Internships as a corruption risk
Nearly all companies offer internships, which are designed to enable interested parties, career entrants, students or graduates to gather initial practical experience in a company, to get to know their future occupation and the company, and during which companies have the possibility to get to know successful interns as future employees. Not only the requirements of the German Minimum Wage Act (Mindestlohngesetz – MiLoG
) have to be observed when employing interns; it also has to be kept in mind that awarding internships can expose a company to corruption risks.
On 18 August 2015, the U.S. Securities and Exchange Commission (SEC) issued a cease and desist order
against Bank of New York Mellon Corp. This order prohibited Bank of New York Mellon from committing any future violations of the U.S. Foreign Corrupt Practices Act (FCPA); it also had to pay disgorgement, interest and a penalty in a total payment of USD 14.8 million. The background to the cease and desist order was as follows: an asset management company of the Bank of New York Mellon managed and serviced the assets of a Middle Eastern sovereign wealth fund. Two important managers of the sovereign wealth fund asked Bank of New York Mellon to arrange internships for a total of three family members. Due to the significance of the business relationship with the sovereign wealth fund, Bank of New York Mellon agreed to this and offered all three family members an internship, in two cases paid and in one case unpaid. None of these persons had the qualifications normally required for internships at Bank of New York Mellon. The internships were arranged at the personal request of the sovereign wealth fund managers.
The SEC saw corrupt behaviour pursuant to Sec. 30A of the Exchange Act in the provision of the internships because a foreign official had with the provision of an internship for a family member been offered something of value with the intention of obtaining or securing an improper business advantage
Although the decision of the SEC is based on the FCPA, it is highly significant for companies in Germany as well because both according to German law and the law of most other countries, providing an internship can constitute a benefit for a third party as defined by Section 333, 334 (1) and 299 (2) of the German Criminal Code (Strafgesetzbuch – StGB). Companies should therefore proceed with particular care when employees of business partners or customers request internships, apprenticeships or similar arrangements for family members or friends. If such employment opportunities are granted with the objective of securing or expanding the existing business relationship, this constitutes a criminal act of corruption. Companies should therefore ensure that they define the qualifications profile for interns, that a clear description of the internship programme exists which states the job description, the duration of the programme and the content to be conveyed, and that clear rules exists on remuneration. Interns should ideally be selected by a department of the company other than that which is responsible for business relations with the business partner or customer. In the event of any close relationship between interns and business partners and customers, it should be ensured that internal company processes and requirements are complied with meticulously.
Any questions? Please contact: Dr. Christian Pelz
Practice Group: Litigation, Arbitration & ADR