When does a gift or entertainment risk being treated as a violation of the Foreign Corrupt Practices Act (FCPA)? When do payments associated with obtaining international business become bribes? What do you do when facilitation payments are requested? How can you deal with these thorny issues and maintain your competitive edge? The answers are fact and setting specific but the Feds have provided some important new guidance. And the best part is that it is free!
On November 14, 2012 the Department of Justice and the Securities and Exchange Commission released a 120 page “Resource Guide to the U.S. Foreign Corrupt Practice Act” designed to be a quick reference resource for all companies active in global business transactions. “Public company officers can put this on their desk . . . and understand what it is we’re doing in this space, and run their companies accordingly,” Robert Khuzami, director of enforcement at the SEC, told reporters during a Wednesday afternoon press conference. The “unprecedented” guidelines provide insight into how the agencies will approach the statute that prohibits U.S.-listed companies from paying bribes to foreign officials—and imposes harsh penalties. FCPA enforcement actions have led to billions of dollars in penalties in recent years.
A fact sheet circulated by the Justice Department provides a concise summary of the full guide, emphasizing guidance on common problems with gifts, travel, charitable payments, and entertainment; who constitutes a “foreign official”; successor liability; and matters the agencies have declined to pursue. The materials also provide guidance on the common “hallmarks” of effective compliance programs.
“This is the first time the key enforcement agencies have produced a unified document outlining interpretations, rationales, and overall guidance for compliance,” Lisa Rickard, president of the U.S. Chamber Institute for Legal Reform, said in a statement. “As such, this document represents an important step forward in an ongoing process of providing much-needed clarity and certainty to the business community.” Nevertheless, while it addresses some matters where there is no authority, the Guide is largely more detail on fairly settled principles. Not only does it provide the FCPA statutory language, but it discusses enforcement actions and opinion releases and repackages prominent FCPA cases as instructive hypothetical fact patterns.
But for compliance officers and counsel, it is a useful resource that emphasizes the hierarchy of risks, enforcement priorities, and provides help on how to prioritize compliance efforts. The Guide also provides important support for presentations to management on the need to upgrade or strengthen compliance efforts. The guidance expressly disclaims any suggestion of rulemaking, noting that it “is non-binding, informal, and summary in nature, and the information contained herein does not constitute rules or regulations”—just like the opinion releases, settlement agreements, and other sources that companies use to benchmark their compliance programs. As a practical matter, however, compliance programs will be viewed through the lens of the new guidance, making it indistinguishable from established legal requirements.
If you have any questions check out the resource guide available on the SEC’s website or give us a call.