Sharie Brown, Chair of DLA Piper’s FCPA Practice, recently traveled to Lagos to conduct FCPA and anti-corruption training there. This question arose in the course of her training and we know that others operating in Nigeria struggle with it.
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“For many, overseas business travel to developing countries can create excitement and a bit of angst about the unknown adventures and experiences to come; this is even more so where Nigeria is concerned. I relished the opportunity to return to Lagos to conduct FCPA and international anticorruption training for Nigerian companies, particularly because several officials from state-owned and controlled banks, and the national oil company and its subsidiaries (as well as local private company executives) had signed up for the two-day anticorruption training session.
But even before that training began, we learned some lessons from our Nigerian hosts about issues to consider in applying the FCPA’s definition of “foreign government official” in Nigeria. Perhaps there are comparable issues to be examined in other countries where formal, informal, religious, cultural and tribal positions are a part of the business, investment, and social framework.
Since the focus of our anticorruption training in Lagos was on public corruption, I discussed with local business leaders and lawyers in pre-conference meetings the different types of officials in Nigeria that could trigger the FCPA, local law and other anticorruption rules and laws. I generally explained that a foreign government official under the FCPA included: a) any person holding any level of legislative, administrative or judicial office or a foreign government or any of its departments, agencies or divisions; b) any person acting on behalf of a foreign government, including a state agency, or state owned or controlled enterprise, business or organization; c) any official or agent of a foreign public administration or publicly funded organization; d) any official or agent of a foreign political party; e) any officer or agent of a public international organization; f) and close family members and relatives of any of those listed above.
The case of Nigeria illustrates how challenging it can be to determine whether officials fall into these categories. Both the country’s federal structure and ethnic composition contribute to a complex system of leadership at both the national and local level. Nigeria is divided into 36 states and the Federal Capital Territory, all of which have their own governments. The states are further subdivided into over 700 local area governments, which are responsible for a range of functions including tax collection, licensing, and population registration. In addition, the country contains over 250 distinct ethnic groups, or tribes. Although most of the population is generally drawn from three groups (Hausa, Igbo, and Yoruba), each state is comprised of numerous tribes, with some chiefs having significant local power and influence.
As one local business person observed, a local “chief” may serve as an unofficial advisor to community members, as well as elected and appointed officials. Sometimes one must effectively “go through” the advisor in order to have issues addressed by the elected or appointed public officials.
Some local rulers or leaders are recognized as a result of traditional tribal rules, ancestry and custom. Others become local leaders because they enjoy the support of the local community based on their good works, community service, and reputation. Still others may be appointed a local leader by elected or appointed government officials. In certain circumstances a tribal leader or chief may actually be paid on a monthly basis for services by a governmental entity within Nigeria. Thus, the types of local leader/chief functions and interrelationships are based on a combination of community mores, tribal traditions, and (sometimes) government appointments. Since I am American, and I do not live in Nigeria, I recognize that there are levels of complexity that I am incapable of understanding from my discussions over the last week in Lagos. Yet, as an FCPA practitioner, I recognize that companies and individuals covered by the FCPA still need some guidance on how to approach the issue of whether these local leaders or tribal chiefs should be considered foreign government officials under the FCPA.
I have developed below a list of criteria for consideration of the issue; others may be able to think of other criteria, as well.
First, test for the possible inclusion of local tribal leaders and chiefs as foreign officials in business dealings by specifically asking about this category of persons during your FCPA due diligence involving Nigeria. If you do not ask the question, you may never learn that someone is a chief or local tribal leader.
Second, determine the specific functions of the particular local tribal leader or chief. Is the function purely ceremonial- – where the leader gives blessings at weddings, funerals and births? Is the leader or chief authorized to perform and approve marriage, divorce, or adoption proceedings? Is the approval of the leader or chief required to be obtained before any construction, road, or building plans are executed?
Third, determine if the local leader or chief is a key advisor or associate for an elected or appointed government official, or party candidate, party official or other foreign government official. Is the local leader or chief acting on his own, or as an agent of the foreign government official? Will the foreign government official exercise decision making power in the absence of the approval of the local leader or chief, etc.?
Fourth, determine if the local leader or chief receives compensation for serving as a recognized local leader or tribal chief . Who pays the compensation – a government entity? Members of the local community? How is that compensation paid, and how much is paid? How is the compensation determined and what is the amount?
Fifth, assuming that there is no formal compensation, is there an informal, yet firm expectation that a gift, money or patronage payment will be made to the local leader or tribal chief at the beginning of each visit or meeting? What is the basis for the gift or payment? How much is usually given? Is the gift or money provided for advice, approval or for making a decision (whether approved or disapproved)?
Sixth, it may be prudent to obtain a local law opinion on whether the local leader or tribal chief would be considered to be a government official under local rules, based on the function, title, and responsibility of that person in the community. The answer may be different depending on the functions and activities associated with the local leader or tribal chief. The fact that the local law does not consider the local leader or tribal chief to be a government official would not be dispositive of the issue under the FCPA. Rather, that local opinion would provide an important component in your analysis of whether the local leader or tribal chief, along with the other considerations reflected in the above six paragraphs, is a foreign official under the FCPA.
While the above discussion is not intended to be exhaustive of the factors that may determine whether a local leader or tribal chief is a foreign official under the FCPA, application of these criteria could help your clients or your company avoid making a costly mistake by not understanding the powerful, recognized functions that exist in overseas local communities based on ethnicity, culture, tribe, geography, ancestry, religion, and community service. In Lagos, we learned from our local conference audience about this important issue.”