FCPA: Payment to government-controlled investment bank

FCPA: Payment to government-controlled investment bank

October 09, 2020 | By Keith Martin in Washington, DC

The US Justice Department said in August that a $237,000 fee that a US fund manager planned to pay an investment bank owned by a foreign government for help with an acquisition would not trigger prosecution under the Foreign Corrupt Practices Act.

The Foreign Corrupt Practices Act makes it a crime for US companies and citizens to give anything of value to an official of a foreign government, political party or public international organization in an effort to win or retain business or secure an improper advantage.

The US fund manager acquired a portfolio of assets from the country A office of a foreign investment bank. The bank was owned 50% plus one share by a foreign government.

The US fund manager initially hired the country B office of the investment bank to advise it on the acquisition, but when the deal languished, it hired a local partner in country A to push the transaction across the finish line.

The country B office later approached the fund manager about paying it a fee. No agreement was signed requiring a fee. The country B office wanted 0.5% of asset value.

The fund manager asked the US Department of Justice whether the payment would get the fund manager into trouble under the Foreign Corrupt Practices Act.

The Justice Department said no. Even if the employees of the country B office are all considered foreign government officials, the payment was to the government entity itself and not to any individuals. There was no evidence the payment would be passed to any individuals. The US fund manager represented that it sought and received legitimate analytical and advisory services from the country B office in connection with the deal.

This is the first advisory letter that Justice has issued under the Foreign Corrupt Practices Act in six years. The document is FCPA Advisory Opinion 20-01. The letter took at least nine months to obtain.