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Revised FCPA Guidance: Legal Issues and Clarifications (Part IV of V)

FCPA practitioners often debate whether the FCPA is “clear” or “ambiguous.”  Like all important issues in life (assuming this is important), the answer really depends on the specific language.  Congress’ ability to write clear and concise statutes varies across the lot, and the FCPA includes provisions that are clear and some that, depending on the situation, may not be. 

The Revised FCPA Guidance addresses a number of issues surrounding the FCPA and provides some important statements concerning the government’s interpretation of the FCPA.

Business Purpose Test (pp. 11-12)

The FCPA applies to payments, offers, or promises made for the purpose of: (i) influencing any act or decision of a foreign official in his official capacity; (ii) inducing a foreign official to do or omit to do any act in violation of the lawful duty of such official; (iii) securing any improper advantage; or (iv) inducing a foreign official to use his influence with a foreign government or instrumentality thereof to affect or influence any act or decision of such government or instrumentality. 

In addition, the payment, offer or promise must be made in order to assist “in obtaining or retaining business for or with, or directing business to, any person.”  This requirement is commonly referred to as the “business purpose test.”

In describing the “business purpose test,” the Revised FCPA Guidance (p. 11 (footnotes omitted)) included new language to provide examples of the broad interpretation of “business purpose”:

Not surprisingly, many enforcement actions involve bribes to obtain or retain government contracts. The FCPA also prohibits bribes in connection with conducting business or to gain a business advantage. For example, bribe payments made to secure favorable tax treatment, to reduce or eliminate customs duties, to obtain government action to prevent competitors from entering a market, or to circumvent a licensing or permit requirement, can all satisfy the business purpose test.

Gifts, Meals, Entertainment and Travel (pp. 14-16)

The Revised FCPA Guidance includes new case examples of extravagant or lavish gifts, melas, travel and entertainment expenditures.  The examples cited include situations that DOJ and SEC prosecutors have repeatedly identified in recent investigations, including: (1) extravagant situations in which a company paid for luxury vehicles and school tuition for a child of a foreign official; (2) overseas trips for foreign officials from state-owned companies for purported “inspections” or “training” that involved no inspections and little to no training; instead many of these trips involved site seeing and locations such as Niagara Falls, Disney World, the Grand Canyon, Universal Studios, and New York.

The Revised FCPA Guidance also cited situations involving payments made to third parties, such as a foreign official’s family members, in order to indirectly influence corruptly thte foreign official.  The Revised FCPA Guidance cites examples where a defendant paid personal bills and provided airline tickets to a cousin and close friend of the foreign official. 

Successor Liability (pp. 29-30)

Over the last ten years, DOJ’s FCPA enforcement policies involving merger and acquisitions has evolved.  Instead of emphasizing pre-acquisition due diligence by strictly holding companies liable for FCPA violations that began prior to closing and continued thereafter, DOJ adjusted the balance to give companies breathing room.  Under the revised approach, companies have to meet specific requirements for post-acquisition integration of the acquired company into the acquiring company’s compliance program, and specifically conduct post-acquisition FCPA audits.  In practice, companies have 12 to 18 months after the closing date to complete such audits.

The Revised FCPA Guidance’s discussion of Successor Liability (p. 29) includes additional language to reflect this policy.  “DOJ and SEC recognize the potential benefits of corporate mergers and acquisition, particularly when the acquiring entity has a robust compliance program in place and implements that program as quickly as practicable at the merged or acquired entity.”  DOJ also added language that in situations where “robust pre-acquisition due diligence may not be possible,” DOJ and SEC “will look to the timeliness and thoroughness of the acquiring company’s post acquisition due diligence and integration efforts.” Successor Liability, p. 29.

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