Principles in the FCPA Corporate Enforcement Policy are Applicable to Successor Companies in M&A

The DOJ announced on July 25, 2018, that it will apply the principles contained in the Foreign Corrupt Practices Act (FCPA) Corporate Enforcement Policy (the Policy) to acquiring companies that uncover misconduct by the acquired company in connection with pre- or post-acquisition anti-corruption due diligence. Thus, there now is a presumption of a declination to prosecute an acquiring or successor company that uncovers wrongdoing by the acquired company, where the former promptly reports that conduct to the DOJ, fully cooperates with the DOJ, and effectively remediates the problem.

Deputy Assistant Attorney General Matthew S. Miner announced the extension of the Policy at the American Conference Institute 9th Global Forum on Anti-Corruption Compliance in High Risk Markets. Miner noted that the DOJ/SEC Resource Guide published in 2012 states that DOJ “will give meaningful credit … and, in appropriate circumstances, … may consequently decline to bring enforcement actions” against successor companies that disclose and remediate misconduct. Miner acknowledged DOJ’s awareness that use of the word “may” in the Guide creates uncertainty for successor companies that discover misconduct before, during, or after an acquisition/merger. To alleviate this uncertainty, Miner announced that the DOJ will apply the principles enshrined in the Policy to M&A situations — presumption of declination if prompt self-reporting, active cooperation with the DOJ, implementation of effective remedial measures, and disgorgement of any ill-gotten gains associated with the wrongdoing.

Miner also urged acquiring companies that uncover corruption during the due diligence process to use the FCPA Opinion Procedures before completing an acquisition. These procedures allow a company to obtain an opinion from the attorney general as to whether certain prospective conduct conforms to DOJ’s present enforcement policy regarding the antibribery provisions of the FCPA. The FCPA Opinion process can take time and slow down a transaction, but Miner feels that “it sometimes makes sense to slow down to assess risks.” The FCPA Opinion Procedures have not been used since 2014, most likely because of the time the process takes and due to the increased transparency by DOJ in its charging documents and other guidance promulgated by the department over the past few years.

This extended application of the FCPA Corporate Enforcement Policy demonstrates the DOJ’s continued effort to incentivize companies to disclose potential wrongdoing and to cooperate with DOJ in its quest to hold those individuals responsible for the wrongdoing accountable. As Miner stated, the DOJ doesn’t want “the specter of enforcement to be a risk factor that impedes [M&A] activity by good actors, and instead cedes the field to noncompliant companies.” Miner believes that “this approach provides companies and their advisers greater certainty when deciding whether to go forward with a foreign acquisition or merger, as well as in determining how to approach wrongdoing discovered subsequent to a deal.”

To ensure that companies involved in mergers and acquisitions remain eligible to benefit from the FCPA Corporate Enforcement Policy, they should:

  • Review current FCPA due diligence policies and procedures to ensure they account for merger and acquisition activity.
  • Conduct training for relevant employees to include FCPA red flags in merger and acquisition activity.
  • Assess your compliance program’s ability to respond to an FCPA issue discovered during a merger or acquisition.
  • Conduct robust anti-corruption due diligence in all mergers and acquisitions.

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