Last fall, the DOJ formalized its corporate enforcement policy for FCPA violations – which provides strong incentives for voluntary corporate disclosure & remediation efforts. Earlier this month, the DOJ clarified that the policy extends to successor entities in M&A transactions. Here’s an excerpt from this Sullivan & Cromwell memo summarizing the application of the DOJ’s policy to successor entities:
During a speech delivered on July 25, 2018 at the American Conference Institute 9th Global Forum on Anti-Corruption Compliance in High Risk Markets, Deputy Assistant Attorney General Matthew Miner, who oversees the U.S. Department of Justice’s (“DOJ”) Fraud Section (which includes the DOJ’s Foreign Corrupt Practices Act (“FCPA”) Unit), announced that successor companies that identify potential FCPA violations in connection with a merger or acquisition and disclose that conduct to the DOJ will be treated in conformance with the DOJ’s FCPA Corporate Enforcement Policy (the “Policy”).
The Policy, which went into effect in November 2017, created a presumption that the DOJ would decline to prosecute a company for potential FCPA violations when the company has satisfied the Policy’s standards for voluntary self-disclosure, cooperation, and remediation (although the company still is responsible for paying any applicable disgorgement, forfeiture, and/or restitution), absent certain aggravating factors.
The memo points out that the policy does not represent a significant departure from prior DOJ practice when it comes to the FCPA liability of successor entities. The DOJ has long taken the position that a successor is generally responsible for FCPA liability incurred by a company that it acquires, but can reduce the risk of an enforcement action through voluntary disclosure, remediation and cooperation with authorities.
The DOJ’s position also highlights the importance of FCPA due diligence in connection with a potential acquisition and the need to take appropriate action based on the results of that due diligence.
– John Jenkins