Impact of FEPA on Companies
Since the Foreign Extortion Prevention Act (FEPA) was enacted several months ago, much of the focus has been on whether and how the new law—meant to be the flip side of the Foreign Corrupt Practices Act (FCPA) to address the demand side of foreign corruption—would impact the prosecution of foreign officials. There has been significantly less focus on how the U.S. Department of Justice (DOJ) could, if they so choose, prosecute companies for paying bribes under FEPA.
As a practical matter, it is unclear whether FEPA will lead to a material increase in the prosecution of foreign officials. DOJ already can prosecute, and has prosecuted, foreign officials for accepting bribes under various other U.S. laws, most notably money laundering, wire fraud and the Travel Act. The remaining cases not already covered by these statutes, but that have sufficient jury appeal for DOJ to invest the resources to pursue a prosecution, may be relatively limited. And of course, there may be an appetite in those foreign countries to prosecute their own officials involved in such conduct.
Perhaps more notable is the impact that FEPA could potentially have on companies. FEPA expressly states that it “shall not be construed as encompassing conduct that would violate [the FCPA] whether pursuant to a theory of direct liability, conspiracy, complicity, or otherwise.” On its face, this language appears to preclude DOJ from prosecuting companies under FEPA for paying bribes. But, for reasons that are not entirely clear, FEPA was not drafted to be the mirror image of the FCPA. To the contrary, FEPA utilizes a more expansive definition of “foreign official” and covers payments that ultimately benefit third-party organizations, not just payments to or for the benefit of foreign officials.
Although FEPA largely tracks the FCPA in its definition of “foreign official,” it deviates from the FCPA in two meaningful ways. First, the FCPA defines “foreign official” to include agents acting “in an official capacity” on behalf of a foreign government, department, agency, or instrumentality, whereas FEPA defines the term to include agents acting both in an official capacity but also acting in an “unofficial capacity” on behalf of the government, department, agency, or instrumentality. Second, unlike the FCPA, FEPA defines “foreign official” to include “senior foreign political figures,” cross-referencing an expansive definition of the term that includes current or former officials of major political parties, senior executives of foreign government-owned commercial enterprises, an entity formed by or for the benefit of any such individual, immediate family members of such individuals, and persons widely known to be a “close associate” of such individuals. That is vastly more expansive than the FCPA’s definition.
In addition, the FCPA only prohibits payments offered or made, directly or through third parties, to a foreign official. FEPA takes this one step further and criminalizes payments not only to foreign officials “personally,” but also payments directed by the foreign official “for any other person or nongovernmental entity.” Although DOJ and SEC have in the past brought cases where the tangible benefit was provided to a third party, including referral hiring cases, the theory in those cases was that an intangible benefit (which DOJ and SEC concluded was a thing of value) was conferred to the foreign official personally.
As a result of these drafting decisions, it is theoretically possible that DOJ could investigate and prosecute companies for conspiracy to violate, or aiding and abetting or causing the violation of, FEPA where the conduct is not covered by the FCPA. Ironically, the exception to the default applicability of conspiracy and accomplice liability (the so-called Gebardi principle, established by the 1932 Supreme Court case) would likely have precluded such prosecution, but by explicitly carving out conspiracy and accomplice liability for some, but not all, of the conduct covered by FEPA, courts could easily conclude that Congress intended such liability to otherwise apply. Compounding this problem is the placement of FEPA in the domestic bribery statute (18 U.S.C. § 201), rather than in the FCPA, because courts have concluded that conspiracy generally applies to Section 201.
It is unlikely that Congress or DOJ intended FEPA to criminalize conduct by companies not already covered by the FCPA. Indeed, it seems clear that DOJ and Congress intended to broaden DOJ’s ability to prosecute the demand side of bribery, not expand supply side coverage, which could have the effect of discouraging companies from voluntarily disclosing potential violations of FEPA. DOJ may, therefore, consider issuing guidance that provides comfort to companies that it is only going to use FEPA to prosecute foreign officials, not those who conspire to violate, or aid and abet or cause the violation of, FEPA.
Partner, White Collar Defense & Investigations, Davis Polk (Washington DC)
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