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US DOJ breaks six-year hiatus with FCPA Advisory Opinion

United States Publication August 2020

On August 14, 2020, the US Department of Justice (DOJ) released its first advisory opinion in six years (Advisory Opinion). Specifically, a US-based investment advisor (the Requestor) sought guidance on whether the DOJ would charge the Requestor with violating the Foreign Corrupt Practices Act (FCPA) if it made a payment to an investment bank's affiliate linked to a foreign government. After multiple rounds of information requests over approximately nine months, the DOJ stated that it would not take any enforcement action because the payment would be to a foreign government instrumentality, not a foreign official, and would not be for the purpose of improperly influencing a foreign official. While the Advisory Opinion does not mark a shift in the DOJ's interpretation of the FCPA, it does underscore some of the practical limitations with the opinion procedure in time sensitive circumstances.

FCPA opinion procedure

Evaluating the FCPA risks associated with payments in complex circumstances involving foreign government officials can often be complicated. Making a decision that the DOJ second guesses and then disagrees with can have potentially drastic consequences. An infrequently utilized way to obtain comfort in such situations is the opinion procedure process. Companies may use that process to seek an opinion from the DOJ as to "whether certain specified, prospective—not hypothetical—conduct conforms with the [DOJ's] present enforcement policy regarding the anti-bribery provisions of the [FCPA]."1

These opinions provide immunity solely to the requestor (and not any other parties) from prosecution by the DOJ with respect to the facts disclosed to the DOJ, assuming they are presented in an accurate and complete manner. Once a company submits its request, the DOJ must respond within 30 days after receipt by either issuing an opinion or requesting additional information.2 The DOJ may make multiple information requests, which has the effect of extending the timeline for issuing an opinion.

The DOJ has issued advisory opinions on various topics, such as due diligence and controls that minimize the likelihood of an FCPA violation in the context of charitable donations or grants; legitimate promotional and contract-related expenses, including travel and lodging expenses; and pre-acquisition due diligence, including appropriate procedures to undertake when pre-acquisition due diligence is not possible. Although advisory opinions can be useful, they are not routinely used, as demonstrated by the six-year hiatus. Since 1993, the DOJ has only issued 40 advisory opinions.

Summary of the new Advisory Opinion

As detailed in the Advisory Opinion, the Requestor submitted its initial request on November 5, 2019. After providing supplemental information in response to four follow up DOJ requests, the DOJ finally issued the Advisory Opinion on August 14, 2020, or approximately nine months after the initial request.

The facts appear to be relatively straightforward. The Requestor was seeking to purchase a portfolio from the wholly-owned subsidiary of a foreign investment bank (Investment Bank), which is majority owned by a foreign government. During the course of the pending purchase, the Requestor retained the services of one of the Investment Bank's other subsidiaries in connection with the purchase. After the sale, that subsidiary sought from the Requestor a fee as compensation for its services, which the Requestor described as legitimate and commercially valuable. The Requestor sought confirmation from the DOJ that it would not contend that the payment to that subsidiary violated the FCPA. The DOJ agreed for the following reasons:

  1. No payment to foreign official. The FCPA prohibits corrupt payments to foreign officials (i.e., individuals), not foreign governments or the entities they control.
  2. No indication of corrupt intent. There is no indication that the payment was intended to corruptly influence a foreign official – no corrupt offers, promises, or payments of anything of value to any individual. Moreover, the Chief Compliance Officer of the subsidiary certified that the payment would only be used for the subsidiary's benefit and not forwarded to another entity.
  3. Legitimate services. The services provided were legitimate and the value was commercially reasonable.

Practical implications

The Advisory Opinion does not reflect a change in the DOJ's enforcement stance. The DOJ's decision not to pursue an enforcement action with respect to a payment to a government-owned entity for legitimate services (albeit in the absence of an executed agreement) is not particularly surprising.

The length of time for resolution is, however, notable, given the relatively uncomplicated nature of the issues. The process took nine months and involved four supplemental document requests from the DOJ. Issues that are far more complicated or cutting-edge, therefore, could be expected to take significantly longer to resolve via the opinion procedure process. In most business contexts, such a time lag will not be a viable option.

Therefore, utilizing this process puts a significant premium on being both exhaustive and absolutely clear with the information provided to the DOJ in the initial submission in order to minimize the need for follow up requests. Otherwise, the utility of the opinion procedure process is likely to be lost.


Footnotes

1   28 CFR § 80.1

2   Id. § 80.8.



Contacts

Head of Regulation, Investigations, Securities and Compliance, United States
Head of Risk Advisory, United States

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