The request of opinion* was filed by a U.S.-based investment advisor that manages private funds serving institutional investors (hereinafter the “Requestor”).
According to the submitted information, in early 2017, the Requestor sought to purchase a portfolio of assets from a foreign investment bank’s foreign subsidiary (the “Country A Office”). A majority of shares of the investment bank was owned by a foreign government. The Requestor received assistance from a different foreign subsidiary of the same investment bank (the “Country B Office”) in connection with the purchase. Without having attained results, after a year, the Requestor also engaged a finance company, its local partner. In early 2019, the Requestor succeeded in purchasing the assets from the Country A Office, and the following month, the Country B Office sought from the Requestor a fee to compensate for the work it had performed.
The Requestor therefore sought an opinion of the U.S. DOJ as to whether the Department would intend to bring an FCPA enforcement action against it if it paid a fee of $237,000 equaling 0.5% of the face value of the assets to the Country B Office for its analytical services and advice.
The DOJ said there was no information evincing a corrupt intent to offer, promise, or pay anything of value to a foreign official in connection with the contemplated payment to the Country B Office, stressing that the FCPA did not prohibit payments to foreign governments or foreign government instrumentalities. Assuming that the Country B Office was an “instrumentality of a foreign government” and that employees of the Country B Office were foreign officials the DOJ found no violation of the FCPA as the payment was made directly to the subsidiary company rather than to its individual employees.
In addition, the DOJ highlighted that the payment to the Country B office was transparent, there was no indication that the Requestor intended or believed that the money would be diverted to any individual, and there is no indication that the money will, in fact, be diverted to any individual [a foreign public official]. Moreover, the Chief Compliance Officer of the Country B Office had certified to the Requestor that the payment into the Country B Office’s corporate bank account would only be used for the benefit of the Country B Office, for general corporate purposes of the Country B Office, and would not be forwarded to any other entity.
Finally, in the DOJ’s opinion, the Requestor sought and received specific legitimate services from the Country B Office. It had represented, and the Chief Compliance Officer of the Country B Office had certified, that the intended payment to the Country B Office was commensurate with the services it had provided and was commercially reasonable.
Therefore, the DOJ informed the Requestor it did not intend to take any enforcement action in response to the fee to be paid by the Requestor to the Country B Office.
* The DOJ is mandated to give advisory opinions as to whether a specified (prospective, not hypothetical) conduct will constitute a violation of the FCPA: the Department publishes these depersonalised responses in a specific section of its website. Throughout all the time the DOJ has fulfilled these functions (since 1980; before 1993 the opinions were called Review Procedure Releases; from 1993 onward they have been called Opinion Procedure Releases) it has issued just 62 releases with the last one dating back to 2014, that is some six years ago.
One of the reasons why entities rarely seek the opinion of the Department is the lengthy processing of such requests and the necessity to provide additional information. In the above-mentioned case, as indicated in the DOJ’s release, the company initially submitted its request in November 2019 and provided supplemental information upon the DOJ’s request in January, February, June and July 2020. It finally received the response only in mid-August 2020.
While the DOJ’s opinion has no precedential value, its opinion that contemplated conduct conforms with the FCPA is entitled to a rebuttable presumption should an FCPA enforcement action be brought as a result of the contemplated conduct.