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FCPA Guidance Update: DOJ and SEC Release Second Edition of Resource Guide to the U.S. Foreign Corrupt Practices Act

Jul.09.2020

On July 3, 2020, the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) released the second edition of their Resource Guide to the U.S. Foreign Corrupt Practices Act (the “Guide”). This new edition provides several clarifications on the enforcement agencies’ view of the FCPA, adds summaries of recent cases and declinations, incorporates DOJ's recently updated guidance on the Evaluation of Corporate Compliance Programs, and addresses other agency policies issued since the first edition including the FCPA Corporate Enforcement Policy and policies on the selection of monitors and the coordination of corporate resolutions. Although the substance of the Guide remains largely unchanged, it does contain several notable edits that give some further insight into DOJ and SEC’s perspective on key developments in the law and enforcement issues under the FCPA since the first edition was published in 2012. While companies’ attention may be elsewhere during the COVID-19 pandemic, they should nevertheless remain vigilant in maintaining and enforcing their anti-bribery and anti-corruption programs. This updated Guide provides additional insights for doing so.

Some of the more significant updates include:

  • Jurisdictional limits: Acknowledging that the FCPA has some jurisdictional limits, the Guide describes the 2018 Second Circuit decision in United States v. Hoskins, which held that a foreign national who did not fall under the categories of persons specifically enumerated in the FCPA’s anti-bribery provisions (because he was not a U.S. national, worked for a foreign company overseas, and did not have an agency relationship with an entity or person directly subject to the anti-bribery provisions) could not be held liable under a conspiracy or aiding-and-abetting theory for violating those anti-bribery provisions. The Guide makes sure to point out, however, that a district court in the Seventh Circuit came to the opposite conclusion in 2019, perhaps suggesting that the agencies will continue to pursue enforcement and litigation on this front, albeit not in the Second Circuit. The Guide also notes that the Second Circuit’s reasoning in Hoskins does not apply to the FCPA’s accounting provisions, which apply to “any person.”
  • “Instrumentality” of foreign governments: The Guide adds a detailed discussion of the non-exhaustive list of factors set forth in 2014 by the Eleventh Circuit in U.S. v. Esquenazi for evaluating whether an entity is an “instrumentality” of a foreign government, such that an employee or official of that entity would be considered a “foreign official” under the FCPA. These factors include the foreign government’s formal designation of that entity, whether the government has a majority interest in the entity, the government’s ability to hire and fire the entity’s principals, the extent to which the entity’s profits go directly into the government’s fiscal accounts and the extent to which the government funds the entity if it fails to break even, whether the entity has a monopoly over the function it carries out, whether the government subsidizes the entity’s costs, whether the entity provides services to the public at large in the foreign country, and whether the government and public of that country generally perceive the entity to be performing a governmental function. 
  • Compliance programs: The Guide includes additional content regarding the importance of a strong corporate compliance program, in particular as the agencies evaluate a company’s qualification for cooperation credit and consider how to resolve a case. However, this is basically a restatement of recent guidance from the agencies, including last month’s updated “Evaluation of Corporate Compliance Programs” guidance from DOJ.
  • Accounting provisions: In addition to highlighting the broader jurisdictional scope for conspiracy and aiding-and-abetting liability, the Guide clarifies that the accounting provisions apply to a company’s internal accounting controls and not to a compliance program writ large, although there may be some overlap between the two. The Guide also notes that companies and individuals may be held criminally liable for violating the accounting provisions only if their failure to comply is both knowing and willful (the previous edition omitted the “willfulness” requirement).
  • Statute of Limitations: The Guide notes a difference in the statute of limitations for criminal actions based on the anti-bribery provision (five years) and criminal actions prosecuting violations of the accounting provision (six years), which are defined as “securities fraud” offenses. Of course, both of these limitations periods can be extended for up to three years when DOJ seeks to obtain foreign evidence. The Guide also acknowledges a change in the statute of limitations for civil cases: the prior edition stated that the SEC was subject to a five-year statute of limitations for civil penalties but that the SEC could seek equitable remedies, such as an injunction or disgorgement, for conduct pre-dating that five-year period. The updated Guide notes that the Supreme Court held in Kokesh v. SEC that disgorgement was a “penalty” and, as such, is also subject to the five-year statute of limitations. 
  • Disgorgement: In addition to acknowledging the five-year statute of limitations for disgorgement, the Guide also adds a new section clarifying the purpose of disgorgement, noting that the Supreme Court in Liu v. SEC recently held that disgorgement is permissible when it does not exceed the net profits of the wrongdoer and is returned to victims. It remains to be seen whether the SEC will endeavor to return disgorged FCPA profits to “victims” of an offense, particularly since many accounting offenses, which need not be material, will have no victims, and victims of other offenses may be extremely difficult to identify, if they exist.
  • Agency cooperation: The Guide adds a new section addressing the DOJ and SEC’s efforts to reach coordinated resolutions to avoid duplicative penalties, forfeiture and disgorgement for the same conduct (known as the anti-piling on guidance). It also notes that the agencies have, in many cases, reached coordinated resolutions with foreign regulators. Moreover, demonstrating increased inter-agency collaboration within the U.S., the Guide now identifies the Postal Inspection Service, the Board of Governors of the Federal Reserve System, the Commodity Futures Trading Commission, and the Financial Crimes Enforcement Network as additional agencies involved in the fight against international corruption. 

The second edition of the Guide provides some valuable updates. It presents detailed summaries of recent FCPA cases, clarifies the DOJ and SEC’s approach to FCPA enforcement, and serves as a comprehensive roadmap for companies to reference as they assess, enhance, and implement their anti-corruption and anti-bribery programs and navigate FCPA investigations.

For more information, please contact the professional(s) listed below, or your regular Crowell & Moring contact.

Thomas A. Hanusik
Partner – Washington, D.C.
Phone: +1 202.624.2530
Email: thanusik@crowell.com
Kelly T. Currie
Partner – New York
Phone: +1 212.895.4257
Email: kcurrie@crowell.com
Derek A. Hahn
Partner – Orange County, Los Angeles
Phone: +1 949.263.8400 , +1 213.622.4750
Email: dhahn@crowell.com
Nimrod Haim Aviad
Partner – Los Angeles
Phone: +1 213.443.5534
Email: naviad@crowell.com
Arlen Pyenson
Counsel – New York
Phone: +1 212.803.4057
Email: apyenson@crowell.com