On September 1, 2010, the Department of Justice (DOJ) released its third Foreign Corrupt Practices Act (FCPA) Opinion Procedure Release of 2010 (Opinion). The DOJ stated that it does not presently intend to take any enforcement action against a United States limited partnership (Requestor) that proposes to enlist a consultant that also represents ministries of a foreign government to assist it in pursuing an initiative with the foreign government.1
The relevant facts noted in the Opinion are as follows:
- The Requestor is pursuing an initiative with a foreign government regarding a novel approach to particular natural resource infrastructure development.
- The Requestor plans to contract with a consultant (Consultant) and its sole owner to assist it. The Consultant has represented ministries of the foreign government that will play a role in discussions of the Requestor’s initiative.
- In order to ensure that no conflict of interest would arise between the Consultant’s representation of the Requestor and the Consultant’s separate and unrelated representation of the foreign government several safeguards have been put in place. For example, for the duration of the consultancy the owner of the Consultant will cease to lobby on behalf of the foreign government, and those working on lobbying efforts for the foreign government will be walled off from the representation of the Requestor. The proposed contract also requires the Consultant to confirm that none of its employees or other individuals affiliated with the Consultant are foreign officials and that no employee or associated individual will become a foreign official during the term of the agreement.
Focusing on the fact that (1) the Consultant will take steps to wall off the employees working on the various representations from each other, (2) the Consultant and the Requestor have fully disclosed the various relationships to the relevant parties, (3) the relationships are permissible under local law, and (4) the Agreement includes obligations to limit the Consultant’s further representation of the foreign government, the DOJ determined that the Requestor had taken measures sufficient to ensure that the Consultant will not be acting on behalf of the foreign government in performing the consulting contract with the Requestor. Accordingly, the DOJ found that the proposed enlistment and payment of the Consultant under the consulting contract would not give rise to a FCPA enforcement action.
Corporations considering enlisting consultants and agents that have relationships with foreign governments, however, should be aware of the limited reach of this opinion. The DOJ emphasized the numerous steps taken by the Requestor and the Consultant to ensure that the Consultant will not be acting on behalf of the foreign government in performing the consulting contract with the Requestor. Further, the DOJ noted that the Requestor secured a local law opinion stating that it is permissible for the Consultant to represent both the foreign government and the Requestor at the same time, and that the contract will be disclosed to the Ministry of Finance of the foreign government. All of these facts supported the determination that the Consultant is not a “foreign official” for purposes of the payments under the consulting contract. A contract made with less transparency or with fewer safeguards to ensure separate and unrelated representation may result in the determination that a consultant that also represents a foreign government is a foreign official, thereby precluding payments under a consulting contract. Moreover, the opinion explicitly notes that “while the Consultant is not a foreign official for FCPA purposes under the limited facts and circumstances described by the Requestor, the proposed relationship increases the risk of potential FCPA violations,” and that the opinion “does not foreclose the Department from taking enforcement action should an FCPA violation occur during the execution of the consultancy.” Companies considering utilizing consultants should heed this warning and thoroughly investigate potential consultants, agents, and contractors to ensure continuing compliance with the FCPA.
To read Arent Fox’s analysis of DOJ’s prior FCPA Opinion Procedure Release of 2010 issued July 16, please click here.