Prior to the issuance of A Resource Guide to the U.S. Foreign Corrupt Practices Act by the Department of Justice and the Securities and Exchange Commission late last year, there were calls for additional guidance on the application of the Act and demands for Congressional reform. Lead by the Business Roundtable and its legal reform arm, the Institute for Legal Reform, many sought amendments to the FCPA on a range of issues. Enforcement officials generally opposed these efforts. Legislative hearings were held. Business groups met with enforcement officials. The Guide was issued about which volumes have been written.
Now the U.S. Chamber and thirty-two other groups are raising concerns about the Guide and the Act. In a letter to Assistant Attorney General Lanny Breuer and Acting SEC Director of Enforcement George Canellos dated February 19, 2013, the groups have called for legislation, requested clarification and at times offered their interpretation.
The letter begins with the supposition that the Guide is part of a continuing process: “we look forward to regular updates to the Resource Guide and to further discussion . . .” It goes on to discuss a series of points including:
Compliance defense: In pre-Guide congressional hearings many business groups pressed for the adoption of a compliance defense. DOJ steadfastly maintained that this was unnecessary since the procedures of the company are fully considered in the charging process, an approach which is embedded in the sentencing guidelines. The Guide continues this approach. Accordingly, the letter argues that “even if a company had in place a state-of-the-art compliance program that was well-designed to prevent FCPA violations and that was aggressively enforced. . . “ liability could be imposed. An assurance should be provided through “legislative reform” that this would in fact constitute a defense.
Cooperation: The DOJ and the SEC have long standing published standards on cooperation which discuss self-reporting and cooperation credit. Noting that the Guide essentially reiterates those principles, the groups request clarification: “It would be more helpful to provide some discussion of the application of those principles to real-life circumstances, including through illustrative hypotheticals and examples of actual enforcement decisions.”
Foreign official: A key issue in Congressional hearings prior to the issuance of the Guide was the definition of the terms “foreign official” and “instrumentality.” The letter acknowledges the fact that the Guide offers some clarification by specifying that typically an entity is unlikely to be a instrumentality if a government does not own or control a majority of its shares. At the same time the authors of the letter continue to believe that the entity must be performing a governmental function. They also note that the multi-factor, fact intensive definition of “instrumentality” is very difficult to apply. Accordingly, clarification is necessary to avoid uncertainty in the business community.
Parent-subsidiary liability: Here the business groups acknowledge that the Guide provides clarity by noting that a parent may be liable for bribes paid by the subsidiary in one of two instances: 1) where the parent is directly involved; or 2) where traditional agency principles would impute the conduct of the subsidiary to the parent. The letter seeks clarification, however, by requesting confirmation that this test is consistent with DOJ’s prior standard of “authorized, directed or controlled.”
Successor liability: While successor liability was a key question in pre-Guide congressional hearings, the letter notes that the Guide offers clarification by stating that it is only an issue in limited circumstances where there are egregious and sustained violations, where the company participated in the violations, or where the wrongful conduct continues after acquisition. Since “the Resource Guide essentially reiterates the Department’s past opinion releases . . . which required . . . post-acquisition diligence on a scale equivalent to a massive internal investigation . . . [w]e urge the Department and the SEC to clarify that . . .[such outsized efforts] are not the norm . . . “
The letter concludes with two additional points. In one it reiterates the discussion of “corrupt intent” in the Guide which is defined to mean “ an intent or desire to wrongfully influence the recipient” and interprets this to mean that those who have no direct knowledge do not have liability under the anti-bribery provisions. In the other it defines a declination to be a situation in which the person could be charged but is not and urges that officials continue to make information available on these decisions.