third party partnerships: a partnership in compliance mike barry senior director of internal audit,...

Third Party Partnerships: A Partnership in Compliance

Mike BarrySenior Director of Internal Audit, Bruker Corporation

Our Position on Ethics and Compliance

Current Risk Environment: What Has Changed? Examples of Third Party FCPA Violations

FCPA / ABAC Basics

Our Distributors: A Partnership in Compliance

Appendix – The Bruker China SEC Ruling

Talking Points

© Copyright 2015 Bruker Corporation. 2

Who we are

Integrity

We build trust and enduring relationships with customers, partners and colleagues in a positive team environment.

People

We promote an environment where committed and high-performance people want to

contribute and succeed.

Excellence

We strive for excellence and sustainability in everything

we do. We continuously improve our business

performance.

Commitment

We are accountable for results and meet our

commitments.

Customer Success

We are passionate about what we do and the success

of our customers.

Innovation

Through product and business innovation, we lead our markets and enable our

customers to shape their fields.

Innovation with Integrity

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Who We are…

What We Believe In…

Our Mission: Our high-performance scientific

instruments, analytical & diagnostic solutions, and comprehensive support

enable the discoveries and innovation of our customers, and drive their productivity and success.

Culture

We foster a dynamic, high-performance culture in a friendly, non-political,

unbureaucratic and supportive environment for our colleagues and

their families. We encourage clear and

direct communication.

Purpose

We contribute meaningfully to the

health, prosperity and safety of our society at

large.

Values

We valueintegrity, respect and

trust.

Ethical behavior, equal opportunity and compliance are at the heart of our business.


4© Copyright 2015 Bruker Corporation.

Current Risk Environment:

What Has Changed?


Bruker operates in @17 countries, either directly or indirectly, which have a Corruption “score” of less than 50.


Where Do We Operate?

Risk Profile

• Our business model and the markets we operate in create specific risks for our Company.• Our customers are often “State Owned Entities,” (government affiliated

academic or research institutions, hospitals, etc.)• To be competitive, we must maintain close relationships, support

research, and advance technologies while maintaining compliance with regulatory requirements.

• We often “go to market” in partnership with Third Party Agents (TPAs) who are legally acting as Bruker in the marketplace.


To be effective in this environment, we must know who are partners are and have a strong, cooperative partnership in Compliance.

A Key “Go To Market Strategy”:

Third Party Partnerships

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Some Context…

• In 2009, 10 of the 11 corporate FCPA investigations initiated by U.S. authorities involved payments made by third parties.

• In 2010, US Assistant Attorney General Lanny Breuer stated, “One benchmark of an effective corporate compliance program is ‘extension of anti-corruption policies to third-party agents and business partners.”

• “Kara Brockmeyer, Chief of the FCPA Unit, noted that her unit brought a variety of cases in 2013….Ms. Brockmeyer stated that the SEC continues to see issues with third-party intermediaries, as many companies enter into arrangements with third parties without adequately explaining the roles of the third parties…”


“The criminal information filed against Daimler AG details years of widespread payments and gifts channeled through third parties, many of them shell companies, to state-owned customers and government officials around the world in order to win business and increase revenue…


On April 1, 2010, Daimler AG announced a $185 million dollar criminal and civil settlement stemming from FCPA violations…”

Daimler, AG, a German Multi-National Auto-maker…

“In the civil settlement with AGCO involving FCPA violations, the Securities and Exchange Commission (SEC) detailed the company's internal control failures, highlighting the absence of adequate oversight by finance personnel of payments to a Jordanian agent and the company legal department's inattention to third-party due diligence and contractual irregularities.


AGCO paid $16 million in civil penalties and agreed to a deferred prosecution agreement with the DOJ.

AGCO, a Georgia-based Agricultural Machinery Supplier……

FCPA Basics


http://www.sec.gov/spotlight/fcpa/fcpa-resource-guide.pdf

http://www.justice.gov/criminal/fraud/fcpa/





Why Should I Care?

Violations may lead to:

Criminal penalties for each violation of the anti-bribery provisions:

- $2 million fine for entities, and

- $100,000 fine for individuals; 5 years imprisonment.

Criminal penalties for each willful violation of the books and records provisions:

– $25 million fine for entities, and

– $5 million fine for individuals; 20 years imprisonment.

Civil penalties for each violation: $10,000 fine.

Civil liability to third parties (competitors) who may have suffered harm (lost sales) as a result of the illicit behavior.

Shareholder lawsuits.

Additional regulatory scrutiny.


Internal Penalties meted out to your Company’s employees, must be uniform across the enterprise.

© Copyright 2015 Bruker Corporation.

Key Provisions

Anti-Bribery: Prohibits corporations and employees of US corporations operating in non-US

jurisdictions from engaging in bribery.

“Encourages” companies to monitor employees, agents, and subsidiaries and report suspected acts of bribery.

Internal Controls: Requires companies to maintain a “system of controls” to ensure transactions

are made with the authorization of management.– “System of controls”: An organized approach to policies, procedures,

reviews, audits.

Books and Records: Companies must ensure that transactions are recorded and accurately

described in the accounting records.

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Anti-Bribery Provisions: Basics

Who Does FCPA Apply To?

What is a “Corrupt Payment”?

Direct Payment

Anything of Value

Indirect Payment

Foreign Officials

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Who Does FCPA Apply To?

Persons and Entities subject to the FCPA: Any individual, firm, officer, director, employee, or agent of a firm, and any

shareholder acting on behalf of a firm.

Includes “Third Party” individuals and firms who order, authorize, or assist someone else to violate the statute.

Must be an SEC registrant; a “ US domestic concern,” or a non-US national or non-US business operating in the US.

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FCPA: What Is Prohibited?

FCPA prohibits: “Corrupt” payments: An offer, authorization, or

promise to pay money or anything of value, to any non-US government official.

Direct payments, as well as payments to a third party intermediary, while “knowing” that a portion of the payment will be passed on to a government official.

Knowledge exists if a person is aware of a high probability that a violation will take place.

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“Willful blindness” or “deliberate ignorance” can result in a violation of the FCPA.


FCPA: What Is Corrupt Payment?

A payment is “corrupt” and impermissible if it is designed to: Influence any act or decision of a non-US official in his/her official

capacity; – or

Induce such official to do or not do any action in violation of the lawful duty of such official;

– or Secure any improper advantage.

It is clear that: The arrangement need not be a of a quid pro quo nature;

and May include any attempt to favorably influence a non-US official,

including purchasing their good will.

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Anything Of Value: Not Just Cash

Anything of Value may be something that: Creates an obligation or liability, not just cash.

May include non-cash benefits, such as:– Trips and travel payments, – Meals, entertainment expenses, – Gifts, – Payments that will ultimately benefit an official

(charitable donations),– Loans with favorable terms, – Scholarships, – Cars or sports equipment, etc.

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There is no minimum amount or materiality requirement. No actual payments need to be made; crime occurs when an offer occurs.


Indirect Payments Also Prohibited

Indirect payments, those made through:– An agent, – Partner, – Subsidiary, – Consultant, or – Any other third party.

may also violate FCPA if,

– The company (or a company employee) knew or should have known that there was a substantial likelihood that an improper payment would occur.

– The company actually authorized the payment.

INNOVATION WITH INTEGRITY: WINNING SMART 20


Foreign (Non-US) Officials: Examples

Employees or officers of any government department, such as a customs official or a building inspector.

An elected official of a non-US government, such as a city mayor.

Employees or officers of any state-owned, state-controlled, or governmental enterprise, such as a national/state university.

Employees in an official capacity for a non-US government – even if not directly employed by the government (e. g. a consultant.)

Employees or officers of public international organizations, such as the World Trade Organization.

Government officials working at an educational institution or scientific enterprise.

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Third Party Agents (TPA)

The Basics


Third Party Compliance: Four Key Requirements

1. All Third Party Agents (TPA) must undergo Bruker Due Diligence annually.

2. All Third Party Agents must comply with standard compliance language in our contracts.

3. All Third Party Agents must comply with Bruker’s Key Compliance Policies:• FCPA

• Gifts and Entertainment

• Collaboration Agreement

• Charitable Contributions

4. All Third party Agents must comply with the Bruker Supplier Code of Conduct.


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Bruker Defines TPAs As….

Lead Finders • TPAs that conduct market-related activities with the intention of

publicizing and creating interest in BRKR’s products or services.

Sales Agents (or Dealers)• TPAs that solicit orders for goods or services on behalf of BRKR but

do not take title to them. They generally perform no warehousing or service functions and are typically commission-based.

Distributors • TPAs that buy goods from Bruker, take title to them, and then resell

them to dealers, retailers or end-users.

Other Consultants • TPAs which provide other materially significant activities for Bruker


Compliance Initiatives: Standard Compliance Contract Language

Third Party Agent Agreements: • Lead Finders, Sales Agents, Distributors, or Consultants

• Must not have any Conflicts of Interest.

• Must not promote, market or sell in violation of any applicable law.

• Must comply with FCPA.

• Must train employees on FCPA / ABAC.

• Must maintain adequate books and records.

• Must grant Right to Audit.

• Must certify compliance upon termination of the agreement.


Third Party Agents: Red Flags

Bruker will view the following circumstances / facts as “Red Flags”

A third party is listed in databases reporting known corruption risks (e.g., World Bank List of Debarred Firms) or has been previously investigated for, charged with, or convicted of corruption or other ethics violations.

A foreign official has specifically requested that a certain third party be involved in the company’s transaction or business.

An agent or consultant holds himself out as someone with close connections to an important minister or minister’s aide.

A third party does not appear to have sufficient resources, real estate/infrastructure, or experience to perform the requested tasks.

A third party asks the company to provide it with unreasonably large discounts, excessive commissions, reimbursements, or contingency fees.

A third party requests payment in an irregular or convoluted manner (e.g., cash, offshore bank account, payments to another company, over/under invoicing).


Example: Gifts / Entertainment

Bruker Agents Must Comply With the Bruker Policy on Gifts & Entertainment:

Entertainment must have a legitimate business purpose.

Gifts must be: Made in good faith, without corrupt intent, and with

no expectation of a favour. Not expensive, lavish or excessively frequent. Permitted under local laws of the host country. Permitted under the policy / rules of the customer. Accurately valued and accurately reflected in books

and records.

Must ensure that there is no any outstanding business with any entity connected to the recipient.

No cash or cash equivalent gift is ever allowed. Ever.


Bruker Agents Must Comply With the Bruker Policy on Gifts & Entertainment:

Frequent gifts and entertainment, no matter what the value, may be inappropriate.

There should be a gift and business meal threshold or limit defined by policy, with pre-approval and justification required if the gift or entertainment is beyond the guidelines established locally.

Company logo on the gift is preferred.


Example: Gifts / Entertainment

Improper Gifts, Travel, and Entertainment

x Paying for extravagant or frequent meals, drinks, and frequent entertainment in connection with a visit by a government official.

x Paying for “side trips” so that government officials can visit tourist attractions anywhere in world while travelling to a Bruker location or to a Bruker-sponsored or other function, including seminars and speaking engagements.

x Providing per-diems or “pocket money” for government officials to use during a visit to a Bruker location or to a Bruker-sponsored or other function, including seminars and speaking engagements.


Improper Gifts, Travel, and Entertainment

x Paying for a government official’s spouse or family to accompany the official on a trip.

x Providing government officials with excessive gifts for birthdays, weddings, holidays, or other events.

x Providing government officials with frequent tickets to sporting events.

x Providing government officials with frequent meals, regardless of the value.


Due Diligence: Some Considerations (1)

Ownership Structure:

• Determine if the third party is a government or state-owned entity, and the nature of its relationship with local, regional and governmental bodies. Are there any members of the business partner related, by blood or marriage, to governmental officials?

Personnel:

• Will the agent be providing personnel? If so, are any of the employees are government officials? We must obtain the names / titles of those who will provide services to Bruker.

Physical Facilities:

• What physical facilities will be used by the third party. We must obtain a physical address.

References:

• Obtain names and contact information for at least three business references that can provide information on the business ethics and commercial reliability of the proposed third party.


Due Diligence: Some Considerations (2)

PEPs:

• Are any of the owners, beneficial owners, officers or directors politically exposed persons (PEPs)?

UBOs:

• It is imperative that you obtain the identity of the Ultimate Beneficial Owner (UBO).

Compliance Regime:

• Does the third party have an anti-corruption/anti-bribery program in place? Do they have a Code of Conduct? We must obtain copies of all relevant documents and training materials.

FCPA Training and Awareness:

• Has the proposed third party received FCPA training? Are they TRACE certified or certified by some other recognizable entity?


Compliance Initiatives: Supplier Code of Conduct

• Goals: • Set expectations for the behavior of our agents.

• Provide protection from rogue agents and TPAs.

• Sections / Sub-Sections include:• Business Ethics

• Export sanctions / Terrorism activities

• Labor

• Forced, involuntary, child labor

• Environment

• Compliance with law

• Management of the Code:

• Supply Chain responsibility


• Read and understand FCPA basics and Bruker’s TPA requirements

• If in doubt, always contact your immediate supervisor or the Bruker Ethics Compliance team:

• APAC: Lee Ling Goh

• Europe: Pascal Salnot

• AMERICAS: David. S. McMahon

• Proactively communicate Bruker’s Code of Conduct policy.

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Summary

third party partnerships: a partnership in compliance mike barry senior director of internal audit,...

Documents

bruker mission

business innovation

points copyright

integrity4 copyright

bruker china sec ruling

supportive environment

compliance appendix

positive team environment