On November 14, 2012, the Department of Justice ("DOJ") and the Securities and Exchange Commission ("SEC") released their much-anticipated joint guidance on the Foreign Corrupt Practices Act ("FCPA"), available at www.justice.gov/criminal/fraud/fcpa/guidance (the "Guide"). The FCPA sets forth very broad prohibitions on corrupt payments to foreign government officials, which the DOJ and the SEC have been aggressively interpreting and enforcing in recent years. The dense 120-page resource guide replaces the DOJ's far more basic 6-page "lay person's guide to the FCPA," which was helpful in breaking down the FCPA provisions, but did not offer guidance on the enforcement practices surrounding the Act.
While the new Guide does not present any notable changes in policy, it provides a useful and comprehensive overview of FCPA enforcement. The Guide reviews relevant case law, includes instructive hypotheticals and provides some insight into the perspective of the DOJ and SEC attorneys who enforce the law. Not surprisingly, however, the Guide relies extensively on the most progovernment case law and on settled cases where the government's most aggressive theories have not truly been tested in front of judges and juries. Although there is little in the Guide that imposes any practical curb on the government's aggressive tendencies in FCPA enforcement, the Guide makes clear that it is "non-binding, informal, and summary in nature" and "may not be relied upon to create any rights, substantive or procedural, that are enforceable at law by any party, in any criminal, civil, or administrative matter."
Nevertheless, for someone new to the FCPA, the Guide offers a useful primer and organizes relevant materials in a helpful way. There are several lists of do's and don'ts that will likely find their way into corporate compliance manuals and training materials. For instance, the Guide offers a 9-point set of safeguards for businesses to implement to ensure that promotional expenditures do not run afoul of the FCPA. (e.g., "Do not advance funds or pay for reimbursements in cash."). By implementing and abiding by policies based on the Guide's specific recommendations, businesses can reduce their own risk of prosecution if conduct that violates the FCPA does occur.
The Guide also provides some useful commentary on the question of successor liability. To many observers it can seem particularly unfair that an acquiring company may face criminal prosecution under the FCPA for conduct by an acquired company that occurred prior to the acquisition. Although the Guide does not rule out the possibility of prosecution under those circumstances, it does suggest that enforcement actions against successor entities are likely to be limited to "cases involving egregious and sustained violations or where the successor company directly participated in the violations or failed to stop the misconduct from continuing after the acquisition." The Guide has a section entitled "Practical Tips to Reduce FCPA Risk in Mergers and Acquisitions" containing useful, albeit general, suggestions.
There is also a fair amount of guidance that merely states the obvious and avoids the hard questions. Certainly, it is no surprise - and little comfort - that the government thinks that giving foreign officials sports cars and luxury vacation packages would violate the FCPA, but handing out promotional pens, hats and t-shirts at a trade show would not. The government could have taken this opportunity to set dollar thresholds that would be presumptively permissible or it could have attempted to address scenarios that fill the large gray area between de minimis gifts and obvious bribes, but it has chosen not to do so.
Practitioners who advise companies facing a host of thorny FCPA-related questions will be disappointed that the Guide cedes little ground to the defense perspective on many issues. For example, the Guide notes that "[s]ituations involving extortion or duress will not give rise to FCPA liability because a payment made in response to true extortionate demands under imminent threat of physical harm cannot be said to have been made with corrupt intent or for the purpose of obtaining or retaining business." Here, the Guide fails to recognize that payments made under threats of reprisal that fall short of imminent physical harm, such as the false arrest of employees or imminent and catastrophic damage to property, are equally unlikely to have been made with the corrupt intent required by the statute.
Similarly, the Guide maintains the government's aggressive position about who is or is not a foreign government official covered by the FCPA's prohibitions. With the prevalence of sovereign wealth funds and a variety of public-private partnership structures in many parts of the world, telling the difference between a foreign government official and a private corporate executive is not always so easy. The Guide provides an 11-factor test to distinguish between foreign government-owned and private entities, which in practice will preserve complete freedom of action for aggressive prosecutors.
Finally, the Guide contains abundant references to the government's view that corporations that encounter potential FCPA violations must self-report in order to avoid civil and criminal penalties. In a section describing cases that the government declined to pursue, all of the examples featured the fact that the company had promptly reported the improper conduct to the authorities. While these examples are helpful, they shed no light on when, if ever, a company can be confident that a small, one-time improper payment that occurred despite a robust compliance program and resulted in swift internal remedial actions need not be reported to the DOJ or SEC. Nor is there significant guidance as to what penalty a company will face in the event that the government decides to bring a prosecution with regard to conduct that was self-reported.
Although the Guide offers little that is new and often falls short of providing real guidance on the difficult questions that practitioners face, it is a useful primer on basic concepts and includes helpful references to relevant case law and other source materials.