While the FCPA world – and this blog – has been abuzz thanks to the new FCPA Guide, on a relatively mundane note, the U.S. Department of Justice (DOJ) also recently issued two Opinion Procedure Releases (OPRs) with respect to whether the DOJ would take enforcement action against particular conduct. The OPRs, the only two the DOJ has released thus far this year, contemplated two distinct issues under the FCPA: (i) the definition of “foreign official,” and (ii) the application of the “reasonable and bona fide expenditure[s]” affirmative defense. Although both OPRs concluded by saying the DOJ would not take enforcement action under the facts presented, each OPR is only as good as those precise facts; in other words, U.S. companies may find it difficult to apply these releases to their own compliance issues.
OPR 12-01. In the first OPR, which was issued September 18, the DOJ considered whether a member of the royal family of a foreign country (a Royal Family Member) is a foreign official under the FCPA. The DOJ concluded that the Royal Family Member at issue would not qualify as a foreign official because he was not acting (i) on behalf of the royal family or (ii) in his capacity as a member of the royal family. But the DOJ refused to articulate a bright line rule, explaining that this question requires a “fact-intensive, case-by-case determination” that will turn on factors such as the following:
- The structure and distribution of power within a country’s government;
- The royal family’s current and historical legal status and powers;
- The individual’s position within the royal family;
- The individual’s present and past positions within the government;
- The means by which the individual could come to hold a position with governmental authority or responsibilities (such as, for example, by royal succession);
- The likelihood that the individual would come to hold such a position; and
- The individual’s ability, directly or indirectly, to affect governmental decision-making.
So, while the outcome of this OPR generally is helpful to companies conducting international business, it likewise is clear there are probably many cases in which the DOJ would conclude that a royal family member is indeed a foreign official under the FCPA.
OPR 12-02. In the second OPR, issued October 18, the DOJ stated that it would not take enforcement action against a group of U.S. adoption agencies seeking to host foreign government officials during a trip to the United States. In declaring that expenses related to the this trip could constitute a reasonable and bona fide expenditure, the DOJ highlighted a number of factors, including the price of the hotel rooms, the means of payment, the cost of entertainment, the adoption agencies’ role in selecting the officials, the value of souvenirs, and the purpose of the trip. We see this OPR as an important reminder that expenses – including substantial expenses – can be borne or paid on behalf of a foreign official so long as certain conditions are met.
Analysis. The good news is that both OPRs show a willingness by the DOJ to interpret the FCPA relatively reasonably. It is also possible that the DOJ was grateful for the opportunity to bless transactions that were submitted to it in advance, thereby encouraging more such OPR requests in the future.
In addition, at least one individual – Joel Esquenazi – reportedly has sought to rely on OPR 12-01 in defending against FCPA charges. (We previously commented on Mr. Esquenazi’s sentencing here.) Esquenazi apparently argued in a recent court filing that the same standards that applied to determine whether a Royal Family Member is a foreign official should be applied to determine whether an employee of a state-owned company qualifies as a foreign official.
The effectiveness of using the OPR defensively remains to be seen. More generally, the ultimate impact of these OPRs may be pretty minimal. Especially as to the treatment of Royal Family Members, rather than risk substantial penalties for erroneously evaluating the facts of a potentially analogous situation, U.S. companies may be inclined to continue treating all Royal Family Members as foreign officials.