DOJ Issues FCPA Opinion Procedure Approving Legitimate Payments To Government Instrumentalities
On August 14, 2020, the U.S. Department of Justice (“DOJ”) released its first Foreign Corrupt Practices Act (“FCPA”) Opinion (the “August 14 Opinion”) in six years, in response to a request from a multinational company headquartered in the U.S. (the “Requestor”). The Requestor sought to clarify whether contemplated payments to a majority government-owned foreign investment bank would result in an FCPA enforcement action against it. The DOJ found that the facts and circumstances as presented by the Requestor evidenced a payment to a foreign government instrumentality, and not a “foreign official,” and were in any event supported by a proper business justification; therefore, such payment would not violate the anti-bribery provisions of the FCPA.
The release of the August 14 Opinion is significant in large part because it represents a revival of a dormant practice. The Opinion Procedure was established to allow companies to make specific inquiries and help them comply with the FCPA, but the last FCPA Opinion Procedure was released by the DOJ in late 2014. Notably, in 2018, then-Deputy Assistant Attorney General Matthew Miner stated that not enough companies were “taking advantage” of the Opinion Procedure which the DOJ views as a “tremendous resource” to companies in complying with the FCPA. Deputy Assistant Attorney General Matthew S. Miner Remarks at the American Conference Institute 9th Global Forum on Anti-Corruption Compliance in High Risk Markets, DOJ Release (July 25, 2018).
As evidenced by the August 14 Opinion, the process of obtaining an Opinion can be lengthy, since the DOJ may seek additional details after a requesting company submits its initial request. The Requestor submitted its initial request in November 2019, and even though the issue presented appears relatively straightforward (after all, a payment to a foreign government-owned company is very different from a payment to a “foreign official”), it was apparently asked to provide supplemental information, which it did in January, February, June, and July 2020.
As outlined in the August 14 Opinion, the Requestor presented the following prospective—not hypothetical—conduct for the DOJ’s consideration: Requestor sought to purchase a portfolio of assets in Country A from the foreign subsidiary of a foreign investment bank, which was indirectly majority-owned by a foreign government. In connection with the same purchase, the Requestor sought and received assistance in Country B from a different foreign subsidiary of the same investment bank. The Requestor also sought the assistance of a local partner with respect to the purchase of assets from the foreign subsidiary in Country A.
Following the successful purchase of assets, the subsidiary in Country B sought a fee of $237,500 (equaling approximately 0.5% of the face value of the assets in question) from the Requestor for the work that the subsidiary in Country B had done. The Requestor represented to the DOJ that this contemplated fee was “justified and commercially reasonable” since the subsidiary in Country B did provide legitimate services during the relevant period.
In determining that it did not presently intend to take any enforcement action against the Requestor, the DOJ found based on the facts and circumstances presented that there was “no information evincing a corrupt intent to offer, promise, or pay anything of value to a ‘foreign official’ in connection with the contemplated payment.”
First, the DOJ found that the contemplated payment was to a commercial entity and not to an individual. The DOJ noted that the FCPA does not prohibit the payment to foreign governments or foreign government instrumentalities, although payments to “foreign officials” are prohibited.
Second, the DOJ found that there were no indications that the Requestor intended or believed that the money would be diverted to an individual. Notably, the Chief Compliance Officer of the subsidiary in Country B certified to the Requestor that the payment was for corporate purposes and would not be diverted to an individual. And even though the company was a wholly-owned subsidiary of a foreign investment bank that was indirectly owned by a foreign government, there were no other indicators that the contemplated payment to the subsidiary in Country B would be used to corruptly influence a “foreign official.”
Lastly, the DOJ found that the Requestor represented that it sought and received specific and legitimate services from the subsidiary in Country B, with the Requestor representing and the Chief Compliance Officer of the foreign subsidiary certifying that the intended payment is “commensurate with the services . . . provided and is commercially reasonable.”
The key takeaway from the August 14 Opinion is that justified and commercially reasonable payments to foreign government agencies or instrumentalities will not be considered a violation of the anti-bribery provisions of the FCPA, as long as there are no indicia that the entity is, in fact, acting as a conduit for improper payments to a foreign official. While the Opinion may have no precedential value for companies other than the Requestor, the August 14 Opinion provides an important marker on a critical delineation in the FCPA that can sometimes be overlooked, causing companies to avoid dealing with government agencies and government-owned or -controlled entities for entirely legitimate purposes. While companies should, of course, continue to employ heightened diligence and controls when dealing with a government-affiliated entity, they should also take some degree of comfort in the August 14 Opinion.