This defense applies to “reasonable” and “bona fide expenditures” incurred by or on behalf of a foreign official that are directly related to:

  • “the promotion, demonstration, or explanation of products or services” or
  • “the execution or performance of a contract with a foreign government or agency thereof.”1

Reasonable expenditures are those that are not extreme or excessive.  This is a fact-intensive inquiry determined on a case-by-case basis, often with reference to available benchmarks.  With regard to travel and entertainment, relevant considerations may include:

  • whether the expenditures are consistent with company policy and employee limits;
  • whether the expenditures are consistent with federal or international travel regulations; and
  • whether the expenditures are excessive when compared to the general income levels in the official’s home country.

In order to be “bona fide,” expenditures must be genuine, made in good faith, and actually relate to the intended purpose.  Common compliance safeguards used in the context of bona fide promotional or contract-related expenses include:

  • obtaining a local law opinion regarding the legality of the expenditures;
  • selection of the beneficiaries of the expenditures by the local government, not the company;
  • paying expenditures directly to service providers;
  • reimbursing expenditures only upon presentation of a proper receipt;
  • not paying expenditures for family or friends of public officials;
  • not paying expenditures for expensive or extravagant gifts or entertainment; and
  • reimbursing only actual costs incurred by foreign officials.

On the other end of the spectrum, the DOJ and SEC have brought charges in cases involving one or more of the following elements:

  • providing gifts of significant intrinsic value;
  • paying or reimbursing expenses for family and friends of foreign officials;
  • paying for extravagant travel and entertainment expenses;
  • paying for travel primarily related to sightseeing or leisure;
  • paying cash per diems or pocket money in excess of reasonably expected expenses; and
  • recording expenses incurred by or on behalf of a foreign official incompletely or misleadingly.2

15 USC §§ 78dd-1(c)(2), 78dd-2(c)(2), 78dd-3(c)(2).
See DOJ Op. Pro. Rel. 81-02, 82-01, 83-02, 83-03, 85-01, 04-01, 04-03, 04-04, 07-01, 07-02, 08-03.

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