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Asia Pacific – DOJ And The SEC Issue New FCPA Guidance.

19 November, 2012



On November 14, 2012, the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) published “A Resource Guide to the U.S. Foreign Corrupt Practices Act.” Through the Guide, DOJ and the SEC provide the most comprehensive written guidance on how they enforce the Foreign Corrupt Practices Act (FCPA) to date. The Guide provides significant guidance regarding how DOJ and the SEC have exercised their prosecutorial discretion, how they might treat numerous hypothetical situations, and how they interpret key sections of the FCPA.
In large measure, DOJ and the SEC re-enforce previous guidance regarding how they exercise their prosecutorial discretion. Key considerations include a robust compliance program, appropriate due diligence, intra-corporate discipline for violators, self-reporting, the egregiousness of the violation, the duration of the violation, and recidivism. Both “DOJ and SEC place a high premium on self-reporting, along with cooperation and remedial efforts, in determining the appropriate resolution of FCPA matters.” (FCPA Resource Guide at p. 54.) But the Guide offers new written guidance on more sophisticated issues that may impact corporate prosecution.
For example, DOJ and the SEC provide specific guidance regarding successor liability. DOJ and the SEC note that the actions taken against successors generally have resulted from three fact patterns: (1) cases involving “egregious and sustained violations;” (2) cases in which the successor participated in the violations; and (3) cases in which the violations continued after acquisition. (FCPA Resource Guide at p. 28.) The Guide includes two hypotheticals to demonstrate how DOJ and the SEC are likely to exercise their prosecutorial discretion. In the first hypothetical, the Guide posits a situation where an acquired company was not subject to the FCPA prior to acquisition. DOJ and the SEC explain that if the acquired company continued to violate the FCPA after acquisition, then they would likely exercise their discretion to prosecute. In the second hypothetical, the Guide posits a situation where both an acquired and an acquiring company were subject to the FCPA prior to acquisition. DOJ and the SEC explain that prosecution will depend largely on the extent of the acquiring company’s due diligence efforts, efforts to integrate the acquired company into the acquiring company’s FCPA compliance program, and the ongoing nature of the violations. In both hypotheticals, DOJ and the SEC emphasize the need for appropriate due diligence prior to mergers and acquisitions. DOJ and the SEC further discuss the ongoing viability of pre-acquisition disclosure or pre-acquisition DOJ opinions as measures that may reduce the risk of an FCPA enforcement action.
While the Guide helps clarify many issues regarding how DOJ and the SEC exercise their prosecutorial discretion, the Guide does not necessarily make FCPA compliance any easier. The United States authorities continue to stress robust compliance programs and appropriate due diligence—both of which require special expertise and detailed analysis as problems arise. Moreover, as we have previously noted, companies are facing increasingly divergent regulatory environments in the different jurisdictions where they do business. These divergent regulatory environments are only more complicated by the fact that these regulators often cooperate with one another—leaving companies exposed to prosecution by multiple jurisdictions for the same violation. Finally, as companies subject to the FCPA become more complex—whether through mergers and acquisitions or through different parent-subsidiary activity—compliance and due diligence become increasingly complex.
In this environment, companies should consider re-evaluating their current FCPA compliance programs and whether changes are needed in light of the new guidance from DOJ and the SEC. Also, companies may want to consult legal counsel regarding the effect of this guidance and how it may relate to the company’s ongoing compliance efforts both in the United States and with foreign jurisdictions.
The Guide may be found on the Department of Justice’s website at http://www.justice.gov/criminal/fraud/fcpa/.
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For further information, please contact:

Joseph J. Aronica, Partner, Duane Morris
Robert H. DietrickPartner, Duane Morris


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