On 14 November 2012, the Department of Justice (‘DOJ’) and the Securities and Exchange Commission (‘SEC’) published long-awaited guidance on the U.S. Foreign Corrupt Practices Act 1977 (the ‘FCPA’). The guidance, ‘A Resource Guide to the U.S. Foreign Corrupt Practices Act’ (the ‘Guidance’), has been jointly published by the agencies; both of which are responsible for enforcement of the FCPA.
Although non-binding, the Guidance does go further than a simple restatement of historic DOJ and SEC decisions and pronouncements on the FCPA and its implementation. It is described by Robert Khuzami, Director of Enforcement of the SEC, as “an ambitious effort to lay out how the government interprets and applies the FCPA.” The Guidance’s self-declared aim is to provide companies and individuals with “information to help them abide by the law, detect and prevent FCPA violations, and implement effective compliance programs.”
The Guidance makes clear that the DOJ and SEC are not in the business of bringing cases over small, insignificant promotional gifts or hospitality. The Guidance specifically lists as being acceptable a one off $50 gift to a public official or the picking up of a modest bar tab. The Guidance does however make clear that they are keenly interested in, and will proactively prosecute, gifts and hospitality which are infact bribes, which have a “fundamentally corrosive” effect on how companies do business. An example of improper entertainment was $10,000 dinner, drinks and entertainment for a governmental official. Although the use of examples is helpful, the use of extremes (the Guidance includes as acceptable a $5 cup of coffee) means that the Guidance is little help to those grappling with real life situations somewhere between the $5 coffee and the $10,000 dinner.
The Guidance also contains a number of hypothetical scenarios, covering issues like facilitation payments, successor liability and third-party vetting. The scenarios include the relevant regulator’s stance on the situation. As well as hypothetical situations, the Guidance also contains real, anonymised, examples of cases where the DOJ or SEC have declined to act. These examples contain a brief discussion of the factors leading towards a decision not to act.
The Guidance seeks to clarify who a ‘foreign official’ is by providing a non-exhaustive list of factors taken into account when determining whether a government ‘instrumentality’ is a foreign official. Factors such as the purpose of the entity’s activities, the circumstances of its creation and the foreign government’s degree of control are all listed. This clarification is a welcome inclusion in the Guidance.
One thing the Guidance does not contain, which should not have surprised its readers, is any form of ‘adequate procedures’ defence. Since the implementation of the UK Bribery Act 2010, many U.S. commentators have been calling for the introduction of an equivalent defence in the U.S.. Such a defence enables an acknowledgement that no matter how comprehensive and well integrated a firm’s compliance program is, rogue employees cannot always be prevented from committing an offence.
Although no equivalent defence was introduced, and rightly so, as that would be overstepping the remit of the agencies’ powers, the Guidance did emphasise the importance of an effective compliance program and the fact that companies will receive credit for this. As well as emphasising the benefits of a robust compliance program, the Guidance also affirms the value the DOJ and the SEC place on individuals and corporates who self-report and cooperate with the regulators. The need to take swift and effective remedial action was also highlighted and commended.
The Guidance does not represent new law and does not represent a departure from previous DOJ or SEC practice but it does provide a fairly comprehensive guide to the FCPA; clarifying key concepts, giving real life examples and outlining the agencies’ thinking on a number of issues relating to the FCPA.