Perhaps reflecting the rapid pace of FCPA enforcement actions, the US Department of Justice (DOJ) has issued its second Opinion Procedure Release in as many months, detailing the agency’s Foreign Corrupt Practices Act (FCPA) enforcement policy regarding “certain specified, prospective—not hypothetical—conduct.”
According to the facts set out in the release, a US-based limited partnership is interested in pursuing, in a foreign country, a novel approach to a particular natural resource infrastructure development project. To be successful, the company determined that it would need assistance in its discussions with the foreign government.
The company proposes hiring a consultant who is employed by a US-owned and -based partnership. The consultant will be compensated with a signing bonus and, should the efforts of the consultant result in the company entering into a contract with the foreign government, a success fee. The consulting company has held and currently holds contracts to represent the foreign government in matters that include marketing on behalf of the Ministry of Finance and lobbying efforts in the United States. Most importantly, the consulting company has represented certain of the foreign government’s ministries that will now be involved in the discussions regarding the infrastructure project.
Recognizing the inherent conflict of interest in the consultant’s current unrelated work on behalf of the foreign government, as well as the FCPA risks in retaining a consultant who, on occasion, acts on behalf of the foreign government, the company has implemented the following safeguards:
- Prohibiting the consulting company’s owner from lobbying on behalf of the foreign government, although other consulting company employees may continue to do so.
- “Walling off” the consultant from any lobbying activity.
- Requiring full disclosure from the consultant and the owner of the consulting company as to any contracts between the consulting company and the foreign government.
- Requiring that neither the owner nor his consultant have any decision-making authority on behalf of the foreign government.
- Securing a local law opinion that the consulting company’s employees are not officials of the foreign government.
- Confirming with the consulting company that none of its employees are foreign officials.
- Disclosing the arrangement to the Ministry of the Finance.
- Requiring the consultant to obtain written prior approval from the company prior to any material action.
- Demanding that the consulting company and its owner commit to not representing or having any other business relationship with the foreign government in connection with the project, nor working or communicating with the foreign government in any respect that is outside the scope of the services that they are providing to the company.
After analyzing the steps taken by the company to ensure FCPA compliance, the DOJ concluded that no enforcement action would be taken with regard to the payments made to the consultant under the proposed agreement. The DOJ noted that the FCPA “does not per se prohibit business relationships with, or payments to, foreign officials.” Instead, the DOJ looks to indicia of corrupt intent, the transparency of the arrangement, whether the arrangement conforms to local law and whether there are safeguards in place to prevent a foreign official from improperly influencing a contract decision.
Here, with the steps taken to wall off the consultant from other foreign government representations, the permissibility of the relationship under local law and the contractual limitations on further representation of the foreign government, the DOJ was satisfied that the consultant was not acting on behalf of the foreign government.
The DOJ did, however, place an important qualifier on the proposed arrangement. The DOJ noted that the consultant is acting as an agent of the foreign government and could, in some situations, act on behalf of the foreign government, rendering him (or other consulting company employees) a “foreign official” under the FCPA. As such, the DOJ declined to “opine on any other aspect of the proposed contract or any other prospective conduct involved in the Request.” Going further, the DOJ ominously noted 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.”
The DOJ Opinion Procedure Release offers real-time assurance that specified and identified conduct does not run afoul of the FCPA. In this instance, the Opinion Release highlights the level of due diligence and design of proper controls an “issuer” or “domestic concern” should consider when employing consultants with existing relationships with a foreign government to interact on their behalf with the government. In making its present enforcement decision, the Department referenced four prior Opinion Releases that covered proposed business relationships with foreign officials. These releases concluded with favorable opinions in circumstances that included a company seeking to pay a finder’s fee to a member of a foreign consulate for work performed that was unrelated to the official’s government duties (Release 82-02) and a US company’s proposed hire of a foreign official as a consultant with an agreement that the official would take measures to prevent his use of official influence to benefit the US company (Release 94-01).
An important lesson to be taken from this release, and the examples provided through reference to prior releases, is transparency in the relationships and contractual terms that conform to local law and clearly describe the scope of the retention of the consultant. As the DOJ made clear, business relationships with and payments to foreign officials are not prohibited. The government’s primary interest is whether corrupt intent exists.