According to a recent DOJ opinion release, an unidentified U.S. consumer products company would not face an FCPA enforcement action in connection with the planned acquisition of an unidentified foreign consumer products company and its wholly owned subsidiary. On April 30 of this year, the U.S. company requested guidance from the DOJ through its Opinion Release process due to concerns uncovered during pre-acquisition due diligence that the foreign firm had likely paid bribes of more than $100,000 to government officials in the firm’s home country and engaged in deficient accounting and recordkeeping.
Because the potential improper payments did not occur in the United States or involve U.S. individuals or issuers, and because no contracts or assets acquired through the bribery would remain in operation through which the U.S. company would derive financial benefit following the acquisition, the DOJ opined that it “would thus lack jurisdiction under the FCPA to prosecute” the acquiring company for improper payments made by the foreign firm prior to the acquisition.
The opinion release is an important reaffirmation of the DOJ’s position, as set out in its FCPA Resource Guide, that “successor liability does not . . . create liability where none existed before.” The opinion release noted that the acquisition was “squarely addressed” by the illustrative example provided in the Resource Guide that “if an issuer were to acquire a foreign company that was not previously subject to the FCPA’s jurisdiction, the mere acquisition of that foreign company would not retroactively create FCPA liability for the acquiring issuer.”
The DOJ also noted that the U.S. company had set forth a plan including remedial pre-acquisition measures and post-acquisition integration steps. While expressing “no view as to the adequacy or reasonableness” of the integration plan, the DOJ did encourage companies engaging in mergers and acquisitions generally to (1) conduct thorough risk-based FCPA and anti-corruption due diligence; (2) implement their codes of conduct and anti-corruption policies as quickly as practicable; (3) conduct FCPA and other relevant training for the acquired entity’s directors, employees, third party agents and partners; (4) conduct an FCPA-specific audit of the acquired entity as quickly as practicable; and (5) disclose to the DOJ any corrupt payments discovered during the due diligence process.
The issuance of an FCPA opinion release is relatively rare. Since 2004 the DOJ has releasedon average only about two such opinions every year. While the opinion creates a presumption that the acquisition is legal, it does not bind prosecutors should they later decide to pursue an enforcement action.