FCPA: Interesting Note From "SEC Speaks" Conference
Cheryl Scarboro, the head of the new SEC Division of Enforcement's specialized Foreign Corrupt Practices Act (FCPA) Unit, made an interesting comment for M&A counsel, Friday morning at the "SEC Speaks" conference in Washington, D.C. In response to a question from former Commissioner Campos on whether due diligence efforts in M&A transactions lead to efforts by SEC Enforcement, Ms. Scarboro replied yes: "A lot of the cases come to us because of the [Merger & Acquisition] due diligence process resulting in self-reporting [by registrants]."
This is a good reminder of the importance of the diligence process -- to be aware of the FCPA red flag and, in instances where potential failures to comply with the FCPA are discovered, to conduct a special assessment to determine if that discovery may trigger a self-reporting duty, and whether that is a duty of the purchaser or of the target.
Last year, this FCPA blog quoted Cheryl Scarboro and Mark Mendelson of the DOJ on the increased sophistication of M&A diligence for FCPA http://wrageblog.org/2009/09/17/the-latest-fcpa-forecast-from-u-s-regulators/ - - referring to the Haliburton procedure.
Due diligence in connection with transactional activity. Mark [Mendelson of the DOJ] believes that the importance of due diligence in anti-bribery compliance programs has finally taken hold, at least among most large multinationals. He finds that practices in this area have become much more sophisticated and that many more companies are coming into the DOJ, in the M&A context, with due diligence at the top of their agenda (e.g., Opinion Procedure Release 08-02).
DOJ and Haliburton crafted the "Haliburton procedure" http://www.justice.gov/criminal/fraud/fcpa/opinion/2008/0802.html when Haliburton wished to make an acquisition rapidly, but did not have adequate time prior to closing conduct due diligence and assess FCPA risk. So, Haliburton approached the DOJ to ask if it could separate the business for a period of time post-closing while it conducted post-closing FCPA diligence. Haliburton would then immediately impose its own Code of Conduct and provide FCPA training to all target personnel - -within 60 days of closing. The DOJ agreed to the procedure, with a full FCPA review and reporting in the 180 days post-Closing.
