Department of Justice and Securities and Exchange Commission's Release of FCPA Resource Guide Provides Practical Guidance While Still Leaving Many Gray Areas

by Wilson Sonsini Goodrich & Rosati


On November 14, 2012, the Criminal Division of the U.S. Department of Justice (DOJ) and the Enforcement Division of the U.S. Securities and Exchange Commission (SEC), divisions of the two government agencies responsible for enforcing the U.S. Foreign Corrupt Practices Act (FCPA), released A Resource Guide to the U.S. Foreign Corrupt Practices Act, which attempts to clarify many of the legal and enforcement issues that companies and individuals have faced in today's increased anticorruption enforcement climate. While the guide's frequent use of hypothetical scenarios may serve to inform companies' anticorruption efforts, many areas remain gray and will present challenges for companies in the future.

At the releasing press conference, Director of the SEC's Enforcement Division Robert Khuzami stated that "[p]ublic company officers can put this on their desk . . . and understand what it is we're doing in this space, and run their companies accordingly." Since Assistant Attorney General for the DOJ Criminal Division Lanny Breuer announced the DOJ's intent to issue new guidance in November 2011, business organizations, including the U.S. Chamber of Commerce and its Institute for Legal Reform, repeatedly have called for the DOJ and SEC to issue defensible guidance upon which companies can rely. As the inside cover of the guide notes, however, the guide "is non-binding, informal, and summary in nature and the information contained [therein] does not constitute rules or regulations." As such, the guide "may not be relied upon to create any rights, substantive or procedural" and should only be treated as informal guidance to businesses. Although the guide does not provide reliable defenses for companies, it does provide some clarity regarding certain areas of DOJ and SEC FCPA enforcement practices.

This alert discusses some of the key highlights of the guide and illuminates both its practical usefulness and its shortcomings.


The FCPA has two provisions: (1) the anti-bribery provision that prohibits the giving of money or "anything of value" to "foreign officials" in order to obtain or retain business, direct business to another, or secure any advantage; and (2) the accounting provisions that require "issuer" companies to (a) keep accurate books and records of their transactions in reasonable detail and (b) maintain a system of internal controls to protect against violations of securities laws.

Highlights of the Guide

The guide attempts to provide clarifications to both the anti-bribery and accounting provisions, outlines the history of the FCPA, demonstrates the U.S. government's interpretation of key portions of the statute, describes the U.S. government's current enforcement stance, and directs companies and individuals to other useful sources of materials relevant to FCPA compliance from the SEC, DOJ, U.S. Department of Commerce, U.S. Department of State, and international organizations. With these objectives, the guide provides some useful practical advice, mostly in the form of hypothetical scenarios with respect to certain areas of the FCPA, but falls woefully short in providing any type of practical guidance in other areas. A few of the more important highlights of the guide are summarized below.

Jurisdictional Conduct Triggering the Anti-Bribery Provision

The guide confirms what FCPA practitioners and many companies already know: that the FCPA's anti-bribery provisions apply to conduct both inside and outside the United States. It further explains that conduct occurring outside the United States can trigger FCPA jurisdiction if the conduct involved "interstate commerce" such as "placing a telephone call or sending an e-mail, text message, or fax from, to, or through the United States . . . as does sending a wire transfer from or to a U.S. bank or otherwise using the U.S. banking system, or traveling across state borders or internationally to or from the United States."1 Moreover, the guide makes clear that the FCPA can apply to foreign companies and nationals that are not "domestic concerns" or "issuers," if they (as well as any co-conspirators) engage in any act in furtherance of a bribe while in the United States. This guidance is not a surprise, given the DOJ and SEC's aggressive prosecutions of foreign companies and nationals.

The Business Purpose Test

The guide notes that the FCPA "applies only to payments intended to induce or influence a foreign official to use his or her position" to obtain or retain business, direct business to any person, or secure an advantage.2 This is known as the "business purpose test" and is interpreted broadly. The guide thereafter provides eight examples of instances that may satisfy the business purpose test:

(1) Winning a contract
(2) Influencing the procurement process
(3) Circumventing the rules for importation of products
(4) Gaining access to non-public bid tender information
(5) Evading taxes or penalties
(6) Influencing the adjudication of lawsuits or enforcement actions
(7) Obtaining exceptions to regulations
(8) Avoiding contract termination

While not particularly controversial, this list is useful for companies to reference when determining whether a particular payment may violate the FCPA.

Definition of "Foreign Official"

One hotly contested issue in recent FCPA cases has been the definition of "foreign official." A foreign official includes not only those employees or officials within a foreign government, but also employees or officers within a "department, agency, or instrumentality" of a foreign government. Thus, FCPA prosecutions have been brought against companies and individuals for paying bribes to employees or officers of state-owned and state-controlled entities. In determining whether a particular state-owned or state-controlled entity qualifies as an "instrumentality" of a foreign government, the guide declines to draw any bright lines. Rather, it outlines a list of "non-exclusive" factors to be considered, such as a foreign state's extent of ownership, degree of control, characterization of the entity, circumstances surrounding the entity's creation, the entity's obligations and privileges under foreign state law, and whether the general perception is that the entity is performing official or government functions, among several others.3

A question that many businesses face is whether a foreign government's minority interest in an entity makes such entity an "instrumentality" of the foreign government. The guide implies that an entity that is minority-owned by a foreign government will less frequently be considered an "instrumentality" of the foreign government. The guide highlights, however, an example of a prosecution of an entity that was minority-owned by a foreign government, but because of a special shareholder status and the appointment of senior officers, the foreign government had veto power over major expenditures and operational decisions. In other words, the guide makes evident that the foreign government's degree of control over the entity is the critical consideration, not the actual level of ownership.

Travel and Entertainment Expenses for Foreign Officials

The FCPA prohibits the provision of money or "anything of value" to foreign officials with the intent to wrongfully influence the recipient. It is well known that "anything of value" does not have to be cash but also can include gifts, travel, entertainment, and other things of value. Companies frequently inquire whether they are permitted to provide travel and entertainment expenses—for example, paying for a current or prospective foreign government customer to attend a company conference—to foreign officials without violating the FCPA. This always has been a gray area of the FCPA but, surprisingly, the guide does provide some guidance by way of several hypothetical scenarios. The hypothetical scenarios note that providing even first-class airfare, or paying for attendance to a baseball game, may be permissible in some circumstances, but providing the same type of expenses to the foreign officials and their spouses in other situations may violate the FCPA. The guide makes clear that the purpose of the travel and entertainment expenses must be squarely related to the purpose of the business trip, rather than purely leisure in nature and not related to a bona fide expenditure, such as paying for the vacation of a foreign official and their spouse. In our opinion, this is the most practical part of the guide from a day-to-day compliance perspective.

Successor Liability

One issue that gives many companies heartburn is successor liability in connection with mergers and acquisitions. The guide notes that successor liability is an "integral component of corporate law" and that it "applies to all kinds of civil and criminal liabilities, and FCPA violations are no exception."4 The guide also makes clear that there is a limitation on successor liability. Specifically, if an issuer company acquires a foreign company that was not previously subject to the FCPA's jurisdiction, "the mere acquisition of the foreign company would not retroactively create FCPA liability for the acquiring issuer."5

In any event, the theme in this portion of the guidance is that conducting pre-merger and acquisition due diligence is the best way to reduce FCPA successor liability. The guide highlights that the DOJ and SEC have declined to take action against companies in the merger and acquisition context that voluntarily disclosed violations, remediated their conduct, and cooperated with the government. It also provides several hypothetical scenarios as examples.

Importance of Implementing a Compliance Program

Under the FCPA's accounting provisions, issuer companies must maintain internal controls that provide reasonable assurances that the company's financial books, record keeping, and reporting are reliable and accurate. One essential component of an issuer's internal controls is an effective compliance program. It is important to note that "[g]ood internal controls can prevent not only FCPA violations, but also other illegal or unethical conduct by the company, its subsidiaries, and its employees."6

The guide does not elucidate precisely what elements comprise an effective compliance program. The "existence and effectiveness of the corporation's pre-existing compliance program" is, however, a key factor in the DOJ's determination of whether to prosecute a company.7 In assessing a company's compliance program, the DOJ and SEC typically ask three questions in order to determine what action to take:

(1) Is the company's compliance program well designed?
(2) Is it being applied in good faith?
(3) Does it work?8

The guide acknowledges that a one-size-fits-all approach to compliance programs is not practicable in the anticorruption context, given businesses' ever limited resources. As such, businesses are encouraged to spend more of their resources in high-risk areas (e.g., contractual arrangements in high-risk countries or industries) and less of their resources in areas where the risk of an anticorruption violation is low. The DOJ and SEC realize that companies may be strategic in determining how to allocate their compliance resources, given the individual characteristics of the business (e.g., size, industry, global reach, etc.).

Finally, the guide notes that having an effective compliance program can lead to reduced fines for prosecuted companies under the U.S. Sentencing Guidelines.9 In today's enforcement climate, the importance of creating and implementing an anticorruption compliance program cannot be emphasized enough.


The guide broadly addresses many of the thorny and unclear areas of the FCPA—in some areas more practically than others. Although not discussed here, the guide also includes discussions on the required level of criminal intent for FCPA violations, examples of common books and records violations, descriptions of the different forms of enforcement actions (e.g., deferred prosecution agreements), and the FCPA's intersection with and/or relation to other laws, such as the U.S. Travel Act, Sarbanes-Oxley Act of 2002, and Dodd-Frank Act of 2010. It is important to note that with respect to designing and implementing compliance systems, the guide is really no substitute for experience, and should only be treated as its name implies—as a mere guide.

The attorneys in Wilson Sonsini Goodrich & Rosati's white collar crime and internal and government investigations practices have substantial experience representing public and private companies in FCPA matters, such as defending individuals or companies that are investigated or prosecuted for FCPA violations, conducting internal or government investigations, responding to subpoenas, designing and implementing anticorruption compliance programs, and providing general FCPA-counseling advice regarding clients' day-to-day operations. If you would like to discuss the guide, or have any FCPA-related questions, please contact the attorneys in the firm's white collar crime or government investigations practices.

1 A Resource Guide to the U.S. Foreign Corrupt Practices Act, Criminal Division of the U.S. Department of Justice and Enforcement Division of the U.S. Securities and Exchange Commission (November 14, 2012), at 11.

2 Id. at 12.

3 Id. at 20.

4 Id. at 28.

5 Id.

6 Id. at 41.

7 Id. at 53.

8 Id. at 56.

9 Id. at 54.

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.

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