To print this article, all you need to do is be registered or log in to Mondaq.com.
The US Department of Justice (DOJ) recently issued an Extortion and Coercion Notice under the Foreign Corrupt Practices Act (FCPA) that provides a unique perspective on the DOJ’s FCPA notice process. While the notice does not break any substantial new legal basis, it demonstrates that in certain urgent circumstances (including where there is a risk to individuals), the DOJ can expedite its typically lengthy notice process.
The review was made in response to a request from a US-based company after it received an extortion claim. This is the DOJ’s first FCPA notice in nearly two years. The notice reaffirmed the DOJ’s long-standing policy that it will not pursue FCPA lawsuits against companies for improper payments made in response to extortion demands by government officials where there are an imminent threat of physical harm to company employees.
The company in this case owned a maritime vessel that inadvertently anchored in the territorial waters of Country A. (Neither the company nor the country making the extortion demands were identified in the DOJ notice.) Country A’s navy intercepted the company’s vessel and directed it to Country A’s port. Once there, Country A’s navy detained the vessel’s captain in a jail ashore and his crew members and officers aboard the ship. At the time of his arrest, the ship’s captain was suffering from a serious illness which would have been aggravated by his continued detention.
Shortly after the vessel’s captain and crew were detained, a third party claiming to be acting on behalf of Country A’s navy contacted the company and demanded a cash payment of $175,000 in exchange for the captain’s release. and crew. Attempts by the company to negotiate a more formal mode of payment, such as a fine or other official sanction, were rejected by the third-party intermediary. The company was told that if cash payment was not made, the captain and crew would be detained longer and the vessel impounded. Based on the nature of the third-party intermediary’s demands, the company estimated that the cash payment of $175,000 was intended for one or more government officials in Country A.
After unsuccessfully seeking the assistance of other agencies within the U.S. government to secure the release of the ship’s captain and crew, the company sought the opinion of the DOJ on whether it was likely to take action under anti-bribery provisions of the FCPA if the company makes the required cash payment through the third-party intermediary. The DOJ expedited this notice due to the circumstances, and within a day of the request, the DOJ issued a brief “preliminary notice” stating that, based on the facts, the DOJ did not “currently have the intent” to bring an FCPA enforcement action. action in response to the contemplated payment. The one-day turnaround time is not typical for the DOJ.
In response to additional questions from the DOJ, the company provided additional information and the DOJ then issued a full response and advisory on January 22, 2022.
In the full notice, the DOJ explained that the payment proposed by the company requesting the notice would not violate the anti-bribery provisions of the FCPA since the payment would not be made “corruptly” or “to obtain or retain market”, as prohibited by law. FCPA. Specifically, the DOJ found that since the proposed payment was made under duress “to avoid imminent and potentially serious harm to the master and crew of the claimant vessel,” it could not be considered to have been made. with “corrupt intent” and would not give rise to liability under the FCPA. Further, since the company was not seeking to do business in Country A and the payment was not “motivated by the intention to obtain or retain business”, it also failed the test of the “business purpose” for liability under the FCPA.
The DOJ was also keen to note in its view that the company did not attempt to conceal the demand for payment and instead “engaged with various members of the U.S. government” to secure the release of the captain and crew. The company only considered making the cash payment of $175,000 and submitting the FCPA Notice request after those efforts failed.
In addition, the Department of Justice distinguished the plaintiff’s situation from other demands for payment made to access a market or to avoid threatened economic or financial consequences. The notice pointed out that economic coercion requires a company to make a “conscious decision” whether or not to pay a bribe to gain access to the relevant market.
The publication of this notice, after a long hiatus in published notices, may also signal a renewed commitment by the DOJ to encourage companies to provide relevant information as soon as possible to avoid future enforcement action. The steps taken by the applicant in this case could serve as a model for other companies finding themselves in similar situations.
The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.
POPULAR ARTICLES ON: United States Criminal Law