The world of international compliance: what transactional lawyers need to know to perform ethically and responsibly.

Once it has been determined that an export is subject to U.S. export controls, the target's polices and procedures for dealing with those exports should be reviewed. In addition, the company should review its export control manuals to determine compliance with the EAR, and other relevant export regulations such as Shippers Export Declarations, delivery verification documents, or use of destination control statements. The target's record keeping practices and procedures should also be examined. To determine whether the end user and end-use of the export is permissible, a transactional attorney should be familiar with the Specially Designated Nationals list, which includes specifically targeted individuals, entities, and organizations, as well as specific activities such as terrorism or narcotics trafficking. (69)

3. ATS Risk Assessment: Understand the Political and Social Context

An ATS risk assessment should start with understanding the political and social issues faced by the country. This will result in a far more accurate assessment of the likelihood of allegations of involvement in human rights abuses by potential target companies, partners, or third parties.

Useful sources of information for this assessment include State Department country reports, (70) investigations by security firms, reports by multilateral institutions, and nongovernmental organizations (NGOs) such as Transparency International. (71) The benefits of using NGOs as part of the risk assessment include receiving additional information regarding issues affecting the geographical area of operations, and increasing the credibility of the assessment by demonstrating corporate responsibility and transparency.

It is important to keep in mind, however, that there are drawbacks to using NGOs as part of the risk assessment process. In Doe v. Unocal, statements made during meetings with NGOs were later used against the company in an ATS lawsuit. (72) Additionally, reports written by NGOs may constitute notice to the company of potential violations in the area of operations, or create tensions with the host government.

B. Conduct a Tailored Review

Once the risk assessment is completed, the company should conduct a tailored due diligence review of the target's operations. This should include both a review of documents as well as targeted interviews of company personnel. The document review should include an examination of documents relating to high-risk payments, records of entertainment (for example, meals, and outings), gifts for government officials, correspondence with government officials, copies of any government contracts, export records and licenses, and any indications of human rights abuses indicated by internal records or reported by the media. Additionally, the company should conduct targeted, in-person interviews of the target company's employees who have any knowledge of the relevant documents, transactions, and relationships. Finally, all the information gathered should be analyzed and recorded in a due diligence report. Whether the due diligence report is given orally or written may depend on the results of the review.

C. Post-Review Steps

Following the review, the company should determine whether potential violations, if any, rise to a level of seriousness that may materially affect the transaction. Keeping in mind that the acquiring company may become liable for the target's FCPA liability, export control, or ATS violations, it may become necessary to assess whether this potential liability outweighs the potential benefit from the transaction. This decision may be impacted by an assessment of whether disclosure to the U.S. government or any other government is warranted or by the financial liability arising from a potential lawsuit.

If the acquiring company wants to proceed with the transaction, it may want any preexisting compliance problems to be resolved prior to closing. Moreover, if any violations are discovered during the course of review, it is imperative to take strong and immediate corrective action after the close of the deal. The company may do this in a variety of ways, including "exporting" its own compliance program to the target, disciplining the employees involved in the wrongdoing, and taking ownership of the problem by pursuing follow-up procedures, such as audits, reviews, and compliance certifications.

The company's review should also include due diligence on the target's third-party agents, representatives, and consultants. This should involve reviewing the preexisting due diligence files of the target's agents. The ultimate purpose is to ensure the target has appropriate policies and procedures in place to review agents and consultants.

In all of these respects, the most important post-review step involves integrating the target company into the acquiring company's compliance program. In the Titan complaint, the SEC's internal controls charge related in part to Titan's failure to integrate Datron World Communications into Titan's compliance program after acquisition.

IV. CONCLUSION

Before transacting business abroad, a company must consider several areas of international compliance. It is necessary for any transactional lawyer contemplating an international transaction to determine the FCPA risk factors, conduct a tailored review, and identify post-review procedures that will best insulate the company from FCPA liability. Additionally, a transactional lawyer must review a company's export controls and trade sanctions compliance, keeping in mind that the export controls and trade sanctions requirements of the target company (as well as the target's liability for violations) may be assumed by the purchaser.

Finally, to minimize the risk of ATS liability for human rights violations, as well as the possibility of injury to the company's reputation, transactional lawyers should consider ATS risks as a part of its overall international compliance risk assessment. Although it is impossible to immunize a purchaser entirely from potential litigation or investigations related to international compliance, a proactive and well-documented due diligence analysis prior to acquisition will minimize the risks.

(1.) 15 U.S.C. [section] 78dd-1 (2000).

(2.) 15 U.S.C. [section] 1350 (2000).

(3.) Complaint at 1-3, SEC v. Titan Corp., No. 05-0411 (JR), 2005 WL 516541 (D.D.C. Mar. 30, 2005).

(4.) Renae Merle, Lockheed Martin Scuttles Titan Acquisition; San Diego Defense Contractor Fails to Settle Federal Bribery Investigation, WASH. POST, June 27, 2004, at A9.

(5.) Id.

(6.) News Release, Office of the United States Attorney, Southern District of California, News Release Summary (Mar. 1, 2005), available at http://www.dodig. mil/IGInformation/IGInformationReleases/Titan_030105.pdf. Although the Titan prosecution represents the largest total combined criminal and civil penalties assessed to date, the DOJ's recent settlement with three subsidiaries of Vetco International Ltd. for $26 million is the largest criminal fine to date in an FCPA prosecution. Press Release, U.S. Department of Justice, Three Vetco International Ltd. Subsidiaries Plead Guilty to Foreign Bribery and Agree to Pay $26 Million in Criminal Fines (Feb. 6, 2007), available at http://www.usdoj.gov/opa/pr/2007/February/07_crm_075.html.

(7.) Simeon M. Kriesberg, Proceed with Caution: International Trade Compliance in Lending Transactions, 123 BANKING L.J. 579, 580 (2006).

(8.) 15 U.S.C. [subsection] 78dd-1(a), 78dd-2(a), 78dd-3(a) (2000).

(9.) See, e.g., In re Schering-Plough Corp., Exchange Act Release No. 34,49838, Accounting and Auditing Enforcement Release No. 2032, Administrative Proceeding File No. 3,11517, 20 SEC Docket 3644, 3645 (June 9, 2004) (finding that charitable donations to Chudow Castle Foundation constituted a "thing of value" to a foreign official under the FCPA because the contributions were requested by the President of the Foundation, who was also a government health official in a position to favor Schering-Plough).

(10.) 15 U.S.C. [subsection] 78dd-l(a), 78dd-2(a), 78dd-3(a) (2000) (enumerating "offer," "promise to pay," and "promise to give" as prohibited actions under the act).

(11.) See In re BJ Servs. Co., Exchange Act Release No. 34,49390, Accounting and Audit Enforcement Release No. 1972, Administrative Proceeding File No. 3,11427, 82 SEC Docket 1282, 1282-83 (Mar. 10, 2004) (defendant allegedly bribed Argentine customs officials to overlook a violation of Argentine customs law to allow the importation of oil well maintenance equipment).

(12.) See SECv. Syncor Int'l Corp., Litigation Release No. 17,887, Accounting and Auditing Enforcement Release No. 1688, 79 SEC Docket 270, 270 (Dec. 10, 2002) (describing doctors at hospitals controlled through foreign government ownership considered "foreign officials" under FCPA).

(13.) See In re BellSouth Corp., Exchange Act Release No. 34,45279, Accounting and Auditing Enforcement Release No. 1494, Administrative Proceeding File No. 3,10678, 76 SEC Docket 1655, 1656-57 (Jan. 15, 2002) (defendant hired wife of legislator to "lobby" for repeal of unfavorable telecommunications law).

(14.) 15 U.S.C. [subsection] 78dd-1(a), 78dd-2(a), 78dd-3(a) (2000) (enumerating an "agent ... acting on behalf" of the concern can trigger liability).

(15.) Kriesberg, supra note 7, at 582 (emphasis added).

(16.) Valerie Ford Jacob, The Foreign Corrupt Practices Act and the Due Diligence Process, 1545 PRAC. L. INST./CORP. 59, 64-65 (2006).

(17.) Complaint, supra note 3, at 1, 6, 21.