Beth France, Greta Lichtenbaum, Dec 12, 2012
On November 14, 2012, the Department of Justice (“DOJ”) and the Securities and Exchange Commission (“SEC”) released FCPA: A Resource Guide to the U.S. Foreign Corrupt Practices Act (“the Guide”). After many months in the making, these agencies’ joint efforts to release such guidance have produced a compendium of past precedents, enforcement principles, and explanatory hypotheticals. Of the many significant issues covered in the Guide, this article addresses the positions the Guide takes regarding the critical issue of the FCPA’s extraterritorial reach, focusing in particular on how the Guide interprets the scope of the statutes’ jurisdiction over foreign persons as well as U.S. parent company liability for acts of foreign subsidiaries. The government’s positions on these two issues signal a willingness to stretch the extraterritorial reach of the FCPA.
On many fronts, the Guide reiterates guidance previously reflected in FCPA non-prosecution and deferred prosecution agreements (“NPAs” and “DPAs”) and voluntary civil settlements. By their natures, however, such agreements are case-specific, and the publicly available information related to them never tells the whole story. Accordingly, over the years, FCPA experts have crafted their own guidance for FCPA compliance by examining the facts and legal theories included in criminal and civil settlement agreements, looking for patterns in those settlement agreements, and using those patterns to predict how the DOJ and the SEC may respond to other companies and situations. The Guide’s greatest value may well be that it confirms that many of the DOJ’s and the SEC’s positions in specific cases are considered to be generally applicable.
The Guide’s observations regarding compliance programs may provide comfort to companies operating internationally and, as such, are priority reading for those on the front lines of company compliance. The DOJ and the SEC identify several measures that companies can take to avoid violations or-if violations occur-to encourage settlements and mitigate penalties. For example, the Guide observes that having a robust compliance program favors resolution of enforcement cases by a negotiated settlement, as well as mitigation of related penalties. It also notes that an appropriate compliance system will vary by company and that policies and procedures should be tailored to the actual risks of FCPA violations that an individual company faces. Taken together, these portions of the Guide should reassure companies that these agencies’ approach to the Act is not rigid or zero-tolerance but involves a practical assessment of the circumstances surrounding potential violations.
Along with some comfort, the Guide provides warning signs for companies operating internationally. The DOJ and the SEC have shown that they are not reluctant to pursue actions against foreign companies and have achieved major settlements with such foreign companies-indeed, nearly all of the largest FCPA settlements have been with foreign-based issuers. The Guide is consistent with this posture, giving companies cause for continued vigilance over all of their foreign operations, as it signals that the government continues to take a broad view of the scope of its enforcement powers, particularly in the areas of jurisdiction over foreign persons and parent liability for actions of a subsidiary.
It is important to recognize at the outset that the Guide’s positions on these two issues are not-for the most part-drawn from court precedent, and when they are, the precedent may not be specific to the FCPA. Most FCPA cases are resolved through some form of settlement, and resolution through settlement does not require the DOJ and the SEC to clarify their precise jurisdictional theories or to defend those theories in court. Some defendants, however, have recently chosen to proceed to court rather than accept a settlement, and a few of these pending court cases include challenges to the government’s jurisdictional theories.
Despite these courtroom challenges, however, the Guide does not suggest that the DOJ and the SEC have abandoned broad interpretations of what constitutes acts “while in the territory of the United States” and parent liability for actions of subsidiaries, both of which bring conduct with sometimes tenuous connections to the United States into the ambit of FCPA enforcement.
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