When a gift is not a gift but a bribe

The 2010 Soccer World Cup is upon us, one result of which is that entertainment and hospitality are on the agenda of most South African corporations.

“With South African Anti-Corruption laws being among the world’s most stringent, firms giving and receiving gifts and hospitality need to exercise a degree of caution,” warns Mandy Munro-Smith, a Partner in the Forensics Department at commercial law firm Bowman Gilfillan.

She notes, unsurprisingly, that the area is grey, with some, for example, maintaining that a client’s acceptance of a dinner invitation is acceptable. At the other end of the spectrum, the acceptance of an invitation for a luxury overseas holiday may amount to an act of corruption.

Exactly where the line is drawn between corruption and acceptable practice is often difficult to decide. Given that difficulty, Munro-Smith advises companies to adopt a gift policy setting out what is acceptable and what is not, within the limits of the law.

She says most corporate gift policies require that gifts or hospitality given or received should be entered into a gifts register, which is usually monitored by an ethics officer or other responsible person.

“Where the ethics officer or responsible person believes that the giving or receiving of a gift or hospitality will lead to an expectation of preferential treatment or may amount to bribery, the employee should decline, regardless of the value.

“Gifts that are clearly of an advertising or promotional nature – such as business diaries, calendars, pencils, mugs and branded T-shirts – would be acceptable, as are other promotional or advertising items of insignificant value.”

Unacceptable gifts include those that:

· are illegal or involve an improper, biased or dishonest act;

· would result in the violation of any law;

· are given for purposes of influencing the recipient;

· amount to loans from any company supplier, customer, etc (save for banking and financial institutions) or any preferential arrangement not readily available to the public;

· involve conduct of a sexual nature and/or violation of mutual respect;

· constitute reciprocal agreements (requiring anything in return for the gift);

· result in breach of mutual respect;

· violate the company’s ethics policy and code of conduct;

· result in the abuse of a position of authority; and

· may be construed as being given or received for an improper purpose.

“The general rule,” says Munro-Smith, “is that where the giving or receiving of gifts, courtesies, or other payments or hospitalities may constitute an inducement to obtain an improper advantage over another, the giving or acceptance of the gift or hospitality is not advisable.”

On the score of public officials, Munro-Smith maintains one needs to be mindful that the Code of conduct under the Public Service Act (the PS Code), with which employees of the public service are required to comply, prescribes that such employees must not use their official positions to obtain private gifts or benefits for themselves during the performance of their official duties, nor should they accept any gifts or benefits when offered, as these may be construed as bribes.

“In terms of the Senior Management Services Handbook (the SMS code), which is applicable to the members of senior management services across all sectors of government, senior managers must not solicit or accept any bribe or other improper inducement.

“Only in exceptional circumstances should gifts be accepted (where the gift is offered as part of a formal exchange of gift). Senior managers may accept unsolicited gifts or moderate acts of hospitality. Accepting such gifts or benefits is essentially a matter of judgment for the individual concerned.”

In such instances, says Munro-Smith, they must be satisfied that their position will not in any way be compromised by acceptance.

She advises that senior management employees in the public service are also required each year to report to the relevant Minister or Provincial Premier (as the case may be) in whose department they are employed, any gifts with a value of more than R350, or gifts from a single source which cumulatively exceed R350 in value during any 12 month reporting period.

“The Executive Ethics Code published under the Executive Members Ethics Act (the EE Code) prohibits Cabinet Ministers, Deputy Ministers and Members of Provincial Executive Committees, who are Ministers in the provincial cabinets, from soliciting or accepting any gift or benefit that is given in return for a benefit that constitutes an improper influence; or is an attempt to improperly influence the Member.

“According to the EE code, Ministers or Members are also generally required to disclose any gifts with a value of more than R350, or gifts from a single source which cumulatively exceed R350 in value during any calendar year. Members must disclose any hospitality which is intended as a personal gift with a value of more than R350, or hospitality from a single source which, cumulatively, exceeds R350 in value during a calendar year.”

Mandy Munro-Smith is a Partner in the White Collar Crime Department in the Corporate Department at commercial law firm Bowman Gilfillan.