tag:blogger.com,1999:blog-71988838130645219252024-03-15T21:09:47.725-04:00White Collar Defense & Compliancemichael volkovhttp://www.blogger.com/profile/15466117708246119284noreply@blogger.comBlogger147125tag:blogger.com,1999:blog-7198883813064521925.post-91219331500899277192011-10-23T21:47:00.000-04:002011-10-23T21:47:22.377-04:00White Collar Defense & Compliance Moves!<div dir="ltr" style="text-align: left;" trbidi="on">
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<a href="http://2.bp.blogspot.com/-kk8ZvqJMQaQ/TqQJk9iODSI/AAAAAAAAACk/9hLzxAk3a3o/s1600/XTCATNDPB0CAOKVB3HCAK4HNGZCAWUMA3JCAMLGANJCANWEP8DCABI4DB9CAJWOO0NCAAA9761CAJ5WHINCA2L2T9MCAM5OFD5CA1GDMR6CAJY3UYCCAFWJO65CAYA6QNXCA7CO4PUCAEQPVBUCA09DJFW.jpg" imageanchor="1" style="clear: left; cssfloat: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="145" rda="true" src="http://2.bp.blogspot.com/-kk8ZvqJMQaQ/TqQJk9iODSI/AAAAAAAAACk/9hLzxAk3a3o/s200/XTCATNDPB0CAOKVB3HCAK4HNGZCAWUMA3JCAMLGANJCANWEP8DCABI4DB9CAJWOO0NCAAA9761CAJ5WHINCA2L2T9MCAM5OFD5CA1GDMR6CAJY3UYCCAFWJO65CAYA6QNXCA7CO4PUCAEQPVBUCA09DJFW.jpg" width="200" /></a></div>
<span style="font-size: large;">White Collar Crime & Compliance has moved.</span><br />
<span style="font-size: large;"><br /></span><br />
<span style="font-size: large;">I am pleased to announce a new website, <strong>Corruption, Crime and Compliance</strong>, which is sponsored by Ethics360.</span><br />
<span style="font-size: large;"><br /></span><br />
<span style="font-size: large;">The address is <span style="font-family: "Times New Roman", "serif"; mso-ansi-language: EN-US; mso-bidi-language: AR-SA; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-US;"><a href="http://corruptioncrimecompliance.com/"><span style="color: purple;">http://corruptioncrimecompliance.com</span></a></span></span></div>michael volkovhttp://www.blogger.com/profile/15466117708246119284noreply@blogger.com54tag:blogger.com,1999:blog-7198883813064521925.post-28997474644924609362011-10-17T20:55:00.000-04:002011-10-17T20:55:08.206-04:00Private Equity and Hedge Fund Compliance Webinar November 8, 2011 at 1230 pm<span style="clear: left; color: blue; cssfloat: left; float: left; margin-bottom: 1em; margin-right: 1em; text-decoration: none; text-underline: none;"></span> <span style="font-size: large;">Join <em>Michael Volkov</em>, <em>Andrew Hulsh</em> and <em>Richard Rosenfeld </em></span><br />
<span style="font-size: large;">Mayer Brown LLP Partners -- </span><span style="font-size: large;">November 8, 2011 at 12:30 pm </span><br />
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In this era of aggressive enforcement of the Foreign Corrupt Practices Act and anti-corruption laws, the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) have now turned their attention to private equity and hedge funds. The implications of this new initiative are far-reaching and cut across all private fund operations, particularly when such funds are purchasing and acquiring foreign companies. <br />
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A recent survey of corporate executives, investment bankers, private equity executives and hedge fund managers found that 63 percent of respondents reported that the FCPA and anti-corruption issues caused their companies to renegotiate or pull out of planned business relationships, mergers or acquisitions over the last three years. Join Mayer Brown partners Andrew Hulsh, Richard Rosenfeld and Michael Volkov who will address the following issues: <br />
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• The focus of the DOJ and SEC on private equity and hedge funds and the implications of anti-corruption enforcement to the business operations of such funds;<br />
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• The extent to which officers, directors and employees at private equity and hedge funds can be held liable under the FCPA and other anti-corruptions law for violations;<br />
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• The impact of the FCPA and anti-corruption laws on the purchase and sale of foreign companies; and <br />
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• The need for private equity firms and hedge funds operating in the international arena to re-tool their compliance controls and mechanisms to protect themselves from enforcement.<br />
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Tuesday, November 8, 2011<br />
<br />
Europe <br />
<br />
6:30 p.m. – 7:30 p.m. CET <br />
5:30 p.m. – 6:30 p.m. GMT<br />
<br />
United States <br />
<br />
12:30 p.m. – 1:30 p.m. EST <br />
11:30 a.m. – 12:30 p.m. CST <br />
10:30 a.m. – 11:30 a.m. MST <br />
9:30 a.m. – 10:30 a.m. PST <br />
<br />
CLE credit is pending.<br />
<br />
Instructions for accessing the program will be sent prior to the event.<br />
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For additional information, please contact Jean Shim at +1 202 263 3885 or jshim@mayerbrown.com.<br />
<br />michael volkovhttp://www.blogger.com/profile/15466117708246119284noreply@blogger.com0tag:blogger.com,1999:blog-7198883813064521925.post-39357837086596174942011-09-20T09:28:00.000-04:002011-09-20T09:28:23.265-04:00Article on FCPA Blog: Where the Ombudsman and the Whistleblower Meet<br />
Where the Ombudsman and the Whistleblower Meet -- <a href="http://www.fcpablog.com/blog/2011/9/20/where-ombudsmen-and-whistleblowers-meet.html">http://www.fcpablog.com/blog/2011/9/20/where-ombudsmen-and-whistleblowers-meet.html</a>michael volkovhttp://www.blogger.com/profile/15466117708246119284noreply@blogger.com1tag:blogger.com,1999:blog-7198883813064521925.post-80913141153141333942011-09-15T21:47:00.001-04:002011-09-15T21:48:43.991-04:00The Gathering Storm: Anti-Corruption Compliance for Private Equity and Hedge Funds<strong>Thursday, October 6, 2011</strong><br />
<strong>8:00 A.M. – 10:00 A.M.</strong><br />
<strong>New York, NY</strong><br />
<br />
Intensified enforcement efforts by international authorities and anti-corruption laws such as the Foreign Corrupt Practices Act and the UK Bribery Act have now presented an increased liability in the private equity and hedge funds sector.<br />
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A recent survey of corporate executives, investment bankers, private equity executives and hedge fund managers, found that 63 percent of respondents reported that the FCPA and anti-corruption issues caused their companies to renegotiate or pull out of planned business relationships, mergers or acquisitions over the last three years. <br />
<br />
Private equity firms and hedge funds operating in the international arena must re-tool their compliance controls and mechanisms to adequately operate in this stringent environment. <br />
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Please join me, Tom Fox, and jim Feltman on October 6, 2011 in New York City for this complimentary breakfast briefing. <br />
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Session Agenda: <br />
8:00 - 8:30 AM - Registration & Continental Breakfast <br />
8:30 - 9:30 AM - Program <br />
9:30 - 10:00 AM - Q&A Session<br />
<br />
<a href="http://ethisphere.site-ym.com/events/event_details.asp?id=179863">LINK HERE</a><br />
<br />michael volkovhttp://www.blogger.com/profile/15466117708246119284noreply@blogger.com0tag:blogger.com,1999:blog-7198883813064521925.post-8774088848570844182011-08-23T12:38:00.000-04:002011-08-23T12:38:52.069-04:00On Vacation<br />
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" 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I am on vacation. White Collar Defense & Compliance will return soon.<br />
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Enjoy the last few weeks of summer.<br />
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Have fun!!michael volkovhttp://www.blogger.com/profile/15466117708246119284noreply@blogger.com0tag:blogger.com,1999:blog-7198883813064521925.post-79750100468905627362011-08-18T22:17:00.000-04:002011-08-18T22:17:30.423-04:00The Twists and Turns of DOJ's Corporate Charging Policies<br />
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One of the more tortured policy areas is DOJ policies relating to corporate charging policies and the attorney-client privilege.<br />
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The history reflects competing interests, political grandstanding and line prosecutors' aggressive attempts to enforce white collar laws against corporate law breakers. The Department’s motto reminds me of Month Python’s famous chant in “The Holy Grail” -- “Run Away! Run Away!”<br />
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Over the last 12 years, the Justice Department has issued five separate memoranda to describe its policies regarding corporate charging decisions. The first three (the Holder, Thompson, and McCallum Memoranda) sought to promote federal prosecutors’ ability to address corporate criminal wrongdoing by seeking waivers of attorney-client and work-product protections to receive cooperation credit. In response to firestorms of criticism, the last two memoranda (McNulty and Filip Memoranda) pushed the Justice Department’s policy against this trend and sought to restrain prosecutors from requesting waivers of attorney-client or work product privileges. <br />
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At the heart of the controversy is federal prosecutors’ conditioning cooperation credit or decisions not to charge corporations on whether a company waives its attorney-client privilege and work product protections, refrains from paying employee legal fees to defend themselves in a criminal case, or fires certain employees involved in corporate misconduct.<br />
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In response to criticisms of disparate treatment of similarly situated corporate actors, the Justice Department issued its first corporate charging policy statement in 1999, the so-called Holder Memorandum (issued by then Deputy Attorney General Eric Holder). DAG Holder had no idea what he was starting. The controversy focused on one factor in the analysis – the company’s timely and voluntary disclosure of wrongdoing and its willingness to cooperate in the investigation, including, waiving the corporate attorney-client and work-product protections. By gaining “cooperation credit” a company could potentially avoid an indictment, the death knell for any company. <br />
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The Holder Memorandum set forth eight factors to be considered in corporate charging decisions, including “the corporation’s timely and voluntary disclosure of wrongdoing and its willingness to cooperate in the investigation of its agents, including, if necessary, the waiver of the corporate attorney-client and work-product privileges.” Significantly, the Holder factors were not binding on prosecutors. <br />
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In response to new corporate scandals in the early 2000s, DAG Larry Thompson revisited the Holder Memorandum and made the charging factors outlined in the Holder Memorandum binding on federal prosecutors rather than advisory. <br />
The Thompson Memorandum was the height of DOJ's powers. After that, the white collar bar, criminal defense organizations, and political figures organized to push back against DOJ’s policies. In the face of such criticism, in October 2005, Deputy Attorney General Robert McCallum issued a one-page amendment to the Thompson Memorandum which required that each U.S. Attorney’s office adopt procedures mandating higher-level review of prosecutor requests for waivers of the attorney-client and work-product protections in criminal investigations. <br />
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The political opponents continued to fight. DOJ did not react. Congress started to conduct hearings on the issue and criticisms started to mount. Senator Patrick Leahy stated that the Thompson Memorandum had created a “dangerous culture of waiver,” adding that the policies underlying the memorandum were “coercive” and “may even rise to the level of a bludgeon."<br />
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On December 12, 2006, then Deputy Attorney General, Paul J. McNulty, issued a memorandum that further revised the Thompson Memorandum and retreated on the issue of waivers of the attorney-client and work product protections, pointing out that “[w]aiver of attorney-client and work-product protections is not a prerequisite to a finding that a company has cooperated in the government’s investigation.” Although the McNulty Memorandum provided significant changes to prior guidelines, the criticism continued and legislative action become a reality. On November 12, 2007, the “Attorney-Client Protection Act of 2007” was passed in the United States House of Representatives. And, on June 26, 2008, Senator Specter and twelve co-sponsors introduced the “Attorney-Client Protection Act of 2008” in the Senate. <br />
<br />
In order to avoid legislative action, on August 28, 2008, then DAG Mark Filip issued a new Memorandum, which made significant changes in the DOJ’s guidelines for granting a company cooperation credit. DOJ stated that while a corporation remains free to voluntarily waive attorney-client or work-product protections, “prosecutors should not ask for such waivers and are directed not to do so.” The decisive factor is “whether the corporation has provided the facts about the events.” The analysis does not turn on whether the corporation actually discloses attorney-client or work-product materials. The Filip Memorandum included two exceptions – requests for waiver of attorney-client and work product protections can be sought when the company relies on an advice of counsel defense or when the communications are in furtherance of a crime or fraud. <br />
<br />
Under the Filip Memorandum, prosecutors may not (i) consider “whether a corporation is advancing or reimbursing attorneys’ fees or providing counsel to employees, officers, or directors under investigation or indictment” or (ii) request that a corporation refrain from advancing attorneys fees.<br />
<br />
While the Filip Memorandum appears to be a victory for the white collar defense bar and criminal defense organizations, the Memorandum still allows the government to hold a company accountable for failing to waive the privilege when the “relevant facts” regarding the conduct under investigation otherwise cannot be readily revealed.. Similarly, failure to disclose relevant facts because of the existence of a joint defense agreement may weigh against a company receiving cooperation credit. And, prosecutors may continue to consider “whether the corporation appropriately disciplined wrongdoers, once those employees are identified by the corporation as culpable for the misconduct” as part of remediation efforts. Thus, corporations must continue to be cognizant of developing practices to determine whether the <em>de facto</em> policy is inconsistent with the Department’s current policy pronouncements.michael volkovhttp://www.blogger.com/profile/15466117708246119284noreply@blogger.com2tag:blogger.com,1999:blog-7198883813064521925.post-21496325545121062942011-08-17T22:52:00.000-04:002011-08-17T22:52:46.825-04:00Leveraging AML Programs Into Anti-Corruption Compliance<br />
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With all due respect to Howard Sklar, the godfather of compliance convergence, the most obvious case for compliance convergence is leveraging anti-money laundering and anti-corruption compliance. Most members of the financial services industry already have an AML program, which is likely to be reasonably rigorous. <br />
<br />
Let's start with some obvious overlaps. <br />
<br />
<strong>Risk Assessment</strong>: A company’s AML risk assessment approach a company already has in place can easily incorporate FCPA issues to create a broader risk profile, including additional areas of inquiry for a due diligence questionnaire, interviews of key operations personnel in regions or significant countries of operations, and analysis of data. <br />
<br />
<strong>Training</strong>: Companies with AML compliance programs have an AML training program for employees and officers (usually based on risk). The training infrastructure and record-keeping requirements can easily be expanded to include anti-corruption training for employees and senior management. <br />
<br />
<strong>Compliance Officer</strong>: Companies have a designated AML compliance officer, as required by the USA Patriot Act, and this same person or perhaps a separate individual could be appointed to lead anti-corruption compliance programs. Even if a separate person is appointed, the compliance officers are likely to serve together and should be able to find efficient overlaps where efforts can be coordinated.<br />
<br />
<strong>Corporate Governance</strong>: The core compliance functions in an anti-corruption compliance program, including policies, procedures and investigation, have significant overlap with AML, and governance and internal reporting and review issues should be handled in a similar way. <br />
<br />
<strong>Financial Investigations Units (FIUs):</strong> Financial services companies usually have a FIU or equivalent office to: investigate alerts and report suspicious activity under the AML regulations, as well as a transaction monitoring system to identify transactions for possible alerts. The FIU can be expanded in several ways to address anti-corruption issues:<br />
<br />
-- Anti-corruption flags can be implemented for existing alerts;<br />
<br />
-- Transaction monitoring systems can be modified to add new data and new scenarios of concern – Anti-corruption issues can be identified from traditional sources such as accounts payable and general ledger entries, and gifts, meals and entertainment expenses can be added to this monitoring system since they are a significant bribery risk;<br />
<br />
-- Politically Exposed Persons who are already identified as part of an AML program will be identified as government officials under anti-corruption compliance programs. This process can be expanded to include vendors, agents and third party intermediaries, especially those PEPs that are linked to specific vendors, agents and third party intermediaries.<br />
<br />
<strong>Internal Audits</strong>: Both AML and anti-corruption compliance programs need to be tested and audited. Existing internal auditors can be trained to examine anti-corruption issues, or develop new procedures to ensure adequate auditing and monitoring. Conducting an independent audit of both programs is important. <br />
<br />
Of course, there are many substantive areas where anti-corruption compliance requires different polices than an AML program, such as gift and entertainment policies, specific books and records requirements, a code of ethics requirement, an employee hotline, disciplinary procedures and other specific measures. AML programs may have more or less overlap with these specific areas. Similarly, the nature of risk assessments and other aspects of an anti-corruption program is different than AML counterparts. However, an AML program may be an effective starting point to leverage existing compliance resources to initiate an anti-corruption compliance program. michael volkovhttp://www.blogger.com/profile/15466117708246119284noreply@blogger.com10tag:blogger.com,1999:blog-7198883813064521925.post-70529922341494872972011-08-16T22:56:00.000-04:002011-08-16T22:56:27.350-04:00The Symbiotic Relationship: Criminal Antitrust and FCPA Enforcement<div style="clear: left; cssfloat: left; float: left; margin-bottom: 1em; margin-right: 1em;">
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<br />
Some may wonder why I regularly report on the Justice Department’s criminal antitrust record and trends. For white collar practitioners, the FCPA and criminal antitrust prosecutions regularly lead to opportunities to represent companies and/or officers. Apart from that, there are important reasons to monitor the Justice Department’s criminal antitrust investigations and prosecutions. <br />
<br />
First, a criminal antitrust investigation of cartel activity in a specific industry can be a precursor to an FCPA investigation in the same or closely-related markets. Second, when a company in an antitrust criminal investigation seeks leniency by cooperating, you can rest assured that all of the officers and employees will be asked about knowledge of potential bribes paid by the company or competitors.<br />
<br />
The Justice Department has worked out the coordination and information sharing kinks between the Fraud Section and the Antitrust Division to ensure that prosecutors share information and access to cooperating witnesses. This is a dangerous development for companies which may be involved in cartel behavior or bribery. Frequently, those officers or managers who are involved in (or have information about) cartel activity involving price fixing, territorial allocations, or other concerted activity, also have knowledge of (or involvement in) illegal payments to foreign government officials. It does not take a rocket scientist to figure this out – wrongdoers do not usually limit their operations based on sections of the federal criminal code; rather, those corporate wrongdoers will seek economic advantages through any available schemes where the benefits outweigh the risks.<br />
<br />
The Justice Department prosecutors understand the inter-relationship of these issues. Cooperating witnesses are regularly asked to provide specific information about cartel activity and bribery. White collar practitioners representing cooperating witness know that a client with information in both areas will achieve a better result by offering assistance in two separate matters. <br />
<br />
Companies involved in corporate leniency applications before the Antitrust Division often include FCPA disclosures in their applications – some small but some more significant, resulting in separate prosecutions and settlements. The Justice Department’s improved coordination and information sharing efforts have been evident in the freight-forwarding cartel investigation which ultimately branched out into the FCPA industry sweep culminating in the “Panalpina” record-setting FCPA investigation and prosecution of the industry and its customers. <br />
<br />
The Antitrust Division’s investigations in other industries such as automobile part suppliers, submarine cables, video displays, are likely to lead to related bribery investigations and prosecutions. Conversely, FCPA inquiries in the pharmaceutical and medical device, telecommunciations, and military supply industries is likely to lead to related antitrust investigations and prosecutions.<br />
<br />
White collar practitioners need to watch these developments and corporate disclosures closely. While everyone points to the dramatic impact that the SEC’s whistleblower program will have on FCPA enforcement, the cooperation between the Antitrust Division and the Fraud Section already has had a huge impact on FCPA enforcement and may be a more significant factor in the Justice Department’s aggressive FCPA enforcement program. michael volkovhttp://www.blogger.com/profile/15466117708246119284noreply@blogger.com0tag:blogger.com,1999:blog-7198883813064521925.post-41532836822105241552011-08-16T07:01:00.000-04:002011-08-16T07:01:59.567-04:00Do You Have Internal Whistleblower Procedures and Policies?<br />
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Friday, August 12, 2011 came and went. The world did not explode, the economy is still running, companies are still standing and life went on. The SEC officially opened the doors for its new Whistleblower Office. As far as we know, there was not a line of whistleblowers standing outside the office waiting to file complaints.<br />
<br />
Surprisingly, the SEC disclosed that there are 20 pending whistleblower claims relating to cases which have already been settled. That is surprising. Complaints are being filed; lawyers are out there encouraging whistleblowers to come forward to seek the financial rewards. SEC officials have estimated that they expect approximately 30,000 complaints to be filed during the year, and that at least 1-2 per day is credible.<br />
<br />
Companies need to be ready. One sure way to get into trouble is to do nothing. Whatever the state of a company’s anti-corruption compliance program, one of the priorities has to be a separate set of policies and procedures for handling whistleblower complaints. The critical rule governing the whistleblower program is the 120 day window after which the whistleblower can file the complaint with the SEC (with certain exceptions).<br />
<br />
The goals of a whistleblower policy should be to:<br />
<br />
-- identify those complaints which could end up being filed in the SEC<br />
-- assess the seriousness of the complaint<br />
-- evaluate the likelihood the whistleblower will file with the SEC and the SEC’s likely response<br />
-- ensure prompt and responsive treatment of whistleblower complaint<br />
-- communicate with the complainant to assure him/her that the company is seriously reviewing the complaint <br />
<br />
Some have optimistically deluded themselves into thinking that if they treat the whistleblower well, he or she will not run to the SEC. That is wishful thinking. When financial incentives are out there, you can bet the whistleblower and his/her attorney will run to the SEC whenever they can to seek financial rewards.<br />
<br />
If the company devotes resources and time to this issue, it should be able to quickly divide those complaints into frivolous and credible complaints. Once that is done, the company needs to investigate the credible complaints as fast as possible to evaluate the merits. <br />
<br />
For those that are credible and potentially serious, the company may need to voluntarily disclose the internal investigation to the SEC. This is an extremely risky proposition – once a company is on the SEC’s radar screen, life can get very difficult. For compliance officers and general counsels, this is a high stakes inquiry which can have serious consequences for the company. The 120-day window will define a period for rapid investigations and difficult decisions.michael volkovhttp://www.blogger.com/profile/15466117708246119284noreply@blogger.com0tag:blogger.com,1999:blog-7198883813064521925.post-91809022409046529592011-08-15T09:35:00.000-04:002011-08-15T09:35:53.750-04:00FCPA 2011 -- The Year of the Trial<br />
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<br />
Everyone's 2011 predictions for FCPA enforcement have turned out to be wrong. It is obvious that 2011 will go down as the year of the FCPA trial. The previous year, 2010, was the year of record settlements, most of which involved non-US companies, and exceeded $1 billion. <br />
<br />
In 2011, the Justice Department's FCPA resources have been stretched by trials -- the DC Sting, Lindsey, Carson, and Terra Telecomm. DOJ's record so far has been pretty good but a reversal of the Lindsey convictions could have a dramatic impact. The DC Sting cases are now scheduled for multiple trials through next year.<br />
<br />
If you want to know what the Justice Department's priorities are, all you have to do is follow the resources (or as we say from the Watergate days -- follow the money). DOJ's FCPA resources are now being allocated in large part to trial work. That leaves less time to manage the voluntary disclosure process, to move internal investigations being conducted by outside counsel, and to wrap up cases and get all the internal approvals needed before filing a settlement or deciding not to prosecute. The number of settlements and the fines collected have dropped significantly during this year.<br />
<br />
The increase in trial work also reflects the importance DOJ is now placing on prosecuting individuals in FCPA investigations. The Antitrust Division has been prolific in prosecuting individuals while securing the cooperation of corporate defendants. The FCPA prosecutors are increasing individual prosecutions but still have a long way to go to measure up to the Antitrust Division's record.<br />
<br />
Some have argued that individual prosecutions provide a more effective deterrent than large fines against companies. It is hard to say and there have been no empirical studies on what impact such prosecutions have in deterring future violations.<br />
<br />
Some argue that corporations pay large fines as merely a "cost of doing business." In my view, that depends on the facts. Assuming that a bribe of $10,000 of a foreign official will secure a $1 million contract, and the company goes ahead and pays the bribe but then is caught and fined $10 million -- whether the company made a rational decision depends on the missing factor in the equation: what was the likelihood of being caught by the company and/or the government? If you add in the potential prosecution of individual actor(s), then this risk may alter the equation by reducing the number of available actors willing to engage in risky conduct to bribe the foreign official.<br />
<br />
For now, the Justice Department has made it clear -- they intend to prosecute individual FCPA violators and are ready, willing and able to go to trial to do so. michael volkovhttp://www.blogger.com/profile/15466117708246119284noreply@blogger.com0tag:blogger.com,1999:blog-7198883813064521925.post-67193304181203580192011-08-11T09:21:00.000-04:002011-08-11T09:21:34.323-04:00A High Priority: Insider Trading Compliance<a href="http://www.google.com/imgres?imgurl=http://fortunewallstreet.files.wordpress.com/2010/11/expert_networks.jpg&imgrefurl=http://finance.fortune.cnn.com/2010/11/22/how-expert-networks-came-to-dominate-wall-street/&usg=__b8QfLneqk2zVN7R82jseDDU0Zjw=&h=255&w=340&sz=26&hl=en&start=10&sig2=IOdoc0quiKqzEuMsKqnfuA&zoom=1&tbnid=MuNulucec7jJ0M:&tbnh=89&tbnw=119&ei=_dRBTu7SO-SNsQLznuSxCQ&prev=/search%3Fq%3DInsider%2Btrading%2Band%2BExpert%2BNetworks%26um%3D1%26hl%3Den%26newwindow%3D1%26sa%3DN%26rls%3Dcom.microsoft:*%26tbm%3Disch&um=1&itbs=1" style="clear: left; cssfloat: left; float: left; margin-bottom: 1em; margin-right: 1em;" target="_blank"><img height="149" src="http://t2.gstatic.com/images?q=tbn:ANd9GcQs3x6LqFBWRHz24aPXnoq5Fq-wm2y3JbosBaEKDPHWSTZ1whiPvGnFLA" width="200" /></a><br />
With all the writing and blog space filled with anti-corruption focus, companies need to take a deep breath and prioritize their compliance efforts. Anti-corruption, antitrust and export controls remain at the top of the list. But companies need to add insider trading compliance programs.<br />
<br />
The recent high-profile investigations and prosecutions stand as a constant reminder for companies. The SEC and DOJ have shown they are willing to use all available tools to prosecute insider trading violations. The Galleon and Primary Global Research cases also show that law enforcement is focusing its efforts on the interactions between investment managers and expert networks. <br />
<br />
An “expert network” provides investment managers and others with access to various industry experts within a given field. There is nothing wrong with such information. The tricky issue is when the experts are current or former employees of a publicly-traded company who may be in possession of material non-public information, the disclosure of which could cause a violation of securities laws. The focus on expert networks and investment managers should cause companies to revisit their own expert networking arrangements. <br />
<br />
<strong>Insider Trading Liability</strong><br />
<br />
Federal courts have developed two theories of liability for insider trading—the classic theory and the misappropriation theory. Under the classic theory, a corporate insider or a temporary insider (such as an<br />
accountant, lawyer or consultant), who obtains material non-public information breaches a duty of trust and confidence owed to the corporation’s shareholders by trading in securities on the basis of the confidential information. The misappropriation theory applies when a corporate “outsider” trades on the basis of material non-public information, in violation of a duty of confidentiality owed by the outsider to the source of the information.<br />
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Section 204A of the Investment Advisers Act of 1940 requires registered advisers to establish, maintain and enforce written policies and procedures reasonably designed to prevent the misuse of material non-public information by the adviser and associated persons.<br />
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There is no bright-line test for assessing materiality. Information is "material" if there is substantial likelihood<br />
that a reasonable investor would consider the information important in making his or her investment decision. The information does not need to cause a reasonable investor to change his or her investment decision to be material, but instead would need to be viewed by such investor as significantly altering the “total mix” of available information.<br />
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Among the factors to be weighed in assessing materiality are (i) the specificity of the information, (ii) the significance attached to the information by those who knew it, (iii) whether the information diverges from analysts’ expectations, (iv) the probability that the events that are the subject of the information will occur and (v) the anticipated magnitude of such event in light of a company’s activity. <br />
<br />
Material information covers a number of obvious events and/or topics such as earnings, stock splits, dividends, mergers and acquisitions, new products, discontinuation of existing products, major investment occurrences, government investigations, and major litigation.<br />
<br />
<strong>Expert Networks and the Mosaic Liability</strong><br />
<br />
The mosaic defense is often asserted by an expert network defendant. Essentially, the defense claims that investment professionals often rely on publicly available information and specific amounts of information which is by itself immaterial, but when pieced together by an expert and combined with the expert's knowledge of the industry, would be a lawful piece of information fitting into the overall mosaic of knowledge.<br />
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<strong>A Compliance Program Responsive to the Expert Network Risk </strong><br />
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Investment advisers should implement compliance controls to reduce the risk of material non-public information being included in the adviser’s mosaic. Advisers should apply standard compliance program review protocols to:<br />
<br />
-- Review insider trading policies annually;<br />
-- Modify policies to reflect new developments in the law and enforcement<br />
-- Review information barriers and controls to ensure that access to information is restricted to those who need to know such information<br />
-- Maintain records and controls for access to such information<br />
-- Impose trading blackout times during scheduled disclosure or preparation of important material information<br />
-- Education and training of officers and employees on insider trading law<br />
-- Disciplinary program which responds to improper access to, or use of, important information<br />
-- Annual certifications by employees of compliance training and overall compliance with corporate policies<br />
<br />
<strong>Due Diligence and Monitoring Interactions</strong><br />
<br />
With respect to expert networks or sources, companies should conduct a due diligence review of the proposed relationship. The due diligence should include an assessment of the expert network's insider trading policy, the network’s processes for checking and approving experts and the representations of the network’s experts with respect to the use of material nonpublic information. The contract with the expert network service should include contract representations and warranties to ensure compliance, audit rights and the right to terminate the contract if a violation occurs. <br />
<br />
In each interaction with the expert service, adviser and representatives need to confirm representations concerning compliance with the insider trading laws and the use of nonpublic material information.<br />
<br />
An adviser’s chief compliance officer should pre-approve any discussion between an adviser’s employee and<br />
an expert. The chief compliance officer also should consider whether to monitorinteractions between employees and experts. The content of all conversations should be documented and retained by the adviser. Further, the adviser’s chief compliance officer should monitor trades by such employees and test such trades against the release of material information. michael volkovhttp://www.blogger.com/profile/15466117708246119284noreply@blogger.com0tag:blogger.com,1999:blog-7198883813064521925.post-36009802186717605592011-08-10T09:44:00.000-04:002011-08-10T09:44:05.684-04:00Coordinating Anti-Corruption Enforcement in China<a href="http://www.google.com/imgres?imgurl=http://www.stirringtroubleinternationally.com/wp-content/uploads/2009/11/corruption2.thumbnail.png&imgrefurl=http://www.stirringtroubleinternationally.com/2009/11/12/corruption-threatens-chinas-future/&usg=__9zvU7raun4KeL-T_pYUevnFHlgI=&h=180&w=275&sz=55&hl=en&start=8&sig2=X9z4StN9o9nnAflCclmRHw&zoom=1&tbnid=coRy1hn6tuKuSM:&tbnh=75&tbnw=114&ei=D2tBTsyzFs_FsQLdoKjlCQ&prev=/search%3Fq%3DCHina%2Band%2BCorruption%26um%3D1%26hl%3Den%26newwindow%3D1%26sa%3DN%26rls%3Dcom.microsoft:*%26tbm%3Disch&um=1&itbs=1" style="clear: left; cssfloat: left; float: left; margin-bottom: 1em; margin-right: 1em;" target="_blank"><img height="131" src="http://t0.gstatic.com/images?q=tbn:ANd9GcRgoZlDu_t1Kl1-IJ9eJp3uLWYU4KsRC92gScbabvPEu9isGzWKHzgYsgw" width="200" /></a><br />
Companies who have expanded into China need to be careful. Call this a profound grasp of the obvious, but the risk of corruption enforcement in China is rapidly increasing, and in the near future could become even more aggressive.<br />
<br />
The United States and the Chinese governments are working closely together to coordinate anti-bribery enforcement. The implications of this are far-reaching. <br />
<br />
US Representatives from the State, Commerce and Justice Departments met in China for two days with their Chinese counterparts as part of the U.S.-China Anticorruption Working Group Meetings and Anti-Bribery Roundtable. The purpose of the meeting was to continue efforts to improve coordination and sharing needed for joint enforcement programs on corruption and other crimes. These efforts will initially lead to coordinated efforts and information sharing on denials of safe havens, asset recovery and mutual legal assistance. <br />
<br />
China is already increasing its efforts to prosecute corruption in its government. Three senior directors of the State FDA were prosecuted for taking in excess of $800,000 from primarily Chinese companies to approve fake or inadequately tested drugs, resulting in the deaths or severe illnesses of many people. One of the officials was executed for his role in the scheme.<br />
<br />
According to Chinese government websites, in the first year, nearly 3,000 government officials have been removed from office and prosecuted for corruption. Nearly 80 bribery cases have been solved. Almost 70 people have been criminally punished and nearly 30 suffered administrative penalties. A province transportation chief was sentenced to life in prison for receiving over $800,000 in bribes beginning in 1994. <br />
<br />
Chinese law punishes both giving and taking of bribes, and covers bribery of “state functionaries” or “government organs.” Commercial bribery criminalizes bribery of “staff of a company or enterprise” and imposes recordkeeping obligations. Employers are liable for the acts of their employees. <br />
<br />
The Chinese have prosecuted foreign employees of foreign companies. Last year, four Rio Tinto employees including an Australian citizen, were found guilty of accepting millions of dollars in bribes and stealing commercial secrets. They were sentenced to between 7 and 14 years in prison and ordered to pay hundreds of thousands of dollars in fines. In addition, Toyota Motor Finance allegedly gave 426,352 RMB ($63,493) in rebates to dealers, who in turn steered business toward Toyota financing over other financing options. Toyota was fined. <br />
<br />
China believes that it has clearly established its intentions to clean up the Party and is now focusing on corporations. The pharmaceutical companies that were implicated in the drug bribery scheme are now being prosecuted and punished. <br />
<br />
China is ranked 78 out of 178 countries on Transparency International's corruption index. Corruption in China is perceived as “pervasive or quite pervasive.” Almost 8 percent of government spending is misappropriated, which is approximately 3 percent of China's GDP.<br />
<br />
In the United States, FCPA enforcement of companies conducting business in China continues to be a significant portion of the Justice Department's enforcement portfolio. Since 2002, DOJ/SEC have brought 39 enforcement actions in China (18 percent of all enforcement actions).<br />
<br />
Chinese business culture is based on relationships, or guanxi, which are formed in part by giving gifts and doing favors. This raises very real risks for violating the FCPA. The Justice Department's broad interpretation of “thing of value” encompasses all manner of gifts, travel, and entertainment. Some examples of prohibited "favors" or "gifts" in recent prosecutions include: non-business related travel to company officials (Lucent); internships to Chinese official’s son and girlfriend, letters to obtain visas and use of vehicle (Daimler AG); payment for college tuition for children of two executives (Control Components); gift certificates and watches (Schnitzer Steel); $4500 in gifts to Chinese telecomm executive (Veraz); watches, cameras and laptop computers (Alliance One); laptop computers, jade, fur coats, kitchen appliances, business suits and expensive liquors (RAE Systems).<br />
<br />
Chinese authorities are tracing the bribery from those implicated in earlier investigations back to the bribe payers. As they identify Chinese agents, corporations and individuals involved, those entities will be prosecuted, be they domestic or foreign. The US Department of Justice is interested in learning the identities of the US companies and their agents, joint venture partners, or contracting parties implicated by the Chinese investigations.<br />
<br />
As China continues to crack down, primarily on bribe recipients, the US and China will inevitably increase joint prosecutions to hold accountable the bribe payers, bribe takers and US companies or their agents, representatives or partners.michael volkovhttp://www.blogger.com/profile/15466117708246119284noreply@blogger.com1tag:blogger.com,1999:blog-7198883813064521925.post-5421140985186758132011-08-09T02:48:00.000-04:002011-08-09T02:48:03.529-04:00The Link Between Corruption and Human Rights<a href="http://www.google.com/imgres?imgurl=http://www.topsecretwriters.com/wp-content/uploads/2011/06/unlogo-300x276.jpg&imgrefurl=http://www.topsecretwriters.com/2011/06/cases-of-united-nations-corruption-you-probably-never-knew-about/&usg=__kplpT8dIYTgzn-78N-2WsajPOPk=&h=276&w=300&sz=27&hl=en&start=91&sig2=hoHQeoQ2qRLF6l2tslhweA&zoom=1&tbnid=EhszL32ALLtxDM:&tbnh=107&tbnw=116&ei=4NdATrPlFMKGsgKgp6HGCQ&prev=/search%3Fq%3Dcorruption%2Band%2Binternational%2Bhuman%2Brights%26start%3D84%26um%3D1%26hl%3Den%26newwindow%3D1%26sa%3DN%26rls%3Dcom.microsoft:*%26tbm%3Disch&um=1&itbs=1" style="clear: left; cssfloat: left; float: left; margin-bottom: 1em; margin-right: 1em;" target="_blank"><img height="184px" src="http://t3.gstatic.com/images?q=tbn:ANd9GcRXsPQd2KAGErZI6QC11XWB-IWjChoiza9s1ggtyCLO_f-9U98C3kWwi80" width="200px" /></a><br />
The link between corruption and human rights is growing stronger. International organizations have been arguing for years that the causal connections between corruption and human rights abuses are clear.<br />
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In developing nations and in particular failed states, corruption undermines human rights. Some argue that the focus of anti-corruption efforts is to ensure that developing countries do not welcome terrorist organizations. Both positions are correct -- corruption undermines legislative, judicial and regulatory institutions, often leading to increased concentration of wealth. The lack of opportunity can foster growth of terrorist ideologies and human rights abuses. The control of power leads to consolidation of wealth, destruction of institutions and then threats to public safety. <br />
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In the minds of many, however, corruption is often associated with developing countries and the impact on human rights seems to be more easily made when linking corruption and lack of economic development. But they may be too narrow a view. The fight against corruption is central to the struggle for human rights. Why?<br />
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Corruption has always greased the wheels of exploitation and injustice. In many ways, corruption is one of several abuses of power employed by political actors who also engage in ethnic cleansing, institutionalised racism, or other abuses designed to promote their continued control of the government. <br />
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For many years, anti-corruption and human rights movements worked in parallel but rarely in coordination. That is fast changing. With greater cooperation among international organizations in fighting corruption, the framework for increased coordination in human rights issues is increasing -- eventually many of these efforts will dovetail to increase synergies and international impact. <br />
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Human rights advocates have been arguing that corruption comes at the expense of the vulnerable -- women, children and minority groups -- who are further marginalized and suffer more with weak institutions. The rich benefit more from corruption and are less dependent on police, judges, hospitals, schools and other government institutions. In Mexico, it is estimated that 25 percent of the income earned by poor households is lost to petty corruption. The lower classes have little recourse against bribery. In Bangladesh, surveys show that nearly one-third of girls trying to enroll in a government stipend scheme for extremely poor students had to pay a bribe, while half had to make a ‘payment’ before collecting their awarded scholarship.<br />
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Corruption can infect every aspect of life and, as such, contravene basic human rights. Human rights conventions set out the legal obligations of a government, including ensuring that all people living in a country enjoy equality, a fair justice system, and access to goods and public services, among other rights. A government’s ability to respect, protect and fulfil these rights will ultimately be defined by the levels of corruption in those states.michael volkovhttp://www.blogger.com/profile/15466117708246119284noreply@blogger.com0tag:blogger.com,1999:blog-7198883813064521925.post-64759528755203786012011-08-08T16:13:00.000-04:002011-08-08T16:13:34.766-04:00What To Do When the Government Shows Up at Your Company?<a href="http://www.google.com/imgres?imgurl=http://www.fromthesidebar.com/FBI%2520-%2520search%2520warrant.JPG&imgrefurl=http://www.fromthesidebar.com/corporate-compliance/search-warrant/&usg=__06hRSJyiUwWFGhedtKfQMqQcYus=&h=500&w=300&sz=57&hl=en&start=3&sig2=-j7YK15BrnKo-qPif7m-KQ&zoom=1&um=1&itbs=1&tbnid=904_7ST373ECJM:&tbnh=130&tbnw=78&prev=/search%3Fq%3Dfederal%2Bagents%2Bshowing%2Bup%2Bwith%2Bsearch%2Bwarrant%26um%3D1%26hl%3Den%26newwindow%3D1%26sa%3DN%26rls%3Dcom.microsoft:*%26tbm%3Disch&ei=4UJATtS-JYKHsAKGxdDnBQ" id="apf2" style="clear: left; cssfloat: left; float: left; margin-bottom: 1em; margin-right: 1em;" target="_blank"><img height="200px" id="ipf904_7ST373ECJM:" src="http://t3.gstatic.com/images?q=tbn:ANd9GcQzk2TDDZzja6NPwKkxQo7XjyNCQkWvtCndK1xLfVn3xDPaSQz4szDaYQA" style="border-bottom: #ccc 1px solid; border-left: #ccc 1px solid; border-right: #ccc 1px solid; border-top: #ccc 1px solid; padding-bottom: 1px; padding-left: 1px; padding-right: 1px; padding-top: 1px; vertical-align: bottom;" width="120px" /></a><br />
The government loves to visit subjects and targets of its investigations. Why? They get access to individuals and information without counsel's presence and the ability to ask questions and learn new information.<br />
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In today's environment, every company should be prepared. Every possible occurrence should be anticipated. The government may approach executives and officers at their home for a 730 am chat, may serve a grand jury subpoena anytime during the day, may show up early in the morning with a search warrant in hand, or may be ready to hand cuff officers and make sure the press is there to see the "perp" walk. Former US Attorney Rudy Guliani was famous for conducting mass arrests in white collar suites with plenty of press to watch, film and report.<br />
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How do you prepare for the government's visit?<br />
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Many of these ideas seem obvious but it is surprising how many companies have no protocol in place. They just cannot believe that anything will happen to them.<br />
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Every company should:<br />
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-- Identify now all the potential persons who may need to be notified quickly in the event of a crisis.<br />
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-- For each person, identify a backup person.<br />
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-- For each person, obtain work, home and cell numbers.<br />
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-- Update the call list regularly. Keep the call list in a place where it is easily accessible 24 hours a day (and not dependent on computer access).<br />
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Within the company, the list should include: In-house Counsel; CFO/Treasurer/Senior Management; Investor Relations/Corporate Communications personnel; Security personnel; and Key HR/IT Personnel.<br />
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Outside the company, the list should include: Outside Counsel; Media Relations Consultants; Crisis Management Consultants; potentially Auditors; and IT Specialists. <br />
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If the government shows up with a search warrant in hand, the company must act quickly. The agents will not only be searching through every location where the documents may exist, but they will be conducting on-the-spot interviews of employees. <br />
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Employees need to understand how to examine a search warrant, understand the limitations and their rights under the search warrant. In case the agents want to search an area not covered under the search warrant, employees need to know how to respond to a request for consent to search. Most importantly, employees need to delay the search as much as they can so that counsel arrives on the scene. On-the-spot interviews need to be limited -- non-essential employees can be sent home and remaining employees can be advised of their rights by counsel. <br />
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Counsel and employees can seek information from the government agents; monitor the search; and learn how to preserve and protect possible privilege claims. <br />
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After the search is completed, counsel needs to conduct a post-search inventory and debriefing to gather as many clues and tips as to the nature of the federal investigation.michael volkovhttp://www.blogger.com/profile/15466117708246119284noreply@blogger.com2tag:blogger.com,1999:blog-7198883813064521925.post-34568362366609895752011-08-05T14:27:00.002-04:002011-08-05T14:31:57.817-04:00FCPA Risks and the Middle East<a href="http://www.google.com/imgres?imgurl=http://4.bp.blogspot.com/-j-_0kUv7xvk/TV61xYHKPtI/AAAAAAAABNQ/WG65zMI0OJw/s1600/Middle%252BEast%252BRegime%252BRisk.png&imgrefurl=http://www.foggofwar.com/2011/02/middle-east-protests-and-regime.html&usg=__nG8HyG3S1WPXTQxNVgp8YPI9Btk=&h=368&w=784&sz=85&hl=en&start=22&sig2=WfRXTBGoUqLg6CTpBskJtA&zoom=1&itbs=1&tbnid=meMq9cL6FEtkpM:&tbnh=67&tbnw=143&prev=/search%3Fq%3DMiddle%2BEast%2BRisks%26start%3D20%26hl%3Den%26newwindow%3D1%26sa%3DN%26gbv%3D2%26ndsp%3D20%26tbm%3Disch&ei=o2M3Tq-REeemsAKG9vkU" id="apf1" style="clear: left; cssfloat: left; float: left; margin-bottom: 1em; margin-right: 1em;" target="_blank"><img height="93px" id="ipfmeMq9cL6FEtkpM:" src="http://t2.gstatic.com/images?q=tbn:ANd9GcSFA3qgcArisQeWbgXyw5jzNhlbxKKPAX72dh1GL4jM3uxTNtNzSZEljBQ" style="border-bottom: #ccc 1px solid; border-left: #ccc 1px solid; border-right: #ccc 1px solid; border-top: #ccc 1px solid; padding-bottom: 1px; padding-left: 1px; padding-right: 1px; padding-top: 1px; vertical-align: bottom;" width="200px" /></a>The dangers of corruption extend into countries in the Middle East. Everyone likes to talk about Brazil, Russia, India and China, but the Middle east raises real corruption risks, and that risk is growing every day. Everyone likes to think that the events of the Spring with increased desires for democracy would reduce the risk of corruption but there is no evidence that has occurred. <br />
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The Middle East is particularly corrupt, even as some countries work to combat graft. In particular, Algeria, Egypt, Lebanon, Libya, Yemen, Iran, Syria and Iraq fall within the bottom half of all countries scored by Transparency International. Countries higher up the scale don’t fare much better: Turkey is seen as being as corrupt as Cuba, Kuwait is seen as corrupt as Georgia, and Saudi Arabia and Italy are seen as comparable. In fact, the only Middle Eastern countries in the top quarter of countries surveyed were Qatar, the United Arab Emirates and Oman.<br />
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Other characteristics of Middle Eastern countries create an increased risk of corruption, including: authoritarian regimes, monarchies and state-owned or controlled entities. The authoritarian rule often found in these countries means there is a lack of transparency Several FCPA enforcement actions have involved activities in the Middle East, including the United Nations Iraq Oil-for-Fodd-Scandal; Control Components; and <br />
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The numerous enforcement actions related to the UN Iraq Oil for Food program reflect the dangers of third party agents and consultants and so-called “after-sales service fees.” The Oil for Food program was set up to provide humanitarian relief to Iraqis while their country was under international trade sanctions. Its terms required payments for Iraqi crude oil be made to a U.N. escrow account created to allow the Iraqi government to purchase humanitarian goods. Beginning in 2000, the Iraqi government began to subvert the program, demanding kickbacks from both companies purchasing oil and those providing humanitarian relief. The payments took many forms, with companies making the bribes into Iraqi-controlled accounts in Jordan and Lebanon.<br />
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The Oil for Food scandal also highlights two other common corruption patterns—using consultants to pay bribes and the use of false invoices or fictitious “service fees” to hide improper payments to government officials. In cases, such as AB Volvo, companies use third party agents or intermediaries to make payments to government officials, which are then reimbursed or otherwise paid by the company through “consulting fees” for nonexistent services or through fictional invoices for goods and services that do not exist.<br />
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The pharmaceutical industry, in which DOJ has recently indicated a particular interest, was also caught up in the Iraq scandal, with Akzo Nobel and Novo Nordisk both paying millions to settle charges regarding illegal payments through third-party agents and consultants, including “after-sales service fees.”<br />
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The action against York International Corp. further illustrates the inherent risks inherent in using agents. In York, the company paid $22 million to settle charges that it paid approximately $522,500 to an intermediary knowing that most of the money was intended to bribe UAE officials to secure contracts. Similarly, going back to the Siemens case, Siemens allegedly paid nearly $20 million in bribes to a former director of the state-owned Israel Electric Company, which were routed through a consultant ostensibly engaged to “identify and define sales opportunities” and otherwise support contract negotiations. In reality, the business consultant was a Hong Kong-based clothing company with no expertise in the power generation industry. <br />
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The Textron matter is also relevant because it made many payments through Lebanese and Jordanian consulting firms and was ultimately charged for the manner in which it recorded the payments (a common hook used by government regulators to get companies to admit to FCPA violations). The company recorded the bribes paid through the agent as “commissions”, evidencing its awareness of the illicit nature of the “after-sales service fees”. Textron was also charged for illicit payments made through its Egyptian agent, where the kickbacks were again disguised as commissions<br />
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Adding to the complexity of operating in the Middle East is the broad definition of “government official” under the FCPA. Under the government’s interpretation of the FCPA, employees of the state-owned Abu Dhabi National Oil Company in the Textron case were “foreign officials” for purposes of the FCPA. This same view was also applied to quasi-governmental entities, as in HealthSouth, where the company was charged with making illicit payments to the director of a foundation in connection with efforts to secure a staffing and management agreement with a Saudi Arabian hospital.<br />
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Other routine interactions with government officials also present FCPA risks. Industries subject to government licensing controls are at risk, as with Latin Node, a Florida-based telecommunications company, that pleaded guilty to violating the FCPA’s antibribery provisions in connection with payments of more than $1 million to government officials in Yemen in order to receive and maintain favorable interconnection rates. The payments were made through a local partner, who received certain profits that Latin Node understood would be paid to government officials.<br />
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Interactions with routine government functions also present risks. In the Turk Deltapine case, involving Delta & Pine’s Turkish subsidiary, the company allegedly made payments to government inspectors who issued certifications regarding the fields where the company’s crops were grown. Rather than actually conducting necessary inspections, Turk Deltapine paid off government inspectors, who in turn failed to inspect the fields as they were required to do. <br />
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In the case of Control Components executives, both pled guilty to making corrupt payments to officials at various state-owned enterprises, including the Dolphin Energy company in the United Arab Emirates and Safco in Saudi Arabia. As with other cases, the executives made payments to government officials, disguised as “commissions.” The payments were primarily made to individuals at the state-owned companies who had the power to direct business.michael volkovhttp://www.blogger.com/profile/15466117708246119284noreply@blogger.com1tag:blogger.com,1999:blog-7198883813064521925.post-59873253204074073972011-08-04T04:25:00.000-04:002011-08-04T04:25:34.301-04:00Howard Sklar's Convergence: Export Controls and the FCPA<table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: left; margin-right: 1em; text-align: left;"><tbody>
<tr><td style="text-align: center;"><a href="http://www.google.com/imgres?imgurl=http://media.linkedin.com/mpr/pub/image-PTv3TNYbiKWei6XyPgfUbn78KrlVFPEyuqJNO2WUKPjqdMf/howard-sklar.jpg&imgrefurl=http://www.linkedin.com/in/howardsklar&usg=__pJjepWcpSqPzsmUJXvJJErX7ukY=&h=80&w=80&sz=3&hl=en&start=3&sig2=4OVlMrwJJvWc9vC76oBlWg&zoom=1&itbs=1&tbnid=XXk3B1eC0iru1M:&tbnh=74&tbnw=74&prev=/search%3Fq%3DHoward%2BSklar%26hl%3Den%26newwindow%3D1%26gbv%3D2%26tbm%3Disch&ei=JGQ3Tu7UHrGgsQLnsZAS" id="apf2" style="clear: left; cssfloat: left; margin-bottom: 1em; margin-left: auto; margin-right: auto;" target="_blank"><img height="200px" id="ipfXXk3B1eC0iru1M:" src="http://t3.gstatic.com/images?q=tbn:ANd9GcTaIrDxlTNHkYqG-eal6ip-65MWA6uyDvCaMfigB3oxcWr75sRO2BFAUQ" style="border-bottom: #ccc 1px solid; border-left: #ccc 1px solid; border-right: #ccc 1px solid; border-top: #ccc 1px solid; padding-bottom: 1px; padding-left: 1px; padding-right: 1px; padding-top: 1px; vertical-align: bottom;" width="200px" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Howard Sklar</td></tr>
</tbody></table>
Last year, the U.S. government imposed record penalties of nearly $2 billion in the FCPA and $1 billion in various penalties for U.S. sanctions and export controls. In some cases, these violations “converged” – meaning they arose from similar deficiencies in a company’s compliance program.<br />
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For those companies that engage in international business, they need to focus on the FCPA’s prohibitions on the payment of bribes; the Department of Commerce’s restrictions regarding the export of “dual-use” (largely commercial) goods, information, software and technology; the Office of Foreign Assets Controls (OFAC) economic sanctions and restrictions on the activities of U.S. persons and companies operating abroad in their dealings with banned countries or persons; and, for companies operating in the Middle East or with Middle Eastern countries, the Department of Commerce and the Internal Revenue Service’s restrictions on providing information in support of the boycott of Israel. <br />
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There is no doubt that companies face a complicated set of regulations which expose exporters to potentially large fines, loss of export privileges and even criminal penalties. The trends are unmistakable and likely to continue: the government is likely to increase scrutiny and enforcement of laws that apply to international transactions, which can include individuals involved, increased willingness to seek criminal penalties, increased criminal fines, use of more FBI agents with specialized knowledge in identifying violations, and improved coordination among agencies and internationally. <br />
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More cases involve exposure to multiple sets of regulations, raising real risks for multinational companies, including sanctions and export controls, FCPA, anti-boycott, and export controls. It is not far-fetched to think of multiple violations occurring out of a single act or failure to act. <br />
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Simple negligence, such as the failure of a company to check out an underlying transaction adequately before guaranteeing a letter of credit, or failure of an exporter to check lists of specially designated nationals before shipping, can cause violations of U.S. regulations governing exports and international conduct. <br />
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This is where Howard Sklar steps in - with the government looking at the laws regulating international conduct of U.S. persons as a common mosaic, companies at risk need an integrated approach.<br />
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It is critical for a company to weave the most common U.S. regulations of exports and international conduct into a common compliance mosaic – focusing on the key requirements of regulations, including the FCPA, the export-control and sanctions laws and the anti-boycott laws. <br />
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It is too often true that companies fail to see the business case for compliance and the need for an integrated approach to compliance, both across the corporation and among the various laws regulating international conduct. The solution is obvious but in many companies thee will to address this convergence is missing. These companies run the risk of seeing their failures to act outlined in the news reports rather than concise reports to an Audit and/or Compliance Committee.michael volkovhttp://www.blogger.com/profile/15466117708246119284noreply@blogger.com0tag:blogger.com,1999:blog-7198883813064521925.post-19324856284988127092011-08-04T04:19:00.000-04:002011-08-04T04:19:31.744-04:00The Critical Compliance Gatekeeper -- The Internal Auditor<a href="http://www.google.com/imgres?imgurl=http://2.bp.blogspot.com/--rcZNU8kPPU/TWPeGozhFhI/AAAAAAAAAp4/lsR1_-h60t8/s1600/gatekeepers.jpg&imgrefurl=http://heidiayarbe.blogspot.com/2011/02/year-of-prime-and-gatekeepers-to-world.html&usg=__6_KiuIyG1KRi_MWICHE_BIZq9XY=&h=250&w=300&sz=27&hl=en&start=20&sig2=q3xNpb2t2po2LQBYjJegRg&zoom=1&um=1&itbs=1&tbnid=hkJyAoYIHUxuBM:&tbnh=97&tbnw=116&prev=/search%3Fq%3DGatekeepers%26um%3D1%26hl%3Den%26newwindow%3D1%26sa%3DN%26rls%3Dcom.microsoft:*%26tbm%3Disch&ei=92E3Tv6fFOOysALkvKU-" style="clear: left; cssfloat: left; float: left; margin-bottom: 1em; margin-right: 1em;" target="_blank"><img height="166px" id="hkJyAoYIHUxuBM:" src="http://t2.gstatic.com/images?q=tbn:ANd9GcQi1idGMIGbKPmhLEebS4GROs_71QoWOVxbNQRSTt8dNAwX0Awsx-oSSNg" style="border-bottom: #ccc 1px solid; border-left: #ccc 1px solid; border-right: #ccc 1px solid; border-top: #ccc 1px solid; padding-bottom: 1px; padding-left: 1px; padding-right: 1px; padding-top: 1px; vertical-align: bottom;" width="200px" /></a><br />
It is unfortunate but true – compliance actors in a company can sometimes engage in internal turf battles which undermine overall compliance efforts. Every organization suffers from internal inefficiencies caused by personalities, protecting spheres of influence and sometimes, even organizational insecurities.<br />
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Without trying to insult general counsels and even compliance officers, the internal auditor in a company is uniquely positioned to identify corruption risks. All too often, internal auditors clash with general counsels and compliance officers. This is where senior management comes in and the tone-at-the-top is critical. Everyone is working for the same goal – to minimize the risk of corruption. Each has a unique role and responsibility, and each constituency must work together to prevent corrupt conduct.<br />
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The internal auditor sits in the trenches with unique access to financial information which may indicate illegal financial schemes. This may seem obvious but the internal auditor follows the money and can smell, early on, potential abuses. This is especially true because the internal auditor employs data analysis techniques which can raise the visibility of potential violations and help management focus on the right offices where the risk may exist. Moreover, the internal auditor should implement a comprehensive monitoring program proven to help detect potential violations. <br />
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The internal auditor adheres to the concept of “material” transactions. This is where the tension arises among the internal auditor, general counsel and compliance officer – the general counsel and compliance officer are not just interested in “material” transactions since bribery schemes can be carried out with transactions which fall below the “material” standard (e.g. petty cash). <br />
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But this difference can be addressed in the design of a financial early warning system for a company. In general, an auditor, as the critical gatekeeper, can help to identify anti-bribery red flags, to implement an early warning financial system, so that employees know if a red flag pops up they will be questioned by the auditor, compliance officer and general counsel’s office.<br />
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The internal auditor’s financial system should include: transaction testing to validate completeness and accuracy of books and records; continuous monitoring of key internal accounting controls; and identification of high volume cash transactions, payments sent outside the country of operation; multiple gifts to a single individual; entertainment of government customers; bonuses of unusual quantity or timing; attempts to circumvent detection (e.g. multiple changes to vendor payment details in a short period of time; duplicate active vendors; payroll employees matching address/phone details of government officials; and charitable contributions to organizations affiliated with the government).<br />
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The internal auditor, as the critical gatekeeper, can help to design and implement a state-of-the art compliance and monitoring program. Compliance officers and general counsels need to put aside their egos, provincial politics, and coordinate among their offices to ensure that their client – the company – does everything in its power to promote compliance.michael volkovhttp://www.blogger.com/profile/15466117708246119284noreply@blogger.com0tag:blogger.com,1999:blog-7198883813064521925.post-38739859380118757422011-08-03T05:35:00.000-04:002011-08-03T05:35:09.858-04:00Congress and Corruption: Practicing What They Preach?<a href="http://www.google.com/imgres?imgurl=http://neveryetmelted.com/wp-images/Corruption.jpg&imgrefurl=http://neveryetmelted.com/categories/corruption/&usg=__laTPXsH3DGdABrK4l0ukSmFvSlo=&h=314&w=375&sz=29&hl=en&start=2&sig2=PpsxrfQW_Uk_RJcKDvnW4w&zoom=1&itbs=1&tbnid=QtY0woaAdaKENM:&tbnh=102&tbnw=122&prev=/search%3Fq%3DCongress%2Band%2BCorruption%26hl%3Den%26newwindow%3D1%26sa%3DG%26gbv%3D2%26tbm%3Disch&ei=jmU3TvTEAeKqsQK985Ut" id="apf1" style="clear: left; cssfloat: left; float: left; margin-bottom: 1em; margin-right: 1em;" target="_blank"><img height="166px" id="ipfQtY0woaAdaKENM:" src="http://t0.gstatic.com/images?q=tbn:ANd9GcQZ1SjvqYqW2B8IgbmHq6VFYumB8Cbfr4HtEA8tKWdjbuHzRDmKZlQmoDs" style="border-bottom: #ccc 1px solid; border-left: #ccc 1px solid; border-right: #ccc 1px solid; border-top: #ccc 1px solid; padding-bottom: 1px; padding-left: 1px; padding-right: 1px; padding-top: 1px; vertical-align: bottom;" width="200px" /></a><br />
In the aftermath of the debt ceiling fiasco, Congress’ reputation took another blow in the court of public opinion. Even before the debt ceiling brinkmanship, Congress’ record on ethics was getting trampled through the mud yet again. <br />
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Washington is a city filled with double standards and perhaps there is no better one when you compare the new and aggressive enforcement policies which have been launched against American business while at the same time Congress cannot even get its house in order. <br />
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It was only five years ago that then Speaker Nancy Pelosi stated “You must drain the swamp if you going to govern for the people.” Unfortunately, Pelosi’s record only filled the swamp more than it was before. No one thought Congress could go any lower but here is the landscape right now. <br />
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The House Ethics Committee is busy investigating itself over misconduct allegations relating to the case against Rep. Maxine Waters, which resulted in the suspension of two staff attorneys and allegations of partisan infighting and violation of basic committee rules. Now, they have had to hire outside counsel to investigate themselves.<br />
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In the other chamber, the Senate Ethics Committee has been inactive on any serious ethical issues and recently issued a lengthy report against Sen. Ensign, who decided not to seek re-election. A Special Prosecutor was responsible for the report which was issued after Sen. Ensign announced his resignation. Still, the Justice Department declined to prosecute, as it adheres to its gun-shy standards for declining cases, even in the face of overwhelming evidence.<br />
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Lets face it – there is no tone-at-top in the Senate or the House, no commitment to ethical compliance and no allocation of resources needed to “drain the swamp.”. Indeed, Rep. Mel Watt introduced legislation to slowly strangle the Office of Congressional Ethics, a separate investigative body which can refer matters for further investigation – it initiated the investigation against Rep. Maxine Waters. Rep. Watt was the focus of an OCE investigation and obviously did not like anyone looking into his behavior.<br />
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It is interesting to see how Congress derides the business community for its unethical behavior when its record clearly shows that Congress is nothing more than the pot calling the kettle black.michael volkovhttp://www.blogger.com/profile/15466117708246119284noreply@blogger.com0tag:blogger.com,1999:blog-7198883813064521925.post-62102501954410964912011-08-03T05:31:00.000-04:002011-08-03T05:31:04.197-04:00When Does the SEC Act and the Justice Department Decline to Act?<a href="http://www.google.com/imgres?imgurl=http://merchantblog.thefind.com/wp-content/uploads/crystal-ball-fullsize.jpg&imgrefurl=http://merchantblog.thefind.com/2011/01/merchant-newsletter/resolve-to-take-advantage-of-these-5-e-commerce-trends/attachment/crystal-ball-fullsize/&usg=__UbcRXMgpltbDUj-CSI9fr2tVjWg=&h=800&w=1000&sz=293&hl=en&start=4&sig2=dDLHspEapxmLIkImSLaAww&zoom=1&itbs=1&tbnid=u9IeelswxfM6aM:&tbnh=119&tbnw=149&prev=/search%3Fq%3DCrystal%2BBall%26hl%3Den%26newwindow%3D1%26sa%3DG%26gbv%3D2%26tbm%3Disch&ei=v2I3Tr_QIIr-sQLBwbgB" id="apf3" style="clear: left; cssfloat: left; float: left; margin-bottom: 1em; margin-right: 1em;" target="_blank"><img height="159px" id="ipfu9IeelswxfM6aM:" src="http://t2.gstatic.com/images?q=tbn:ANd9GcTV8PW1Vaov8kJglvQqBTj_AAdyFkoDJrtLdKOesYf3hTuXR3uZzUnSCD0" style="border-bottom: #ccc 1px solid; border-left: #ccc 1px solid; border-right: #ccc 1px solid; border-top: #ccc 1px solid; padding-bottom: 1px; padding-left: 1px; padding-right: 1px; padding-top: 1px; vertical-align: bottom;" width="200px" /></a>With the recent Diaego settlement of FCPA charges, the question arises – when does the SEC act while the Justice Department declines to act? More accurately, when does the SEC see an FCPA violation which the Justice Department does not see?<br />
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The easiest answer to the questions is burden of proof: The SEC has civil responsibility, meaning a preponderance of evidence; and the Justice Department has criminal responsibility, meaning beyond reasonable doubt. But is that the only difference? <br />
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Some practitioners lament that the SEC “always” will find a violation while the Justice Department staff is more “reasonable” when it comes to finding a violation. It is hard to come up with a clear dividing line.<br />
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In 2011, there are two cases – Rockwell Automation and now Diaego where the SEC acted and the Justice Department declined prosecution, which is significant since the Justice Department did not enter into a non-prosecution agreement in these two cases but declined to prosecute. <br />
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In the Rockwell case, the SEC entered into a cease and desist involving "violations of the books and records and internal controls provisions of the Foreign Corrupt Practices Act ("FCPA") by Rockwell, through one of its former subsidiaries in China, Rockwell Automation Power Systems (Shanghai) Ltd. ("RAPS-China"), which was divested by Rockwell in January, 2007."<br />
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The SEC outlined specific facts: "From 2003 to 2006, certain employees of RAPS-China paid approximately $615,000 to Design Institutes, which were typically state-owned enterprises that provided design engineering and technical integration services that can influence contract awards by end-user state-owned customers. The payments were made through third-party intermediaries at the request of Design Institute employees and at the direction of RAPS-China’s Marketing and Sales Director. RAPS-China’s Marketing and Sales Director intended that these funds be paid directly to the Design Institute employees, with the expectation that they would influence the ultimate state-owned customers to purchase RAPS products. While the Design Institutes did provide some bona fide engineering and other services in connection with RAPS-China’s end-user contracts, RAPS-China could not substantiate the specific services rendered or the value of those services. Also during the same period, employees of RAPS-China paid approximately $450,000 to fund sightseeing and other non-business trips for employees of Design Institutes and other state-owned companies."<br />
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Rockwell ultimately earned $1.7 million in net profits on sales contracts with end-user Chinese government-owned companies and failed to accurately record the payments in its books and records. More importantly, Rockwell discovered the DI Payments through its normal financial review process, hired counsel and investigated the DI Payments with the oversight of its Board of Directors. It voluntarily self-reported the DI Payments to the Commission and voluntarily provided the Commission Staff with all relevant facts found in the investigation, and otherwise cooperated with the Commission. Rockwell undertook numerous remedial measures, including employee termination and disciplinary actions, enhancements to its internal controls and compliance program and conducted a global review of its other operations.<br />
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Rockwell agreed to "pay disgorgement of $1,771,000, prejudgment interest of $590,091and a civil money penalty of $400,000. Other FCPA enforcement actions focused on alleged improper travel and entertainment benefits to employees of Chinese state-owned enterprises include but resulted in criminal fines and settlements ( Lucent Technologies and UTStarcom Inc.); and other FCPA enforcement actions focused (in whole or in part) on allegedly improper payments to employees of so-called Chinese "Design Institutes" (see e.g. ITT Corp.and Avery Dennison).<br />
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In the most recent FCPA enforcement action, Diageo agreed to pay the SEC more than $16 million to resolve FCPA offenses that stretched over six years and involved bribes to foreign officials in India, Thailand, and South Korea. This recent action was resolved through an administrative action – which is a relatively new procedure authorized by the Dodd-Frank reform law. <br />
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The SEC alleged that Diaego - paid $2.7 million in bribes through subsidiaries for sales and tax benefits. Diageo's civil penalty consists of $11,306,081 in disgorgement, prejudgment interest of $2,067,739, and a further penalty of $3 million. The Justice Department declined to prosecute Diaego. <br />
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Diageo paid $1.7 million in bribes to government officials in India from 2003 to mid-2009. In India, government officials were responsible for purchasing or authorizing the sale of its beverages in India; in Thailand, Diageo paid $12,000 per month from 2004 to 2008– totaling nearly $600,000 – to a Thai government and political-party official for "consulting" services. He intervened on Diageo’s behalf in multi-million dollar tax and customs disputes, helping it win favorable decisions from the Thai government; and in South Korea, Diaego paid $86,000 to a customs official "as a reward for his role in the government’s decision to grant Diageo significant tax rebates." Other payments went to customs officials for travel and entertainment expenses connected with the tax negotiations. Diageo also gave hundreds of cash payments as gifts to South Korean military officials to obtain and retain liquor business.<br />
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Diageo’s subsidiaries made hundreds of illicit payments to foreign government officials because of lax oversight and deficient controls. Diageo cooperated with the investigation and took remedial measures, "including the termination of employees involved in the misconduct and significant enhancements to its FCPA compliance program."<br />
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In reviewing the publicly-available facts of both these cases, there is no apparent rationale which explains why the SEC acted and the DOJ did not. The violations themselves seem pretty clear cut. One can only surmise that the evidence supporting the claimed bribes was not sufficiently strong to justify a criminal prosecution. This may reflect the fact that some of the payments had “mixed motives” in that a portion of the payments were made in return for legitimate services and the other part constituted the “illegal” component intended to influence the decision maker to obtain and retain business.michael volkovhttp://www.blogger.com/profile/15466117708246119284noreply@blogger.com0tag:blogger.com,1999:blog-7198883813064521925.post-59390671872102244152011-08-02T02:12:00.003-04:002011-08-02T06:42:43.943-04:00Corporate Boards and Risk Management<a href="http://www.google.com/imgres?imgurl=http://www.financialchallengeexpo.com/press/101.jpg&imgrefurl=http://www.financialchallengeexpo.com/press.cfm&usg=__EJy6sWZnergZtV2Bc8SNmJyD5N4=&h=143&w=110&sz=4&hl=en&start=57&sig2=nSuhWsGbiZ8teK7Wrr4NNQ&zoom=0&um=1&itbs=1&tbnid=PfwsmiucEBIr6M:&tbnh=94&tbnw=72&prev=/search%3Fq%3Dcorporate%2Bboards%2Band%2Brisk%2Bmanagement%26start%3D40%26um%3D1%26hl%3Den%26newwindow%3D1%26sa%3DN%26rls%3Dcom.microsoft:*%26ndsp%3D20%26tbm%3Disch&ei=jXozTt7EFcqJsgLih7zcCg" style="clear: left; cssfloat: left; float: left; margin-bottom: 1em; margin-right: 1em;" target="_blank"><img height="200px" id="PfwsmiucEBIr6M:" src="http://t0.gstatic.com/images?q=tbn:ANd9GcSs0prwtNYG7NJpirOsZos4PZvzE5RDKJN3vNmpT9XjFr6FR8sE9A" style="border-bottom: #ccc 1px solid; border-left: #ccc 1px solid; border-right: #ccc 1px solid; border-top: #ccc 1px solid; padding-bottom: 1px; padding-left: 1px; padding-right: 1px; padding-top: 1px; vertical-align: bottom;" width="153px" /></a><br />
We always hear about the Corporate Compliance Officer, the Audit Committee or the Compliance Committee, if a company has created one, and how they are all supposed to act. But let's look at the most important actor of them all -- the Corporate Board. Of course, there are numerous corporate committees which have important responsibilities, but in the end, when the rubber meets the road, the entire board itself is going to make the critical decisions.<br />
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The dynamics of corporate boards vary depending on the industry, the make up of the board and the company itself. The "independent" board members play a critical role in ensuring that the board as a whole carries out its fiduciary duties. As I have noted in prior posts, board members themselves are being challenged in civil suits and government enforcement actions for failures to act or even deliberate forms of misconduct.<br />
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A company's board can set the tone for how a company is going to comply with the law, and how the company will respond to potential violations and misconduct. Corporate boards can be proactive and anticipate emerging risks and seek to manage them in a responsible manner. Or they can avoid issues and choose only to respond when an issue arises. <br />
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The mix of unethical values, potential profits and pride can create compliance combustion -- denial of responsible actions, scapegoating as a way to avoid pitfalls and liability, and cover ups. Such strategies never work and usually cost the company money, reputational harm and positions on the board itself.<br />
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A more reasoned and compliance-oriented approach should be employed, relying on enterprise risk management strategies. All too often, mid-size and smaller company board members are being asked to manage risks they do not even understand. That has to change. <br />
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Board members need to have certain skill sets and commitment to manage risk. Nominating Committees need to take more time in identifying board members with the right skill sets. Too often the need for such skills are overlooked, especially when it comes to non-independent board members. This is the critical issue which needs to be addressed before a board starts to assign members to committees. The skill sets and experiences needed have to be defined and have to be adhered to when judging the qualifications of potential board members. A board that truly serves as a strategic asset to investors is one that brings together a team whose skill sets are aligned with the goals of the company.<br />
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Recruiting directors who have the necessary expertise to identify and deal with significant risks is the challenge for corporate governance experts. Nominating Committees need to retool with these objectives in mind.michael volkovhttp://www.blogger.com/profile/15466117708246119284noreply@blogger.com0tag:blogger.com,1999:blog-7198883813064521925.post-32353941537620418632011-08-02T02:09:00.000-04:002011-08-02T02:09:52.438-04:00How Far Should AML Laws Go?<a href="http://www.google.com/imgres?imgurl=http://4.bp.blogspot.com/_VoTMOdI9adk/SUZ4DTDCYCI/AAAAAAAAErs/CuamIydtDJQ/s1600/private%2Bequity%2Bcnbc.jpg&imgrefurl=http://richard-wilson.blogspot.com/2009/11/private-equity-hedge-fund-secondaries.html&usg=__XqXoDmjEvWfpHgSgHAKs9mIpcz8=&h=240&w=327&sz=7&hl=en&start=25&sig2=bSTUyvOKwNjg0BYs36b4sg&zoom=1&um=1&itbs=1&tbnid=_6uZNDbp1N-FqM:&tbnh=87&tbnw=118&prev=/search%3Fq%3Dprivate%2Bequity%2Bfunds%26start%3D20%26um%3D1%26hl%3Den%26newwindow%3D1%26sa%3DN%26rls%3Dcom.microsoft:*%26ndsp%3D20%26tbm%3Disch&ei=CvcqTqO8K6vLsQKGh7HMCw" id="apf4" style="clear: left; cssfloat: left; float: left; margin-bottom: 1em; margin-right: 1em;" target="_blank"><img height="146px" id="ipf_6uZNDbp1N-FqM:" src="http://t1.gstatic.com/images?q=tbn:ANd9GcQNguZVL9krIZJT4GLbQULCyrHbrH0h8fTQf6VVDcD-meAFRzh39DIysqA" style="border-bottom: #ccc 1px solid; border-left: #ccc 1px solid; border-right: #ccc 1px solid; border-top: #ccc 1px solid; padding-bottom: 1px; padding-left: 1px; padding-right: 1px; padding-top: 1px; vertical-align: bottom;" width="200px" /></a><br />
For "financial institutions" (banks, mutual funds and broker-dealers), AML compliance requirements are established by statutes and regulations implemented by the Department of Treasury. These entities are required to adopt a written AML program that includes policies and procedures reasonably designed to detect and cause the reporting of suspicious transactions, designation of an AML compliance officer, regular and independent auditing/testing of the AML program; and a written customer identification program.<br />
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Private equity funds and hedge funds are not required to implement AML programs. While the law may not require them to do so, market force realities require them to address the issue. Investors and counterparties demand that such firms impose AML compliance regimes.<br />
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This situation may soon change. Senator Levin, who has been conducting vigilant oversight of financial institutions for years, introduced the Stop Tax Haven Abuse Act. Section 203 of that bill would require the Department of Treasury to require hedge funds and private equity funds to establish anti-money laundering programs and submit suspicious activity reports. <br />
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Before everyone rushes to support Senator Levin's proposal, it is important to consider whether there is a real need to treat hedge funds and private equity companies the same. Private equity funds are not safe havens for money launderers. In the typical scenario, private equity investors do not engage in multiple cash transactions -- participants invest money and, if successful, receive payments for investments that are profitable. This can take time. <br />
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Money launderers who want to disguise and conceal money also want to be able to move money through the financial vehicle. They do not want to wait to gain access to their money. <br />
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More importantly, private equity fund managers do not want money from any investor. They want solid and reliable investors to establish a long-term financial relationship. Of course, they are subject to OFAC laws and regulations for dealing with prohibited persons. For this reason, most private equity funds have their own set of screening practices, many of which are thorough and reliable. <br />
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Before imposing a set of laws and regulations which were designed for financial institutions, Congress and the Treasury Department need to take a closer look at the practical implications of Senator Levin's proposal.michael volkovhttp://www.blogger.com/profile/15466117708246119284noreply@blogger.com1tag:blogger.com,1999:blog-7198883813064521925.post-68064167522582889672011-07-29T22:37:00.001-04:002011-08-01T12:00:22.980-04:00Do DPAs and NPAs Promote Balanced Justice?<a href="http://www.google.com/imgres?imgurl=http://learn.cvuhs.org/file.php/1427/scales_of_justice2.jpg&imgrefurl=http://learn.cvuhs.org/course/view.php%3Fid%3D1427&h=796&w=690&sz=28&tbnid=sXNkljMwM03UmM:&tbnh=241&tbnw=209&prev=/search%3Fq%3DScales%2Bof%2BJustice%26tbm%3Disch%26tbo%3Du&zoom=1&q=Scales+of+Justice&usg=__3TmfEqeDjw4Mul_h9kvuP5I_wOo=&sa=X&ei=4HQzTpnLKOyEsAKIiNXCCw&ved=0CB8Q9QEwAA" style="clear: left; cssfloat: left; float: left; margin-bottom: 1em; margin-right: 1em;" target="_blank"><img align="middle" alt="" border="1" class="" height="200px" src="http://www.google.com/images?q=tbn:ANd9GcRZQ5ndXuxrOuMytdWaSDU0ETYkN5nRudAV4kSyS4erfDb80HscBD2EcSSE" style="margin: 3px; padding-bottom: 1px; padding-left: 1px; padding-right: 1px; padding-top: 1px;" title="http://learn.cvuhs.org/course/view.php?id=1427" width="171px" /></a><br />
In the Bush Administration, the Justice Department turned deferred prosecution agreements (DPAs) and non-prosecution agreements (NPAs)into relevant terms for defense counsel. Now, even the SEC has joined the club entering into the first DPA and NPA.<br />
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The distinction between a DPA and an NPA is critical -- the DPA invokes the Court's supervisory jurisdiction and requires the Justice Department to lodge a criminal information to charge the company but defer the prosecution; the NPA remains within the discretion and control of the Justice Department, the Executive Branch, and does not involve any filing with the courts.<br />
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The primary benefit of these two tools is to avoid the catastrophic consequences which can result to a public company which is indicted -- the Arthur Andersen case in the early 2000s resulted in the collapse of the company, the loss of thousands of jobs and economic harm to communities around the country. <br />
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The Justice Department's use of DPAs and NPAs has been criticized as a tool which rewards bigger companies with more effective defense counsel and lobbyists, to the detriment of mid-size and less influential corporate actors. It is hard to find a consistent dividing line between a decision to charge a company and the decision to enter into a n NPA or a DPA. The Justice Department has tried to articulate such standards, without much success. However, at least the Justice Department is trying to use consistent forms of NPAs and DPAs, imposing similar burdens on actors who enter into these agreements. <br />
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The use of corporate monitors, and when they are necessary, remains a troublesome area. The Monfrot Memo which was adopted years ago in response to criticisms that corporate monitorships were being handed out to Justice Department cronies, has not done too much to life the opaque standards being employed for corporate monitors. <br />
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Despite all of these concerns, the Justice Department and now the SEC continue to employ DPAs, NPAs and corporate monitors at a significant pace. More and more component's of the Justice Department, such as the Antitrust Division, are using DPAs and NPAs for the first time, and of course, the rate of voluntary disclosures continues to rise as corporations are being scared into confessing their sins. <br />
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The Fraud Section is the largest user of DPAs and NPAs. The SEC plans to use these tools in more cases. The Antitrust Division recently entered into its two NPAs in the municipal bond investment investigations under which two companies acknowledged their participation in unlawful agreements to manipulate the bidding process and rig bids on municipal investment contracts. The two companies paid civil penalties of $160 million and $228 million, respectively. <br />
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DPAs and NPAs are frequently used when dealing with corporations which are highly regulated and where the collateral consequences of a conviction can be devastating to the corporation. These concerns typically occur in the financial and health care industries,e specially with the impact that exclusion from Medicare and Medicaid could have on a corporation.<br />
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Enforcement agencies are developing new tools which give them greater flexibility to resolve cases. But they have to be careful to use these new tools to avoid situations where uneven justice is dispensed. The more consistent the standards for use of the tools, the terms and provisions of the tools, and the more transparent the process is, the more likely the government is to earn judicial support and avoid public and political criticism.michael volkovhttp://www.blogger.com/profile/15466117708246119284noreply@blogger.com1tag:blogger.com,1999:blog-7198883813064521925.post-8673372164749909092011-07-29T09:42:00.000-04:002011-07-29T09:42:32.327-04:00DOJ's Expansive View of "Obtain or Retain Business"<a href="http://www.google.com/imgres?imgurl=http://www.taylorwessing.com/bribery/images/i_overview_lg.jpg&imgrefurl=http://www.taylorwessing.com/bribery/i_overview.html&usg=__wpPGYanGWuuaKtxXYVaRpDWc0H4=&h=187&w=345&sz=6&hl=en&start=5&sig2=5nqUVRaqXhErwnTyeSfgZA&zoom=1&um=1&itbs=1&tbnid=J3fZd6CxdSsqmM:&tbnh=65&tbnw=120&prev=/search%3Fq%3Dobtain%2Bor%2Bretain%2Bbusiness%26um%3D1%26hl%3Den%26newwindow%3D1%26sa%3DN%26rls%3Dcom.microsoft:*%26tbm%3Disch&ei=E0krTvbgK-eJsgLV6LSkCw" id="apf4" style="clear: left; cssfloat: left; float: left; margin-bottom: 1em; margin-right: 1em;" target="_blank"><img height="108px" id="ipfJ3fZd6CxdSsqmM:" src="http://t1.gstatic.com/images?q=tbn:ANd9GcRPEFTwnhh5waHqP6YnSzQe0y72X42jJK87YwmfIg2kGixOUKcNqUB4Gw" style="border-bottom: #ccc 1px solid; border-left: #ccc 1px solid; border-right: #ccc 1px solid; border-top: #ccc 1px solid; padding-bottom: 1px; padding-left: 1px; padding-right: 1px; padding-top: 1px; vertical-align: bottom;" width="200px" /></a><br />
The News Corp scandal has focused attention on the interpretation of the FCPA element which requires that bribes be paid (or attempted) to "obtain or retain business." Some commentators have claimed that the News Corp facts cannot satisfy this element because the bribes paid to police officers were made for "information." <br />
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In the past few years, the SEC and DOJ have broadly interpreted the "obtain or retain business" element of the FCPA to capture a wide range of conduct beyond the clear example of a payment to win a contract award, including payments to expedite and approve patent applications, to obtain favorable treatment in pending court cases, to schedule inspections, to obtain product delivery certificates, to alter engineering design specifications in favor of a particular bidder, to obtain preferential customs treatment, to avoid or expedite necessary inspections, to alter the language in an administrative decree, to obtain governmental reports and certifications necessary to market a product, and to reduce taxes. This interpretation was praised by the OECD in its Phase 3 Report on the U.S. anti-corruption efforts. <br />
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The News Corp case is likely to reopen the debate as to the meaning of the “obtain or retain business” element. In its 2004 decision in U.S. v. Kay, the Fifth Circuit appeared to have ended the debate, holding that the FCPA was not limited to bribes to obtain business from a foreign government or even to bribes that led “directly to the award or renewal of contracts.” The Kay court ruled that “bribes paid to foreign officials in consideration for unlawful evasion of customs duties and sales taxes could fall within the purview of the FCPA’s proscription.” The court warned, however, that the scope of the statute was not limitless, stating, “We hasten to add, however, that this conduct does not automatically constitute a violation of the FCPA: It still must be shown that the bribery was intended to produce an effect – here, through tax savings – that would ‘assist in obtaining or retaining business.’”<br />
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In the Panalpina cases, most of the payments were made to customs or tax officials to reduce duties and taxes, to expedite customs clearances, or to evade import regulations. In the latter cases, the government made very little effort to link such payments to obtaining or retaining business. For example, in Pride International, the DOJ alleged a number of what it termed “bribery schemes,” including payments to a Mexican Customs Official “to avoid taxes and penalties for alleged violations of Mexican customs regulations relating to a vessel leased by Pride International.” Similarly, in GlobalSantaFe, the SEC alleged that through a number of “suspicious payments” the company “avoided costs and gained revenue.” Without more explanation, such barebones allegations create the impression that the government equates gaining revenue or reducing costs generally with “obtaining or retaining business.” <br />
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By reducing costs and increasing profits, a company does not necessarily "obtain or retain" business. While this may seem like a hyper-technical reading of the statute, Congress' intent was clearly to link the bribery payment to a business motive for additional (or preserving existing) business. There are bound to be circumstances in which such a cost reduction does nothing other than increase the profitability of an already-profitable venture or ensure profitability of some start-up venture. Indeed, if the government is correct that anytime operating costs are reduced the beneficiary of such advantage is assisted in getting or keeping business, the language that expresses the necessary element of assisting in obtaining or retaining business would be unnecessary, and thus surplusage.<br />
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Some of the Panalpina payments fall within the Kay rule, e.g., some payments appear to have allowed the importers to bring in equipment and rigs without which they could not perform new or existing contracts. It is even possible that, similar to the facts in Kay, the importers could not have competed for existing or new business had they paid the full duties or taxes or complied with other local requirements. Unfortunately, the government’s pleadings in the Panalpina cases do more to blur than clarify the limits of the law.michael volkovhttp://www.blogger.com/profile/15466117708246119284noreply@blogger.com0tag:blogger.com,1999:blog-7198883813064521925.post-78720767555076989692011-07-28T10:47:00.000-04:002011-07-28T10:47:46.378-04:00Russia: The Anti-Bribery Frontier<a href="http://www.google.com/imgres?imgurl=http://www.russiablog.org/PutinMedvedevUnitedRussia.jpg&imgrefurl=http://www.russiablog.org/2008/07/russian_federation_situation_r_5.php&usg=__Lu3mS0cxIkIFraUVQ4VhGjNJhNE=&h=462&w=300&sz=23&hl=en&start=10&sig2=52w0W9w-gpjNuW3MQDAG1Q&zoom=1&um=1&itbs=1&tbnid=dIbwwsvvaOkmQM:&tbnh=128&tbnw=83&prev=/search%3Fq%3DRussia%2Band%2BMedvedev%26um%3D1%26hl%3Den%26newwindow%3D1%26sa%3DN%26rls%3Dcom.microsoft:*%26tbm%3Disch&ei=uDwqTvq5FaOQsQLJ0JCLCw" id="apf9" style="clear: left; cssfloat: left; float: left; margin-bottom: 1em; margin-right: 1em;" target="_blank"><img height="200px" id="ipfdIbwwsvvaOkmQM:" src="http://t0.gstatic.com/images?q=tbn:ANd9GcQy_8iwpp2kI7CNFW5sqcM9bzPYrZxef0LRLOdK-xX2hSVYJDBtm16_Kjo" style="border-bottom: #ccc 1px solid; border-left: #ccc 1px solid; border-right: #ccc 1px solid; border-top: #ccc 1px solid; padding-bottom: 1px; padding-left: 1px; padding-right: 1px; padding-top: 1px; vertical-align: bottom;" width="129px" /></a><br />
More multinational companies are expanding into Russia. China has become passe. Years ago, every company was considering expanding into China. Now, Russia is the new frontier. India is a close second on the frontier competition. <br />
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China and India pose real corruption risks. Corruption is built into China's government and social fabric. India has extensive layers of government regulation and market structures which increase corruption risks.<br />
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Russia presents even greater risks. Corruption exists at every level of the economy. Organized crime has grown and permeated every aspect of the marketplace. <br />
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President Medvedev is trying to fight back. He has launched anti-corruption initiatives and is struggling to have them take root. Transparency International's most recent Corruptions Perception Index ranks Russia 154th out of 178 nations. The Russian government itself estimates that corruption and inefficiencies in state and local government procurement costs the Russian economy approximately $35 billion. <br />
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Russia enacted a new anti-corruption law on May 5, 2011, Federal Law No. 97-FZ which amends the Russian Criminal Code which outlaws bribery of Russian or non-Russian officials by Russian individuals or companies. The new law also adds steep new fines for bribery violations.<br />
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The law is aggressive but its effectiveness will depend on enforcement. The OECD has now invited Russia to join its Anti-Bribery Convention and Working Group on Bribery. Even AG Holder and AAG Lanny Breuer praised the new law. <br />
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Russia's enforcers hope that the threat of steep fines will deter potential violators from engaging in bribery. That may be wishful thinking given the pervasive corrupt attitudes in Russia's economy and society. Importantly, the system of tough fines and penalties also applies to intermediaries who pass bribes, such as consultants and third party agents.<br />
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The Russian government hopes that the new fine structure will deter companies and motivate those companies operating in Russia to take their anti-corruption obligations. <br />
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The jury is still out on Russia and the risks are significant. If Russia adopts an aggressive enforcement program, it could have a real impact and help to improve Russia's image.michael volkovhttp://www.blogger.com/profile/15466117708246119284noreply@blogger.com0tag:blogger.com,1999:blog-7198883813064521925.post-27962576438034691642011-07-26T13:02:00.000-04:002011-07-26T13:02:28.373-04:00Criminal Antitrust: The Continuing Risk<br />
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<img alt="Graph: Criminal Antitrust Fine" height="200px" src="http://www.justice.gov/atr/public/criminal/264101a.gif" width="320px" /></div>
While everyone is focused on anti-corruption enforcement and compliance issues, global antitrust enforcement continues as a significant risk. Over the last few years the most important trend has been the rising role of European antitrust enforcement against cartels and imposition of higher fines. Even with this steady rise in European enforcement, US criminal antitrust enforcement has returned in 2011 from a slower 2010. The pace of US criminal antitrust fines are expected to set new records.<br />
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The more important trend is the continuing global coordination of antitrust enforcement. Global cartel activity has challened enforcement agencies to coordinate thier own efforts. The regulators are now catching up. <br />
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In particular, the Antitrust Division has demonstrated cooperation with competition authorities in Europe, North America, Asia, Australia and New Zealand, South America and Africa, on a range of investigations involving auto part suppliers, air cargo, submarine and land cables, and liquid crystal displays. <br />
Last year, the Antitrust Division secured $550 million in criminal fines. This did not reflect a change in commitment but the cycles of criminal prosecutions and grand jury investigations. For the current year, the Antitrust Division is on a pace to exceed this amount.<br />
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This calculation does not even include recent civil settlements reached by the Antitrust Division and the SEC in the municipal bonds investigation. When those settlements are included then the Antitrust Division <br />
will exceed $1 billion, the highest amount in any one year since the banner year in 1999. <br />
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The average prison sentence for individual defendants in FY 2010 was 30 months and the percentage of cirminal defendants receiving sentences of incarceration was near 80 percent. These trends are consistent with past years. An individual defendant in the concrete mix conspiracy was sentenced to 48 months incarceration, whcih tied the record for the highest amount ever imposed.<br />
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The Justice Department has demonstrated that it will impose tough sentences on foreign nationals. Since 1999, nearly 50 foreign nationals have received jail sentences. The Antitrust Division increasingly is seeking and obtaining aggressive pre-trial release conditions for foreign nationals charged with criminal antitrust offenses. In recent cases, the Justice Department opposed pre-trial releasae of defendants who wished to return to Taiwan pending their criminal trials. The court has required that the defendants to stay in the US while awaiting trial. <br />
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For compliance officers, antitrust continues to be a major risk. The FCPA gets all the press attention but global comapnies need to be vigilant when it comes to possible antitrust violations.michael volkovhttp://www.blogger.com/profile/15466117708246119284noreply@blogger.com0