On January 21, 2022, the DOJ issued a rare FCPA Opinion Procedure Release,[1] only the second since 2014.[2] While the facts presented were quite unusual – a ship, with its captain and crew, detained without explanation in the waters of a foreign country, and facing an ambiguous demand for payment in order to be released – it offers more broadly applicable lessons.
Facts Presented to DOJ
The facts at issue arose from detention by the naval forces of a foreign country (“Country A”) of a maritime vessel, including the captain and crew, owned by a US-based company (the “Requester”) and the accompanying demand for payment of $175,000 in cash from a third party purporting to act on behalf of the Country A Navy (the “Third-Party Intermediary”).[3] The Requester, concerned that the third party intended to pass on the payment being demanded to one or more Country A government officials,[4] decided to seek an opinion from the DOJ. Resolution of the matter was urgent, as the detained captain was suffering from serious medical conditions putting his health and safety at significant risk.[5]
DOJ Conclusion
The DOJ determined that it would not bring an enforcement action based on the proposed $175,000 payment because the Requester would not be making the payment (1) “corruptly” or (2) “to obtain or retain business” as contemplated by the FCPA.[6] These elements have only rarely been interpreted by DOJ in the context of the Opinion Procedure, or for that matter by the federal courts in a litigated FCPA case.
DOJ Reasoning
In finding that Requester’s primary reason for payment was to avoid imminent and potentially serious harm to the captain and crew of the Requester vessel rather than being motivated by corrupt intent, the DOJ relied on United States v. Kozeny,[7] for that court’s assertions that “an individual who is forced to make payment on threat of injury or death would not be liable under the FCPA” and that “Federal criminal law provides that actions taken under duress do not ordinarily constitute crimes.”[8] In Kozeny, the court distinguished between viable FCPA defenses involving “true extortion” and “duress” on the one hand and those situations in which “the payer could have turned his back and walked away” on the other.[9] The DOJ found that Requester’s situation fell under the first category of cases contemplated by Kozeny. [10] At the same time, the DOJ stressed that Requester’s situation was distinct from others where a company is threatened with severe economic harm or financial consequences in the absence of payment, which might lead to liability under the FCPA.[11]
In finding that the payment was not motivated by an intent to obtain or retain business, the DOJ relied on the Requester’s attestations that it had no ongoing or anticipated business with Country A and that the Requester was only in Country A’s waters due to an error.[12] This error, which resulted in Requester mistakenly anchoring its vessel in Country A’s waters, may have violated Country A’s regulations and laws governing shipping and anchoring locations and triggered the payment demand by the Third-Party Intermediary,[13] but it did not amount to a “business purpose” associated with payment.[14] It has been accepted as settled law since the Fifth Circuit’s holding in United States v. Kay that “Congress intended for the FCPA to apply broadly to payments intended to assist the payor, either directly or indirectly, in obtaining or retaining business for some person.”[15] Requester’s circumstances, however, fell outside of that admittedly broad scope.
The Requester’s efforts to avoid making the payment provided further support for the DOJ’s conclusion that there was no corrupt intent. The Requester had made every effort to obtain written, official documentation from the Country A government setting forth the alleged violation and appropriate fine, and had been exceedingly transparent, including by advising US authorities of the situation and requesting that they intervene and notify the foreign government of the issue.[16]
Expedited Review by DOJ
Finally, it is worth noting the speed with which the DOJ provided its opinion in this case. This Request was made on October 19 and 20, 2021, and in a highly unusual move, only one day later, on October 21, the DOJ issued a short preliminary opinion stating it did not intend to take enforcement action under the FCPA’s anti-bribery provisions in response to the contemplated payment. Following the DOJ’s preliminary opinion, the Requester provided additional information to the DOJ, and the DOJ issued the Release on January 21, 2022. The DOJ explained that it provided the short preliminary opinion due to the unusual and exigent circumstances at issue, including the risk of imminent harm to the health and well-being of the individuals noted in the Request.[17]
Takeaways
A duress defense to the FCPA must implicate real risk to life or individual health and safety. Conversely, threats of economic harm, even if severe, generally will not support such a defense.
The “obtain or retain business” element of the FCPA is very broad, but not without its limits. This element of the FCPA has been found to be ambiguous on its face but, when interpreted in light of its legislative history, to be very broad indeed. This is the teaching of the Fifth Circuit’s seminal 2004 decision in United States v. Kay. That said, there are circumstances in which a payment to a foreign official will not be improper because it lacks this statutorily-required purpose. What is not clear from this Release is how much the accidental character of the Requestor’s entry into the waters of Country A influenced the DOJ’s position here.
Taking steps to achieve transparency is often an important compliance step. While the exact parameters of what type of transparency to seek will depend on the facts of the particular situation, the steps taken by the Requestor (including its efforts to determine the legal basis for the payment request) represent best practices for addressing ambiguous situations where a payment is requested under circumstances presenting red flags suggesting that the purpose may be for the personal benefit of a foreign government official or officials.
The amount of a payment is relevant, but not determinative. The payment at issue here—$175,000—was large, but that did not prevent DOJ from concluding it would not prosecute in this instance. While the size of a payment can itself be evidence of corrupt intent, the result in this Release underscores that there is no per se amount that is either illegal or, conversely, permissible. The amount is a critical fact, but one that has to be analyzed in the context of the overall facts and application of the statutory elements to those facts.
Overview of the DOJ Opinion Procedure
The FCPA Opinion Procedure enables issuers and domestic concerns to obtain the DOJ’s opinion as to whether certain specific, prospective—not hypothetical—conduct conforms with the DOJ’s present enforcement policy regarding the anti-bribery provisions of the FCPA.[18] If an enforcement action is brought against a requester following an opinion finding the requester’s conduct is in conformity with the DOJ’s enforcement policy, the opinion creates a rebuttable presumption that the requester’s conduct, as specified in the opinion, is in compliance with the anti-bribery provisions of the FCPA.[19] DOJ FCPA opinions are not precedential, and are not binding on any agency except the DOJ. Moreover, they can be relied on only to the extent that the disclosure of facts and circumstances in the request is accurate and complete.[20] As FCPA enforcement has matured, and other guidance has emerged, the use of the Opinion Procedure by companies – never that robust to begin with – has declined significantly.
[1] DOJ Opinion Procedure Release, Foreign Corrupt Practices Act Review, No. 22-01 (Jan. 21, 2022).
[2] As discussed in Steptoe’s 2020 FCPA Year in Review, DOJ released Opinion Release No. 20-01 on August 14, 2020.
[3] DOJ Opinion Procedure Release at 1-2.
[4] Id. at 2.
[5] Id. at 2.
[6] DOJ Opinion Procedure Release at 2.
[7] 582 F. Supp. 2d 535 (S.D.N.Y. 2008).
[8] DOJ Opinion Procedure Release at 3 (citing United States v. Kozeny, 582 F. Supp. 2d 535, 540 n.31 (S.D.N.Y. 2008).
[9] Kozeny, 582 F. Supp. 2d at 540.
[10] DOJ Opinion Procedure Release at 1, 3.
[11] Id. at 4.
[12] Id. at 3.
[13] Id.
[14] Id. at 4.
[15] United States v. Kay, 359 F.3d 738, 755 (5th Cir. 2004) (Kay I).
[16] DOJ Opinion Procedure Release at 3.
[17] Id. at 1.
[18] 28 CFR Part 80.1.
[19] 28 CFR Part 80.10.
[20] See 28 CFR Part 80.11.