Private Equity Portfolio Companies and Bribery Charges

The U.S. is investigating Allianz SE, for possible bribery by a German printing press company in which it holds a majority stake according to a story by Joe Palazzolo in WSJ.com’s Corruption Currents.

The Foreign Corrupt Practices Act bars US companies from paying bribes to foreign officials to keep or obtain business. The SEC claims jurisdiction over Allianz under the FCPA because it was listed on the New York Stock Exchange until October 2009.

FCPA investigations are a dime a dozen, so I didn’t pay much attention to this one a first. But then I noticed something different about this one. The company accused of bribery is Manroland AG a private equity portfolio company of Allianz.

This raises the specter that federal regulators are looking at the private equity industry as the next area for increased enforcement under the FCPA. At least, Tom Fox raises that possibility.

The additional FCPA challenge in the private equity industry is what level of control and ownership will be required to pass the liability up to the parent. Past actions have shown that when you purchase a company, you purchase the FCPA liabilities. Will other forms of acquisitions continue FCPA liability and pass it up the ownership chain? What if a transaction is structured as a purchase of a company’s assets instead of the ownership of the company? That traditionally severs most liabilities. What if ownership is just a minority interest? How much of a say over management will trigger FCPA liability being passed to a minority owner? One board seat? A majority of board seats?

Sources:

, , ,

Comments are closed.