FCPAméricas Blog
“The Foreign Law Firm I Use has a Government Official as a Partner”
7.25.2012
A company recently asked me if the following scenario creates a potential FCPA issue: its Latin American operations wish to hire a law firm in Central America and one of the law firm’s partners concurrently serves in the President’s administration of that foreign country.
Yes, this situation can certainly create an FCPA compliance issue. In the eyes of enforcement, payments that the company makes to the law firm might be (or might appear to be) improper payments to a foreign official to obtain or retain a business benefit.
To manage a situation like this, the key is to structure the relationship in a way that clearly establishes that the company is not paying the partner/government official to take an action in his own capacity as a public official, or use his influence as a public official to influence another public official, to benefit the company in return. The company will want to demonstrate that it is not using the law firm with corrupt intent. It should take precautionary steps to avoid a knowing violation of the FCPA.
The level of necessary safeguards will depend on the level of involvement of the partner/government official in matters involving the company. Depending on the circumstances, the following considerations might be relevant.
Is there a bona fide commercial reason to use the law firm? Does it have legal expertise in the area in which the company needs assistance? Does it have a good reputation in the market for this type of work?
Does the compensation arrangement make sense in the market? Is compensation reasonable given the work performed? Is it generally in sync with the fees that other firms charge? Are means of payment straightforward? Fees should be paid to the law firm itself and never to the partner/government official. The company might even want to seek assurances from the law firm that the partner/government official will not personally benefit from the engagement (ie., that the fees will not be passed through to that individual).
Does the partner/government official perform a role for the government that can directly benefit the company? For there to be an FCPA violation, the company’s payments must be made to influence an official act or decision by the government official, to induce an official act or omission of the government official in violation of a lawful duty, or to induce the government official to influence a government act or decision. The company therefore might want to obtain a specific representation from the partner/government official that he or she will recuse him or herself from any government decisions that might affect the company and that he or she will not use special influence within the government to benefit the company. The more specific and comprehensive the representation, the better. Is the partner/government official in a position to represent the company before the government? Is the partner/government official in a position to initiate meetings with other officials about the company’s business? Is the partner/government official in a position to appoint, promote, or compensate officials who can affect the company’s business? Such scenarios should be considered, addressed, and avoided.
Does the retainer letter make appropriate FCPA representations? The letter should reference the FCPA issues at play. It can specify that the partner/government official will not be involved in any representation of the company, or, if involved, will not personally receive payments directly or indirectly from the company. The law firm can represent that it understands the FCPA’s provisions and can certify that it will comply.
Has the company disclosed the relationship to the government? Transparency is one of the best protections. The company can tell relevant government entities with whom it interacts that it has retained the law firm, that the partner/government official is a member of the firm, and that the law firm will be benefiting financially from the engagement. Steps like this could help minimize the possibility that the partner/government official would try to use his or her influence in the government to benefit personally.
In addition, the company should document everything. It should make sure its own books and records are in order. It should do its proper due diligence on the law firm itself. It should make sure it is legal under local law for the firm to have a government official as a partner in the first place.
These are some thoughts that can help guide an analysis. Here are opinions provided by the U.S. Department of Justice that might shed more light on a specific situation:
80-02 (Oct. 29, 1980)
82-03 (Apr. 22, 1982)
86-01 (July 18, 1986)
93-02 (May 11, 1993)
94-01 (May 13, 1994)
95-03 (Sept. 14, 1995)
01-02 (July 18, 2001)
10-03 (Sept. 1, 2010)
The FCPAméricas blog is not intended to provide legal advice to its readers. The blog entries and posts include only the thoughts, ideas, and impressions of its authors and contributors, and should be considered general information only about the Americas, anti-corruption laws including the U.S. Foreign Corrupt Practices Act, issues related to anti-corruption compliance, and any other matters addressed. Nothing in this publication should be interpreted to constitute legal advice or services of any kind. Furthermore, information found on this blog should not be used as the basis for decisions or actions that may affect your business; instead, companies and businesspeople should seek legal counsel from qualified lawyers regarding anti-corruption laws or any other legal issue. The Editor and the contributors to this blog shall not be responsible for any losses incurred by a reader or a company as a result of information provided in this publication. For more information, please contact Info@MattesonEllisLaw.com.
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© 2012 Matteson Ellis Law, PLLC
Post authored by Matteson Ellis, FCPAméricas Founder & Editor
Comments
July 27th, 2012 at 8:56 pm
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August 2nd, 2012 at 4:24 am
Very sound advice. Companies seem to fret over this kind of situation way too much , though the solution is usually simple as you point out.
Establishing business practices which require the company’s management and employees to go through the process outlined in this article and take a business-like approach to deterring corruption is a key to running a clean business.