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DOJ Reassures Companies Fearing Certain Successor Liability, Further Turns its Attention to Individual Executives

Publisher: Day Pitney Alert
November 21, 2014
Day Pitney Author(s) Robert M. Appleton

A U.S. Department of Justice ("DOJ") opinion released earlier this week suggests that, under the right circumstances, companies that buy foreign businesses may not incur liability for the target's pre-acquisition corrupt conduct if the misconduct occurred outside the U.S. and did not involve U.S. nationals. In issuing the Opinion, the DOJ was responding to a request in April from an anonymous U.S. consumer products company planning to acquire a foreign business that, according to an internal inquiry conducted by the acquiring company, had made improper payments to foreign government officials in the past. The company had sought the DOJ's view of the propriety of the transaction, which resulted in the issuance of the Opinion.

In a rare response confirming it did not intend to take action, the DOJ cited a section of its FCPA resource guide, which states that "[I]f an issuer were to acquire a foreign company that was not previously subject to FCPA's jurisdiction, the mere acquisition of that foreign company would not retroactively create FCPA liability for the acquiring issuer." In the current case, the DOJ found it significant that there was no jurisdiction for the perceived bad acts at the time of their occurrence, and the fact that a U.S. company acquired the entity did not give rise to jurisdiction where none previously had existed. In addition, the Opinion also plainly identified the fact that the U.S. company planned to divest any tainted contracts and assets from the target business before acquiring it, and that it had done its due diligence beforehand.

It is unusual for the DOJ to publish such opinions, having done so only once before in 2014, and just once in 2013. The facts underlying the Opinion, however, are not rare. Often, target companies have problematic histories, and the acquirer is concerned about what it might be inheriting. The Opinion bears noting for the fact that it appears to rely on the quality of the company's efforts to undertake due diligence and remediate the identified deficiencies prior to closing. It also clearly bears noting the Opinion found that there was no jurisdiction over the activities and parties at the time of the events in question. The DOJ, of course, stressed that the Opinion only related to the particular circumstance in that case, did not bind them in any other case, and should be considered null and void if the facts later turned out to be different than represented.

In other very recent events, in Washington, D.C., Assistant Attorney General Leslie R. Caldwell, who helps lead the DOJ's FCPA efforts, confirmed at the American Conference Institute's International Conference on the FCPA that the DOJ will continue to focus upon individual officers of companies responsible for FCPA offenses. She confirmed that "there is a trend in prosecuting individuals [for such offenses] and that [she] expects that to continue." Caldwell also confirmed the DOJ's increased participation with foreign partner governments, indicating that the DOJ is not the only enforcement agency that will play a significant role in rooting out foreign corrupt practices going forward. Caldwell noted that several other countries are focusing on individuals that facilitate illegal bribes, and bringing their own actions against U.S. and foreign companies, as well as their corporate officers. Such countries include the United Kingdom, Colombia, France, Japan and the Philippines.

Also, at the Conference, the Director of the Division of Enforcement of the Securities and Exchange Commission Andrew Ceresney confirmed that the SEC will continue to "look for opportunities" to bring more FCPA-related cases. Importantly, Ceresney reinforced the need for all companies that engage in commercial activity abroad to have instituted sound compliance programs. He stated that the agency will "look well on companies that have robust [compliance] programs and that the existence of such programs will pay dividends should an FCPA issue arise."