Dennis Romero is a Manager with Treliant. Dennis has over eight years of experience investigating fraud, accounting irregularities, employee misconduct and bribery, as well as performing internal and external compliance audits and Anti-Money Laundering (AML) reviews for large multinational companies across a wide range of sectors including healthcare, financial services…
- Source: justice.gov
The U.S. Department of Justice (DOJ) and Securities and Exchange Commission (SEC) released “A Resource Guide to the U.S. Foreign Corrupt Practices Act, Second Edition” (or “the Second Edition”), a comprehensive compilation of information and analysis regarding the Foreign Corrupt Practices Act (FCPA) and related enforcement. The first edition of the Resource Guide, released in November 2012, was widely viewed as an invaluable compilation of DOJ and SEC insights and practices regarding the FCPA through hypotheticals, examples of enforcement actions and anonymized declinations, and summaries of applicable case law and DOJ opinion releases. The first update of the Resource Guide indicates the government’s continuing enforcement of the FCPA and reinforces the DOJ’s and SEC’s expansive view of civil and criminal liability under the FCPA.
Treliant’s Corporate and Regulatory Investigation practice provides forensic accounting, data analytics, and expert witness services in investigations before the SEC, DOJ, and other government agencies. Treliant’s experts work with organizations and their counsel to investigate facts, resolve disputes, and manage regulatory challenges in environments where the level of scrutiny is high and the margin for error is low.
The Second Edition retains the core structure and content of the original Resource Guide but contains significant updates regarding a variety of legal, compliance and enforcement topics under the FCPA. The following non-exhaustive list highlights a few of the updates reflected in the Second Edition:
- Further analysis of criminal liability under the FCPA’s accounting and anti bribery provisions. The Second Edition analyzes the decision made by the Second Circuit in United States v. Hoskins regarding criminal liability under FCPA’s anti bribery and accounting provisions. The Second Circuit concluded that individuals not directly covered by the FCPA anti bribery provisions cannot be found guilty of conspiring to violate, or aiding and abetting the violation of, the FCPA anti-bribery provisions. However, the Second Edition clarifies that the accounting provisions apply to “any person,” and thus are not subject to the reasoning in the Second Circuit’s decision in United States v. Hoskins. The DOJ and SEC appear to be interpreting more broadly who may be liable under the accounting provisions in the Second Edition, suggesting this may be an expanding area of enforcement.
- Reaffirming DOJ guidance regarding voluntary disclosures. The Second Edition reaffirms the DOJ’s FCPA Corporate Enforcement Policy position regarding voluntary disclosure, explicitly stating “where a company voluntarily self-discloses misconduct, fully cooperates, and timely and appropriately remediates, there will be a presumption that DOJ will decline prosecution of the company absent aggravating circumstances.” The Second Edition cites examples from 2018 and 2019 where companies ultimately received declination letters, even when certain aggravating circumstances existed, because of their cooperation and transparency with the DOJ.
- Updating guidance regarding “instrumentality” of a foreign government. The Second Edition highlights the assertions made about the definition of instrumentality in United States v. Esquenazi. The Eleventh Circuit concluded that “instrumentality” under the FCPA is “an entity controlled by the government of a foreign country that performs a function the controlling government treats as its own.” The Second Edition also notes the non-exhaustive list of factors, provided by the Eleventh Circuit, to determine whether the government “controls” an entity including “the foreign government’s formal designation of that entity, whether the government has a majority interest in the entity and the government’s ability to hire and fire the entity’s principals.”
- Clarifying guidance regarding internal accounting controls. Echoing DOJ guidance on compliance programs and prior settlements, the Second Edition provides insight into the government’s expectations for a company’s internal accounting controls to consider risks specifics to its industry and global footprint. The Second Edition notes that “although a company’s internal accounting controls are not synonymous with a company’s compliance program, an effective compliance program contains a number of components that may overlap with a critical component of an issuer’s internal accounting controls.” This guidance emphasizes the evolving definition of an effective internal accounting control program under the FCPA by requiring a tailored approach based on a company’s specific risks.
- Updating discussion regarding Mergers and Acquisitions and Successor Liability. The Second Edition expressly recognizes that in certain mergers and acquisitions, “robust pre-acquisition due diligence may not be possible,” and highlights that the government will consider the “timeliness” and “thoroughness” of due diligence efforts for acquiring companies in these situations. The Second Edition further encourages cooperation with the DOJ as declination letters may also be considered for acquiring companies that voluntarily disclose, remediate conduct and cooperate with the DOJ and SEC.
The Second Edition will provide helpful guidance for companies, practitioners and the public in the years ahead with its updated insight from the DOJ and SEC since the release of the first edition. The Second Edition does not present new fundamental changes in principles of FCPA enforcement but underlines how the government has approached FCPA related matters over the years indicating how these agencies may handle these matters in the years ahead. With the release of the Second Edition, the DOJ and SEC are indicating FCPA enforcement remains a high priority for the government even with the law enforcement challenges due to COVID-19.