On August 14, 2020, the Department of Justice (DOJ) issued its first Foreign Corrupt Practices Act (FCPA) Opinion Procedure Release in six years. In the opinion, DOJ advised that it would not bring an enforcement action against a U.S.-based investment adviser if the firm moved forward with paying an advisory fee to a foreign investment bank owned by a foreign government because the “FCPA does not prohibit payments to foreign governments or foreign government instrumentalities,” and DOJ found no corrupt intent to influence a foreign official.
The advisory opinion does not break new ground. Like all Opinion Procedure Releases, this one was limited to the question of whether the payment would merit enforcement action under FCPA’s anti-bribery provisions. Payments directed to foreign government entities rather than individual foreign officials may still generate liability under the FCPA’s accounting provisions if inaccurately recorded, as the Oil-for-Food Program settlements a decade ago made clear.
Under 28 C.F.R. § 80.1, domestic concerns may “obtain an opinion of the Attorney General as to whether certain specified, prospective – not hypothetical – conduct conforms with the Department’s present enforcement policy regarding the antibribery provides of the Foreign Corrupt Practices Act…” A multinational investment adviser headquartered in the U.S. submitted its opinion request to the DOJ on November 5, 2019, and provided supplemental information at DOJ’s request between January and July 2020.
In 2017, the investment adviser sought to purchase a portfolio of assets from a foreign investment bank and engaged a foreign subsidiary of the same bank to assist with the purchase. A foreign government is an indirect majority shareholder in the bank. After the successful purchase of assets, the bank subsidiary that assisted with the purchase sought $237,500 —0.5% of the value of the portfolio acquired — as compensation for its services. Because the bank is majority-owned by a foreign government, the purchaser sought an opinion from DOJ as to whether the payment would result in an enforcement action under the FCPA.
DOJ’s determination that the proposed fee payment would not run afoul of the FCPA was based on three principal considerations. First, the payment at issue is to be made to an entity, not to a foreign official. Second, although the bank is indirectly owned by a foreign government, there is no indication that the investment adviser intends its payment to the foreign investment bank to be diverted to corruptly influence an individual official. Finally, the foreign investment bank provided “specific, legitimate services” to the investment adviser, and the bank subsidiary’s compliance officer certified that the payment “is commensurate with the services that [the bank] provided and is commercially reasonable.”
It remains to be seen whether the advisory opinion heralds a resurgence in the use of DOJ’s Opinion Procedure Release program, particularly given the nine-month wait between submission of the request in this case and release of DOJ’s opinion.
