ANTI-CORRUPTION POLICY AND PROCEDURES

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1 ANTI-CORRUPTION POLICY AND PROCEDURES EXECUTIVE SUMMARY The nature of the oil, gas and power industries requires STS Consulting Services, LLC ( Company ) to operate in a wide range of legal and business environments, many of which challenge our firm commitment to conduct business with honesty and integrity. The purpose of this Anti-Corruption Policy and Procedures ( Policy ) is to reiterate that commitment and to explain the specific requirements and prohibitions of the applicable laws that reinforce and police this commitment. Corruption is a threat to our business and employees, and is counter to our culture. We owe it to our customers, our communities, our stakeholders, and ourselves to conduct our business pursuant to high ethical standards and to denounce corruption. To state it simply: We do not pay bribes. SCOPE All Company officers, directors, employees, and agents must comply with the requirements and prohibitions set forth in this Policy. Every Company employee, agent or representative whose duties are likely to lead to involvement in or exposure to any of the areas covered by the U.S. Foreign Corrupt Practices Act, as amended ( FCPA ) is expected to become well versed in and comply with this Policy to avoid inadvertent violations and to recognize potential issues in time for them to be appropriately addressed. This Policy extends to all of Company s domestic and foreign operations, including operations conducted by any departments, subsidiaries, agents, consultants or other representatives. This Policy also extends to all of Company s financial recordkeeping activities and is integrated with the obligations to which Company is already subject by virtue of the federal and state securities laws. Each Company employee whose duties are likely to lead to involvement in any of the areas covered by the FCPA will be asked periodically to attend training sessions and complete, sign and return a certification of compliance with this Policy to the Company s General Counsel. COMPANY ASSISTANCE/EXCEPTIONS If you have questions or problems concerning this Policy, interactions with foreign officials, or payment practices, you should contact one of following: Mike Sinclair [email protected] or Mike White [email protected] 434 E Loop 281, Suite 105 Longview, Texas Phone: (903) FCPA Consultants at: Mark Jenkins, CFE Fidelity Forensics Group LLC Thanksgiving Tower Revision 000

2 1601 Elm Street, Suite 2380 Dallas, Texas Office: (214) General Counsel at: Brent W. Bull Bull & Barrett, LLP 1127 Judson Road, Suite 120 Longview, Texas Telephone: (903) Facsimile: (903) Any questions or concerns directed to General Counsel may be designated Anonymous, in which case your identity shall not be disclosed to any of Company s personnel without your permission or by order of a court of competent jurisdiction. GENERAL POLICY STATEMENT It is the policy of Company and its employees, officers and directors to comply fully with applicable U.S. and international laws prohibiting corruption, including the FCPA and similar anti-bribery laws of other countries. However, where other anti-corruption laws apply and are more restrictive than the FCPA, those laws must be followed. The use of Company funds or assets for any unlawful, improper or unethical purpose is prohibited. Failure to comply with this Policy may result in significant civil and criminal penalties for the Company and the individual(s) involved, which is cause for disciplinary action against such individual(s), up to and including termination. The FCPA also requires accurate and complete books and records and the maintenance of proper internal accounting controls. To comply with these requirements, all Company personnel must follow Company s accounting requirements. Company personnel should never consent to requests for false invoices or for payment of expenses that are unusual, excessive, inadequately described, insufficiently documented or should otherwise raise questions. Company policy prohibits retribution or retaliation of any kind against employees who in good faith report potential or actual ethics or legal violations. Our employees commitment to full compliance with our legal obligations and ethical standards is valued, respected and essential to fulfillment of this Policy. GENERAL SUMMARY OF KEY FCPA PROVISIONS The Foreign Corrupt Practices Act is a federal law that: (i) prohibits payment of bribes (broadly defined) to foreign officials, and (ii) requires companies to keep accurate books and records. All employees, agents and third parties should remain vigilant in watching for, avoiding and reporting to Management any questionable transactions. Revision 000

3 Contents I. PROHIBITED AND RESTRICTED PAYMENTS... 4 A. Interactions with Foreign Officials... 4 B. Cash and Non-Cash Payments: Anything of Value... 4 C. Prohibited Payments... 4 D. Third Party Payments... 4 E. Guidelines for Common Risk Areas Gifts to and Entertainment of Foreign Officials Hosting Foreign Officials Facilitating Payments Donations to Foreign Charities Foreign Political Contributions... 6 II. RECORDKEEPING AND INTERNAL ACCOUNTING CONTROLS PROVISIONS... 6 A. Recordkeeping, Accounting and Payment Practices Financial Control Systems and Accounting Requirements Responsibilities... 8 B. FCPA Audit Procedures to Verify Compliance... 8 C. Guidelines for Contribution Compliance... 9 III. DUE DILIGENCE PROCESS FOR INTERNATIONAL CONSULTANTS AND AGENTS IV. AWARENESS OF POTENTIAL RED FLAGS Revision 000

4 FCPA POLICY I. PROHIBITED AND RESTRICTED PAYMENTS The FCPA prohibits the offer, promise, authorization, or payment of a bribe or anything of value to a foreign official with corrupt intent to cause the foreign official to misuse his position in order to obtain or retain business or secure an improper advantage. The FCPA prohibits these payments whether they are made directly or indirectly through third parties, such as consultants, agents or intermediaries. A. Interactions with Foreign Officials The FCPA applies to interactions with foreign officials. A foreign official means any officer or employee of a foreign government, regardless of rank, employees of governmentowned or government-controlled businesses, foreign political parties, party officials, candidates for political office, and employees of public international organizations. The term public international organization includes such organizations as the United Nations, the World Bank, the International Finance Corporation, the International Monetary Fund, and the Inter-American Development Bank. Company s General Counsel should be contacted if there is a question as to whether an organization should be treated as a public international organization for the purpose of this Policy. B. Cash and Non-Cash Payments: Anything of Value Requests by foreign officials for payments that would violate the FCPA arise in varied settings and can be much more subtle than a direct request for a kickback or bribe. The FCPA prohibits the provision of anything of value to a foreign official for improper purposes. This term is very broad, and can include any item of pecuniary value. C. Prohibited Payments As a practical matter, past enforcement actions have shown that the FCPA s prohibition against improper payments to obtain or retain business or to secure any other improper advantage may cover virtually any improper payment made in a business context. For example, Company s employees and agents must not pay or give things of value to foreign officials, directly or indirectly, in order to obtain business or any advantage (including for example, a reduction in taxes, a favorable change in regulations, tolerance or non-compliance with local rules or other favors or preferential treatment). D. Third Party Payments The FCPA prohibits both direct and indirect payments to foreign officials. Thus, Company can face FCPA liability based on improper payments made by its agents, consultants, intermediaries or other business partners. Therefore, for business and legal reasons, Company s practice of fairness and professionalism must extend to the activities of Company s agents, consultants, intermediaries, representatives and business partners. In those circumstances where third party relationships are appropriate, to protect against the business and legal risks of dealing with third parties who do not share Company s Revision 000 4

5 commitment to fair dealing, Company must carefully choose its partners and representatives. Therefore, prior to entering into an agreement with any agent, consultant, joint venture partner or other representative who will act on behalf of Company with regard to foreign governments on business development or retention, Company will perform appropriate FCPArelated due diligence and impose prudent safeguards against improper payments. Contracts with representatives who will interact with foreign governments on international business development or retention must be approved by the Chief Executive Officer or the CEO s designee. Once any third-party relationship has been entered into, Company will be vigilant in monitoring the relationship. Any questions regarding the Policy or procedures, or their applicability to proposed third parties, should be directed to the Chief Executive Officer or General Counsel. E. Guidelines for Common Risk Areas To be consistent with the FCPA and this Policy, all payments must be bona fide, reasonable, fully documented, supported by original receipts, accurately recorded in Company s books and records, and properly approved in advance by the Company s CEO and/or General Counsel, as described below. This is to include all payments, including any improper payments. Because of the FCPA s strict prohibitions, Company personnel should not make or authorize any gift, payment or offer of anything of value to any foreign official, whether on the local, regional or national level, unless approved in accordance with this Policy. 1. Gifts to and Entertainment of Foreign Officials Except as provided herein, no offer, payment, promise to pay or authorization to pay or provide money, gifts or anything of value will be made by or on behalf of the Company to: Any foreign official, regardless of rank Any person, while knowing or being aware of a high probability that all or a portion of any payment will be offered, given or promised, directly or indirectly, to a foreign official. 2. Hosting Foreign Officials When Company hosting occurs outside the foreign official s home locale, extend over more than one day, and involve airfare, hotel, transportation, and meals expenses, the hosting will tend to involve more significant expense amounts. As such, they pose higher FCPA and public relations risks than routine hosting and entertainment of foreign officials. Accordingly, it is Company policy to limit these types of hosting. In all cases, it is important to ensure that Company communicates clearly in advance, and in writing to the foreign official, what expenses will and will not be covered by Company. A failure to do so can increase legal risks as well as the potential for misunderstandings with the foreign official. Additionally, in all cases that entertainment, gifts or travel expenses are approved, the expenses must be supported by receipts and accurately recorded in the Company s books. Revision 000 5

6 3. Facilitating Payments Facilitating payments are an exception to the FCPA s anti-bribery provisions. It may not be a violation to make a small payment to a low-ranking foreign official to expedite or secure the performance of a routine, non-discretionary governmental action. Examples of the facilitating payments covered by this exception include: routine payments made to obtain documents necessary to qualify a person to do business in the country, to process government papers, to provide police protection, postal services, or necessary inspections or to provide phone, utilities, cargo or similar services. However, to be legal, such payments must also be allowed under local foreign law and must be approved by CEO or Executive Vice President before a payment is made. 4. Donations to Foreign Charities The making of improper charitable contributions on behalf of foreign officials may have severe consequences under the FCPA for the Company and involved employees. In no instance may an employee or a business segment make a donation payment at the behest of a foreign official or to an organization affiliated with a foreign official or his close relatives without first obtaining approval from the General Counsel. If a donation is made, it must be accurately described in the Company s books and records. 5. Foreign Political Contributions The Company shall not make contributions to political parties or committees or to individual politicians without the prior written consent of the Chief Executive Officer. Approved contributions may only be made in accordance with the applicable law, and all requirements for public disclosure of such contributions shall be fully complied with. II. RECORDKEEPING AND INTERNAL ACCOUNTING CONTROLS PROVISIONS A. Recordkeeping, Accounting and Payment Practices The recordkeeping provisions of the FCPA require U.S. companies to establish and maintain a system of internal controls that ensures that all transactions and dispositions of assets occur only with management s authorizations, and that all such transactions are recorded accurately and in reasonable detail in the companies books, records and accounts. Thus, the FCPA prohibits the mischaracterization or omission of any transaction on a company s books, or any failure to maintain proper accounting controls that result in such a mischaracterization or omission. Adhering to Company s internal controls, and keeping detailed, accurate descriptions of all payments and expenses is crucial for compliance with this component of the FCPA. Any documents related to this FCPA policy should be kept for at least five years. Accordingly, Company employees must follow applicable standards, principles, laws and Company practices for accounting and financial reporting. In particular, employees must be timely and complete when preparing all reports and records required by management. In connection with dealings with public officials and with other international transactions Revision 000 6

7 explained in this Policy, employees must obtain all required approvals. Prior to paying or authorizing a payment to a foreign official, Company employees, agents or consultants should be sure that no part of such payment is to be made for any purpose other than as fully and accurately described in Company s books and records. All payments to a foreign official must be reported as such. No undisclosed or unrecorded accounts of Company are to be established for any purpose. False or artificial entries are not to be made in the books and records of Company for any reason. Finally, personal funds must not be used to accomplish what is otherwise prohibited by this Policy. 1. Financial Control Systems and Accounting Requirements Company employees must adhere to the following financial control systems and accounting requirements: All cash, bank accounts, investments and other assets of the Company must always be recorded accurately on the official books of the Company. In accordance with this Policy and the Company s internal control structure, the Audit Department will periodically review such books, records, and controls to ensure their compliance with the requirements of the FCPA. No employee shall falsify any accounting or other business record, and all employees shall respond truthfully and fully to any questions from the Company s internal or independent auditors. Bank accounts should be opened or closed only upon the prior written approval of the CEO. Payments will not be made into anonymous bank accounts or other accounts not in the name of the payee or of any entity known to be controlled by the payee. Except for regular, approved payroll payments or normal disbursements from petty cash supported by signed receipts or other appropriate documentation, payments will not be made in cash. Checks will not be drawn to the order of cash, bearer or similar designations. Fictitious invoices, over-invoices or other misleading documentation will not be used. Fictitious entities, sales, purchases, services, loans or financial arrangements will not be used. Check requests will be in writing and contain a complete explanation of the purpose and authority for the payment. The explanation will accompany all documents submitted in the course of the issuing process and will be kept on file. No expenses relating to foreign business will be reimbursed to persons or companies assisting the Company in obtaining or retaining such business unless such expenses are supported by reasonable written documentation and conform to this Policy. No payment to any consultant will be made outside of either the country where a substantial portion of the related services are performed or the country from which the person performing such services normally conducts business. Payments for any services rendered to the Company by a foreign official (including an officer of a foreign government-owned or controlled commercial enterprise), including honorarium payments and reimbursement of expenses, will be made solely to the foreign government agency or instrumentality employing the individual. Such payments will be made by check directly to the foreign government agency or instrumentality or by wire to its named bank account within the foreign government agency s or instrumentality s country, or by wire through its duly authorized Revision 000 7

8 correspondent bank within the U.S. No such payment shall be made without the prior written approval of the CEO. Receipts, whether in cash or checks, will be deposited promptly in a bank account of the Company. Any employee who suspects the possibility that a bribe, kickback or over-invoice is associated with a particular receipt or that an understanding exists that all or a portion of a receipt will be rebated, refunded or otherwise paid in contravention of any applicable laws, will immediately report that suspicion to a member of the Management Team. A representative(s) of the Company and each subsidiary thereof will prepare a report and certification, which will be submitted to the Manager of Business Administration annually, with respect to all gifts made in connection with such company s operations in foreign countries during that year. Company will document annually all gifts made in connection with operations in foreign countries during that year. These requirements apply to the Company in the United States or in international locations. Thus, all affiliates, including third parties, agents, and consultants of Company also will make a good-faith effort to ensure that affiliates comply with the FCPA recordkeeping and accounting provisions. 2. Responsibilities Company personnel shall not make any false or misleading entry in Company s books and records for any reason, nor may they engage in any arrangement that results in such prohibited acts. The Accounting Department shall maintain accounting procedures, financial reporting and internal controls. Company shall monitor and review the records of personnel who have discretionary authority over Company assets, who are likely to come into contact with foreign officials, or who submit financial data that affects Company financial statements, accounting records or reports. Company should ensure that its employees know that anyone having information or knowledge of any unrecorded or mischaracterized asset or fund must report that activity directly to the General Counsel. Company will respect requests for anonymity, however, employees may be encouraged to provide their identity in the event further information is needed to pursue an investigation. B. FCPA Audit Procedures to Verify Compliance Company may periodically conduct confidential audits as described in this section. Reports of audit findings will be provided directly to the General Counsel in order to preserve and retain the attorney-client privilege. These regular audits of Company s records, books and accounts are designed to prevent and detect violations of the FCPA, this Policy and other Company policies, practices and procedures. Corporate FCPA audits should include interviews of key persons who are responsible for administering, implementing, and monitoring Company s compliance program. The audit Revision 000 8

9 should focus, in particular, on the Company s FCPA compliance files, as well as the personnel files, due diligence information, and agreements with international representatives, agents or consultants, international mergers or acquisitions, international joint ventures or other international equity investment transactions that may be material. Both corporate and foreign affiliate FCPA audits should include a review of Company s books and records pertaining to the entertainment, gift, and travel expenditures of Company on behalf of foreign officials. The review should encompass any certificates of compliance that designated employees are required to sign on a routine basis. Similarly, to the extent not otherwise covered, the audit should include third-party representatives certifications of compliance. The audit should also review the Accounting Department s records pertaining to international agents and consultants. All partners and joint venturers shall be subject to audits at Company s request to ensure compliance with Company s FCPA policy. Audits, if any, of Company s international partners should focus on ensuring that partners are complying with this FCPA policy and the procedures required herein. C. Guidelines for Contribution Compliance Contributions may never be made as part of an exchange of favors with any government official, even if the recipient organization is a bona fide charity. Individual contributions of greater than $250 USD, or multiple contributions to one charity that in the aggregate are greater than $1000 USD in a calendar year, must be considered according to the following procedures: Request must be in writing: All requests for contributions must be made in writing. The request must specify at a minimum (i) the person or department requesting the contribution, (ii) a description of the contribution request, and (iii) the purpose of the contribution. The request must be on official letterhead of the requesting organization and it must be signed by a person authorized to sign on behalf of the organization. Written requests must be forwarded to management for review. Investigation: All contributions must be carefully reviewed to assess whether the contribution is likely to confer a personal benefit on a foreign official. Decision: The final decision to approve a contribution must be made by the management. Response: The Company, through management, must provide a written response to every written contribution request. Any such contribution requires written approval by two of the following three persons: Mike Sinclair, Mike White, or the General Counsel. authorization constitutes written approval. Evidence of Receipt: Company, through management, must obtain evidence of receipt for each contribution made by the company. Individual contributions in an amount less than $250 USD, or multiple contributions to one charity that in the aggregate are less than $1000 USD in a calendar year, may be awarded without the prior approval of management provided that they comply with this Policy. However, such contributions must be reported within two days to management. All of the written records connected with each contribution (including the written request, due diligence, letter of acceptance or rejection, evidence of receipt, and any publicity) must be Revision 000 9

10 maintained by management. III. DUE DILIGENCE PROCESS FOR INTERNATIONAL CONSULTANTS AND AGENTS No employee of Company may retain an international intermediary or agent until sufficient due diligence has been performed to enable the Company to conclude with reasonable assurance that the consultant, agent, or intermediary understands and will fully abide by the FCPA and the Code of Business Ethics and Compliance with Company Policy and Laws. Employees who are considering entering into a business arrangement with a third party intermediary, broker/dealer, outside sales force or a joint venture, must submit in writing to compliance team (General Counsel, Management) the business purpose for arrangement. The compliance team will work with employee through the written FCPA due diligence procedures. An intermediary for these purposes is any agent consultant, distributor, Government service provider (companies that provide local customs clearance, visa, legal or other regulatory services), joint venture partner, or any other person or entity who will interact with a foreign official on the Company s behalf. If you are considering retaining an intermediary, please contact the CEO, and undertake the due diligence process required by this Policy. Any retained intermediary shall be subject to the provisions in this Policy and the audit provisions of Section II.B. Any international intermediary or agency agreement must contain representations, warranties and provisions regarding the agent s agreement to comply with this Policy. IV. AWARENESS OF POTENTIAL RED FLAGS In evaluating potential intermediaries and during any relationship with them, Company s employees must be conscious of any red flags that may be present or arise. A red flag is a fact or circumstance that serves as a warning signal that an intermediary may act corruptly. It is the responsibility of the officer, director, employee or agent that observes a red flag to either resolve such red flag by further investigation or to refer the matter to the CEO or General Counsel. A non-exclusive list of examples of red flags is below: Rumors regarding unethical or suspicious conduct by an employee, marketing representative, consultant, agent, or other business partner, or by a foreign official Unnecessary, third parties or multiple intermediaries Requests for payments to a third party rather than the consultant or agent Requests for payments in a third country Business in a country with significant corruption risk Requests for payments in cash Requests for unusually large commissions or other payments, or payments that appear excessive for the service rendered Political contributions Requests for reimbursement of expenses that are poorly documented Incomplete or inaccurate information in required disclosures Refusal to certify compliance Revision

11 The partner is, or has close family or business ties to, a Government Official. The partner cannot contribute anything to the venture except influence with Government Entities or Government Officials. Revision