Entertainment and Travel Fraud Schemes Olympics, World Cup and SuperBowl Oh My! Kathleen K. Edmond Partner, Robins Kaplan Lisa Beth Lentini VP Global Compliance, Carlson Wagonlit Travel EMAIL: Brazil Summer Olympics, US Open Tennis, and Masters Golf Travel Experiences Let me know if you want to see our calendar of the top rated events for 2015 2016. We offer advisors extremely large commissions on all of our allinclusive luxury packages. I can send you our information on these events or even some incredible culinary experiences. Thank you! 1
Agenda Basic Overview Recent Developments BHP Other examples in the news Internal Controls What to do When the Unthinkable Happens Basics MYTH: Providing entertainment, hospitality and/or travel is prohibited or are highly risky REALITY: Reasonable gifts, hospitality, travel and entertainment are permitted and there is guidance on how to mitigate risks UK as a general proposition, hospitality or promotional expenditure which is proportionate and reasonable given the sort of business you do is very unlikely to engage the [U.K. Bribery] Act. So you can continue to provide tickets to sporting events, take clients to dinner, offer gifts to clients as a reflection of your good relations, or pay for reasonable travel expenses in order to demonstrate your goods or services to clients if that is reasonable and proportionate for your business. No one wants to stop firms getting to know their clients by taking them to events like Wimbledon or the Grand Prix. [o]rdinary hospitality to meet and network with customers and to improve relationships is an ordinary part of business and should never be a criminal offence. US it can be appropriate to pay for travel and related hospitality including business class airfare, meals and entertainment provided the expenses are reasonable and the trip has a legitimate business purpose. DOJ/SEC Resource Guide, p. 18; 2
BHP case December 2005 BHP and Beijing Olympics announced agreement where BHP provided metal for medals and a sponsorship fee, and in return received trademark rights and priority access to hospitality, etc. during the 2008 games BHP developed Olympic steering committee to assess hospitality propositions and with a goal to reinforce and develop relationships with key stakeholders Special compliance process developed with select review by Ethics panel comprised of internal and external members BHP case the assessment questions 9. What business obligation exists or is expected to develop between the proposed invitee and BHP Billiton? 10. Is BHP Billiton negotiating or considering any contract, license agreement or seeking access rights with a third party where the proposed invitee is in a position to influence the outcome of that negotiation? 11. Do you believe that the offer of the proposed hospitality would be likely to create an impression that there is an improper connection between the provision of the hospitality and the business that is being negotiated, considered or conducted, or in any way might be perceived as breaching the Company s Guide to Business Conduct? If yes, please provide details. 12. Are there other matters relating to the relationship between BHP Billiton and the proposed invitee that you believe should be considered in relation to the provision of hospitality having regard to BHP Billiton s Guide to Business Conduct? 3
The Five Strikes Why wasn t this enough? No ACTUAL independent legal or compliance review of hospitality applications by someone outside the business unit (did not clearly communicate to employees that the Ethics Panel was not reviewing and approving each invitation to a government official) Some of the applications weren t accurate and complete No specific training for this sensitive event No process for handling changes in circumstance (newly pending) The applications were only by one business unit and didn t take into account activities of other business units BHP Remediation Steps (1) creation of compliance group independent of the business units; (2) review of its anti corruption program and implementation of certain upgrades; (3) embedding of anti corruption managers into the business units; (4) enhancements of its policies and procedures concerning hospitality, gift giving, use of third party agents, business partners, and other highrisk compliance areas ; (5) enhancement of financial and auditing controls, including policies to specifically address conducting business in high risk markets ; and (6) enhanced anti corruption compliance training. 4
What to watch for? Paying for extravagant meals, drinks, and entertainment in connection with a visit; Paying for side trips to visit tourist attractions (e.g., Disney, shopping centers, wineries, tourist cities where you don t have operations, etc); Providing per diems or pocket money (particularly for representatives of SOE or foreign officials) to use; Paying for spouse, family (or other invitees not employed by the company, agency or government) to accompany on a trip; and Providing excessive gifts for birthdays, weddings, holidays, or other events. Other examples in the news Avon China Gifts (expensive handbags billed as public relations ) Meals (watch for attendees and for high priced bottles of wine, etc.) Travel (does the business have any role and is it the primary objective? What kind of side trips are involved?) Cash (a perennial favorite) Payments through third parties (charge backs and other schemes) 5
Other examples in the news Weatherford Weatherford and its subsidiaries allegedly falsified its books and records to conceal not only illicit payments made through third party entities, but also to hide commercial transactions with Cuba, Iran, Syria, and Sudan that violated US sanctions and export control laws Travel related bribery Trip by two officials to the FIFA World Cup soccer tournament in Hanover, Germany Honeymoon trip of the daughter of an official; and Employee and family to Jeddah, Saudi Arabia, for religious reasons that were improperly booked as a donation. Other examples in the news GSK Pharmaceutical company operating in China China accused company of a sophisticated money laundering operation using more than 700 travel agents and travel agencies to bribe government officials, medical associations, hospitals and doctors to boost sales Bribes were in the form of cash (often chargebacks to alternate credit cards) and sexual favors GSK allegedly collaborated with travel agencies to funnel bribes to doctors and officials by creating fake "conference services and corporate meetings. The budget for these fictitious meetings would then be used to bribe doctors to prescribe GSK drugs. Allegations included that GSK funded leisure travel for the benefit of doctors and officials. 6
Internal Controls Do not select foreign officials to participate in a event, or use a systematic evaluation to identify appropriate attendees Pay all costs directly to vendors and do not put cash in the pockets of any attendees (as an advance or for reimbursement) Ensure that payments are transparent and accurately reflected in company books and records Never make conditional payments Always get written confirmation that activities do not violate local law For travel, make sure that any invitees are subject to the same or more stringent policies as apply to your own employees Internal Controls Verify that meetings are actually taking place Make sure that every line item has a receipt Watch for gifts and tips Work collaboratively with your travel management company to ensure that your policies at the company are incorporated into the travel policy appropriately. Disconnects or gaps are where mischief can happen Special training for those in this field Hiring the right people is important Making sure that you have good oversight of third parties and that there are a reasonable number of providers 7
When the Unthinkable Happens Prevention is always better than having to investigate Transaction by transaction analysis versus sampling Eye on expenditures Look for anything that seems to be a method to obtain cash Check that all processes and procedures were followed (oftentimes they aren t) Questions 8