Yesterday, I ended my blog post with a few words about what we call in Texas Creative Lawyerin in the context of a Securities and Exchange Commission (SEC) enforcement action where there was zero fine and penalty due to the extraordinary remediation engaged in by the recalcitrant company whose Chief Executive Officer (CEO) allegedly engaged in fraudulent and illegal behavior. While the rest of the world calls this ‘Creative Lawyering’; whether you say it with a Texas drawl or not, what it means is that lawyers are at times called upon to find creative ways of working within a legal framework. According to Summize, this means, “The outcome often relies upon a lawyer’s storytelling ability – how they package an argument or a party’s point of view in a suitable and meaningful way. These abilities, in addition to critical thinking, social skills, listening and reasoning, can be particularly useful in commercial law when working with multiple stakeholders.” Another way to say it is one of my most favorite phrases about lawyering which is as a lawyer, “you are only limited by your imagination.”
Background
We saw yet another example of such creativity in the first Opinion Release of 2022, 22-01. The Opinion Release procedure allows companies (Requestor) to submit questions to the Department of Justice (DOJ) to determine if they would see any potential Foreign Corrupt Practices Act (FCPA) violations from the actions the Requestor took or anticipates taking. The facts of the matter are quite unique however the discussion and analysis provide significant guidance for FCPA aficionados and compliance practitioners going forward. Additionally, and yet again, the matter does provide a clear example of how a lawyer can be creative and achieve a superior result for their client.
Requestor was required to anchor its ship to await repairs, refit and unloading in Country B. It was directed to a location to do so. However, the location was in the territorial waters of Country A, which promptly arrested the ship’s captain and held the crew aboard the ship. The captain had a medical condition which required treatment. Country B sent a third-party intermediary (intermediary) to demand a monetary payment in the amount of $175,000 for release of the captain. Requestor brought in its own third-party representative (representative) to negotiate the release of the captain with the intermediary, requesting the “formal basis for the payment — such as an invoice or other documentation setting forth charges or an enumerated fine amount — to ensure that the payment would be made pursuant to a fine or other penalty resulting from a legal or regulatory violation, if any.” The intermediary refused to provide any such documentation.
The Requestor also sought the assistance of Country B, US embassy representatives and “sought the assistance from other agencies within the U.S. government to end the captain’s detention and permit the Requestor vessel and its crew to leave Country A expeditiously. Requestor also requested that those agencies notify relevant Country A authorities of the detention of the captain and crew, and the confiscation of the Requestor vessel.” All such avenues were unsuccessful to obtain the release of the captain.
Analysis
The DOJ analysis reminded us all that the FCPA does not prevent payment of all bribes. A predicate for FCPA liability is that the bribe must be made with corrupt intent and used to ‘obtain or retain business.’ The DOJ found neither requirement was present under this fact pattern. First, “the primary reason for the payment was to avoid imminent and potentially serious harm to the captain and the crew of the Requestor vessel.” In fact, the payment was made under duress, and that “an individual who is forced to make payment on threat of injury or death would not be liable under the FCPA.”
Significantly, the payment was not made with an eye towards ‘obtaining or retaining business.’ Requestor was trying to do business in Country B and not Country A and inadvertently strayed into the territorial waters of Country A. The Opinion Release stated, “Requestor has no ongoing or anticipated business with Country A, and the entire episode appears to be the result of an error, emanating from the incorrect advice Requestor received about where to anchor its ship while waiting for the port of Country B to carry out mandatory repairs.” Moreover, the Requestor was transparent in its request for assistance from various US government agencies and representative. The DOJ concluded, “Put simply, under the specific facts presented by Requestor, there does not appear to be a sufficient business purpose associated with the payment — and relatedly, there is a lack of a corrupt intent under the FCPA.”
Discussion
- Corrupt Intent in Obtaining and Retaining Business
First and foremost is the requirement for corrupt intent in the obtaining and retaining of business. As noted, neither was present here. It certainly helped that the Requestor had no commercial business with or in Country A. If not for the delay in getting into port in Country B, the Requestor would never have been in Country A. The Requestor had no “historical, pending, ongoing, anticipated, or sought after business relationships with government actors” in Country A.
2. Extortion Payments Not Prohibited Under the FCPA
Under the FCPA, an “individual who is forced to make payment on threat of injury or death would not be liable under the FCPA. Federal criminal law provides that actions taken under duress do not ordinarily constitute crimes.” Indeed, this was noted in the FCPA Resource Guide, 2nd edition, which was cited in this Opinion Release for the following, “Situations involving extortion or duress will not give rise to FCPA liability because a payment made in response to true extortionate demands under imminent threat of physical harm cannot be said to have been made with corrupt intent or for the purpose of obtaining or retaining business.”
3. Speed of Decision
A separate note must be made and frankly kudos to the DOJ for the speed in which it handled this most unusual request. As stated in the footnotes, the DOJ received the request on October 19 and 20, 2021. Due to the highly unusual and exigent circumstances, including the risk of imminent harm to the health and well-being of the persons involved, the DOJ provided to the Requestor a preliminary response. Additional information was provided which led to this full Opinion Release.
It is this final piece which caps off the importance of Opinion Release 22-01. Every compliance practitioner should understand that this resource is available to them. I have counseled several companies over the years to use this process and they all declined, not wanting to “open the kimono” and disclose the facts to the DOJ for fear it would result in a FCPA enforcement action. Opinion Release 22-01 shows how being creative as a lawyer can lead to a superior result for your client, especially under the FCPA.
