DOJ Reiterates Position On FCPA Successor Liability

By Yin Wilczek

Nov. 17 — In a rare opinion release, the Department of Justice Nov. 7 reiterated that successor liability under the Foreign Corrupt Practices Act does not “create liability where none existed before.”

In the release, the department told a company it didn't intend to initiate an FCPA enforcement action in connection with the acquisition of a foreign entity that had engaged in foreign bribery and deficient recordkeeping.

In view of the acquiring company's description of the circumstances, the alleged violative conduct doesn't fall under U.S. jurisdiction because the improper payments didn't occur in the U.S. or involve U.S. individuals or issuers, the DOJ said in its analysis. “The Department would thus lack jurisdiction under the FCPA to prosecute Requestor (or for that matter, Seller or the Target Company) for improper payments made by Seller or the Target Company prior to the acquisition,” it said.

Long-Debated

Successor liability has long been a subject of debate for companies and defense counsel, said Thomas Gorman, a Washington-based partner in Dorsey & Whitney LLP.

The release is an important affirmation of the DOJ's position, as stated in its FCPA resource guide, that “there is no successor liability based only on the prior conduct of the acquired company where the acts were not subject to prosecution,” Gorman said. He warned that because DOJ opinions are fact-specific, the release “is of limited use going forward.”

U.S. companies and others may request input from the DOJ under its FCPA opinion procedure as to whether their prospective activities conform to the department's enforcement policy. While providing guidance, the releases may be relied upon only by those asking for them, known as requestors, and only to the extent that the facts and circumstances represented are “accurate and complete.”

The DOJ rarely issues such releases—it issued only one other opinion in 2014, one in 2013 and two in 2012. Over the past two decades, the department issued the most FCPA opinions—four—in 2004.

In the latest release, a multinational company told the DOJ it is buying a foreign entity that has “negligible business contacts” in the U.S. During pre-merger due diligence, the company identified about $100,000 in transactions that may have gone toward bribing foreign officials to obtain permits and licences. The acquiring company also said it discovered significant recordkeeping shortfalls, shoddy compliance practices and lack of employee training on anti-bribery requirements.

To contact the reporter on this story: Yin Wilczek in Washington at ywilcek@bna.com

To contact the editor responsible for this story: Mike Moore at mmoore@bna.com