DOJ has expanded its efforts to give more concrete guidance to companies facing FCPA risk to M&A transactions and the question of successor liability. In a speech on July 25, 2018, at the American Conference Institute’s 9th Global Forum on Anti-Corruption Compliance in High Risk Markets, Deputy Assistant Attorney General Matthew S. Miner highlighted DOJ’s views on successor liability for FCPA violations by acquired companies.[1] Miner sought to clarify DOJ’s policy regarding the voluntary disclosure of misconduct by successor companies and to highlight the benefits of such disclosure as spelled out in the joint DOJ and SEC FCPA Resource Guide (the “Resource Guide”).[2] In general, as with other recent pronouncements and actions by DOJ, such as the FCPA Corporate Enforcement Policy,[3] Miner’s speech seemed intended to highlight ways in which firms can gain cooperation credit (up to and including a declination) in FCPA investigations.
The Resource Guide, published in 2012, states that “[a]s a general legal matter, when a company merges with or acquires another company, the successor company assumes the predecessor company’s liabilities . . . and FCPA violations are no exception.”[4] However, as Miner explained, the Resource Guide also recognizes that “a successor company’s voluntary disclosure, appropriate due diligence, and implementation of an effective compliance program may also decrease the likelihood of an enforcement action regarding an acquired company’s post-acquisition conduct when pre-acquisition due diligence is not possible” and “DOJ . . . will give meaningful credit to companies who undertake these actions, and, in appropriate circumstances, DOJ . . . may consequently decline to bring enforcement actions.”[5]
Miner acknowledged that acquiring companies may want greater clarity as to how DOJ will exercise its discretion to decline prosecution following an M&A event. He explained his understanding that “‘may’ decline is a significant sticking point for corporate management” in deciding how to proceed in the M&A context. Miner went on to clarify that the DOJ “intend[s] to apply the principles contained in the FCPA Corporate Enforcement Policy to successor companies that uncover wrongdoing in connection with mergers and acquisitions and thereafter disclose that wrongdoing and provide cooperation, consistent with the terms of the Policy.”[6]
Miner’s remarks suggest that DOJ has prioritized encouraging robust compliance policies and diligence on the part of acquiring companies and ensuring the continued entry of companies into high risk markets and industries. Miner also advocated the benefits both to industry and the economy when companies with strong compliance cultures uncover wrongdoing, self-report, and cooperate with DOJ and to DOJ when resources that would otherwise be spent investigating an acquired company can be dedicated to other areas.
Another related area of emphasis for Miner was the FCPA Opinion Procedure,[7] which allows a company that discovers potential corruption issues during the diligence process to seek guidance from DOJ. The FCPA Opinion Procedure, which is rarely used (and was last used in 2014), provides that “an issuer or domestic concern” can request an opinion from the Attorney General regarding prospective conduct in an actual—and not hypothetical—transaction. If the Attorney General issues an opinion that the conduct that was the subject of the request is in compliance with DOJ’s current enforcement policy, the requestor is entitled to a rebuttable presumption in a subsequent enforcement action that the requestor’s conduct is in compliance with the FCPA. While the procedures provide that an opinion shall be issued within 30 days after the request, provided the request contained all necessary information and there were no requests for additional information, historically the process can take several months from start to finish. Miner noted that Opinion Procedure Releases are publically available, but that the process is not frequently used. He encouraged companies to take the time to seek guidance from DOJ and noted that DOJ “can, to a degree, expedite our analysis based on timing needs.”[8] Although time is often of the essence in M&A transactions, the FCPA Opinion Procedure in certain contexts may be a valuable resource that companies may overlook.
Miner’s speech highlights DOJ’s ongoing efforts to encourage companies to cooperate in the FCPA context and, in that vein, to articulate specific and concrete steps to maximize such credit. It is thus important for companies to familiarize themselves with the FCPA Corporate Enforcement Policy and to ensure that they have in place robust mechanisms to prevent, detect, and remediate issues as they arise. And, significantly, Miner reaffirmed the importance of diligence on corruption issues in M&A transactions, remediation if wrongdoing is identified, and ensuring that an acquired company has appropriate compliance programs and controls in place to prevent and detect misconduct.
[1] DOJ Press Release, Deputy Assistant Attorney General Matthew S. Miner Remarks at the American Conference Institute 9th Global Forum on Anti-Corruption Compliance in High Risk Markets, https://www.justice.gov/opa/pr/deputy-assistant-attorney-general-matthew-s-miner-remarks-american-conference-institute-9th [hereinafter “Miner Remarks”].
[2] A Resource Guide to the U.S. Foreign Corrupt Practices Act, 2012, https://www.justice.gov/sites/default/files/criminal-fraud/legacy/2015/01/16/guide.pdf [hereinafter “FCPA Resource Guide”].
[3] For additional discussion of DOJ’s FCPA Corporate Enforcement Policy see The New DOJ FCPA Corporate Enforcement Policy Highlights the Continued Importance of Anti-Corruption Compliance, Cleary Enforcement Watch (Jan. 9, 2018), https://www.clearyenforcementwatch.com/2018/01/new-doj-fcpa-corporate-enforcement-policy-highlights-continued-importance-anti-corruption-compliance/; DOJ Releases FCPA Corporate Enforcement Policy, Cleary Enforcement Watch (Dec. 1, 2017), https://www.clearyenforcementwatch.com/2017/12/doj-releases-fcpa-corporate-enforcement-policy/. For a further discussion of a recent settlement under the FCPA Corporate Enforcement Policy see Recent Settlement Highlights Cooperation Parameters Under the Department of Justice’s FCPA Corporate Enforcement Policy, Cleary Enforcement Watch (Jul. 6, 2018), https://www.clearyenforcementwatch.com/2018/07/recent-settlement-highlights-cooperation-parameters-department-justices-fcpa-corporate-enforcement-policy. The recent Lava Jato investigation highlights the significance of ever-expanding anti-corruption legislation and prosecutions globally and the importance of effective due diligence, robust compliance policies, and understanding M&A risk in the FCPA context. For a further discussion of Lava Jato and approaches to minimizing FCPA risk see Investors, Brazil and the FCPA: Minimizing M&A Risk in the Wake of Lava Jato, Cleary Enforcement Watch (Jan. 11, 2018), https://www.clearyenforcementwatch.com/2018/01/investors-brazil-fcpa-minimizing-ma-risk-wake-lava-jato/.
[4] FCPA Resource Guide at 28.
[5] Miner Remarks at 5 (quoting FCPA Resource Guide at 29, 30).
[6] Miner Remarks at 5.
[7] For more information on the Foreign Corrupt Practices Act Opinion Procedure, 28 C.F.R. Part 80, see https://www.justice.gov/sites/default/files/criminal-fraud/legacy/2012/11/14/frgncrpt.pdf.
[8] Miner Remarks at 6.