Boeing recently announced it was acquiring the commercial jet business of the Brazilian company Embraer. The acquisition will result in a new business venture that is owned 80 percent by Boeing and 20 percent by Embraer. The announcement came on the heels of an earlier announcement that the U.S. refining giant LyondellBassell is looking to acquire another Brazilian entity, Braskem.
If Embraer and Braskem sound familiar to the readers of this blog it is because they both paid massive fines for their respective Foreign Corrupt Practices Act violations and are now both under monitorships from U.S. regulators and Brazilian authorities.
Is Boeing buying itself an FCPA violation in the purchase of the Embraer assets. The short answer is no, if the purchaser follows some very basic guidelines outlined under Hallmark 10 in the 2012 FCPA Guidance. First and foremost both companies should engage in as much pre-acquisition due diligence from the compliance perspective as possible. If anything askance appears in this investigation it should be ring-fenced for remediation as soon as possible.
After closing, both companies should work as quickly as possible to remediate the areas, bring both entities into their respective compliance programs, and engage in a full forensic audit to determine if there are any other FCPA violations lurking out there. Both Boeing and LyondellBassell, however, are in the unique positions of purchasing companies or their assets that have gone through major FCPA enforcement actions, paid massive fines, and now are condemned to direct government oversight in the form of corporate monitors.
Not only does all of this give a greater level of comfort that the businesses are being run in compliance with international anti-corruption norms, but there is also a large amount of accessible data for review. In other words, because both Braskem and Embraer did go through such catastrophic anti-corruption enforcement actions, there may actually be in better compliance shape than other companies that have not sustained FCPA enforcement actions.
Isn't it ironic?
An FCPA enforcement action could be so devastating financially that your company is forced to sell all or parts of itself, but the same enforcement action results could make a company more attractive.