CALABASAS, Calif., May 29, 2012 -- Executives in those fortunate cities that land the NBA and NHL finals will be scrambling for last-minute luxury suites and box seats to entertain their biggest customers, with little time to determine if obtaining these pricey, in-demand tickets complies with the complex requirements of the IRS, Sarbanes-Oxley and the Foreign Corrupt Practices Act (FCPA).
And that, says Tony Knopp, CEO and co-founder of SpotlightTMS (www.spotlighttms.com), a veteran of StubHub and AEG, presents corporate T&E with both an opportunity and a challenge.
Unlike other top corporate hospitality events such as the Super Bowl, the Masters Tournament, the Kentucky Derby and tennis's U.S. Open -- all of which provide lead times for planning corporate entertaining because of their pre-determined locations -- the NBA and NHL finals are typically down to the wire.
"The Stanley Cup and NBA finals are just days away, and we still don't know where some of these games will be played," Knopp says. "This means missed opportunities for companies in the host cities that don't already have season tickets and suites. But jumping on these corporate entertainment opportunities at the last minute without taking affirmative steps to ensure that they're used in accordance with applicable laws can put companies at risk."
In an environment of anti-corruption enforcement, Knopp says that companies run the risk of triggering anti-corruption laws if their marketing and entertainment expenditures cross a line into conduct that could be characterized as bribery. In 2010 alone, U.S. companies paid $1.6 billion in FCPA fines.
"Most importantly, companies need to ensure that entertainment costs are reasonable under the circumstances and are connected to a legitimate business purpose," Knopp says. "Entertaining clients at these in-demand sporting events must be provided in good faith and without a corrupt intent or the expectation of a favor in return."
He also notes that, as a general rule, company personnel should be in attendance at the event to support the business justification of relationship building. "And the company should have procedures in place for the accurate tracking, identification and reporting of business entertaining at these events," he adds.
Used correctly, entertaining clients at sports events, especially major league playoff games, is an important element of the marketing mix, and helps to solidify business relationships and close deals. "But if used improperly, without strict controls in place, companies run the risk of running afoul of the law and the potential penalties are significant," Knopp says. (continued...)