The Real FCPA Guide: 35 years in the MakingFebruary 15, 2013 – Articles
More than 35 years after becoming law, the Criminal Division of the United States Department of Justice and the Enforcement Division of the Securities and Exchange Commission released their long-awaited guidance on the application and enforcement of the U.S. Foreign Corrupt Practices Act in late 2012. The 120 page document, entitled A Resource Guide to the U. S. Foreign Corrupt Practices Act (the “Guide”), is a useful reference for companies and individuals, who are competing in the international workplace or considering doing so. That being said, it is important to note that the guidance is non-binding and “does not in any way limit the enforcement intentions or litigating positions.”
Additionally, while the Guide does not represent a change in the FCPA enforcement policy, it does address a wide variety of topics, including:
- who and what is covered by the FCPA’s anti-bribery and accounting provisions
- the definition of a “foreign official”
- what constitutes proper and improper gifts, travel and entertainment expenses
- the nature of facilitating payments
- how successor liability applies in the mergers and acquisitions context
- the hallmarks of an effective corporate compliance program
- the different types of civil and criminal resolutions available in the FCPA context
A few key topics of the Guide are listed below:
HALLMARKS OF EFFECTIVE COMPLIANCE PROGRAMS
When it comes to compliance, there is no one-size-fits-all program; however, the Guide does provide insight into the aspects of compliance programs that the DOJ and SEC assess, recognizing that companies may consider a variety of factors when making their own determination of what is appropriate for their specific business needs.
Clearly Articulated Policy Against Corruption – the DOJ and SEC consider the commitment of corporate leaders to a “culture of compliance” and look to see if this high-level commitment is also reinforced and implemented by middle managers and employees at all levels of a business.
Code of Conduct – Whether a company has policies and procedures that outline responsibilities for compliance within the company, detail proper internal controls, auditing practices, and documentation policies, and set forth disciplinary procedures
Oversight – Whether a company has assigned responsibility for the oversight and implementation of a company’s compliance program to one or more specific senior executives within an organization.
Risk Assessment – The degree of appropriate due diligence is fact-specific and should vary based on industry, country, size, and nature of the transaction, and the method and amount of third-party compensation.
Training and Continuing Advice – Whether a company has taken steps to ensure that relevant policies and procedures have been communicated throughout the organization, including thorough periodic training and certification for all directors, officers, relevant employees, and, where appropriate, agents and business partners.
WHAT DOES THE SEC CONSIDER WHEN DECIDING WHETHER TO OPEN AN INVESTIGATION OR BRING CHARGES?
In determining whether to open an investigation and, if so, whether an enforcement action is warranted, SEC staff considers a number of factors, including:
- the statutes or rules potentially violated
- the egregiousness of the potential violation
- the potential magnitude of the violation
- whether the potentially harmed group is particularly vulnerable or at risk;
- whether the conduct is ongoing
- whether the conduct can be investigated efficiently and within the statute of limitations period
- whether other authorities, including federal or state agencies or regulators, might be better suited to investigate the conduct
WHAT ARE THE POTENTIAL CONSEQUENCES FOR VIOLATIONS OF THE FCPA?
The Guide elaborates on the FCPA provisions for different criminal and civil penalties for companies and individuals:
Criminal Penalties – For each violation of the anti-bribery provisions, the FCPA provides that corporations and other business entities are subject to a fine of up to $2 million. Individuals, including officers, directors, stockholders, and agents of companies, are subject to a fine of up to $100,000 and imprisonment for up to five years.
Civil Penalties – Although only the DOJ has the authority to pursue criminal actions, both DOJ and SEC have civil enforcement authority under the FCPA. The DOJ may pursue civil actions for anti-bribery violations by domestic concerns (and their officers, directors, employees, agents, or stockholders) and foreign nationals and companies for violations while in the United States, while the SEC may pursue civil actions against issuers and their officers, directors, employees, agents, or stockholders for violations of the anti-bribery and the accounting provisions.
U .S. Sentencing Guidelines – When calculating penalties for violations of the FCPA, the DOJ focuses its analysis on the U.S. Sentencing Guidelines in all of its resolutions, including guilty pleas, Deferred Prosecution Agreements (DPAs), and Non Prosecution Agreements (NPAs). The Guidelines provide a very detailed and predictable structure for calculating penalties for all federal crimes, including violations of the FCPA.
Loss of Export Privileges – Companies and individuals who violate the FCPA may face consequences under other regulatory regimes, such as the Arms Export Control Act (AECA), 22 U.S.C. § 2751, et seq., and its implementing regulations, the International Traffic in Arms Regulations (ITAR), 22 C.F.R. § 120, et seq. AECA and ITAR together provide for the suspension, revocation, amendment, or denial of an arms export license if an applicant has been indicted or convicted for violating the FCPA.
Factors The DOJ and SEC Consider When Determining Whether a Compliance Monitor Is Appropriate Include:
- Seriousness of the offense
- Duration of the misconduct
- Pervasiveness of the misconduct, including whether the conduct cuts across geographic and/or product lines
- Nature and size of the companyQuality of the company’s compliance program at the time of the misconduct
- Subsequent remediation efforts
While there are plenty of hypotheticals provided by the SEC and the DOJ in the Guide, the threat of being pursued by these agencies for FCPA violations can be very real. If you have any questions about the Guide, or how to comply with the FCPA with your own compliance procedures, please contact a member of Dinsmore’s White Collar Crime Group.