This is the tenth survey from the Corporate Compliance Committee.1 This survey summarizes selected legal developments regarding corporate compliance and ethics programs, which consist of an organization’s code of conduct, policies, and procedures designed to achieve compliance with applicable legal regulations and internal ethical standards.2 For an overview and introduction to the subject, as well as updates from prior years, please see the prior surveys.3 This update assumes familiarity with the background and overview discussed there.
The developments discussed here relate to revised federal guidance under the Foreign Corrupt Practices Act; a recent federal court decision interpreting the Foreign Corrupt Practices Act; application of the attorney-client privilege to internal investigations; and caselaw developments under corporate law, federal employment discrimination law, and state employment law. Part I reviews significant developments under the anti-bribery provisions of the Foreign Corrupt Practices Act, Part II reviews recent decisions under the attorney-client privilege, and Part III reviews significant caselaw developments.
I. FOREIGN CORRUPT PRACTICES ACT
The U.S. Foreign Corrupt Practices Act (FCPA) has two parts: the accounting provision and the anti-bribery provision. The accounting provision requires that all public companies keep accurate financial records and maintain internal controls adequate to produce such records. The anti-bribery provision, which is the focus of this discussion, makes it a federal crime to bribe a foreign government official.4 The anti-bribery provision applies to a wide range of actors, including companies with securities registered under federal law; companies incorporated or located in the United States; U.S. citizens, nationals, and residents; and any person or company that took action in furtherance of a prohibited bribe “while in the territory of the United States.”5 An unlawful bribe occurs when a person or entity covered under the statute uses interstate commerce to give anything of value to a foreign official with the corrupt purpose of obtaining or retaining business.6
Making matters more complicated, the FCPA applies when an organization directly makes the forbidden payment to a foreign government official and when that organization makes a payment to a third party (such as an agent or contractor) knowing that the third party will then make a forbidden payment to a foreign government official.7 “Knowing” is defined to include circumstances where “a person is aware of a high probability of the existence of [the forbidden payment], unless the person actually believes that such circumstance does not exist.”8 Thus, a company or individual may be deemed to know of an agent’s bribe if the company were “aware of a high probability” that a bribe might be made.9 Such awareness could exist when an agent’s activities raise red flags, such as a request for payment in cash or under an assumed name, a higher than usual commission, or a refusal to document expense-reimbursement requests. To avoid a finding that the organization “knew” such an agent was making bribes, the organization should implement compliance controls to prevent and detect agent misconduct.
Many terms within the anti-bribery provision are open to interpretation: What does it mean to take action “while in the territory of the United States”? What constitutes anything of value? Who is a foreign official? Because most FCPA investigations settle, there are few decided cases interpreting these terms.10 Therefore, the government’s interpretation takes on added significance; that is, because settlement with the government is almost certain, compliance professionals want to know what kinds of behavior are likely to trigger an investigation by the U.S. Department of Justice (DOJ) or the U.S. Securities and Exchange …