Archive for the ‘Facilitating Payments’ Category

Friday Roundup

Friday, August 1st, 2014

When the dust settles, scrutiny alerts and updates, quotable and for the reading stack.  It’s all here in the Friday roundup.

When the Dust Settles

Given the ease in which information now flows and the world-wide interest in corruption and bribery, FCPA enforcement actions are read around the world.  It is thus not surprising that when the dust settles on the U.S. FCPA enforcement action, many are left wondering … who are those “foreign officials”?

Most recent case in point concerns this week’s FCPA enforcement action against Smith & Wesson which involved alleged conduct in Indonesia, among other countries.  According to the SEC:

“In 2009, Smith & Wesson attempted to win a contract to sell firearms to a Indonesian police department by making improper payments to its third party agent in Indonesia, who indicated that part of the payment would be provided to the Indonesian police officials under the guise of legitimate firearm lab testing costs. On several occasions, Smith & Wesson’s third-party agent indicated that the Indonesian police expected Smith & Wesson to pay them additional amounts above the actual cost of testing the guns as an inducement to enter the contract. The agent later notified Smith & Wesson’s Regional Director of International Sales that the price of “testing” the guns had risen further. Smith & Wesson’s Vice President of International Sales and its Regional Director of International Sales authorized and made the inflated payment, but a deal was never consummated.”

As noted in this Jakarta Post article:

“The Indonesian Corruption Watch (ICW) has called for an investigation into an alleged attempt by US gunmaker Smith & Wesson to bribe officials at the National Police.  [...] In response to the SEC [action], ICW legal researcher Donal Fariz urged the Corruption Eradication Commission (KPK) to look into the scandal.  The National Police may face a conflict of interest by handling the case. So, it is better to entrust the investigation with the KPK. The KPK needs to ask for the detailed report [from the SEC] on the police officials who were involved in the scandal,” he said on Wednesday in a telephone interview”

Nominate

If FCPA Professor adds value to your practice or business or otherwise enlightens your day and causes you to contemplate the issues in a more sophisticated way, please consider nominating FCPA Professor for the ABA Journal’s Blawg 100 list (see here).

Scrutiny Alerts and Updates

Bloomberg reports here:

“British prosecutors told several former employees of Alstom SA that they’ll be charged as part of its prosecution of the French train-maker, according to two people with knowledge of the situation.The prosecutor contacted the individuals yesterday to offer to start plea discussions, the people said, asking not to be identified because the correspondence isn’t public. Some may appear with the company at a London court on Sept. 9, according to the people. The U.K. Serious Fraud Office charged Alstom’s U.K. subsidiary with corruption and conspiracy to corrupt yesterday following a five-year investigation. The company was charged in relation to transport projects in India, Poland and Tunisia, the agency said. The SFO contacted at least five individuals about two months ago inviting them for plea discussions, people with knowledge of the matter said in June. The SFO then decided to postpone the talks until it decided whether to prosecute Alstom.”

Bloomberg reports here:

“Wynn Resorts said it has been contacted by Macau’s anti-corruption agency regarding the company’s land purchase for its new resort-casino on the Cotai Strip. “We are working cooperatively with” the city’s Commission Against Corruption, the Las Vegas-based company said in an e-mailed reply to questions yesterday. The Macau Business newspaper reported July 11 that the agency is investigating why Wynn Resorts was made to pay 400 million patacas ($50 million) for the land rights, citing Commission Chief Fong Man Chon.  Wynn Resorts had to buy the rights from certain mainlanders, though the Land Public Works and Transport Bureau said it wasn’t aware of their involvement, according to the Macau Business report.”

As highlighted in this February 2012 e-mail, Wynn Resorts was under FCPA scrutiny for its $135 million donation to the University of Macau. See here for an update based on the company’s disclosures.

Quotable

Thomas Baxter (Executive Vice President and General Counsel of the Federal Reserve Bank of New York) stated, in pertinent part, as follows in a recent speech:

“[T]here is one part of the FCPA that makes me uncomfortable.  The FCPA’s bribery prohibition, and the compliance officers in the audience will know this well, contains a narrow exception for “facilitating or expediting payments” made in furtherance of routine governmental action.  [...]  The real mischief is what this exception might do to an organizational value system.  When an organizational policy allows some types of official corruption (and we have come up with candy coated names for this, like facilitation or expediting payments), this diminishes the efficacy of compliance rules that are directed toward stopping official corruption.  Again, the best compliance cultures are formed when the rules and the organizational value system are in perfect harmony.  So, for U.S. chartered institutions, perhaps this is a place where your organizational value system should go beyond black-letter U.S. law.  If you tolerate a little corruption, watch out!”

I generally agree and as highlighted in this recent post when it comes to employee FCPA training, companies should consider omitting reference to the FCPA’s facilitating payments exception and affirmative defenses.  The Global Anti-Bribery Course I have developed in partnership with Emtrain best assists companies in reducing their overall risk exposure by omitting reference to the FCPA’s facilitating payments exception and affirmative defenses in rank-and-file employee training.

To learn more about the course, see here.

To read what others are saying about the course, see here.

Michael Volkov at the Corruption, Crime & Compliance site often tells-it-like-it-is and this post begins as follows.

“The Internet is littered with FCPA Mid-Year Assessments and reports on enforcement activity and so-called trends and developments. Talk about making mountains out of molehills. Some of the reports are excellent; others are rehashes filled with “analysis” that are intended to promote FCPA fear marketing.”

Reading Stack

This recent article in the Corporate Law & Accountability Report details comments made by SEC FCPA Unit Chief Kara Brockmeyer.  In the article Brockmeyer talks about:

  • SEC administrative proceedings;
  • the 11th Circuit’s recent “foreign official” decision; the recent conclusion of the SEC’s enforcement action against Mark Jackson and James Ruehlen which she called “a very good settlement for us”;
  • the origins of SEC FCPA inquiries; and
  • holistic compliance and typical risk areas.

“Countering Small Bribes” – Nice Words, We’ve Heard Them Before, But They Are Wrong

Monday, July 14th, 2014

Today’s post is from Professor Bruce Bean (Michigan State University College of Law).  Prior to academia, Bean had a diverse practice career including at various law firms and in-house counsel positions.

*****

As FCPA Professor recently highlighted, Transparency International UK released a new publication, “Countering Small Bribes – Principles and Good Practice Guidance for Dealing with Small Bribes including Facilitation Payments.” (See here.)  For once, TI has it all wrong!

This publication focuses on “grease,” “tea money,”  “facilitation payments.”  These terms describe small payments, and while no one knows how small these may be, such payments are common in the real world.  “Countering Small Bribes” discusses these in 44 pages and prescribes how such “bribes” can be eliminated.

TI begins by repeating a mantra regularly heard by those of us who deal in this area:

“[P]aying small bribes feeds a climate of corruption, which creates an unstable operating environment for companies. It destroys trust in government and public administration, undermines the rule of law, damages human rights and distorts business transactions. Small bribes are not confined to demands made to companies, as there are no boundaries for officials and others who demand bribes.”

Nice words.  We have heard them before.  They are wrong.

Small bribes do not “[create] an unstable operating environment,” “[damage] human rights” or “[distort] business.”  Rather, small bribes are one of the results of being in a jurisdiction where the rule of law has not been established and locals already do not trust government.  Facilitation payments do not create and do not corrode public and business standards; they are the result of an existing culture of corruption.

While the goal of eliminating corruption is a noble one, punishing the alleged “bribe” givers while ignoring the officials, high level and low, who extort such payments has proved to be fruitless.  Small and large bribes are more often extorted from businesses.  After all, no legitimate business hopes to give a bribe.  Such extortion is practiced by experts who have developed techniques very difficult to resist.  Fighting corruption by punishing the victims of such extortion is equivalent to pushing on a rope.  It gets us nowhere.  Given the 37 years of experience we have had with the FCPA, we cannot escape the conclusion that approaching bribery in international business solely from the bribe payers’ perspective has not, does not, and will not work.

Consider the prescription contained in “Countering Small Bribes.”  The TI approach is based upon ten unobjectionable principles.

“Effective countering of small bribes – including facilitation payments – will be based on the following principles.

1: There is a supporting culture of integrity

2: The company commits to eliminating small bribes

3: Risk assessment is the basis for designing the strategy and programme to eliminate small bribes

4: The company implements a programme to counter small bribes

5: Communication and training are provided to employees

6: Attention is given to countering third party risks

7: The internal accounting controls are designed specifically to counter small bribes

8: Appropriate actions are taken if small bribes are detected

9: The company monitors the effectiveness of its programme to counter small bribes

10: The company acts strategically to influence the corruption environment in which it operates.”

These principles already underlie many companies’ in-house anti-bribery compliance programs.  But these Ten Principles, or any principles, cannot be effective in eliminating bribes, large or small, in a corrupt environment.  The corruption problem in my experience (eight years in Moscow) will never be eliminated by focusing solely on the bribe payer, as the FCPA and the U.K. Bribery Act do.

TI-UK’s “Countering Small Bribes” focuses on small bribes.  Fine.  Consider an employee driving home from work in a foreign city, late at night.  This is a common scenario if the client’s home office in the US opens for business at 3:30 PM or later Moscow time.  Leaving the office in Moscow at 10 PM is not unusual.  A local police officer, lying in wait on the street opposite the office parking lot, flags down the employee and suggests that, because of the late hour, he must have been drinking.  This faithful public servant demands a blood test and displays a not-very-sanitary syringe.  Which of the Ten Principles applies?  (After a payment of less than $20, I was no longer deemed inebriated.)

“Countering Small Bribes” also explains why the FCPA exception for “facilitation payments” is wrong.

“The US Foreign Corrupt Practices Act (‘FCPA’), which was passed in 1977, introduced in 1988 the concept of facilitating (also commonly referred to as ‘facilitation’) payments with an exception from prosecution for such payments. This was to recognise a type of intractable bribery confronting US businesses when operating abroad. Since then, this form of bribery has attracted considerable debate and controversy.

Facilitation payments are illegal in most countries, although a small number including Australia, New Zealand, South Korea and the USA provide exceptions, in certain circumstances, for facilitation payments when paid abroad. They remain illegal in their own domestic law.

There is growing international recognition that facilitation payments are not easily separated from other forms of small bribes and more and more companies are following a no-bribes policy throughout their global operations, with no exemptions for facilitation payments.”

The “growing recognition” referred to in the final quoted paragraph doubtless refers to UK’s Bribery Act 2010, which criminalized all bribes, no matter how small.  The Bribery Act was the UK’s long delayed response to the OECD Convention on Combating Bribery of Public Officials in International Business Transactions first signed by the British in 1997.  At that time, the official Commentary addressed facilitation payments as follows:

“Small “facilitation” payments do not constitute payments made “to obtain or retain business or other improper advantage” …  and, accordingly, are also not an offence. Such payments, which, in some countries, are made to induce public officials to perform their functions, such as issuing licenses or permits, are generally illegal in the foreign country concerned. Other countries can and should address this corrosive phenomenon by such means as support for programs of good governance. However, criminalization by other countries does not seem a practical or effective complementary action.”

Note the final sentence: “Criminalization by other countries does not seem a practical or effective complementary action.”  Obviously the U.K. Parliament disagreed when, after much debate, it explicitly criminalized facilitation payments.  Governmental hypocrisy is normal in every U.S. administration and is perhaps a necessary aspect of today’s democracies.  Our British cousins exemplify this with this statement describing facilitation payments which is found in the Guidance to the UK Bribery Act 2010:

“As was the case under the old law, the Bribery Act does not (unlike US foreign bribery law) provide any exemption for such payments.”

This carefully crafted statement is precisely accurate.  It explains that neither the Bribery Act enacted in 2010, nor the superseded earlier anti-bribery laws in England and Wales dating back to 1886, exclude facilitating payments from the definition of crime of bribery.  Absolutely true – the law of England and Wales has never excepted such payments.  On the other hand, in the century plus of British foreign trade under their prior trio of anti-bribery laws, and in the three years since the new Bribery Act became effective, there has also never been a prosecution for foreign facilitating payments.  Not one!  Perhaps this is why Parliament had no problem criminalizing something they believed was not going to be prosecuted.  Whatever one might think about the wisdom of the grease payment exception in the FCPA, as readers of FCPA Professor are aware, the Department of Justice does actively ignores this exception in bringing enforcement actions.

TI-UK’s “Countering Small Bribes,” unfortunately, does nothing to advance the fight against corruption. TI does very valuable work, the results of which we all rely upon.  But “Countering Small Bribes” does not advance this fight.  To combat bribery, national prosecutors must actually bring cases.  To be meaningful, such cases should involve actual bribes, not small facilitation payments.  And if we are sincerely interested in effectively reducing bribery, we must enhance our efforts to punish the extortionate government officials who demand bribes, rather than continue to punish only the victims of extortion.

*****

Note – contrary to TI’s suggestion, facilitating payments were always exempted in the FCPA originally though a carve-out in the “foreign official” definition (i.e. a “foreign official” did not include an individual with ministerial or clerical duties).  In 1988 this exemption became the stand-alone facilitation payments exemption currently found in the FCPA.

Selective Prosecution?

Thursday, July 10th, 2014

The term selective prosecution is a legal term of art with rather exacting factors.  This post is not about the legal term of art selective prosecution, but rather selective prosecution as a practical matter, in order words, in layman terms.

As highlighted in the below chart, there have been eight corporate Foreign Corrupt Practices Act enforcement actions based largely on alleged improper payments to Nigerian officials in connection with Nigeria’s Temporary Import Process (TIP) for oil and gas rigs.

Company Settlement Amount Related Individual Actions 
Panalpina $81.9 million
$70.6 (DOJ)
$11.3 (SEC)
 
No
Pride Int’l $56.2 million
$32.6 (DOJ)
$23.5 (SEC)
 
No
Royal Dutch Shell $48.1 million
$30 (DOJ)
$18.1 (SEC)
 
No
Transocean $20.7 million
$13.4 (DOJ)
$7.2 (SEC)
 
No
Parker Drilling $15.9 million
$11.8 (DOJ)
$4.1 (SEC)
 
No
Tidewater $15.7 million
$7.4 (DOJ)
$8.3 (SEC)
 
No
Noble Corp. $8.2 million
$2.6 (DOJ)
$5.6 (SEC)
 
Yes
GlobalSantaFe $5.9 million
$5.9 (SEC)
No

As indicated in the above chart, the enforcement agencies collected approximately $253 million in the enforcement actions.  (Note certain of the enforcement actions also alleged other improper payments to Nigerian customs officials and, because of the “where else” question, certain of the enforcement actions also alleged improper payments in other countries as well).

To extent settlement amounts serve as a reasonable proxy for the severity of an FCPA enforcement action, the above chart highlights that among the TIP-related enforcement actions, the enforcement action against Noble Corp. was comparatively minor.  This conclusion is further bolstered by the fact that among the TIP-related enforcement actions to involve a DOJ component, the Noble enforcement action was the only action to be resolved via a non-prosecution agreement.

Nevertheless, as highlighted by the above chart, the Noble enforcement action was the only TIP-related enforcement action to result in any related charges against individuals.  In February 2012, the SEC charged Mark Jackson (Noble’s former CEO) and James Ruehlen (a current Noble executive) in a wide-ranging enforcement action charging violations of, among other things, the FCPA’s anti-bribery provisions and books and records and internal controls provisions.

This contemporaneous post flagged the SEC action as one to follow since the SEC has never been put to its burden of proof in an FCPA enforcement action.  The post further noted that the FCPA’s facilitation payments exception was likely to be at issue and even highlighted the unusual nature of the DOJ’s NPA against Noble Corp. which, not once but twice, stated that the alleged payments at issue “would not constitute facilitation payments for routine government actions within the meaning of the FCPA.”

In an ironic twist, after the enforcement agencies collected more than $200 million in the TIP-related enforcement actions against risk averse corporate defendants, Jackson and Ruehlen did indeed put the SEC to its burden of proof and the court ruled that the SEC “must bear the burden of negating the facilitating payments exception” and that the “exception is best understood as a threshold requirement to pleading that a defendant acted ‘corruptly.’”  (See here for the prior post).

The SEC, a law enforcement agency with merely a civil burden of proof, was never able to carry this burden and this was among other reasons why the SEC’s case against Jackson and Ruehlen failed – and yes – this is the only reasonable conclusion to be drawn from last week’s settlement (see here).

The above facts and circumstances from the many TIP-related enforcement actions should cause any reasonable observer to ask why Jackson and Ruehlen were singled out for prosecution by the SEC?

As will be explored in a future post that goes more in-depth into the SEC’s failed prosecution of Jackson and Ruehlen, the SEC’s case against the individuals  was all the more curious given that Noble actually booked the TIP-related payments as facilitating payments (the SEC of course disagreed with this position) and given that – per the SEC’s own briefing in the matter – its charges were based on little more than a series of supposed inferences supported by little more than circumstantial evidence.

Friday Roundup

Friday, June 27th, 2014

Elevate, a surprise verdict? SEC Chair on compliance, self-reporting and cooperation, quotable, and for the reading stack.  It’s all here in the Friday Roundup.

Elevate Your FCPA Knowledge and Practical Skills

Join lawyers and other in-house counsel and compliance professionals from around the country – indeed the world –  already registered for the inaugural FCPA Institute July 16-17th in Milwaukee, Wisconsin.  The FCPA Institute is a unique two-day learning experience ideal for a diverse group of professionals seeking to elevate their FCPA knowledge and practical skills.  FCPA Institute participants will have their knowledge assessed and upon successful completion of a written assessment tool can earn a certificate of completion. In this way, successful completion of the FCPA Institute represents a value-added credential for professional development.

To register see here.

A Surprise Verdict?

As has been widely reported (see here and here for instance) Rebekah Brooks, a former senior News Corporation executive, was found not guilty of various counts (including conspiracy to commit misconduct – in other words bribery) by an English jury earlier this week.

The bribery-related verdict comes as a bit of a surprise given that Brooks – as highlighted in this previous post and as reported by the media:

“[Rebekah Brooks testified that] she authorized payments to public officials in exchange for information on “half a dozen occasions” during her time as a newspaper editor—but did so only in what she said was the public interest. [...]  On the stand, Ms. Brooks, who edited News Corp’s Sun newspaper and its now-closed News of the World sister title, said the payments were made for good reasons, and done so on rare occasions and after careful consideration. “My view at the time was that there had to be an overwhelming public interest to justify payments in the very narrow circumstances of a public official being paid for information directly in line with their jobs,” said Ms. Brooks.”

As to the other defendants – Andy Coulson (a former senior News Corp. editor) and Clive Goodman (a former royal reporter for New Corp.’s defunct News of the World publication) –  the jury failed to reach a verdict on the bribery-related count.

At the beginning of the trials, in this October 2013 post, I observed:

“What happens in these trials concerning the bribery offenses will not determine the outcome of any potential News Corp. FCPA enforcement action.  But you can bet that the DOJ and SEC will be interested in the ultimate outcome.  In short, if there is a judicial finding that Brooks and/or Coulson or other high-level executives in London authorized or otherwise knew of the alleged improper payments, this will likely be a factor in how the DOJ and SEC ultimately resolve any potential enforcement action and how News Corp.’s overall culpability score may be calculated under the advisory Sentencing Guidelines.”

SEC Chair White on Compliance, Self-Reporting and Cooperation

SEC Chair Mary Jo White recently delivered this speech titled “A Few Things Directors Should Know About the SEC.”

Among other topics, White spoke about the importance of compliance, self-reporting and cooperation and relevant portions of the speech are highlighted below.

Compliance

“Ethics and honesty can become core corporate values when directors and senior executives embrace them.  This includes establishing strong corporate compliance programs focused on regular training of employees, effective and accessible codes of conduct, and procedures that ensure complaints are thoroughly and fairly investigated.  And, it must be obvious to all in your organization that the board and senior management highly value and respect the company’s legal and compliance functions.  Creating a robust compliance culture also means rewarding employees who do the right thing and ensuring that no one at the company is considered above the law.  Ignoring the misconduct of a high performer or a key executive will not cut it.  Compliance simply must be an enterprise-wide effort.”

Self-Reporting and Cooperation

“Even in the best run companies with strong boards, the right tone at the top and robust compliance programs, wrongdoing will almost inevitably occur from time-to-time.  What should you do when that happens?  How should you respond?  What does the SEC expect you to do?  When should a company self-report wrongdoing to the SEC or other authorities?  All of these questions require careful consideration and appropriate action. For tonight, I will focus just on the last one about self-reporting.

If your company has uncovered serious wrongdoing, you will need to decide whether, how and when to report the matter to the SEC.  One immediate question you will have to answer is whether what has been discovered constitutes material information that requires public disclosure.  If the answer is yes, that fact will also invariably dictate an obvious affirmative answer to broader self-reporting to the SEC.

In other situations, you will need to decide whether to call us about a serious, but non-material event – perhaps a rogue employee in a small foreign subsidiary has been bribing a foreign official in violation of the Foreign Corrupt Practices Act (“FCPA”).  You intend to take decisive action against the employee and enhance your FCPA compliance program.  Your disclosure lawyer’s view is that the occurrence does not require public disclosure.  That does not, however, end your inquiry or responsibilities.  Your company still needs to decide whether to self-report to the SEC, and consider what that may mean for the company.

As many of you know, the Commission in the 2001 Seaboard statement on cooperation, explained how self-reporting, cooperation, self-policing, and remediation factor into our decisions when considering enforcement actions.  And, I can tell you from experience that of those four factors, self-reporting is especially important to both the SEC and the Department of Justice.

What are the benefits to your company of self-reporting?  You can read about that in the SEC’s press releases on enforcement actions, which routinely highlight how the quality of a company’s cooperation has affected any resulting enforcement action.  Typically, a company realizes the benefits of cooperation through a reduced penalty, or, at times, no penalty or even not proceeding in an exceptional case.

Not that you should need any extra incentive, but keep in mind that there are also downsides in deciding not to self-report.  If the wrongdoing is not self-reported, the opportunity to earn significant credit for cooperation may be lost.  And, with our new whistleblower program … the SEC is more likely than ever to learn of the misconduct through another channel.

Let me just say a few words about how to cooperate with SEC investigations.

As an initial matter, the decision to cooperate should be made early in the investigation.  The tone and substance of the early communications we have with a company are critical in establishing the tenor of our investigations and how the staff and the Commission will view your cooperation in the final stages of an investigation. Holding back information, perhaps out of a desire to keep options open as the investigation develops, can, in fact, foreclose the opportunity for cooperation credit.  We are looking for companies to be forthcoming and candid partners with the SEC investigative team – and the board has a responsibility to ensure that management and the legal team are providing this kind of cooperation.

When choosing the path of self-reporting and cooperation, do so decisively.  Make it clear from the outset that the board’s expectation is that any internal investigation will search for misconduct wherever and however high up it occurred; that the company will act promptly and report real-time to the Enforcement staff on any misconduct uncovered; and that the company will hold its responsible employees to account.

There is, of course, cooperation and then there is cooperation, just as there are compliance programs that look great on paper but are not strongly enforced.  We know the difference.  Cooperation means more than complying with our subpoenas for documents and testimony – the law requires you to do that.  If you want your company to get credit for cooperation – and you should – then sincere and thorough partnering with the Division of Enforcement to uncover all the facts is required.”

As highlighted in this previous post, here is what White had to say about cooperation issues as a lawyer in private practice.

“Today, before making their decisions about charging companies, some prosecutors are exerting considerable – some say, extreme -pressure on corporate behavior under the not so subtle threat that if the company doesn’t do as the government wishes, the company risks, at the end of the day, being indicted.”

[...]

“To ensure that a company does not become that ‘rare’ case resulting in a corporate indictment with all of its attendant negative consequences, a company must not poke the government in the eye by declining any of its requests or suggestion of how a cooperative, good corporate citizen is to behave in the government’s criminal investigation.  This template, in my view, can give prosecutors too much power.”

Quotable

Homer Moyer (Miller & Chevalier) states as follows in the June issue of Global Investigations Review.

“As this area of law has evolved, the challenges for all concerned have changed.  Agencies plainly hold most of the cards here.  They have great leverage in these cases.  [...] [T]hey are rarely subject to judicial review.  That creates a special responsibility for enforcement agencies.

As a practical matter, they are creating the operative jurisprudence.  Companies and practitioners read those settlements and try to tease out of them the principles that have been at play.  So it’s important that the government articulates its legal rationales, and frankly it’s important the government self-policies.  It may invest in a lengthy investigation at the end of which it should take no action.  And that’s sometimes hard for an agency to do.

The agencies have, over the last 25 years, expanded their jurisdictional reach; they’ve expanded their theories of liability; they have expanded the penalties imposed with new kinds of penalties and new kinds of settlements.  So I think there’s a burden on the agencies, given that much sway, to act especially responsibly.

[...]

[T]he great interest in this area has been prompted in part by reports of enormous costs to corporations of investigations.  I think law firms have to address that.  Many of the reported cases are stupefying and, in my opinion, can be avoided.  But that takes a little clear-eyed thinking on the part of both outside law firms and corporations.”

Reading Stack

From Transparency International UK - Countering Small Bribes.  As described in this release:

“[The report] provides practical advice on addressing the challenge of countering small bribes including “grease payments”. It is also designed to be of assistance to regulators, law-makers, prosecuting agencies and professional advisers. Countering small bribes is a complex challenge for companies. Transparency International research shows that, globally, more than 1 in 4 people paid a bribe in a recent 12 month period, highlighting the scale of the problem facing companies. Demands most often occur in overseas markets, where employees may be vulnerable through travelling alone or the company needs to release critical goods from customs. The guidance provides a set of principles, discussion and advice designed to help companies operate to high ethical standards, protect their reputations and fulfill their legal obligations.”

*****

A good weekend to all.

When It Comes To Employee FCPA Training, Companies Should Consider Omitting Reference To The FCPA’s Facilitating Payments Exception And Affirmative Defenses

Thursday, June 19th, 2014

Employee FCPA training is obviously an essential component of an effective Foreign Corrupt Practices Act compliance program. Yet when it comes to employee training, companies should consider omitting reference to the FCPA’s facilitating payments exception and affirmative defenses.

You may be asking in your best Gary Coleman impersonation “whatcha talkin bout.”

What I am talking about begins with a parenting analogy.  Would a parent best achieve compliance with the command “clean your room” if the parent spent much time telling a child why they should clean their room, but then ended the conversation by telling the child various “outs” not to clean their room?

Of course not, and the same logic applies to rank-and-file employee FCPA training.

By including the FCPA’s facilitating payments exception and the FCPA’s affirmative defenses (the local law affirmative defense and the reasonable and bona fide expenditures affirmative defense) in employee training, companies are providing employees with concepts and words of art that employees can use to justify their conduct – conduct that could expose the company to FCPA scrutiny and enforcement based on enforcement agency theories.

By training rank-and-file employees on the FCPA’s facilitating payments exception – and its guiding principle of “routine government action” – companies are inviting employees to make discretionary, subjective calls as to what “routine government action” is.

By training rank-and-file employees on the FCPA’s local law affirmative defense, companies are inviting employees to justify their conduct if the conduct is accepted or condoned in a foreign country (even though the local law affirmative defense only applies to conduct lawful under the written laws and regulations of a foreign country).

By training rank-and-file employees on the FCPA’s reasonable and bona fide expenditures affirmative defense companies are inviting employees to make discretionary, subjective calls as to what “reasonable’ and “bona fide” mean as well as whether such an expense is “directly related” to business purposes specifically set forth in the affirmative defense.

A company with best-in-class FCPA compliance policies and procedures does not want rank-and-file employees making these discretionary, subjective calls in the global marketplace.

The point of employee FCPA training is to provide employees with “FCPA goggles” so that they can spot FCPA risk and report it to designated experts in the company to allow the experts to decide issues that could potentially implicate the FCPA’s facilitating payment exception and/or the FCPA’s affirmative defenses.

Many FCPA training courses in the marketplace contain discussion of the FCPA’s facilitating payments exception and affirmative defenses in rank-and-file employee training and thereby actually increase the company’s overall risk exposure.

The Global Anti-Bribery Course I have developed in partnership with Emtrain takes a different approach and best assists companies in reducing their overall risk exposure by omitting reference to the FCPA’s facilitating payments exception and affirmative defenses in rank-and-file employee training.  (Such concepts are – as is appropriate – included in the executive / manager version of the course).

To learn more about the course, see here.

To read what others are saying about the course, see here.