Beyond the FCPA. A Global Change in Anti-Corruption Enforcement. Presented by: Dana Choi John Irving Sonya Strnad. July 19, 2011

Transcription

1 Beyond the FCPA A Global Change in Anti-Corruption Enforcement July 19, 2011 Presented by: Dana Choi John Irving Sonya Strnad Copyright 2011 Holland & Knight LLP. All Rights Reserved

2 Global Approach to Anti-Corruption OECD Convention on Combating Bribery of Foreign Public Officials Recent Revisions to Anti-Corruption Laws of OECD Members Australia, Brazil, Chile, Israel, Ireland, Korea, Mexico, and Spain United Kingdom UK Bribery Act Anti-Corruption Enforcement by OECD Members Anti-Corruption Laws of Select Non-OECD Countries Global Challenges Policies and Procedures Investigations Key Elements of a Global Anti-Corruption Compliance Program 2

3 OECD Anti-Bribery Convention OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions In force since 1999 Established legally binding standards to criminalize bribery of foreign public officials Convention has been adopted by: 34 OECD member countries 4 non-member countries (Argentina, Brazil, Bulgaria and South Africa) Convention provides: Definition of bribery of a foreign public official Requires countries to impose sanctions Requires mutual legal assistance Provides basis for extradition Peer-driven monitoring mechanism to ensure compliance with the Convention, including monitoring the steps each country has taken to implement national anti-corruption laws 3

4 Anti-Corruption Laws of OECD Members: Recent Changes Australia Increased financial penalties for bribery offenses Individual: up to 10 years imprisonment and/or a fine of up to $1.1 Million (AUD) per offense Corporation: fine of up to $11 million (AUD) or 3x the benefits obtained by the act of bribery, whichever is greater. Led the Development of the APEC Code of Conduct for Business Ethics Implemented in Vietnam, Thailand, Chile and the Philippines. U.S. is using the Code as basis for outreach to certain industry sectors, i.e., pharmaceuticals. Working with the Philippines, Thailand, Indonesia and Malaysia to improve the production/dissemination of financial intelligence; aims to establish domestic and regional cooperation among regulators/anti-corruption agencies. Brazil Statement of Commitment for Exports: exporters who avail themselves of Brazilian programs must certify they know Brazil s anti-corruption laws, including the criminal penalties. 4

5 Anti-Corruption Laws of OECD Members: Recent Changes Chile Strengthened auditing requirements; must include ongoing information regarding the existence of best practices, internal procedures, and any other crime prevention measures. Israel Increased maximum sanctions for active bribery Individual: up to seven years in prison and a fine of up to $1.1 million (ILS). Corporation: a fine of up to $2.2 million (ILS) or up to 4X the benefit obtained from the offense. Ireland Enacted the Prevention of Corruption (Amendment) Act of 2010 Includes an extension of extraterritorial jurisdiction and whistleblower protection provisions. 5

6 Anti-Corruption Laws of OECD Members: Recent Changes Korea Adopted The Act on the Protection of Public Interest Whistleblowers; takes effect on September 30, First prosecution under its anti-corruption law: May 13, 2011 Mexico Adhered to the Mutual Administrative Assistance in Tax Matters of the OECD and the European Council; allows access to wide network of international for the cooperation and exchange of information in tax matters and to combat tax evasion. Spain Amended Spanish criminal law to conform with OECD Convention. Created a separate crime of bribery of a foreign official (formerly under national bribery offense), with increased penalties and status of limitations period. 6

7 UK Bribery Act of 2010 Effective as of July 1, 2011 Purpose: Reform the criminal law of bribery to provide for a new consolidated scheme of bribery offenses to cover bribery both in the United Kingdom (UK) and abroad. Key Changes: Replaces the offenses at common law and under the Public Bodies Corrupt Practices Act 1889, the Prevention of Corruption Act 1906 and the Prevention of Corruption Act 1916 with two general offenses. 1. The first covers the offering, promising or giving of an advantage (offenses of bribing another person). 2. The second deals with the requesting, agreeing to receive or accepting of an advantage (offenses of being bribed). Abandons the agent/principal relationship on which the previous law was based in favor of a model based on an intention to induce improper conduct. Also creates a discrete offence of bribery of a foreign public official and a new offence where a commercial organization fails to prevent bribery. 7

8 UK Bribery Act: Other Key Changes Key Changes (cont d): Replaces the requirement for the Attorney General s consent to prosecute a bribery offence with a requirement that the offences in the Act may only be instituted by, or with the consent of, the Director of the relevant prosecuting authority. Maximum penalty of 10 years imprisonment for all the offenses, except the offence relating to commercial organizations, which will carry an unlimited fine; Extra-territorial jurisdiction to prosecute bribery committed abroad by persons ordinarily resident in the UK as well as UK nationals and UK corporate bodies; Defense for conduct that would constitute a bribery offence where the conduct was necessary for the proper exercise of any function of the intelligence services or the armed forces engaged on active service. 8

9 Summary of the UK Bribery Act s Anti-Corruption Provisions Section One prohibits making bribes to any person. Prohibits offering, promising and giving money or other advantage to a person to induce the person to improperly perform a relevant function or activity or reward the person for that improper performance. Prohibits both commercial bribery and bribery of government officials. Improper performance involves doing or failing to do something in breach of good faith, or something that violates a position of trust. Relevant function or activity includes public functions, business activities, activities performed within the course of a person s employment and activities performed on behalf of a company. Section Two prohibits receiving bribes. Prohibits receiving, requesting and agreeing to accept a bribe or reward intending to improperly perform a relevant function or activity. It usually does not matter whether the bribe/reward is requested or accepted through an agent, or whether the advantage is for the benefit of the recipient or another person. 9

10 Summary of the UK Bribery Act s Anti-Corruption Provisions Section Six prohibits bribing foreign officials. Prohibits bribery of foreign officials with the intent to influence the official in order to obtain or retain business or an advantage in the conduct of business. Covers payments made directly/indirectly through a third party. Prohibits payments not only for acts within the scope of an official s job, but also for inducing the official to influence other governmental functions not within his authority. Narrow exception where the payments are expressly permitted or required by the written laws of a country. Section Seven imposes criminal liability upon companies that fail to prevent bribery by persons associated with them (i.e., employees, agents and subsidiaries). Makes it a crime for a company to fail to prevent persons associated with the company and acting for or on its behalf from making bribes to obtain/retain business or a business advantage for the company. Provides a defense if the company has adequate procedures in place to prevent the unlawful conduct. Broad extraterritorial jurisdiction; applies to foreign companies that carry on a business, or any part of a business within the U.K. 10

11 UK Bribery Act: Recommended Compliance Procedures The Ministry of Justice Guidance (3/11) recommends that companies structure anticorruption compliance procedures around the following six principles: 1. Proportionality: The degree to which businesses need extensive written policies or policies at all addressing the six principles will vary greatly according to the size, complexity and risk areas present in a particular business operation. 2. Top-Level Commitment: Top management officials foster a culture of integrity where bribery is unacceptable. 3. Risk Assessment: The Guidance categorizes commonly encountered risks into five categories: Country Sectoral Transactional Business Opportunity Business Partnership Risks 11

12 UK Bribery Act: Recommended Compliance Procedures 4. Due Diligence: Due diligence procedures should adequately inform the application of proportionate measures designed to prevent persons associated with them from bribing on their behalf. Level of due diligence will vary depending on the risks arising from the particular relationship with third parties. 5. Communication: Internal communications, including training, should focus on policies that address particular risks, such as decision making, financial controls, hospitality and facilitation payments, as well as describe reporting procedures and disciplinary consequences for employees who violate the company s policies. External communications should affirmatively state a company s anti-corruption stance and commitment to ethical conduct, and might include a written code of conduct. 6. Monitoring and Review: Ongoing obligation to monitor and evaluate the effectiveness of anti-corruption procedures. 12

13 Enforcement of OECD Countries Reported data from 1999 to March 2011: Criminal proceedings against 199 individuals and 91 entities for foreign bribery At least 54 individuals sentenced to prison Highest fine against a single company (Siemens) was EUR 1.24 billion Currently 260 ongoing investigations in 15 countries, including pending criminal charges against: 20 individuals 20 entities Currently 144 criminal proceedings against: 122 individuals 22 entities and 13

14 Criminal Cases from OECD Member States Decisions from 1999 to USA UK Germany Hungary Italy Korea Japan France Norway Individuals Convicted* Individuals Acquitted Companies Convicted* Companies Acquitted *Convictions include plea agreements, DPA s and NPA s. Germany is still in the process of collecting data back to

15 Civil Cases from OECD Member States Administrative and Civil Cases from 1999 to USA Germany Japan Individuals Sanctioned* Individuals Not Liable Companies Sanctioned* Companies Not Liable *Includes settlements. 15

16 FCPA Enforcement The U.S. leads the world in anti-corruption enforcement efforts Two agencies responsible for enforcement: Criminal enforcement through Department of Justice (DOJ) Civil enforcement for public companies on U.S. stock exchanges through Securities and Exchange Commission (SEC) Both agencies have created task forces to focus on FCPA enforcement Drastic 85% increase in FCPA enforcement actions from 2009 to 2010 Penalties paid to SEC and DOJ in 2010 alone totaled $1.8 billion Prosecutors aggressively targeting individual prosecutions and jail time Enforcement set to rise in light of new Frank-Dodd law providing substantial rewards to FCPA whistleblowers 16

17 Global impact of FCPA Enforcement U.S. cooperation with other countries: Gun sting case (U.K.) Siemens case (Germany) Daimler AG (Russia) International follow-on to U.S. enforcement: emerging market anticorruption enforcement agencies increasingly prosecuting companies following settlements with U.S. agencies (e.g., Honduras, Malaysia, Italy, China, Nigeria) Alcatel-Lucent SA: after total of $137 million in criminal penalties and disgorgement to U.S. agencies, authorities in Honduras, Nigeria and Malaysia began their own investigations Panalpina: investigated by Nigerian officials after settling with U.S. officials KBR: Nigerian officials obtained settlement of $128 million after U.S. settlements Foreign authorities not just targeting entities; they are requesting information obtained from U.S. enforcement actions Companies may risk violating terms of U.S. settlement agreements if they fail to cooperate with foreign governments investigations 17

18 Select Non-OECD Countries Anti-Corruption Laws Russia Ratified UN Convention against Corruption; Invited to join the OECD Convention Anti-bribery bill signed into law on May 24, 2011, criminalizing foreign bribery and allowing prosecutors to seek large fines. India Bribes to foreign officials are punishable by up to 12 years in prison The Prevention of Bribery of Foreign Public Officials and Officials of Public International Organizations Bill introduced March 25, 2011 for extradition and punishment of foreign government officials involved in bribery in India China Amended Criminal Law 164, effective May 1, 2011, to include the offense of payment of bribes to foreign (non-prc government) officials and officials of international public organizations in order to secure improper commercial benefits. Imprisonment of up to three years or, if the amount involved is very significant, criminal detention of between three and 10 years. In addition, fines can be levied on the individuals and companies involved. Does not define foreign public official or official of an international public organization. 18

19 Global Challenges - Policies and Procedures Companies operating in foreign jurisdictions face challenges in formulating polices and procedures that comply with all laws Business entertainment Entertainment expenses considered reasonable in the U.S. may be lavish in China, or inadequate in Switzerland Different standards for entertaining foreign government officials and private clients Some companies are creating specific guidance for each country in which they do business Facilitating payments FCPA permits UK Bribery Act does not 19

20 Global Challenges - Investigations Labor and Employment Laws Can prevent questioning of employees by company counsel during internal investigations Laws restricting export of data outside of the country, even intra-company transfers Blocking Statutes Blocking statutes prohibit compliance with a foreign court s discovery request. Countries with blocking statutes include United Kingdom, Canada, Australia, Sweden, the Netherlands, South Africa and Japan. See also Switzerland s Bank Act, China's State Secrecy Law and Venezuela s Special Law Against Information Systems Crimes. Data Privacy Laws Define personal information and regulate how it can be handled and disclosed EU has strict data privacy laws, implemented differently by each member state 20

21 Global Challenges - Investigations To respond to one country s subpoena may subject a company to criminal sanction in another, if data not properly obtained A French lawyer working with a U.S. firm was criminally fined 10,000 for making a phone call to informally obtain information in France U.S. courts increasingly unlikely to respect difficulties in disclosure of information due to foreign data privacy laws or blocking statutes Common solutions Employee consent Use of designated safe harbors or third parties (e.g., Switzerland) Hague Convention Letters Rogatory 1 Société Nationale Industrielle Aérospatiale v. U.S. District Court, 482 U.S. 522, 549 (1987). 21

22 Global Anti-Corruption Compliance Program 1. Risk Assessment: Annually assess bribery and corruption risk; use assessment as a guidelines to take steps to reduce the overall risk of such conduct. If a company enters into a new business sector or new geographic area, new risks should be assessed, evaluated and managed as well. 2. Company-Wide Buy In: Involvement by all levels of an organization, including (a) appropriate tone from the top ; (b) senior level involvement; (c) individual responsibility; and (d) company-wide culture. 3. Policies and Procedures: Written policies and procedures form the cornerstone for any anti-corruption and anti-bribery program. Must be written in plain English, not legalese. 4. Training: Training of company employees with an annual certification is requisite part of an effective anti-bribery/anti-corruption program. The UK Bribery Act extends this training to third parties. 22

23 Global Anti-Corruption Compliance Program 5. Reporting/Response: An anonymous reporting hotline with recognized reporting mechanisms in place that allow an employee to report allegations of bribery and corruption. Must also have whistleblower protections. 6. Third Party Compliance: Third party risk must be properly evaluated, investigated and managed going forward. Appropriate due diligence must be performed. Third party anticorruption certifications must be mandatory. 7. Auditing: Ongoing monitoring, auditing and assessment to determine if its overall program in effective both internally and externally. Additionally, if there are new best practices, assess whether those practices should be included into anti-bribery/anticorruption program. 8. Record Keeping and Internal Controls: Not only must books and records adequately reflect a company s expenses but companies must have strong internal controls; key defense and preventative measure against bribery and corruption. 23

24 Questions?

25 Dana L. Choi Holland & Knight LLP 701 Brickell Avenue, Suite 3000 Miami, FL John S. Irving IV Holland & Knight LLP 2099 Pennsylvania Avenue, NW, Suite 100 Washington, DC Sonya Strnad Holland & Knight LLP 701 Brickell Avenue, Suite 3000 Miami, FL