Unpeeling Opinion Procedure Releases

Our post about DOJ Release 08-03 — which deals with the payment of promotional expenses to journalists who work for state-owned media in China — drew this comment from Frequent Reader . . .

Interesting, but the value of the release is uncertain to commercial companies that cannot meet the stipulation that they “have no business pending with any PRC government agency.” Unlike TRACE, many US companies are in China to conduct commercial business which inevitably means business will likely be pending with a PRC agency or state-owned entity.

We responded this way . . .

Careful. TRACE’s “representations” are not necessarily “conditions” applicable to all companies in a similar situation. For example, in at least one other recent Release related to the PRC involving promotional expenses, Release 07-02 (September 11, 2007), the Requestor represented that it had no non-routine business pending before the agency that employed the specific “foreign officials” receiving payments. That’s a much narrower representation and could apply to many or even most companies.

Since we’re the blogger here, we’re going to say a bit more . . .

When it comes to DOJ Opinion Procedure Releases, user beware. A too-literal reading can distort the analysis. Before we get into that, though, let’s say a few words in praise of Releases.

FCPA practitioners don’t have a body of appellate opinions to help unlock the law’s mysteries. Instead we have Releases. Although not binding on anyone except the requesting parties, and creating no legal precedent in the strict sense for anyone else, Releases still carry weight in the compliance community. With so little FCPA litigation, Releases become a de facto substitute for judicial interpretation. They don’t have the force of law behind them (except as to requestors), but they’re cited by practitioners and compliance professionals as “official” guidance from the government. We’re no exception; we rely on Releases all the time.

So what’s the problem? It’s this: Releases often contain too much information. Why? Because the Opinion Procedure Regulations in 28 CFR Part 80 say, among other things, that a request to the DOJ must contain all details of the transaction. So requestors throw in the kitchen sink.

And what happens? The kitchen sink that’s in the request frequently shows up in the final Release, too, where “facts” are often called “representations.” But representations (aka facts) aren’t equivalent to “conditions,” and not all representations are equal. The facts of one case may never be duplicated in another case, and facts that are important here may not even be relevant there. Again, however, because requestors are required by law to disclose all of their relevant facts, and because those facts are likely to be repeated in the final Release, the so-called representations simply accrete. They grow like barnacles from one Release to the next. That’s happened most obviously with Releases dealing with promotional expenses, a phenomenon we’ve commented on before.

This accretion doesn’t mean the DOJ is requiring each and every representation (aka fact) in the Release. All it means is that the latest requestor had his or her own specific facts that had to be included in the request. That’s the case with Release 08-03. TRACE, a non-profit organization, happens to have no pending business with the PRC government. That’s a fact, not a requirement, and it could have been different. And then there are other requestors — driven by caution or advocacy or both — who load up their requests with lots of representations (aka facts) they’ve seen in earlier Releases. And so the barnacles grow.

Wherever they come from, the so-called representations in Releases shouldn’t be mistaken for requirements. There are some of those, of course, but they’re less common. But does all this matter? Yes it does, because viewing every representation in a Release as a requirement can only produce a view of the FCPA’s affirmative defenses and exception that are too narrow to be of much use.