I recently read all the advisory opinions that the Department of Justice posts online (there are dozens) in regards the Foreign Corrupt Practices Act (FCPA) [as you may appreciate, this was client-related, not recreational]. The FCPA makes it illegal to bribe foreign officials. I could find no advisory opinion where the DOJ said that a transaction violated the FCPA.
It is popular for white collar crime lawyers to insist that the FCPA has somehow morphed into a strict liability statute thanks to prosecutors’ expansive definitions. Crocodile tears. Maybe there is an argument that when the Securities and Exchange Commission (as opposed to the DOJ) enforces the FCPA’s bookkeeping requirements on publicly-traded companies, this comes close to strict liability. But even that is a stretch. While the mens rea standard is not been set in concrete, prosecutors generally must prove “willfulness” and “corruptly.” We would see more people going to prison if the FCPA did impose strict liability. FCPA prison sentences are exceedingly rare even as prosecutions and open investigations have boomed.
Which got me to thinking: has the FCPA advisory opinion procedure ever resulted in an indictment? Is it even possible for prosecutors to prove mens rea against people requesting an advisory opinion from the DOJ? How can you “corruptly” intend a bribe if you first check with federal prosecutors? Has the DOJ ever decided that, no, this transaction just doesn’t pass muster? With over three decades of interpretation, you would think that there would be at least a few cases where that happened...unless there is something in the process of requesting an advisory opinion that inoculates the transaction against criminal liability.
So, I emailed the DOJ’s Fraud Division the following:
Do you publish any opinion procedure releases, or do they even exist, where you tell the party requesting the opinion that, no, the transaction does not pass muster and is illegal under the Foreign Corrupt Practices Act? It appears that all the releases conclude with a "we see no problem and do not plan to take any action." If there any releases that say the opposite or something different, please me where to find these releases.
Oscar Gonzalez, Attorney
After a couple weeks of not hearing anything back, I emailed the DOJ again. And then again. My persistence finally paid off when last month the DOJ emailed me back the following:
Dear Mr. Gonzalez –
All of our opinions are available on the website. Releases under the prior procedure (pre-1988) are under a separate heading on the FCPA page.
Because the opinion procedure involves consultation between the parties, the requestors generally have the opportunity to adjust the circumstances to ensure they are compliant with the FCPA. Thus, the Department has not yet had occasion to state that a transaction would violate the FCPA in an opinion.
Fraud Section, Criminal Division
U.S. Department of Justice
The DOJ conceded that it has never issued a written advisory opinion that concludes that a transaction violates the FCPA.
There are, of course, a few possibilities to explain this state of affairs. First, it is unlikely that someone who blatantly violates the FCPA will ever file a request for an advisory opinion with the DOJ. The FCPA is not the most complicated law on earth, and you pretty much know when you violate it. It is hard, for example, to accidentally bribe someone. The advisory opinion procedure is designed for borderline cases, and is probably taken advantage of mostly by requestors who think they are already on the “no violation” side of the risk analysis. Second, as the DOJ explained, the DOJ and requestors work out and eliminate potential violations during their collaboration and before the DOJ releases a written opinion. The DOJ is playing nice, in other words.
I suspect there is a third factor at work: mens rea. The DOJ’s own regulations require that the transaction be an actual one. No hypotheticals accepted. 28 CFR 80.3. If the DOJ ever told a requestor “this is a violation,” then the DOJ might feel obligated to indict. Not only would that dissuade others from requesting written advisory opinions, but the DOJ would be shouldering a burden of proof and persuasion it would find nearly impossible to discharge. The DOJ (actually, the Attorney General) would be required to prove some level of bad intent, a huge hurdle given that the requestor came hat-in-hand to ask for the DOJ’s special guidance and blessing.
Thus, the DOJ created a procedure that inoculates would-be violators against FCPA enforcement actions.
How often does one see an enforcement agency divest itself of enforcement powers?
All this makes me reconsider the worth of requesting a FCPA written opinion from the DOJ.
The Foreign Corrupt Practices Act (FCPA) is alive and thriving. The FCPA has become a monster (in keeping with our Halloween theme) of an obstacle for companies seeking to secure business from foreign governments. The FCPA penalizes companies and individuals for bribing foreign officials. The Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) enforce the FCPA with increasingly devastating effect. Not only are these agencies vigorously prosecuting violators, they are also extracting huge settlements, often in the tens of millions of dollars and beyond. The SEC and DOJ are rumored to have well over one hundred active FCPA cases open at any one time.
The scariest part about the FCPA is that is everything just mentioned is not the scariest part. The scariest part is that Congress just placed a bounty on violators. As part of the recent overhaul of our nation’s financial sector, Congress enacted a law to reward people who report FCPA violators to enforcement authorities. Whistleblowers can get up to 30% of fines that the SEC (and possibly the DOJ) collect over $1 million. Competitors and disgruntled employees are about get very rich very quickly.
There is one hopeful development for would-be violators. The DOJ just released FCPA Advisory Opinion 10-3. It appears that the DOJ may be interpreting “foreign official” (an element under the FCPA) to allow some companies to possibly escape liability by taking certain precautions, including requesting an advisory opinion from the DOJ, following a recusal policy if suspect transactions surface, and alerting all parties of your preventative and remedial steps. The DOJ is not bound (or so it claims) to follow and apply current advisory opinions to future cases. Thus, the agency may not be so forgiving in future cases. Still, it may be worth your time to read FCPA Advisory Opinion 10-3 and follow the steps contained therein.
Principal and a founding member of GRVR Attorneys.