FCPA: Internal Audit Review of Charitable Donations Under the FCPA

When is a rose not a rose? When it is a charitable donation not made for philanthropic purposes and it violates the Foreign Corrupt Practices Act (FCPA). I thought about that concept when reviewing the Eli Lilly and Company (Lilly) FCPA enforcement action brought by the Securities and Exchange Commission (SEC) late last month. The Lilly enforcement action discussed a bribery scheme utilized by Lilly in Poland. The scheme and FCPA violations mirrored an earlier FCPA enforcement action, also brought by the SEC as a civil matter, rather than by the Department of Justice (DOJ) as a criminal matter, against another US entity Schering-Plough, for making charitable donations in Poland which violated the FCPA. One of the remarkable things about both of these enforcement actions, brought almost eight years apart, was that they involved improper payments to the same Polish charitable foundation to wrongfully influence the same Polish government official to purchase products from both of these companies.

I. The Bribery Schemes

Both companies were involved in negotiations for the sale of products with the Director of the Silesian Health Fund (Health Fund). He had also established a charitable foundation, the Chudow Foundation to engage in restoration of ancient castles in Poland. Both companies made donations to the Chudow Foundation at or near the time decisions were made regarding the purchase of their respective products by the Health Fund. The FCPA books and records violations for the donations stated that they were all mischaracterized on the respective company’s books. The donations were made by each company with the description for the donations as follows:


Date Amount of Donation Listed Reason for Donation 1 6/21/2000 $2,730 Purchase of computers 2 11/13/2000 $1,855 To support the foundation in its goal to develop activities in [Chudow Castle] ...Zum vollständigen Artikel

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