SHELL INTERNATIONAL EXPLORATION & PRODUCTION OPTIMIZING YOUR CODE OF CONDUCCT TINA I. BRYAN ETHICS & COMPLIANCE OFFICER 10-FEB-2009 AGENDA o o o o CODE BENEFITS EMBEDDING THE CODE ENFORCING THE POLICIES FOOTNOTE: CONSIDERATIONS FOR A CODE 1 1
CODE BENEFITS Cohesion Common reference document for all employees Multinational corporations Consistency 2 CODE BENEFITS Reputation Partners Customers Society Recruitment and Attraction 3 2
CODE BENEFITS Responding to External Regulatory Considerations Excerpts from the U.S. Federal Sentencing Guidelines: http://www.ussc.gov/2008guid/chap8.htm 8C2.7 Determining the Fine Within the Range (Policy Statement) (a) In determining the amount of the fine within the applicable guideline range, the court should consider: (1).(10) (11) whether the organization failed to have, at the time of the instant offense, an effective compliance and ethics program within the meaning of 8B2.1 (Effective Compliance and Ethics Program). 4 Excerpts from the U.S. Federal Sentencing Guidelines 8B2.1 Effective Compliance and Ethics Program 8B2.1(b) Due diligence and promotion of an organizational culture that encourages ethical conduct and a commitment to compliance with the law within the meaning of subsection (a) minimally require the following: (1) The organization shall establish standards and procedures to prevent and detect criminal conduct. (2) (A) The organization s governing authority shall be knowledgeable about the content and operation of the compliance and ethics program and shall exercise reasonable oversight with respect to the implementation and effectiveness of the compliance and ethics program. 8B2.1(b) (5) The organization shall take reasonable steps (A) to ensure that the organization s compliance and ethics program is followed, including monitoring and auditing to detect criminal conduct; (B) to evaluate periodically the effectiveness of the organization s compliance and ethics program; and (C) to have and publicize a system, which may include mechanisms that allow for anonymity or confidentiality, whereby the organization s employees and agents may report or seek 5 guidance regarding potential or actual criminal conduct without fear of retaliation. 3
Excerpts from the U.S. Federal Sentencing Guidelines 8B2.1(b) (6) The organization s compliance and ethics program shall be promoted and enforced consistently throughout the organization through (A) appropriate incentives to perform in accordance with the compliance and ethics program; and (B) appropriate disciplinary measures for engaging in criminal conduct and for failing to take reasonable steps to prevent or detect criminal conduct 6 EMBEDDING THE CODE Communicate Messages from leaders Discussions at local team meetings (don t forget tone at the middle!) Mandatory on boarding for all new staff Partner with functions emphasizes value Face to face engagements with all levels Avenues for advice - publish listing of Policy Subject Matter Experts 7 4
Communicate 8 Dissemination of sanitized incidents (examples) Employee manipulated contracting and procurement processes to favor consultant for kick back Employee terminated Employee operated private business out of company offices utilizing company assets Employee terminated Employee submitted fraudulent travel claims Employee terminated Communicate In the news http://www.legalbrief.co.za/article.php?story=20081218083346188 Siemens fined $1.6bn over bribes Published in: Legalbrief Forensic Date: Thu 18 December 2008 Category: Corruption Issue No: 0144 Officials from Siemens AG traveled the globe with suitcases full of cash, paying more than a billion dollars in bribes to win lucrative public works contracts in countries such as Argentina, Bangladesh and Venezuela, the Justice Department said. The Washington Times reports that the German engineering company now will pay a total of $1.6bn in fines to US and German authorities, and remain under the supervision of an independent monitor for four years. The company pleaded guilty in US District Court to violating the Foreign Corrupt Practices Act (FCPA) by failing to maintain proper internal controls and keeping required records. The fine is the largest ever under that statute. 'Siemens' pattern of bribery was unprecedented in scale and geographic reach,' said Linda Chatman Thomsen, director of the Security Exchange Commission's (SEC) division of enforcement. Authorities say the company, which performs all manner of infrastructure projects, paid $1.4bn in bribes in recent years to win contracts in Asia, Africa, Europe, the 9 Middle East and South and Central America. 5
Communicate In the news Former AIG Vice President Sentenced to Four Years in Prison for Role in Fraudulent Manipulation Scheme http://news.prnewswire.com/viewcontent.aspx?acct=109&story=/www/story/01-27-2009/0004961571&edate WASHINGTON, Jan. 27 /PRNewswire-USNewswire/ -- The former vice president of reinsurance of American International Group Inc. (AIG), was sentenced today to four years in prison for his role in a fraudulent scheme to manipulate AIG's financial statements, the Department of Justice announced. Christian M. Milton, 61, of Wynnewood, Pa., who served as vice president of reinsurance at AIG from approximately 1982 to March 2005, was convicted by a federal jury on Feb. 25, 2008, on charges of conspiracy, securities fraud, false statements to the U.S. Securities and Exchange Commission (SEC) and mail fraud. In addition to the prison term, Milton was sentenced by U.S. District Judge Christopher F. Droney to two years of supervised release following his release from prison and a $200,000 fine. Milton was ordered to surrender himself to federal authorities in 60 days. 10 Communicate In the news Ex UBS executive sentenced for insider trading http://www.domain-b.com/companies/companies_u/ubs_warburg/20081104_ubs.html In one of the biggest insider trading cases on Wall Street since the 1980s, Michael Guttenberg, a former institutional client manager in UBS' equity research department, has been sentenced to six and a half-years in prison and ordered to pay back $15.8 million he made in the scam for running an insider trading scheme involving several hedge funds. Vetco Pays Largest Criminal Fine in the History of the FCPA http://www.willkie.com/files/tbl_s29publications%5cfileupload5686%5c2393%5cvetco_pays_largest_criminal_fine.pdf On February 6, 2007, three subsidiaries of Vetco International Ltd. pleaded guilty to violating the authority provisions of the Foreign Corrupt Practices Act ( FCPA ). The subsidiaries, Vetco Gray Controls, Inc., Vetco Gray Controls Ltd., and Vetco Gray UK Ltd. (the Vetco subsidiaries ), paid a total combined fine of $26 Million the largest criminal fine in the history of the FCPA. A fourth Vetco affiliate, Aibel Group, Ltd. reached a deferred prosecution agreement with the Justice Department in the case. 11 In pleading guilty, the Vetco subsidiaries admitted to violating the FCPA by making corrupt payments of approximately $2.1 million to Nigerian Customs Service officials over a two-year period. The Vetco sub paid the bribes through a major international freight forwarding and customs clearance company. According to the Justice Department, the companies coordinated the payments largely through Vetco Gray Control Inc. s Offices in Houston. Texas. 6
EMBEDDING THE CODE Train Identify high risk areas Identify at risk staff for: face to face training online training Mandatory on boarding for new joiners Periodic refreshers for all staff Face to face engagements with all levels 12 EMBEDDING THE CODE Train Utilize dilemmas to engage staff in problem solving Identify processes which aid in meeting policy expectations 13 7
ENFORCING THE POLICIES Mechanisms to report potential violations Anonymous / Confidential Helpline Line Manager Human Resources Legal Ethics and Compliance Officer 14 ENFORCING THE POLICIES Policy of no retaliation for good faith concerns brought forward Investigation guidelines to ensure consistency Identified staff for conducting investigations Consistency in consequence management Refer back to Excerpts from U.S. Federal Sentencing Guidelines 15 8
2 0 0 1 8 0 1 6 0 1 4 0 1 2 0 1 0 0 8 0 6 0 4 0 2 0 - ENFORCING THE POLICIES TRACKING & REPORTING REPORTING EXAMPLE Incidents by business 160 140 120 Number of cases 100 80 60 40 20-52 22 16 71 10 9 149 47 106 Total Inquiry / Allegations Incident Substantiated Number of staff terminated/disciplined 108 51 39 23 21 7 6 7 3 8 2 6 -A- -B- -C- -D- -E- -F- -G- -H- 82 40 89 -A- -B- -C- -D- -E- -F- -G- -H- Total Carryforwards from previous years 13 50 25 9 18 9 3 13 140 Current year cases 39 21 124 14 3 99 5 69 374 Total Inquiry / Allegations 52 71 149 23 21 108 8 82 514 Investigation in progress 9 6 38 3-13 1 11 81 Query answered 3 47 22 8 2 13 3 17 115 Case Unsubstantiated 18 8 42 5 12 31 2 14 132 42% Incident Substantiated 22 10 47 7 7 51 2 40 186 58% # Employee/ Contractors disciplined 7 2 53 3 3 28 5 81 182 16# Employee/ Contractors terminated 9 7 53 3-11 1 8 92 ENFORCING THE POLICIES TRACKING & REPORTING 22 10 47 7 REPORTING EXAMPLE Consequence management by business and type -A- - B - - C - - D - - E - - F - - G - - H - -A- - B - - C - - D - - E - - F - - G - - H - TL Termination 6 7 22 3-11 1 8 58 Counseling & other disciplinary action 7 1 23 2 2 24 1 16 76 Total case with direct CM 13 8 45 5 2 35 2 24 134 Other or no action 9 2 2 2 5 16-16 52 Total case substantiated 22 10 47 7 7 51 2 40 186 7. 51 2 40 28 79 53 20 2 Counseling & other disciplinary action Unspecified Contractors Staff Supervisors Managers Executives 60 16 14 2 Termination 17 9
18 FOOTNOTE: CONSIDERATIONS FOR A CODE Comprehensive Code High level principles supplemented by company or national policies Global vs. Local High Risk Areas Company size and dispersion Reference U.S. Federal Sentencing Guidelines Criminal Conduc QUESTIONS AND ANSWERS? 19 10
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