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The New FCPA Guidance: the Best Advice You Can Get For Free
On Wednesday, the U.S. Justice Department and Securities and Exchange Commission published their long-anticipated guidance on the U.S. Foreign Corrupt Practices Act. The 130-page tome is an assembly of longstanding opinion releases, statutes, settlements, and cases. The Wall Street Journal quickly pointed out that some of the DOJ's interpretation of the FCPA is unsettled law.
Guidance on the FCPA is required by the 1988 Trade Act to ensure that companies and individuals trying to address foreign bribery and accounting controls adequately understand the anticorruption law. The previous version of the guidance, called the "lay person's guide to the FCPA," was a concise, reader-friendly review of the FCPA and its scope. The new guidance is significantly more comprehensive, with over 300 footnotes replete with detailed case citations and legalese. 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.
The intended audience appears to be experienced FCPA practitioners (not a lay person), but the guidance omits much of the practical advice sought by readers to address FCPA compliance risk. Few companies that have given any consideration to the FCPA are struggling with such issues as whether a $10,000 dinner or a trip to Paris for a government official and spouse are appropriate under the FCPA, as addressed in the new guidance. What about having a government official attend the 2014 World Cup? The UK Bribery Act guidance squarely addresses this issue in just a third of the pages.
As noted by the WSJ, a close review of a few of the footnotes raises questions about the reliance on enforcement actions to establish FCPA guidance. For instance, the guidance notes that, "the FCPA covers corrupt payments to low-ranking employees and high-level officials alike." Some practitioners believe that this issue is still awaiting resolution by the U.S. Court of Appeals for the Eleventh Circuit (U.S. v. Esquenazi), which is currently considering whether payments made to employees of the Haitian state-owned telecom qualify as payments to "foreign officials." The guidance also relies on non-pattern jury instructions that "a number of courts have approved" and, in one instance, on the DOJ's own opposition motion. The guidance says that these sources are authoritative because the decisions "are consistent with the acceptance by district courts around the country of over 35 guilty pleas by individuals." Notably missing from the DOJ's collection of sources are cases where the DOJ's FCPA enforcement efforts have fallen flat.
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. This disclaimer makes sense because the DOJ is not an administrative agency, and the SEC engages in notice and comment when it makes rulessoliciting input from interested parties.
As a practical matter, however, compliance programs will be viewed through the lens of the new guidance, making it indistinguishable from established legal requirements. It is unclear whether the 1988 Trade Act contemplated making policy by selectively choosing enforcement actions or settlement agreements (many of which were settled out of court and never faced judicial scrutiny) to provide guidance on the FCPA.
As noted by Russell Mokhiber this week, the guidanceand all its unanswered questionswill certainly be debated at countless CLEs devoted to anticorruption compliance. Some FCPA practitioners may be troubled that the guidance implicitly passes off enforcement actions and settlements as compliance requirements (albeit with an express disclaimer). Others will appreciate the guidance's free collection of key resources and quick resolution of pending legal issues. But you know what they say about free advice. . .
Ryan McConnell is a former federal prosecutor and partner at Baker & McKenzie LLP in Houston. Charlotte Simon is an associate at Baker & McKenzie LLP in Houston. Both teach a class on International Corporate Compliance at the University of Houston Law Center.
See also: DOJ and SEC's New FCPA Guidance Provides a Desktop Compliance Reference for Companies, CorpCounsel, November 2012.