Anti-Corruption Enforcement and Compliance in the US, UK, and China: Trends from 2014 and Forecast for 2015

1. © 2015 Baker & McKenzie LLP
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2. © 2015 Baker & McKenzie LLP
Anti-Corruption Enforcement and
Compliance in the US, UK and China:
Trends from 2014 and Forecast for
2015
January 30, 2015

3. © 2015 Baker & McKenzie LLP
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SPEAKING TODAY
John P. Cunningham
Partner, Washington, DC
Vivian Wu
Special Counsel, Beijing
Geoff Martin
Associate, London, UK/Washington, DC

5. Baker & McKenzie LLP is a member firm of Baker & McKenzie International, a Swiss Verein with member law firms around the world. In accordance with the common
terminology used in professional service organizations, reference to a "partner" means a person who is a partner, or equivalent, in such a law firm. Similarly, reference to an
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© 2015 Baker & McKenzie LLP
Anti-Corruption Enforcement and
Compliance in the US, UK and China:
Trends from 2014 and Forecast for 2015
January 30, 2015
John P. Cunningham: Washington, DC
Vivian Wu: Beijing, China
Geoff Martin: London, UK; Washington, DC

6. © 2015 Baker & McKenzie LLP 6
Global Enforcement and
Compliance Trends - Overview
‒ Burgeoning global enforcement of anti-corruption laws
 US, UK, China, Brazil, Russia, Canada
‒ Increased multi-country enforcement actions
‒ Proactive cross-border investigative cooperation (sharing)
‒ Keying in on individual prosecutions
‒ Heavy involvement by agents or intermediaries (75%) [Source =
OECD Foreign Bribery Report, Dec. 2014]
‒ Majority of global matters in four sectors (67%): extractive,
construction, transportation, and information
‒ Greater compliance awareness among companies and employees
(e.g., whistleblower risk, monitoring)

7. © 2015 Baker & McKenzie LLP 7
2014 Transparency Int’l CPI Index*
From 1 (least corrupt) to 174 (most corrupt), the countries of particular interest in
this specific presentation rank as follows:
‒ USA: Rank 17, Score 74 (Score of 100 = least corrupt; 1 = most)
‒ UK: Rank 14, Score 78
‒ China: Rank 100, Score 36
Other Countries of Note in the TI 2014 CPI Index (i.e., top and bottom rankings)
‒ Denmark (Rank 1, Score 92)
‒ New Zealand (Rank 2, Score 91)
‒ Note: Singapore (Rank 7, Score 84) is only ASEAN country in top 10
‒ North Korea (Rank 174, Score 8)
‒ Somalia (Rank 174, Score 8)
*The TI Corruption Perceptions Index (CPI) measures how one country compares to others
included in the Index based on the perceived level of public-sector corruption in each country

8. United States

9. © 2015 Baker & McKenzie LLP
Top 20 FCPA
Settlements
(US millions)
Siemens AG $800
Alstom S.A. $772
KBR/Halliburton $579
BAE $400
Total S.A. $398
Alcoa $384
ENI S.p.A. $365
Technip S.A. $338
JGC Corporation $219
Daimler AG $185
Weatherford $152
Alcatel-Lucent $137
Avon $135
Hewlett-Packard $108
Deutsche / Magyar Telekom $95
Marubeni Corporation $88
Panalpina $82
Johnson & Johnson $70
Pfizer / Wyeth $60
ABB $58
2008
2009
2010
2013
2011
2012
2014

10. © 2015 Baker & McKenzie LLP
US - Enforcement and Compliance Trends in
2014 and Outlook for 2015: Overview
‒ US ranked 17 out of 174 on TI’s 2014 Corruption Perceptions Index
‒ FCPA still by far most actively enforced anti-corruption law in the world
‒ Cost of settling FCPA enforcement actions continues to rise –
accompanied by big global headlines
‒ Emergence of more active cross-border cooperation between US
authorities and other countries involving FCPA matters
‒ FCPA enforcement against non-US companies continues
‒ Self-reporting, cooperation, and remediation increasingly important
factors in reducing anti-corruption settlement penalties
‒ Prosecution of individuals involved in FCPA misconduct on the rise
‒ Continued emphasis on benefits of an effective compliance program
10

11. © 2015 Baker & McKenzie LLP 11
US - Key Trends 2014
‒ Increased role in global enforcement and cooperation
 Sharing information
 Joint prosecutions
 More countries: UK, Brazil, China, Russia, Canada
‒ Expanded charges
 Combining anti-corruption with export violations,
money laundering, mail and wire fraud, other
charges

12. © 2015 Baker & McKenzie LLP 12
US - Key Trends 2014
‒ Greater corporate awareness
 Self-reporting and cooperation
 Front page media reports
 Whistleblowers
‒ Higher expectations for compliance programs
 Third party due diligence
 M&A, JVs due diligence
 Investigation protocols and rapid response

13. © 2015 Baker & McKenzie LLP 13
US – Key Trends 2014
‒ Aggressive expansion of FCPA jurisdiction to non-
domestic concerns and non-issuers
 Exerting extra-territorial jurisdiction
 Enforcement based on abetting and conspiracy theories
‒ Higher expectations for compliance programs to be
comprehensive and premised on company-specific risk
profile
‒ Immense penalties and collateral consequences (legal
fees, compliance program costs, shareholder
derivative actions, debarment, negative publicity)

14. © 2015 Baker & McKenzie LLP 14
US - Key Trends 2014
“The prosecution of individuals – including corporate
executives – for white-collar crimes is at the very top of the
Criminal Division’s priority list under Assistant Attorney
General Caldwell.”
--Marshall Miller, US Principal Deputy Assistant Attorney
General for the Criminal Division, September 17, 2014

15. © 2015 Baker & McKenzie LLP 15
US – Key Trends 2014:
Increased Focus on Asia
‒ Of the five 2014 settlements in the top 20:
 Alstom and Marubeni both relate to corrupt payments in
Indonesia -- schemes to procure officials’ assistance in
securing power projects for Alstom and its subsidiaries;
and to secure a contract to provide power-related
services in Indonesia (Marubeni)
 Avon involved allegations of corrupt conduct in China,
including improper gifts, entertainment, and hospitality
provided to public officials

16. © 2015 Baker & McKenzie LLP 16
US – Key Trends 2014:
Increased Focus on Asia (cont’d)
‒ Other 2013 and 2014 FCPA resolutions with
allegations of corrupt payments to officials in SEA /
Asian countries include:
 Bio-Rad Products (Vietnam & Thailand)
 Smith & Wesson Holding Corporation (Indonesia)
 Bruker Corporation (China)
 Diebold Inc (China)

17. © 2015 Baker & McKenzie LLP 17
US – Looking Ahead in 2015
‒ Hiring practices abroad
 US government investigating major financial firms
including Morgan Stanley and Citigroup, Inc.
‒ Travel issues
 Recent FCPA matters demonstrate continued interest
and significantly increased fines in connection with
travel-related improprieties
‒ Third parties
 70-80% of FCPA cases involve third parties committing
violations on or behalf of main corporate entity

18. © 2015 Baker & McKenzie LLP 18
US – Looking Ahead in 2015
‒ M&A
 DOJ opinion release: DOJ will not penalize a company
subject to the FCPA for acquiring a foreign target with
corruption issues, provided certain conditions were met
‒ Commercial bribery
 Diebold (2013) – SEC folding commercial bribery into its
FCPA enforcement realm

19. © 2015 Baker & McKenzie LLP 19
US – Looking Ahead in 2015
‒ Sep. 2014 – $30 million USD award to a foreign
whistleblower in a fraud case (largest ever)
‒ November, 2014: SEC released annual Dodd Frank
whistleblower report covering FY’14:
 3,620 tips, 20% increase over two years
 9 whistleblower awards (5 in all previous years
combined)

20. © 2015 Baker & McKenzie LLP 20
US – Looking Ahead in 2015
‒ Increased prosecution against individuals
 DOJ: Corporate cooperation credit will depend on
disclosure of evidence of individual culpability, more
aggressive tactics will be used to investigate individuals
 Creation of 3 new and dedicated FBI units to focus on
FCPA matters

21. United Kingdom

22. © 2015 Baker & McKenzie LLP 22
UK - Enforcement and Compliance Trends
in 2014 and Outlook for 2015: Overview
‒ Tooling-up for corporate prosecutions
‒ Building a head of steam - more cases brought
‒ Significant firsts on the horizon?
‒ A pipeline of cases for 2015
‒ The future of the Serious Fraud Office

23. © 2015 Baker & McKenzie LLP 23
UK – Gearing Up for Corporate
Prosecutions
‒ Introduction of Deferred Prosecution Agreements
‒ New Sentencing Guidelines
‒ Proposals for a broader ranging Corporate Offence of
a Failure to Prevent Fraud/Economic Crimes
‒ UK Anti-Corruption Plan

24. © 2015 Baker & McKenzie LLP 24
UK - Building a Head of Steam in 2014
‒ Enforcement of pre-Bribery Act legislation
 Smith and Ouzman (December)
 Innospec (August)
 Alstom - Charged (July)
 Bruce Hall (July)
‒ Bribery Act enforcement
 Bio Fuel fraud & bribery convictions (December)

25. © 2015 Baker & McKenzie LLP 25
UK - Significant Firsts on the Horizon?
‒ First Deferred Prosecution Agreement
‒ First corporate conviction under Bribery Act s.7
‒ First Bribery Act conviction for foreign bribery

26. © 2015 Baker & McKenzie LLP 26
UK - Pipeline of Cases for 2015 (selected)
‒ Rolls Royce
‒ GlaxoSmithKline
‒ Alstrom
‒ Barclays

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UK - Future of the Serious Fraud Office
‒ Continued challenges
 Tchenguiz and Dahdaleh cases
 HM Crown Prosecution Service Inspectorate report
(November 2014)
‒ Home Office considers disbanding SFO and rolling into
the National Crime Agency

28. China

29. © 2015 Baker & McKenzie LLP 29
China - Enforcement and Compliance
Trends in 2014 and Outlook for 2015:
Overview
‒ Greater scrutiny from Chinese authorities
‒ Surge in prosecutions and higher penalties
‒ Strengthened administrative enforcement
‒ New legislation focusing on bribery

30. © 2015 Baker & McKenzie LLP 30
China - PRC Anti-Bribery Law
PRC law prohibits and penalizes both the giving and receiving
of “bribes” in exchange for “improper benefits”.
Legislation Context Authority
Criminal Law • Criminal Law Judiciary Interpretation
• Regulates both official bribery and commercial
bribery
Public Security
Bureau
Procuratorate;
People’s courts;
Anti-Unfair
Competition
Law (AUCL)
• Regulations Concerning the Prohibition of
Commercial Bribery Acts
• Regulates commercial bribery
State Administration
for Industry and
Commerce and its
local counterparts
CPC Rules • Communist Party of China (CPC) polices and
rules
Commission for
Discipline and
Inspection of the
Central Committee
of CPC (CCDI)

31. © 2015 Baker & McKenzie LLP 31
China - General Enforcement Trends
‒ Increasing scrutiny of SOEs
‒ Industry sweeps
 Energy
 Telecommunications
 Media
 Automobile
 Banking
‒ Dawn raids frequently used by regulators
 Criminal prosecution
 Administrative enforcement

32. © 2015 Baker & McKenzie LLP 32
China - Highlights in Anti-Corruption
Campaign
‒ Enforcement against Chinese government officials
‒ Prosecution against foreign invested enterprises
 GSK – a record fine of US$489 million
“Tigers”
30 transferred
to criminal
charges
68 “Flies”
penalized for
breaking
disciplinary
rules
71,748 “Fox Hunt”
illegal assets
recovered from
abroad
US$
500
million

33. © 2015 Baker & McKenzie LLP 33
China - Legislation Development
‒ New rule on enterprise information publication
‒ Draft 9th Amendment to Criminal Law
 New crime of offering bribes to close relatives of
government officials
 Impose fines to corruption/bribery related crimes
 Replacement of amount-based standards for sentencing
bribe-taking crimes with more general criteria
‒ Intensified international cooperation
 2014 APEC Beijing Declaration on Fighting Corruption

34. © 2015 Baker & McKenzie LLP 34
China – Looking Ahead in 2015
‒ Continuation of the country’s anti-corruption compaign
 Establish and Improve Punishment and Prevention of
Corruption System Work Plan (2013-2017)
‒ Strengthen prosecution of bribery crimes
 A new anti-corruption agency within the Supreme
People’s Procuratorate is to be established in 2015
‒ Industry sweeps
 Industries concerning people’s livelihood will continue to
be enforcement targets

35. © 2015 Baker & McKenzie LLP 35
Baker & McKenzie - Additional
Resources
Follow ongoing developments in global anti-
corruption enforcement and compliance via:
 http://globalcompliancenews.com/
 Baker & McKenzie’s acclaimed “Inside the FCPA” Newsletter
http://www.bakermckenzie.com/insidethefcpa/

36. Thank you!
Any questions?

37. © 2015 Baker & McKenzie LLP 37
Contact Information for Presenters
John P. Cunningham, Partner, Washington, DC
 Email: john.cunningham@bakermckenzie.com
 Phone: + 1 202 835 6148
Vivian Wu, Special Counsel, Beijing
 Email: Vivian.Wu@bakermckenzie.com
 Phone: + 86 10 6535 3860
Geoff Martin, Associate, London, UK/Washington, DC
 Email: geoff.martin@bakermckenzie.com
 Phone: + 1 202 835 1677

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Corruption and Corporate Risk: How to Integrate
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