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The Guidance As A Useful Measuring Stick For Future Enforcement Agency Activity

Now that the enforcement agencies have issued Foreign Corrupt Practices Act guidance, it can serve as a useful measuring stick for future enforcement agency activity.  Principal Deputy Chief of the DOJ Fraud Section Jeffrey Knox recently stated (see here) that the legal community can have confidence that the enforcement agencies will act consistently with the Guidance.

Many will be watching and in this regard several Guidance statements are noteworthy particularly because certain past FCPA enforcement actions, in whole or in part, have seemingly run counter to the statements.

Below is a list of ten meaningful statements in the Guidance as to future enforcement agency accountability.

“[T]he FCPA does not cover every type of bribe paid around the world for every purpose …” (Pg. 14)

“The corrupt intent requirement [of the FCPA] protects companies that engage in the ordinary and legitimate promotion of their business while targeting conduct that seeks to improperly induce officials into misusing their positions.” (Pg. 15)

“[A]s a practical matter, an entity is unlikely to qualify as an instrumentality [of a foreign government and its employees as “foreign officials”] if a government does not own or control a majority of its shares.” (Pg. 21)

“Successor liability does not […] create liability where none existed before. For example, if an issuer were to acquire a foreign company that was not previously subject to the FCPA’s jurisdiction, the mere acquisition of that foreign company would not retroactively create FCPA liability for the acquiring issuer.” (Pg. 28)

“The ‘in reasonable detail’ qualification [of the FCPA’s books and records provisions] was adopted by Congress ‘in light of the concern that such a standard, if unqualified, might connote a degree of exactitude and precision which is unrealistic.’ […] The term ‘reasonable detail’ is defined in the statute as the level of detail that would ‘satisfy prudent officials in the conduct of their own affairs.’ Thus, as Congress noted when it adopted this definition, ‘[t]he concept of reasonableness of necessity contemplates the weighing of a number of relevant factors, including the costs of compliance.'” (Pg. 39)

“Like the ‘reasonable detail’ requirement in the books and records provision, the [FCPA’s internal control provisions] defines ‘reasonable assurances’ as ‘such level of detail and degree of assurance as would satisfy prudent officials in the conduct of their own affairs.’ The Act does not specify a particular set of controls that companies are required to implement. Rather, the internal controls provisions gives companies the flexibility to develop and maintain a system of controls that is appropriate to their particular needs and circumstances.” (Pg. 40)

“Companies may not be able to exercise the same level of control over a minority-owned subsidiary or affiliate as they do over a majority or wholly owned entity. Therefore, if a parent company owns less than 50% of a subsidiary or affiliate, the parent is only required to use its best efforts to cause the minority-owned subsidiary or affiliate to devise and maintain a system of internal accounting controls consistent with the issuer’s own obligations under the FCPA.” (Pg. 43)

“The [DOJ’s] Principles of Federal Prosecution provide that prosecutors should recommend or commence federal prosecution if the putative defendant’s conduct constitutes a federal offense and the admissible evidence will probably be sufficient to obtain and sustain a conviction …”. (Pg. 52)

“[U.S. Sentencing Guidelines] reflect the recognition that a company’s failure to prevent every single violation does not necessarily mean that a particular company’s compliance program was not generally effective.  DOJ and SEC understand that ‘no compliance program can ever prevent all criminal activity by a corporation’s employees,’ and they do not hold companies to a standard of perfection.” (Pg. 56)

“Under the Alternative Fines Act … courts may impose significantly higher fines than those provided by the FCPA – up to twice the benefit that the defendant sought to obtain by making the corrupt payment, as long as the facts supporting the increased fines are included in the indictment and either proved to the jury beyond a reasonable doubt or admitted in a guilty plea proceeding.” (Pg. 68 citing Southern Union v. United States, 132 S.Ct. 2344 (2012))

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