International Trade Issues for the Pump Industry

Transcription

1 International Trade Issues for the Pump Industry Eric McClafferty Chair, International Trade Group Kelley Drye Warren LLP (202)

2 Kelley Drye s International Trade Compliance Team Eric McClafferty Paul Rosenthal Larry Lasoff Rob Slack Brooke Ringel Scott Wise Bill Reinsch Greg Rohling

3 TOPIC: Complexity, Change and Risk Treasury s Office of Foreign Assets Control (OFAC) and Committee on Foreign Investment in the U.S. (CFIUS) Denied Party Screening Country Sanctions Commerce s Bureau of Industry and Security (BIS) Sanctions Product and Know How Export Controls State s Directorate of Defense Trade Controls ITAR Department of Justice and Securities and Exchange Commission Foreign Corrupt Practices Act (FCPA)

4 Topics Focus on Individual Culpability Yates Memo Whistleblowers - rewards What to do if you spot a violation Dealing with inquiries from the government and enforcement visits Responding to Complexity, Change and Risk

5 Complexity, Change and Risk OFAC Sanctions Russia Crimea Belarus Cuba Iran

6 Key Industry Cases Schlumberger $232 million paid, including $155 million criminal fine Guilty plea criminal case involving trade with Iran and Sudan Weatherford International and Subsidiaries Pay $252 Million in OFAC and Export Penalties and Fines Individual cases

7 Example -- FCPA - Potential Penalties Criminal Penalties, per violation Anti-bribery Businesses -- fine up to $2 million Individuals (officers, directors, stockholders, agents) fine up to $250,000 and imprisonment for up to five years Accounting Businesses -- fine up to $25 million. Individuals -- fine of up to $5 million and imprisonment up to 20 years Alternative Fines Act, fine up to twice the benefit that the defendant obtained by making the corrupt payment

8 Penalties cont d Note: Fines imposed on individuals may not be paid by their employer or principal U.S. Sentencing Guidelines When calculating penalties for criminal violations of the FCPA, DOJ focuses its analysis on the U.S. Sentencing Guidelines

9 Civil Penalties Antibribery Business entities and individuals -- up to $16,000 per violation Individual penalties may not be paid by employer or principal Accounting Civil penalty not to exceed the greater of (a) the gross amount of the gain to the defendant as a result of the violations or (b) a specified dollar limit based on egregiousness, ranging from $7,500 - $150,000 for an individual and $75,000 - $725,000 for a company

10 Collateral Consequences Debarment Federal Acquisition Regulations and Defense Federal Acquisition Regulations (FAR and DFARs) Cross Debarment by Multilateral Banks Loss of export privileges under the U.S. International Traffic in Arms Regulations (ITAR) Monitorship Reputational Concerns Shareholder derivative suits alleging that directors and officers failed to prevent violation and did not implement proper internal controls

11 Top Ten FCPA enforcement cases 1. Siemens (Germany): $800 million in Alstom (France): $772 million in KBR / Halliburton (USA): $579 million in Och-Ziff (USA): $412 million in BAE (UK): $400 million in Total SA (France) $398 million in VimpelCom (Holland) $397.6 million in Alcoa (U.S.) $384 million in Snamprogetti Netherlands B.V. / ENI S.p.A (Holland/Italy): $365 million in Technip SA (France): $338 million in 2010

12 Trade Rules and Extraterritoriality Note that 7 of the top 10 FCPA cases involved companies headquartered outside the U.S. Jurisdictional issues are critical -- and triggers for FCPA jurisdiction are expanding Unitel and VimpelCom Unitel management used U.S.-based accounts to communicate with others and effectuate the scheme And DOJ alleged that the companies made numerous corrupt payments executed through correspondent bank accounts at New York financial institutions

13 Knowledge and Controls Standard Know or Should Have Known Lack of Internal Controls

14 Complexity, Change, and Risk Complexity of the rules and the chilling effect of blurry lines Penalties Significant increase in frequency and severity of penalties over last 10 years Yates memo: Focus on executives, employees involved and individual criminal penalties

15 Government contacts Calls Visits Requests for Documents Administrative Subpoena Grand Jury subpoenas Search warrants Ambush interviews ( voluntary so no Miranda warning) Border interviews

16 Increasing Enforcement and Prosecution Resources Added three new operational squads to FBI s International Corruption Unit focusing on FCPA 10 new prosecutors being added to Fraud Section s FCPA unit (increase of 50%) Effectively need to deal with an active and very interested SEC when dealing with DOJ, but, SEC also acts independently 9 SEC corporate enforcement cases on its own in 2015 International Cooperation on increase as is international enforcement Export and Sanctions Thousands of ICE agents now involved, FBI, Homeland Security Investigators, BIS enforcement, DOJ training

17 Dodd Frank and Whistleblowers Receipt of letter / Who sees it and who is responsible for next steps and investigation? Role of company outside counsel Whistleblower = insider or insider + lawfirm? Incentive to report? Monetary or just fix the problem? Also sent to authorities? Company contact with authorities Contact the whistleblower or lawfirm? Tread carefully

18 Voluntary Self-Disclosure Considerations Complex analysis Getting the facts is key to making the right determination Scope of the investigation is critical Get initial facts Prior acts? What steps are needed? Interviews, document reviews? Think about how your investigative decisions will look to an agency in a year Disclose and face review process and agency decision, or not What if others disclose for the company loss of VSD opportunity Worse off?

19 RESPONSE TO THESE CHALLENGES Key steps 19

20 Implement a Program Sentencing Guidelines and Agency Recommendations But what is really needed?

21 Conservative Approach? Companies sometimes adopt conservative approaches to compliance Result of: Ambiguity in the rules Difficulty of obtaining formal guidance from agency Reputational and brand damage Risk of substantial penalties for non-compliance Limited ability to challenge agency determinations Aren t Disclosures Voluntary?

22 Allocate risk Require counterparties to comply with U.S. sanctions laws May require partners to perform sanctions compliance processes, like prohibited party screening Strict liability regime, but can mitigate risk Trust, but verify approach Strongest agreements contain monitoring or auditing rights Consider costs and benefits of this approach

23 Monitoring & auditing Adopt a process to regularly monitor compliance Unanticipated areas of risk? Procedural gaps? Policies being implemented? Take and record corrective action Internal audit is not always a good fit

24 Questions? Eric McClafferty (202)