DOJ Releases First FCPA Advisory Opinion in Six Years

BakerHostetler

On August 14, 2020, the Department of Justice (the “DOJ”) issued its first Foreign Corrupt Practices Act (the “FCPA”) advisory opinion in almost six years.[1] Through its Opinion Procedure, the DOJ periodically issues advisory opinions on whether an anonymous party’s prospective conduct would violate the FCPA.[2] In this particular opinion (the "Opinion”), the DOJ states that it will not take enforcement action against a U.S. investment advisory firm that sought to pay a subsidiary of a foreign, government-owned bank for services related to a sale of assets. The Opinion concludes that the proposed payment did not reflect a corrupt intent to influence any “foreign official.”

This rare DOJ opinion release is important for two reasons. First, it is a reminder that the Opinion Procedure is available for companies to gain valuable assurances about potential FCPA issues if they are willing to endure the long and sometimes invasive opinion process. Second, it is another indication that companies are doing all they can to avoid violating the FCPA because they perceive that FCPA enforcement is a DOJ priority. This is a well-founded perception when one considers that the DOJ published its updated and detailed FCPA Resource Guide in July[3] and continues to aggressively pursue FCPA enforcement actions even amid the pandemic.[4]

Companies should thus continue monitoring FCPA enforcement trends and consider, with the advice of counsel, whether they should use the DOJ’s Opinion Procedure to vet a potential FCPA issue.

The DOJ’s FCPA Opinion Procedure

The FCPA prohibits the bribing of foreign officials to obtain or retain business[5] and is meant to “halt those corrupt practices, create a level playing field for honest businesses, and restore public confidence in the integrity of the marketplace.”[6] The FCPA covers U.S. and foreign public companies listed on a U.S. stock exchange (issuers),[7] U.S. companies and citizens (domestic concerns),[8] and any person within the territorial United States.[9]

The DOJ’s FCPA Opinion Procedure allows issuers and domestic concerns[10] to request an anonymous opinion from the DOJ on whether its “prospective—not hypothetical—conduct” would violate the FCPA’s antibribery provisions.[11] The requesting party must provide the DOJ with all relevant materials and make a “full and true disclosure” of information related to the prospective conduct.[12] The resulting opinion can provide valuable assurances to the requesting party but has no application to any party that does not join the request.[13]

The opinion process can be time-consuming and potentially invasive. It could take months, sometimes as much as a year, to receive an opinion. Additionally, the DOJ will frequently ask for supplemental information, which delays the issuance of the final opinion[14] and could be quite involved. For example, the requesting company in the Opinion waited more than nine months to receive the DOJ’s answer and submitted supplemental information four times.[15] The process could also put the DOJ on notice of a practice it may consider to be an FCPA violation.

The Opinion

The Opinion addresses whether a U.S. investment advisor can pay a subsidiary of a foreign, government-owned bank for services related to a sale of assets.

In early 2017, the investment advisor (the “Requestor”) sought to purchase assets valued at $47.5 million from a subsidiary of a foreign bank (the “Country A Office”).[16] The bank was indirectly owned by a foreign government.[17] In connection with the purchase, the Requestor received legitimate assistance from a different foreign subsidiary of the same bank (the “Country B Office”).[18] In February 2019, the Requestor purchased the assets from the Country A Office.[19] A month later, the Country B Office sought from the Requestor a fee of $237,500—0.5% of the assets’ face value—as compensation for its services to the Requestor in connection with the sale.[20] The Requestor and the Chief Compliance Officer (the “CCO”) of the Country B Office represented that the fee was commensurate with the Country B Office’s services and was commercially reasonable.[21] The CCO also certified that the fee would go into a corporate bank account, would only be used for the office’s benefit, and would not be given to any other entity.[22]

The Opinion provides the DOJ would take no enforcement action if the Requestor paid the fee to the Country B Office for two reasons.

First, the Requestor did not seek to give anything of value to a “foreign official.”[23] The FCPA prohibits the bribing of foreign officials to obtain or retain business. A foreign official is defined as “any officer or employee of a foreign government or any department, agency, or instrumentality thereof[.]”[24] Even assuming the Country B Office is an “instrumentality” of a foreign government,[25] the payment would not violate the FCPA because the FCPA does not prohibit payments to foreign governments or foreign government instrumentalities.[26] Given the representations of the Requestor and CCO, there was no evidence that the payment would go to any individual.

Second, there was no evidence of corrupt intent. The FCPA prohibits domestic concerns from “corruptly” giving anything of value to foreign officials to obtain or retain business.[27] Corruptly means an “intent or desire to wrongfully influence the recipient.”[28] Here, there was no corrupt intent because the Requestor sought to pay a commercially reasonable fee for legitimate services.

Conclusion

This opinion release is a reminder that the Opinion Procedure is available to companies that seek assurances they are not violating the FCPA. With FCPA enforcement continuing to be a priority for the DOJ, companies should monitor FCPA enforcement trends and consider, with the advice of counsel, whether it makes sense under their circumstances to use the DOJ’s Opinion Procedure to vet a potential FCPA issue.

[1] Dep’t of Justice, Foreign Corrupt Practices Act Review, Opinion Procedure Release No. 20-01 (Aug. 14, 2020) (“Opinion”), available at https://www.justice.gov/criminal-fraud/file/1304941/download.
[2] 28 C.F.R. §§ 80.1 et seq.; Dep’t of Justice, Foreign Corrupt Practices Act Opinion Procedure, available at https://www.justice.gov/criminal/fraud/fcpa/docs/frgncrpt.pdf.
[3] A Resource Guide to the U.S. Foreign Corrupt Practices Act, Second Edition (July 2020) (Resource Guide), available at https://www.justice.gov/criminal-fraud/file/1292051/download. BakerHostetler published an alert detailing the highlights of the Resource Guide. Jonathan R. Barr, John J. Carney, Lauren J. Resnick, George A. Stamboulidis, Andrew M. Serrao, “DOJ and SEC Publish New FCPA Resource Guide” (Aug. 13, 2020), available at https://www.bakerlaw.com/alerts/doj-and-sec-publish-new-fcpa-resource-guide.
[4] Dep’t of Justice, 2020 Foreign Corrupt Practices Act Enforcement Actions (last updated Sept. 2, 2020), available at https://www.justice.gov/criminal-fraud/case/related-enforcement-actions/2020.
[5] See 15 U.S.C. §§ 78dd-1, 78dd-2, 78dd-3.
[6] Resource Guide at 1.
[7] 15 U.S.C. § 78dd-1.
[8] 15 U.S.C. § 78dd-2.
[9] 15 U.S.C. § 78dd-3.
[10] 28 C.F.R. § 80.4 (“The request must be submitted by an issuer or domestic concern within the meaning of 15 U.S.C. 78dd-1 and 78dd-2[.]”).
[11] 28 C.F.R. § 80.1 (“These procedures enable issuers and domestic concerns to 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 provisions of the Foreign Corrupt Practices Act of 1977, as amended, 15 U.S.C. 78dd-1 and 78dd-2.”).
[12] 28 C.F.R. § 80.6 (“Each request shall be specific and must be accompanied by all relevant and material information bearing on the conduct for which an FCPA Opinion is requested and on the circumstances of the prospective conduct, including background information, complete copies of all operative documents, and detailed statements of all collateral or oral understandings, if any. The requesting issuer or domestic concern is under an affirmative obligation to make full and true disclosure with respect to the conduct for which an opinion is requested.”).
[13] 28 C.F.R. § 80.5 (“An FCPA Opinion shall have no application to any party which does not join the request for the opinion.”).
[14] Generally, the DOJ must issue its opinion within 30 days of receiving a request. But a request for supplemental information resets this time limit. 28 C.F.R. § 80.7 (providing procedure for furnishing of supplemental information); 28 C.F.R. § 80.8 (providing for 30-day time limit after requesting party meets all requirements, including submitting supplemental information).
[15] Opinion at 1.
[16] Id. at 1–2.
[17] Id. at 1.
[18] Id. at 2.
[19] Id.
[20] Id.
[21] Id. at 3.
[22] Id.
[23] Id.
[24] 15 U.S.C. § 78dd-2(h)(2)(A).
[25] The Opinion cites United States v. Esquenazi, 752 F.3d 912 (11th Cir. 2014), where the court held that an “instrumentality” under the FCPA is “an entity controlled by the government of a foreign country that performs a function the controlling government treats as its own.” Id. at 925; Opinion at 3 n.6.
[26] Opinion at 2 n.5 (citing previous FCPA opinions).
[27] 15 U.S.C. § 78dd-2(a).
[28] Opinion at 2 and n.4 (citing United States v. Kozeny, 667 F.3d 122, 135–36 (2d Cir. 2011) (upholding jury instructions that provided a person acts “corruptly” if he acts with an “improper motive” to accomplish a result “by some unlawful method or means” and sought to have the official “misuse his official position”)).

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