Introduction to the Foreign Corrupt Practices Act (a training presentation for employees)

Transcription

1 Introduction to the Foreign Corrupt Practices Act (a training presentation for employees)

2 Introduction Thank you for participating in our Foreign Corrupt Practices Act (FCPA) training program. [Our Company] is committed to maintaining the highest level of ethical and legal standards in the conduct of our business activities, and our compliance with the FCPA is an important part of this program. If you violate the FCPA, you could subject the Company and yourself personally to potentially enormous monetary penalties and even imprisonment. This program is not intended to make you an expert on the FCPA, but it will help you recognize "red flags" situations presenting a risk of FCPA violations and deal with them properly.

3 Introduction to Anti-Bribery Laws - The Foreign Corrupt Practices Act (the FCPA) is a US criminal law that prohibits bribery of foreign government officials and requires companies to maintain accurate records. - While this presentation focuses on U.S. law, no matter where in the world you are doing business, there is likely an anticorruption law that applies. The UK and other countries have recently toughened their anti-bribery laws. Enforcement of the FCPA is a priority for the US Department of Justice, the Securities and Exchange Commission (SEC) and many foreign governments.

4 Why Should I Care? The US Department of Justice (DoJ) and SEC are stepping up enforcement. Penalties for violating the FCPA are very stiff: Corporation: $2 million criminal fine per violation or twice the gain (in reality, fines can be tens of million of dollars) Debarment (co. cannot do business with the government) Disgorgement of profits from unlawful business Expensive investigations and legal fees Terrible press coverage Individual: up to 5 years in prison per violation (in some recent cases, jail terms have been even higher due to multiple violations) $100,000 million criminal fine per violation $10,000 civil penalty or gross gain The fine shall not be paid, directly or indirectly, by the company Loss of job

5 Enforcement Trends The U.S. Government has significantly expanded enforcement in recent years. DoJ increasingly seeks jail time for offenders. Increased evidence sharing between countries (Swiss authorities sharing banking records, etc.) Parallel investigations in multiple countries Rise in enforcement in Europe Denmark, France, Germany, Hungary, Netherlands, Sweden, Switzerland, UK (France, Germany, Hungary each have had more prosecutions than the U.S. recently) The Far East, including China, is also increasing investigations.

6 What is the FCPA? Antibribery provisions: Prohibit payment of anything of value directly or indirectly to a foreign government official (non U.S. official) for the purpose of (i) influencing, inducing or otherwise affecting an official act, decision or omission of an act or decision, (ii) securing an improper advantage, or (iii) assisting in obtaining or retaining business for any person or entity. Accounting provisions: Require companies to maintain accurate books, records and accounts.

7 Who is covered? [YOUR COMPANY] and all of its U.S. and international employees are covered, regardless of where they are doing business. - U.S. companies - Personnel of U.S. companies (even foreign personnel) - Any other person while in the U.S. - Any U.S. persons or entities outside the U.S. For example, [YOUR COMPANY S sales force in India and Israel, and/or employees of its facilities in China are covered.]

8 Who is a Foreign Government Official? A foreign government official is any one of the following, even a low-ranking official: an officer or employee of a government or a governmental department or agency; a political party, party official, or candidate for political office; an officer or employee of a government owned or controlled entity or company (e.g. state-owned bank, hospital or telecommunications company); a member of a military; an officer or employee a public international organization (such as the United Nations or the World Bank); or any person acting in an official capacity for or on behalf of any of the above.

9 What is Knowing? Under the FCPA, it is illegal to pay anyone (including third party agents) when knowing that all or part of the payment will be passed to a covered official. Knowing means: Actual knowledge Awareness of high probability that prohibited payment will occur Can be proved by circumstantial evidence: Ignoring obvious warning signs Conscious disregard Willful blindness

10 What is Anything of Value? Company and employees can be liable for - Promises or attempts to bribe, even if the bribe is not accepted or the bribe never actually occurs. - Authorization or ratification of payments made by others. Anything of value is not only cash. It can include: - Entertainment or travel (e.g. hotel stays, gambling, dinners) - Gifts (watches, rugs etc.) - Property, investments, or discounts - Contributions to an official s charity - Job offers for the official s relatives

11 You Can Be Liable for Acts of Third Parties [YOUR COMPANY] and its employees may be liable under the FCPA not only for their own actions, but also for actions of external sales agents, distributors, joint venture partners, consultants or other business associates. Direct authorization of an agent or consultant Failure to adequately supervise an agent or consultant Payments to a third party who is associated with a government official

12 Books and Records All employees are responsible for maintaining accurate books and effective controls. The US Government has imposed serious fines for violating these provisions. Books and records must be in reasonable detail which accurately and fully reflect transactions Accounting for payments, gifts, entertainment, etc. MUST be accurate and complete [YOUR COMPANY] will implement and monitor effective controls such as: Gifts and Entertainment Questionnaire Guidelines for Gifts and Business Entertainment Expense forms Training

13 Protect Yourself: Against Missteps by Third Parties You must complete the following before hiring any third party which interacts with any government: Review the third party business associate s qualifications, expertise, and relationship to government officials Conduct public records searches Check references Have third party sign agreement not to violate anti-bribery laws [YOUR COMPANY S LEGAL COUNSEL OR LOCAL BUSINESS HEAD] must sign off before you hire any such third party

14 Red Flags Do not hire a third party agent if they have: A reputation for unethical conduct; Made payments to a government official, his or her relative, or a company owned by the official in the past; Requests for unusually large commissions or other payments; or requests that payments be made in cash, or in goods and services; Requests for payments to another person or entity rather than directly, or into a third-country bank account; Requests for false invoices or other false documentation; Failure to make full and accurate disclosure during any investigation; lack of cooperation during due diligence; Insistence on anonymity; Recommendation by a potential customer who is a government official to use or hire a particular business associate; Lack of the necessary staff, facilities, or expertise.

15 Protect Yourself: Travel and Entertainment Meals and Entertainment for government officials must be: Modest, appropriate under the circumstances, and customary in the country in which it is given (e.g. a dinner while negotiating a business contract is fine) A representative of [YOUR COMPANY] must be present No meal or entertainment for the same company or person more than 4 times in any 12 month period; Never give if recipient has hinted that the meal/entertainment will make them more likely to favor [YOUR COMPANY]. Travel for government officials must be: Directly related to promoting [YOUR COMPANY s] products or services or performing a contract; Of a reasonable amount in light of the business purpose (e.g. airfare and hotel, but not also a daily per diem); Amount of reimbursement must equal the actual expense Whenever possible, pay actual expenses for the travel rather than reimbursing the government official in cash.

16 Protect Yourself: Gifts Gifts to government officials (whether given directly or by third party) must be: Approved in advance by [YOUR COMPANY S LEGAL TEAM, CONTROLLER, WHOMEVER YOU DESIGNATE] Of modest value ([COMPANY SHOULD CHOOSE AN AMOUNT MANY COMPANIES USE $80 OR LESS]) (e.g. calendar, pen, mouse pad, book) Never in cash; Permitted under local laws of the host country; Customary, in type or value, in that country; Given openly and not secretly; Accurately reflected in [YOUR COMPANY S] books, records and accounts; Not offered at the request or suggestion from the government official. Use your judgment: if it is embarrassing to admit that you gave the gift, then DO NOT give it. NOTE: Leading companies such as Apple Inc. and WalMart no longer allow employees to give or receive ANY gifts at all.

17 The Exception: Facilitating Payments There is an exception to the anti-bribery prohibition for payments to facilitate or expedite performance of a "routine governmental action." For example: paying a very small tip to - obtain permits, licenses, or other official documents to which the company is entitled in any event; - processing governmental papers, such as visas and work orders; - turning on phone service, etc. [It is difficult to establish that the exception applies in any particular case, so [YOUR COMPANY S] policy is that its employees will not make facilitating payments of any kind.] [Note: you should insert your company s actual policy here. Most companies prohibit facilitating payments.]

18 Example A Chinese company approaches [YOUR COMPANY S] sales team and suggests that its products be included in a package of goods it hopes to sell to the Chinese military. [YOUR COMPANY S] sales team will not be personally involved in the bid, but knows that the Chinese company plans to fly the military officials in charge of the bid process to Macau for meetings and an all-expense paid three day golfing and gambling holiday. What should you do?

19 Example [YOUR COMPANY S] sales team in India is bidding for a project where it will sell components to a company that is 30% owned by the local government. The local minister s daughter is the CEO of the company. Can you give the company s contract manager a Diwali present (sweets)? Can you give the company s contract manager a watch? Can you hire the CEO s son for an unpaid summer internship? Discuss.

20 Example You must obtain a building operating license for [YOUR COMPANY S] manufacturing plant in Indonesia. You hire a local law firm to handle the negotiations with the authorities. The law firm s bill includes $500 of miscellaneous expenses. What should you do?