Caveat Emptor: Five Steps to Avoid FCPA Successor Liability in M&A

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Anti-corruption due diligence has become increasingly common in the M&A context. But when such pre-acquisition diligence identifies possible improper payments to foreign government officials or other red flags, what is the best way for acquirers to minimize potential liability should they decide to move forward with the acquisition? A recent Opinion Procedure Release issued by the US Department of Justice (“DOJ” or the “Department”) reiterates five key steps the Department recommends that acquirers should take to mitigate or avoid post-acquisition successor liability.

On November 7, 2014, the DOJ issued its second Opinion Procedure Release of the year (“Release #14-02” or the “Release”), which relates to issues of successor liability in the M&A context. The DOJ’s opinion procedure is a mechanism whereby entities that are subject to jurisdiction under the US Foreign Corrupt Practices Act (“FCPA”) submit information to the DOJ to obtain an opinion as to whether specific, future conduct conforms to the Department’s FCPA enforcement policy. In this case, the requestor, a multinational company headquartered in the United States, identified apparent improper payments at the target companies—albeit without any US connection—as well as significant accounting and recordkeeping issues in the course of its pre-acquisition diligence. Consistent with the 2012 FCPA Guidance jointly issued by the DOJ and the US Securities and Exchange Commission (“SEC”) (the “FCPA Guidance”), the DOJ indicated that it did not intend to take any enforcement action with respect to the pre-acquisition misconduct identified by the requestor as the conduct was not a US crime because the targets were not subject to US jurisdiction at the time the conduct occurred...

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