Global Anti-Corruption Compliance Requirements for International Business

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1 Global Anti-Corruption Compliance Requirements for International Business Doreen Edelman Co-Chair of the Global Business Team Joe Whitley Chair of the Government Enforcement & Investigations Group

2 The Global Standard Approach Consistently applying a single global standard through the implementation of a worldwide compliance program ensures compliance across national borders and minimizes costs. 2

3 UK Bribery Act Six Principles The U.K. Ministry of Justice published Guidance on the Bribery Act including 6 principles to guide companies implementation of adequate procedures 1. Proportionate procedures 2. Top-level commitment 3. Risk assessment 4. Due diligence 5. Communication (including training) 6. Monitoring and review 3

4 Gifts and Entertainment General rule: You may give or receive gifts only if the gift is infrequent, modest and intended to further legitimate business goals. General rule: All business entertainment expenses must be reasonable. 4

5 Quiz: Business Hospitality Q: At a trade show, Company A invites current and prospective customers out for food and drinks and pays the moderate bar tab. Some of the current and prospective customers are foreign officials under the FCPA. Is Company A in violation of the FCPA? 5

6 Quiz: Business Hospitality Q: Japanese officials travel to the US to inspect Company A s facilities Because it is a lengthy international flight, Company A agrees to pay for business class airfare, which its own employees are entitled to for lengthy flights The foreign officials visit for several days Company A executives take the officials to a moderately priced dinner, a baseball game, and a play Do any of these actions violate the FCPA? Q: Would this analysis be different if Company A provided the senior officials and their spouses with an all expenses paid first-class trip to Las Vegas, where Company A has no facilities? 6

7 Global Best Practices Continuously reinforce the tone at the top: a zero-tolerance policy with respect to corruption Do not ask or allow a government official to make business arrangements Use local language and incorporate ethical local customs Accurately document and report all payments to accounting Have a system of internal accounting controls Be able to show that transactions are executed in accordance with management's authorization Be able to show authorizations required for access to assets Do timely audits to compare books/records to accounts Use technology to educate, train, and monitor Be careful with /voic no joking about this topic! Pay attention to concerned employees because most whistleblowers try internal reporting first New York Times Rule 7

8 Developing Case - EADS Based in the Netherlands, EADS is Europe s largest aerospace and defense firm In 2012 German police raided the offices of EADS in connection to an investigation into sales of military aircraft to Austria In 2013 German police raided an EADS joint venture looking for evidence of bribes of $24 million to Greek officials in connection to the sale of submarine equipment The SFO is investigating allegations that EADS U.K. subsidiary bribed Saudi Arabian officials with cars, jewelry, and cash in an effort to secure a 2 billion communications contract with the Saudi National Guard The case highlights the increase in cross-border cooperation between governments and potential for carbon-copy prosecutions (EADS stock is traded in the United States, subjecting it to FCPA prosecution as well) 8

9 The Current Case of Rolls-Royce Rolls-Royce is the world s second-largest aircraft engine manufacturer In December 2013 the UK s Serious Fraud Office ( SFO ) commenced a formal investigation of allegations of bribery in Indonesia and China A former employee s allegations date back to the 1980 s and include the giving of $20 million in payments and a car to the Indonesian President s son to persuade the national airline to order Rolls engines Rolls-Royce is also accused of making payments in return for a 2005 contract with Air China and a deal with China Eastern Airlines in 2010 Both the company and individual employees are facing possible prosecution and millions of pounds in fines On March 6 the US Department of Justice announced that it has opened a parallel investigation into allegations of bribery at Rolls-Royce 9

10 Case Studies US v. Tyson Foods (2011) Tyson s Mexican subsidiary put the wives of Mexican government veterinarians responsible for certifying the safety of the company s meat exports on its payroll The wives did not perform services for the company The company conducted an internal investigation and voluntarily disclosed the conduct Tyson entered into a deferred prosecution agreement with the DOJ and paid a $4 million fine, as well as $1.2 in disgorgement of profits and interest The meat did meet Mexico s export standards, so Tyson was bribing the inspectors to do their jobs 10

11 Examples of Red Flags Lack of due diligence on third parties Missing written contract Payments that do not match contract terms Split payments or payments to third persons Requests for unusually large commissions in relation to the services provided Payments to third parties outside the country where the services are rendered Wire transfers that do not disclose identities of parties Commissions greater than are typical within the particular industry 11

12 Elements of an Effective Compliance Program Tone at the top: commitment from Board of Directors and senior management and a clearly articulated policy against corruption Compliance policies and procedures Oversight, autonomy, and resources Understanding of industry risk Training and continuing advice Disciplinary measures Third-party due diligence Confidential reporting and internal investigations apparatus Continuous improvement: periodic testing and review and Mergers and acquisitions: pre-acquisition due diligence and postacquisition integration 12

13 Contact Information Doreen Edelman (DC) Joe Whitley (DC) (Atlanta) 13