Carnegie Mellon University expects all members of the university community to maintain the highest ethical and professional conduct in all domains. Conducting ourselves in accordance with the highest ethical, legal, and professional standards is not only consistent with the university’s mission but also reflects the university’s values and ensures that members of the university community strive for excellence in all aspects of their work.
Simply put, the university does not allow bribes, kickbacks, payments, or any other similar inducements to be offered or given directly to any individual or organization — or given indirectly through any intermediary such as an attorney, agent, consultant, or other third-party individual or organization — for any purpose, including for the purpose of influencing such individual or organization in connection with obtaining or retaining business for, or directing business to, the university or a member of the university community, or for the purpose of securing an otherwise improper advantage for the university or any member of the university community. The university’s activities in foreign countries are no exception. Furthermore, they are subject to particular scrutiny.
This guidance has been compiled by the Office of the General Counsel to assist members of the university community to recognize FCPA issues and to avoid circumstances which may lead to or give the appearance of unethical business conduct by members of the university community.
Scope of this Guidance
This guidance applies to all members of the university community, and is designed to help ensure compliance with the FCPA. Violations of the FCPA can result in criminal, civil and regulatory penalties for the university and or the individuals involved, as well as significant damage to our collective reputation. Any failure to follow this guidance may lead to disciplinary action, up to and including termination of employment.
Summary of the FCPA
As a result of U.S. Securities and Exchange Commission investigations in the mid-1970’s, over 400 U.S. companies admitted making questionable or illegal payments in excess of $300 million to foreign government officials, politicians, and political parties. These abuses ran the gamut from bribery of high foreign officials to secure some type of favorable action by a foreign government to so-called facilitating (or expediting or “grease” payments) that allegedly were made to ensure that government functionaries discharged certain ministerial or clerical duties. Congress enacted the FCPA in 1977 to bring a halt to the bribery of foreign officials and to restore public confidence in the integrity of the American business system.
Following passage of the FCPA, Congress became concerned that American companies were operating at a disadvantage compared to foreign companies who routinely paid bribes and, in some countries, were permitted to deduct the cost of such bribes as business expenses on their taxes. Accordingly, in 1988, Congress directed the Executive Branch to commence negotiations in the Organization of Economic Cooperation and Development (“OECD”) to obtain the agreement of the United States’ major trading partners to enact legislation similar to the FCPA. In 1997, almost ten years later, the United States and thirty-three other countries signed the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. In 1998 the FCPA was amended to incorporate the anti-bribery provisions of the OECD Convention.
The anti-bribery provisions of the FCPA make it unlawful for a U.S. person, including the university, 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. In addition to bribes in the form of payments of money, the FCPA also prohibits favors and other inducements that are of value to the recipient, and can include lavish or inappropriate gifts and entertainment. The FCPA prohibits direct bribes to foreign officials, as well as indirect bribes made through a third party, such as a consultant or other agent.
As a general matter, there are six elements which must be met to constitute a violation of the FCPA:
A. Who — The FCPA applies to U.S. and non-U.S. companies traded on U.S. stock exchanges, U.S. concerns (including educational and not-for-profit institutions) whether publicly-traded or not, and employees and representatives of those companies and institutions. As a result, this guidance presumes that the FCPA applies to the university and all members of the university community conducting university business overseas.
B. Recipient — The FCPA extends only to corrupt payments to a foreign official, a foreign political party or party official, or any candidate for foreign political office. A “foreign official” means any officer or employee of a foreign government (including subdivisions of a foreign government, such as regional, state, or local governments), a public international organization, or any department or agency thereof, or any person acting in an official capacity. Obviously, this includes members of a royal family and members of the legislature or regulatory agencies. In addition, a “foreign official” for purposes of the FCPA also includes executives and other employees of state-owned or -controlled businesses or enterprises, such as the president of state-owned company or even a professor at a state-run university. The FCPA applies to payments to any public official, regardless of rank or position, and focuses on the purpose of the payment instead of the particular duties of the official receiving the payment.
C. Payment — The FCPA prohibits paying, offering, promising to pay (or authorizing to pay or offer) money or anything else of value. As a result, the FCPA applies not only to the types of payments that you might recognize as a common bribe or kickback, but also to things like:
(i.) gifts and excessive meals, hospitality, entertainment, and travel expenses to foreign officials and/or their family members;
(ii.) “favors” provided to foreign officials, such as an internship for a family member outside the normal hiring process, or hiring a vendor owned by a foreign official or a member of his or her family, or admitting to an educational program an unqualified candidate because of his or her relationship to a foreign government official;
(iii.) donations to a charity favored by the foreign official; and
(iv.) the uncompensated use of university facilities or property.
D. Business Purpose Test — The FCPA prohibits payments made in order to assist the university in obtaining or retaining business for or with, or directing business to, any person. The Department of Justice interprets “obtaining or retaining business” very broadly, such that the term encompasses more than the mere award or renewal of a contract. It should be noted that the business to be obtained or retained does not need to be with a foreign government or foreign government-controlled instrumentality.
E. Corrupt intent — To constitute a violation of the FCPA, the person making or authorizing the payment must have a “corrupt” intent, and the payment must be intended to induce the recipient to misuse his or her official position to direct business wrongfully to, or to secure an improper advantage for, the payor or to any other person. Although this covers a payment in exchange for direct action by a foreign official (a clear quid pro quo), the FCPA also covers other payments made in connection with obtaining or retaining business, even in the absence of a direct quid pro quo. You should also note that the FCPA does not require that a corrupt act succeed in its purpose. The offer or promise of a corrupt payment can constitute a violation of the statute.
F. Knowledge — To constitute a violation of the FCPA, the payment or other inducement to the foreign official must be made knowingly. However, under the FCPA, the term “knowing” includes legal concepts known as “conscious disregard” and “deliberate ignorance.” Under the FCPA, a company or an individual is deemed to have the required degree of knowledge of a particular factor or circumstance if the company or the individual is “aware of a high probability of the existence of such circumstance, unless the person actually believes that such circumstance does not exist.” The FCPA prohibits corrupt payments through third-party intermediaries (including attorneys, agents, consultants, joint venture partners, and others) while knowing or being aware of a high probability that all or a portion of the payment will be passed on to a “foreign official.”
To avoid being held liable for corrupt third party payments, the university and members of the university community must exercise care and take all necessary precautions to ensure that we have formed business relationships only with reputable and qualified partners and representatives. Such care can include investigating potential foreign representatives and joint venture partners to determine if they are in fact qualified to do business with us, whether they have personal or professional ties to the foreign government, the number and reputation of their other clientele, and their reputation with the U.S. embassy or consulate and with local bankers, clients, and other business associates.
In addition, in negotiating a business relationship, you should be aware of so-called “red flags,” i.e., unusual payment patterns or financial arrangements, a history of corruption in the country, a refusal by a foreign joint venture partner or representative to accept the university’s contractual FCPA language, unusually high commissions, lack of transparency in expenses and accounting records, apparent lack of qualifications or resources on the part of a joint venture partner or representative to perform the services offered, and whether a joint venture partner or representative has been recommended by an official of the potential governmental customer.
The Office of the General Counsel and the University Contracts Office have standard language that must be included in written contracts (and purchase order terms and conditions) used abroad to ensure that individuals, vendors, and other university representatives working on our behalf are aware of university policy regarding compliance with the FCPA.
Permissible Payments and Affirmative Defenses
The FCPA contains an explicit exception to the bribery prohibition for “facilitating payments” for “routine governmental action” and provides affirmative defenses which can be used to defend against alleged violations of the FCPA.
A. Facilitating Payments for Routine Governmental Actions
The statute lists the following examples of “routine government action”: obtaining permits, licenses, or other official documents; processing governmental papers, such as visas and work orders; providing police protection, mail pick-up and delivery; providing phone service, power and water supply, loading and unloading cargo, or protecting perishable products; and scheduling inspections associated with contract performance or transit of goods across country.
Actions “similar” to these are also covered by this exception, and are intended to cover small payments made in connection with non-discretionary actions by government officials, that is actions those government officials are legally obligated to take. “Routine governmental action” does not include decisions that are discretionary with government officials, including any decision by a foreign official to award new business or to continue business with a particular party.
Facilitating payments may be made only if:
(i.) the proposed payment is legal and customary in the foreign country;
(ii.) no reasonable alternative to making the payment exists; and
(iii.) you discuss the situation in advance with the Office of General Counsel.
Approval will be given by the Office of the General Counsel after it has determined that such payment is consistent with the FCPA and with other applicable law. The Office of the General Counsel will provide documented evidence of its approval, when given.
If someone’s health or safety is at risk, and it is therefore impossible to inform the Office of the General Counsel in advance as required by this guidance, a member of the university community may make a facilitating payment only if, in his or her judgment, the payment is consistent with this guidance, including but not limited to (i)–(ii) above. The member of the university community must then promptly inform the Office of the General Counsel after the payment is made.
B. Affirmative Defenses
A person charged with a violation of the FCPA’s anti-bribery provisions may assert as a defense that the payment was lawful under the written laws of the foreign country or that the money was spent as part of demonstrating a product or performing a contractual obligation.
Regarding the defense that the payment is lawful in the foreign country, whether a payment is lawful under the written laws of the foreign country may be difficult to determine. It is not sufficient for payments or other inducements to foreign officials be common or otherwise “normal” business practice in a foreign country. For this affirmative defense to apply, the country’s written laws must actually say that such payments are legal to be made. No payments should be made or other inducements provided with this defense in mind without consulting the Office of the General Counsel in advance. Any questions about the laws of a foreign country should be directed to the Office of the General Counsel.
Regarding the defense related to product demonstration, or performing a contractual obligation, certain payments such as for travel expenses to visit the university’s U.S. campus, and certain gifts such as “promotional items” bearing the name of the university, may be appropriate under certain circumstances. Prior to agreeing to make any such payment, or providing any such gift, you should consult with the Office of the General Counsel.
In light of the above, the university’s existing policies and procedures include the following with respect to the FCPA:
A. Prohibition on Improper Payments, Kickbacks, and Other Forms of Bribery to Foreign Officials.
(i) Members of the university community are prohibited (whether acting in their own capacity or on the university’s behalf) from:
- offering, promising, giving or authorizing, directly or indirectly, any bribe or kickback to or for the benefit of any person in order to obtain any business, retain any business, or otherwise secure an improper advantage for the university, for themselves, or for their family, friends, associates or acquaintances;
- soliciting, accepting or receiving, whether for the university’s benefit, their own benefit, or that of their family, friends, associates or acquaintances, any bribe or kickback from any person in return for providing any business or other advantage; and
- otherwise using illegal or improper means, including bribes, favors, financial payments, commissions or other inducements, to influence the actions of others.
(ii) The university will not approve or be party to any irregular or illegal payments or benefits in circumstances where a third party could reasonably perceive that their purpose is to win or retain business, to influence a business decision, or in connection with the improper performance of a recipient's duties.
B. Payments, Gifts, and Hospitality Provided to Foreign Officials
The university prohibits giving money or anything else of value to foreign officials for the purpose of influencing their official actions in order to benefit the university. This prohibition includes payments made for the purposes of:
(i) influencing a foreign official to take an action or make a decision in his or her official capacity in the university’s favor, such as granting a necessary government approval for a university program overseas;
(ii) inducing a foreign official to do or omit to do an act in violation of his or her lawful duty; or
(iii) inducing a foreign official to use his or her influence to affect an act or decision of government.
(iv) Except as provided below in section (v), certain types of entertainment and gifts are never acceptable. These include:
- Any gift of cash or a cash substitute;
- Anything that is offered as a quid pro quo;
- Any gift or entertainment that is illegal under the foreign country’s laws, or known to be prohibited by the foreign official’s department, agency, or organization;
- Anything that may have, or may be perceived as having, a benefit to any university or personal activity, in the sense that such a gift could be perceived as influencing the decision of anyone considered to be a foreign official;
- Anything given to foreign officials associated with a tender or competitive bidding process where the university is involved;
- Any inappropriate entertainment (such as entertainment that is illegal under local law or U.S. law);
- Any travel, entertainment, or gifts to family members of foreign officials. (In rare instances, it may be acceptable for the university to pay for the travel expenses of the spouse of a foreign official who has been invited to speak on campus, consistent with the university's policies for pay and travel expenses of spouses and speakers who are not considered foreign officials. However, such a commitment should not be made without the express approval of the Office of the General Counsel).
(v) As a general matter, and consistent with the Code of Business Ethics and Conduct and with the university’s other policies and procedures, small gifts and entertainment expenses may be incurred in the following instances:
- when the expenses are modest, both in isolation and when considered in the context of other gifts and hospitality offered to the same recipient or the same recipient’s department, agency, or entity;
- when the expenses are appropriate and consistent with reasonable business practice;
- when the expenses are provided with the intent only to build or maintain a relationship or offer normal courtesy, rather than to influence the recipient’s objectivity in making a specific business decision;
- when the expenses are not within any of the categories of prohibited gifts and entertainment above; and
- when the expenses are otherwise permissible under all applicable U.S. and foreign laws.
If you have any doubts about whether a particular gift or entertainment expense may be permissible, please consult with the Office of the General Counsel.
Charitable donations can in some circumstances be considered a bribe, for example where a donation is provided to a “charity” which is controlled by a foreign public official or member of his or her family. A Donation Routing Form must be completed for all requests for charitable donations. The Office of the General Counsel must approve any charitable donation where the recipient of the donation is a foreign official or where any owner, board member, officer, director, or other high level employee of the recipient is a foreign official (or a family member of a foreign official).
The prohibitions in this policy apply to university partners and other third parties engaged to represent the university’s interests. As noted previously, the Office of the General Counsel has contract language that should be included in all written contracts between the university and any third party vendors, partners, or other consultants or representatives.