A U.S. Department of Justice ("DOJ") opinion released earlier this week suggests
that, under the right circumstances, companies that buy foreign
businesses may not incur liability for the target's
pre-acquisition corrupt conduct if the misconduct occurred outside
the U.S. and did not involve U.S. nationals. In issuing the
Opinion, the DOJ was responding to a request in April from an
anonymous U.S. consumer products company planning to acquire a
foreign business that, according to an internal inquiry conducted
by the acquiring company, had made improper payments to foreign
government officials in the past. The company had sought the
DOJ's view of the propriety of the transaction, which resulted
in the issuance of the Opinion.
In a rare response confirming it did not intend to take action, the
DOJ cited a section of its FCPA resource guide, which states that
"[I]f an issuer were to acquire a foreign company that was not
previously subject to FCPA's jurisdiction, the mere acquisition
of that foreign company would not retroactively create FCPA
liability for the acquiring issuer." In the current case, the
DOJ found it significant that there was no jurisdiction for the
perceived bad acts at the time of their occurrence, and the fact
that a U.S. company acquired the entity did not give rise to
jurisdiction where none previously had existed. In addition, the
Opinion also plainly identified the fact that the U.S. company
planned to divest any tainted contracts and assets from the target
business before acquiring it, and that it had done its due
diligence beforehand.
It is unusual for the DOJ to publish such opinions, having done so
only once before in 2014, and just once in 2013. The facts
underlying the Opinion, however, are not rare. Often, target
companies have problematic histories, and the acquirer is concerned
about what it might be inheriting. The Opinion bears noting for the
fact that it appears to rely on the quality of the company's
efforts to undertake due diligence and remediate the identified
deficiencies prior to closing. It also clearly bears noting the
Opinion found that there was no jurisdiction over the activities
and parties at the time of the events in question. The DOJ, of
course, stressed that the Opinion only related to the particular
circumstance in that case, did not bind them in any other case, and
should be considered null and void if the facts later turned out to
be different than represented.
In other very recent events, in Washington, D.C., Assistant
Attorney General Leslie R. Caldwell, who helps lead the DOJ's
FCPA efforts, confirmed at the American Conference Institute's
International Conference on the FCPA that the DOJ will continue to
focus upon individual officers of companies responsible for FCPA
offenses. She confirmed that "there is a trend in prosecuting
individuals [for such offenses] and that [she] expects that to
continue." Caldwell also confirmed the DOJ's increased
participation with foreign partner governments, indicating that the
DOJ is not the only enforcement agency that will play a significant
role in rooting out foreign corrupt practices going forward.
Caldwell noted that several other countries are focusing on
individuals that facilitate illegal bribes, and bringing their own
actions against U.S. and foreign companies, as well as their
corporate officers. Such countries include the United Kingdom,
Colombia, France, Japan and the Philippines.
Also, at the Conference, the Director of the Division of
Enforcement of the Securities and Exchange Commission Andrew
Ceresney confirmed that the SEC will continue to "look for
opportunities" to bring more FCPA-related cases. Importantly,
Ceresney reinforced the need for all companies that engage in
commercial activity abroad to have instituted sound compliance
programs. He stated that the agency will "look well on
companies that have robust [compliance] programs and that the
existence of such programs will pay dividends should an FCPA issue
arise."
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