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2 THE FCPA IN 2018 NEW POLICIES, NEW CHALLENGES January 11, 2018 Presented by: John J. Carney, JD, CPA Partner, BakerHostetler Mark J. Gerber, CPA Partner, PricewaterhouseCoopers Rory M. Wilson, CFE Director, PricewaterhouseCoopers Andrew M. Serrao, JD Associate, BakerHostetler

3 Presenters John J. Carney, JD, CPA Partner, co-leader of White Collar, Investigations and Securities Enforcement and Litigation Team, BakerHostetler Former Fraud Chief, Assistant U.S. Attorney, and Securities and Exchange Commission counsel Mark J. Gerber, CPA Partner, PricewaterhouseCoopers, market leader for Philadelphia Forensic Services Former special agent with the FBI, a CFO, and an auditor with a Big 4 accounting firm Rory M. Wilson, CFE Director, PricewaterhouseCoopers, Forensic Services Andrew M. Serrao, JD Associate, White Collar, Investigations and Securities Enforcement and Litigation Team, BakerHostetler

4 Today s Discussion I. Multi-Jurisdictional Resolutions II. Broad Interpretation of Foreign Official III. Revised Corporate Enforcement Policy

5 Part I: Multi-Jurisdictional Resolutions

6 Recent Multi-National Enforcement Actions Keppel Offshore & Marine Ltd. (Dec. 2017) $422 million total resolution Brazil, Singapore SBM Offshore N.V. (Nov. 2017) $824 million total resolution Brazil, Netherlands Odebrecht S.A. & Braskem S.A. (Dec. 2016) $3.5 billion total resolution (largest foreign bribery resolution in history) Brazil Switzerland

7 Latin American Focus We have... secured guilty pleas by a number of individuals in connection with corruption in Latin America.... More will be announced in the coming weeks and months. - Daniel Kahn, Chief of DOJ s FCPA Unit

8 Latin American Focus Brazil: Clean Companies Act (2014) U.S. government helped Brazilian government launch investigation of Petroleo Brasileiro SA (Petrobras) Led to increase in FCPA investigations in Brazil, conviction of former president Luiz Inácio Lula da Silva, and $3.5 billion settlement Mexico: General Law of Administrative Responsibility (2017)

9 Part II: Broad Interpretation of Foreign Official

10 Eleventh Circuit s Broad Interpretation In U.S. v. Esquenazi, 752 F.3d 912 (11th Cir. 2014), the court defined an instrumentality under the FCPA to be an entity controlled by the government of a foreign country that performs a function the controlling government treats as its own. Factors to determine if a government controls an entity: Government s percentage of interest in the entity Government s ability to hire and fire principals The extent to which the government receives profits from the entity In Esquenazi, the court held that a telecommunications company where Central Bank of Haiti owns 97% of shares and granted the company a monopoly over telecommunications services was an instrumentality.

11 Broadening Interpretation of Foreign Official In September 2017, Massachusetts-based medical diagnostic test manufacturer Alere, Inc. agreed to pay over $13 million to settle SEC charges that it made improper payments to foreign officials to increase sales. Alere allegedly made payments to a manager of a privately-incorporated health insurance company in Colombia. SEC alleged that Colombia s Ministry of Health took control of the company, which thus made it an instrumentality of the Government of Colombia and its employees were officials of the Government of Colombia.

12 Broadening Interpretation of Foreign Official In November 2017, SBM Offshore N.V., a Netherlands manufacturer of offshore drilling equipment, agreed to pay $238 million to settle DOJ charges that it made bribes to Kazakhstan s state-owned oil company and an employee of an Italian oil and gas subsidiary. The Italian company was acting on behalf of Kazakhstan s state-owned company because the government of Kazakhstan granted a concession as the operator of the Kashagan oil field development in Kazakhstan. Based on this, DOJ alleged that the Italian company s employee was a foreign official.

13 Part III: Focus on Individuals

14 DOJ Pilot Program One-year program announced on April 5, 2016: The goal of the program was to promote greater accountability for individuals and companies that engage in corporate crime by motivating companies to self-report. Program requirements 1. Voluntary self- disclosure 2. Full cooperation 3. Timely and appropriate remediation

15 Highlights from the ACI FCPA Conference During the year and a half that the Pilot Program was in effect, 30 voluntary disclosures were received, as compared with 18 during the previous 18- month period. 7 declinations were issued under the Pilot Program. Deputy Attorney General Rod Rosenstein announced the revised FCPA Corporate Enforcement Policy converting the Pilot Program into permanent guideline (USAM ): Presumption of a declination when company satisfies the standards of the revised policy. To qualify, company must pay all disgorgement, forfeiture and/or restitution resulting from the misconduct (may be satisfied by a parallel resolution with a relevant regulator). Policy provides details about how DOJ evaluates an appropriate compliance program.

16 Revised DOJ Corporate Enforcement Policy On November 29, 2017, Deputy Attorney General Rod Rosenstein announced a revised FCPA Corporate Enforcement Policy. The revised policy effectively codifies the FCPA Pilot Program. If a company voluntarily self-discloses misconduct, fully cooperates, and timely and appropriately remediates, there is a presumption that the company will receive a declination. Rosenstein observed that the revised Enforcement Policy promises greater certainty for companies deciding whether to disclose FCPA violations and greater clarity about DOJ s decision-making.

17 Revised DOJ Corporate Enforcement Policy: Definitions Voluntary self-disclosure occurs when a company discloses prior to an imminent threat of disclosure or government investigation and within a reasonably prompt time after becoming aware of the offense. Full cooperation means, among other things: Disclosing all facts gathered in an investigation with attribution of facts to specific sources (without violating attorney-client privilege) Proactive cooperation. Timely preservation, collection and disclosure of documents. Not interviewing witnesses until the government has interviewed them. Making officers and employees who have relevant information available for interviews.

18 Revised DOJ Corporate Enforcement Policy: Definitions Timely and appropriate remediation means, among other things: Conducting a root cause analysis. Implementing an effective compliance and ethics program. Disciplining employees. Retention of business records. Recognizing of the seriousness of the misconduct. Accepting responsibility. Implementing measures to reduce the risk of repetition of the misconduct, including measures to identify future risks. Remediation includes the requirement that the company remediate at the time of the resolution, including paying all disgorgement, forfeiture and/or restitutions resulting from the misconduct.

19 FCPA Corporate Enforcement Policy Aggravating circumstances that may warrant a criminal resolution include, but are not limited to: Involvement by executive management of the company in the misconduct. A significant profit to the company from the misconduct. Pervasiveness of the misconduct within the company. Criminal recidivism.

20 Interplay of Forces Criminal: DOJ Corporate Enforcement Policy Public Findings Company Auditor s Concerns Shareholder Suits Civil: Regulator Suits - SEC/DOJ/FTC

21 Effective Compliance Company s culture of compliance (replacing tone at the top ). Resources company has dedicated to compliance. Quality and experience of the personnel involved in compliance. Authority and independence of the compliance function and the availability of compliance expertise to the board. Effectiveness of company s risk assessment and how compliance program has been tailored based on that risk assessment. Compensation and promotion of the personnel involved in compliance. Auditing of the compliance program to assure its effectiveness. Reporting structure of any compliance personnel employed or contracted by the company.

22 BakerHostetler Areas of White Collar Expertise Export controls compliance and defense Healthcare compliance and defense Criminal antitrust compliance and defense Anti-money laundering compliance and defense Securities enforcement defense Whistleblower compliance and defense Sanctions compliance Government contracts

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