BHP Billiton’s $25m FCPA fine should focus minds of sport sponsors
21 May 2015
On 20 May a press release popped up on the US Securities and Exchange Commission (SEC) website which deserves wider attention among the sports community than it is likely to receive.
The SEC charged mining company BHP Billiton with violating the Foreign Corrupt Practices Act (FCPA) when it sponsored the attendance of foreign government officials at the Beijing 2008 Olympic Games.
BHP Billiton agreed to pay a $25 million penalty to settle the SEC’s charges. That’s an expensive hospitality programme.
The SEC goes on to say that BHP Billiton, which was an official sponsor providing the metal for the medals at Beijing 2008, invited 176 government officials and employees of state-owned enterprises plus some other guests, mostly from Africa and Asia. Beneficiaries enjoyed three or four day stays worth around $12,000 to $16,000 USD, which is at the upper end but not beyond the budget range that big sponsors of sport will pay for hospitality at major events.
Interestingly, the SEC said that while inviting government officials created a “heightened risk”, BHP Billiton “failed to implement sufficient internal controls”. Notably, internal training and approval processes were inadequate.
BHP Billiton co-operated with the enquiry and has reached a settlement in which the company neither admits nor denies the SEC’s findings.
This case is highly significant for sport sponsorship for several reasons.
- Here we have a company regarded as Anglo-Australian with headquarters in Australia (although it is very much multinational) that sponsored a sports event in China, inviting hospitality guests from other countries. And yet the investigation and fine stem from the Foreign Corrupt Practices Act in the USA. Both the FCPA in the USA and the Bribery Act (2010) in the UK potentially have international reach
- The violation is in relation to failing to implement sufficient internal controls. The press release makes no mention of any accusations of intentions or attempts to bribe
Need for adequate procedures
So what must sponsors do in order to avoid the same fate? Planning hospitality programmes for sports events requires great care. It is essential that brands which sponsor sport have adequate procedures in place.
In 2014 the United Nations Global Compact published a practical guide Fighting Corruption in Sport Sponsorship and Hospitality, which is a useful starting point.
Contact I Trust Sport regarding sponsorship and hospitality questions. Legal advice may also be needed.