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FCPA Blog Daily News

Entries in Opinion Procedure Release (42)


JP Morgan revisited: What's a princeling supposed to do?

We at the FCPA Blog are long overdue in recognizing the new resource that is the Global Anticorruption Blog. With my colleague in the legal academy, Harvard Law professor Matthew Stephenson, at the helm, GAB analyzes corruption law issues with uncommon intellectual rigor. They break down issues as few can. In so doing, they add great value to the anti-corruption debates of our day.

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The princeling problem: In search of a legal theory (Part 1)

Recently, I had the good fortune of hearing a partner from a leading FCPA practice discuss JP Morgan's hiring of Chinese princelings.

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My partner is now a foreign official! First DOJ opinion release of 2014

The DOJ issued its first FCPA opinion procedure release of the year on March 17 (and posted it to its website nearly a week later).

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In year's first FCPA opinion, DOJ clears ‘humanitarian aid’

On December 19, the Justice Department published FCPA Opinion Procedure Release No. 13-01, ruling that a law firm partner could pay some medical expenses of foreign official's daughter.

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DOJ: Not all royals are 'foreign officials'

As Mike Koehler noted yesterday, the DOJ has issued its first Opinion Procedure Release of 2012.

The release is dated September 18 but didn't appear on the DOJ's website until this week.

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Scholarship That Rocked The Boat

A few years ago, after a dozen or so enterprising law students asked me what FCPA-related topics were ripe for research, I answered with a post on the FCPA Blog.

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Year's First DOJ Opinion Deals With Promotional Expenses

In its first FCPA Opinion Procedure Release of 2011, the DOJ confirmed what should be obvious -- that the promotional expenses affirmative defense can be used to pay travel expenses of government officials who are being shown a company's products.

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Bigger And Better: Hughes Hubbard's 2011 Spring Alert

Hughes Hubbard's annual FCPA reviews are new kids on the block. But we don't know a better source for FCPA and compliance-related information.

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Former AG Wants 'Meaningful' FCPA Advice From Feds

In his testimony last week before the House committee investigating the FCPA, former U.S. Attorney General Michael Mukasey proposed improving the procedures for guidance and advisory opinions from the DOJ. He said the current practice is inadequate and little used.

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Where Is Canada, Really?

Why is Canada's anti-bribery enforcement moving at a crawl? Cyndee Todgham Cherniak says the answer may be found not in the similarities between U.S. and Canadian enforcement, but in the differences.

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Lobbyists Aren't Always Foreign Officials

In FCPA Opinion Procedure Release No. 10-03 issued Wednesday, the Requestor -- a U.S. limited partnership -- is working with a foreign government on "an innovative natural resources project with a novel approach," and needs help dealing with that government.

The consultant it retained -- a U.S. partnership and its U.S. owner -- is registered as an agent of the foreign government under the Foreign Agents Registration Act, 22 U.S.C. § 61. The consultant "has extensive contacts in the business community and the government in the foreign country, has previously and currently holds contracts to represent the foreign government and act on its behalf, including performing marketing on behalf of the Ministry of Finance, and lobbying efforts in the United States."

While working for the Requestor, the consultant won't be doing any lobbying for the foreign government. And those employees of the consultant still working for the foreign government will be walled off from the Requestor's business. In addition to other controls, the consultant won't have authority to make any decisions on behalf of the foreign government in connection with the Requestor's business. Under local law, according to an opinion the Requestor received, the consultant and its employees aren't officials of the foreign government, and the consultant can legally contract with the Requestor while continuing its other work with the foreign government.

Because the consultant is an agent of the foreign government, and sometimes acts on its behalf, the consultant and its employees could be “foreign officials” for purposes of the FCPA. But in this case, the DOJ said, "the consultant and its owner are not acting on behalf of the foreign government and therefore are not foreign officials."

By walling off the consultant's employees, fully disclosing the relationships to the relevant parties, making sure the relationships are permitted under local law, and putting in place the various contractual obligations to limit the consultant's work for the foreign government, the DOJ was satisfied "the consultant is not a foreign official as defined by the FCPA, 15 U.S.C. § 78dd-2, and the Department would not take enforcement action based solely on payments to the consultant."

In the opinion, the DOJ continued its helpful practice begun earlier this year of listing prior releases that may be relevant. It cited:

• Release 80-02 (Oct. 29, 1980), concerning an employee of a foreign subsidiary of a U.S. corporation who planned to run for political office;

• Release 82-02 (Feb. 18, 1982), about paying a “finder’s fee” to a Nigerian citizen employed in Nigeria’s foreign consulate;

• Release 86-01 (July 18, 1986), about employing foreign members of parliament; and

• Release 94-01 (May 13, 1994), about hiring a foreign official to provide consulting assistance.

FCPA Opinion Procedure Release No. 10-03 (September 1, 2010) can be downloaded here.

All other Releases can be downloaded here.


Microfinance Meets The FCPA

Photo courtesy of World Vision CanadaThe Justice Department has published its second FCPA Opinion Procedure Release of 2010.

The Requestor in Release 10-02 is a U.S. non-governmental organization and a “domestic concern” under the FCPA. It's a non-profit microfinance institution operating globally, providing loans and other basic financial services to the world’s lowest-income entrepreneurs. Funding comes from grants and donations by governments, NGOs, public and private organizations, and individuals.

The Requestor has a wholly-owned, self-sufficient subsidiary organized as a limited liability company in "a Eurasian country." The so-called Eurasian Subsidiary wanted to contribute $1.42 million to a local microfinance institution through a grant.

The Requestor has been converting all of its local operations, including the Eurasian Subsidiary, to commercial entities licensed as financial institutions. The conversion will help the local entities attract capital and offer new services such as savings accounts, microinsurance, and remittances. The Eurasian Subsidiary's $1.42 million grant to the local microfinance organization is required for the subsidiary's license conversion.

During due diligence, the Requestor discovered that one of the board members of the local microfinance institution and its parent "is a sitting government official in the Eurasian country and that other board members are former government officials."

Despite the presence of at least one foreign official on the target's board, the DOJ gave the Requestor a green light for its subsidiary's investment. The sitting foreign official has and will have no government role in the Requestor's activities. And, under the law of the Eurasian country, sitting government officials can't be paid for this type of board service.

Additional controls in the grant included staggered payments, ongoing monitoring and auditing, earmarking of funds to be spent, further prohibitions on compensating board members, and anti-corruption compliance provisions in the grant documents.

The Release said the purpose of the proposed grant is to obtain or retain business. The DOJ reasoned that the Eurasian Subsidiary's nonprofit business is to be followed by for-profit business activity in the Eurasian country, and the proposed grant would be made as a condition precedent to obtaining a license to operate as a profit-making financial institution.

So, the DOJ said, the issue is whether the proposed grant would amount to the corrupt giving of anything of value to any officials of the Eurasian country in return for obtaining or retaining business. "Based on the due diligence that has been done and with the benefit of the controls that will be put into place, it appears unlikely that the payment will result in the corrupt giving of anything of value to such officials."

Release 10-02 also includes a helpful discussion about charitable giving and the FCPA.

Download a copy of the DOJ's FCPA Opinion Procedure Release No. 10-02 dated July 16, 2010 here.

All DOJ Opinion Procedure Releases can be found here.