Vetrox Inc. is a U.S. company listed on the New York Stock Exchange. The company is growing internationally and plans to acquire Hexaco Inc., a Chinese company that has no activities or presence in the United States. During the course of conducting robust anti-corruption due diligence of Hexaco, Vetrox discovers that Hexco has paid bribes to a government official at China’s state-owned petroleum corporation disguised as commissions to third-party agents. Despite this information, Vetrox proceeds with its Hexaco acquisition.
- The FCPA only covers conduct engaged in by a covered person under the statute; that is, issuers and domestic concerns, and their agents, and any other person committing an act in furtherance of foreign bribery while in the territory of the United States. The acquisition of a company by a covered person does not provide the DOJ and SEC with jurisdiction over pre-acquisition conduct by a non-covered person.
- Where corruption risks are present, post-acquisition due diligence and compliance program integration should be conducted expeditiously and as soon as possible, to ensure that no post-acquisition corrupt conduct by the acquired entity is ongoing.
- Steps should include:
- Applying the parent company’s anti-bribery compliance policies, procedures and key finance and compliance controls to the new subsidiary;
- Reevaluating the new subsidiary’s relationships with third parties using the parent company’s policies and standards;
- Including the new subsidiary in the appropriate audit cycle;
- Training employees at the new subsidiary and setting up a system for training new hires at the new subsidiary;
- Documenting all post-transaction audit and due diligence steps.