DOJ and SEC's New FCPA Guidance Provides a Desktop Compliance Reference for Companies

Catherine Dunn

Corporate Counsel

11-15-2012

The long wait is over for guidance on how U.S. law enforcement agencies will prosecute companies under the Foreign Corrupt Practices Act. On Wednesday, the Department of Justice and the Securities and Exchange Commission released a document that officials said they hoped would serve as a desk reference for companies big and small as they work to prevent bribery in global business dealings.

“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. 

Entitled “A Resource Guide to the U.S. Foreign Corrupt Practice Act” [PDF], the much-anticipated document—promised one year ago by Assistant Attorney General Lanny Breuer—clocks in at 120 pages, with a smattering of hypothetical examples and 418 endnotes. Breuer described the FCPA guidance both as an “unprecedented” undertaking and as a “window” onto how the agencies will approach the statute that prohibits U.S.-listed companies from paying bribes to foreign officials—and has ensnared corporations such as Siemens, Johnson & Johnson, and Alcatel-Lucent in enforcement actions, and led to billions of dollars in penalties. 

A fact sheet [PDF] circulated by the Justice Department reads like a CliffsNotes version of the full guide, highlighting discussions of gifts, travel, and entertainment; who constitutes a “foreign official”; successor liability; and matters the agencies have declined to pursue. Another notable section of the guidance deals specifically with the common “hallmarks” of effective compliance programs. 

As FCPA attorneys poured over the output on Wednesday (a day before a major FCPA conference in Washington D.C.), many agreed that while the guidance delivered no major surprises, it constitutes a helpful tool for compliance officers—whether they’re already on the right track or seeking more support from their companies. 

“There’s nothing Earth-shattering here, but it’s a great one-stop shopping manual for both practitioners and compliance officers,” says Mintz Levin attorney Paul Pelletier, who previously served as principal deputy chief in the Justice Department’s fraud section.

Simply by having an effective compliance program in place, a company “can often use that as a shield to prosecution,” Pelletier added. He pointed to “helpful hints” like the like the “Five Questions to Consider When Making Charitable Payments in a Foreign Country” on page 19.

“While [the guidance is] not going to provide new defenses, it’s going to help companies understand why the government acts the way it does in an FCPA investigation,” Pelletier says. 

The U.S. Chamber of Commerce and other business groups have criticized the government for lack of clarity around FCPA enforcement and called for new defenses—such as a formal compliance defense—for companies as well. Yet with the release of the new document, the Chamber reacted to the guidance in positive fashion Wednesday, commending both agencies. 

“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.”

Alexandra Wrage, who heads the compliance training nonprofit TRACE International (and writes the Compliance Insider column for CorpCounsel.com), participated in a roundtable discussion with the agencies prior to the completion of the new guidance. “I think they heard what we needed was practical, clear guidance,” she says. “They acted on that.” 

Many companies that have already enacted compliance programs will be able to take comfort from the new guide: “I think most good, well-governed companies will find this document reassuring,” Wrage says. Though for those that aren’t up to speed, she adds, the guidance will come us a “wake-up call.”

BuckleySander partner James Parkinson agrees. “The companies that have sophisticated, well-thought-out compliance programs are going to find they are, by and large, essentially ratified by this document,” he says. 

Lucinda Low, who leads the FCPA practice at Steptoe & Johnson, was pleasantly surprised by the “depth and detail” she found in the guidance: “I had low expectations for these guidelines, and I’d say there’s more here than I expected,” she says.

For compliance officers, it’s a useful resource that emphasizes “the notion that not all risks are equal,” Low says, adding: “It may help them prioritize, and it may give them something they can show to their management.”

BakerHostetler partner John Carney, a former securities fraud chief at the SEC, noted the section on declinations, which speaks to the importance of a strong compliance program, thorough investigation, prompt self-reporting, and strong remediation. So for compliance officers looking to make their case to the business side for a robust approach to compliance, the document, says Carney, does provide them with “ammunition to go to their boards.” 

With a focus on prevention, “everyone wins,” Khuzami said at the press conference. “Fewer violations, more deterrence, and fewer victims.” 

See also: “The New FCPA Guidance: the Best Advice You Can Get For Free,” CorpCounsel, November 2012; and “DOJ, SEC Provide Updated Foreign Bribery Enforcement Guidance,” The National Law Journal, November 2012.