Archive for the ‘Multimedia’ Category

FCPA Compliance And The Important Role Of Gatekeepers

Thursday, July 17th, 2014

To best manage and minimize Foreign Corrupt Practices Act risk, it is important that a business organization not view FCPA compliance as strictly a legal function, but rather a function best achieved holistically throughout the organization.  This requires business managers, including finance and audit professionals in particular, to have the skill-set to recognize FCPA risk.

It is clear from recent FCPA enforcement actions that the enforcement agencies, and the SEC in particular, expect much from business managers when it comes to FCPA compliance including the ability of these gatekeepers to spot FCPA issues and display a high degree of intellectual curiosity as to many company transactions and expenditures.  (See enforcement actions here, here and here).

This free video (created in collaboration with Emtrain with whom I’ve created a global anti-bribery and corruption training course) has been created to help business organizations best mitigate FCPA risk.  Feel free to share the video with clients, in-house counsel and other compliance professionals, and business managers within your organization.

Understanding Risk To Reduce FCPA Scrutiny

Wednesday, July 2nd, 2014

In order for a business organization to effectively minimize its Foreign Corrupt Practices Act  scrutiny, employees need to understand the risks present in their specific job function.

The best way for this to happen is for business leaders to directly engage with employees and inspire them to spot risk.

This free video (created in collaboration with Emtrain with whom I’ve created a global anti-bribery and corruption training course) has been created to help business leaders accomplish these objectives. Feel free to share the video with clients, in-house counsel and other compliance professionals, and employees.


Monday, June 23rd, 2014

Today’s post is short on written words, but long on content.

Recently, I had the pleasure to again visit with Thomas Fox for his Foreign Corrupt Practices Act Compliance and Ethics Report.  In this episode I discuss:

  • The 11th Circuit’s recent “foreign official” ruling (see here, here, here and here for prior posts).  Among the issues discussed are my involvement in the “foreign official” challenges, what was not at issue in the 11th Circuit appeal and what was at issue, and the court’s flawed reasoning.
  • My new book “The Foreign Corrupt Practices Act in a New Era”) (see here and here for prior posts).
  • My FCPA Institute – a unique two-day learning experience ideal for a diverse group of professionals seeking to elevate their FCPA knowledge and practical skills.  The inaugural FCPA Institute is July 16-17th in Milwaukee, WI.

During the past month, I also had the pleasure to conduct two webinars hosted by Hiperos (a leader in third party risk management).

The first webinar was titled “Understanding the Root Causes of FCPA Scrutiny and Enforcement” (see here to view the hour long event).  The webinar:

  • Highlights the fallacy that only “bad” and “unethical” companies are the subject of FCPA scrutiny and explores certain foreign business realities and conditions that often serve as the root causes of FCPA scrutiny and enforcement.
  • Discusses what 99% compliance means.
  • Uses the root causes of many FCPA enforcement actions to highlight how an essential component of FCPA compliance is understanding the boring, day-to-day aspects of a company’s business in foreign markets and targeting, through training and other compliance policies, the relatively low-level employees and others who engage in these day-to-day activities.

The second webinar was titled ““The Ripple Effect:  Understanding Financial and Business Consequences of FCPA Scrutiny and Enforcement” (see here to view the hour long event).  The webinar:

  • Highlights how settlement amounts in an actual FCPA enforcement action are often only a relatively minor component of the overall financial consequences that can result from FCPA scrutiny or enforcement in this new era.
  • Discusses the “three buckets” of FCPA financial exposure:  (1) pre-enforcement action professional fees and expenses; (2) enforcement action settlement amounts: and (3) post-enforcement action professional fees and expenses and highlights how bucket #1 is typically (in many cases 3, 5, 10 or higher times the settlement amount) the greatest financial hit to companies the subject of FCPA scrutiny or enforcement.
  • Explores other negative financial consequences that often result from FCPA scrutiny or enforcement such as market capitalization, cost of capital, M&A activity, lost or delayed business opportunities, and FCPA-related litigation.
  • Shifts the FCPA conversation from being a purely legal issue to its more proper designation as a general business issue that needs to be on the radar screen of business managers and highlights how the FCPA’s many ripples instruct that business managers should view the importance of FCPA compliance more holistically and not merely through the narrow lens of actual enforcement actions.

Thank you for reading FCPA Professor every day.

With today’s post, you have the opportunity to hear me discuss FCPA, FCPA enforcement, and FCPA compliance issues for 2 hours and 30 minutes … should you so choose.

Instead Of “What’s Wrong With Us?” Perhaps There Are Better Questions To Ask

Tuesday, April 22nd, 2014

As noted in this Money News article, SEC Chairman Mary Jo White was recently interviewed  by C-SPAN founder Brian Lamb as part of its Q&A series.  (See here for the full interview).

As noted in the article,”Lamb spent roughly two-thirds of the program walking through White’s career as the chief prosecutor for Manhattan under both local and federal auspices, coupled with top-level private experience as head of litigation” for a large law firm.

As further noted, “during the last part of the program, Lamb listed cases settled under the Foreign Corrupt Practices Act involving leading U.S. corporations, and he asked, “What is wrong with us?”  (The FCPA Blog posted the FCPA specific portion of the interview here).

Specifically Lamb asked “what is wrong with us” in connection with four corporate FCPA enforcement actions:  Alcoa, ADM, Diebold, and Eli Lilly.

So – “what is wrong with us?”

Well, actually not much and perhaps the more appropriate question Lamb could have asked is what is wrong with the DOJ and SEC?

In other words, perhaps Lamb was not aware (as detailed in this prior post) that the Alcoa action was primarily based on conduct over 20 years old or that the consultant at the center of the alleged bribery scheme was criminally charged by another law enforcement agency, put the law enforcement agency to its burden of proof at trial, and the law enforcement agency dismissed the case because there was no ”realistic prospect of conviction” (see here for the prior post concerning the U.K. enforcement action of Victor Dahdaleh).  Perhaps, Lamb was not aware that the SEC’s administrative cease and desist order in Alcoa specifically stated as follows.  ”This Order contains no findings that an officer, director or employee of Alcoa knowingly engaged in the bribe scheme.” Perhaps Lamb was not aware that the SEC’s enforcement action against Alcoa received not one ounce of judicial scrutiny.  Indeed, as highlighted in this previous post, as SEC Chairman White stated that “the public airing of facts, literally in open court, creates accountability for both defendants and the government” and that “trials allow for more thoughtful and nuanced interpretations of the law in a way that settlements and summary judgments cannot.”

Regarding ADM, perhaps Lamb was not aware – as detailed in my article “Why You Should Be Alarmed By the ADM FCPA Enforcement Action,” that per the DOJ’s and SEC’s own allegations, ADM and its shareholders were the victims of a corrupt Ukraine government which did not have the money to pay VAT refunds that it owed to companies like ADM that sold Ukrainian goods outside of Ukraine.  In my article I noted that the ADM enforcement action “will be blindly inserted into FCPA enforcement statistics and trotted out at every available opportunity to demonstrate how the U.S. is the leader in anti-bribery enforcement.” Lamb did just that.

Regarding Diebold, perhaps Lamb was not aware – as detailed in this prior post – that the enforcement action primarily focused on the conduct of two employees and that the SEC’s complaint specifically stated that these two employees received FCPA training in 2007, yet still continued their alleged improper practices.  In addition, the SEC specifically stated that the employees “took further steps to hide the leisure nature of [the problematic] trips including, on at least one occasion, providing false information to the company’s auditors in China.”

Regarding Eli Lilly, perhaps Lamb was not aware – as detailed in this prior post – that a focus of the SEC’s allegations (there was no DOJ enforcement) was that sales representatives at Lilly-China submitted false expense reports for items such as wine, speciality foods, a jade bracelet, meals, visits to bath houses, card games, karaoke bars, door prizes, spa treatments and cigarettes.  Perhaps Lamb was not aware that other allegations in the SEC’s complaint concerned conduct between 12 – 18 years ago.

Perhaps Lamb was not aware that the majority of the above enforcement actions, like most corporate FCPA enforcement actions, were resolved via non-prosecution or deferred prosecution agreements.

As to these resolution vehicles, it has been noted:

“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.”

“[they have become] a semi-automatic response by the government in responding to corporate crime. Most cases of corporate crime should result in no action by the government against corporations that have responded appropriately to the wrongdoing and any remaining problems of controls, compliance and corporate culture.”

“[using alternative resolution vehicles] is almost becoming an automatic reaction in many cases beyond those where it should be used. Prosecutors are thinking – before we close out this case that involves any kind of corporate crime, we should get something from the companies.”

“[P]rosecutors are like anybody else – when they devote a lot of time and effort to a case, they want something to show for it. And so I fear the deferred prosecution is becoming a vehicle to show results.”

Perhaps Lamb was not aware that:

“the sweep of corporate criminal liability could hardly be broader …  its breathtaking scope always bears repeating: If a single employee, however low down in the corporate hierarchy, commits a crime in the course of his or her employment, even in part to benefit the corporation, the corporate employer is criminally liable for that employee’s crime. It is essentially absolute liability.”

Perhaps Lamb was not aware that the person who made all of the above statements was Mary Jo White – the person he was interviewing.  (See here for the prior post).

A Debate Regarding The General Upward Trend Of FCPA Enforcement Actions

Thursday, February 27th, 2014

Recently, I had the pleasure to again visit with Thomas Fox for his Foreign Corrupt Practices Act Compliance and Ethics Report in a two-part series.

In Part II of our discussion (approximately 25 minutes) we debate the reasons for the general upward trend of FCPA enforcement over the last several years.  I disagree with Tom’s conclusion that a “main reason for the increase – indeed the explosion (as he calls it)” of FCPA enforcement over the last several years has to do with the U.S. fight against terrorism.  (See this recent post from Fox advancing the same theory).  I make the following points in the debate.

  • For starters, calling 10-15 core enforcement actions per year an explosion is strange when one considers that all U.S. business organizations, over 1,000 foreign companies with shares listed on a U.S. exchange, and theoretically all foreign companies if certain jurisdictional requirement are met, are subject to the FCPA;
  • It is a fact that approximately 35% of all corporate enforcement action since 2007 are the result of just three unique events:  (1) Iraq Oil for Food; (2) Bonny Island, Nigeria; and (3) various oil and gas services companies utilizing the services of Panalpina.  (See here for the prior post).
  • Approximately 50% of the remaining FCPA enforcement actions are the result of corporate voluntary disclosures.
  • Numerous practical reasons (there are provocative reasons as well) easily explain the general upward trend of FCPA enforcement actions:

(1) In 1998 the FCPA was expanded through the dd-3 prong of the statute and the DOJ has used this prong to bring several FCPA enforcement actions;

(2) There has been a general increase in international business activity including in high risk jurisdictions.  For instance, approximately 50% of sales from companies in the S&P 500 are non-U.S. sales compared to approximately 30% a decade ago.  It is thus not surprising that there has been more FCPA enforcement given the increase in international business activity for the same reason that more cars on the road results in more accidents, traffic violations and speeding tickets.

(3) In 2004, NPAs and DPAs were introduced to the FCPA context and this third option of “enforcing” the FCPA is one of the more obvious reasons for the general upward trend in FCPA enforcement.  For instance, the former chief of the DOJ’s FCPA unit stated that if the DOJ did not have the option of resolving FCPA enforcement actions with NPAs and DPAs, the DOJ “would certainly bring fewer cases.”  Likewise, the OECD Report on U.S. FCPA enforcement stated that “it seems quite clear that the use of these agreements is one of the reasons for the impressive FCPA enforcement record in the U.S.”

(4) Sarbanes Oxley was passed in 2002 – a law that resulted from Enron, Worldcom, etc. (not terrorism).  In 2004, SOX’s internal controls provisions became effective and this new requirement caused issuers to more actively assess internal controls across its business operations particularly in foreign subsidiaries.  In both the 2010 Senate FCPA hearing and 2011 House FCPA Hearing, the DOJ witness identified SOX as being one of the reasons for the increase in FCPA enforcement.

In Part I of our discussion (approximately 30 minutes) the following topics are discussed:

  • How long FCPA scrutiny tends to last;
  • A plethora of FCPA enforcement statistics (see here);
  • The most accurate and reliable way to keep FCPA statistics (see here);
  • The “three buckets” of FCPA financial exposure including pre-enforcement action professional fees and expenses;
  • My new FCPA training course (see here).