Tag: Clifford Chance

Who Is a Foreign Official After the Government Bailout of Financial Instiutions?

We have all read about the bailout of US financial institutions by the US government. This is not happening in other countries.  This complicates the analysis under the Foreign Corrupt Practices Act.

As Joel M. Cohen, Michael P. Holland, and Adam P. Wolf of Clifford Chance examined in Under the FCPA, Who Is a Foreign Official Anyway?, the FCPA does not define a foreign official. An employee of a state-owned enterprise is a foreign official. But the FCPA does not define a state-owned enterprise. The Anti-Bribery Convention of OECD does a better job of defining. See International Standards for the Bribery of Public Officials.

In some of these government bailouts, the governments are purchasing equity and equity-like interests in the financial institutions. Is AIG a state-owned enterprise? The US government has the right to purchase majority ownership!

Morgan Lewis put out LawFlash on this issue: Financial Turmoil and the Expanding Reach of the FCPA.

Morgan Lewis points out that the DOJ will likely treat sovereign wealth funds as state-owned enterprises and therefore their employees are foreign officials under the FCPA.

If a government has a small passive interest in a company, then the company is probably not a state-owned enterprise. As the ownership interest increases and the management control increases the company starts looking more like a state-owned enterprise.

Merely buying assets (like crappy CMBS and CDO interests) or guaranteeing loans should not affect the treatment of the company.

Who is a Foreign Official under the FCPA?

The FCPA defines “foreign official” as:

[A]ny officer or employee of a foreign government or any department, agency, or instrumentality thereof, or 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.

It is obvious that person holding political office is a foreign official. In this age of increasing privitization of government services and the sudden investment of government investment in private businesses, it is not clear when an entity is an “instrumentality” of a foreign government.

The OECD Anti-Bribery Convention uses the term “public enterprise” which it defines to include “any enterprise in which the government holds a majority stake, as well as those over which a government may exercise a dominant influence directly or indirectly.

Under the FCPA, Who Is a Foreign Official Anyway? by Joel M. Cohen, Michael P. Holland, and Adam P. Wolf of Clifford Chance examine some of thses issues in great detail. You can find the article in the August 2008 edition of The Business Lawyer.