On August 14, 2020, the US Department of Justice (the DOJ) issued its first Foreign Corrupt Practices Act (FCPA) Opinion Procedure Release in six years, which relayed that it did not intend to pursue an enforcement action stemming from a fee that a US-based multinational investment advisor intends to pay to the subsidiary of a foreign state-owned bank.¹

 

Pursuant to the FCPA Opinion Procedure,² “issuers and domestic concerns” (i.e. companies with securities listed on a US national exchange, US companies, and US persons) may request an opinion from the DOJ “as to whether certain specified, prospective--not hypothetical--conduct” conforms with the DOJ’s “enforcement policies regarding the [FCPA’s] anti-bribery provisions.” A favorable opinion from the DOJ creates a rebuttable presumption that the requestor’s conduct complies with the FCPA’s anti-bribery provisions. These opinions are published, with the identity of the requestor anonymized, to provide guidance to the business community. They are specific to the circumstances set forth in the request and do not bind or obligate any agency other than the DOJ with respect to the underlying conduct.

 

 

The request for this opinion was made by a US-based multinational investment advisor. In 2017, the advisor sought to purchase a portfolio of assets from a foreign subsidiary of a foreign investment bank (the Country A Office), which is indirectly majority owned by a foreign government. In connection with the purchase, the firm requested and received assistance from a different foreign subsidiary of the same investment bank (the Country B Office). Approximately one year later, the firm also retained a local partner after failing to agree on a purchase price for the portfolio. After the firm successfully completed the purchase in February 2019, the Country B Office requested $237,500 in compensation from the firm for analytical and advisory tasks it had performed in furtherance of the purchase. The firm sought an opinion from the DOJ, pursuant to the DOJ’s FCPA Opinion Procedure, as to whether paying the fee would violate the FCPA’s anti-bribery provisions and trigger an enforcement action.

 

The DOJ concluded that it would not pursue an enforcement action based on these facts for three reasons.

 

First, the payment did not amount to a foreign bribery violation because the firm intends to pay the fee to a government-owned entity (the Country B Office) and not to an individual. In its analysis, the DOJ pointed out that “[t]he FCPA does not prohibit payments to foreign governments or foreign government instrumentalities.” Instead, it prohibits payments made to individual foreign government officials.³

 

Second, there is no indication that the firm intends or believes that the money will be diverted to any individual, or that this might in fact happen, as well as no evidence of “a corrupt intent to offer, promise or pay anything of value to a ‘foreign official’ in connection with the contemplated payment to the Country B Office.”

 

Third, the DOJ noted that the firm sought and received specific and legitimate services from the Country B Office. The firm represented, and the Chief Compliance Officer of the Country B Office certified, that the payment is commensurate with services provided and is commercially reasonable. Moreover, even though there was no signed agreement covering these services, there was a non-binding draft agreement that specified the fee sought by the Country B Office, which added legitimacy to the request.

 

 

Obtaining an opinion that effectively signs off on conduct that could violate the FCPA may be tempting. However, companies have typically shied away from requesting such opinions, and such opinions have been uncommon.⁴ In practice, the process may increase the risk of enforcement actions and other litigation, cause business disruptions, and result in unnecessary costs.

 

First, companies may expose themselves to legal risks by requesting an opinion. As part of the process, the DOJ may request all documents it considers necessary to opine over the prospective conduct. During the process—and irrespective of whether the company succeeds in obtaining a favorable opinion with respect to certain transaction—the company may be asked to disclose information that could serve as the basis for an FCPA enforcement action. In other words, by requesting an opinion, a company ultimately may self-disclose potential misconduct or otherwise reveal information that could lead to a years-long enforcement inquiry. In addition, the FCPA Opinion Procedure does not provide requestors with an opportunity to challenge an opinion’s findings either indirectly or in court.

 

Second, obtaining an opinion has historically been a slow, tedious, and costly process, and companies may reject this option as too onerous if it impedes their ability to make quick business decisions. In theory, the DOJ must render an opinion within 30 days of receiving all information—but the DOJ may request additional information, thereby extending the process. For example, the firm that is the subject of the August 14, 2020 opinion initially requested an opinion from the DOJ in November 2019. However, the DOJ requested supplemental information in January, February, June and July 2020. As a result, the opinion was issued more than nine months after the initial request was made. Notably, this extended timeline is not an anomaly for FCPA opinions.⁵ In addition to long turnaround times, companies may be required to prepare multiple submissions to respond to the DOJ’s requests for information, which would inevitably result in further business disruptions and costs.

 

 

While the latest FCPA opinion serves as a reminder that this option exists, companies likely will continue to refrain from utilizing the FCPA Opinion Procedure in most situations. Requesting an opinion from the DOJ may be helpful for companies seeking to gain additional comfort, if they are already relatively confident that a discrete action is unlikely to violate the FCPA. However, companies should carefully consider whether the benefits of requesting an opinion outweigh the risks of a potential enforcement action, litigation, and business disruptions.

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