The FCPA Needs More Regulatory Clarifications for Businesses

In a recent, insightful article that appeared in the Business Lawyer, Jim Doty of Baker Botts’
Washington, DC office makes a strong argument about why the SEC needs to promulgate an
FCPA regulation—"Regulation FCPA"—to provide safe harbors that businesses could take
advantage of when structuring their operations so that they are fully compliant with the FCPA,
thereby removing unnecessary costs and risks that businesses operating in today’s global markets
encounter. See James R. Doty, Toward a Reg. FCPA: A Modest Proposal for Change in
Administering the Foreign Corrupt Practices Act, The Business Lawyer 62(4): 1233–1256
(August 2007) (available to members of the ABA Section of Business Law at
www.abanet.org/buslaw/tbl/tblonline/2007_062_04/home.shtml). The scarcity of advisory
opinions provided by the U.S. Department of Justice in the years since the FCPA has been on the
books demonstrates a real need for more regulatory clarity and certainty.
The Opinion Procedures are codified in Title 28 of the Code of Federal Regulations Part 80, and
are available at http://www.usdoj.gov/criminal/fraud/fcpa/opinion/frgncrpt.html. Under the
procedures, a party seeking to use the FCPA Opinion Procedures must inquire about a real
transaction and the request must be made before a party has committed to the transaction. See 28
C.F.R. §80.3. If the request meets all requirements, a party can obtain relative clarity about the
legality of the transaction—at least as to the DOJ's present likelihood of enforcement:
In any action brought under the applicable provisions of 15 U.S.C. 78dd-1 and 78dd-2,
there shall be a rebuttable presumption that a requestor's conduct, which is specified in a
request, and for which the Attorney General has issued an opinion that such conduct is in
conformity with the Department's present enforcement policy, is in compliance with
those provisions of the FCPA. Such a presumption may be rebutted by a preponderance
of the evidence. . . .
28 C.F.R. §80.10 (emphasis added). The FCPA is hardly a model of clarity. So few cases have been litigated that courts have not had
many occasions to fill in some of the apparent gaps not addressed in the Act by Congress and the
regulators. As pointed out by one commentator, the FCPA’s provisions remain hard for
businesses conducting operations outside the United States to fully comply with in part because
Congress attempted to legislate morality in the Act for how domestic businesses should operate
in our nation and others:
The United States is increasingly using its securities laws to try to govern the behavior of
corporations - and their employees - as well as that of U.S. citizens abroad. By requiring
businesses and individuals to adhere to a U.S. model of behavior when acting overseas,
the United States exerts a kind of moral imperialism that imposes U.S. business standards
and ethics on transactions occurring wholly outside of the United States; these
transactions even include those conducted through remote subsidiaries using foreign
employees with little or no understanding of these U.S. based models of behavior. . . .
Aaron G. Murphy, The Migratory Patterns of Business in the Global Village, 2 N.Y.U. J. L. &
Bus. 229, 230 (2005).
While apologists for the FCPA may argue that the Act already provides sufficient leeway for
businesses, noting that they can engage in activities that host jurisdiction recognize as being
lawful, this argument is naive because the provision in question, 15 U.S.C. §78dd-1(c)(1) (―the
payment, gift, offer, or promise of anything of value . . . was lawful under the written laws and
regulations of the foreign official’s, political party’s, party official’s, or candidate’s country‖), is
an affirmative defense that often will not be available. This is because many common business
practices or customs have not yet been enacted as law. In one reported case, D’Agostino v.
Johnson & Johnson, Inc., 133 N.J. 516, 628 A.2d 305 (N.J. 1993), this provision was construed
in a wrongful termination suit by a Swiss resident who had been employed with Swiss subsidiary
of New Jersey corporation and who alleged he was wrongfully terminated for refusing to go
along with bribing a Swiss official to obtain approval for J&J's pharmaceutical products. The
company relied upon this affirmative defense provision to the FCPA. The appellate court
observed, inter alia, that the Swiss Public Prosecutor had found the bribery allegation to be
unsubstantiated, explaining ―We are not evaluating the propriety of this form of conduct under
Swiss law. We are informed, however, that Swiss regulatory practices were changed after the
events giving rise to this suit.‖ D’Agostino, 133 N.J. at 543, 628 A.2d at 320.
More to Come
©Michael E. Clark, Hamel Bowers & Clark LLP. Information provided in this blog does not, nor
is it intended to, create an attorney-client relationship. It is offered solely for informational
purposes.
For additional information about me, my practice, background and interests, see the following
pages (which contain links to some of my published papers and articles:
www.avvo.com/attorneys/77007-tx-michael-clark-121553.html and
www.superlawyers.com/texas/lawyer/Michael-E-Clark/a051f497-181f-4399-862b-
cd4a7ad5c1cf.html The treatise about pharmaceutical law for which I am Editor-in-Chief was published in
December 2007 by BNA/ABA Section of Health Law. See
http://storefront.bnabooks.com/epages/bnastore.sf/?ObjectPath=/Shops/bnastore/Products/
9823