Many an in-house compliance professional has spent a weekend (or ten) consumed with handling the tricky questions presented when an employee finds themselves incarcerated in one emerging market or another. It is unclear, especially at first, whether the arrest was justified in most cases. And, it is often the case that a friendly local police officer or judge has suggested that a payment would free the employee. How companies handle this scenario varies, often depending on the perceived justification of the incarceration.
A company may be willing to make a payment where it is clear the employee was jailed simply so that the police could extort a payment and refuse to make a payment where it seems likely that the employee may have violated the law. A payment in the former scenario might be considered a “personal safety payment,” while a payment in the latter scenario could well be a bribe.
On January 21, the DOJ issued an Opinion Procedure Release (OPR) which speaks to this scenario in ways that seem strange and not at all intuitive. In short, the DOJ sanctioned a $175,000 payment – almost certainly to a government official – to get an employee out of jail and allow a ship to continue on its way.
Without reciting all the details in the OPR, I note the following salient facts: A ship captain was incarcerated after inadvertently sailing his ship into the waters of “Country A.” The captain had serious health issues, and the detention was putting his life in danger. According to the DOJ, Country A authorities did not “provide any documentation authorizing his arrest or detention.” Shortly after the detention, a “Third Party Intermediary” approached the company and demanded a payment to release the captain and permit the vessel to leave Country A’s waters. The company engaged an agent with whom it was familiar and whom it had put through diligence to liaise with the Third Party Intermediary. The company and the Intermediary engaged in various means to have the captain released, including working with the U.S. government, presumably including the State Department.
In the end, the company was unable to ascertain any sort of legitimate basis for the proposed payment. The DOJ further noted in the OPR that “it is possible that [the company] inadvertently violated Country A, and perhaps other, regulations and laws governing shipping routes and anchoring locations.”
In requesting an OPR, the company asked the DOJ whether it would bring an enforcement action were the company to make a $175,000 payment to the Third Party Intermediary to cause Country A to allow the ship to leave its waters and to release the captain. The DOJ answered no, it would not bring an enforcement action were the payment to be made. The DOJ based this decision on its view that the payment would not be made “corruptly” or to “obtain or retain business.” And, the DOJ cited the Kozeny case and the DOJ/SEC Resource Guide for the proposition that a payment forced by the threat of serious harm or death does not violate the FCPA.
While the situation faced by the company was certainly a difficult one, it was also one that is relatively common. That the DOJ essentially blessed the payment of $175,000 to circumvent Country A’s legal system is more than a little strange, especially in view of the scant analysis provided in the OPR. The DOJ concluded that the payment would not be to “obtain or retain business,” noting simply that the company has no actual or anticipated business with Country A.
The DOJ failed, however, to address the obvious commercial interest that the company had in getting Country A to allow the ship to leave its waters (and getting the captain out of jail so that he might captain the ship). More egregiously, the OPR is completely silent on how the DOJ justified the payment while also acknowledging that the company may well have violated the law. In other words, the captain’s incarceration and the ship’s detention may well have been legal under the laws of Country A. If that is the case, it is hard to understand how the payment was not a bribe – even when considering the perilous situation of the captain.
OPRs do not have the force of legal precedent, and companies cannot rely on them as a matter of law. Nevertheless, they do – as the DOJ is aware – have enormous value to companies in providing guidance, particularly concerning thorny situations. This OPR will certainly inform how companies handle the tricky scenario of incarcerated employees in a way that may not promote respect for the rule of law in emerging markets. Given this, it seems like a strange decision, and I, for one, would welcome more explication of the DOJ’s rationale.