On November 14, 2012, the Department of Justice and the Securities and Exchange Commission jointly released guidelines concerning the Foreign Corrupt Practices Act, in the form of a 120- page manual titled A Resource Guide to the U.S. Foreign Corrupt Practices Act. While not breaking any new substantive ground, the Guide provides insight into how the DOJ and SEC evaluate potential FCPA cases, and equally importantly, what they consider effective compliance programs for deterring FCPA violations. There are also numerous hypothetical questions posed and answered concerning specific conduct, which provide additional guidance to companies seeking to steer clear of the broad reach of the FCPA.
The Guide is devoted to three basic areas: (1) explanation of existing law; (2) the agencies' "guiding principles of enforcement"; and (3) potential resolutions. The sections covering the legal issues surrounding the FCPA addresses common definitional questions (e.g., Who is covered by the law? Who is a foreign official? What affirmative defenses are available?). The Guide offers no new interpretations of the law, but it provides a useful tool for those seeking to understand the basics of the FCPA. There are summaries of recent cases, as well as bullet point lists concerning key issues (e.g., What is an improper gift? A $12,000 birthday trip, a $10,000 dinner, and sightseeing trips to Italy or Paris. What are good examples of actions taken to obtain or retain business? Winning a contract, influencing a procurement process, evading taxes or penalties, and avoiding contract termination.) The DOJ and SEC suggest that gifts of nominal value will not generally be subject to FCPA actions, but expensive trips with no real business purpose and even charitable contributions that are, at heart, bribes, will be enough to trigger liability.
The second section of the Guide is devoted to explaining when the DOJ and SEC will seek to enforce the FCPA. The Guide stresses the importance of corporate compliance programs and details the "hallmarks" of an effective compliance program—one that will deter violations and catch those that do occur. An effective compliance program may help convince the DOJ and SEC not to take action against a company if violations are found. The familiar hallmarks of an effective program include a senior-level commitment against corruption, a well developed and current code of conduct, appropriate risk assessment including devoting resources to high-risk areas, training programs, disciplinary measures for those who violate protocol, a method for confidential reporting, and continuous improvements to the program.
Finally, the Guide focuses on potential consequences for those with FCPA liability. Of interest, the DOJ and SEC provide numerous examples of instances in which they declined to pursue charges and listed particular factors that mattered in deciding not to do so. These included the companies' decisions to: (1) terminate employees involved with the bribe; (2) self-report the violations; (3) complete a rigorous internal investigation and disclose the findings to the DOJ and SEC; (4) further improve their compliance programs. The agencies also thought factors such as the amount of the bribe and how quickly the wrongful conduct was detected were important in deciding not to prosecute violations. For those that are proactively addressing FCPA issues, the Guide also provides detailed guidance on how to obtain a DOJ opinion about whether proposed conduct falls within its enforcement policy.
For a link to the Guide, click here.
Originally published November 21, 2012
This update is for information purposes only and should not be construed as legal advice on any specific facts or circumstances. Under the rules of the Supreme Judicial Court of Massachusetts, this material may be considered as advertising.