DOJ, SEC Release FCPA Resource Guide
The U.S. Department of Justice and SEC have released their long-awaited Resource Guide to the U.S. Foreign Corrupt Practices Act (the "FCPA").
The government has not limited the broad language of the FCPA or issued clear rules, as many in the business community had urged. The Guide does, however, present a comprehensive overview of the FCPA, with practical examples taken both from cases the government has pursued and cases it has chosen not to pursue. The Guide also offers guidance on the hallmarks of an effective FCPA compliance program, and a view of how the government weighs self-reporting and makes prosecution decisions. The Guide is nonbinding, but it provides helpful guidance to companies as they make decisions concerning their operations overseas.
The following are some highlights from the Guide:
Who is a "foreign official"?
The government continues its broad interpretation of who is a foreign official. Employees of state-owned or state-controlled entities (e.g., a pharmaceutical company in which the government has a majority interest), may be considered "foreign officials" to whom bribes are prohibited. Employees of public international organizations, such as the World Bank, IMF and WTO, are specifically named in the statute. The Guide also emphasizes the need to perform appropriate diligence on third-party consultants or contractors, who may then make bribes to foreign officials.
What is "anything of value"?
A bribe may be anything from cash (sometimes in the guise of a consulting or other fee) to a travel reimbursement, lavish meal or charitable contribution. The government declines to set any value thresholds. But the Guide does state that "it is difficult to envision any scenario" in which buying someone a cup of coffee, paying a taxi fare or giving a company gift of nominal value would be prosecuted as a bribe. The Guide also states that a "small gift or token of esteem or gratitude" may be appropriate where it is given openly and transparently, recorded in the giver's books and records, provided only to reflect esteem or gratitude, and permitted under local law. In giving examples of prohibited bribes, the Guide emphasizes large cash payments, lavish gifts, and foreign travel unrelated to actual business. The Guide also suggests that charitable donations be monitored closely to ensure that they are not cover for a bribe.
What travel and lodging payments are permitted?
The government does not set any hard limits for permissible travel, lodging, or entertainment payments. But it does offer some helpful suggestions, such as paying costs directly to travel and lodging vendors, not advancing cash or using cash reimbursements, ensuring the expenditures are transparent, and ensuring that travel and lodging are reasonable and relate directly to a business function.
When are facilitating payments permitted?
The FCPA's exception for facilitating (or "grease") payments turns "on the purpose of the payment rather than its value." Such payments are acceptable for "routine governmental action" that is non-discretionary, such as processing visas or providing mail or utility services. They are not permitted for discretionary functions such as the awarding of a new contract.
Are there limits to successor liability?
A successor company can assume liability for FCPA violations by a company it has merged with or acquired. The Guide encourages companies to conduct active diligence in connection with mergers or acquisitions, and to self-report any violations. The Guide states that the SEC and DOJ have declined to take actions against companies that voluntarily disclosed and remediated conduct by predecessor companies; by contrast they have taken action against successor companies that failed to stop misconduct from continuing after an acquisition.
What does the SEC look for in a compliance program?
The Guide states that there is no one-size-fits-all compliance approach. The government looks for a compliance program that is tailored to an organization's specific situation, reflects a commitment by senior executives and an appropriate "culture of compliance," is actively overseen and implemented, involves appropriate assessments of risk, employs adequate training, communication and ongoing advice, and is actually enforced. The Guide also emphasizes the need to conduct due diligence on third parties and payments, and to investigate and report problems. The SEC and DOJ will look favorably on companies that self-report FCPA violations and take active steps to prevent continued violations.
FKSA's White-Collar Criminal Defense and Investigations Group is available to assist clients in assessing FCPA risk, designing or evaluating compliance programs, conducting training and providing ongoing FCPA advice. We are also available to conduct internal investigations of potential violations and to represent companies or individuals in government proceedings. Please contact Eric Corngold, Mary E. Mulligan, Ricardo Solano Jr., or Katherine L. Pringle.