The Long Wait is Over

Catherine Dunn

Corporate Counsel

01-01-2013

In November the U.S. Department of Justice and the Securities and Exchange Commission finally released the long-awaited document that officials hope will serve as a desk reference for companies working to prevent bribery in their global businesses.

"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 in a press conference.

Entitled "A Resource Guide to the U.S. Foreign Corrupt Practice Act," the 120-page document explains the rules, offers hypothetical examples, and includes no fewer than 418 endnotes. Assistant Attorney General Lanny Breuer, who first promised the guide a year ago, described it as both 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. In recent years the law has ensnared the likes of Siemens AG, Johnson & Johnson, and Alcatel-Lucent S.A. in enforcement actions, and led to billions of dollars in penalties.

A fact sheet circulated by the Justice Department reads like a CliffsNotes version of the full guide. It highlights discussions of gifts, travel, and entertainment, and explains who constitutes a "foreign official" and how companies can mitigate successor liability. It also presents examples of matters the agencies have declined to pursue. Another section of the guidance describes the common hallmarks of effective compliance programs [see "What Computer Models Can—and Can't—Do"].

As FCPA attorneys studied this early (or very late) holiday gift, 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 Paul Pelletier, an attorney at Mintz, Levin, Cohn, Ferris, Glovsky, and Popeo 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 adds. He pointed to "helpful hints" like the "Five Questions to Consider When Making Charitable Payments in a Foreign Country."

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

The U.S. Chamber of Commerce and other business groups have for years criticized the government for the lack of clarity on FCPA enforcement. They have also called for new defenses for companies, such as a formal compliance defense. Yet, the Chamber reacted positively to the release of the new document, 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 document. "I think they heard that what we needed was practical, clear guidance," she says. "They acted on that."

Companies that have already adopted compliance programs will take comfort from the new guide, Wrage continues: "I think most well-governed companies will find this document reassuring." For those that aren't up to speed, she adds, it may come as a "wake-up call."

Some lawyers hadn't been expecting much. 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. "It may help them prioritize, and it may give them something they can show to their management." Or "ammunition to go to their boards," adds John Carney, a Baker & Hostetler partner (and former SEC securities fraud chief).