DOJ Issues First FCPA Opinion in Six Years, Shortly After New FCPA Compliance Guidance

White Collar & Corporate Investigations Alert | September.01.2020

On August 14, 2020, the U.S. Department of Justice (DOJ) issued its first Opinion Procedure Release (OPR) in nearly six years, OPR 20-01.[1] OPRs allow companies to seek guidance from DOJ “as to whether certain specified, prospective—not hypothetical—conduct conforms with the Department’s present enforcement policy regarding the antibribery provisions of the Foreign Corrupt Practices Act of 1977.”[2] Though OPRs are only binding with respect to one company’s proposed transaction, they nonetheless can serve as helpful guidance for other companies contemplating similar actions.

In OPR 20-01, the Requestor, a U.S.-headquartered multinational investment advisor that manages private funds serving institutional investors, sought to purchase a portfolio of assets from a foreign investment bank’s foreign subsidiary.  A foreign government indirectly owned a majority of shares of the foreign investment bank.  In connection with the purchase, the Requestor sought financial services from a different foreign subsidiary of the same investment bank.  The foreign subsidiary charged the Requestor $237,500 as compensation for the work performed (0.5% of the face value of the assets).  The Requestor sought an opinion from DOJ as to whether paying that fee violates the FCPA.

DOJ concluded that, on the facts presented, it would not bring an FCPA enforcement action.  It relied on several factors, including that:  the payment was to an entity, not an individual; the payment was for legitimate services; and there was no evidence of corrupt intent.

OPRs are of limited utility—and are rarely sought—for several reasons.[3]  The process is onerous and often lengthy.  In 20-01, the Requestor submitted the initial request in November 2019, provided supplemental information in January, February, June, and July 2020, and finally received the opinion from DOJ in August 2020.  The process also requires companies to surrender all decision making and judgment calls on a specific fact pattern—not a hypothetical—to DOJ.  Finally, it gives DOJ the discretion to expand its view of the FCPA’s reach.  However, DOJ has encouraged use of the process in some instances.  In 2018, then-Deputy Assistant Attorney General Matthew Miner encouraged companies to use the OPR process if they encounter corruption during pre-acquisition diligence.[4]

A more expansive elaboration of DOJ’s positions on the FCPA and compliance programs is provided through DOJ and SEC’s joint Resource Guide to the FCPA (Resource Guide), which was updated in July 2020.[5]  The revisions largely left the original guidance intact but highlighted recent evolutions in the government’s expectations for corporate FCPA compliance, including:  identifying, disclosing, and remediating misconduct; the role of pre- and post-acquisition diligence and post-acquisition integration; and the development, effective implementation, and continuous improvement of corporate compliance programs.  DOJ also published updated Guidance for the Evaluation of Corporate Compliance Programs (Guidance) in June 2020.[6] The Guidance provides an overview of how prosecutors are expected to evaluate corporate compliance programs.  It can be used as a guide for when DOJ determines what charges to bring, for prosecutors throughout an FCPA investigation, and when determining the appropriate resolution.  The new Guidance expects companies to use data-driven assessments to continuously and in real-time reassess fraud and corruption risk.  The revised Guidance also added greater emphasis on pre- or post-acquisition diligence and integration, where possible, with respect to M&A.

Sometimes OPRs give insight into DOJ’s perspective on FCPA enforcement before information is updated in the Resource Guide or any other guidance.  Most notable is OPR 08-02.[7] There, the requestor’s ability to conduct pre-acquisition diligence was limited by local law.  DOJ provided guidance on acceptable practices for companies to follow when thorough pre-acquisition diligence cannot be completed.  The same guidance ended up in the revised Resource Guide and Guidance, which both acknowledged that certain circumstances may prevent thorough pre-acquisition diligence and discussed expectations for post-acquisition diligence and integration.

In the most recent OPR discussed above, 20-01, DOJ reinforced key themes from the Guidance and Resource Guide. 

For example, in the revised Guidance, DOJ emphasized the importance of conducting thoughtful pre-acquisition diligence, encouraged self-reporting, and stressed the importance of transparency in M&A transactions.  Similarly, the revised Resource Guide states the government’s interest in promoting, not deterring, M&A activity.  In 20-01, DOJ confirms that low-risk and legitimate transactions that may tangentially involve foreign entities are perfectly allowable under the FCPA. This works to demonstrate DOJ’s position that they do not intend to discourage M&A transactions that have some degree of FCPA risk.

Similarly, one of the Resource Guide’s key revisions made clear that while finance and internal accounting controls are separate from an effective compliance program, the government expects collaboration between the Compliance and Finance functions.  In 20-01, collaboration between Compliance and Finance increased transparency of the transaction overall, thereby reducing FCPA risk.  The Chief Compliance Officer (CCO) of the subsidiary providing the services certified to the Requestor that the payment would be used for general corporate purposes and would not be forwarded to any other entity.  Similarly, the CCO certified that the payment was commensurate with the services the subsidiary provided and was commercially reasonable.  

So, while seeking an opinion from DOJ may not always be an attractive option for a company, OPRs published by DOJ can provide insight into themes in FCPA compliance and enforcement, and companies should take note.  In 20-01, DOJ highlighted the following factors as mitigating the FCPA risk of this transaction:

  • The payment was to a foreign government instrumentality, not a foreign official;

    • This is true even though the investment bank was indirectly majority owned by a foreign government;
  • The payment was to a company, not an individual, and there was no indication that the money would be diverted to any individual;
  • The payment was for specific, legitimate services, with no corrupt intent to influence a foreign official, and there was no evidence to suggest it included any corrupt offers, promises, or payments of anything of value to any individual; and
  • The payment was transparent to management and the Chief Compliance Officer certified all of the above.

 


[1] U.S. Dept. of Justice, FCPA Op. Release 20-01 (August 14, 2020), available at https://www.justice.gov/criminal-fraud/file/1304941/download.  The last DOJ OPR was issued on November 7, 2014.  U.S. Dept. of Justice, FCPA Op. Release 14-02 (November 7, 2014), available at https://www.justice.gov/sites/default/files/criminal-fraud/legacy/2014/11/14/14-02.pdf.

[2] 28 C.F.R. § 80.1.

[3] Since 1980, DOJ has only released 62 OPR opinions related to the FCPA. 

[4] Matthew Miner, Deputy Assistant Attorney General, Remarks at the American Conference Institute 9thGlobal Forum on Anti-Corruption Compliance in High Risk Markets (July 25, 2018), available at https://www.justice.gov/opa/pr/deputy-assistant-attorney-general-matthew-s-miner-remarks-american-conference-institute-9th.

[5] A Resource Guide to the U.S. Foreign Corrupt Practices Act Second Edition (July 2020 (updated)), available at https://www.justice.gov/criminal-fraud/file/1292051/download.

[6] Evaluation of Corporate Compliance Programs (June 2020 (updated)), available at https://www.justice.gov/criminal-fraud/page/file/937501/download.

[7] U.S. Dept. of Justice, FCPA Op. Release 08-02 (June 13, 2008), available at https://www.justice.gov/sites/default/files/criminal-fraud/legacy/2010/04/11/0802.pdf.