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What Are The FCPA Implications?

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Like yesterday’s post (see here), today’s post also looks at a current issue through the lens of the Foreign Corrupt Practices Act.

Russia’s invasion of Ukraine and the related response by many U.S. (and other) companies (many of them subject to the FCPA or related laws) doing business in Russia have been well-documented.

A recent Wall Street Journal article titled “Companies Weigh Risk of Asset Seizures” noted that more than 300 foreign firms have said they are leaving or temporarily suspending work in Russia. According to the article, some companies have simply walked away from its business while others “have kept the door open to an eventual return.” The article noted that McDonald’s has indicated that its move to close its 847 Russian restaurants is temporary, but that it will cost the company roughly $50 million a month.

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President Biden Did Not Introduce “A Big Idea Into The Global Debate When He Declared That Combating Corruption Is A ‘Core U.S. National Security Interest” And National Security Is A Reason Not To Enforce The FCPA

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Last week, President Biden released a memo titled “Memorandum on Establishing the Fight Against Corruption as a Core United States National Security Interest.”

In pertinent part, the memo states that “countering corruption [is] a core United States national security interest” and Biden pledged that his “Administration will lead efforts to promote good governance; bring transparency to the United States and global financial systems; prevent and combat corruption at home and abroad; and make it increasingly difficult for corrupt actors to shield their activities.”

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The CIA’s Classified Relationships With U.S. Publicly Traded Companies And The FCPA

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One of the more obscure portions of the Foreign Corrupt Practices Act states:

“With respect to matters concerning the national security of the United States, no duty or liability under [the books and records and internal controls provisions] shall be imposed upon any person acting in cooperation with the head of any Federal department or agency responsible for such matters if such act in cooperation with such head of a department or agency was done upon the specific, written directive of the head of such department or agency pursuant to Presidential authority to issue such directives.”

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National Security And The FCPA

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National security, so the narrative goes, is a reason why the U.S. enforces the Foreign Corrupt Practices Act. However, as a matter of law, and seemingly as a matter of practice, national security is a reason not to enforce the FCPA.

After detailing some relevant background information, this post highlights additional information recently revealed about a historical FCPA enforcement action which demonstrates that national security has always been a reason not to enforce (or not enforce to the fullest extent) the FCPA.

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A Seeming Mismatch

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Foreign Corrupt Practices Act enforcement officials frequently invoke national security and foreign affairs when talking about FCPA enforcement

Here are just a few recent quotes:

“We stand at a critical juncture in the fight against transnational corruption.  And the importance of this fight cannot be overstated.  The impact of corruption is unambiguous.  Because of the efforts of prosecutors in countries across the globe—some of them the very definition of high risk—the curtain has been ripped back/ revealing deep-rooted and pervasive corruption up to the highest levels of governance/ and putting on display for the world to see its devastating effects:

The way that corruption undermines the rule of law and destabilizes economies; the link between corruption and terrorism and the attendant threat to global security; the erosion of the free and fair market and, with it, the public’s confidence.” (See here).

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