16 November 2012

The DOJ And SEC's New Foreign Corrupt Practices Act Guide: Practical Guidance, No Shifts In Approach

Yesterday, the DOJ and SEC released their much anticipated joint Resource Guide to the U.S. Foreign Corrupt Practices Act (the Guide).1 Those hoping for a new approach to FCPA enforcement - whether a step back from the agencies’ aggressive interpretations of the statue or the adoption of a compliance-based defense similar to the “adequate procedures” defense under the UK Bribery Act - will be disappointed. A comprehensive tome of 120 pages, the Guide largely reiterates the agencies’ longstanding enforcement principles. Even so, the Guide promises to be a tremendously useful tool because it collects and rationalizes prior enforcement decisions and provides detailed guidance and hypotheticals in a number of areas. Moreover, the fact that the Guide was issued jointly is an important reassurance that the agencies have adopted a unified approach to FCPA enforcement.

We will provide in-depth analysis of various aspects of the Guide in the coming weeks, but here is a summary of some key highlights:

  • Detailed Compliance Recommendations, But No Compliance Defense: The Guide outlines what the agencies view as best practices in developing and implementing an anti-corruption compliance program, including detailed procedures for third party vetting. The agencies reiterate their longstanding position that the effectiveness of a company’s compliance policy is a factor in enforcement decisions, but do not adopt a clear compliance-based defense as some commentators had urged.
  • Practical Gifts and Entertainment Guidance: The Guide is perhaps at its most useful in setting out detailed guidance on what types of gift and entertainment expenses will pass muster, and provides examples that will help corporate compliance departments craft real-world guidelines. The Guide reassures that “anti-bribery enforcement actions have focused on small payments and gifts only when they comprise part of a systemic or long-standing course of conduct that evidences a scheme to corruptly pay foreign officials.”3
  • M&A Due Diligence: The agencies have set out what they view as the key elements of risk-based anti-corruption due diligence, which include disclosure of any corrupt payments discovered to the SEC and/or DOJ. The agencies pledge to give “meaningful credit” to companies who undertake these actions but do not promise to forego prosecution.4 Notably, certain examples provided indicate that the agencies urge self-disclosure of pre-acquisition bribes by a target even where those payments were not covered by the FCPA.5
  • M&A Successor Liability: The Guide contains hypotheticals that shed light on how the government would likely react to potential violations in the M&A context. The agencies also assert that, as a practical matter, successor liability is only imposed in circumstances where there have been egregious or sustained violations, or where they continued post-acquisition. More often, where an FCPA disclosure is made in an acquisition context, an enforcement action is brought solely against the target or predecessor company.6
  • “Foreign Official”: The agencies resisted calls to clarify the circumstances under which an employee of a state-owned enterprise will be deemed a foreign official. Instead, they maintain that whether a state-owned enterprise is a “government instrumentality” for purposes of the statute is fact-specific and will be assessed by reference to the factors set out in recent case law.7 The Guide does state that, as a practical matter and subject to certain exceptions, an entity is unlikely to qualify as an instrumentality if the government owns or controls less than 50% of its shares.8
  • Business Purpose Test: The enforcement agencies did not retreat from their view that the “obtain or retain business” element of an anti-bribery violation may be met in any circumstances where a payment was made to “gain a business advantage.” This expansive interpretation includes, for example, bribes to evade taxes or obtain regulatory exceptions.9

In the coming weeks, we will be sending additional E-Alerts that assess the implications of the Guide in greater detail.


1 The Guide is available online at the DOJ website.

2 See Guide, pp. 56-65.

3 See id., p. 15.

4 See id., p. 29.

5 See id., pp. 31 (Scenario 1), 79 (Example 5).

6 See id., pp. 28-33.

7 See United States v. Aguilar, 783 F. Supp. 2d 1108 (C.D. Cal. 2011).

8 See id., pp. 19-21.

9 See id., pp. 12-14.

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