Top 10 Issues to Consider With Respect to the Foreign Corrupt Practices Act in M&A Transactions and Joint Ventures

Top 10 Issues to Consider With Respect to the Foreign Corrupt Practices Act in M&A Transactions and Joint Ventures

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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.

Excerpt:

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 ventures.

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