What Stands Out In the SEC & DOJ’s New Guide to FCPA Compliance?

“Although much of the guidance walks through established DOJ and SEC positions and practices, the [Resource Guide to the U.S. Foreign Corrupt Practices Act] does, through the use of real-world examples and detailed hypotheticals, provide more concrete direction than was previously available.” (Foley Hoag)

Earlier this week, the Securities and Exchange Commission and the Department of Justice released their long-awaited guidance on complying with the US Foreign Corrupt Practices Act.

A must-read for corporate executives and in-house lawyers, the 130-page resource guide provides an in-depth look at issues (and solutions) on the collective minds of the agencies responsible for enforcing the country’s anti-bribery and anti-corruption laws.

What stands out?

1. Gifts and travel:

“The gifts, travel, and entertainment hypotheticals offer some specific and useful guidance regarding where the government draws the line between legitimate and improper hospitality. For example, when facilitating a several day-long inspection under a contract with a foreign government, a company can pay for business class airfare, a moderately priced dinner, a baseball game, and a play for the officials performing the inspection, but cannot pay for the officials to travel first-class with their spouses for a side trip to Las Vegas.” (Morvillo Abramowitz)

2. Compliance programs:

“The Guide highlights the importance of effective anti-corruption compliance programs and identifies the basic elements that DOJ and SEC consider when evaluating such programs. The Guide notes that DOJ and SEC understand that ‘no compliance program can ever prevent all criminal activity by a corporation’s employees,’ and that they do not hold companies to a standard of perfection. The Guide reiterates the agencies’ prior claims that companies will receive meaningful credit if they implement in good faith a comprehensive, risk-based compliance program, even if that program does not prevent an infraction in a low-risk area because greater attention and resources had been devoted to a higher-risk area.” (Perkins Coie)

3. Faciliation payments:

“Not surprisingly, the Guide did not endorse any compliance program ‘safe-harbor.’ Instead, the Guide continued to emphasize a practical approach to giving credit to compliance efforts, first looking to determine if the compliance program is well designed, done in good faith, and whether it works. The Guide acknowledges that there may be a violation of the FCPA even in the face of a well-designed, good faith compliance program, and highlights one recent prominent example where, finding an effective enforcement program, the government declined to undertake enforcement action against a company and instead prosecuted only an individual.” (Foley Hoag)

4. Foreign officials:

“One of the main issues repeatedly confronting companies conducting business in countries like China, where seemingly private companies are often owned or partially owned by the State, is whether the person they are dealing with is indeed a foreign official. In other words, is the seemingly private entity an ‘instrumentality’ of the State covered by the FCPA? … DOJ and SEC state that ‘as a practical matter, an entity is unlikely to qualify as an instrumentality if a government does not own or control a majority of its shares.’” (Manatt, Phelps & Phillips)

5. Whistleblower rules:

“Notably, the guide contains an entire chapter dedicated to the applicable whistleblower provisions and protections available to employees. Employers seeking to minimize liability may want to evaluate any internal anti-bribery policy or whistleblower policy, as well as review possible penalties, sanctions and remedies available under the FCPA, including criminal liability provisions.” (XpertHR)

6. M&A successor liability:

“For example, DOJ and the SEC provide specific guidance regarding successor liability. DOJ and the SEC note that the actions taken against successors generally have resulted from three fact patterns: (1) cases involving ‘egregious and sustained violations;’ (2) cases in which the successor participated in the violations; and (3) cases in which the violations continued after acquisition.” (Duane Morris)

7. Self-reporting:

“The Guide reaffirms what has long been conventional wisdom, namely that both DOJ and SEC place a high premium on self-reporting, along with cooperation and remedial efforts, in determining the appropriate resolution of FCPA matters.” (Perkins Coie)

8. Extortion payments:

“The Guide explicitly recognizes that businesses operating in high-risk countries may face real threats of violence or harm to their employees. The Guide states that payments made in response to imminent threats to health and safety do not violate the FCPA. The guidance draws a clear distinction, however, between true extortionate demands under imminent threat of physical harm and mere economic coercion.” (Manatt, Phelps & Phillips)

9. Jurisdiction:

“[The FCPA extends] not only to (1) issuers (including their officers, directors, employees, agents and shareholders), (2) domestic concerns (and their officers, directors, employees, agents and shareholders), (3) persons and entities who act while in the territory of the United States, but, importantly, also (4) any co-conspirators or aiders or abettors who are not operating at all in the United States but who have assisted a company in violating the FCPA.” (Foley Hoag)

10. Cases the authorities have declined: 

“One of the things the guidance does at least scratch the surface of are instances in which the two agencies have come across FCPA violations that they have declined to prosecute. As we have covered in this space before – and certainly others as well – the SEC and DOJ have been notoriously tight-lipped about those cases. They exist, of course. We learned yesterday that the Justice Department has declined several dozen potential FCPA cases against companies in just the last two years.” (Brooks Pierce)

11. Accounting Fraud:

“The Guide lists 14 common accounting entries that may be used to conceal a bribe in corporate books, simultaneously cautioning companies who may be hiding corrupt transactions and aiding companies and their counsel who are searching for evidence of bribes while conducting due diligence.” (Ropes & Gray)

The updates:

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