Page 38 - U.S. FOREIGN CORRUPT PRACTICES ACT

A Resource Guide to the U.S. Foreign Corrupt Practices Act. Second Edition.

In a significant number of instances, DOJ had each engaged in bribery—both the new entity
and SEC have declined to take action against and the foreign subsidiaries were liable under the
companies that voluntarily disclosed and FCPA. The new parent entered into a deferred
remediated conduct and cooperated with DOJ and prosecution agreement with DOJ and settled a civil
SEC in the merger and acquisition context. 191 And action with SEC, while the company’s U.S.-based

DOJ and SEC have taken action against successor subsidiary pleaded guilty. 193
companies only in limited circumstances, generally More often, DOJ and SEC have pursued
in cases involving egregious and sustained enforcement actions against the predecessor
violations or where the successor company directly company (rather than the acquiring company),
participated in the violations or failed to stop the particularly when the acquiring company uncovered
misconduct from continuing after the acquisition. and timely remedied the violations or when the

In one case, a U.S.-based issuer was charged with government’s investigation of the predecessor
books and records and internal controls violations company preceded the acquisition. In one such
for continuing a kickback scheme originated by its case, a U.S.-based multinational conglomerate
predecessor. 192 Another recent case involved a acquired the power business of a French power and
merger between two oil and gas companies, where transportation company, which had paid bribes to

prior to the merger both predecessor companies obtain contracts prior to the acquisition. In that
committed FCPA violations over the course of case the matter was resolved with a guilty plea for
many years. The two companies, one of which was the French power and transportation company,
an issuer and the other a former issuer operating and deferred prosecution agreements for two of
through a U.S.-based subsidiary, merged to form the newly acquired subsidiaries; no successor
a new publicly traded company. Under these liability was sought against the acquiring entity. 194

circumstances—the merger of two companies that

Practical Tips to Reduce FCPA Risk in Mergers and Acquisitions
Companies pursuing mergers or acquisitions can take certain steps to identify and potentially reduce FCPA risks:

M&A Opinion Procedure Release Requests:
One option is to seek an opinion from DOJ in anticipation of a potential acquisition, such as occurred with
Opinion Release 08-02. That case involved special circumstances, namely, severely limited pre-acquisition due
diligence available to the potential acquiring company, and, because it was an opinion release (i.e., providing
certain assurances by DOJ concerning prospective conduct), it necessarily imposed demanding standards and
prescriptive timeframes in return for specific assurances from DOJ, which SEC, as a matter of discretion, also
honors. Thus, obtaining an opinion from DOJ can be a good way to address specific due diligence challenges,
but, because of the nature of such an opinion, it will likely contain more stringent requirements than may be
necessary in all circumstances.

M&A Risk-Based FCPA Due Diligence and Disclosure:
As a practical matter, most acquisitions will typically not require the type of prospective assurances
contained in an opinion from DOJ. DOJ and SEC encourage companies engaging in mergers and acquisitions to:
(1) conduct thorough risk-based FCPA and anti-corruption due diligence on potential new business acquisitions;
(cont’d)
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