Dc fcpa tour final ho

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2. High-VelocityEnforcement
3. DOJ / SEC Matters Initiated | 2002 - 2010
4. Total Criminal and Civil Penalties
Imposed on Corporations | 2002 - 2010
5. WhatHas Not Changed?
6. Photo Edgar de Evia
WhatHasChanged?
7. 8. Total Criminal and Civil Penalties
Imposed on Corporations | 2002 - 2010
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FCPABlog Strategy Session
Michael Volkov
PartnerMayer Brown LLP
(202) 263-3288
[email protected]
April 2011
10. Overview

• Current Enforcement Picture

11. Legal Elements of the Offense 12. UK Bribery Act Effective Date 13. Designing and Implementing a Compliance Program 14. Third Party Agents and Due Diligence10
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15. CurrentEnforcementPicture
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FCPA Enforcement Trends
Corporate mega fines fueled by voluntary disclosure process.
DOJ has dedicated additional prosecutors to FCPA cases.
FBI has dedicated FCPA squad.
Obama administration is continuing focus on FCPA prosecutions.
FBI is using aggressive investigative tactics.
DOJ is increasing use of industry-wide investigations.
Dodd-Frank whistleblower bounty program will increase prosecutions by exponential factor.
17. FCPA DOJ Priority
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As President Obama has said, The struggle against corruption is one of the great struggles of our time Corruption is, simply put, a scourge on civil society. We must vigorously enforce our own laws that prohibit bribery of foreign officials, such as the Foreign Corrupt Practices Act. And we must work together to support our partners in anti-corruption enforcement.
Eric Holder, U.S. Attorney General, Nov. 7, 2009
18. FCPA DOJ Priority
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[T]he Departments enforcement of the FCPA is aggressive, and its on the rise This year alone, weve collected well over $1 billion already[L]ast year and this year combined, weve charged over 50 individuals. Moreover, last year we tried three FCPA cases successfully to verdict and approximately 35 individuals currently await trial on FCPA charges in the United States. In all, our message to companies and individuals who would bribe foreign officials is clear: foreign bribery is not an acceptable way of doing business, and we wont tolerate it.
Lanny Breuer, Assistant Attorney General, Nov. 4, 2010
19. The SEC and Justice Department are sending a clear message that those who engage in corrupt activities face a strong and united front around the world.
Mary L. Schapiro, SEC Chairman, July 9, 2010
"The new [SEC FCPA] unit will give us the resources and the ability to do even more going forward. People on the ground will be focusing exclusively [on FCPA investigations], making them smarter about industry practices [and] problem areas.
Cheryl Scarboro, SEC FCPA Unit Chief, Feb. 25, 2010
Well explore all parties conduct and make a determination of the facts of each case.It is a trend you will see going forward.
Cheryl Scarboro, SEC FCPA Unit Chief, Nov. 8 & 10, 2010
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FCPA Enforcement SEC Priority
20. Increase in FCPA Enforcement Actions
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2010 witnessed an 85% increase in FCPA enforcement actions over 2009, which itself was a record year.
60
48
50
40
DOJ
30
26
26
SEC
20
20
18
20
14
13
8
10
7
7
5
3
2
0
2004
2005
2006
2007
2008
2009
2010
21. * Eight of the top ten monetary settlements in FCPA history were reached in 2010.
$900
Siemens
2008
$800
2009
$700
2010
KBR/Halliburton
2011
$600
$500
BAE Systems
ENI/Snamprogetti
$800
$400
Technip
$579
$300
JGC Corporation
Daimler
$400
$200
Alcatel-Lucent
$218.8
$365
$338
Panalpina
Johnson & Johnson
Johnson & Johnson
$100
$185
$58
$52
$137
$70
$82
$0
Blockbuster FCPA Settlements
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22. David Kay,American Rice, Inc.
37 months
John Warwick,Ports EngineeringConsultants Corporation
37 months
Robert Antoine,Haiti Telco
48 months
Juan Diaz,Third party consultantto Haiti Telco
57 months
Douglas Murphy,American Rice, Inc.
63 months
Albert Jack Stanley,KBR
84 months
Charles Paul Edward Jumet,Ports EngineeringConsultants Corporation
87 months
0
10
20
30
40
50
60
70
80
90
100
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Most Severe Jail Sentences for FCPA Violations
23. DOJ is employing strategies and tactics typically used for violent gangs, drug trafficking organizations and organized crime
Developing intelligence pool based on cooperating witness information gathered across all white collar cases (e.g. antitrust, fraud)
Undercover Officers and Confidential Informants
Search Warrants
Wiretaps
Seizure of assets and forfeiture
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AggressiveLaw Enforcement Tactics
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Two-Year Undercover Operation:
Undercover informant who recorded over 5000 telephone calls and over 100 hours of video recordings.
22 Individuals arrested in Las Vegas and indicted in US District Court in DC.
Take down involved over 150 FBI agents.
21 search warrants executed in US and UK.
Investigation has expanded to companies and additional individuals.
The Shot Show Sting
25. $70 million settlement for improper payments, gifts and travel to doctors at state-owned hospitals in Romania, Greece and Poland.
Substantial discount in fine (approximately $17 million):

• Voluntary disclosure

26. Cooperation against other medical deviceand pharma companiesJohnson & Johnson has provided information leading to industry-wide FCPA investigation targeting medical device and pharma practices in foreign companies.
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Johnson & Johnson Settlement
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Oil and Oil-Services Industry Panalpina Investigation Vetco settled FCPA case in 2007 based on illegal bribes made through Panalpina.Following settlement, DOJ issued at least 11 letters to oil and oil services companies, requesting information about their dealings with Panalpina.On Nov. 4, 2010, DOJ and the SEC announced settled FCPA enforcement actions against Panalpina plus six of these oil and oil services firms (most of which were Panalpina customers) totaling $236.5 million in disgorgement, fines, and penalties.
Industry-Wide Investigations
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Medical Device and Pharmaceutical Industry

• Biomet, DePuy, Diagnostic Products, Medtronic, Micrus, Smith & Nephew, Stryker, Syncor, Wright Medical, Zimmer Holdings

29. Eli Lilly, Merck, Astra Zeneca, Bristol-Myers Squibb, GlaxoSmithKline, SciCloneMilitary and Law Enforcement Products Industry

• SHOT Show Sting targets, Armor Holdings, DynCorp, Smith & Wesson, Allied Defense, Blackwater/Xe

Telecommunications Industry

• Alcatel-Lucent, Haiti Teleco, ITXC, Latin Node, Magyar Telekom, Siemens entities, UTStarcom, Veraz

SEC recently launched industry-wide investigation against global financial companies focusing on dealings with sovereign wealth funds.
Industry-Wide Investigations
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Dodd-Frank bill created whistleblower bounty program which authorizes whistleblowers to recover between 10 and 30 percent of any settlement that exceeds $1 million.
SEC has proposed regulations, selected chief of program and requested funding for 43 new positions.
SEC has been inundated with whistleblower complaints and recently disclosed it has received 1-2 credible complaints each day.
Businesses have filed comments opposing regulations claiming that program creates incentives for whistleblowers to avoid internal reporting programs.
Whistleblower Bounty
31. Elements of theOffense
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32. A payment, offer, authorization, or promise to pay money or anything of value to a foreign government official

• Includesa party official or manager of a state-owned company, or public organizations such as World Bank or UN), or to any other person,;

Knowing that the payment or promise will be passed on to a foreign official
With a corrupt motive forthe purpose of (i) influencing any act or decision of that person, (ii) inducing such person to do or omit any action in violation of his lawful duty, or (iii) securing an improper advantage;
Corrupt payments extend to business advantages such as tax refunds and reductions; government inspection reports and certifications; customs clearance for improperly or illegally imported goods and equipment; expedited government registration certifications; and beneficial changes to laws and regulations
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Elements of an FCPA Violation
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Elements of an FCPA Violation
Accounting / Recordkeeping Provisions:
Under the books and records provisions, issuers must keepaccurate books and records and maintain adequate internal controls.
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Who is liable under the FCPA?
Domestic:

• All US issuers and private companies (domestic concerns)

35. Any US corporation or national or any foreign bribery-related conduct 36. US citizens or foreign nationals operating in the US or using instrumentalitiesForeign:

• Foreign corporations subject to SEC regulation (e.g., via ADRs) and using instrumentalities

37. All foreign corporations when in US territory, whether or not they use instrumentalities of interstate commerceIncludes directors, officers, employees,and agents of entities subject to the statute
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Criminal Penalties
For companies, criminal violations can result in:

• $2 million fine for an anti-bribery violation; and

39. $25 million fine for a books and records violation.Individuals face up to:

• 5 years in jail with a maximum $250,000 fine for an anti-bribery violation; and

40. up to 20 years in jail with a maximum $5 million fine for abooks and records violation.Under a federal alternative fine provision,companies and individuals may be fined up totwice the benefit sought or received.
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Civil Penalties

• In the civil context, the SEC and DOJ can impose a $10,000 fine per violation upon individuals and companies.

42. The SEC may also impose further civil penalties ranging between $7,500 to $150,000 upon individuals and $75,000 to $725,000 upon companies. Alternatively, the SEC may impose a civil penalty equal to the gross pecuniary gain to an individual or company and equitable relief, such as disgorgement of profits.
43. A foreign official includes any officer or employee of a non-U.S. government, and any officer or employee of any department, agency, or instrumentality of a non-U.S. government.
The SEC and DOJ liberally construe the term instrumentality to cover employees of private company where foreign government owns controlling interest or exercises control.
District court recently upheld DOJ interpretation of statute in Noriega case .Issue pending in two other cases.
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Foreign Official
44.

• The SEC and DOJ liberally construe the statutory definition and apply it to interactions with employees of state-owned enterprises.

45. To determine whether employees of a state-owned enterprise are foreign officials, SEC and DOJ consider the percentage of government ownership in the enterprise and the amount of control the non-U.S. government exerts over the entity in question. 46. Recent FCPA settlements indicate that even a minority government ownership may be sufficient for employees to be foreign officials.32
Foreign Official
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Facilitation Payments

• FCPA exempts facilitation payments (small grease payments) to expedite routine governmental action.

48. Limited to payments that merely move a particular matter toward an eventual act or decision applies only when the government official has no discretion in performing duties. 49. Payment must be for something to which the payor was already entitled, e.g., the mere receipt of an application, as opposed to approval of the application. 50. Best practices counsel to prohibit facilitation payments entirely 80% of U.S. companies have banned them.