Perkins Coie's Markus Funk and Spencer Gottlieb focus on significant developments from the Justice Department's updated guidelines for the Foreign Corrupt Practices Act.
The Department of Justice's updated guidelines for investigations and enforcement under the Foreign Corrupt Practices Act put to rest notions that the law will lie dormant for the foreseeable future.
The DOJ's revised approach will focus on a more targeted and strategic use of investigative and enforcement resources, prioritizing holding particular individuals accountable and stopping corrupt conduct that harms US economic interests.
There are good reasons to commend this approach as more effectively incentivizing compliance and protecting US interests. Yet, by further deprioritizing the pursuit of criminal charges against the legal edifice of the "corporation," the DOJ's new approach bucks the international trend away from punishing individuals and toward punishing companies.
That may not be a bad thing.
Protecting US Economic Interests
Matthew Galeotti, head of the DOJ's Criminal Division, said the updated guidelines direct prosecutors to focus "on specific misconduct of individuals, rather than collective knowledge theories."
The guidelines' changes can be considered an evolution from former Deputy Attorney General Lisa Monaco's 2022 memo, which identified corporate criminal enforcement as a "core priority" for the DOJ and recognized the importance of increasing individual accountability.
The DOJ will now focus on transnational criminal organizations
and cartels, as well as those who assist such organizations, and
misconduct that impacts US national security. Although these are
laudable targets, in the real world, FCPA enforcement will likely play at most
an accompanying role for prosecutors digging into their substantial
statutory toolbelts to bring charges against, say, transnational
drug cartels, organized street gangs, or spy networks.
The DOJ announced that it will also target bribery that hampers US
companies' ability to compete on a level playing field. One
reasonable interpretation is that, in practice, bribery by non-US
entities and individuals that harms the interests of US companies
will be the DOJ's top priority in the future (and that US
"victim" companies, accordingly, are more likely to
pursue proactive whistleblowing as an offensive tool in their
arsenal).
Global Bribery Enforcement Trends
The shift from expansive corporate liability to more targeted individual liability is understandable from a public policy perspective. The best way to motivate companies from engaging in corruption is not through the threat of hefty fines on "the company." Organizations, after all, are legal creations incapable of forming true, morally blameworthy, corrupt intent.
Historically, companies have negotiated largely non-public settlements with the DOJ that assured no individual prosecutions. Today, enforcers can arguably better motivate compliance by credibly threatening to jail company employees and executives who are directly or indirectly responsible for corrupt conduct. Other countries in the past prioritized individual accountability long before the concept of corporate liability gained traction. Regulators outside the US sought to limit true criminal liability to corrupt acts directly traceable to individuals. However, this balance has shifted considerably in the past decade.
The UK Bribery Act 2010, for example, penalizes corporations for failing to prevent bribes paid on their behalf by an "associated person." The UK is considering further expanding corporate criminal liability for the acts of its employees. Earlier this year, it also joined France and Switzerland in forming an International Anti-Corruption Prosecutorial Task Force with the mission of facilitating transnational information-sharing and cooperation.
The German Criminal Code prohibits active and passive bribery involving domestic or international business transactions, and has for decades rejected wholesale the notion that a legal entity can engage in crime. It also has increasingly used the Administrative Offenses Act to hold companies liable for certain types of managerial misconduct.
The Organization for Economic Cooperation and Development has likewise strongly encouraged countries to "prosecute legal entities, not only individuals" and to ensure "domestic laws empower prosecutors to hold companies accountable." The European Parliament and Council, as well as influential organizations such as Transparency International, have echoed this push for enhanced organizational accountability.
Protections for Companies
The DOJ's guidance also recognizes that commercial bribery undermines the rule of law, skews markets, and disadvantages law-abiding US companies. DOJ prosecutors, therefore, are instructed to prioritize cases where, whether on the supply (i.e. offering bribes) or demand (i.e. asking for bribes) side, the "alleged misconduct deprived specific and identifiable US entities of fair access to compete and/or resulted in economic injury to specific and identifiable American companies [organizations, etc.]."
It is reasonable to expect that the DOJ will take direct aim at corrupt conduct engaged in by non-US companies that have a statutorily-defined nexus to the US. Accordingly, US companies will be likely to engage in ramped up proactive investigations in order to gather evidence of their victimization and persuade DOJ prosecutors to initiate investigations of their non-US competitors. Alleged corrupt overseas conduct by companies headquartered in the US, in contrast, will, per the guidelines, be of secondary enforcement interest.
To this end, and tellingly, the DOJ's memo includes a footnote that observes "the most significant FCPA enforcement actions ... have been overwhelmingly brought against foreign companies."
The DOJ has now informed the public that it's less interested in FCPA resolutions for which no individual is held legally accountable. It has also signaled that foreign companies and individuals engaging in corrupt schemes that harm US companies will be prime targets for enforcement actions.
For companies seeking to conduct business ethically and avoid scrutiny by US and foreign administrations, targeted investments in meaningful anti-corruption compliance remain the prudent approach.
The guidelines signal protection and opportunities for US companies. US companies that believe they're being harmed by bribery engaged in by foreign companies falling under the FCPA's jurisdiction have a much stronger case for approaching the DOJ with their evidence and pushing for enforcement.
The FCPA will no doubt continue to play a significant role in corporate compliance efforts. Companies and their counsel will soon see how the slimmed-down FCPA Unit will chart its course against a global backdrop of ever-expanding corporate liability.
This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.
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