Foreign Corrupt Practices Act in India in 2013 Compliance Strategies for India's Unique Cultural and Governmental Intricacies Today’s faculty features: 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10. TUESDAY, MAY 14, 2013 Presenting a live 90-minute webinar with interactive Q&A Elizabeth D. Keating, Global Compliance Counsel - Investigations, Johnson Controls, Milwaukee, Wis. Jay Holtmeier, Partner, Wilmer Cutler Pickering Hale and Dorr, New York Michael Stavridis, Partner, Ernst & Young, Chicago
49
Embed
Foreign Corrupt Practices Act in India in 2013media.straffordpub.com/products/foreign-corrupt-practices-act-in... · Foreign Corrupt Practices Act in India in 2013 ... Cadbury in
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
Foreign Corrupt Practices Act in India in 2013 Compliance Strategies for India's Unique Cultural and Governmental Intricacies
Industry-Specific Risks (e.g., SEC probe of banks’ business with sovereign
wealth funds)
New Tools at the SEC – Deferred Prosecution Agreements and Non-
Prosecution Agreements
Shift Away from Compliance Monitors; Increased Use of Alternatives
New Development – A Resource Guide to the U.S. FCPA
7
8
A Resource Guide to the U.S. FCPA
In November 2012, the SEC and DOJ jointly issued long-promised
guidance on the FCPA.
The Guide provides unprecedented, detailed information on federal law
enforcement approach and priorities but does not pronounce revamped
enforcement priorities or alter previously stated positions.
Guide reinforces DOJ/SEC interpretations of the FCPA found in prior
settlements and cases.
Although it failed to clarify some of the more controversial aspects of the
government’s enforcement approach, the Guide is a helpful document,
and will likely be much-cited resource for years to come.
8
A Resource Guide to the U.S. FCPA
Key topics addressed in the Guide:
Jurisdiction under the FCPA
Corrupt Intent, Knowledge, and Willfulness
Business Purpose
Gifts, Travel, and Entertainment Expenses
Charitable Contributions
Definitions of Foreign Officials and Instrumentalities
Use of Third Parties
Facilitating Payments
Successor Liability
The FCPA’s Accounting Provisions
Compliance Programs
9
Enforcement by Indian Authorities
India saw more high-profile scandals and anti-corruption protests led by popular activists in 2012.
India's Central Bureau of Investigation filed corruption charges against 5 companies and 17 individuals in connection with the "Coalgate" scandal.
Prime Minister Singh has stated that his government is seeking to amend the Prevention of Corruption Act to make failure to prevent bribery by a corporation an offense.
10
FCPA ENFORCEMENT ACTIONS RELATED TO INDIA
Oracle (2012)
– Oracle, a California-based computer technology company, was charged with failing to prevent a subsidiary from secretly setting aside money off the company’s books, monies which were eventually used to make unauthorized payments to phony vendors in India. The SEC alleged that on more than a dozen occasions Oracle and its India subsidiary held over $2.2 million in unauthorized “side funds.”
– Oracle settled SEC books and records and internal controls charges for $2 million.
– No anti-bribery or DOJ case.
11
FCPA ENFORCEMENT ACTIONS RELATED TO INDIA
Diageo (2011)
– Diageo is one of the world’s largest producers of alcoholic
beverages, such as Johnnie Walker and Windsor Scotch
whiskeys. From 2003 to mid-2009, Diageo’s Indian subsidiary
made hundreds of illicit payments to government officials
responsible for purchasing or authorizing the sale of its
beverages in India and disguised those payments in Diageo’s
records. The payments, routinely made through third parties,
totaled an estimated $1.7M.
– Diageo settled SEC books and records and internal controls
charges for $16M, including $11.3M in disgorgement,
prejudgment interest of $2.1M, and a further civil penalty of
$3M.
– No DOJ case. 12
FCPA ENFORCEMENT ACTIONS RELATED TO INDIA
Pride International (2010)
– Pride International is an oil and gas services company.
Pride’s Indian subsidiary paid $500K to judges of the Indian
Customs, Excise, and Gold Appellate Tribunal for a favorable
determination in a customs duties and penalties dispute. The
estimated value of the favorable decision was approximately
$10M.
– Pride’s Indian subsidiary pleaded guilty to criminal charges for
conspiring to violate and violating the anti-bribery and books
and records provisions of the FCPA and paid a $32M criminal
penalty. Pride International entered into a Deferred
Prosecution Agreement. Pride International settled similar
civil charges with the SEC and agreed to pay disgorgement of
$19.3M plus pre-judgment interest of $4.2M.
13
FCPA ENFORCEMENT ACTIONS RELATED TO INDIA
Control Components, Inc. (2009)
– CCI designs and manufactures valves used in the power, oil
and gas, and nuclear industries. CCI made payments of at
least $4.9M from 2003 – 2007 to employees of state-owned
companies in several countries, including in India to the
Maharashtra State Electricity Board.
– CCI pleaded guilty to criminal anti-bribery and Travel Act
charges and paid an $18.2M fine. Additionally, the company
was placed on organizational probation for three years and
ordered to create and implement a compliance program and
retain an independent compliance monitor for three years.
– No SEC case.
14
FCPA ENFORCEMENT ACTIONS RELATED TO INDIA
Westinghouse Air Brake Technologies (2008)
– WABTEC manufactures brake subsystems and related
products for locomotives, freight cars, and passenger transit
vehicles. From 2001 through 2005, WABTEC’s subsidiary
paid approximately $137K in cash to Indian Railway Board
officials to obtain contracts, schedule inspections, obtain
certificates, and avoid tax audits.
– WABTEC and its subsidiary entered into a non-prosecution
agreement with the DOJ and a civil settlement with the SEC.
WABTEC paid a $300K criminal penalty, $288K in
disgorgement of profits including pre-judgment interest, and
$89K in civil penalties (a total of approximately $677K) for
violating the anti-bribery, books and records, and internal
controls provisions of the FCPA. 15
FCPA ENFORCEMENT ACTIONS RELATED TO INDIA
Dow Chemical (2007)
– Dow Chemical is one of the world’s largest chemical
manufacturers; its fifth-tier Indian subsidiary manufactured
and marketed pesticides and other products. The subsidiary
paid an estimated $200K in payments and gifts to Indian
government officials. Payments were made to a Central
Insecticides Board official, state inspectors, and other officials.
The subsidiary also made improper payments for gifts, travel,
and entertainment to Indian government officials.
– Dow settled SEC books and records and internal controls
charges and agreed to pay a $325K civil penalty.
– No allegation that Dow itself was aware of the illegal conduct.
– No DOJ case.
16
FCPA ENFORCEMENT ACTIONS RELATED TO INDIA
Electronic Data Systems (2007)
– EDS is one of the world’s largest technology companies; the
company provides electronic data processing management
and computer equipment. EDS’ subsidiary paid $720K to
Indian government-owned companies between 2001 and
2003. The subsidiary had been struggling to perform its
obligations with the Indian companies and the payments were
made so the subsidiary would not lose contracts.
– EDS settled SEC books and records charges and paid $491K
in disgorgement and prejudgment interest. The subsidiary’s
president also settled with the SEC and paid a $70K penalty.
– No DOJ case.
17
FCPA ENFORCEMENT ACTIONS RELATED TO INDIA
Textron Inc. (2007)
– Textron is a global, multi-industry company which does work in
aircraft, defense and intelligence, industrial, and finance businesses.
As part of an investigation into $700K in kickback payments related
to its sale of humanitarian goods to Iraq under the UN’s oil for food
program, Textron identified an illicit payment by an Indian subsidiary
of approximately $52K to a non-government customer to obtain
business.
– As part of a settlement, Textron agreed to disgorge $2.3M in profits,
plus $450K in pre-judgment interest, and to pay a civil penalty of
$800K. Textron was also ordered to comply with an FCPA
compliance program. Textron was further ordered to pay a $1.15M
fine pursuant to a non-prosecution agreement with the DOJ.
– The charges relating to the Indian non-government customer were
brought under the books and records and internal controls
provisions. 18
CURRENT FCPA INVESTIGATIONS RELATED TO INDIA
Anheuser-Busch
– American brewing company, Anheuser-Busch, disclosed in March 2013 that it is currently being investigated by the SEC in connection with its non-consolidated Indian joint venture, InBev Indian Int’l Private Ltd. The SEC is conducting an investigation into whether certain agents and employees engaged in conduct that violated the FCPA.
Kraft Foods
– Kraft Foods, a food and beverage company, has disclosed that it is currently being investigated by the SEC in connection with a facility in India that was part of its $19B acquisition of Cadbury in 2010. In its 2012 filings the company stated that it was continuing to cooperate with authorities, and noted that the SEC’s subpoena focused on its dealing with Indian governmental agencies and officials to obtain approvals related to the operation of its facility.
19
CURRENT FCPA INVESTIGATIONS RELATED TO INDIA
Avon Products
– Avon Products, a cosmetics, perfume, and toy seller, has
disclosed that the SEC has issued a formal order of
investigation into possible violations of the FCPA. According
to Avon, the investigation is focused on expenses and
accounting for travel, entertainment, gifts, use of third-party
vendors and consultants, and related due diligence, joint
ventures, and acquisitions, and payments to third-party agents
and others.
– Reports indicate that the payments under investigation
occurred in numerous countries, including India.
20
CONTACTS WITH GOVERNMENT OFFICIALS IN INDIA
Public procurement/contracting with government agencies
Customs clearance/importation of goods
Immigration processes
Real estate (both purchasing and leasing land)
Tax administration (excise and sales taxes, audits)
Obtaining certificates, registrations, permits, and licenses (approval from
multiple officials often required to obtain one permit/license)
Gifts and entertainment (especially during religious festival, Diwali)