DOJ And The SEC Issue Much-Anticipated FCPA Guidance.


On November 14, 2012, the Department of Justice (DOJ) and Securities and Exchange Commission (SEC) published their long-awaited joint guidance on the US Foreign Corrupt Practices Act (FCPA or the Act). The guidance, entitled A Resource Guide to the U.S. Foreign Corrupt Practices Act (the Guide), is not an FCPA watershed that pronounces revamped enforcement priorities or alters the government's previously stated positions on some more controversial issues, as some may have hoped. And, to be sure, the Guide is non-binding a fact highlighted in the Guide's opening disclaimer. The courts will continue to have the final word on interpreting the Act.

It is, however, unprecedented in federal law enforcement that DOJ and the SEC have provided the public with such detailed information on their joint FCPA enforcement approach and priorities. In that regard, the Guide is a welcome publication that will no doubt serve as a useful resource, particularly for those who need a plain-language understanding of the Act and its relevance to international business and corporate compliance programs. In certain areas, however, the Guide leaves open difficult issues that face compliance officers and practitioners. This client alert provides our observations on key issues discussed in the Guide.


The Guide reiterates the government's expansive interpretation of the FCPA's interstate commerce element but does little to shed light on the jurisdictional necessities for prosecuting non-US persons or companies under § 78dd-3. Under § 78dd-1 (relating to US and non-US "issuers") and § 78dd-2 (relating to domestic concerns), the statute provides that certain conduct involve "use of the mails or any means or instrumentality of interstate commerce." The Guide observes that "placing a telephone call or sending an email, text message or fax from, to, or through the United States involves interstate commerce as does sending a wire transfer from or to a US bank or otherwise using the US banking system."1

Section 78dd-3, which applies to others who are not issuers or domestic concerns, has an additional requirement that the person commit an act "while in the territory of the United States." Thus, the statute can be read to require something more than emails, bank transfers, or the usage of other means of interstate commerce for those foreign companies or persons. In the hypothetical example relating to this issue, the Guide describes a relatively easy case in which all the relevant participants are physically present in the United States. What the Guide does not clearly address, is whether the government views activities such as phone calls, emails, or banking transactions as sufficient to satisfy the "in" the United States element. While the hypothetical addresses an instance involving physical US presence, it would likely be a mistake to assume the government has adopted the view that physical presence is always required to charge foreign companies or persons with substantive violations of § 78dd-3. The Guide does reiterate that, under a conspiracy theory, if any participant in the conspiracy engages in a relevant act in the United States, all the conspiracy's participants may be charged whether they act in the United States or not.

Corrupt Intent, Knowledge and Willfulness

The Guide does not provide new direction on the issues of what constitutes corrupt intent, knowledge, or willfulness. The Guide reminds readers that the FCPA's intent element does not require "successful" bribes or actual receipt of payment by a foreign official. The Guide also states that the payor need not know the identity of the recipient. Concerning the knowledge requirement, the Guide highlights the Second and Fifth Circuits' holdings that the FCPA does not require proof of specific knowledge of the FCPA's elements or knowledge that the conduct violated the FCPA.

On the issue of willfulness, the Guide restates the FCPA's language and legislative history regarding the meaning of "willful blindness," notes that FCPA liability can be imposed not only on those with actual knowledge of wrongdoing but also on those who "purposefully avoid actual knowledge," and briefly summarizes the Second Circuit's ruling in the United States v. Kozeny case, where the definition of willfulness was at issue.2 The Guide, however, neither delves deep into the controversies in recent cases regarding the specific nature of "willful blindness" nor reflects that this issue is a complicated and emerging one.

Business Purpose

The FCPA covers only payments to foreign officials that meet the so-called "business purpose test" payments must be intended to induce or influence an official to use his or her position "in order to assist . . . in obtaining or retaining business for or with, or directing business to, any person." Enforcement actions have shown that the government considers this test to be expansive. Reflective of that position are the examples listed in the Guide, which include influencing the procurement process, evading taxes or penalties, and obtaining exceptions to regulations. And, indeed, courts, such as the Fifth Circuit in the Kay decision, cited in the Guide, have also interpreted this requirement broadly. The Guide, however, glosses over Kay's nuanced holding.3 In Kay, the Fifth Circuit found that the FCPA could apply to bribes to evade customs duties and sales taxes but only if the government could show that the bribery was intended to produce an effect that would assist in obtaining or retaining business.4 The FCPA's business purpose limitation, as recognized by Kay, is still very much alive despite the government's (unsurprisingly) expansive position set forth in the Guide.

Gifts, Travel and Entertainment Expenses

The provision of gifts, travel, and entertainment to government officials is a perennial concern for businesses; the Guide attempts to draw some useful lines between permitted conduct and conduct that may violate the FCPA. The Guide notes that there is no minimum threshold amount for corrupt gifts or payments and cautions that "what might be considered a modest payment in the United States could be a larger and much more significant amount in a foreign country."5

The Guide distinguishes minor travel and entertainment expenses from other gifts and payments that would evidence a corrupt intent to influence an official, and it attempts to provide some reassurance that reasonable expenses would not likely violate the FCPA. The Guide notes that "cups of coffee, taxi fare, or company promotional items of nominal value" are unlikely to demonstrate corrupt intent.6 Moreover, the Guide states that: "[i]tems of nominal value" such as "reasonable meals and entertainment expenses, or company promotional items, are unlikely to improperly influence an official, and as a result, are not, without more, items that have resulted in enforcement action by DOJ or SEC."7 Efforts in the Guide to reassure readers that the government is not focused on de minimis items are helpful, but some ambiguity remains in the government's position. The Guide points out that the government has "focused on small payments and gifts only when they comprise part of a systemic or long-standing course of conduct that evidences a scheme to corruptly pay foreign officials to obtain or retain business."8 It is unclear whether the government would consider pursuing a long-standing or systemic practice of making small payments to one individual (which might arguably suggest a corrupt relationship with that official) or a long-standing or systemic practice of making small payments to various individuals (for which it is harder to see corrupt intent or effect).

The Guide provides examples of "larger or more extravagant" gifts, travel and entertainment that are more likely to demonstrate corrupt intent. For example, the Guide cites impermissible scenarios in which government officials were paid $500 to $1000 per diems in addition to meal, lodging, and transportation expenses on primarily sightseeing...

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