compliance challenges in latin 1 office of global compliance – ethics & compliance group...

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Office of Global Compliance – Ethics & Compliance Group

Utilities & Energy Compliance & Ethics Conference February 2012, Houston Texas

Compliance Challenges in Latin AmericaCompliance Challenges in Latin America

Marco Antonio Padilla MerigoRegional Compliance Counsel Latin America

2 © 2011 Weatherford. All rights reserved.

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Regional Overview: The Countries

LATAM OIL & GAS COUNTRIES

• Argentina• Brazil• Bolivia • Chile• Colombia • Ecuador• Mexico• Peru• Trinidad & Tobago• Venezuela


Region Overview: The Players

NATIONAL OIL COMPANIES• Argentina (Enarsa)• Bolivia (YPFB)• Brazil (Petrobras)• Chile (ENAP)• Ecuador (Petroecuador)• Mexico (Pemex)• Peru (Petroperu)• Trinidad & Tobago (National Gas Co.• Trinidad & Tobago (Petrotin)• Venezuela (PDVSA)

STATE OWNED ENTITIES • Petrominerales (Bolivia)• HOCOL (Colombia)• Emerald (Colombia)• Mansarovar (Colombia)• Savia (Peru)

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Region Overview: Corruption Index

TI’s CPI 2011 • Chile 7.2 – 22

• Brazil 3.8 – 73

• Colombia 3.4 – 80

• Peru 3.4 – 80

• T&T 3.2 – 91

• Argentina 3.0 – 100

• Mexico 3.0 – 100

• Bolivia 2.8 – 118

• Ecuador 2.7 – 120

• Venezuela 1.9 ‐ 172

TI’s BPI by Country

• Brazil 7.7 ‐ 14

• Argentina 7.3– 23

• Mexico 7.0 – 26

TI’s BPI by Sector

• Oil&Gas 6.2 – 16

• Utilities 6.1 – 17


Region Overview: Enforcement

Enforcement of anti-corruption laws is on the rise around the world

3 58

20

13 14

26

27 7

18 20

26

48

5

1215

3833

40

74

0

10

20

30

40

50

60

70

80

2004 2005 2006 2007 2008 2009 2010

SEC Actions

DOJ Actions

Total

There has been a significant increase in U.S. enforcement actions against both entities and individuals in recent years

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Region Overview: Enforcement

Date Company Penalties Location of Conduct

Apr 2009 Latin Node $2 million Honduras and another country

Jul 2009 Nature’s Sunshine $600,000 Brazil

Jul 2009 Helmerich & Payne $1.4 million Argentina & Venezuela

Sep 2010 ABB $58.3 million Mexico, other countries

Dec 2010 Alcatel –Lucent $137 million Costa Rica, Honduras, Nicaragua, Ecuador, other countries

Dec 2010 Pride $56.2 million Venezuela, Mexico, other countries

Dec 2010 Panalpina $81.8 million Brazil, other countries

Feb 2011 Tyson Foods $5.2 million Mexico

Sep 2011 Bridgestone $28 million Mexico and other countries

Dec 2011 Aon $16.2 million Costa Rica and other countries

10 CORPORATE SETTLEMENTS INVOLVING CONDUCT IN LATAM SINCE 2009


Regional Overview: Enforcement

• Nature’s Sunshine (Brazil) – civil action against CEO and former CFO.

• ABB (Mexico) – criminal charges against former GM and agent.

• PECC (Panama) – criminal charges against two former presidents.

• Terra Communications (Haiti) – former president and executive VP indicted.

• Pride (Mexico, Venezuela) – civil complaint filed against former VP and former VZ country manager.

• Lindsey Manufacturing (Mexico) – President and CFO indicted, Convictions overturned in Dec 2011.

• Latin Node (Honduras) – former CEO sentenced and guilty pleas by former CFO, former VP, and former Chief Commercial Officer.

• Siemens (Argentina) – criminal charges filed against eight executives and agents and civil charges filed against seven former executives.


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9 © 2011 Weatherford. All rights reserved.9 © 2011 Weatherford. All rights reserved.


Challenges: Resistance to ChangeChallenges: Resistance to Change

• “This is a common practice in the industry”

• “But.. Our competitors are doing it!”

• “Being compliant in LATAM is a business disadvantage”

Change in the perspective of being compliant

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Challenges: The Clients

National Oil Companies and State Owned Entities

• Tender Requirements • Tender Process• Direct Awards• Contract Extension• Work Orders• Social Responsibility Projects • Technology Transfer Clauses• Certifications• Operational Interaction


Challenges: Business Partners, M&A


Business Partners• Co-Bidding• Consortium• Joint Ventures• Consultants• Agents• Suitcase companies

M&A• Ownership • Contracts Acquired• Permits, Certifications

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Challenges: Business Partners, M&A


YOUR LOCAL PARTNER

Construcciones y Servicios Tecnicos del Sureste won 100k USD in Pemex Contracts


Challenges: Project Funding

Argentina, Bolivia, Ecuador, Colombia, Mexico, Peru and Venezuela are considered high risk countries for Money‐Laundering. (AML‐monitor)

Argentina, Bolivia, Ecuador, Colombia, Mexico, Peru and Venezuela are considered high risk countries for Money‐Laundering. (AML‐monitor)


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Challenge: Suppliers


Suppliers: • Owned by Government Officials Family or Friends• Suggested by Government Officials

Challenge: Industry Regulators


ENVIRONMENTAL, SOCIAL SECURITY, HEALTH, SAFETY, OPERATION PERMITS, HAZARDOUS MATERIALS, EXPLOSIVES, TRANSPORTATION, LICENSE PLATES, RADIOACTIVE SOURCES, WASTE MANAGEMENT, PUBLIC REGISTRY, TAXES, CUSTOMS, VISAS, WORK PERMITS, RELOCATIONS, CONSTRUCTION PERMITS, ESCORTS, CERTIFICATIONS, ….

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Challenges: Interaction with regulators


The infamous “Gestores”


Challenges: Charitable Contributions

Request for Charitable Contributions is a very common practice… Request for Charitable Contributions is a very common practice…


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Mitigating Risks: Compliance Program

• Tone from the Top• Effective Communication• Train, Train and Train• Focused Training• On the ground counseling• Interaction at all levels • Reporting Hotline• Compliance as part of the

team

Build Compliance DNA

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Mitigating Risks: Due Diligence

• Business Partners

• Acquisitions

• Intermediaries

• Project Financing

• Suppliers

• Monitor & Review



Mitigating Risks: Simple and Clear Policy

Zero Tolerance Policy for Corruption

Prohibition on Facilitation Payments

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Establish your own limits in your program

Mitigating Risks: Governmental Interaction


YesYes NoNo

© 2011 Weatherford. All rights reserved.

• Limits for gifts (type of gifts/amount/frequency)• Limits for entertainment (amount/frequency)

Mitigating Risks: Governmental Interaction Mitigating Risks: Governmental Interaction

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NoNoYesYes


• Clear rules on travel related to technical visits or inspections

Mitigating Risks: Governmental Interaction Mitigating Risks: Governmental Interaction

Mitigating Risks: Contributions Control

• Monitored Process

• Well Documented


• Do not donate to clients

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Marco Antonio Padilla MerigoRegional Compliance Counsel Latin America│ 2000 St. James Place│Houston │ TX │ 77056

Direct: +1. (713) 836‐4137 │ Mobile: +1.281.467.0931 [email protected]

compliance challenges in latin 1 office of global compliance – ethics & compliance group...

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