FCPA Issues First Opinion Release in Six Years
Take it from me, if I recommend a stock pick to buy or sell – do the opposite. In a great episode of Seinfeld, George Costanza adopted a new-life approach by doing the exact opposite of what he normally would do in a situation. Here is the classic clip.
In a podcast episode I recorded with Tom Fox, I made the “brilliant” point that DOJ had not issued an Opinion Release in years because of the extensive guidance it had provided on compliance issues. After making that bold statement, DOJ turned around and issued a new Opinion Release. So I humbly have swallowed my own words.
While the issuance of an Opinion Release after six years is a significant development in the FCPA arena, I am puzzled why the requestor even submitted the request. In reviewing the facts, the requestor’s inquiry does not appear to raise significant legal questions under the FCPA.
Notwithstanding my view, I am sure we will see a plethora of client alerts, reviews and articles issued by the FCPA Paparazzi citing this release as some important and new guidance. Please save the paper and electronic transmissions – we are witnessing yet another profound grasp of the obvious.
Maybe I am getting cynical in my old age, but this appears to be an issue that FCPA practitioners could have analyzed and provided a legal analysis to the client without invoking DOJ’s Opinion Release procedure. To be fair, I am not privy to all the facts but on its face, the issue and analysis does not present a close legal question or clarification. In fact, as I note below, the requestor failed to take a basic step by executing a written contract with the state-owned entity that it sought approval to pay under the scenario presented.
The facts are straight-forward and in some sense contain the answer to the legal issue.
The requestor is a multinational firm based in the United States and sought to purchase a portfolio of assets from a foreign investment bank’s foreign subsidiary (“Country A Office”). The foreign investment bank is indirectly owned by a foreign government which holds a majority of the shares. A different subsidiary (“Country B Office”) provided assistance with the transaction. Subsequently, the requestor enlisted a local partner to assist in its approach to the Country A Office regarding the potential purchase.
In early 2019, the requestor succeeded in purchasing the assets from the Country A Office. The Country B Office sought a $237,500 payment for work the Country B Office performed to assist in the transaction, which reflected legitimate services and was commercially reasonable based on a percentage commission calculated on the overall purchase price.
For some unexplained reason, the requestor did not enter into a written contract with the Country B Office. On its face, this omission was cited by DOJ but did not impact its ultimate conclusion.
The requestor sought an opinion as to whether it was legal for the requestor to pay the Country B Office $237,500.
My reaction is two-fold. Assuming that the services provided by the Country B Office were legitimate, documented and commercially responsible, pay the Company B Office. All the requestor had to do was secure a legal opinion from outside counsel, take reasonable steps to document the transaction, secure surrounding certifications from the Country A and Country B Offices and execute a written contract as well. Deal done, next go. Save money on your legal expenses and do not file a request with DOJ for an Opinion Release.
But life is not so simple.
DOJ’s analysis confirms what everyone knows – the evidence does not reveal “a corrupt intent to offer, promise, or pay anything of value to a “foreign official.” The term “corruptly” means an intent or desire to wrongfully influence the recipient. See, e.g. U.S. v Kozeny, 667 F.3d 122, 135-36 (2d Cir. 2011).
Further, the requestor’s payment to a foreign government instrumentality and not to a single or group of government officials. See, e.g., U.S. Dept. of Justice, FCPA Op. Release 09-01 (Aug. 3, 2009) (declining to take any enforcement action, in part, because the thing of value would be “provided to the foreign government, as opposed to individual government officials”); U.S. Dept. of Justice FCPA Op. Release 97-02 (Nov. 5, 1997) (declining to take any enforcement action where the donation would “be made directly to a government entity — and not to any foreign government official”); U.S. Dept. of Justice Review Procedure Release 83-01 (May 12, 1983) (declining to take any enforcement action where the payment would be “made directly to the Sudanese corporation, and not to any individual” and there was “no expectation that any individual Sudanese government official w[ould] personally benefit”).
The Country B Office is not a “foreign official” under the FCPA. The requestor has no indication that any of the payment will be diverted to any specific individual or foreign official. In fact the Country B Office Chief Compliance Officer certified to the requestor that the payment will only benefit the Country B Office. Further, the requestor confirmed that it received specific and legitimate services from the Country B Office and the payment amount is commensurate with the services provided.