Archive for the ‘Australia’ Category

Checking In Down Under

Monday, August 25th, 2014

Today’s post is from Robert Wyld (Johnson Winter & Slattery), the Australia Expert for FCPA Professor.

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This post highlights a range of important developments in Australia and the Asia Pacific Region in the area of foreign bribery policy, investigations and regulation through August 2014.  Issues covered include:

  • Australia’s agenda for the G20 November meetings;
  • Whistleblower protections;
  • Australian courts and “super injunctions”;
  • Australian foreign bribery investigations and prosecutions – media updates;
  • New Zealand amendments to foreign bribery and other economic crime laws; and
  • Asia-Pacific Anti-Corruption Network

Australia’s G20 Anti-Corruption Agenda

The Australian Government has a significant opportunity to proactively shape the anti-corruption agenda at the forthcoming meeting of G20 countries in Brisbane in November 2014. Senior members of the Attorney General’s Department (AGD) are leading the way, seeking to develop initiatives for consideration by all G20 countries.

The Action Plan of 2012 is due to expire in 2014. The AGD is focusing on three key priorities:

  • developing rules for the disclosure of beneficial ownerships;
  • combating foreign bribery; and
  • promoting judicial integrity.

There is a broadly held view that corporate or other structures are regularly used to engage in economic crime, including corruption, and transparency is required to identity the beneficial ownership of a particular entity. Together with targeting foreign bribery and corruption, the G20 governments regard these topics as of high priority.  Each G20 country is to prepare a detailed self-assessment of their performance as against the OECD Convention criteria. Once principles are agreed upon, they will be made public by the G20 leaders.

In terms of any National Anti-Corruption Plan, promoted by the former Labor Government, the Plan appears to have died due to government inactivity and it is not clear whether it will be resuscitated. The public perception from the media is that the current government is not interested in any over-arching Commonwealth anti-corruption body. This is disappointing as history tells us that wherever governments make decisions worth significant money, the existence of corruption rears its head.

ASIC and Whistleblower Protections

The role of protections for whistleblowers is not going away despite the apparent lack of focus within ASIC (Australian Securities and Investments Commission) to manage whistleblower complaints.

On 26 June 2014, the Australian Senate Economics Reference Committee released its report into the ongoing review of ASIC. The Committee made a number of key recommendations:

  • that ASIC establish an “Office of the Whistleblower”;
  • that existing laws should be extended to cover anonymous disclosures;
  • the “good faith” requirement for protected disclosures under the Corporations Act 2001 (Cth) be repealed;
  • the Government explore options to incentivise whistleblowers through a rewards-based system (as currently existing in the US under the Exchange Act).

It will be interesting to see how this last point develops. In the past, the Chairman of ASIC has publicly started he does not favour a scheme that rewards whistleblowers, believing that a reward will in some way corrupt the value of the evidence and undermine a whistleblower’s credibility (although that has not been a problem in the US to date).

Australian Courts and Super Injunctions

Australia is a signatory to the OECD Anti-Bribery Convention.  Article 5 of the Convention reads as follows:

“Investigation and prosecution of the bribery of a foreign public official shall be subject to the applicable rules and principles of each Party. They shall not be influenced by considerations of national economic interest, the potential effect upon relations with another State or the identity of the natural or legal persons involved.”

This principle is reflected in the Prosecution Guidelines issued by the Commonwealth Director of Public Prosecutions (CDPP) where, in Annexure A to the Guidelines dealing with prosecutions for foreign bribery, it is made clear a prosecutor must not be influenced by the factors identified in Article 5 of the OECD Convention. It should be noted that the CDPP has issued Guidelines for Suppression Orders (as at May 2013). These Guidelines acknowledge that while the fundamental principle of open justice should prevail, circumstances involving “national security”, “ensuring a fair trial” and the “protection of vulnerable witnesses” may justify suppression orders.

In June 2014, unbeknown to anyone outside a select group of litigants, the Victorian Supreme Court issued what is known as a “super injunction” in Australia’s prominent foreign bribery case. This injunction prevents the media from reporting anything about the case, the terms of the order or the identity of various persons named in the order. These orders have now been published on the internet by WikiLeaks and have been republished across a range of Asian media. These types of orders, secured in secrecy and imposing draconian contempt penalties for any contravention, sit very uncomfortably with Australia’s international obligations and the principle of open justice. Indeed, when the internet is free to publish such orders and they are republished across the regional media, one can only conclude that such orders are ineffective and are driven by unknown and unstated political or economic or other reasons. The only party that can explain the need for such orders is the Commonwealth Government, yet it remains conveniently silent, no doubt relying on that well-worn phrase “you may think that but I could not possibly comment”.

New Zealand Amends Anti-Corruption Laws and Penalties

The New Zealand Government has published the Organised Crime and Anti-Corruption Bill in Parliament to update its economic crime laws, to allow for a greater degree of international agency collaboration and to reflect the country’s obligations under the OECD and United Nations Conventions.

The principal features of the Bill, in so far as anti-corruption laws are concerned, include the following:

  • authorising the NZ Police to share personal information with their international counterparts;
  • creating a criminal offence to accept a bribe from a foreign public official (attacking the demand side of corruption);
  • creating a criminal offence to accept a bribe for using one’s influence over an official (referred to as “trading in influence”);
  • clarifying the circumstances under which a body corporate commits the criminal offence of bribery and corruption;
  • making it clear that a foreign bribery offence can be prosecuted whether or not the conduct is an offence in  the country in which the conduct occurred;
  • increasing the maximum penalty for imprisonment for a bribery and corruption conviction from 2 years to 7 years;
  • including bribery and corruption offences as a “crime involving dishonesty”;
  • requiring companies to record facilitation payments (permitted under the NZ Crimes Act) in a consistent manner under the Companies Act; and
  • amending the Income Tax Act to ensure bribes are not tax-deductible.

These are important changes and while the maintenance of facilitation payments is still regrettable, the laws demonstrate the NZ Government’s commitment to bringing its domestic laws into harmony with those of other OECD member countries.

Asia-Pacific Anti-Corruption Network

The recent meeting of the APEC Network of Ant-Corruption Authorities and Law Enforcement Agencies, or ACT-NET in Beijing announced the commencement of a new channel or platform for regulatory agencies to exchange information targeting large scale corruption and bribery in the Asia Pacific region. The secretariat will by initially hosted by China, based in Beijing and the Chinese Ministry of Supervision will manage the information sharing in an institutional capacity.

As Fu Kui, Vice Minister of China’s National Bureau of Corruption Prevention said:

“As domestic anti-corruption efforts intensify, corrupt officials flee abroad and remain at large by taking advantage of legal differences between our jurisdictions…this is a serious challenge to each economy’s rule of law. By building a multilateral platform to strengthen work-level exchange and case cooperation, and expand channels for anti-corruption and law enforcement partnership, we could cut off the escape route of corrupt fugitives.”

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Regarding the above-referenced New Zealand bill, it – like the FCPA-like laws of many other OECD member countries that recognize corporate criminal liability – contains compliance-defense concepts.  Specifically, the bill states:  ”a body corporate or corporation sole does not commit an offence … if it has taken reasonable steps to prevent the offence.”

Checking In Down Under

Wednesday, April 23rd, 2014

Today’s post is from Robert Wyld (Partner, Johnson Winter & Slattery).  Wyld is the Australia Expert for FCPA Professor.

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This update covers a range of important developments in Australia and overseas in the area of foreign bribery policy, investigations and regulation in the first quarter of 2014.

The key issues that are covered in this Update include:

  • Australia’s address to the G20 Anti-Corruption Roundtable
  • The Australian Securities and Investment Commission (ASIC) and whistleblower protections
  • ASIC and civil penalties
  • Australian foreign bribery investigations and prosecutions – media updates
  • Asia Pacific developments

Australia and the G20 Anti-Corruption Roundtable

The Australian Government has been remarkably quiet in the foreign bribery space. A Consultation Paper into whether facilitation payments should be abolished (published in November 2011) appears to have died an unfortunate death by inertia.

It was refreshing to read that the Attorney General, George Brandis QC, in delivering his opening address to the G20 Anti-Corruption Roundtable, made it clear that corruption is and remains one of the greatest barriers to global growth and that all governments must address the systemic problems flowing from corruption.

The Attorney General highlighted three specific issues that warranted close attention by the Roundtable group – judicial integrity, foreign bribery and the transparency of legal structures, and the identity of beneficial owners. While little was said on the detail, it is encouraging to see the topic of foreign bribery (whatever that entails) is firmly on the agenda while Australia chairs the G20 in 2014.

ASIC and Whistleblower Protections

On 18 February 2014, ASIC published its Information Sheet No. 52 entitled ‘Whistleblowers and whistleblower protection’. ASIC’s responsibilities are to regulate companies acting in contravention of the Corporations Act 2001 (Cth) (Act). ASIC’s focus is on conduct which is disclosed to it which involves a potential contravention of the Act. The Act provides a statutory framework to protect whistleblowers (see Pt9.4AAA, sections 1317AA to 1317AE).

The key elements under the statutory whistleblower protection regime that must be satisfied are:

  • the whistleblower must be an officer or an employee of the company or a contractor or employee of a contractor which has a current contract to supply goods or services to the company the disclosure is about;
  • the disclosure must be to the company’s auditor, a director, secretary or senior manager within the company, a person authorised by the company to receive whistleblower disclosures or ASIC;
  • the whistleblower must identify himself when making the disclosure;
  • the whistleblower must have reasonable grounds to suspect that the information disclosed indicates the company or company officers may have breached the Act (or ASIC’s Act); and
  • the whistleblower must make the disclosure in good faith.

The tenor of ASIC’s approach is that it still has limited resources, it prefers to focus on the disclosed conduct and it keeps emphasising that a whistleblower should seek independent legal advice. ASIC has been criticised in the past for responding very slowly at times to significant complaints. ASIC will now appoint a dedicated Liaison Officer to be in regular contact with the whistleblower. While a whistleblower may have protection from victimisation, any complaint about how a whistleblower is treated is a private matter between the whistleblower and the company.

In an Ethics Conversation hosted by the St James Ethics Centre in Sydney on 8 April 2014, the ASIC Chairman, Greg Medcraft indicated that while the protection of whistleblowers was important, he appeared less enamoured of the US whistleblower bounty scheme established under the US Securities Exchange Act. Mr Medcraft felt that such a scheme sat uncomfortably with the Australian culture of “not dobbing in a mate”. At the same event, Rod Sims, the Chairman of the Australian Competition & Consumer Commission, was concerned about how Australian courts might treat an individual who had a financial interest in a prosecution and the impact that might have on a whistleblower’s overall credibility. Perhaps the pioneering research work of Prof AJ Brown at Griffith University might help to debunk the myth of not dobbing in a mate – and encourage regulators to realise that the vast majority of Australians consider that whistleblowers who report serious misconduct should be both praised and protected. It remains to be seen how ASIC will act in the future towards whistleblowers.

ASIC and Civil Penalties

In March 2014, ASIC published its Report No. 387 entitled ‘Penalties for corporate wrongdoing’ which considered the penalties available to ASIC and whether they were proportionate and consistent with those for comparable wrongdoing in selected overseas jurisdictions. The key findings of the Report were as follows:

  • ASIC rated effective enforcement as critical to achieving its strategic priorities of fair and efficient financial markets with a range of penalties designed to deter contravention and promote greater compliance;
  • in relation to imprisonment and fines open to ASIC to seek through litigation: the maximum fines are broadly consistent with other comparable jurisdictions save for the US; other jurisdictions have greater flexibility to impose higher non-criminal fines; other jurisdictions can seek the disgorgement of profit generated by the wrongdoing,
  • within Australian legislation, there are examples where non-criminal fines can be imposed at a much higher amount than those available to ASIC.

ASIC has called for greater penalties to be available to it for corporate wrongdoing. While ASIC made it clear that it will pursue the sanctions and remedies best suited to each case on its merits, Mr Medcraft made it clear at the St James Ethic Centre Conversation that he wanted to target individuals as it was only through “scaring the hell out of people” faced with imprisonment, that he believed commercial behaviour might, in fact, change.

Australian Foreign Bribery Investigations and Prosecutions – Media Updates

The Securency banknote printing corruption prosecution continues to roll on slowly in Victoria. While the whole process is subject to suppression orders in Victoria, it is hoped significant public progress in the case occurs during 2014.

The Australian media has continued to follow the saga of an AFP investigation into the Middle East business activities of Leighton Holdings, its various entities and senior officers. While no criminal prosecution has occurred, the opening salvos in a securities class action in Victoria concerning non-disclosure to the market between aggrieved Leighton shareholders and the company suggests the case will continue to affect the company, currently under new Spanish management.

Asia Pacific Developments

The Asia Pacific region is home to both many of the world’s most active economies and to those where the perception of systemic corruption is the greatest.

Developments in China, as one of Australia’s most significant trading partners, must be followed. From mid-2013, the Chinese Government started to target multinational companies in the pharmaceutical sector, in the “supply side” of corruption rather than its traditional focus on the “demand side” of corruption, being the local Chinese public official. This must ring warnings to all Australian business that they are not immune from Chinese Government investigation.

In addition, the role of the US – China Joint Liaison Group on Law Enforcement, may yet see an increase in parallel US and China investigations, although human rights issues may see such investigations undertaken only in limited cases.

In the Asia-Pacific Economic Cooperation (APEC) Bali Declaration in late 2013, APEC called for greater regional cooperation on corruption and collaboration between regulators. A new regional authority is to be established, called the APEC Network of Anti-Corruption Authorities & Law Enforcement Agencies (ACT-NET). The goal of this agency is to, in part, “encouraging private sector stakeholders to implement APEC’s high standard principles for codes of business ethics”.

At the meeting of the APEC Anti-Corruption and Transparency Working Group held in Ningbo in China in February 2014, members agreed to further discuss ACT-NET’s development and implementation during 2014. The goal of the ACT-NET was said to advance greater collaboration among law enforcement authorities in combating corruption, bribery, money laundering, and illicit trade.. Future meetings of ACT-NET will take place during 2014.

Friday Roundup

Friday, January 17th, 2014

Did you notice?, scrutiny updates, quotable, too narrow, save the date and for the reading and viewing stack.  It’s all here in the Friday roundup.

Did You Notice?

This previous post – “Double Dipping” – spotlighted a common trend in issuer FCPA enforcement actions.  That is, the company pays twice for the improper conduct.  First, to the DOJ because alleged improper gain is a key factor in the advisory U.S. sentencing guidelines which guide criminal fine amounts, and again to the SEC because alleged improper gain often equates to a disgorgement amount.

Did you notice the following in the recent Alcoa enforcement action?  In the DOJ’s plea agreement with Alcoa World Alumina LLC the DOJ set forth various factors justifying a reduced criminal fine amount including:  “the significant remedy being imposed on the Defendant’s majority shareholder, Alcoa, by the U.S. Securities and Exchange Commission for Alcoa’s conduct in this matter.”

FCPA practitioners would be wise to file this someplace important and the DOJ’s recognition of such “double-dipping” is a welcome development.  Time will tell whether it was case specific.

Scrutiny Updates

Companies have different disclosure practices.  Some companies disclose specific FCPA internal investigation costs, others do not.  When a company falls into the former category, it is a relevant datapoint.  Nordion (see this prior post for its initial disclosure) recently disclosed that its “full year expenses associated with [its] investigation was $11.8 million.”

Microsoft, which first became the subject of FCPA scrutiny in March 2013 (see here) - thereby exposing the fallacy of the “good companies, don’t bribe period” position (see here) –  ”is now requiring its partners to educate their employees on the legal
consequences of bribery and other illegal activity.”  So says this recent article in CRN which further states:   “A new Microsoft partner program requirement that went into effect this month calls for partners to “provide anti-corruption training to all employees who resell, distribute, or market Microsoft products or services,” Microsoft said in a document sent recently to partners, which was viewed by CRN.”

Quotable

Homer Moyer (Miller & Chevalier and a dean of the FCPA) steps up to the plate and hits another one out of the park.  In this recent article he states:

“One reality is the [FCPA] enforcement agencies’ views on issues and enforcement policies, positions on which they are rarely challenged in court.  The other is what knowledgeable counsel believe the government could sustain in court, should their interpretations or positions be challenged.  The two may not be the same.  The operative rules of the game are the agencies’ views unless a company is prepared to go to court or to mount a serious challenge within the agencies.”

Spot-on.

While the decision of one risk-averse business organization to settle an FCPA enforcement action may seem case specific, the long-term effects of such a decision affect not only the settling company, but other business organizations subject to increasingly aggressive FCPA enforcement theories.  (See here for a previous guest post titled “Prosecutorial Common Law”).

As former Attorney General Alberto Gonzales rightly noted:

“In an ironic twist, the more that American companies elect to settle and not force the DOJ to defend its aggressive interpretation of the [FCPA], the more aggressive DOJ has become in its interpretation of the law and its prosecution decisions.”

Too Narrow

See here, and here for the Truth in Settlements Act recently introduced by Senator Elizabeth Warren (D-MA) and Tom Coburn (R-OK).  As stated here:

“Federal agencies are charged with holding companies and individuals accountable when they break the law, and their investigations regularly end in settlement agreements rather than public trials. All too often, the critical details of these agreements are hidden from the public.”

The bill is too narrow.  The rule of law would be better advanced and transparency achieved by abolishing non-prosecution and deferred prosecution agreements.

Save the Date

On January 29th, Fordham Law School in New York City and the Chinese Business Lawyers Association will jointly host a panel titled “China and the Foreign Corrupt Practices Act:  Challenges for the 21st Century.” The event will be held from 6:00–7:30 p.m. in the Law School’s McNally Amphitheatre.  Speaker include:

Ohio State University Professor Daniel Chow, author of China Under the Foreign Corrupt Practices Act; Nathaniel Edmonds, Partner at Paul Hastings and Former Assistant Chief of the FCPA Unit of the Department of Justice; and Thomas O. Gorman, Partner at Dorsey & Whitney and Former Senior Counsel, Division of Enforcement, Securities and Exchange Commission.

To learn more and to register see here.

For the Reading and Viewing Stack

It would not be a major sporting event without FCPA Inc. marketing material.  But then again, certain FCPA enforcement actions in recent years have included such allegations.

For the latest on JPMorgan’s hiring scrutiny in China, see here from Bloomberg which reports that a former “regional chief who expanded the bank’s business in Asia … was met by FBI agents while traveling through a New York-area airport late last year and then interviewed.”

For the latest on the FCPA related case against Frederic Cilins, see here from Bloomberg.  As noted in the article, Cilins “won approval from [the judge] to run forensic tests on contracts that were sought by a grand jury probing claims of bribes paid to win mining rights in Guinea.”

Multimedia content here from down under questioning the lack of Australia bribery related enforcement actions.  (An interesting view, even if the program begins with a false statement).

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A good weekend to all.

An Update From Australia – 2013 Year In Review

Thursday, December 19th, 2013

Today’s post is from Robert Wyld (Partner, Johnson Winter & Slattery).  Wyld is the Australia Expert for FCPA Professor.

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The year in Australia for foreign bribery and corruption matters has been mixed.  While the singular Securency prosecution has become delayed in legal argument with the committal hearing yet to be completed, the Australian media has been at the forefront of promoting a greater awareness of foreign bribery issues and taking to task corporations and management (ranging from allegations concerning the Reserve Bank banknote printing scandal, BHP Billiton and tainted Olympic medal minting contracts, Oz Minerals and Cambodian mining sagas and Leighton Holdings construction projects in the Middle East) who appear, at least in the eyes of the media, to be less than diligent in their compliance and ethical activities.

In September 2013, Australia changed government from a Labor to a conservative (Liberal/National) government.  Whether or not foreign bribery and its regulation and enforcement are of interest to the current government is unclear as they have said almost nothing on the topic. It is hoped international momentum in combating foreign bribery and commercial corruption continues to germinate in Australia, albeit very slowly and becomes more of a focus during 2014.

Australia’s Corruption Reputation

The Transparency International Corruption Perception Index 2013 was released earlier this month and, surprise surprise, Australia’s ranking amongst the stars in cleanliness dropped from 85 in 2012 to 81 in 2013.

While Australia was still ranked as the 9th “cleanest” country in the world and the 3rd cleanest country in the Asia Pacific region, the constant flow of media attention on the topic, particularly the criminal prosecution of the Securency and Note Printing Australia executives through to the offshore activities of BHP Billiton, Oz Minerals and Leighton Holdings to the NSW State-based corruption investigations of various former politicians and crown ministers, it does not take much publicity to generate a negative perception that Australia is perhaps not as clean as it would like to be seen.  Clearly, further work needs to be done to address these perceptions.

Australia’s Enforcement Activity

Over the last 12 months’ since the OECD Phase 3 Review was published in October 2012, the response from the Australian Federal Police (AFP) has been noteworthy.

The AFP’s Expert Panel on Foreign Bribery cases has been running for nearly 12 months. In addition, a range of earlier investigations have been reviewed and resources pooled into a coordinated team approach. Senior AFP officers have candidly admitted past shortcomings while proactively seeking to improve investigation procedures. In May 2013, the AFP signed up to the International Foreign Bribery Taskforce together with regulators from the US, Canada and the UK. While further criminal prosecutions are yet to occur, there is significant activity in the investigation space which bodes well for encouraging business to understand and comply with the law and the ethical standards underlying the law.

The AFP has also been active in the proceeds of crime jurisdiction. The AFP Asset Confiscation Taskforce has turned its attention to economic crime. Given the size of profit opportunities that exist in many large-scale contractual deals won through corrupt practices, the threat of disgorging the value of the profit or contract value secured from corrupt conduct should add a significant deterrent element to the array of regulatory sanctions that can and should be used to encourage ethical commercial behaviour.

However, the position of Australia’s corporate regulator, the Australia Securities and Investments Commission (ASIC) has been less favourably reviewed. ASIC has been heavily criticised in the media for it apparent inaction on any significant investigation into highly public scandals including the bribery allegations concerning the Reserve Bank of Australia subsidiaries (Securency and Note Printing Australia) and Leighton Holdings. The Chairman of ASIC has responded by saying that foreign bribery is a criminal matter, therefore it falls to be investigated by the AFP and besides, it will rarely interfere in a criminal investigation or undertake a civil investigation while a criminal investigation is running, save for exceptional circumstances. More surprising, the Chairman’s strategic goals of ASIC made no mention of enforcement – which is surprising and appears to add weight to a popularly held view (in many sections of the media) that ASIC is, in comparison to other corporate regulators, relatively weak and risk adverse in taking on well-funded corporations and their executives.

Some careful thought should be given to the creation of one national agency or a national coordinating agency that takes full responsibility for the criminal and civil investigations of foreign bribery and corruption complaints. This ought to have the following features:

  • a clear mandate to cover all civil and criminal investigations and to prosecute and/or negotiate settlements;
  • all potential settlements should be ultimately supervised by the Courts and the terms made public (similar to the current UK model for Deferred Prosecution Agreements in the Crime and Courts Act 2013 Schedule 17);
  • the new agency should be properly and adequately resourced (drawing upon the existing skills within numerous Commonwealth agencies);
  • prosecutions could take place in conjunction with the existing Commonwealth Director of Public Prosecutions, or a dedicated independent Prosecutor; and
  • the organisations under investigation do all the heavy work in their internal assessment of the offending conduct and report that to the agency (similar to the US and UK position) and the agency can then determine its own action or further work that it needs to perform.

This would be a great step forward in addressing the criticism directed to all Australian Governments over the years (that they pay lip service to really targeting foreign bribery by creating numerous laws and adopting international treaties but rarely follow through in practice because it is just all too hard or too expensive). However, in the current political cycle dominated by budget deficits and slash and burn financial savings, this may still be but a dream!

Australia’s Moribund National Anti-Corruption Plan

In 2011, the Commonwealth Attorney General’s Department actively promoted a National Anti-Corruption Plan.  Since that time, silence has descended and little, if anything, has been heard about it.  Indeed, some sources have suggested that the Commonwealth Government does not believe there is corruption in its ranks, and if a national Anti-Corruption Commission is necessary, then it requires examples of corruption in order to justify the creation of the commission!  We had thought such obtuse attitudes had finally been abandoned when all Australian States agreed to or are in the process of implementing their own State-based anti-corruption commissions.  The Commonwealth is clearly lagging behind in this field and it is hardly to its credit in a year when it takes on the chairmanship of the G20 Group, that it had failed to address corruption at a national level.

To Blow or Not to Blow the Whistle?

Australian Governments of all political persuasion appear alarmed by the thought that whistleblowers who report incidents of potentially serious crime should be free to do so. Over the years, Australian Governments and business have each preferred to shoot the messenger rather than address unpalatable messages.

In July 2013, the Public Interest Disclosure Act 2013 (Cth) came into effect. The Australian States have various forms of public interest disclosure statutes while other laws, for example, the Corporations Act 2001 (Cth), create a statutory protection in favour of an employee in reporting the company’s conduct which may amount to a potential offence under that Act. While the 2013 Act is a significant improvement on the previous very patchy protections given to whistleblowers and the almost inevitable targeting of whistleblowers as rogue complainants, the system still does not cover all those involved in exercising public power (that is, politicians) and ASIC’s public perception of responding to whistleblowers appears patchy at best. What is needed is clear leadership to encourage the transparent (and protected) reporting of serious allegations of commercial and public wrongdoing which can then be investigated.

Australia has not gone down the US path of offering bounties to whistleblowers if the evidence they disclose (often direct to the US Securities & Exchange Commission) results in securing a conviction against the perpetrators. Australia is probably unlikely to adopt such a course. But, the value of such a system, in positively rewarding whistleblowers, ought to be seriously considered in light of how the US program has developed over nearly 2 years of operation. The sky did not fall in and yes, the SEC has approved two modest and one more significant bounty to a whistleblower. What the system has generated is a well recognised process for whistleblowers to rely upon, completely independent from reliance upon any internal reporting of the alleged wrongdoing (often to the alleged wrongdoer) which can often result in persecution and retribution against the complainant.

Facilitation Payments

In November 2011, the Commonwealth Government issued a Discussion Paper calling for comment on certain proposed changes to the Criminal Code 1995 (Cth), the most important of which was whether to abolish facilitation payments as a defence to foreign bribery. The Government only allowed one month for submissions with the deadline closing in December 2011. Again, since then, a deafening silence.

The UK Bribery Act 2010 had no facilitation payment defence. The world of commerce in London did not fall over and collapse. The Canadians followed suit earlier this year. In January 2014, the Brazilian Clean Companies Act will impose strict liability on conduct constituting the bribery and corruption of domestic and foreign public officials with no facilitation payments permitted.

There is no good principled reason to retain any facilitation payments as a defence to conduct constituting the offence of foreign bribery. All facilitation payments do is encourage both developing and developed nations and their public officials and corporations to trade in minor bribes for pure commercial gain and personal exploitation (particularly the bribe recipient). The arguments peddled in favour of facilitation payments (maintaining Australian jobs and business and simply having to comply with “local demands”) are spurious and illustrate a misguided view about any concept of ethical commercial behaviour.

When most corporations espouse the highest standards of integrity (in the Codes of Conduct) and then resort to facilitating bribes to pursue their commercial projects, there is a serious disconnect between ethical perception and reality. For Australia to fail to address this glaring issue in a year in which it assumes a leading role within the G20 community reflects very poorly on its own ethical standards

Anti-Corruption Guidance for the Public and Business

The website of the Commonwealth Attorney General’s Department contains a series of short Fact Sheets which set out in plain terms what is foreign bribery, the offence, the penalties, Australia’s international obligations and how to report suspect conduct.

Given the vast amount of literature that exists and the level of guidance published by various regulatory agencies (such as the US FCPA Resource Guide) and NGOs (such as the World Bank, the OECD and Transparency International), it would be of great benefit for the Australian authorities to draw this body of knowledge together and to publish a guide for Australian business on anti-corruption ethics and compliance to clearly demonstrate the type of commercial conduct and ethical behaviour that is expected by Australian corporations and individuals consistent with their legal obligations, particularly operating outside Australia. The traditional view (adopting a conservative economic free market theory framework) is largely to leave it to business to work out the issues as Australian Governments and regulators do not like telling business what to do – they only act when business gets it wrong. Such a guide is likely to be of great assistance to many businesses who genuinely try and do the right thing, but who would be assisted by a clear message on what the Australian Government considers (in a non-binding sort of way) to be the way to behave.

Wish List for 2014

If I was asked to advance some key developments that I would like to see occur in 2014, then these would be on top of the ethical Santa’s list:

  • abolish facilitation payments;
  • implement a robust National Anti-Corruption Plan underpinned with a truly independent national anti-corruption commission;
  • issue a discussion process for the creation of one properly funded and resourced national agency to take responsibility for all civil and criminal investigations and prosecutions of foreign bribery offences with clear powers to negotiate settlements in a manner contemplated by the UK acceptance of Deferred Prosecution Agreements into its criminal law;
  • publish a thorough and informative guide for Australian business to encourage them to proactively manage their offshore trade risks and reduce the likelihood of foreign bribery occurring; and
  • give serious thought to implementing a whistleblower bounty scheme (modelled on the US SEC scheme) which promotes a transparent and regulated system for encouraging those inside in the know to report corrupt conduct to the authorities.

Will any of this occur? I live in hope but remain slightly pessimistic given Australia’s apparent traditional minimalist approach to tackling foreign bribery and corruption.

Checking In Down Under

Monday, November 4th, 2013

Today’s post is from Robert Wyld (Partner, Johnson Winter & Slattery).  Wyld is the Australia Expert for FCPA Professor.

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There have been a number of recent developments in Australia in relation to the risks associated with foreign bribery and corruption.

The Lessons for Australian Business – Why Proactive Ethical Compliance is Important

The recently published Ernst & Young “Asia-Pacific Fraud Survey Report Series 2013″ makes some important findings from its survey results which will resonate within boardrooms:

  • weak systems and controls are exposing companies in the Region to significant risks;
  • slower growth is putting management under pressure to take short cuts;
  • fraudulent practices are on the increase; and
  • there is a disconnect between compliance policies in place and how they are applied in practice.

The recent developments will impact on Australian businesses operating offshore. They highlight the key lesson for all companies and executives with business operations in high risk countries – you must proactively recognise and address potential corruption risks at all levels of your business operations consistent with all Australian and local laws and you must instil a real sense of ethical behaviour throughout your organisation. If you fail to do this, you will be exposed to potentially severe consequences for the company and for individual directors, executives and officers involved in any questionable conduct.

These developments include:

  • an increased focus concerning the lack of obvious enforcement activity in Australia;
  • the role of Australia’s corporate regulator, the Australian Securities and Investments Commission (ASIC) in investigating foreign bribery;
  • internal governance issues and offshore commercial behaviour of Australian business highlighted by the Reserve Bank of Australia and Securency and the Leighton Holdings investigations;

Australia’s Regulatory Performance on Foreign Bribery

Over the last few weeks, the media spotlight has turned to examine the conduct of ASIC and the Australian Federal Police (AFP) in investigating foreign bribery and corruption. The issues raised in the media include:

  • ASIC’s role in corruption investigations and what it ought to be doing; and
  • the political push to inquire into the existing regulatory regime and whether, for example, one coordinating regulatory agency should be created and properly funded and resourced to investigate foreign bribery.

The existing regime in Australia has been criticised by the OECD and others over recent years. Foreign bribery and corruption invariably involve complex international inquiries, formal requests for mutual legal assistance that can take many months to complete and negotiations with foreign agencies and governments to gain the local support critical to undertake a proper investigation. In addition, while ASIC usually waits to undertake its civil investigation until a criminal investigation has been completed before undertaking its civil investigation, there is something to be said for the US approach where the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) conduct parallel investigations and invariably commence parallel prosecutions (usually involving a corporate settlement) even though the criminal hearing takes precedence. These joint prosecutions and ensuing corporate settlements may be in part explained by the severe US fines regime imposed on any company that actively defends a criminal prosecution and loses – the fines may be escalated to a point that the convicted company is unable to pay and is insolvent.

There is considerable merit in Australia reviewing how foreign bribery and corruption investigations are undertaken, how they are properly resourced and funded and the internal procedures that can allow civil and criminal investigations to run concurrently, recognising that a criminal trial ought to take precedence over a civil proceeding even one seeking the imposition of civil penalties. Some independent politicians have called for a substance review of how Australia investigates foreign bribery. This is an important issue that needs to be considered aside from any party-political notions of how business should be regulated.

The Role of ASIC v the AFP in Foreign Bribery Investigations

On 11 October 2013, Mr Greg Medcraft, the Chairman of ASIC gave a speech to the AmCham Business Leaders Lunch and responded directly to the considerable press criticism of ASIC’s handling of foreign bribery matters (which he described as “ill-informed”).

Mr Medcraft described ASIC’s role in investigating foreign bribery as follows:

  • ASIC’s strategic priorities are to focus on ensuring there is a fair and efficient financial market with confident and informed investors (enforcement gets no mention as a strategic priority);
  • ASIC has limited resources and will target its action primarily against listed companies where wrongdoing affects a wide range of mum and dad investors;
  • the AFP is responsible for investigating and prosecuting foreign bribery as a crime under the Criminal Code;
  • ASIC will liaise with the AFP and while noting foreign bribery investigations are invariably long, complex and expensive, absent exceptional circumstances or the risk of a limitation time bar arising, ASIC will defer any civil action until the completion of any criminal investigation and/or prosecution; and
  • it is primarily the responsibility of directors and executives to exercise what ASIC describes as the appropriate level of scepticism (to avoid a charge of wilful blindness) and to ensure systems and controls reflect sound corporate governance in order to ensure they comply with their statutory duties.

What can be concluded from this approach: hardly the US SEC approach of “bold and unrelenting” enforcement espoused by the new SEC Chairman in a recent speech. At the heart of this speech is confirmation that while ASIC will look at egregious conduct involving foreign bribery (maybe something on the scale of AWB), as to the rest, it is too hard, complex and expensive to allocate ASIC’s limited resources to it. Over to the AFP!

Current Corruption Investigations – Cultures of Compliance or Non-Compliance

The governance issues surrounding the foreign bribery allegations in the media involving the Reserve Bank banknote printing interests and Leighton Holdings’ offshore operations have a number of common themes, whatever the individual merits are of specific allegations. The themes are these:

  • the apparent limited investigation by ASIC into the conduct of senior company officers;
  • the role and resourcing available to the AFP to investigate allegations of complex commercial corruption;
  • the apparent payment of significant fees to overseas intermediaries in countries where there is a recognised high risk of corruption;
  • whether internal company records were or were not disclosed to regulators; and
  • the treatment of internal whistleblowers.

As an example, the media have reported that a former executive of the RBA company that printed its polymer bank notes is said to have provided a statement to the AFP that accuses a current senior Reserve Bank executive of “directing him never to use email, fax or hard copies to provide information about the company’s allegedly corrupt overseas activities” (Australian Financial Review 1 October 2013).

Whatever the merits of the individual allegations, these events raise serious issues for all companies, boards of directors, institutional investors and shareholders. They go to the heart of how companies actually perform and their professed culture of compliance.

What does all this mean?

It is fundamental to sound ethical business that a corporation must believe in its own integrity and act consistently with that belief. It requires an absolute commitment pervading a company over many years from the top to the bottom. If a corporate structure suggests an absent or disinterested parent, directors and executives being less than diligent and with management, only focused on the bottom-line profit and potential self interest (bonuses and salary benefits on hitting sales KPIs) (Chanticleer: Bribery scandal a question of culture, Australian Financial Review 9 October 2013), the words of Commissioner Cole resonate as to why this sort of conduct occurs (in the context of AWB):

The answer is a closed culture of superiority and impregnability, of dominance and self-importance. Legislation cannot destroy such a culture or create a satisfactory one. That is the task of boards and management of companies. The starting point is an ethical basis. At AWB the Board and management failed to create, instil or maintain a culture of ethical dealing.

These investigations and the Securency prosecutions have some little while to go and developments will be monitored.