality involving foreign officials, including a written business justification and confirmation of permissibility under applicable written local laws where relevant to the statutory affirmative defense.
Equally important is to implement targeted training for employees interacting with government officials and procurement personnel, emphasizing prohibited-source concepts, restricted contacts, solicitations, conflict of interest, gratuities and the need to avoid even the appearance of impropriety.
Pei Pei Cheng de Castro
Jennifer Hopkins
