On November 7, 2014, the Department of Justice (“DOJ”) issued an opinion reinforcing its position that successor liability will not “create liability where none existed before.” See DOJ Opinion Procedure Release No. 14-02 (the “Opinion”). The Opinion offers further clarity to U.S.-based companies that pre- acquisition discovery of potential FCPA violations by a foreign target company will not trigger FCPA liability if the target company is not already subject to the FCPA.


In the Opinion, a multinational company headquartered in the United States (the “Requestor”) sought guidance related to a proposed acquisition of a foreign consumer products company and its wholly-owned subsidiary (the “Target Company”) which were incorporated and operating in a foreign country. The Target Company’s shares were held by another foreign corporation (the “Seller), a prominent consumer products manufacturer and distributor in a foreign country. There was no evidence that the Target Company or the Seller were subject to United States jurisdiction (they had no operations in the U.S., no issuance of securities in the U.S., and no direct sales or distribution of products to the U.S.).

In the course of pre-acquisition due diligence, the Requestor engaged an established forensic accounting firm to test a sample of the Target Company’s transactions. The accounting firm reviewed nearly 1,300 transactions valued at approximately $12.9 million and found what the DOJ described as “glaring compliance, accounting, and recordkeeping deficiencies” by the Target Company, including:

Potentially Improper Payments – At least $100,000 in payments to government officials to obtain permits and licenses, gifts to government officials, charitable contributions and sponsorships, and payments to state-controlled media;

  • Accounting Failures – Missing documentation for many transactions and inaccurate bookings of expenses; and
  • Lack of Compliance Culture – No written code of conduct or anti-corruption policies or procedures and a lack of employee awareness of anti-bribery laws.

Based on the facts and circumstances as represented by the Requestor, the DOJ stated it does not presently intend to take any enforcement action regarding any pre-acquisition violations by the Target Company or the Seller.

Key Takeaways

1. The Absence of FCPA Jurisdiction Over the Foreign Target Is Key

The DOJ’s opinion was premised on the Target Company having “negligible business contacts” in the United States. Both the Seller and Target Company: (i) were incorporated outside of the United States,(ii) operated only in a foreign country, (iii) never have been issuers of securities in the United States, and (iv) never directly sold or distributed products in the United States. But if an acquiring company is considering a target company that has even minor connections to the United States, the Opinion does not provide similar comfort around successor liability.

2.  Watch Out for FCPA Violations With Continuing Benefit

The Requestor informed the DOJ that its pre-acquisition due diligence showed that “no contracts or other assets were determined to have been acquired through bribery that would remain in operation and from which Requestor would derive financial benefit following the acquisition.” Instead, the Requestor identified improper payments made in the past and that were not likely to yield any direct continuing benefit to the Requestor after closing. The DOJ is not likely to look the same way at improper payments made to secure any contracts that will remain in place at the time of closing.

3.  FCPA Due Diligence & Compliance Integration Remain Critical in the Merger & Acquisition Context

The DOJ continues to emphasize the importance of effective anti-corruption due diligence in the deal context. Specifically, both the DOJ and the Securities and Exchange Commission (“SEC”) have urged companies pursuing mergers or acquisitions to implement, conduct, and consider the following:

  • Pre-Acquisition Due Diligence – Conduct thorough risk-based FCPA and anti-corruption due diligence on potential target acquisitions.
  • Post-Acquisition Compliance Integration – Ensure the acquiring company’s code of conduct and FCPA compliance policies/procedures are implemented “as quickly as is practicable” after closing to a target company or merged entity.
  • Anti-Corruption Training – Train the directors, officers, and employees of a target company or merged entity as well as agents and business partners.
  • FCPA Audit – Conduct an FCPA-specific audit of a target company or merged entity as quickly as practicable after closing.
  • Disclosure to Government – Disclose any corrupt payments discovered as part of due diligence of a target company or merged business.

See DOJ and SEC’s A Resource Guide to the U.S. Foreign Corrupt Practices Act (2012). In the recent Opinion, the DOJ again urges acquiring companies to follow these steps and suggests that they will factor into whether the DOJ will bring an enforcement action.

Regarding post-closing integration of the Target Company, the Requestor informed the DOJ that it would implement (i) full compliance integration within a year of closing, (ii) a schedule for transitioning the Target Company into the Requestor’s anti-corruption compliance and training program, and

(iii) standardization of third party business relationships and accounting functions. While the DOJ declined to assess these proposed efforts in the Opinion, such on-boarding procedures should be standard in any acquiring company’s post-acquisition plan.


Companies pursuing mergers and acquisitions where the FCPA is implicated must remain vigilant in conducting thorough pre-acquisition FCPA due diligence and implementing a post-acquisition anti- corruption integration plan regardless of whether a target company is subject to U.S. jurisdiction. But the DOJ’s recent opinion provides some comfort that succe