Interagency guide provides a blend of statutory interpretation, case analysis, and practice recommendations for corporations and their advisors but lacks definitive answers to many FCPA questions.
On November 14, the U.S. Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) released "A Resource Guide to the U.S. Foreign Corrupt Practices Act" (Guidance)—the regulators' long-anticipated guide to the Foreign Corrupt Practices Act's (FCPA's) criminal and civil enforcement provisions.
Although the Guidance—which Assistant Attorney General Lanny Breuer championed as "the boldest manifestation of [the DOJ's] transparent approach to enforcement"—is essentially a nonbinding compilation of past positions taken by the regulators, it does blend statutory interpretation, case analysis, and practice recommendations in a comprehensive and teachable manner. Key Guidance takeaways are summarized below.
Key Takeaways from the Guidance
Definition of "Foreign Official" – Focus on Ownership and Control for "Instrumentalities"
The focus of the Guidance's section on "foreign officials" concerns when a government "instrumentality" constitutes a foreign official for the purposes of the FCPA. The Guidance provides the following assistance for making this determination:
Gifts and Expenses – Focus on Intent
The Guidance reiterates that the critical element in giving a thing of value is a finding of corrupt intent—the intent to improperly influence a government official. However, the Guidance offers the following new practical guidance as to what gift-giving may be considered corrupt intent:
The Guidance makes clear that charitable contributions are often a hallmark of legitimate community outreach and are not prohibited by the FCPA. Such contributions, however, may trigger scrutiny by regulators. The following are explained in the Guidance:
Affirmative Defenses – Bona Fide Expenditures
The Guidance provides advice regarding both the local law and bona fide business expenditure affirmative defenses, with a particular focus on safeguards that will help to ensure that expenses are appropriate (bona fide). Such safeguards include:
Corporate Liability – Parents, Successors, and Agents
The Guidance provides a lengthy discussion of corporate liability and reaffirms the regulators' long-held positions that general principles of corporate criminal and civil liability apply to the FCPA, including principles of successor liability and agency liability under a theory of respondeat superior. Highlights of these discussions include the following:
In listing what is critical to determining successor liability, the Guidance places emphasis on preacquisition due diligence adequately designed to detect improper conduct and implement remedial steps to ensure that such conduct does not continue.
Payments to Third Parties
The Guidance reiterates that corrupt payments made to third parties or intermediaries are prohibited under the FCPA and provides that common red flags include excess commissions to third parties, unreasonably large discounts to distributors, "consulting agreements" that only vaguely describe the terms of service, and third parties that are closely affiliated with a foreign government official.
The Guidance emphasizes the need for appropriate due diligence and vetting before engaging third parties. Guiding principles for such programs include the following:
Hallmarks of Effective Compliance Programs
The Guidance emphasizes the importance of effective anticorruption compliance programs and notes that regulators often consider the adequacy of a company's program when determining what action, if any, to take. Recognizing there is no "one size fits all" approach, a message that was recently reinforced by Kara Brockmeyer, the chief of the SEC's FCPA Unit, and Charles Duross, the deputy chief of the DOJ's Fraud Section, the Guidance provides a list of elements for an effective program:
In addition to these hallmarks, the Guidance also endorses compliance program advice issued by other federal agencies, including the U.S. Departments of Commerce and State, as well as those published by international agencies and multinational organizations.
Declinations Decisions – Real-World Examples
One of the Guidance's distinctive features is its presentation of six anonymized cases in which regulators declined to take enforcement action. In each of those cases, the companies in question either self-reported the offending conduct or voluntarily disclosed that the conduct had occurred. In addition, all of the companies conducted thorough internal investigations, revised their compliance programs, and proactively remediated the violations by terminating employees, severing third-party relationships, and/or withdrawing bid proposals. In several of the cases, declinations were attributed in part to existing robust compliance programs and effective internal controls.
For further discussion on the highlights discussed above, as well as analysis of the Guidance's impact on FCPA reform efforts and recent FCPA actions, please visit http://www.morganlewis.com/pubs/SummaryDOJ-SECResourceGuidetoFCPA.pdf.
Morgan Lewis's White Collar Practice
Morgan Lewis's national and international White Collar Practice features dozens of former prosecutors and former high-level government officials whose experience representing companies and individuals covers a broad array of substantive white collar and government enforcement areas, including, among others:
If you have any questions regarding this LawFlash, or require assistance with any issue relating to the defense of a government enforcement matter, please contact any of the authors, George J. Terwilliger, III (202.739.5988; email@example.com), Eric Kraeutler (215.963.4848; firstname.lastname@example.org), Eric W. Sitarchuk (215.963.5840; email@example.com), Benjamin D. Klein (202.739.5394; firstname.lastname@example.org), or Dallas Kaplan (202.739.5407; email@example.com), or any of our white collar practitioners:
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Colm F. Connolly
. Crim. Div. of the U.S. Dep't of Justice & Enforcement Div. of the U.S. Sec. & Exch. Comm'n, A Resource Guide to the U.S. Foreign Corrupt Practices Act (Nov. 14, 2012), available here [hereinafter FCPA Guidance]. See also U.S. Dep't of Justice, A Resource Guide to the U.S. Foreign Corrupt Practices Act Fact Sheet (Nov. 14, 2012), available here.
. Lanny A. Breuer, Assistant Attorney Gen., U.S. Dep't of Justice, Remarks at the American Conference Institute's 28th National Conference on the Foreign Corrupt Practices Act (Nov. 16, 2012), available here.
. A disclaimer on an unnumbered page toward the front of the Guidance reads, in relevant part, as follows:
[The Guidance] is non-binding, informal, and summary in nature, and the information contained herein does not constitute rules or regulations. As such, it is not intended to, does not, 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. It is not intended to substitute for the advice of legal counsel on specific issues related to the FCPA. It does not in any way limit the enforcement intentions or litigating positions of the U.S. Department of Justice, the U.S. Securities and Exchange Commission, or any other U.S. government agency.
. FCPA Guidance, supra note 1, at 20.
. Id. at 15.
. Id. at 16.
. Id. at 18, 19.
. Id. at 19.
. Id. at 24.
. Id. at 14.
. Id. at 27.
. Id. at 28.
. See id. at 28, 62.
. Id. at 22.
. Id. at 60.
. Id. at 57.
. Kara Brockmeyer, Chief, Foreign Corrupt Practices Unit, U.S. Sec. & Exch. Comm'n. & Charles Duross, Deputy Chief, Foreign Corrupt Practices Unit, U.S. Dep't of Justice, Panel Discussion at the American Conference Institute's 28th National Conference on the FCPA: The U.S. DOJ and SEC Speak on the Key FCPA Cases of 2012 and Current Enforcement Priorities (Nov. 15, 2012).
. FCPA Guidance, supra note 1, at 57.
. Id. at 58.
. Id. at 59.
. Id. at 59–60.
. Id. at 60.
. Id. at 61.
. Id. at 62.
. Id. at 63.
. Id. at 77–79.