I see lots of recent literature about aggressive SEC and DOJ enforcement of the FCPA.  Traditionally, easy targets were the medical and energy sectors; the statute prohibits improper payments to overseas government officials, and these industries feature deep governmental ownership.

Last year, the DOJ and SEC jointly published a Resource Guide to help US businesses understand their duties of diligence and compliance under the FCPA.  Coupled with recent active investigations, this Guide suggests diligence requirements on the part of PE firms buying any company with overseas sales.

The concept is easy: if a PE firm invests in a portfolio company it must diligently search for risks under the FCPA.  Once invested, the PE firm should monitor that risk.  Failure to discern and remediate noncompliance, even if arising pre-investment, can create liability directly on the PE firm as major or controlling stockholder. 

While generally shareholders are passive and have no liability for the acts of their portfolio companies, PE firms undertake diligence as a matter of course and thus become tainted with putative knowledge of FCPA risk.  PE firms also sometimes obtain various control rights, not to mention functional voting control, relative to target operations.  PE involvement is heightened when board seats are taken.

PE firms also just look like good targets for the government to deliver the FCPA message; and, they are deep pockets to boot.  It is unsettling to think that a PE firm, putting down its money to make an acquisition and itself being misled into buying a target that is in violation of FCPA, could further be found to be itself directly liable.  All part of the continuing trend to make third parties the policemen in our capital markets.

Coupled with a recent suggestion that PE firms may suffer liability under ERISA with respect to portfolio companies, FCPA presents yet another operational risk and yet another possible risk disclosure obligation to LPs.