Compliance A New Vision
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A review of current FCPA compliance requirements.

A review of current FCPA compliance requirements.

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Compliance A New Vision Presentation Transcript

  • 1. Compliance-A New Vision Thomas R. Fox-General Counsel, Drilling Controls, Inc. IQPC Contract Risk Management Conference Houston TX May 29, 2008
  • 2. Legal Disclaimer The views stated herein are solely those of the author and are not those of Drilling Controls, Inc. or Aibel Group Ltd. 14 July 2005 Presentation Title Page 2
  • 3. Aibel and Deferred Prosecution Agreement Aibel entered into a DPA with the US DOJ on February 6, 2007, agreeing to: Comply with all commitments made to US government. Comply with all additional requirements. Implement and monitor compliance program and internal control procedures. Compliance Counsel-Ray Bonoun 14 July 2005 Presentation Title Page 3
  • 4. FCPA-Why Enforcement? FCPA enacted into law in 1977 14 July 2005 Presentation Title Page 4
  • 5. Enforcement Explosion-What is Response? Compliance Compliance Compliance 14 July 2005 Presentation Title Page 5
  • 6. Compliance-Steps in Response What did you do to stay out of trouble? Code of Conduct Hotline Training Due Diligence What did you do when you found out? Investigate Internal v. External What remedial action did you take? Disciplinary Action 14 July 2005 Voluntary Disclosure Presentation Title Paul McNulty-Baker McKenzie General Counsel Seminar-April 1, 2008 Page 6
  • 7. Presentation Title 14 July 2005 Page 7 Costs and Risks
  • 8. Costs Financial Costs  Direct Financial Costs-standard commission of 10% but often higher.  Repeated Demands-once paid, precedent set.  No recourse-no control over outcome or how money is used. 14 July 2005  Substandard business partners, sub-contracts or suppliers. Presentation Title Page 8
  • 9. RISKS In addition to the costs there are other Risks for companies who do not operate ethically. Risk of Blackmail Risk of Violence Political Risk 14 July 2005 Risk of Public Perception Presentation Title Page 9
  • 10. A New Vision- Positive Effects of Compliance 14 July 2005 Presentation Title Page 10
  • 11. Protect and Strengthen Sales, Brand Image and Reputation Companies should do more than just “give money”. 50% considered punishing a company based upon its “social actions”. 30% avoided doing business with a company for its “social actions”. 14 July 2005 (Environics International Survey) Presentation Title Page 11
  • 12. Protect the Company M&A-Misrepresentations in merger agreement can lead to a securities fraud claim. Titan Corporation Wrongful Termination-failure to engage in illegal act. Sabin Pilots Franchisor Liability-more than vicarious liability Successor Liability-US entity acquiring foreign entity 14 July 2005 Non-Controlling Investor in Foreign Entity-FCPA does not Presentation Title distinguish between controlling and non-controlling affiliation. Page 12
  • 13. Strengthen Employee Loyalty and Commitment Only 6% of employees were inclined to stay when they believed their leaders to be unethical. (Walker Information Survey) Employees who believe they work in an ethical environment are 6X more likely to be loyal. (Hudson Institute Survey) Employees are generally more positive about their work and have greater loyalty if they work for a company with good values and ethical practices. (Diener and Seligman, “Beyond Money” Psychological Science in the Public Interest, Vol. 5, No. 1, 2004)) 14 July 2005 Presentation Title Page 13
  • 14. Avoid New and Additional Regulation Enron/World Com/SOX SOX and other regulatory changes as evidence of a “frame shift” in which “all history is put through a new lens” (Wall Street Journal, January 15, 2003) 14 July 2005 Presentation Title Page 14
  • 15. Weather the Storm with Integrity Capital Companies with a demonstrated commitment to ethical behavior can limit vulnerability to shareholder and outside activist pressure due to heightened credibility. 14 July 2005 Presentation Title Page 15
  • 16. Reduced Costs Cost Reduction through Enhanced Communications: Proactive and effective engagement with shareholders. Reporting identifies the effectiveness of programs. Reporting identifies priorities to insure the greatest impact of available resources. 14 July 2005 Reporting to use as a benchmark for overall Presentation Title organizational effectiveness. Page 16
  • 17. Improved Attractiveness to Investors Shareholders, particularly institutional investors welcome increased disclosures. A growing number include non-financial metrics in their analysis on the quality of investments, such as corporate governance. 75% of stakeholders believe that overall Board and Corporate Governance factors as important as financial performance for large institutional investors. (McKinsy/World Bank Large Institutional Investor Survey) 14 July 2005 Large institutional investors will to pay higher prices for stocks of companies considered to be accountable. (McKinsy/World Bank Large Institutional Investor Survey) Presentation Title Page 17
  • 18. Marketplace Advantages Accountability makes market entry and retention easier. Know your customer. Due diligence your suppliers, agents and business partners. 14 July 2005 Presentation Title Page 18
  • 19. Supplier Due Diligence Background research and inqueries required under the Aibel Directive for certain Supplier Due Diligence:  Certificate of Incorporation/Articles of Incorporation.  Company Brochures or Other Promotional Materials.  Annual Report.  Resumes of Senior Personnel.  Media Search Results-Google 14 July 2005  Media Search Results-Lexis/Nexis Presentation Title Page 19
  • 20. Supplier Due Diligence-cont’d 7.Boycott Data Base Search Results. 8. Special Designated Person (SDN) Data Base Search Results. 9. Inquiry to Government Agencies and Other Sources. 10. Certification Regarding Absence of Legal Prohibitions. 14 July 2005 Presentation Title Page 20
  • 21. Supplier Due Diligence-cont’d 11.Report of In Person Interview. 12. Report of Business Reference Interview. 13. Report of Financial Reference Interview. 14. Comparative Fee Inquiry 14 July 2005 15. Annual Update Presentation Title Page 21
  • 22. Presentation Title 14 July 2005 Page 22 Questions