Understanding Anti- Corruption Risk of Global Market Entry

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1 Understanding Anti- Corruption Risk of Global Market Entry Alan Gourley Morris DeFeo Dalal Hasan April 14-15, Crowell & Moring LLP

2 Overview Introduction Foreign Corrupt Practices Act Elements & Compliance Application To Situational Scenarios Hypothetical Case Study obtaining and performing an international contract 2

3 Where is Bribery Legal? Nowhere! Countries Where Local Laws Prohibit Bribery of Government Officials 3

4 Enforcement & Penalties Jail Fines Collateral Consequences 4

5 Elements of an FCPA Bribery Offense Use of instrument of interstate commerce Corruptly to offer or pay Anything of value To a foreign government official Either directly, or indirectly with knowledge To influence or secure an improper advantage through an act or omission To obtain or retain business. 5

6 Who is covered by the FCPA? Issuers, US Companies, Foreign Companies & Agents Directors Employees Officers Agents Stockholders 6

7 Who is a foreign official? Foreign Governments Employees International Organizations Agencies and Officials Universities State-Owned Enterprises Hospitals 7

8 Anything of value 8

9 Corruptly Borrowed from the U.S. domestic bribery statute: Evil motive/wrongful intent quid pro quo Does not require proof that defendant knew she was violating the FCPA 9

10 To Obtain or Retain Business Need not be to obtain a contract Any favorable government action or omission Registration of products Favorable customs treatment Inspections Prosecution need only show a nexus between the action or omission and a business advantage 10

11 Some Exceptions Facilitation Payments Routine government action No Discretion Still Risky Legal under local law Reasonable and bona fide expenses related to promotional activities 11

12 Direct or Indirect Offers of Payments Corporations can be liable for the acts of others who perform services on their behalf foreign subsidiaries consultants, employees Freight Forwarders Distributors Agents 12

13 Knowledge of Intermediary Payments May not self-blind Cannot ignore misconduct or consciously avoid examining red flags Facts that would lead a reasonable person to inquire further 13

14 Due Diligence Types COMPANY REGISTRY SITE VISIT/ INTERVIEW QUESTIONNAIRE CONTRACT TRANSPARENCY DUE DILIGENCE REFERENCE CHECKS MARKET VALUE OF SERVICES FCPA DECLARATION PAYMENT METHODS/ RECIPIENTS 14

15 Risk Assessment Regional Risk 2013 TI CPI - Scale: 0 (highly corrupt) to 100 (very clean) 15

16 Risk Risk Assessment Relationship Risk Government Contracting Consultant Freight Forwarder Subcontractor JV Partner Distributor Independent Contractor Commercial End-User Company Registry FCPA Declaration Due Diligence Questionnaire Due Diligence Interview/Site Visit Reference Checks 16

17 Case Study: 2022 Qatar World Cup VA HI-TECH is keen to sell its Pan Tilt Zoom (PTZ) IP cameras to Qatar for new stadiums being built for 2022 World Cup No prior experience in selling into MENA region Case Study follows VA HI-TECH from approaching the market through award & performance 17

18 Approaching the Market Abdulrahman Al Keiber To: Alan Beaumont Reply-To: Re: Interesting opportunity Qatar World Cup 2022 October 23 rd, :14am Friend Alan, Here is the RFP from the Qatar Ministry of State for Interior Affairs we discussed yesterday. It has not been made public yet, but it will be soon and there will not be a lot of time to bid. They want (100) Pan Tilt Zoom (PTZ) IP cameras, including software and hardware, and a 3 year support contract with 2 optional years. This only for the first stadium there will be more to follow. You will need a Qatari partner to be eligible to bid on this award. that can set you up with the right partner very quickly. I know a local consultant What do you think? Abdulrahman

19 Approaching the Market Ahmed Al Keiber -consultant.com> October 23 rd, :22am To: Alan Beaumont Reply-To: consultant.com Re: Re: Re: Interesting opportunity Qatar World Cup 2022 Alan, Abdulrahman tells me you are in need of a local partner for the MOI security camera bid. I know the perfect company Al Shouban. Their BOD has all the right connections, and they can help with offset obligation as well. Time is short, so you will need to move fast. I can begin working on this as soon as you give the green light, but I will need my commission fee ($50,000) to be paid in advance. I have a bank account set up in the U.A.E. that you can wire the funds to. Ahmed You replied October 23rd, 7:49am Sent from idesk Thanks Abdulrahman. We have never formed a local partnership for these bids, so it would be great to get Ahmed s. advice. Please put us in touch. Alan. Abdulrahman Al Keiber <AAK@qatar.moi.gov> To: Alan Beaumont Reply-To: AAK@qatar.moi.gov October 23 rd, :14am

20 Getting the Contract Ahmed Al Keiber To: Alan Beaumont Reply-To: -consulting.com Re: Re: Re: Re: Interesting opportunity Qatar World Cup 2022 October 23 rd, :59am Alan, I think your standard technical proposal will be fine. l know from experience that MOI procurement officials will also want to visit your Virginia facilities for a product demonstration as well. A two-day tour for the 5-member committee and their wives should do it. It is important we show them how much VA HI-TECH cares. A trip to Atlantic City would impress them. Ahmed You replied October 23rd, 8:37am Sent from idesk Ok. What are the next steps? Best, Alan Ahmed Al Keiber <AAK@private-consulting.com> To: Alan Beaumont Reply-To: AAK@private-consulting.com October 23 rd, :22am

21 Getting the Contract Ahmed Al Keiber To: Alan Beaumont Reply-To: -consulting.com Subject: JV Agreement with Al-Shouban Attachment: JV Agreement November 15 th, :35am Alan, We are all set on the proposal, and the Qataris loved their visit to the U.S. We just need to finalize the JV agreement with Al-Shouban. Attached is your draft JV Agreement with Al-Shouban s revisions. They agree with most of the terms, but will not agree to comply with any U.S. anti-corruption laws. Let s not insult them by insisting on U.S. law. There are local laws that deal with this issue. We are very close to a deal, and the bid is due very soon. Remember, Al-Shouban has close ties with the right procurement officials and can ease satisfaction of the offset. Please let me know today if VA HI-TECH is willing to sign the agreement. Otherwise, Al-Shouban may choose to work with another partner. Ahmed

22 Performing the Contract Ahmed Al Keiber To: Alan Beaumont Reply-To: -consulting.com Re: Re: Congratulations on the contract award! November 30 th, :59am Alan, Yes, unfortunately the processing time for the forms and product inspections is very slow. Not to worry I can recommend a freight forwarder that deals with shipment and customs. They have a reputation for knowing how to get things done in the usual Qatari way. You replied November 30 th, :37am Sent from idesk Thanks, Ahmed. We need to get a freight forwarder lined up quickly for the camera parts, cabling, and mounting brackets. I understand the customs process in Qatar is very complicated. Can you help? Best, Alan Ahmed Al Keiber <AAK@private-consulting.com> To: Alan Beaumont Reply-To: AAK@private-consulting.com Re: Congratulations on the contract award! November 30 th, :22am

23 Performing the Contract Jason Smith January 27 th, :22am To: Alan Beaumont Reply-To: Re: Freight forwarder invoices Alan, We received the final invoices from the Qatari freight forwarder. Accounting has cleared most of them, but there are a number of invoices for special handling, or special intervention that I have held because there is no back-up documentation. I ed the FF to request explanation and support, but was told that these are typical local expediting fees for which receipts are not customary. The FF threatened to stop performance if we don t pay. What should I do? Jason Sr. Accountant, VA HI-TECH CO. Jsmith@virginiahitech.com

24 As the Relationship Develops Yousef Al Jakili To: Alan Beaumont Reply-To: Subject: Follow-On RFP November 30 th, :59am Alan, The MOI is getting ready to release the follow-on IP Camera RFP for additional stadiums. With 12 stadiums needed, this RFP could to be many times the size of the original award. We will need to show progress on our offset commitments to win the favor of procurement officials. I hear that Abdulrahman is getting ready to retire from the committee soon. He would be an excellent addition to the JV for continuing our success. Trust me, this is how the game is played here if you want to win. Youself Al Jakili Managing Director Al-Shouban Inc.

25 Conclusion 25

26 Contact Us Alan Gourley Morris DeFeo Dalal Hasan