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DOJ, SEC Release Resource Guide Detailing Enforcement Approach, Priorities Under FCPA, BNA's Health Care Daily Report

November 15, 2012

Reproduced with permission from BNA's Health Care Daily Report (Nov. 15, 2012). Copyright 2012 by The Bureau of National Affairs, Inc. (800-372-1033) <http://www.bna.com>

Agencies Issue Resource on Foreign Bribery Law

Key Development: DOJ, SEC release A Resource Guide to the U.S. Foreign Corrupt Practices Act, designed to give businesses insight into FCPA requirements, outline agencies' enforcement approach and priorities under the act.

Impact: Experts say detailed guidance will be critical resource for businesses seeking to enhance their FCPA compliance programs and gain insight into government's thinking on FCPA issues.

By Dana A. Elfin

After almost a yearlong wait, the Department of Justice and the Securities and Exchange Commission Nov. 14 released A Resource Guide to the U.S. Foreign Corrupt Practices Act, designed to give businesses insight into FCPA requirements, as well as outlining the agencies' enforcement approach and priorities under the act.

The 120-page guide is intended to "maximize ... businesses' ability to comply with the FCPA in the most effective and efficient way suitable to their business and the markets in which they operate," the agencies said.

The FCPA, which covers companies that list their securities in the United States, prohibits offering or paying bribes to foreign government officials at any level of government. DOJ and SEC enforce the statute, and drug and medical device companies' overseas marketing activities have been the subject of recent enforcement actions under the law.

Experts Praise Guidance.

Experts told BNA that the new guidance offers businesses invaluable insight into the government's thinking on FCPA issues such as what constitutes an effective corporate compliance program and considerations to take into account when settling FCPA matters.

"All of the companies doing business abroad, whether large or small, should review this Guide with an eye to enhancing their own compliance programs," Mark S. Radke and Peter V.B. Unger, of Arent Fox LLP in Washington, told BNA Nov. 14 in an emailed statement. "There is important information, from the most basic to the most sophisticated."

"This guidance has been expected and was worth the wait," Kathleen McDermott, of Morgan Lewis & Bockius LLP's Washington office, told BNA Nov. 14. "It is extraordinary and impressive and will prove to be a critical resource for companies implementing FCPA compliance programs. It is a serious effort to help companies navigate FCPA issues."

While having a basic working understanding of the FCPA is crucial for companies to avoid potential problems, the statute's lack of clearly defined terms has made this a sometimes challenging task.

The guidance, Radke and Unger said, "will be a useful learning and teaching tool and will help to bring more transparence to the government's regulatory approach to the statute."

Radke and Unger noted that the guidance gives helpful hypothetical examples on certain key issues, such as what is an improper gift or travel or entertainment expense. Even the "418 footnotes in the 120 page Guide contain a wealth of detail," they observed.

McDermott added that the guidance includes DOJ's position "on a wide variety of interpretative concepts, including 'corrupt intent' and the prosecution emphasis on systemic wrongful acts or other indicia of corrupt intent."

In particular, McDermott said, "there is much discussion on how an effective FCPA compliance program may support meaningful credit in DOJ prosecution decisions. The guidance warns that 'check in the box' compliance programs are ineffective."

The guidance is tied to prior FCPA settlements and DOJ opinion releases, Radke and Unger said, "so it is not so much 'new' guidance as it is a very helpful compendium of existing law and 'lore.'"

McDermott noted that many of the voluntary disclosures and resolutions to date under FCPA have involved life science companies and their relationships with third parties. Indeed, she said, several aspects of the guidance are in accord with the Advanced Medical Technology Association (a medical devices industry group) and other industry codes of conduct.

Drug, Device Companies in FCPA Crosshairs.

The guidance should be welcome news to the drug and medical device industries, which have been recent targets of the U.S. government's FCPA scrutiny over how the companies market their products in foreign countries.

For example, a subsidiary of drugmaker Pfizer Inc. agreed in August to pay $15 million to resolve criminal FCPA charges involving improper payments to government officials in Bulgaria, Croatia, Kazakhstan, and Russia (152 HCDR, 8/8/12). Pfizer also agreed to disgorge $45 million in profits and interest to settle related civil charges.

Medical device manufacturer Orthofix International NV agreed in July to pay $5.2 million to settle SEC charges involving alleged bribes paid to Mexican officials by one of the company's subsidiaries. Orthofix also said it would pay more than $2.2 million to settle related FCPA charges brought by the Justice Department (133 HCDR, 7/12/12).

Medical device maker Biomet Inc. agreed in March to enter into a deferred prosecution agreement and pay nearly $17.3 million in criminal penalties to resolve charges that it paid bribes to health care providers in China and Latin America (58 HCDR, 3/27/12). The company paid almost $5.6 million to settle related SEC charges.

Medical device maker Smith & Nephew Inc. in February entered into a DPA to resolve FCPA charges in connection with improper payments by the company and certain affiliates. As part of the agreement, Smith & Nephew agreed to pay a $16.8 million penalty (24 HCDR, 2/7/12).