FCPA Guidance: Understanding Key Issues and Ensuring Compliance
Overview:The joint Department of Justice and Securities and Exchange Commission, “A Resource Guide to the U.S. Foreign Corrupt Practice Act”, highlights the agencies intention and approach to halt corrupt practices and bribery of U.S companies to foreign officials.
Aside from addressing enforcement issues, (1) Definition of Foreign Official; (2) Issues on Gifts, travel and Entertainment; (3) Mergers and Acquisition and Successor Liability; and (4) Effective Compliance Program, were also discussed as they are deemed relevant to FCPA. But, above all, the guidance aims to help U.S companies comply with FCPA rules, mitigate potential pitfalls and prevent costly errors.
Join us in this two-hour Live webcast as our panel of distinguished leaders and practitioners provide an in-depth discussion of the significant issues included in the guidelines, along with training and other best practices in complying. The panel will also be available to answer questions and illuminate the latest regulations for participants.
Jeffrey A. Udell, Partner ,
Olshan Frome Wolosky LLP
- FCPA Basics
- Brief History/Purpose
- Two sets of provisions
- Broad definition of foreign official
- Anything of value
- Narrow exceptions
- Reasonable and bona fide business expenses
- SEC/DOJ Guidance – no sea-change, but lots of practical examples and regulators' previously-articulated positions memorialized
- Current Noteworthy Topics Particularly with an uptick in enforcement activity in this area recent years, there has been a significant amount of media coverage on FCPA and anti-corruption related issues. Here's some topics that we've been asked about and worked with clients on most recently, in light of current enforcement activity and other events.
- Books and records changes – Is Oracle a fact-specific outcome or sign of likely trend?
- In August 2012, Oracle agreed to pay $2 million civil penalty to settle FCPA charges arising from a slush fund in India used to pay bribes.
- The SEC said that Oracle "failed to prevent a subsidiary from secretly setting aside money off the company's books that was eventually used to make unauthorized payments to phony vendors in India."
- Oracle structured transactions with India's government in a way that enabled its India distributors to hold $2.2 million of the proceeds in unauthorized side funds, the SEC said.
- The India employees then directed the distributors to make payments from the slush fund to purported local vendors. Many were merely storefronts that didn't provide any services to Oracle, the SEC said. Oracle's subsidiary documented some of the payments with fake invoices.
- Notably, there was no allegation of actual improper payments to India officials. The only allegations against Oracle itself are that it failed to audit distributor margins against end-user prices and that it failed to audit third-party payments made by distributors.
- But the government didn't allege red flags that should have triggered such audits.
- Reiterates that regulators are willing to treat the FCPA as a strict-liability statute
- Highlights the risk of future stand-alone books and records violations, without any allegations of improper payments
- While not the first time distributor margin payments have been used as basis for enforcement action—reemphasizes continued broad reach of the statute
James Slear, Partner,
Thompson Coburn LLP
- Third Party Due Diligence – The Importance of Knowing Your Foreign Partners
- While this is not new news to anyone practicing in this area, GSK, Walmart, and other cases highlight regulators' continued focus on third party intermediaries and the importance of third-party due diligence
- In Wal-Mart and other cases, many of the alleged payments were not made through the company itself, but through intermediaries. Agents are one of the most common channels for illegal payments.
- Under the FCPA, a company can be liable for the activities of its agents, consultants, advisors, joint venture partners, and agents.
- Even if such payments through intermediaries do not meet the elements of an FCPA anti-bribery violation, they likely implicate the FCPA books and records and internal control provisions.
- As such, any third parties that interact with foreign governments on the company's behalf (as sales agents, by obtaining licenses such as attorneys, filing taxes such as accountants, etc.) should:
- go through a comprehensive due diligence process before the intermediary is retained,
- sign a statement saying they understand the key provisions of the FCPA and will abide by them (which should be renewed annually)
- both the due diligence and acknowledgement should be updated periodically to remind third parties of their obligations.
- Also, all relevant company employees should be trained to understand that payments through intermediaries can create FCPA liability for the company and for them personally.
Walter Ricciardi, Partner,
Paul, Weiss, Rifkind, Wharton & Garrison LLP
- 2. Role of the FCPA whistleblower -- Dodd-Frank and anticipated increase in whistleblower cases and awards.
- In June, the SEC announced its second-ever whistleblower award under the Dodd-Frank Act. Having received over 3,000 whistleblower tips in the first full year of the revamped program, the SEC made its first award in August of 2012 and is
- Further, over 10% of the tips in the first year originated outside the US, making clear that employees of US companies operating in foreign jurisdictions are also at least aware of the SEC's rising enforcement activity and increase protections and incentives for employees who report violations at their companies.
- Discuss Fifth Circuit Asadi decision
- An effective whistleblower program is an essential component of any corporate compliance program and promoting a culture of transparency and compliance throughout the organization. Particularly in light of these recent expansions and SEC signals that more significant whistleblower cases and awards are on the horizon (including FCPA cases), public companies should revisit their whistleblower and hotline reporting policies and make them as simple and productive as possible, including training under those policies.
- There are a few key benchmarks of an effective whistleblower program:
- Choice of reporting mechanisms – Regardless of how a complaint is initiated (through an anonymous hotline, during a conversation with a supervisor, internally from an employee, or from an external source), a company should follow a standard protocol for addressing such allegations. This protocol should ensure that complaints are responded to promptly and documented correctly.
- Anonymity and confidentiality – Among other things, Section 301 of the Sarbanes-Oxley Act of 2002 requires that audit committees establish procedures for "the confidential, anonymous submission by employees of the issue of concerns regarding questionable accounting or auditing matters." As a practical matter, if a company does not have a mechanism in place to accept complaints with a high degree of assurance that confidentiality will be preserved, this will significantly undermine the motivation to report internally.
- Simplicity and accessibility – A whistleblower program that encourages and facilitates ease of use will be more likely to encourage employees to use internal systems rather than going directly to the government. For internal reporters, it needs to be obvious how to file a complaint and the procedure should be simple. In addition, companies may wish to explore how best within their culture to encourage reporting internally, whether through management training or offers of perks or other benefits to those reporting true concerns.
Updates on progress of the complaint – Whistleblowers typically want to know that their claims are being taken seriously and reviewed by qualified advisors. While it is important to provide this reassurance, it is also necessary to protect both the privacy of the whistleblower and others who may be affected by the complaint, as well as the company itself. This can be a complex series of considerations, which should be addressed thoughtfully with counsel.
- SEC SPECIALTY UNITS
Who Should Attend:
- General Counsel
- FCPA Attorneys and consultants
- International Counsel
- Trade Counsel
- Compliance Officers
- Ethics and Compliance Executives
- Forensic Auditors and Accountants
- In-House and Outside Counsel
- FCPA Securities and Corporate Governance Attorneys
- And Other Related Professionals
Jeffrey A. Udell is a partner in the Litigation Group at Olshan, with experience litigating a wide variety of matters in both federal and state courts. His practice focuses on white-collar criminal defense, regulatory enforcement and internal investigations, and he represents both corporations and individuals in some of their most sensitive, complex and high-stakes matters. He also represents hedge funds, investors and companies in complex commercial litigations. He has tried cases in a variety of forums, including federal district courts in New York and Ohio, New York State court, FINRA, New York’s Judicial Conduct Commission and the New York City Police Department Trials Commission. For three years (2008-2011), Jeff chaired the New York City Bar Association’s Professional Responsibility Committee.
Prior to joining Olshan, Jeff served for six years as an Assistant U.S. Attorney in the Criminal Division of the U.S. Attorney's Office for the Southern District of New York. He was also a public defender for two years at the Office of the Appellate Defender. Jeff began his legal career by clerking for the Honorable Edward R. Korman, U.S. District Judge for the Eastern District of New York.
• Email – email@example.com
Jeffrey A. Udell is a partner in the Litigation Group at Olshan, with experience litigating a wide variety of matters …
Jim Slear is a partner in Thompson Coburn's International Trade practice. He focuses his practice on international trade compliance and enforcement, including the FCPA, the economic and trade sanctions administered by the OFAC, ITAR, and the EAR. He advises domestic, foreign and multinational clients in a wide array of industries, including aerospace, biomedicine, defense, financial services, insurance, Internet services, manufacturing, semiconductor and telecommunications. Jim has more than 25 years of experience conducting investigations and has conducted internal investigations for numerous clients in international trade and other matters--such as antitrust and securities--both domestically and abroad, including Europe, the Middle East, Japan, the People's Republic of China and Malaysia. Prior to entering private practice, Jim was a Judge Advocate with the U.S. Air Force.
Jim Slear is a partner in Thompson Coburn's International Trade practice. He focuses his practice on international trade compliance and …
Walter G. Ricciardi is a partner in the Securities Litigation and Enforcement Group at Paul, Weiss. Walter has extensive experience defending a broad variety of investigations conducted by the U.S. Securities and Exchange Commission and other regulatory authorities. Prior to joining Paul, Wei
ss Walter was the Deputy Director of the SEC's Division of Enforcement, where he supervised many of the Commission's most significant investigations related to financial fraud, Foreign Corrupt Practices Act, insider trading and broker-dealer and mutual fund compliance issues.
Prior to joining the SEC, Walter spent 20 years with PricewaterhouseCoopers and its predecessor, Coopers & Lybrand, where he was in charge of defending the firm's litigation and regulatory matters. While at PwC, he was elected by his partners to serve on the firm's board, which is responsible for overseeing the management of the firm, and to serve on the Global Oversight Board of the PwC global organization.
Walter G. Ricciardi is a partner in the Securities Litigation and Enforcement Group at Paul, Weiss. Walter has extensive experience …
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About Olshan Frome Wolosky LLP
Olshan, a law firm based in New York, represents major businesses and entrepreneurs for their most significant transactions, problems and opportunities. Olshan’s clients range from public companies, hedge, venture capital, private equity and other investment funds to entrepreneurs and private companies worldwide. Clients choose Olshan for innovative strategies and sophisticated, game-changing advice in corporate, securities law and shareholder activism, complex commercial, corporate and securities litigation, bankruptcy and creditors’ rights, real estate, intellectual property and advertising. Since its founding, Olshan has offered an alternative to the AmLaw 50 law firm business model with responsive, independent and client-focused legal counsel provided by the firm’s senior lawyers.
About Thompson Coburn LLP
Thompson Coburn attorneys represent clients from nearly every industrial and corporate sector, including manufacturing, banking, transportation, energy, and communications. Companies choose to work with our firm because of our results-oriented approach, staffing that is appropriate for each assignment, and our understanding of their business. Thompson Coburn was recently named as one of the top 30 firms in the nation for client service in 2014 by BTI Consulting, which also named the firm among the nation's top firms at providing exceptional value. With 360 attorneys and 40 practice areas, we serve clients nationally and internationally.
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