Here’s a tip about how U.S. corporate executives can avoid violating America’s anti-foreign bribery law: Buying a foreign official a latte won’t likely draw scrutiny, but skip the trip for two to Paris.
Ending months of speculation among corporate officials and white-collar defense attorneys, the Justice Department and Securities and Exchange Commission have published a much-anticipated guide that attempts to clarify key provisions of the Foreign Corrupt Practices Act. The 120-page memo is the product of a year of work for senior DOJ lawyers and SEC officials who set out to craft a comprehensive catalogue of court rulings, hypothetical scenarios and enforcement practices in the criminal and civil arena.
“Some will say maybe it goes too far. Others will say we hit the sweet spot,” SEC enforcement director Robert Khuzami told reporters in announcing the FCPA guide at a new conference Nov. 14. “And yet others will say it’s not far enough. That’s just the nature of an undertaking like this.”
White-collar defense lawyers largely praised the guidance as a one-stop collection of how the government intends to enforce the FCPA. “It is not, however, a clear road map for compliance,” said Erich Schwartz, a securities enforcement partner in the Washington office of Skadden, Arps, Slate, Meagher & Flom.
The FCPA guidance doesn’t break substantial new ground, several criminal defense and securities lawyers said. Attorneys suggested enforcement agencies were essentially consolidating the gains made in litigation but refraining from creating any semblance of an FCPA checklist to provide a safe harbor for companies and individuals. Companies are likely to continue to face uncertainty over the benefits of voluntary disclosure of potential foreign bribery violations.
Covington & Burling partner Steven Fagell, who co-chairs the firm’s anti-corruption practice, said the resource reflects “accumulated wisdom” but stops short of any “bright-line rules that some may have hoped for.”
The U.S. Chamber Institute for Legal Reform and more than two dozen business and trade groups pressed DOJ to address issues that include successor liability, the definition of a foreign official and scenarios in which enforcement agencies declined to file criminal or civil charges. The institute’s president, Lisa Rickard, called the new manual an “important step forward in an ongoing process of providing much needed clarity and certainty to the business community.”
DOJ’s Lanny Breuer, who leads the criminal division, said that on the day the new guidelines were publicly issued he called and personally thanked former Attorney General Michael Mukasey, now a Debevoise & Plimpton partner in New York, for his input on the memo. “Any fair-minded person will say that this guide addresses the issue, and I think takes a substantial step forward in adding transparency,” Breuer said.
The FCPA has long been on the books — since 1977 — but the relatively obscure law has seen an uptick in enforcement in the past several years, especially in the criminal arena against individuals. The government has collected more than $2 billion in FCPA-related fines and penalties since 2009, according to DOJ.
The resource manual doesn’t change the substance of the law — that would take an act of Congress — but it does give a better picture of the conduct the government wants to thwart and provides steps that companies can take to minimize the chance of running afoul of the law, enforcement officials said.
The memo, for instance, assesses effective corporate compliance programs. Is the program well designed? It is being used in good faith? These are among the questions enforcement officials are weighing. A “check-the-box” approach to compliance, the memo said, “may be inefficient and, more importantly, ineffective.”
In “appropriate circumstances,” the DOJ and SEC said officials may decline to pursue charges against a company based on its compliance program, according to the guidance. The government may also seek to reward a company for its program, even when it didn’t prevent an FCPA violation.
Breuer told reporters a standalone compliance defense — a company’s chance to rebut criminal liability — would restrict the government’s ability to assess a wide number of factors, including the seriousness of the offense, in deciding whether to bring a case.
“I think that would be very dangerous and is antithetical to the way we pursue criminal justice cases,” Breuer said. “I also think we run the risk of a race to the bottom. We look at compliance programs. One size does not fit all.”
On the day the guidance was released, Gibson, Dunn & Crutcher partner F. Joseph Warin, who leads Gibson’s Washington office litigation department, said he talked about the memo in conversations with five clients. The guidebook, Warin said, will give attorneys a greater ability to reason by analogy. He called the FCPA guide “very balanced” and “laudatory.”
In meetings with enforcement officials, Warin said, a lawyer can now say, “This looks like what you discussed in the guidance here. It seems your guidance would suggest this is behavior that doesn’t rise to the level of enforcement activity or interest.”
Defense lawyers have long sought guidance over the murky world of gift-giving. When does it cross the line? One of the hypotheticals in the FCPA presents a scenario in which a corporate executive gives a “moderately priced” crystal vase, as a wedding present, to the general manager of a state-owned electricity commission. Not a violation, the FCPA memo said.
The FCPA guide said it’s “difficult to envision” any circumstance where coffee or taxi fare would ever show corrupt intent on the part of a company official.
“To violate the FCPA you have to have a corrupt intent,” Breuer said. “It would be pretty hard to establish that you had a corrupt intent because you bought someone a latte. At some level there’s a commonsense approach to it.”
An example of an improper travel and entertainment expense? The guide highlights several, including this: “a trip to Paris for a government official and his wife that consisted primarily of touring activities via a chauffeur-driven vehicle.”
Reed Smith litigation partner Eric Dubelier said clients routinely agonize over the holidays in China, unsure what provision of gifts could draw scrutiny from FCPA enforcement officials. “I think, historically, [what] most lawyers would say is, ‘A gift is a gift. You can’t give a gift,’ ” he said. The FCPA memo’s discussion of gifts is “striking,” Dubelier said.
The memo’s language about “appropriate under local law” is fuzzy, Dubelier said, but the guidance does provide some meaningful information about the appropriateness of some gift-giving. “We can’t take an American doctor, but now we can take a foreign doctor to a play or a baseball game,” Dubelier said.
One of Khuzami’s hopes flowing from the FCPA guidance? That corporate officials will put the resource book on a desk, pick it up and understand directly what enforcement agencies are up to in the realm of anti-corruption.
“The real value here is the clarity and the transparency,” Khuzami said. “This guide is unique because it allows us to communicate directly with the regulated community. You don’t always have the opportunity to do that.”