On June 14, 2011, the Crime, Terrorism and Homeland Security Subcommittee of the House Judiciary Committee, held a hearing on the Foreign Corrupt Practices Act ("FCPA"). Congressman Jim Sensenbrenner presided over the hearing, which included four witnesses: Greg Andres, Deputy Assistant Attorney General of the Criminal Division of the United States Department of Justice; the Honorable Michael B. Mukasey, Partner at Debevoise & Plimpton LLP and former Attorney General of the United States; George J. Terwilliger, Partner at White & Case LLP; and Shana-Tara Regon, Director of White Collar Crime Policy of the National Association of Criminal Defense Lawyers.
The focus of the hearing centered around five possible reforms to the FCPA: (1) clarification of the definition of "instrumentality;" (2) clarification of what constitutes benign facilitation payments; (3) whether a state-of-the-art compliance program may provide an affirmative defense against criminal liability; (4) raising the mens rea requirement for companies from "willful blindness" to "willful;" and (5) limiting successor liability.
Clarification of the Definition of "Instrumentality" The FCPA currently defines "foreign official" to be "any officer or employee of a foreign government or any department, agency, or instrumentality thereof, or of a public international organization, or any person acting in an official capacity for or on behalf of any such government or department, agency, or instrumentality, or for or on behalf of any such public international organization." However, the FCPA does not define "instrumentality," making it difficult to determine whether an employee or officer of a state-affiliated foreign company qualifies as a "foreign official." Both the Department of Justice ("DOJ") and the Securities Exchange Commission ("SEC") interpret the terms broadly, forcing companies to accept the imposition of hefty fines or risk criminal indictment.
Three of the four witnesses—Mukasey, Terwilliger, and Regon—advocated for the clarification of these broadly-interpreted terms. Specifically, Mukasey proposed that the FCPA include a provision indicating the percentage of ownership by a foreign government that will result in a company being considered an "instrumentality" of that government.
Andres countered that courts have already established a bright-line test to determine whether a company qualifies as an "instrumentality." Andres contended that providing a statutory...