On June 13, 2008, the Department of Justice ("DOJ") issued Opinion Procedure Release 08-02 which allowed Halliburton Company ("Halliburton") to acquire Expro International Group, PLC ("Expro"), a foreign (U.K.) corporation with potential Foreign Corrupt Practices Act ("FCPA") violations, without exposing Halliburton to immediate FCPA liability. Specifically, the DOJ agreed that it would forgo action against Halliburton for any FCPA violations committed by Expro both prior to the acquisition and in the first 180 days after the acquisition provided Halliburton followed a "post closing plan" consisting of FCPA due diligence and disclosure.
Circumstance of Halliburton Request – U.K. Law in Bidding Process
Halliburton was involved in a bidding process to acquire Expro, a public U.K. company that provides well-flow management for the oil and gas industry. As a result of U.K. legal restrictions inherent in the bidding process, Halliburton had insufficient time and inadequate access to conduct thorough pre-acquisition FCPA due diligence. In addition, pursuant to the terms of a confidentiality agreement between Expro and Halliburton, Halliburton was restricted from providing information to the DOJ regarding FCPA issues during the bidding process. Halliburton estimated that, in the event it successfully acquired Expro, such FCPA due diligence could take several months to complete. Normally, an acquiring company is liable for FCPA violations of the target company after the date of acquisition. Since Halliburton did not have sufficient time or access to information, Halliburton requested that, for 180 days after the acquisition, the DOJ forgo any FCPA action against it in exchange for Halliburton’s satisfaction of a rigorous "post closing plan" consisting of rigorous FCPA due diligence and disclosure.
Halliburton’s Proposed Post Closing Plan
Halliburton proposed the following "post closing plan" to the DOJ:
- Immediately after closing, Halliburton would disclose to the DOJ information related to FCPA violations made available to Halliburton;
- Within 10 business days of closing, Halliburton would present to the DOJ a comprehensive FCPA and anti-corruption due diligence work plan which would include "the use of agents and other third parties; commercial dealings with state-owned customers; any joint ventures, teaming or consortium arrangements; customs and immigration matters; tax matters; and any government licenses and permits". The work plan would organize efforts into high, medium and low risk areas. Halliburton would complete high risk due diligence within 90 days, medium risk due diligence within 120 days and low risk due diligence within 180 days;
- Retain external counsel and third-party consultants to conduct FCPA and anti-corruption due diligence. The due diligence would include email review and review of Expro’s financial and accounting records as well as interviews with certain Expro personnel and other individuals;
- Require all Expro agents who would continue to work for Halliburton post-acquisition to complete new contracts containing anti-corruption provisions;
- Implement Halliburton’s Code of Business Conduct at Expro and provide FCPA and anti-corruption training for all relevant Expro officers and employees; and
- Disclose to the DOJ all FCPA and corruption issues that it discovered in the 180 day due diligence period.
Halliburton also agreed to maintain Expro as a wholly-owned subsidiary as long as the DOJ was investigating any conduct by Expro or any of its officers, directors, employees, agents, subsidiaries, and affiliates.
The DOJ addressed the following questions presented by Halliburton:
1. Would Halliburton’s proposed acquisition of Expro itself violate the FCPA?
The DOJ concluded that completing the acquisition of Expro would not, in and of itself, create FCPA liability since payments made by Halliburton would be made to the shareholders of Expro and would not, in all likelihood, be used to fund unlawful activities.
2. Would Halliburton assume FCPA liability for pre-acquisition unlawful conduct by Expro?
The DOJ indicated that it would not hold Halliburton liable for Expro’s pre-acquisition FCPA violations so long as Halliburton had complied with its "post closing plan" and had disclosed such violations within the 180-day period following closing.
3. Would Halliburton be liable for post-acquisition unlawful conduct by Expro prior to Halliburton’s completion of its "post closing plan"?
The DOJ indicated that it would not hold Halliburton liable for post-acquisition violations of the anti-bribery provisions of the FCPA committed by Expro during the 180-day period after closing so long as Halliburton (a) disclosed such conduct to the DOJ within 180 days of closing, (b) stopped and remediated such conduct within 180 days of closing, or, if the alleged conduct, in the judgment of the DOJ, could not be completely investigated within the 180-day period, stopped and remediated such conduct as soon as reasonably possible and (c) completed its due diligence and remediation, including completing its investigation of any issues that were identified within the 180-day period, by no later than one year from the date of closing.
What is the Significance of this Opinion?
Opinion Procedure Release 08-02 demonstrates that the DOJ may be willing, in certain limited circumstances, to allow companies to purchase a foreign target and subsequently remedy pre-existing FCPA violations without prosecution. However, the DOJ in its opinion makes it clear that this was a unique case since the U.K. bidding process did not allow Halliburton to conduct proper FCPA due diligence prior to the acquisition. Therefore, it is unclear under what other circumstances the DOJ might extend this type of agreement. However, since the DOJ’s opinion repeatedly mentions that U.K. law prevented Halliburton from being able to conduct proper FCPA due diligence, it can be inferred that an acquiring company would likely assume a target company’s pre-acquisition FCPA liability in instances where adequate FCPA due diligence could have been completed. It should also be noted that the DOJ, in its opinion, expressly discourages companies wishing to receive an FCPA Opinion Release from entering agreements which limit the information that may be provided to the DOJ (such as the confidentiality agreement entered into between Halliburton with Expro).