The Red Flag Group®

Bribes masquerading as charity

Bribes masquerading as charity

When is a charitable donation an act of philanthropy and when does it constitute a bribe or conflict of interest? The line can be hard to define. Companies that are subject to the Foreign Corrupt Practices Act (FCPA) need to be careful when drafting their policies and procedures to cast a wide net over what is illegal or even unethical. There have been numerous cases of United States companies that have made ‘charitable’ donations to a government official’s charity of choice, only to benefit from lucrative signed contracts days after such a donation was paid.

The link between the timing of such donations and business dealings is often undeniable, as previous cases have shown deals getting done just hours after donations are made. In many cases, the charities themselves are legitimate enterprises that are truly doing humanitarian work or supporting a worthy cause. The donations often directly or indirectly benefit the government official.

In some cases, the charitable donations made by companies are for the benefit of the arts, schools or hospitals to which the government official has special ties or lives in close proximity. In many others, the ties can be hard to identify. It could be the case that a spouse, close friend or family member is closely related to the charity or cause. It may seem as though the donation helps the community to build up necessary or desired resources when, in fact, the opposite is true. Bribes masquerading as charitable donations only further contribute to the overall drain of government resources that serves as a disservice to communities and citizens.

Bribery by any other name is still bribery. All acts of bribery result in a depletion of public resources by cementing deals that are not based on merit or value but, instead, are founded on backroom dealings and favours. The FCPA broadly defines “anything of value” to include charitable donations and companies that have faced multiple million dollar fines as a result representing bribes as donations.

Recent allegations against presidential candidate Hillary Clinton and her Clinton Foundation have raised the topic of charitable donations once again. In the case of Clinton, it has been alleged that foreign heads of state and other international power players were making donations to her privately funded Clinton Foundation in exchange for access to top United States government officials.

Payments came from high ranking government officials and business owners that have complex relationships with the United States, such as Qatar, the United Arab Emirates and Saudi Arabia. The donations have been viewed by some as a conflict of interest, where official duties conflicted with personal enrichment.

For companies thinking about contributing to charitable causes, a number of important factors should be considered:

  • Conduct proper due diligence on any organisation that your company is considering making a donation to, in order to ensure that organisation is truly a philanthropic entity;
  • Know who the top officials are at the charity. A company should know if the head of a charity is the spouse of a person with whom they have business dealings;
  • Any request for a donation should be an obvious red flag;
  • Even donations to legitimate charities can cause problems if other business dealings are connected to the donation;
  • Update policies to provide guidance on charitable donations and make sure that proper approval and disclosures are in place prior to payment.