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

Posted on November 4, 2008March 25, 2009 by Doug Cornelius
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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.

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