The release of the Second Edition of the Resource Guide to the U.S. Foreign Corrupt Practices Act (the Guidance) comes nearly eight years after the DOJ and SEC published its inaugural guidance as to the scope and application of the FCPA in November 2012.
The issuance of the Guidance affirms that FCPA enforcement remains a governmental priority. However, because relatively few FCPA cases are litigated, the metes and bounds of the government’s FCPA enforcement approach are often discerned though publications such as the Guidance, policy pronouncements, and the specific circumstances of non-litigated FCPA enforcement actions and settlement agreements. For companies and practitioners alike, the Guidance is an important desktop resource tool. By including citations and details of recent enforcement actions and incorporating compliance guidance from other sources, the Guidance provides a valuable refresher on the government’s perspective of its enforcement approach and its views regarding FCPA compliance best practices.
There are several practical takeaways from the Guidance:
Successor liability in mergers and acquisitions
The Guidance provides useful affirmation of potential limitations to FCPA successor liability in the merger and acquisition context. Often, robust FCPA pre-acquisition due diligence is difficult due to timing, logistics and other circumstances. Recognizing these real world limitations, the Guidance underscores that most companies can address FCPA compliance concerns with prompt post-acquisition remediation efforts. (On the other hand, the DOJ and SEC have pursued a limited number of enforcement actions against successor companies in aggravating circumstances, including those involving blatant and repeated violations).
To protect against potential successor liability for pre-transaction misconduct by an acquired entity, the Guidance suggests due diligence, remediation, and integration as part of an effective compliance program, as well as self-reporting to authorities. A successor company’s voluntary disclosure, appropriate due diligence, and implementation of an effective compliance program may decrease the likelihood of an enforcement action regarding an acquired company’s post-acquisition conduct when pre-acquisition due diligence is not possible and the company may be eligible for a presumption of declination. See Guidance at 29-31.
Broad interpretation of jurisdiction and statute of limitations
The Guidance maintains the government’s expansive view of the scope of FCPA liability for certain foreign individuals for conspiracy and aiding and abetting bribery violations. Despite its rejection by the Second Circuit in United States v. Hoskins, 902 F.3d 69 (2d Cir. 2018), the Guidance reiterates the government’s broad interpretation of the FCPA’s jurisdiction reach for violations to include persons or companies outside the United States so long as a coconspirator commits an overt act within the United States. While acknowledging Hoskins, the Guide treats the case as a mere outlier and signals that the DOJ will continue to aggressively prosecute foreign individuals under conspiracy and aiding and abetting theories, at least outside of the Second Circuit. See Guidance at 36. Additionally, the Guidance states that, unlike the anti-bribery provisions of the FCPA, the accounting provisions of that statute apply to “any person,” and thus are not subject to the restrictions on bribery violations set forth in Hoskins restricting conspiracy and aiding and abetting liability to a limited group of covered persons. See Guidance at 46.
The Guidance also includes an expansive interpretation of the statute of limitations applicable to criminal violations of the FCPA’s accounting provisions. The first iteration of the Guidance in 2012 stated that the default federal five-year limitations period, 18 U.S.C § 3282, applies to all FCPA violations. But the updated Guidance now asserts that the Dodd-Frank Act’s six-year limitation period for “securities fraud offense[s]” applies to criminal violations of the FCPA’s accounting provisions (though not its anti-bribery provisions). See Guidance at 36. It should be noted that the Dodd-Frank Act was enacted in 2010, before the 2012 first edition of the Guide; the DOJ has apparently decided to interpret the relevant provision, 18 U.S.C § 3301, more broadly to include criminal violations of the FCPA’s accounting provisions.
Assimilated compliance guidance
Finally, the Guidance assimilates the compliance principles it previously published in its June 2020 Evaluation of Corporate Compliance Programs into an FCPA-specific context. See Guidance at 57-62. It emphasizes a risk-based approach in the design, implementation and assessment of FCPA compliance policies. Given the frequency of FCPA issues arising out of the use of third parties, the Guidance places particular emphasis upon the need for a company to engage in due diligence regarding the qualifications and business justifications for the engagement of third parties as well as on-going monitoring of the third-party relationships.
Client Alert 2020-436
