DOJ's First Opinion Release Shows Cautious Moves Amidst Aggressive FCPA Enforcement

Explore:  DOJ Enforcement FCPA

The Foreign Corrupt Practices Act (FCPA) prohibits giving or offering anything of value to any foreign official with a corrupt intent to assist in obtaining or retaining business. Enforcement of FCPA compliance by the Department of Justice (DOJ) has been particularly active in recent years, making companies increasingly wary of carrying out business transactions with foreign officials.

One US financial services company took a particularly cautious approach, requesting that the DOJ approve of its planned purchase of the shares of a foreign businessman with a minority interest in the Requestor's company, given his appointment to a senior government position in a foreign country. After eight months of inquiry, the DOJ issued its first opinion procedure release for 2014 on the Foreign Corrupt Practices Act (Opinion 14-01) on March 17, 2014.

The Requestor was concerned that any payments made to the shareholder would now be considered a payment to a foreign official under the FCPA. After consideration of the facts, the DOJ concluded that paying a foreign government official money he is properly due in the sale of a business interest he owned prior to becoming a foreign official would not result in any type of FCPA violation or enforcement action.

Generally, the DOJ considers a number of factors in determining whether the intent of a payment is corrupt, including the transparency of the transaction, and conformance with local laws and safeguards implemented to prevent the foreign official from using his or her position to benefit the issuer's business interests. In Opinion 14-01, the DOJ ruled that the Requestor's transaction was simply an attempt to sever an existing financial relationship that existed before the foreign shareholder was appointed to an official position, and absent any corrupt intent.

The DOJ's analysis took note that the foreign shareholder became a passive shareholder in the Requestor's foreign company after his government appointment. He also recused himself from any decisions regarding the award of business to the Requestor, its foreign company or their affiliates. Additionally, when the use of the formula in their 2007 shareholders agreement led to a negative valuation of the foreign shareholder's interest, they used a reputable, third-party accounting firm to determine the shares' value. Finally, the Requestor indicated that the transaction would not violate any laws in the foreign shareholder's country.

This opinion shows the prudence taken by some companies with respect to FCPA compliance. While it may be that this transaction would have attracted the attention of the DOJ for some reason, most companies do not need to go as far as the DOJ’s FCPA opinion procedure to confirm the legality of a transaction. A strong FCPA compliance program with thorough documentation of risky transactions should be able to provide enough evidence to eliminate any signs of corrupt intent.

FCPA compliance training shows employees how to properly document and address any potential red flags with a transaction and avoid violations.

Topics:  DOJ, Enforcement, FCPA

Published In: General Business Updates, International Trade Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© WeComply, a Thomson Reuters business | Attorney Advertising

Don't miss a thing! Build a custom news brief:

Read fresh new writing on compliance, cybersecurity, Dodd-Frank, whistleblowers, social media, hiring & firing, patent reform, the NLRB, Obamacare, the SEC…

…or whatever matters the most to you. Follow authors, firms, and topics on JD Supra.

Create your news brief now - it's free and easy »