The Globalization of Anti Corruption Laws: Looking Beyond

Transcription

1 The Globalization of Anti Corruption Laws: Looking Beyond the FCPA ABA Section of International Law: 2012 Spring Meeting The opinions expressed in this presentation are those of the panelist and do not reflect the opinions, practices nor policies of the Panelists' respective employers, nor do they constitute legal advice.

2 T. Markus Funk, Partner, Perkins Coie (moderator) Andrew S. Boutros, Assistant US Attorney (panelist in his personal capacity) Kenyanna Scott, Senior Counsel, Investigations, GE Capital (panelist) Milos Barutciski, Partner, Bennett Jones (panelist) Pascale Helene Dubois, IBRD/IDA Evaluation and Suspension Officer, World Bank Note: The opinions expressed in this presentation are those of the panelist and do not reflect the opinions, practices nor policies of the Panelists' respective employers, nor do they constitute legal advice.

3 FCPA Enforcement Overview and Trends T. Markus Funk, Perkins Coie

4 Anti bribery Provisions: The FCPA prohibits: 1. Giving or offering; 2. Anything of value; FCPA Primer 3. To a foreign government official, political party, or party official; 4. With the corrupt intent to influence that official in his or her official capacity; and 5. To secure an improper advantage in order to obtain or retain business. Accounting Provisions: The FCPA also requires publicly traded U.S. companies to maintain accurate books and records and reasonably effective internal controls

5 Anti Bribery Provisions Corporations Criminal: $2 million fine (per violation) or twice the loss/gain; disgorgement of profits; possible debarment/suspension Civil: $500,000 fine (per violation); disgorgement Individuals What are the penalties? Criminal: $250,000 fine (per violation) or twice the loss/gain; 5 years imprisonment Civil: $100,000 fine (per violation) 5

6 Select FCPA-Related Monetary Settlements (in millions) Siemens (2008) $800.0 FCPA Enforcement Overview KBR/Halliburton (2009) BAE Systems (2010) ENI/Snamprogetti (2010) Technip (2010) Daimler (2010) Alcatel Lucent (2010) $185.0 $137.4 $365.0 $338.0 $400.0 $579.0 Panalpina (2010) $81.9 ABB (2010) $58.3 Pride International (2010) $56.2 $0.0 $100.0 $200.0 $300.0 $400.0 $500.0 $600.0 $700.0 $800.0 $

7 FCPA enforcement is stronger than it s ever been and getting stronger. We are in a new era of FCPA enforcement; and we are here to stay. Assistant Attorney General Lanny A. Breuer Individual Prosecutions on the Rise Note that in 2012, DOJ dismissed all charges against 22 defendants from the 2010 "Shot Show" case. 5

8 Dodd Frank Whistleblower Reward Provisions Rewards individuals who provide tips to the SEC leading to enforcement actions that exceed $1 million in sanctions Whistleblowers can earn a payout of 10% to 30% of any monetary sanctions collected Tipster must voluntarily provide original information about a possible federal securities law violation that has occurred, is ongoing, or is about to occur 120 day rule Anti retaliation protections for employee whistleblowers, including a cause of action in federal court; reinstatement; double back pay with interest; and litigation reimbursement 6

9 Putting Global Bribery (and Enforcement) Into Perspective Transparency International Corruption Perceptions Index Scale of 1 (poor reputation) to 10 (good reputation)

10 Going Global: Enforcement in US and Beyond Andrew S. Boutros, US Attorney's Office Chicago (in his personal capacity)

11 Cooperation with Foreign Authorities Alcatel Lucent (SD Fla Dec 2010) [C]ooperate fully with such other domestic or foreign law enforcement authorities and agencies, as well as Multilateral Development Banks, in any investigation of Alcatel Lucent Panalpina (SD Tex Nov 2010) Cooperate with any other federal, state, local or foreign law enforcement agency Shell (SD Tex Nov 2010) [C]ooperate fully with other domestic or foreign law enforcement authorities and agencies... in any investigation of [Shell] 32

12 So what is a "Carbon Copy" Prosecution? Four elements 1) Jurisdiction A 2) Files an enforcement action 3) Based on charging document/guilty plea/admissions 4) From Jurisdiction B

13 "Carbon Copy" Prosecutions Consecutive prosecutions/investigations by multiple jurisdictions for same conduct KBR acquired by Halliburton $579 million to DOJ and SEC $35 million to Nigerian government Dropped criminal complaint against Vice President Cheney Shell $48.1 million to DOJ and SEC $10 million to Nigerian government Snamprogetti/ENI $365 million to DOJ and SEC $32.5 million to Nigerian government 33

14 Carbon Copy Prosecutions (cont.) Alcatel Lucent $10 million to Costa Rican government $137.4 million to DOJ and SEC Under investigation in Honduras JGC Corporation $28.5 million to Nigerian government $218.8 million to DOJ million to DOJ Siemens $800 million to DOJ and SEC $569 million to Munich Prosecutor (simultaneously) $46.5 million to Nigerian government 34

15 Carbon Copy Prosecutions (cont.) BAE Systems $400 million to DOJ 30 million (~$46.5 million) to UK s SFO (simultaneously) Innospec $27.5 million to DOJ, SEC, OFAC 8.5 million (~$12.7 million) to UK s SFO (simultaneously) 35

16 Double Jeopardy No Bar to Successive Foreign Federal Prosecutions US v Jeong, 624 F3d 706 (5th Cir 2010) South Korean national convicted in South Korea for paying bribes to American public officials Time served 58 days + ~$21,000 fine US submitted MLAT for evidence: USA not seeking to further prosecute Jeong Defendant traveled to USA Bribery, wire fraud, and conspiracy Sentenced to 5 years + $50,000 fine 36

17 Double Jeopardy (cont.) Jeong court s holdings: No violation of Convention on Combating Bribery of Foreign Public Officials in Int l Business Transactions; Article 4.3 only required consultation upon request Double jeopardy does not attach when separate sovereigns prosecute the same offense... Both US and South Korea had right to prosecute defendant US v Martin, 574 F2d 1359 (5th Cir 1978) The Constitution of the United States has not adopted the doctrine of international double jeopardy 37

18 Emerging Anti Corruption Trends and Recent Developments in "BRIC" Nations Kenyanna M. Scott, General Electric

19 Brazil Corruption Perception Index (2010): Score 3.7 Rank 69 (out of 178) Brazil has signed the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions of the Organization for Economic Cooperation and Development (OECD) Brazil is a signatory of the Inter American Anti Corruption Convention and also signed and ratified the United Nations Anti Corruption Convention

20 Brazil Risk Areas Size of public sector (33% of economy) Government control of many sectors considered strategic, including power generation, oil extraction, mining of natural resources, water supply, infrastructure (ports, airports, roads, railroads), and hospitals Influence over State Owned Companies Pension Funds, State Commercial Banks, State Development Banks, State Owned Saving Accounts Regulatory bodies and agencies Tax, Labor, Regulated Sectors

21 Brazil's New Law March 2012 Bill Pending No criminal liability/leniency Program No central investigatory agency Adds obstruction charge No books & records violation No whistleblower protection/bounty STRICT liability on corps Forbids bribes through third parties Includes successor liability language (corp liability "subsists" in case of merger)

22 Russia "What should be done to eradicate corruption? Probably [execution by] hanging, but this is not our method Prime Minister Putin attending a session of the regional branch of Russia's ruling United Russia party in the North Caucasus (June 6, 2010)

23 Russia Corruption Perception Index (2010): Score 2.1 Rank 154 (out of 178) 2011 New law criminalizes foreign bribery combining once scattered proscriptions No concept of "corporate" criminal liability but Russia always in DOJ crosshairs Disclosures & Cooperation = immunity ("effective regret")

24 Russia Russian Prosecutor General's Office facing enforcement challenges No deferred or non prosecution agreements "Effective regret" an easy way to avoid liability Small team of prosecutors Motivation to prosecute Anti corruption campaigns popular election tool Russian Federation Economic Security Department of the Ministry of the Interior

25 Statements and Views on Corruption in India Corruption dents our international image and demeans us before our own people... [Corruption must be] tackled boldly, quickly. Prime Minister Manmohan Singh (February 2011)

26 India: Statistics, Trends and Risk Areas Statistics and Trends: Corruption Perception Index (2010): Score 3.3 Rank 87 (out of 178) Bribe Payers Index (2008): Score 6.8 Rank 19 (out of 22) Fortified Corruption Law Doesn't Clear Parliament, but remains on horizon Creates independent anti corruption agency Covers senior politicians and officials Introduces Corruption Ombudsman Broad public support

27 India: Risk Areas Large public sector Public Sector lacks transparency, is cumbersome, and delays granting licenses and permits are the norm all of is a recipe for corruption as a way to help "cut the red tape" Existence Parallel Economy in India which accounts for some 40% of India s GDP Strong push towards whistleblower reporting (ex. "Ipaidabribe.com")

28 CHINA President Hu Jintao: China should take more forceful steps to root out government corruption," which he said remains a "grave problem. More efforts should be made to investigate graft in key industries and key posts. 10 Jan 2011 Speaking at a three-day plenary session of the CPC Central Commission for CCDI

29 China Risk Areas Gift giving culture (Travel & Entertainment) State owned enterprises ( SOEs ) employees deemed government officials Longer supply chains/unfamiliar trade practices Wages of government staff bribes supplement wages Decentralization of power Inconsistent enforcement of laws Immature legal remedies and dispute resolution mechanisms Scarcity of qualified and experienced middle management Prevailing culture of loyalty to family, friends, etc.

30 FCPA Risk Mitigation Measures Government touch points (customs, tax, regulatory, patent, trademark officials, customers, suppliers, etc.) Third Party intermediaries (agents, distributors, etc.) Training Due diligence (third parties, JVs, acquisitions) Review vendor s financial records and past ethical behavior before entering into a contract Focus resources on the areas of greatest risk Develop procedures for effectively addressing whistleblower allegations Focus on "petty cash" and similar "slush funds" they are high risk

31 China's State Secrets Law (2010) "Matters related to State security and national interests" and "other secret matters" If doing internal investigation relating to SOE, risk of violation Negligence is floor for mens rea Secret trials; limited access to counsel

32 Surveying UK and Canadian Anti Bribery Efforts Milos Barutciski, Bennett Jones

33 UK Bribery Act Enacted on April 8, 2010 In force July 1, 2011 Enforced by Ministry of Justice (MoJ) and Serious Fraud Office (SFO) MoJ Guidance issued March

34 UK Bribery Act (cont.) Offering, promising or giving an advantage to a private party Requesting, agreeing to receive or accepting an advantage Offering promising or giving a bribe to a foreign government official Failure to prevent a bribe by an associated person Penalties: 10 years imprisonment for individuals and/or unlimited fines for corporations 20

35 UK Bribery Act (cont.) Facilitation payments are not permitted "Associated persons" can include: Employees Agents Contractors Suppliers Others? Defense available if company has in place adequate procedures designed to prevent bribery by associated persons 21

36 UK Bribery Act (cont.) MoJ Guidance cites six principles for bribery prevention: 1) Proportionate procedures 2) Top level commitment 3) Risk Assessment 4) Due diligence 5) Communication and training 6) Monitoring and review 22

37 UK Bribery Act (cont.) Extraterritorial reach Bribery Act applies to: UK corporations UK citizens Individuals ordinarily resident in UK Non UK persons where an act or omission forming part of the offence takes place in the UK Companies who carry on a business or part of a business in the UK Will this be interpreted to require a UK nexus? Will broad jurisdictional reach be interpreted to require a UK nexus? 23

38 Canada Corruption of Foreign Public Officials Act (CFPOA) enacted on December 10, 1998 In force February 14, 1999 Canada's ratification of the OECD Convention triggered the Convention's entry into force Offence to offer or give anything of value to a foreign public official in order to obtain or retain an advantage in international business Ancillary Criminal Code offences for possession or laundering the proceeds of a bribe 24

39 Canada (cont.) Jurisdictional test real and substantial connection to Canada Defenses: Reasonable promotion, demonstration and contract expenses Lawful under applicable foreign law Facilitation payments Penalties: Five (5) years imprisonment for individuals Unlimited fines for corporations 25

40 Canada (cont.) Limited enforcement prior to 2008 No dedicated enforcement agency Single conviction (Hydro Kleen 2005) In 2008, the government established a dedicated International Anti Corruption Unit of the Royal Canadian Mounted Police (RCMP) dedicated to CFPOAenforcement Offices and investigators based in Ottawa and Calgary 26

41 Canada (cont.) RCMP has 34 active investigations as of March 2012 Frequent use of formal investigative measures including: Search warrants Criminal Code production orders MLAT requests Niko Resources convicted in June 2011 for bribing Bangladeshi Minister of Energy Fined $9.5 million 27

42 Canada (cont.) Search warrants executed in 2011 against: SNC Lavalin re alleged bribe of Bangladesh official Blackfire Exploration re alleged bribe of Mexican mayor Karigar trial to begin September 2012 re alleged bribe paid to Indian Minister of Aviation in sale of security systems Bottom Line: After a slow start, Canadian enforcement is now a going concern 28

43 World Bank Sanctions and Anti Corruption Efforts Pascale Helene Dubois, IBRD/IDA Evaluation and Suspension Officer World Bank

44 The World Bank International Financial Institution (IFI) Owned by 187 member countries Largest Multilateral Development Bank (MDB) Mission: A World Free of Poverty Financial and technical assistance to developing countries IBRD: Middle Income Countries Low interest loans, guarantees, advisory services IDA: Poorest Countries Interest free loans, grants 100+ country offices $57.3 billion committed by the World Bank in FY 2011, distributed in credits, loans, grants, and guarantees 39

45 Why Fighting Corruption Matters We help ensure that development funds from the World Bank Group are used for their intended purposes 40

46 Why Fighting Corruption Matters (cont.) New baby warmer Does not fit the specifications of the procurement User risks electric shock Procurement unit accepted the delivery Contract paid in full 41

47 Why Fighting Corruption Matters (cont.) 42

48 Why Fighting Corruption Matters (cont.) 30 days to completion more than 50% of funds disbursed 43

49 Why Fighting Corruption Matters (cont.) Road 30% narrower than specifications No road surfacing, contrary to specifications The contract was paid in full 44

50 The Sanctions Process 46

51 Sanctions & Compliance What are the sanctionable offenses at the World Bank? Fraud Corruption Collusion Coercion Obstructive practices What sanctions can the World Bank impose? Letter of reprimand Conditional non debarment Debarment with conditional release Restitution 47

52 Sanctions & Compliance (cont.) Baseline Sanction as of September 2010: Debarment with Conditional Release Debarred parties now will be required to meet certain rehabilitation conditions before they can apply for reinstatement to participate in WBG financed activities 48

53 What is the Effect of Sanctions? Debarred companies and individuals are not eligible to receive new contracts for Bank projects Cross Debarment among Multilateral Development Banks (MDBs) First global enforcement mechanism Applies as of 1 July 2010 to all new contracts Covers debarments that are public, over one year 49

54 Web and Media Coverage Sanctions are Public Information 50

55 List of Debarred Entities Sanctions are Public Information 51

56 If a respondent chooses not to contest, the sanction recommended by the EO is imposed and the EO s determination is published on the internet. 52

57 So, Does It Work?

58 World Bank Enforcement Making an Impact Since firms and individuals publicly debarred 176 firms and individuals temporarily suspended 28 criminal convictions based on INT referrals 54

59 For more information, please see the following websites: Sanctions: Integrity Vice Presidency: 55

60 Questions?