The U.S. Foreign Corrupt Practices Act (FCPA):

Transcription

1 The U.S. Foreign Corrupt Practices Act (FCPA): The Basics, Recent Developments & How the FCPA Applies to Businesses in Thailand (and not just American businesses) 26 July 2016 Douglas Mancill PriceSanond Bangkok Thailand

2 FCPA Basic Overview Enacted in 1977 Two Prongs The Anti-Bribery Provisions (familiar to most). Books & Records Applies to Issuers, but more proceedings under this prong than the Anti-Bribery Provisions. Enforcement: Department of Justice (DOJ) for criminal enforcement and Securities & Exchange Commission (SEC) for civil enforcement.

3 FCPA Anti-Bribery Provisions To Whom Does it Apply? Jurisdiction Nationality Conduct What Sort of Payments? Business Purpose Test. The obvious and not so obvious. Payment or Offer Must be Made Corruptly. To induce an official to misuse or abuse her or his authority. The focus is on intent: it doesn t matter if the payment is successful.

4 FCPA Anti-Bribery Provisions Anything of Value Counts. Excessive expenditures on gifts for trips and entertainment. Government Official. Instrumentality of a Foreign Government What is that? What sort of Knowledge is Required? The head in the sand issue. Third party payments. Affirmative Defenses. Good luck.

5 FCPA - Books & Records What s Required? Every issuer must make and keep books, records and accounts, which in reasonable detail, accurately and fairly reflect the transactions and disposition of assets. No materiality requirement. Inadvertent mistakes do not violate the books & records provisions. Practical Issue: Convincing the enforcement agencies that a mistake was inadvertent when what appears to be a bribe was lurking behind that mistake.

6 Legal Developments Jurisdiction VimpolCom - Unitel Use of US accounts to effect the scheme Correspondent bank accounts in New York. Books & Records Cueto CEO approved US$1.15 million in payments to consultant in Argentina. Understood that some funds would be used to bribe union officials. A union official is not a foreign official under FCPA.

7 Legal Developments Parent-Subsidiary Liability Problem with Agency Theory Disregards corporate form (automatic piercing of corporate veil?) Books & Records charges used. Anything of Value Hiring children of foreign officials. Donation to foreign official s charities (no money reached pocket of foreign officials). Press back on theory of intangible benefit?

8 Legal Developments - Compliance DOJ s One Year Pilot Program DOJ wants: (1) voluntary disclosure in a timely manner; (2) full cooperation; and (3) appropriate remedial measures. Benefits: (1) company may receive 50% reduction off of sentencing guidelines; (2) generally no compliance monitor; (3) DOJ will consider not prosecuting. Problems: Conditional language and, perhaps, simply memorializes existing practices under the Yates Memorandum.

9 Trends DOJ & SEC collectively brought as many actions in the first six month of 2016 as they did in all of SEC far more active than DOJ. Average Fine: US$12.5 million (excluding VimpelCom) Eight new individual enforcement actions. Increase in individual prosecutions, but statistics skewed by a few high profile cases. Regional management increasingly the focus of prosecutions. Perception that misconduct typically occurs at subsidiary level..

10 Trends Geography and Industries Geographic: China dominates 7 of 13 involved alleged acts of bribery in China (corporate & individual cases). Relevance to Thailand View that problem is often at division or regional level. Hard to prosecute senior level management in the U.S.. Industry: Healthcare 6 of 13 involved healthcare industry. In each year since 2011, SEC or DOJ (or both) have brought at least one action against a party in the healthcare industry.

11 Penalties Individuals Imprisonment of up to 5 years, fines of up to US$100,00 or both per violation. Longest: Joel Esquenazi 15 years. Lost on appeal; writ of cert to Supreme Court. Fine of up to US$2 million per violation. Average is about US$12.5 million. Siemens was maximum (US$1.6 billion when penalties levied in Munich included) Compliance Monitors (companies). Disgorgement of profits. Disbarment. Private litigation. Often derivatives and securities class action lawsuits.

12 Compliance Best Practices 1. Commitment to Compliance at Highest Levels 2. Written & Widely Disseminated Compliance Policies 3. Periodic Reviews & Updates 4. Independence & Funding 5. Training & Guidance 6. Internal Reporting Mechanism 7. Investigations 8. Enforcement of Policies & Disciplinary Measures for Non-Compliance (but Thai Labor Law considerations) 9. Scrutinize Third Party Relationships See Next Slide 10. Monitoring & Testing

13 Compliance Third Parties Third Party Intermediaries Big Problem in Thailand. Due Diligence should cover: Local Check on Reputation Determine Ownership & Control Does it have its own compliance system? How long in business? Names and background of senior personnel Shareholders: 10% + Any ties to government? Document every step of due diligence. Document relationship

14 Not Just American Businesses 1. Siemens (German) US$800 million 2. Alstom (France) US$772 million 3. KBR / Halliburton (US) US$579 million 4. BAE (UK) US$400 million 5. Total SA (France) US$398 million 6. VimpelCom (Holland) US$397.6 million 7. Alcoa (US) US$384 million 8. Snamprogetti Netherlands B.V. (Holland) US$365 million 9. Technip SA (France) US$338 million 10. JGC Corporation (Japan) US$218.8 million

15 Thank you While reasonable efforts have been made to ensure the preceding slides are accurate, this presentation does not constitute legal advice. Douglas Mancill PriceSanond 16th Floor, Q House Sathorn 11 South Sathorn Road Bangkok, Thailand