A somewhat rare citing that should be of interest to those following Foreign Corrupt Practices Act enforcement: The Department of Justice has published its first FCPA advisory opinion of 2014.

The FCPA opinion procedures allow issuers and domestic concerns to get the Attorney General's opinion on whether certain conduct is in line with the Justice Department's enforcement policy regarding the statute's anti-bribery provisions. Opinion Releases can only be relied upon by the requestor and have no binding application to any other companies.

In its latest opinion, dated March 17, the Justice Department said that paying a foreign government official for money owed to him in the sale of a business interest that he owned prior to becoming a foreign government official would not constitute an FCPA violation.

In this case, the requestor is a U.S. financial services company and an investor bank. According to the facts of the case, the requestor—the majority shareholder of a foreign financial services company—contracted to purchase the remaining minority interest from a foreign shareholder, a private citizen at the time, in March 2007.

To guarantee the foreign shareholder's participation, the parties' agreement contained a five-year lock-in period that prohibited the foreign shareholder from selling his interest prior to Jan. 1, 2012. The agreement did, however, allow the foreign shareholder to leave the foreign company before the end of the five-year period if he were appointed to a government official position.

In December 2011, the foreign shareholder was appointed to serve as a high-level official at the foreign country's central monetary and banking agency, becoming a “foreign official” within the meaning of the FCPA. Upon his appointment, the foreign shareholder ceased to have any role at the foreign company, other than as a passive shareholder.

When the foreign government official decided to sell his interest in the foreign company, under the formula for the repurchase of his interest, his shares at the time had no value, primarily due to the financial crisis. Rather than be faced with litigation, or a situation where the government official sells his shares to a third party, the parties agreed to another form of valuation and sought approval from the Justice Department through its opinion procedure for how to pay the foreign government official under the new valuation.

The requestor further represented to the Justice Department, among other facts, that:

The foreign government official, in his role at the foreign government agency, recused himself from any decision concerning the award of business to the U.S. financial services company, the foreign company, or their affiliates made by the foreign agency or foreign country's government.

The U.S. financial services company obtained a representation from the foreign government official that he has disclosed his ownership interest and the proposed sale of the shares in the foreign company in question to the relevant government authorities and the relevant foreign agency, and the relevant government authorities have informed him that they approve or do not object to the sale of the shares.

The foreign government official has warranted in writing that any payment to him to purchase the shares will be made to him solely as consideration for the shares, not in his official capacity or in exchange for any present or expected future official action.

The U.S. financial services company received written assurance from local counsel in foreign country that the purchase of the shares is lawful in that foreign country. 

Department's Analysis

The Justice Department noted that only one other prior advisory opinion, issued in March 2000, directly addressed the severing of an existing business relationship with an individual who was becoming a foreign official. That opinion, which involved a partner at a U.S. law firm taking a leave of absence to serve as a high-ranking foreign official, “highlighted the very strict recusal and conflict-of-interest avoidance measures that were put in place during the period when the former partner would be a foreign official to prevent him from assisting the requestor in obtaining or retaining business,” the Justice Department stated.

In the latest case, the U.S. financial services company represented that “it has taken and will continue to take similarly strict measures to prevent foreign shareholder from assisting requestor in obtaining or retaining business,” the Justice Department stated.

“Because the facts, representations, and warranties described in the request demonstrate at present that the only purpose of the payment to foreign shareholder is consideration for the shares, the Department does not presently intend to take any enforcement action,” the Justice Department stated.

The opinion does not bar a future enforcement action, however, should potential corrupt intent later arise, such as if the foreign shareholder directed business to U.S. financial services company, or inflated earnings projections used to induce the foreign shareholder to act on requestor's behalf, the government stated.

FCPA opinion requests, which can help shed some light on the Justice Department's interpretation of the statute and give companies some comfort that they won't find themselves in the Justice Department's crosshairs, are relatively rare. Only 38 have been issued since 1993.

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