Page 41 - U.S. FOREIGN CORRUPT PRACTICES ACT

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

Scenario 2:

Company A performs only minimal and pro forma pre-acquisition due diligence. It does not conduct a risk-
based analysis, and its review of Foreign Company’s data, contracts, and third-party and distributor agreements
is cursory. Company A acquires Foreign Company and makes it a wholly owned subsidiary. Although Company A
circulates its compliance policies to all new personnel after the acquisition, it does not translate the compliance
policies into the local language or train its new personnel or third-party agents on anti-corruption issues.
A few months after the acquisition, an employee in Company A’s international sales office (Sales Employee)
learns from a legacy Foreign Company employee that for years the government contract that generated most of
Foreign Company’s revenues depended on inflated commissions to a third-party agent “to make the right person
happy at Foreign Government Agency.” Sales Employee is told that unless the payments continue the business
will likely be lost, which would mean that Company A’s new acquisition would quickly become a financial failure.
The payments continue for two years after the acquisition. After another employee of Company A reports the
long-running bribe scheme to a director at Foreign Government Agency, Company A stops the payments and DOJ
and SEC investigate.

Based on these facts, would DOJ or SEC charge Company A?

Yes. DOJ and SEC have prosecuted companies like Company A in similar circumstances. Any charges would
not, however, be premised upon successor liability, but rather on Company A’s post-acquisition bribe payments,
which themselves created criminal and civil liability for Company A.

Scenario 3:
Under local law, Company A’s ability to conduct pre-acquisition due diligence on Foreign Company is limited.
In the due diligence it does conduct, Company A determines that Foreign Company is doing business in high-risk
countries and in high-risk industries but finds no red flags specific to Foreign Company’s operations. Post-
acquisition, Company A conducts extensive due diligence and determines that Foreign Company had paid bribes
to officials with Foreign Government Agency Company A takes prompt action to remediate the problem, including
following the measures set forth in Opinion Procedure Release No. 08-02. Among other actions, it voluntarily
discloses the misconduct to DOJ and SEC, ensures all bribes are immediately stopped, takes remedial action
against all parties involved in the corruption, and quickly integrates Foreign Company into a robust compliance
program and Company A’s other internal controls.

Based on these facts, would DOJ or SEC prosecute Company A?
DOJ and SEC have declined to prosecute companies like Company A in similar circumstances. Companies
can follow the measures set forth in Opinion Procedure Release No. 08-02, or seek their own opinions, where
adequate pre-acquisition due diligence is not possible.

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