Wednesday, January 9, 2013
DOJ’s new FCPA Resource Guide: Three Practical Takeaway Points
On November 14, 2012, the Department of Justice and the Securities and Exchange Commission released their long-awaited guidance on the U.S. Foreign Corrupt Practices Act (“FCPA”). The 130-page document contains the most comprehensive FCPA analysis produced by the U.S. government to date and provides insight into current DOJ and SEC enforcement practices. However, those hoping that the agencies would effectively narrow the statute or embrace suggested reforms will be greatly disappointed. In short, the guide largely reaffirms the government’s current (aggressive) stance on FCPA enforcement—ensuring many more sleepless nights for company executives.
The Foreign Corrupt Practices Act of 1977, as amended (15 U.S.C. §§ 78dd-1, et seq.), makes it unlawful for certain classes of persons and entities to provide money or anything of value to foreign government officials to assist in obtaining or retaining business. The FCPA also requires companies whose securities are listed in the United States to (1) make and keep books and records that accurately and fairly reflect the transactions of the corporation, and (2) devise and maintain an adequate system of internal accounting controls. Violations can result in significant civil, criminal, and administrative penalties.
Three Key Takeaways From the New FCPA RESOURCE guide
- “Foreign Officials” Are Not Always Foreign Officials
The FCPA defines “foreign official” to include “any officer or employee of a foreign government or any department, agency, or instrumentality thereof.” The guide notes the DOJ and SEC’s broad position that an “instrumentality” of a foreign government includes certain state-owned or controlled entities (commonly found in the defense, healthcare, banking, energy, telecommunications, and transportation sectors). As a result, employees of such entities, regardless of position, are foreign officials under the FCPA.
- FCPA Violations Do Not Always Involve Foreign Corrupt Practices
Though commonly associated with the anti-bribery provisions, the FCPA accounting provisions apply regardless of whether foreign bribery has occurred. Therefore, public companies, at all times, are required to keep accurate books and records and have sufficient internal controls. While private companies are not directly subject to the accounting provisions, adhering to these principles helps to prevent and mitigate the consequences of anti-bribery violations.
- Compliance, Compliance, Compliance
The guide emphasizes that effective anti-corruption compliance programs are so critical that the government “may decline to pursue charges . . . based on the company’s effective compliance program, or may otherwise seek to reward a company for its program, even when that program did not prevent the particular underlying FCPA violation that gave rise to the investigation.” The guide goes on to state that effective programs must be specifically tailored to the company’s business, regularly tested, and constantly improved and updated.