DOJ Releases First FCPA Advisory Opinion in Six Years
On August 14, 2020, the Department of Justice (DOJ) released its first Foreign Corrupt Practices Act (FCPA) advisory opinion since 2014. The new opinion, formally known as an "Opinion Procedure Release," was requested by a US investment firm seeking to pay a foreign state-owned bank for "certain enumerated analytical and advisory" services. While the conduct at issue and DOJ's response are unremarkable in substance, this latest release draws attention to a rarely used source of guidance on DOJ's concerns over foreign bribery—and the reasons that companies have generally been reluctant to avail themselves of the process, despite DOJ's encouragement that they do so.
Under the FCPA opinion procedure regulations, companies can request the Attorney General's opinion on whether specific contemplated conduct conforms with DOJ's enforcement policy regarding the anti-bribery provisions of the FCPA. The advisory opinions, which are anonymized and published online, are binding only on the requestors themselves and only to the extent that the requestors have provided DOJ with all relevant and material information.
As detailed in this latest opinion, a US-based investment advisor bought assets worth $47.5 million from a subsidiary of a foreign state-owned investment bank in February 2019. The next month, another of the foreign bank's units, which had assisted in the sale, asked the US buyer for a payment equal to 0.5% of the assets' value as compensation for analytical and advisory services provided during the two-year acquisition period. In November 2019, the US buyer asked DOJ for an advisory opinion on its intent to provide a fee to a foreign government entity for services, and also submitted supplemental information over the course of the next eight months. In the opinion, DOJ advised the company that the payment would not trigger an enforcement action, because the payment was made to a government-owned entity (not an individual) and was made in exchange for specific legitimate services.
DOJ's conclusion is unsurprising and consistent with previous advisory opinions, other DOJ guidance, and enforcement practices. In fact, the innocuous underlying fact pattern and lack of novel legal issues raise the question as to why this company requested an opinion at all. However, it is possible that details not included in the anonymized opinion—such as the possibility that the foreign bank or the requestor itself previously came under legal scrutiny—played a role in the company's decision to seek an advisory opinion here.
The investment firm's decision to request guidance is especially noteworthy given how few businesses have used the FCPA advisory opinion procedure. Not only is this the first FCPA advisory opinion published in six years, but, since 1993, DOJ has issued only 40 opinions total. By contrast, under the similar advisory opinion procedure for the Foreign Agents Registration Act (FARA), DOJ has published over 100 opinions since 2010. Companies' reluctance to use the FCPA opinion process comes despite DOJ's express encouragement that they seek advice on planned conduct that DOJ might perceive as implicating foreign bribery.
This track record raises the question: Why do so few companies use this avenue for communication with prosecutors? First, given the amount of time it takes to receive a reply from the government, engaging with DOJ may not be a realistic option for companies working in a fast-paced and dynamic corporate environment. Especially in the context of mergers and acquisition, businesses often need answers in days or weeks, and the advisory opinion process can take months. The process also may entail multiple rounds of communications, which can drag the timeline out further. For example, in the case of the latest opinion, the requestor provided supplemental information four times over the course of eight months following its original November 2019 request. DOJ finally published the opinion more than nine months later after the initial request, which itself was submitted over half a year after the proposal under review.
Second, companies may be hesitant to raise these issues with DOJ for fear of inviting unwanted questions or scrutiny, preferring instead to seek guidance from outside legal experts. The online (albeit anonymized) publication of these letters also may discourage some potential requestors if they worry that the opinions may reveal too much information to competitors or the media about planned transactions or relationships.
Finally, the release of DOJ guidance on the FCPA and related issues in recent years—including the FCPA Resource Guide, published in 2012 and updated in July 2020, and the FCPA Corporate Enforcement Policy—has provided welcome clarity on how US officials interpret and enforce the FCPA. This may have mitigated some of the need for additional requests for opinions.
For questions about the FCPA, the advisory opinion process, or broader anti-corruption issues, please reach out to the authors or any of their colleagues in Arnold & Porter's Anti-Corruption or White Collar Defense & Investigations practice groups.
*Nora Ellingsen contributed to this blog post. Ms. Ellingsen is a graduate of Harvard Law School and is employed at Arnold & Porter's Washington, DC office. Ms. Ellingsen is admitted only in California. She is not admitted to the practice of law in Washington, DC.
© Arnold & Porter Kaye Scholer LLP 2020 All Rights Reserved. This blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.