Embed Size (px)
Citation preview
From PLI’s Online ProgramFCPA Compliance in High Risk Jurisdictions#20434
6
EXECUTIVE COMPENSATION GROUPADVISORY — DISCLOSURE DEVELOPMENTS: EXECUTIVECOMPENSATION
Ernest W. Torain, Jr.Vedder Price P.C.
Disclaimers and Suggested References: The outline
that follows provides a general overview of retiree
medical benefit VEBAs, with specific focus on the
VEBAs recently proposed by the Big Three U.S.
automakers. The author is by no means an expert on
PLI FCPA COMPLIANCE SERIESFCPA Compliance InFCPA Compliance In
High Risk Jurisdictions
December 2, 2008
Richard W. Oehler Lee Stein Pravin [email protected] [email protected] [email protected] 359 8419 602 351 8190 312 324 8592
14953916
206.359.8419 602.351.8190 312.324.8592
Overview of PresentationOverview of Presentation
We assume a basic understanding of the FCPA, g ,but will provide a quick review of the elementsThe characteristics of a high risk jurisdictiong jBest practices for businesses operating in high-risk jurisdictionsjPractical strategies for mitigating FCPA risks in high risk jurisdictionsg j
2
Elements of an FCPA A ti B ib Vi l tiAnti-Bribery Violation
Gi i ff iGiving or offeringAnything of valueTo a foreign (non-US) government officialDirectly or indirectlyCorruptly (i.e. quid pro quo)To advance a business objective
3
What Does "High Risk" MeanWhat Does High Risk Mean
They are all high risk – it is like asking what isThey are all high risk it is like asking what is "minor surgery"But there are some relevant factors to consider
The part of the worldThe type of businessThe corporate culture
4
Risk Factor: GeographyRisk Factor: Geography
Obviously, some parts of the world experience more ti th thcorruption than others
A convenient (but far from perfect) guide to the relative levels of corruption in various countries all over the world i T I tl' A l C ti P tiis Transparency Intl's Annual Corruption Perception Index [http://www.transparency.org/policy_research/surveys_indices/cpi]The World Bank also provides guides and analysisThe World Bank also provides guides and analysis [www.worldbank.org/wbi/governance ]News ReportsPersonal experiences of employees and others in thePersonal experiences of employees and others in the country
5
Example: China
42,000 officials investigated for corruption every year from 2002 to 2005, with more than 30,000 per year facing criminal chargesFrom August 2005 to June 2006 6 972 casesFrom August 2005 to June 2006 – 6,972 cases involving 416 officialsWorld Bank ranked China 142 out of 204 countriesWorld Bank ranked China 142 out of 204 countries on the 2005 “Control of Corruption” indexEstimated corruption costs: China 0.5% -13.2 % of GDP
6
Transparency International Corruption P ti I d 2007Perceptions Index 2007
Country Rank (of 179)
Denmark, Finland, New Zealand, Singapore, Sweden 1-4
Australia, Canada, France, Hong Kong, Japan, Germany, UK 9-19
USA 20USA 20
Israel 30
Czech Republic, Hungary, Italy, Malaysia, S. Korea, Taiwan 39-43
Brazil China India Mexico Saudi Arabia 72-79Brazil, China, India, Mexico, Saudi Arabia 72 79
Argentina, Egypt, Ukraine 105-118
Pakistan, Indonesia, Russia, Nigeria 138-147
Iraq, Myanmar, Somalia 178-179q y
Source: http://www.transparency.org
7
8
Risk Factor: GeographyRisk Factor: Geography
Other factors to consider when trying toOther factors to consider when trying to determine the risks associated with conducting business in a particular country:
Political StabilityEmerging EconomyImportance of Government relationships in achieving business objectivesRespect for Human Rights and FreedomsRespect for Human Rights and Freedoms
9
Risk Factor: Type of BusinessRisk Factor: Type of BusinessCertain industries historically have experienced
t i id f ti th tha greater incidence of corruption than others.Pay closer attention if products or services at issue:issue:
Are subject to heavy government regulationAre largely purchased by the government
If the business does not regularly come into contact with the government, opportunities for corruption are reduced and the risk is diminishedcorruption are reduced and the risk is diminished (but not eliminated, e.g., zoning, taxes)
10
Some High-Risk Business SectorsSome High Risk Business Sectors
HealthcareHealthcareAviationMedical devicesMedical devicesLand transferEnergyEnergyConstructionGovernment ProcurementGovernment ProcurementBusinesses Relying on Imports
11
Risk Factor: Type of BusinessRisk Factor: Type of Business
Consider the Business ModelReliance on agents/third parties to conduct businessImportance of government relationships in achieving business objectivesbusiness objectivesReliance on a local workforce versus ex-patsThe way in which transactions occur (many small y ( ytransactions versus large transactions)
12
Risk Factor: Corporate CultureRisk Factor: Corporate CultureTone at the top of the company
IntegrityEmphasis on compliance
Historical issues with the company (or the acquiredHistorical issues with the company (or the acquired company) including maturity of programQuality of training and internal controlsDegree to which persons familiar with the FCPA are in positions of leadershipAutonomy/control by parent or US leadershipAutonomy/control by parent or US leadership
13
Best PracticesBest PracticesConduct due diligence on:
Prospective business combinations (e g mergerProspective business combinations (e.g., merger, joint venture, partnership)Prospective agents and key employees
No affirmative obligation to perform due diligence but it is expected by DOJ and a Board of Directors, and it is prudentpObjective: determine whether the proposed "partner" is or has engaged in practices that suggest the use of corruption as a means to further businessthe use of corruption as a means to further business objectives
14
Best Practices (cont'd.)( )Not all proposed business relationships are the samesameIn deciding how much and what kind of due diligence inquiry to perform, consider the risk factors of geography business type and corporate cultureof geography, business type and corporate cultureA proposed merger in Russia should be treated differently from hiring a sales agent in LuxembourgH ill b iti i d b DOJHowever, you will never be criticized by DOJ or a Board of Directors for doing too much due diligence
15
Best Practices (cont'd.)( )Resources for Evaluating the Suitability of a Proposed Partnerp
Engage a third party to conduct background checks and perform in-country researchObtain a Company Profile from the U.S. Department p y pof CommerceReview the company's books and records or, if an individual, review contracts and agreements, gConsult with the U.S. EmbassyInternet researchRetain local counsel to advise on the politicalRetain local counsel to advise on the political structure and normsConduct interviews of key personnel and references
16
Mitigating FCPA Risks in g gHigh Risk Jurisdictions
Develop a comprehensive FCPA complianceDevelop a comprehensive FCPA compliance program which provides clear direction to employees.Key components:
Written policy/code of conductBoard oversight/Designated responsibilityBoard oversight/Designated responsibility Communications and trainingEncourage reportingg p gEvaluation of allegations/assessment of risksConsistent, appropriate treatment
17
Mitigating FCPA Risks in High Risk Jurisdictions
Training that addresses:Training that addresses:FCPA basicsProhibited recipients and payments Intent and "knowing" standard Due diligence and recognizing red flags The "books and records" provisions
Institute an approval processHelp line and other reporting toolsHelp line and other reporting toolsAudit for anti-corruption complianceRefresh due diligence on a regular basisInclude FCPA compliance terms in any agreement (consultingInclude FCPA compliance terms in any agreement (consulting agreement, sales representative agreement, JV operating agreement)
18
Dealing with Government Customers i Hi h Ri k J i di tiin High-Risk Jurisdictions
When doing business with government agency or state-owned enterprises (SOE's)
Req est a certification that contracts are permittedRequest a certification that contracts are permitted under local law.Conduct analysis to confirm that the transaction and yrelated compensation are at fair market valueSeek out local counsel for opinion letter and advice
l lit f t t d l l lon legality of contracts under local law
19
Our SpeakersOur SpeakersRick Oehler ([email protected]) is a ( @p )Perkins Coie LLP Litigation partner who handles internal and government investigations in the FCPA, U.S. export control and , pgovernment procurement areas. He also conducts related counseling. A former U.S. Department of Justice attorney Rick hasDepartment of Justice attorney, Rick has handled numerous FCPA investigations, established FCPA compliance programs and conducted FCPA compliance audits andconducted FCPA compliance audits and training.
20
Our Speakers (cont)Our Speakers (cont)
Lee Stein ([email protected]) is Co-chair ( @p )of Perkins Coie's Investigations and White Collar Criminal Defense Practice Group. Lee's practice is focused on advising clients on FCPA mattersis focused on advising clients on FCPA matters, conducting investigations and criminal defense. Lee is a frequent lecturer on the FCPA and qrelated matters. Lee spent a number of years at the U.S. Attorney's Office and the Arizona Attorney General's office prosecuting primarilyAttorney General s office prosecuting primarily fraud and public corruption cases.
21
Our Speakers (cont)Our Speakers (cont)
Pravin Rao ([email protected]) is a Perkins (p @p )Coie Litigation partner who focuses his practice on Investigations and White Collar Criminal Defense, Securities, and Corporate Governance. , , pPravin uses his prior experience both as a prosecutor with the U.S. Attorney's Office and an enforcement attorney with the SEC to adviseenforcement attorney with the SEC to advise clients on the FCPA and a variety of related matters, including exposure to possible criminal and civil (i e "books and records") violationsand civil (i.e., books and records ) violations.
22
