Latest Tea Leaves from the Justice Department’s FCPA Settlements
The Justice Department is planning to issue its long-awaited FCPA Guidance before October 10, 2012. I am sure that DOJ’s Guidance will provide plenty of issues for analysis. While it is certainly a welcome action, I am sure the critics will continue their carping. FCPA critics will not be happy until the FCPA is eviscerated.
Meanwhile, the Justice Department has continued to settle cases and appears to be relaxing some of its policies. Tom Fox, Howard Sklar and Mike Koehler have covered many of these issues but I thought I would add my own perspective to the mix.
The Justice Department has been criticized for its inflexible approach in the area of mergers and acquisitions, Critics point to the stringent requirements contained in the 2008 Halliburton Opinion Letter 08-01, and DOJ’s hard-line policy requiring companies to conduct an FCPA audit of acquired companies almost immediately after closing (with reporting obligations) and integration of the acquired company into the company’s training and compliance program.
Starting with the 2011 settlement in the Johnson & Johnson case, DOJ has relaxed the requirements in this area. DOJ has continued to relax its policies in 2012 as reflected in its settlements in the Nordam, Data Systems & Solutions, and BizJet cases. Interestingly, these cases involved both Deferred Prosecution and Non-Prosecution Agreements, and the specific terms relating to compliance in mergers & acquisitions were similar.
The Nordam, Data Systems and BizJet settlements require the companies to conduct appropriate risk-based FCPA and anti-corruption due diligence on prospective acquisition targets; ensure that the company’s anti-corruption policies and procedures apply to the newly acquired or merged entities as quickly as practicable; promptly train directors, officers, employees, agents, consultants, representatives, distributors, and joint venture partners of the newly acquired or merged entities on anti-corruption laws and the company’s related policies; and conduct an FCPA-specific audit of the newly acquired or merged entities as quickly as possible.
The merger and acquisition compliance requirements are keyed to flexible terms – “as quickly as practicable,” “promptly” and “as quickly as possible.” The Justice Department relaxed specific time deadlines from prior settlements and instead pronounced more flexible standards which take into account surrounding circumstances.
The Pfizer resolution includes “enhanced compliance” obligations which require Pfizer to create a compliance team for mergers and acquisitions in order to identify potential risks early in the due diligence process and ensure prompt integration into Pfizer’s compliance program. In contrast to the more flexible terms used in the Nordam, Data Systems and BizJet settlements, Pfizer was required to complete post-acquisition audits, training and integration within one year of the acquisition.
The Pfizer settlement includes a number of interesting “enhanced compliance” obligations, including a requirement to maintain significant resources for it s compliance program; the establishment of an internal investigation “team” for potential violations and compliance; a centralized guidance and compliance staff to provide assistance to all of Pfizer’s operations; and a specific set of proactive audit and review requirements for high risk countries.
The Pfizer settlement represents a significant movement in the Justice Department’s approach to anti-corruption compliance. It will be interesting to see how these issues are addressed in future settlements.
The Justice Department clearly listens to FCPA commentators and critics. They have shown flexibility and commitment to new and innovative compliance requirements. These ideas are likely to be reflected in its FCPA Guidance. We shall see what we shall see.