ANTI-Corruption And ANTI- Bribery Compliance - The Center For American .

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ANTI-Corruption and ANTIBribery Compliance Multi-National Counsel Boot Camp: Practical Solutions for International Lawyers Compliance and Sanctions, Part I: An Overview June 15, 2015 2015 Haynes and Boone, LLP

Outline of Discussion Overview of Anti-Corruption and Anti-Bribery Laws Major risk areas and concerns Implementing effective compliance programs Recent government actions and trends 2 2015 Haynes and Boone, LLP

Global Anti-corruption Standard A number of countries around the world have enacted anticorruption laws – E.g., United Kingdom, Brazil, Russia, India, China – 40 countries have also signed the OECD Anti-Bribery Convention Policies and procedures can help company mitigate liability Regulators will assess P & P – Tailored to business – Designed to address risks – Comprehensive – Implemented effectively and in good faith – Tested regularly (at least annually) – Ultimately, whether it works 3 2015 Haynes and Boone, LLP

INTERNATIONAL COMPARISONS FCPA UK Act China Laws Brazil Limited to Foreign Officials Yes No No Yes Private Bribery No Yes Yes No Offer/Receipt Offer only Both Both Both Failure to Stop 3rd Parties Vicarious Liability Strict Liability Unknown Strict Liability Corrupt Intent Foreign Officials No Improper Benefit Strict Liability Facilitation Payments Exempted No Exception No Exception No Exception Promotional Costs Reasonable costs No defense No defense No defense Requisite Intent 2015 Haynes and Boone, LLP

COMPARISONS (cont’d) FCPA UK Act China Laws Brazil Books and Records Yes No No Yes Robust Compliance No Defense Yes No Defense Yes Individual Penalties 250k / violation 5 years prison Up to 10 years prison & Unlimited fines Private: 3 to 10 years prison Official: fines, prison, death Up to 12 years prison and fines Company Penalties 2M / violation Unlimited fine Fines, asset confiscation, or licenses revoked Up to 20% of gross revenue, assets seized, dissolution 2015 Haynes and Boone, LLP

TRANSPARENCY INTERNATIONAL GLOBAL CORRUPTION INDEX 2015 Haynes and Boone, LLP

Foreign corrupt practices act (FCPA) Anti-Bribery Provisions: Cannot provide anything “of value” to “foreign (non-U.S.) officials” for “improper purposes” Accounting Standards and Internal Controls Must keep “books, records and accounts, which, in reasonable detail, accurately and fairly reflect” transactions Maintain internal accounting controls Covers “All U.S. Persons” – Public company issuers and their officers, directors, employees, agents, and shareholders acting on their behalf – Non-public domestic concerns and their officers, directors, employees, agents, and shareholders acting on their behalf – Certain persons and entities acting while in U.S. territory Civil and criminal penalties – Companies and individuals 7 2015 Haynes and Boone, LLP

Anti-Bribery Basics Cannot offer/make bribes To foreign officials – Including low ranking employees and high-level officials of foreign government instrumentalities With intent to induce/influence official to use position to help get or retain business “Facts and circumstances” analysis 8 2015 Haynes and Boone, LLP

Major Risk Areas Global risk: compliance with foreign anticorruption laws Insufficient internal controls M&A transactions – successor liability Intermediaries & third parties Gifts, meals, and entertainment 9 2015 Haynes and Boone, LLP

Meeting the Global Standard CORE COMPONENTS OF AN EFFECTIVE COMPLIANCE PROGRAM Support and commitment from the top. A clearly articulated and visible corporate policy. Making compliance the duty of individuals at all levels of the company. Oversight by the senior corporate officers with autonomy, resources and authority. Generally applicable compliance measures focused on high-risk areas. Ensuring the compliance of third parties. Financial and accounting procedures, including a system of internal controls. Periodic communication and documented training. Encouragement and positive support for compliance. Appropriate disciplinary procedures to address violations. Guidance, advice, confidential reporting and whistleblower protections. Periodic reviews. 10 2015 Haynes and Boone, LLP

Expanding Internal Controls Provision The FCPA require issuers to adopt accounting controls that “provide reasonable assurances that . . . transactions are executed in accordance with management’s authorization.” Enforcement agencies have interpreted this to require that companies adopt robust anti-corruption compliance programs Recent enforcement actions by the SEC have focused on the requirement that companies adopt internal controls sufficient to “prevent and detect” violations of the books and records provisions of the FCPA. – 1/10/2014 – Archer Daniels Midland Co. 54 million settlement – 2/25/2015 – Goodyear 16 million settlement 11 2015 Haynes and Boone, LLP

M&A Transactions Successor inherits FCPA liability of the acquired company In a recent advisory opinion, the DOJ affirmed no successor liability if the target company’s pre-acquisition conduct had no nexus to the U.S. “Successor liability does not create liability where none existed before.” Additional focus on post-acquisition continuation of unlawful conduct Recommended action to acquiring companies: – Due diligence & disclosure of irregularities – Integrate acquired company in compliance program 12 2015 Haynes and Boone, LLP

Limiting Third Party Liability Standard: Can be liable for payments made to third parties if know, or are willfully blind to fact, that third party is or will be making unlawful payments – Awareness of a high probability can be enough Guiding principles: Due Diligence – Determine third party’s qualifications & associations – Understand business rationale for including third party in transaction – Ongoing monitoring of third party relationships – Third party training – Regular FCPA compliance certifications – Ensure payments at market rates 13 2015 Haynes and Boone, LLP

Gifts/Payments to Foreign Officials Impermissible: payments made “to assist in obtaining or retaining business” Likely permissible: – Items of nominal value (coffee, taxi, promo items) – Gifts, must be Given openly and transparently Properly recorded in “reasonable detail” Provided “only” to reflect esteem/gratitude Ok under local law Permissible – Legitimate charitable contributions – Facilitating payments 14 2015 Haynes and Boone, LLP

Recent Enforcement Trends Fewer enforcement actions, but larger fines – In 2010, 74 enforcement actions 48 by the DOJ and 26 by the SEC – Contrast with 2014, 26 enforcement actions 17 by the DOJ and 9 by the SEC – Average fine: 34 million in 2012 but 156.6 million in 2014 – 772 million fine against Alstom, S.A. – 135 million fine against Avon Products The emergence of whistleblowers 15 2015 Haynes and Boone, LLP

The Emergence of Whistleblowers 16 2015 Haynes and Boone, LLP

Whistleblower Bounty Program Under Dodd-Frank, the SEC pays bounties to those reporting certain violations – Award of at least 10% but not more than 30% of monetary award in excess of 1 million In 2014, 159 (4.4%) out of 3,620 whistleblower tips related to FCPA – Over 40% tipsters are current or former employees – 20% were contractors or consultants Growing number of tips on FCPA – 2014 -159 – 2013 - 149 – 2012 - 115 17 2015 Haynes and Boone, LLP

2015 Haynes and Boone, LLP

Recent Enforcement Trends Fewer enforcement actions, but larger fines -In 2010, 74 enforcement actions 48 by the DOJ and 26 by the SEC -Contrast with 2014, 26 enforcement actions 17 by the DOJ and 9 by the SEC -Average fine: 34 million in 2012 but 156.6 million in 2014 - 772 million fine against Alstom, S.A.

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