The Foreign Corrupt Practices Act (FCPA) has long been a favorite topic of the Global Connection. The FCPA, as well as various other foreign anti-corruption laws – such as the U.K. Bribery Act – and international agreements, place a high premium on compliance in often challenging multicultural business environments. As background, the FCPA establishes detailed accounting and recordkeeping standards to prevent (and punish) bribery activities. As discussed in previous articles, an FCPA offender may be punished up to $2 million and five years in jail. Simply, the United States government requires businesses and individuals to act ethically as they develop opportunities in foreign countries. The axiom “when in Rome, do as the Romans do” is not only obsolete, but potentially devastating to businesses.
Although the FCPA has existed since 1977, the Department of Justice (DOJ) and the Securities Exchange Commission (SEC), which are the two entities with jurisdiction to enforce the law’s provisions, have at times provided confusing guidance as to what would technically be an FCPA violation. Although the DOJ provides a good resource in giving “opinions” on potential actual transactions that may have FCPA implications, this is a costly and time consuming process – especially, when a deal is on the “fast track” to completion. The DOJ also has previously issued the “Lay Person’s Guide to the FCPA,” which is helpful in breaking down the FCPA provisions, but does not provide much “guidance.”
Likely as a result of the U.K. Bribery Act and the U.K.’s guidance on how to comply with the provisions of that law, the DOJ announced in November 2011 that it would publish its own guidance in regard to the FCPA. Such guidance was widely expected in October 2012, which obviously did not occur. Now, it is expected that the guidance should be coming out in early November before a major conference about the FCPA.
Although the anticipated guidance is expected to be more detailed than the “Lay Person’s Guide,” the guidance will likely still require a reader to be versed in legalese and FCPA compliance to decipher. One issue that will be clear to any reader is that DOJ is expected to reinforce its heightened enforcement of FCPA cases and reiterate its commitment to cross-border, multi-jurisdictional cooperation and investigations of bribery allegations.
Further, DOJ will likely consolidate recent court interpretations of the FCPA – some of which went against the government’s interpretation — into its guideline, including the definition of “Foreign Official” that is the recipient of the overt bribery act. This will clearly include private organizations that are owned by foreign governments – i.e., sovereign wealth funds, certain Chinese companies, healthcare companies under a nationalized health system, etc.
Unfortunately, in the constant changing global marketplace, it is becoming harder to determine who is and who is not a “Foreign Official.” But, this should not really matter since several foreign laws, including the U.K. Bribery Act, make any act of bribery – regardless as to whether it is to a governmental official or private individual – unlawful.
It is possible that DOJ may announce that it is relaxing its successor liability enforcement (i.e., punishment) so long as the acquiring company aggressively integrates the acquired company into its compliance program and voluntarily reports any violations. However, a caveat may be that the DOJ may recommend that a precursor to such relaxation is that the acquiring company must go to DOJ before the transaction is completed to seek an opinion on the due diligence performed during the acquisition and seek a reasonable time to conduct the integration and possible voluntary disclosure. Or, DOJ may state a policy as to the timing of the interim post-acquisition due diligence period to obtain the relaxed successor liability punishment. Regardless, as company acquisitions are a major area of enforcement for DOJ and SEC, due diligence in regard to all foreign transaction laws (not just the FCPA) is paramount.
Although unlikely, it would be helpful if the DOJ discussed the voluntary disclosure process and the potential benefits associated with such disclosure. A recent study revealed that there were no tangible benefits in regard to such voluntary disclosure when compared against punishments to companies and individuals who did not disclose. But, such discussion of mitigation and disclosure benefits would be more appropriately handled through the Federal Register and notice opportunities, rather than through a Guideline. Regardless, lobbying groups, including the U.S. Chamber of Commerce, will utilize any DOJ Guideline to advocate for changes in the FCPA, which would then require an updated guideline.
It is expected that DOJ will reiterate the need for a compliance program and specifically highlighting the punishment mitigation potential by having such a program, which would include a written policy, training, “standards of conduct” clauses in all agreements, accounting procedures and regular audits. As with the majority of the export control laws, there is not a “law” mandating a compliance program. It is just expected. However, it is still hoped that DOJ will include certain “best practices,” several of which are referenced above, that can lead to a true mitigation of any potential penalty.
The DOJ’s Guidelines will not drastically change the current enforcement and compliance environment regarding foreign transactions. However, it is important for companies and individuals who continue to take advantage of the global opportunity to review the Guidelines and ensure that all foreign transaction policies are updated and reiterated.