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Managing Foreign Corrupt Practices Act (FCPA) Risks

FCPA Resource Guide Cover, Nov 2012Thu, Apr 24. Any business operating in the global marketplace must make the FCPA and anti-corruption an integral part of its business plan. Vigorous enforcement of the Foreign Corrupt Practices Act (FCPA) has become a top priority for both the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC). Recently, both have increased resources dedicated to FCPA enforcement. At the same time, civil and criminal penalties for FCPA violations continue to grow and DOJ has shown an increasing willingness to criminally prosecute individuals for FCPA violations. In addition, many other nations have enacted and/or have begun to seriously enforce anti-corruption legislation of their own. . Read more

Foreign Corrupt Practices Act Enforcement Trends And Priorities

Kara Brockmeyer, SEC - FCPAComments of U.S. officials and others at a November conference on the FCPA  provide a critical snapshot of the current state of play in still increasingly stringent U.S. enforcement of the FCPA and growing international cooperation to pursue anti corruption law enforcement well beyond U.S. borders. Addressing the question of the most significant recurring issues that the SEC is seeing in cases that they investigate, Ms. Brockmeyer highlighted companies’ use of third-party intermediaries. In the past two years, up to 70 percent of the cases in the SEC’s FCPA Unit have involved joint ventures, vendors, suppliers or other third parties.

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GSK in China: A Game Changer in FCPA Compliance

GSK in China: A Game Changer in Compliance, by Thomas FoxHOUSTON, AUG. 22, 2013 — /PRNewswire/ — A new e-book published by attorney, author and Foreign Corrupt Practices Act (FCPA) expert Tom Fox is pulling back the curtain on this summer’s bribery accusations leveled by the Chinese government against pharmaceutical giant GlaxoSmithKline.

In “GSK in China: A Game Changer in Compliance,” Mr. Fox explores the many unusual elements of the case, in which company employees are accused of bribing Chinese doctors and other officials to encourage the use of Glaxo drugs.

“As bad as it seems, there are many lessons that compliance officers can draw from and use as teachable moments within their own companies,” Mr. Fox says. Read more

Nine Handy Safeguards: The 12 days of FCPA • Useful takeaways from the new FCPA Resource Guide (9)

breuer-meeting

The U.S. .Securities and Exchange Commission (“SEC”) and U.S. Department of Justice (“DOJ”) issued a long-delayed Foreign Corrupt Practices Act (“FCPA”) Resource Guide in November 2012. While the Guide was preceded by years of pressure to clarify the enforcement of the FCPA, it generally does little to break new ground as a matter of policy and is not legal precedent. The Guide functions best as a single-reference source of preexisting agency enforcement actions and opinion letters. In this regard, it is a useful resource for the long-held interpretations of the FCPA by the agencies tasked with enforcement and offers a single source for the ounce of prevention that may be worth a pound of cure. It is important that companies review the Guide to assess whether current compliance programs or measures will pass the watchful eye of the SEC or DOJ and for insight into how the agencies are likely to view future compliance issues and potential misconduct. With that in mind, one legal services firmed pulled together 12 important takeaways that can be drawn from the Guide. Read one per day or all at once.

The Ninth Day: Nine Handy Safeguards

Takeaway number nine is the nine safeguards that the Guide notes will help ensure payments are reasonable and bona fide. While payments to foreign officials are more likely to raise red flags, the Guide notes that payments “will not give rise to prosecution if they are (1) reasonable, (2) bona fide, and (3) directly related to (4) the promotion, demonstration, or explanation of products or services or the execution or performance of a contract.” The nine safeguards that a company can follow when considering whether a payment to a foreign official is appropriate or violates the FCPA are the following:

  • Do not select the particular officials who will participate in the party’s proposed trip or program or else select them based on predetermined, merit-based criteria.
  • Pay all costs directly to travel and lodging vendors and/or reimburse costs only upon presentation of a receipt.
  • Do not advance funds or pay for reimbursements in cash.
  • Ensure that any stipends are reasonable approximations of costs likely to be incurred and/or that expenses are limited to those that are necessary and reasonable.
  • Ensure the expenditures are transparent, both within the company and to the foreign government.
  • Do not condition payment of expenses on any action by the foreign official.
  • Obtain written confirmation that payment of the expenses is not contrary to local law.
  • Provide no additional compensation, stipends, or spending money beyond what is necessary to pay for actual expenses incurred.
  • Ensure that costs and expenses on behalf of the foreign officials will be accurately recorded in the company’s books and records.

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12 Days of FCPA: Useful Takeaways from the New Foreign Corrupt Practices Act Resource Guide

DOJ and SEC Resource Guide to the U.S. Foreign Corrupt Practices Act for more in-depth details on specific provisions.

12 Days of Christmas • to provide cultural background on why there are “12 Days of FCPA”

Hypothetical Examples: The 12 days of FCPA • Useful takeaways from the new FCPA Resource Guide (7)

breuer-meeting

The U.S. .Securities and Exchange Commission (“SEC”) and U.S. Department of Justice (“DOJ”) issued a long-delayed Foreign Corrupt Practices Act (“FCPA”) Resource Guide in November 2012. While the Guide was preceded by years of pressure to clarify the enforcement of the FCPA, it generally does little to break new ground as a matter of policy and is not legal precedent. The Guide functions best as a single-reference source of preexisting agency enforcement actions and opinion letters. In this regard, it is a useful resource for the long-held interpretations of the FCPA by the agencies tasked with enforcement and offers a single source for the ounce of prevention that may be worth a pound of cure. It is important that companies review the Guide to assess whether current compliance programs or measures will pass the watchful eye of the SEC or DOJ and for insight into how the agencies are likely to view future compliance issues and potential misconduct. With that in mind, one legal services firmed pulled together 12 important takeaways that can be drawn from the Guide. Read one per day or all at once.

The Seventh Day: ‘Twas the Night Before . . . and Other Hypotheticals 

Takeaway number seven is that the Guide provides examples of how the government believes the FCPA applies (or not) to specific sets of facts. While we’ve referenced some particular hypotheticals, they’re also worth a word generally. While these hypotheticals are not legally binding, a party can reference them in future enforcement proceedings. Overall, the hypotheticals address a range of issues including liability for successor and parents, jurisdiction, gifts and other expenses, and facilitating payments. Some notable examples are Chapter Five’s compliance program case study and several situations addressing third-party vetting and joint ventures, as well as Chapter Two’s discussion of hypothetical gifts and travel payments.

Read more …

12 Days of FCPA: Useful Takeaways from the New Foreign Corrupt Practices Act Resource Guide

DOJ and SEC Resource Guide to the U.S. Foreign Corrupt Practices Act for more in-depth details on specific provisions.

12 Days of Christmas • to provide cultural background on why there are “12 Days of FCPA”

Examples of Gifts and Travel: The 12 days of FCPA • Useful takeaways from the new FCPA Resource Guide (4)

breuer-meeting

The U.S. .Securities and Exchange Commission (“SEC”) and U.S. Department of Justice (“DOJ”) issued a long-delayed Foreign Corrupt Practices Act (“FCPA”) Resource Guide in November 2012. While the Guide was preceded by years of pressure to clarify the enforcement of the FCPA, it generally does little to break new ground as a matter of policy and is not legal precedent. The Guide functions best as a single-reference source of preexisting agency enforcement actions and opinion letters. In this regard, it is a useful resource for the long-held interpretations of the FCPA by the agencies tasked with enforcement and offers a single source for the ounce of prevention that may be worth a pound of cure. It is important that companies review the Guide to assess whether current compliance programs or measures will pass the watchful eye of the SEC or DOJ and for insight into how the agencies are likely to view future compliance issues and potential misconduct. With that in mind, one legal services firmed pulled together 12 important takeaways that can be drawn from the Guide. Read one per day or all at once.

The Fourth Day: Examples of Gifts and Travel

Takeaway number four is that finding the perfect gift this season may be a tiny bit easier. The FCPA has always been known for the principle that giving a little can cost you a lot. There’s nothing in the new Guide to change this as a general principle, but the compiled guidance and new hypotheticals in the Guide offer some valuable insight into which gifts are acceptable. The Guide, of course, notes that “tems of nominal value, such as cab fare, meals and entertainment expenses, or company promotional items . . . without more,” are not likely to result in enforcement action by the DOJ or SEC. Gifts that are more significant, i.e., ones likely to “improperly influence,” are prohibited, as are widespread smaller gifts that equal a “pattern of bribes.” As to what one should make of the many things that fall between a new sports car and a cup of coffee, there’s no hard and fast rule. In fact, the Guide suggests that there could be no such rule since “a modest payment” in the United States could have more significance in a foreign setting. The hypotheticals offer some help, including one describing legitimate activities where foreign officials on a business trip are taken to a baseball game and a play and are even flown business class. Of course, the hypothetical is not comprehensive and doesn’t include the value of the tickets (or if it was a playoff game), but it is more guidance than existed prior to the Guide. Given the way that examples can become fixed models in the law, you may have a harder time tracking down tickets to your favorite sporting event next year. For one final note, it is important to remember that even a proper gift can violate the books and records provisions if not properly recorded.

Read more …

12 Days of FCPA: Useful Takeaways from the New Foreign Corrupt Practices Act Resource Guide

DOJ and SEC Resource Guide to the U.S. Foreign Corrupt Practices Act for more in-depth details on specific provisions.

12 Days of Christmas • to provide cultural background on why there are “12 Days of FCPA”

Effective Compliance Program: The 12 days of FCPA: Useful takeaways from the new FCPA Resource Guide (6)

breuer-meeting

The U.S. .Securities and Exchange Commission (“SEC”) and U.S. Department of Justice (“DOJ”) issued a long-delayed Foreign Corrupt Practices Act (“FCPA”) Resource Guide in November 2012. While the Guide was preceded by years of pressure to clarify the enforcement of the FCPA, it generally does little to break new ground as a matter of policy and is not legal precedent. The Guide functions best as a single-reference source of preexisting agency enforcement actions and opinion letters. In this regard, it is a useful resource for the long-held interpretations of the FCPA by the agencies tasked with enforcement and offers a single source for the ounce of prevention that may be worth a pound of cure. It is important that companies review the Guide to assess whether current compliance programs or measures will pass the watchful eye of the SEC or DOJ and for insight into how the agencies are likely to view future compliance issues and potential misconduct. With that in mind, one legal services firmed pulled together 12 important takeaways that can be drawn from the Guide. Read one per day or all at once.

The Sixth Day: Deck Your Compliance Program with the Hallmarks of Effectiveness

Takeaway number six is that the SEC and DOJ have summarized what the agencies consider to be the attributes of an effective compliance program. Of course, the Guide stresses that there are “no formulaic requirements regarding compliance programs,” but Chapter Five sets out the “hallmarks” that will be used in determining whether a compliance program is effective. The Guide notes three basic questions in analyzing a compliance program:

  1. Is it well designed?
  2. Is it being applied in good faith?
  3. Does it work?

In addition, Chapter Five references compliance program basic elements (although the Guide notes that the elements do not guarantee mitigation credit in an enforcement action). The elements listed are:

  • a commitment from senior management and a clearly articulated policy against corruption;
  • an accessible corporate code of conduct and compliance policies and procedures;
  • a compliance department with oversight, autonomy, and adequate resources;
  • appropriate risk assessment in tailoring the program to high-corruption jurisdictions;
  • periodic training for personnel and continuing advice;
  • employee incentives, including rewards and disciplinary measures;
  • appropriate third-party due diligence;
  • a means of confidential reporting and conducting appropriate internal investigations;
  • continuous improvement through periodic testing and review; pre-acquisition due diligence and post-acquisition integration.

Read more …

12 Days of FCPA: Useful Takeaways from the New Foreign Corrupt Practices Act Resource Guide

DOJ and SEC Resource Guide to the U.S. Foreign Corrupt Practices Act for more in-depth details on specific provisions.

12 Days of Christmas • to provide cultural background on why there are “12 Days of FCPA”

Legal Facilitating Payments: The 12 days of FCPA • Useful takeaways from the new FCPA Resource Guide (5)

breuer-meeting

The U.S. .Securities and Exchange Commission (“SEC”) and U.S. Department of Justice (“DOJ”) issued a long-delayed Foreign Corrupt Practices Act (“FCPA”) Resource Guide in November 2012. While the Guide was preceded by years of pressure to clarify the enforcement of the FCPA, it generally does little to break new ground as a matter of policy and is not legal precedent. The Guide functions best as a single-reference source of preexisting agency enforcement actions and opinion letters. In this regard, it is a useful resource for the long-held interpretations of the FCPA by the agencies tasked with enforcement and offers a single source for the ounce of prevention that may be worth a pound of cure. It is important that companies review the Guide to assess whether current compliance programs or measures will pass the watchful eye of the SEC or DOJ and for insight into how the agencies are likely to view future compliance issues and potential misconduct. With that in mind, one legal services firmed pulled together 12 important takeaways that can be drawn from the Guide. Read one per day or all at once.

The Fifth Day: Legal Facilitating Payments 

Takeaway number five is that while the best gift is the one for which you expect nothing in return, you can still sometimes make a payment to facilitate things. The Guide recognizes the exception for one-time facilitating payments or expediting payments for routine, nondiscretionary government service, but like an unexpected relative around the holidays, such payments are heavily scrutinized and should be handled cautiously. The Guide distinguishes between payments that facilitate processing of visas and providing police protection or mail service, and payment to an official to obtain or retain business. Form will not trump substance, either. Labeling a bribe a “facilitating payment” won’t make it so and only opens the door to a potential books and records violation. Also, it is notable that this exception is not recognized by some countries, and their anti-bribery laws may prohibit a gift even if the FCPA does not.

Read more …

12 Days of FCPA: Useful Takeaways from the New Foreign Corrupt Practices Act Resource Guide

DOJ and SEC Resource Guide to the U.S. Foreign Corrupt Practices Act for more in-depth details on specific provisions.

12 Days of Christmas • to provide cultural background on why there are “12 Days of FCPA”

Think the “Foreign Corrupt Practices Act” is a U.S. Issue? Think Again!

Last February the former chief executive of KBR, Inc. was sentenced to 30 months in prison for his role in a massive, decade-long scheme to bribe Nigerian government officials to win $6 billion in contracts for development of the Bonny Island liquefied natural gas facility.

Albert “Jack” Stanley, 69, had pleaded guilty in September 2008 in a scheme to route $182 million in bribes to Nigerian government officials. And his sentencing sent a chill through executive suites of not just U.S. corporations, but multi-national and non-U.S. foreign corporations as well.

But what really caught the attention of the executive suite world-wide was the degree to which persons and companies outside of the United States became caught up in a bribery and kick-back scandal prosecuted under a law generally thought to affect only U.S. companies.

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Walmart’s Debacle – What PE Firms Can Learn

The recent allegations against Wal-Mart that the company engaged in bribery to assist in its expansion efforts illuminates the great challenges facing multinational companies transacting overseas.

Tyson Foods, Diageo, IBM and Pfizer have been alleged to violate the Foreign Corrupt Practices Act (FCPA).

And while these larger corporations have been subject to scrutiny, the Department of Justice is sure to be taking a closer look at smaller companies too as it ramps up its effort to clean its international house.

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