FCPA: Enforcement, Investigations and Compliance

Transcription

1 FCPA: Enforcement, Investigations and Compliance Association of Corporate Counsel Austin Chapter October 14, 2014 Michael Marinelli, Greenberg Traurig, Austin Sandra Gonzalez, Greenberg Traurig, Austin GREENBERG TRAURIG, LLP ATTORNEYS AT LAW All rights reserved.

2 The Government s Point of View It is the invariable habit of bureaucracies, at all times and everywhere, to assume that every citizen is a criminal. H.L. Mencken 2

3 FCPA Enforcement Actions DOJ Enforcement Actions SEC Enforcement Actions Total FCPA fines paid : $4.42 billion. 3

4 FCPA Coverage Applies to: Companies organized under U.S. law Foreign issuers of securities in the U.S. Individuals located in the U.S., including foreign nationals Employees of covered companies U.S. government takes a very broad view of its jurisdiction 4

5 FCPA Bribery Provisions Prohibit: Paying or offering bribes to foreign officials to Obtain or retain business Influence a government decision Obtain an improper advantage, such as beneficial regulatory treatment Paying money to a third party knowing that the third party will use it to pay bribes to foreign officials 5

6 FCPA Books and Records Issuers are required to keep books, records, and accounts which: in reasonable detail accurately and fairly reflect transactions and the disposition of assets Issuers are required to have internal controls sufficient to assure that: Transactions are executed and assets are accessed only in accordance with management's authorization Financial statements can be prepared Audits can be conducted Appropriate action can be taken in response to issues that arise 6

7 FCPA Penalties Criminal Penalties Company -- Up to $2 million or an alternative based on the gain to the company Individuals -- up to $100,000, five years in prison, or both Individual fines may not be paid by employer Civil Penalties Up to $10,000 plus disgorgement of profits Suspension or debarment from Federal procurement programs Compliance monitor paid by company 7

8 Weatherford Charges and Penalties Violated anti-bribery and internal controls provisions $152 million settlement Two-year Deferred Prosecution Agreement Independent Compliance Monitor, at least 18 months Government highlighted the company s lack of internal controls 8

9 Smith & Wesson Recent comments by Kara Brockmeyer, Chief of the SEC s FCPA Unit [The SEC still sees] a lot of paper programs, lots of boxes, forms, but no teeth, no testing. Small to medium size companies generally have deficient compliance policies and procedures DOJ-SEC FCPA Update: Trends and Significant Developments, October 2,

10 Morgan Stanley Morgan Stanley executive pled guilty to FCPA violations The company avoided an FCPA prosecution due to its robust compliance program Guilty executive was trained at least seven times in seven years Executive had received at least 35 reminders regarding the company s FCPA policies and procedures Executive certified as to compliance with the FCPA on multiple occasions 10

11 U.S. Sentencing Guidelines Set the legal standard by which the effectiveness of a compliance program is measured Program must be reasonably designed, implemented and enforced so that the program is generally effective in preventing and detecting criminal conduct. Require that the company establish standards and procedures Identify specific program elements 11

12 Risk Assessment Review of business operations to identify foreign bribery risks facing the Company, including: International locations Interactions with government officials Degree of governmental oversight and inspection Volume and importance of goods clearing through customs Guidelines Commentary 7(A); Armor Holdings 12

13 Organizational Requirements High-level personnel with overall responsibility for the compliance program Specific individuals charged with operational responsibility for the program Program must have adequate resources and appropriate authority Guidelines at 8B2.1(b)(2) 13

14 Develop, Publish, and Update Compliance Procedures Initial development of procedures Regular reviews and updating of the compliance procedures taking into account: Relevant legal developments Evolving international and industry standards, Changes in business operations Guidelines at 8B2.1(b)(1); Tenaris, Armor, Aon, and Panalpina 14

15 Training Effective communication of policies and procedures Targeted to specific business units based on functions and interaction with the government Third parties should be trained, where appropriate Guidelines at 8B2.1(b)(4)(A);Tenaris, Armor, Aon, Marubeni, Siemens, Panalpina and J&J. 15

16 Third Party Due Diligence Due diligence be conducted on third parties that will interact with the government on the company s behalf Sales agents Distributors Lobbyists Law firms Tax advisers Common practice is to use a service provider to prepare diligence reports Aon, Armor and Pfizer 16

17 Additional Third Party Requirements Inform third parties of the company s commitment to anti-corruption compliance Require TPI and business partner contracts containing standard provisions such as anticorruption representations rights to conduct audits J&J, Marubeni, Siemens, Panalpina, Aon, Tenaris, Pfizer and Armor 17

18 Prior Approval of Expenditures Compliance function should review and approve high-risk expenditures and disbursements in advance, including: Gifts Hospitality, entertainment and travel for government official Donations Tenaris, Armor, Aon, Panalpina and Pfizer 18

19 Responding to Reports of Violations Mechanisms for reporting to possible violations Anonymous reporting No retaliation Company should be prepared to take appropriate action, including modification of compliance program Guidelines at 8B2.1(b)(6)-(7); Tenaris, Armor, Aon, Panalpina and Pfizer 19

20 Periodic Reviews of the Compliance Program Periodic review and testing of the compliance procedures to evaluate effectiveness Role of internal audit Monitoring Reviews should account for: Changes in law Changes in business operations Prior reports of possible violations Audit reports Guidelines at 8B2.1(b)(5)(B); Tenaris, Aon, Marubeni, J&J, Panalpina, Siemens, and Pfizer. 20

21 Cases Cited: US Penalties Aon: $16.26 million Armor Holdings: $16 million Johnson & Johnson: $70 million Marubeni: $88 million Panalpina: $236.5 million Pfizer: $57.4 million Siemens: $800 million Tenaris: $8.9 million 21

22 Presenters Michael Marinelli* (512) Sandra Gonzalez (512) *Not admitted in Texas 22