Anti-Corruption Programs for Private Equity Firms in 2013

Edward T. Kang, Partner, 
Alston & Bird LLP

• Opens the discussion, setting the foundation.
• How private equity firms could be potentially liable for FCPA violations.
• The recent criminal and civil charges filed against DAP Partners, and what implications that development has for private equity firms.
• How private equity firms can best assess their FCPA risk and what steps they can take to mitigate that risk.
• Steps that private equity firms should take when a potential FCPA concern has been identified.
• Deciding whether to self-report FCPA violations and how best to do so.

Richard Thomas, Principal, 
Ernst & Young LLP

• How do you identify bribery and corruption issues before an acquisition?
• What should you do upon making an acquisition to prevent bribery and corruption issues from arising in your portfolio? And how can you mitigate the risks?
• Do the funds themselves also have bribery and corruption risks?
• What should you do when you identify an issue within your portfolio?

James P. Dowden, Partner , 
Ropes & Gray LLP

• Current anti-corruption hot topics for companies conducting business in high risk jurisdictions
• Jurisdictional issues
  • How the FCPA applies to conduct both inside and outside the United States
  • Recent cases deciding FCPA jurisdictional issues
• Sovereign Wealth Funds
  • SEC’s investigation into Sovereign Wealth Funds
  • Providing internships to relatives of foreign officials.
• Travel Agencies and Other Third Parties
  • Recent cases
  • Red flags and the importance of third-party due diligence.

Jonathan S. Kolodner, Counsel, 
Cleary Gottlieb Steen & Hamilton LLP

• You are in the crosshairs
  • FCPA unit at DOJ, Private Equity Initiative at SEC
  • Morgan Stanley declination
  • JP Morgan – hiring the connected
  • Both Morgan Stanley and JP Morgan were extreme facts
• Keep it simple
  • Don’t try to track the statutes
  • Differences among UK Bribery, FCPA, Travel Act less than anticipated
• Don’t be too rigid/prescriptive
  • Risk of a policy on paper that can’t be followed in practice
  • Identify issues and offer tools/resources
• Keep it active
  • Compliance is a process, not a decision – need to keep the channels open
  • Train and test regularly
  • Monitor high-risk payments
• Focus on what matters
  • Guidelines very focused on risk-based controls
  • Agents/finders a source of firm risk
  • Tier portfolio company risk by geography/business
• Diligence – use your relationships
  • Internally – if you can’t trust your people, you’re in trouble
    • GSK – managers knew controls and could evade them
    • JP Morgan
  • Externally
    • Deal team relationships can be the best source of candid information
    • Be open about the need to adjust models and metrics
    • Accounting diligence
    • External diligence firms
    • Make sure they get it – “everyone else is doing it” does not work
    • Local knowledge
• Governance – do the best you can, but don’t promise what you can’t
  • Tone at the top – make it clear that compliance costs (direct and indirect) are expected
  • Portfolio companies need policies appropriate to their business (Maltese shipping company vs. North Dakota call center)
  • Agents
    • Certifications have limited value
    • Know what they do and benchmark your payments
    • Train and examine compliance programs
  • Minority investments are particularly challenging
    • Remember you may be the big fish
    • Requirement to adopt and follow compliance policy
    • Exit rights
    • Be cautious about audit/investigation rights if you don’t really control

Louis D. Greenstein , Partner, 
McGuireWoods LLP

• Regulatory Framework
  • Brief overview of FCPA
    • Main provisions
• Anti-bribery provisions
• Books & records and internal accounting control provisions
  • Other jurisdictions have anti-corruption regulations
• Self-reporting
  • Discussion of considerations and related benefits and detriments
  • Illustrative example — Ralph Lauren NPA<,/
• Hallmarks of an effective compliance program
  • Discussion of recent DOJ and SEC guidance on keys to effective compliance program