Understanding the Foreign Corrupt Practices Act. A training program for Evergreen

Transcription

1 Understanding the Foreign Corrupt Practices Act A training program for Evergreen 2012

2 Why this is Important to know The FCPA has had a significant impact on the way American firms do business since it was passed in Congress enacted the FCPA to make bribery of foreign officials illegal and to ensure the integrity of the American business system. The US Department of Justice and the Securities and Exchange Commission enforce these rules. Abuses can include everything from bribery of high foreign officials to ensure favorable action by a foreign government to facilitating payments in order to ensure that government functionaries discharge certain duties. 2

3 Punishment Firms that have violated these laws have been subjected to both civil and criminal charges that have resulted in huge fines, suspension from doing business and even the fining and imprisonment of employers and/or their employees. Employers are forbidden to reimburse fines and legal expenses for their employees. 3

4 Evergreen Implementation As many other companies have done, Evergreen is implementing a compliance program in order to educate its staff and agents so that they can avoid any improper activities. 4

5 Prohibited Recipients Any foreign official, political party, party official, or candidate such as: Officers, employees, instrumentalities, agencies or anyone active in an official capacity for foreign governments Officers and employees of public international organizations Officers and employees of state-owned or controlled enterprises Members of a royal family or legislative body Any third party who will use any kind of payment to gain influence with an official. 5

6 Criminal and Civil Scope of FCPA The Department of Justice is responsible for all criminal and civil enforcement of the anti-bribery provisions with domestic concerns and foreign companies and nationals. The SEC is responsible for civil enforcement of the antibribery provisions with respect to issuers. 6

7 Criminal Penalties Criminal penalties may be imposed and companies are subject to a fine of up to $2,000,000 per incident; officers, directors, stockholders, employees and agents are subject to a fine of up to $100,000 and imprisonment for up to five years. Under the Alternative Fines Act, these fines may be quite higher (see slide 16 for examples) -- up to twice the benefit that the defendant sought to obtain by making the corrupt payment. You should also be aware that fines imposed on individuals cannot be paid by their employer or principal. 7

8 Civil Penalties The Attorney General or the SEC may bring a civil action for a fine of up to $10,000 against any firm and any officer, director, employee or agent of a firm, or stockholder acting on its behalf. In an SEC enforcement action, the court may also impose an additional fine not to exceed the greater of the gross amount of the economic gain to the defendant as a result of the violation, or a specified dollar limitation, based on the egregiousness of the violation. 8

9 A Possible Scenario Rosa is the daughter of a government official in an overseas country. She has just received her graduate degree from a prestigious American university. She is now determined to pursue her career in international trade in the U. S. but she must have an employment offer to get a working visa. Her native country has trading rules that impact your company s business. You advise the government official that you will ensure she is offered a job by your company if there is a relaxing of rules for your company and its customers. You go to your HR department to introduce her and promote her employment, especially to enhance the company's business environment. Is this a violation of FCPA? Let s continue going through the regulations and find out. 9

10 Corrupt Payments Criteria The value of a bribe or gift is immaterial. The bribe need not be successful or accepted to be illegal. It has to be given to influence the recipient to misuse an official position and/or abuse a relationship to gain a benefit. In addition to a bribe, an offer cannot even include a charitable donation or entertainment-related item or anything that benefits a foreign official s family. You may not think it is corrupt. Trust us, it is. 10

11 Knowing the Standard The law is specific that the person making or authorizing the payment must have a corrupt intent. The FCPA does not require that a corrupt act succeed. The offer or promise of a corrupt payment can constitute a violation of the statute. Simply stated: Corrupt intent is determined in hindsight Company may not bypass the FCPA by making payments through intermediaries FCPA prohibits corrupt payment made knowing that all or a portion will be given or offered directly or indirectly to a foreign official. 11

12 Due Diligence Honoring the rules of the FCPA takes some self-policing by individuals and by the company. The best rule is that when in doubt ASK! Whether it is your supervisor, any other management person or Human Resources. All Evergreen employees and agents must use due diligence, which is an unbiased examination and evaluation of the financial dealings of an organization, when negotiating international business relationships. 12

13 Enacting Due Diligence It can be done internally by employees of the organization or externally by an outside firm. Due diligence varies. We must ensure we have formed business relationships with a reputable and qualified entity. This is done by considering the following: Whether the associate has professional or personal ties to a foreign government The associate s clientele s reputation The associate s reputation with the US Embassy or Consulate, bankers and other business associates 13

14 Red Flags Risk assessment should provide a red flag before entering into a business relationship. It should include corruption in the country and the associate s or company s shareholders, directors, officers or relatives and if they are foreign officials or are recommended by a government official. A lack or resources or qualifications should also be a warning sign. Again, ask if you are unsure or suspicious. Check out whether there are unusually high commissions or fees, suspicious payment patterns, a request for payment outside of the country where the associate resides or where services are rendered and requests for payment to a third party or checks made to cash. 14

15 Implications You and Evergreen can be implicated in bribery or corruption activities that were carried out by others without your direct knowledge. Involvement in any type of bribery or corruption is costly: Adverse publicity can impact your future, the reputation of Evergreen and impact employee morale worldwide Consumes management time and costs huge legal fees and penalties Employees face enormous fines and possible prison terms 15

16 Consequences of Non-Compliance It does not matter if you are employed by a large influential company or a small business just emerging on the international scene, the consequences of non-compliance can be significant. Recent prosecutions and financial penalties have included: KBR/Halliburton (2009) - $559 million settlement and possible imprisonment (Nigeria) Siemens (2008) - $800 million to settle US charges plus $850M in Germany: $1.6 billion (Argentina, Bangladesh, Venezuela) Baker Hughes (2007) - $44 million (Nigeria, Angola, Indonesia, Russia, Uzbekistan, Kazakhstan) Vetco International (2007) - $26 million (Nigeria) 16

17 Exceptions and Defenses Sometimes facilitating payments to foreign entities are completely routine and legal. This includes payments for police protection or mail delivery, obtaining official documents, to process Government papers, scheduling inspections, providing phone, power, water, cargo loading and protecting perishable products from deterioration. The defenses are simply that the payment was lawful under the written laws or regulations of the foreign officials or the payment was reasonable and bona fide and spent on demonstration or performance of contract. 17

18 So Lets Return to Rosa Rosa s education and background made her a suitable employee for the company. And she probably could have been hired based on her own competence. The fact that the request was tied to potential favorable treatment made this incident. ILLEGAL UNDER THE FCPA.. 18

19 Your Responsibility Evergreen employees have a responsibility to understand the FCPA and abide by the law. The result of illegal activity can destroy your personal and professional goals. If you do not comprehend, please discuss immediately with your supervisor or HR representative. The DOJ has links to translations of FCPA in Arabic, Bengali, Chinese (Cantonese), Chinese (Mandarin), French, German, Japanese, Javanese, Korean, Malay, Portuguese, Russian, Spanish, and Urdu. Evergreen urges anyone with language challenges to access these links for improved understanding. They are found at: 19

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21 ASK slide Thank you for your attention. 21