These past few years, the
government made Corrupt Practices Act ("FCPA") enforcement a priority
and the number of cases has increased dramatically. Heightened enforcement of
the FCPA is a growing concern for companies engaging in mergers, acquisitions
and joint ventures involving non-U.S. entities. This article focuses on ten key
issues that any acquiror should consider in light of potential FCPA liability
in M&A transactions and joint ventures.
Congress enacted the Foreign
Corrupt Practices Act ("FCPA") in 1977 in an effort to curb bribery and
illicit payments by U.S. companies to foreign officials. During the first two
decades of the FCPA's existence, the SEC and DOJ rarely brought cases under the
statute. In the past few years, however, the government has made FCPA
enforcement a priority. The sheer number of cases brought under the FCPA has
increased dramatically-from just one or two per year in the 1980s to more than
one hundred between 2007 and 2009.
In addition to the growing number of cases brought under the FCPA, government
enforcement of the statute has become far more aggressive. Recently, the SEC
created a specialized unit focused exclusively on FCPA enforcement, and the DOJ
has started working with an FBI squad dedicated to FCPA investigations. The
government has also stepped up efforts to encourage self-disclosure. The
Dodd-Frank Act, enacted in July 2010, includes a provision that allows the SEC
to give whistleblowers up to 30% of certain monetary sanctions awarded in
successful securities enforcement actions, including actions under the FCPA.
Heightened enforcement of the FCPA is a growing concern for companies engaging
in mergers, acquisitions and joint ventures involving non-U.S. entities. Such
transactions involve many challenges that may implicate the FCPA. Buyers must
navigate different cultures, unfamiliar legal systems and situations in which
transparency is limited. Given recent trends in FCPA enforcement, the danger of
successor liability in these situations is extraordinarily high. In addition,
as evidenced by the many non-U.S. companies recently charged with corruption
under the FCPA, enforcement is not limited to U.S. companies. Related issues
may also arise under the U.K. Bribery Act.
To avoid liability, companies pursuing M&A or joint venture transactions
involving non-U.S. entities must perform increasingly thorough due diligence.
Buyers should also protect themselves through negotiation of contractual
remedies. This article focuses on ten key issues that any acquiror should
consider in light of potential FCPA liability in M&A transactions and joint
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