how to succeed in business without bribery: …...– covers foreigners or foreign entities doing...

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How to Succeed in Business Without Bribery:

Staying on the Right Side of Corruption Laws

SEPTEMBER 13, 2018

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Panelists

• Matt Cipolla, Partner, Jenner & Block LLP

• Andrea DeShazo, Associate General Counsel,

Western Digital

• Brandon Fox, Partner, Jenner & Block LLP

• Alixandra Smith, Deputy Chief, Business &

Securities Fraud, U.S. Attorney’s Office, EDNY

• Daniel Spitzer, Legal Director, Anticorruption

Compliance Counsel, PepsiCo

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Agenda

• FCPA Basics

• Enforcement Trends

• Discussion Questions

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FCPA Overview – Statutory Basics

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What is the FCPA?

• The U.S. Foreign Corrupt Practices Act of 1977, 15 U.S.C. § § 78dd-1 et seq.

• Unlawful for certain persons, entities to offer anything of value to foreign

officials to assist in obtaining or retaining business.

• Three sets of provisions

– Anti-bribery

– Accounting, or “books and records” provisions

• Failure to accurately reflect nature of transactions in company’s accounts

– Internal control provisions

• “Issuer” to maintain adequate controls:

– Reasonably assure transactions properly authorized, accurately recorded

– Permit preparation of financial statements in compliance with GAAP

• Other federal laws prohibit domestic bribery (mail and wire fraud, extortion,

federal program bribery)

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Plain English: Anything of Value

– Cash or cash equivalents

– Gifts, entertainment or travel

– Discounts

– Goods

– Personal favors

– Employment opportunities (internships)

– Political contributions

– Charitable donations

– Limited exceptions apply

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Plain English: Foreign Officials

– Employees of any government department, division, or

agency

– Employees of state-owned enterprises

– Party officials and political candidates

– Employees of political parties

– Members of royal families

– Employees of public international organizations

– Employees of state universities or state-owned media

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Plain English: Obtain or Retain Business

– Winning a contract

– Influencing a procurement process

– Obtaining a permit or license

– Reducing duties or taxes

– Avoiding fees or penalties

– Circumventing regulations

– Influencing the outcome of a lawsuit or enforcement action

– Gaining advantage by jumping a queue

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Who is Subject to the FCPA?

• FCPA jurisdiction is broad and extends to:

– “Issuers” (15 U.S.C. § 78dd-1)

– “Domestic Concerns” (15 U.S.C § 78dd-2)

– “All other persons” acting while in U.S. territory (15 U.S.C § 78dd-3)

– Agents/employees of above categories

– U.S. persons (15 U.S.C § 78dd-1(g), § 78dd- 2(i))

• Conspiracy and accessory liability

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FCPA Penalties – Companies

Criminal penalties• Anti-bribery – statutory fines of up to $2 million per violation

• Accounting – statutory fines of up to $25 million per violation

• Or – up to twice the gross gain

• Forfeiture of proceeds

Civil penalties• Anti-bribery – up to $16,000 per violation

• Accounting – $75,000 to $775,000 per violation

• Disgorgement

• Cease-and-desist orders and injunctions

• Debarment

Separate criminal and civil penalties for individuals

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Comparable Foreign Laws

• United Kingdom: U.K. Bribery Act of 2010

– Broader than the FCPA; applies to bribes offered or given to any person (rather than only foreign officials)

– No corrupt intent required and no reasonable business expense defense

– Does not permit facilitation payments

– Commercial organization in violation if they fail to prevent bribery

• China: Anti-Unfair Competition Law of the PRC and the Criminal Law of the PRC

– The Criminal Law prohibits bribery related to (a) “State functionary” or “entity”; and (b) “non-state functionary”

– Offering or receiving of bribes offense

– Covers foreigners or foreign entities doing business in China

• Brazil: The Anticorruption Law of Brazil

– Civil and administrative liability for wrongful acts in relation to any public official, whether domestic or foreign

– Strict liability

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FCPA Enforcement Trends

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Focus Remains on the FCPA

“[I]t is not for the Department of Justice to say whether the FCPA reflects sound

policymaking. . . . Our mission is to detect, deter, and punish violations of the

laws of the United States.

The Attorney General and I have been faithful to that principle. We plan to

continue to emphasize it as an essential step in promoting respect for the rule

of law.

The FCPA is the law of the land. We will enforce it against both foreign and

domestic companies that avail themselves of the privileges of the American

marketplace.”

– Deputy Attorney General Rod Rosenstein, Remarks at 34th

International Conference on the Foreign Corrupt Practices Act,

Nov. 29, 2017

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New DOJ Enforcement Policy

• New policy announced in November 2017, adopting April 2016 pilot guidance

• Four requirements for receiving full mitigation credit

– “Reasonably prompt” self-disclosure

– “Full cooperation” with the government investigation

– Remediating flaws

– Disgorging ill-gotten profits

• Substantial benefits

– Presumption of a declination

– Recommendation of 50% off low end of Sentencing Guidelines

– No monitor, if company has implemented effective compliance program

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Enforcement Increasingly International Enhanced cooperation between U.S. and foreign authorities

• Société Générale: U.S. and French resolution of $585 million

– Cooperation between U.S., France, and Switzerland

• Keppel Offshore & Marine LtdV: Global resolution of $422 million

– Involved authorities in U.S., Brazil, and Singapore

• Telia Company AB: Global resolution of $965 million

− Cooperation between U.S. and eleven European countries

• Rolls-Royce plc: Global resolution of more than $800 million

– Cooperation between U.S., Brazil, U.K.

• Odebrecht S.A.: Global resolution of more than $3.5 billion

– Involved authorities in the U.S., Brazil, and Switzerland

“Don't be surprised if in the coming months there is coordinatedresolution with foreign counterparts that the DOJ has not coordinatedwith before.”

-- Assistant Chief of the DOJ's FCPA Unit (April 23, 2018)

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Discussion Questions

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Discussion Question 1:

How can you tailor your anticorruption

compliance program to your business

and corporate culture?

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Tailored Approach to Compliance

Tailor your program to your unique risks.

“Assessment of risk is fundamental to developing a strong

compliance program . . .”

− Department of Justice

“One-size-fits-all compliance programs are generally ill-

conceived and ineffective.”

− Department of Justice

AVOID “CHECK-THE BOX” PROGRAMS

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No news is not necessarily good news:

how do you know if your compliance

program is working or just missing

things?

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DOJ’s Evaluation of Corporate Compliance Programs

DOJ published guidance on how it evaluates compliance programs

Notable items:

− Stature and autonomy of compliance officer; funding of compliance function

− Collection and tracking of metrics to create risk assessment

− Gatekeepers and payment systems

− Risk management methodology

− M&A due diligence

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When your program identifies a potential

corruption concern, what factors should

you consider in deciding how to

respond?

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Evaluating Investigative Steps

DOJ guidance on responses to misconduct:

Investigations should be “properly scoped”

Consider systemic risks, involvement of senior managers

“Missed opportunities,” how to catch in future

Relevant policies, training, and incentives

Multijurisdictional considerations

Restrictions on removal of data

Due process and employee rights

Privilege law

Local anti-corruption laws

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What should you do to remediate

corruption?

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Remediation Factors

Case specific

Identify root cause

Improve compliance programs, including dedicating

sufficient resources and compensation

Discipline employees, including supervising executives

Compensation structure reflects disciplinary infractions

Effective risk assessment and regular audits

Maintenance of business records

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How do you decide whether to self-

report?

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Self-Reporting Considerations

DOJ places a “high premium” on self-reporting

Must be made soon after discovery

Pros: can result in lower penalties; Declination,

DPA or NPA instead of negotiated judgment

Cons: DOJ will investigate disclosure, may also

discover unknown problems; there will be some

penalty; additional costs related to cooperation

with government authorities

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QUESTIONS?

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Contact

Matt [email protected]

Brandon [email protected]

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