Managing International Risks + Corporate Investigations


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Global business attorney Luis Alcalde presented "Managing International Risks + Corporate Investigations" on Thursday, January 16, at the Schneider Downs' Corporate Corruption + Fraud Seminar.

Luis discussed international corporate investigations involving the Foreign Corrupt Practices Act (FCPA), corporate ethics and other regulatory matters.

Published in: Business, Economy & Finance
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  • Although the focus is still substance abuse and alcoholism – mental health issues continue to be a theme in our profession
  • Managing International Risks + Corporate Investigations

    1. 1. z Managing International Risks + Corporate Investigations presented by Luis M. Alcalde Corporate Corruption + Fraud Seminar January 16, 2014
    2. 2. z Risks in International Business + Market Risks (unexpected market changes, raw material prices, supply problems, new competitors) + Regulatory Risks (changes in regulatory scheme) + Socio-Political Risks (political/social instability/changes to government programs) + Economic/Financial Risk (nonpayment by third parties, changes in monetary exchange rates) + Operating Risks (inability to maintain high standards of efficiency and production, infrastructure problems, labor issues) Management Risks (inability to comply with international ethical and compliance norms; poor fit with local culture)
    3. 3. z International + Internal Corporate Investigation INTERNATIONAL + Company A is Jurisdiction INTERNAL Subject to U.S. + Affiliated, Subsidiary or Joint Venture Partner of Company A is in a foreign jurisdiction + This can include the wide range of reasons to self-investigate and gather information upon learning of possible wrongdoing For this presentation: + Violations of FCPA + Violations of other U.S. laws and regulatory matters + Public Companies
    4. 4. z Basics To Lessen Management Risks Tone from the top re importance of ethics & internal controls Internal Risk Management Processes & Protocols Action when Wrongdoing is Detected Supervision, Dialogue, Enforcement & Testing of Processes & Controls
    5. 5. z Risk Management + Corporate Ethics Policy that addresses requirement of legal competition, anti-bribery, gifts and entertainment, proper business expenditures and records + Company Anti-Bribery/Anticorruption Policy and specific policies tailored to local risks with foreign affiliates and partners + Local engagement with SOEs; Regulators; High Risk Partners + Protocol/Policy Re + Policy to Hiring Agents, Consultants, Vendors ensure all contracts address company ethics and anticorruption policies
    6. 6. z Risk Management (audit standards 15 U.S.C. 78 j-1) +Procedures designed to provide reasonable assurances of detecting illegal acts that would have a direct and material effect on the determination of financial statement amounts +Procedures designed to identify related party transactions that are material to the financial statements or otherwise require disclosures therein
    7. 7. z Risk Management (supervision) +Regular and consistent supervision & dialogue with foreign partners and employees + “trust but verify” +Create trust and dialogue +Enforcement and Testing + Periodic review of process + Risk assessment audits Take Action upon learning of risk or wrongdoing
    8. 8. z Triggers to Internal Corporate Investigations INTERNAL EXTERNAL + Anonymous tip to hotline or corporate officers + Employee Whistleblower tip to SEC, DOJ or Other Regulator reports wrongdoing + Company internal controls detect possible wrongdoing or risks auditor or consultant identifies possible risk areas and transactions SEC/ Regulator subpoena/ request interviews/starts administrative or civil action + Independent DOJ Criminal Investigation/Grand Jury/ Search warrants/Agent interviews
    9. 9. z Why Investigate? Government is Investigating or likely to investigate No Governmental Investigation + Company needs + Internal to gather information to argue: + There is no wrongdoing + The wrongdoing does not warrant prosecution of company + Convince government that it need not investigate or do a less intrusive investigation + Seek best company settlement possible for investigations are key component of effective compliance program + Outside auditors are required to report illegal acts to Company Board/ management and evaluate the company’s response + Directors/senior management have legal and fiduciary duties to investigate and ensure internal controls are working
    10. 10. z Principles of Federal Prosecution of Corporations – U.S. Attorney’s Manual + Seriousness of + Extent Offense, Harm to Public, Prior History of Wrongdoing Of Corporate Wrongdoing And Complicity of Top Management + Timely and Voluntary Disclosure Government + Existence and Cooperation by Corporation with & Effectiveness Pre-Existing Compliance Program + Remedial Steps to Implement Compliance Program, Punish Wrongdoers, Pay Restitution + Collateral Harm to Shareholders, Pension Holders, Employees, and Others not Proven Personally Culpable + Adequacy of + The the Prosecution of Individuals Responsible adequacy of Civil or Regulatory Remedies
    11. 11. z Corporate Criminal Liability Agent acting within scope of authority Agent motivated at least in part to benefit corporation Agent’s knowledge imputed to corporation
    12. 12. z Consequences of Corporate Criminal Liability Direct Sanctions Fines, Reimbursement, Disgorgeme nt, Legal Fees Loss of State Corporate Charter Shareholder Lawsuits Loss of Government Contracts, & Accreditation Impact on Corporate Stock and Securities
    13. 13. z Conducting the Investigation 1. Identifying Client 4. + Board + Audit Committee + Management 5. 2. Defining Scope of Investigation 6. 3. Investigation Team 7. + U.S. Counsel + Foreign Counsel + Auditors/Forensic Team (IT) Evidence/Document Preservation + Gathering Interviewing Domestic and Foreign Witnesses Privileges Attorney/Work Product Preparing a Report + Oral or written? + Who gets reports? + Reports to client + Reports to auditors
    14. 14. z Importance of Remedial Measures Principles of Federal Prosecution: Remedial steps to implement compliance program, punish wrongdoers, pay restitution Audit Standards Require Auditors to Consider : Board and management response to potential illegal acts and remedial measures put in place.
    15. 15. z Disclosure of Investigation Certain Government Involvement Self Disclosure Possible Leniency
    16. 16. z Non-disclosure--Risk/Benefits Analysis If detected without self disclosure then more intrusive government involvement and possible greater sanctions No Disclosure, implement remedial measures without government involvement , and hope for no further consequences
    17. 17. z SEC Disclosure Obligations Material pending legal proceeding Facts that may materially affect the business Director or executive officer involved in legal proceedings Facts that materially affect finances of company Facts that materially affect previously filed financial reports
    18. 18. z
    19. 19. z Thank You! Luis M. Alcalde, Of Counsel Kegler Brown Hill + Ritter 614-462-5480