IKEA’s charitable giving in Russia and the FCPA (Part Five)

This is the fifth post in our series about IKEA’s charitable contributions in Russia in the 1990s and early 2000s. Today we’re looking at an event that at first glance doesn’t even appear to be a donation.

In the appendix of his memoir, the former CEO of IKEA Russia, Lennart Dahlgren, drills down into IKEA’s history and culture. He writes:

“Contrary to Russian tradition, we typically interacted with government organs directly and without intermediaries. A good example of open and constructive dialogue was our collaboration with customs institutions. In order to provide a continuously functioning supply chain, from the supplier to the ultimate consumer, we had to obtain many permits. We organized several joint projects with the Russian customs committee. Our distribution center was one of the first in Russia to implement new technologies regarding documentation procedures and became a learning center for the state customs committee.”

On its face, a public-private partnership as Dahlgren describes might not appear to involve a charitable contribution. There is, however, a relevant DOJ FCPA opinion release.

Opinion Procedure Release No. 06-01 (released after the majority of the events described in Dahlgren’s memoir) discusses a company’s donation to a foreign customs department. The funds in that situation were used to create an educational program to improve anti-counterfeiting measures. The program was deemed legal in the opinion, but the U.S. government’s reasoning was based on a variety of details particular to that case.

We cannot evaluate IKEA’s actions fully because we do not know all the nuances of the joint program in Russia. Nevertheless, it’s worth noting that, in the situation outlined in the DOJ opinion, the donor stated that “its pending business activities . . . are relatively small and ‘entirely unrelated to the current request for an advisory opinion.’” In contrast, IKEA already had substantial ongoing operations in Russia at the time of the program described by Dahlgren. And as he notes, IKEA’s close ties with the customs department were crucial for its success in Russia.

In light of Release No. 06-01, which isn’t binding legal precedent but does indicate the DOJ’s position, IKEA’s “joint projects with the Russian customs committee” that Dahlgren refers to could serve as an example of a potentially improper donation.

As I’ve said, this series doesn’t presume IKEA was subject to the FCPA when the events described by Dahlgren happened or that any FCPA violations might have occurred. Instead, we’re looking at IKEA’s Russia experience to learn more about charitable giving under the FCPA and how to manage giving programs.

I’ll conclude this series in the next post.

Part One of the series is here, Part Two is here, Part Three is here, and Part Four is here.

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Ilya Zlatkin is a Chicago attorney focusing on business planning, intellectual property, and international entrepreneurship. Having passed the CFE exam, he is on track to become a Certified Fraud Examiner in early 2015. He can be contacted here.