The Justice Department issued an FCPA Opinion Procedure Release Friday, the first new release since November 2014, advising a U.S.-based investment advisor that fees paid to a foreign government-linked investment bank’s affiliate wouldn’t trigger an FCPA enforcement action.
The U.S.-based investment advisor (the Requestor) said it intended to pay $237,500 to the foreign investment bank unit as compensation for services that helped the Requestor acquire a portfolio of assets from another office of the same foreign investment bank. A government entity owns a majority of the shares of the foreign investment bank.
The Requestor said it received “specific, legitimate services” from the investment bank’s advisory unit and that the compensation to be paid for the services was commensurate with their value. The Requestor didn’t have a signed advisory agreement with the foreign investment bank for the services. But a draft agreement between them had specified an advisory fee of 0.5 percent of the value of assets to be acquired.
The DOJ said it wouldn’t bring an enforcement action because the payments from the Requestor were going to the foreign investment bank’s unit and not to any individual. The DOJ said the payment arrangements were “transparent” and that the Requestor had received assurances from the foreign investment bank unit’s chief compliance officer that the payment would only be used for the unit’s business operations and wouldn’t be forwarded to any other entity.
The DOJ said the facts revealed “no indicia that Requestor’s payment to the [foreign investment bank unit] is intended to corruptly influence a foreign official.”
The Requestor also represented to the DOJ that “there have been no corrupt offers, promises, or payments of anything of value, directly or indirectly, to any individual in connection with this transaction.”
The Opinion Procedure Regulations require requestors (issuers and domestic concerns) to give the DOJ all the relevant facts about an actual, not hypothetical, scenario. Opinion Releases aren’t binding on any party except the requestors, and only to the extent the requestors disclosed accurate and complete facts.
Congress directed the DOJ to give advisory opinions to help small and medium-sized businesses comply with the FCPA. Before 1993 the opinions were called Review Procedure Releases; from 1993 onward they’ve been called Opinion Procedure Releases.
There have never been a lot of FCPA opinion releases — just 62 since 1980. Even in the busiest year for releases, 2004, the DOJ issued just four of them.
Friday’s release was the first since late 2014, when a U.S. requestor planned to acquire a foreign company on which it couldn’t perform meaningful due diligence until after the acquisition, but which was suspected of having inadequate accounting practices that probably concealed illegal payments to foreign officials.
One reason companies stopped asking for DOJ releases is because the process can take a long time. Once a requestor submits an initial request, the DOJ can ask for more details. For Friday’s release, the Requestor submitted its original request on November 5, 2019, and provided “supplemental information” four times this year — on January 15, February 10, June 18, and July 17.
Another reason Opinion Procedure Releases fell out of favor is because they are publicly available and can reveal too much information about a planned overseas transaction or commercial relationship. Also, the FCPA Resource Guide, first published in 2012 and updated this year, collates and summarizes past releases, providing detailed guidance to anyone about FCPA enforcement policy.20-1