June 29, 2022

Volume XII, Number 180

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DOJ FCPA Opinion Encourages Corporate Disclosure

On January 21, 2022, the Department of Justice issued an opinion applying the Foreign Corrupt Practices Act to a Hollywood movie-like factual scenario relating to extortion and duress. The opinion is one of two FCPA opinions published within the last two years. Before those two opinions, DOJ had not published one since 2014. Publication of the opinion shows that DOJ’s FCPA Unit is ready to act, and it also signals benefits for proactive disclosure—a broader DOJ theme.

The January 2022 opinion was in response to a request by a U.S. Requestor, whose vessel was seized in international waters and its captain and crew detained by an unnamed country’s naval forces. Initially, the vessel was supposed to anchor at another country’s port, but due to the port reaching maximum capacity, the captain was advised to anchor in another location until the port became available. The captain was given incorrect coordinates by a shipping agent, and those coordinates inadvertently led the vessel into the unnamed country’s territorial waters. The unnamed country intercepted the vessel and directed the captain and crew into its harbor. Thereafter, the vessel’s documents were confiscated; the captain was jailed without questioning or apparent legal reason; and the crewmembers and officers were ordered to remain on the ship. At the time of his detention, the captain was suffering from serious medical conditions that “would be significantly exacerbated by his detention,” which “created a significant risk to his life and well-being.”

In the midst of the captain’s detention, a third party, purportedly acting on behalf of the unnamed country, demanded $175,000 in cash to release the captain and crew, and permit the vessel to leave. If the payment was not made, the captain and crew would be held longer and the vessel would be permanently seized. After repeated requests, however, the third party refused to show official documentation setting out the alleged charges or regulatory fines in relation to the payment demand. This raised concerns for the Requestor, which suspected the payment was intended for one or more officials from the unnamed country.

After unsuccessfully seeking assistance from other U.S. agencies, on October 19-20, 2021, the Requestor sought a DOJ advisory opinion as to whether the agency would likely bring an enforcement action under the FCPA’s anti-bribery provisions if the Requestor made the cash payment demanded by the third-party. In response, the DOJ provided a “preliminary opinion” just one day later. The DOJ indicated that it did not “presently intend to take an enforcement action under the FCPA’s anti-bribery provisions in response to the contemplated payment.”

In its full advisory opinion, the DOJ explained that in its view, the payment to the third party did not meet the elements for an FCPA violation. First, the DOJ concluded that the Requestor did not have the corrupt intent required when making the payment to the third party. Specifically, the advisory opinion explained that since the Requestor made the payment under duress “to avoid imminent and potentially serious harm to the captain and crew of the Requestor vessel,” the Requestor did not have the “corrupt intent” required for an FCPA violation. The DOJ quoted language from United States v. Kozeny, 582 F. Supp. 2d 535, 540 n.31 (S.D.N.Y. 2008), that “an individual who is forced to make payment on threat of injury or death would not be liable under the FCPA.” The opinion distinguished between the facts at hand and other circumstances where a company is threatened with economic or financial consequences for lack of payment or where payment is demanded for entry into a certain market. In the latter scenarios, paying a bribe under “economically coercive” conditions may violate the FCPA. Second, the DOJ concluded that since the Requestor had no ongoing or anticipated business with the unnamed country “and the entire episode appears to be the result of an error,” the payment was not motivated by an intent to “obtain or retain business.”

Notably the DOJ pointed out that the Requestor did not conceal the payment demand and instead “engaged with various U.S. governmental personnel” and the unnamed country for proper documentation on the alleged violations. Only after these efforts failed and the Requestor was told that the sole avenue to safely and promptly release the captain and crew would be through the $175,000 cash payment “did the Requestor consider making such payment and submit the FCPA Opinion Request.”

On its face, the opinion may be instructive for other companies that encounter similar circumstances, though the facts of this case seem fairly unusual and FCPA opinions have no binding application to any party other than the Requestor. The opinion’s emphasis on the Requestor having first exhausted means of assistance by other U.S. agencies is noteworthy for companies contemplating seeking an opinion. So is the speed with which DOJ rendered its opinion.

The decision to publish a release of the opinion is a matter of DOJ’s discretion. Doing so here, and particularly within such a short time frame, signals an FCPA Unit that is ready to act.

The opinion also suggests, more broadly, that it can be beneficial for companies to proactively disclose issues to DOJ. Although the opinion reaches the conclusion that the proposed conduct would not meet the elements of an FCPA violation, and although the facts seemed sympathetic for the Requestor, neither point in DOJ’s analysis is entirely obvious under current law. One might therefore conclude that the company’s decision to come forward and disclose the situation proactively inured to its benefit with respect to how DOJ saw the law applying to the facts. That general theme—that proactive self-disclosure ultimately benefits companies—is an increasingly common one across multiple DOJ components.

© Copyright 2022 Squire Patton Boggs (US) LLPNational Law Review, Volume XII, Number 60
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About this Author

Sanaa M. Bayyari Financial Services & Corporate Squire Patton Boggs Cincinnati, OH
Associate

Sanaa Bayyari is an associate in the Financial Services and Corporate practice groups. She advises financial institutions and other multinational companies on a variety of corporate matters, including securities offerings, US Securities and Exchange Commission (SEC) filings, equity/debt capital markets, corporate governance, and mergers and acquisitions.

Prior to joining the firm, Sanaa worked at one of the “Big Four” global accounting firms, where she assisted multinational companies on foreign direct investment in the United Arab Emirates. During law school, Sanaa was an intern...

513-361-1221
Benjamin C. Glassman Trial Attorney Squire Patton Boggs Cincinnati, OH & Columbus, OH
Partner

Former US Attorney Benjamin Glassman helps clients with some of their most difficult and sensitive problems -- whether by providing strategic advice, leading internal investigations or representing them at trial or on appeal. He divides his time between the Cincinnati and Columbus offices.

Ben served as the US Attorney for the Southern District of Ohio from 2016 to 2019, working in both Democratic and Republican administrations. As the chief federal law enforcement official for the more than 5 million residents of Ohio’s southern 48 counties, he oversaw the work of approximately 65...

513-361-1248
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