DOJ applies FCPA Corporate Enforcement Policy principles to successor companies

The issue of successor liability for violations of the Foreign Corrupt Practices Act (FCPA) has long dogged companies pursuing mergers and acquisitions (M&A).[1] But the US Department of Justice (DOJ) -- noting the “many benefits when law-abiding companies with robust compliance programs are the ones to enter high-risk markets or, in appropriate cases, take over otherwise problematic companies” -- may now have taken some of the bite out of M&A-related FCPA enforcement risk. In recent remarks, Deputy Assistant Attorney General (DAAG) Matthew S. Miner announced that the DOJ intends “to apply the principles contained in the FCPA Corporate Enforcement Policy to successor companies that uncover wrongdoing in connection with mergers and acquisitions and thereafter disclose that wrongdoing and provide cooperation, consistent with the terms of the Policy.”

As a reminder, the November 2017 FCPA Corporate Enforcement Policy (see also this Freshfields briefing) establishes a presumption that the DOJ will decline to prosecute companies that voluntarily self-report potential FCPA violations, provide full cooperation, and engage in timely and appropriate remediation. The Policy reflects the DOJ’s ongoing effort to provide greater clarity and predictability regarding the benefits that companies can expect to obtain if they do so. In applying Policy principles to successor companies, the DOJ similarly aims to provide “companies and their advisors greater certainty when deciding whether to go forward with a foreign acquisition or merger, as well as in determining how to approach wrongdoing discovered subsequent to a deal.” [2]

Invoking the FCPA Corporate Enforcement Policy here does not, however, mean that the DOJ intends to let bygones be bygones. Indeed, the DOJ “continues to focus on individual accountability, and those responsible for past wrongdoing or the concealment of wrongdoing will continue to be investigated and prosecuted.”

DAAG Miner also used his remarks to urge acquiring companies that come across corruption-related concerns in conducting due diligence to make use of the DOJ’s FCPA Opinion Procedures, which allow “issuers and domestic concerns to obtain an opinion of the Attorney General as to whether certain specified, prospective--not hypothetical--conduct conforms with the Department’s present enforcement policy regarding the antibribery provisions of the” FCPA. (He did add that undertaking the opinion process before proceeding with an acquisition “may take a little more time.”)

This most-recent DOJ announcement related to corporate enforcement -- following both the FCPA Corporate Enforcement Policy and the May 2018 anti-piling-on policy (see also this Freshfields article) -- offers some comfort to companies engaging in mergers and acquisitions, particularly with respect to “high-risk industries and market[s].”

Moreover, DAAG Miner’s remarks underscore the continued importance of conducting “robust” due diligence, and of investing in effective compliance programs and strong internal controls, in preventing and responding to corporate wrongdoing. Like the FCPA Corporate Enforcement Policy, and the FCPA Pilot Program before it (see also this Freshfields article and blog post), this latest announcement is grounded in incentivizing self-regulation and in utilizing corporate vigilance to “stamp out global corruption.”