1. FCPA Update and Voluntary
Disclosure Process
Michael L. Volkov June 2011
Partner
202-7263-3288
[MVolkov@mayerbrown.com
Mayer Brown is a global legal services organization comprising legal practices that are separate entities ("Mayer Brown Practices"). The Mayer Brown Practices are: Mayer Brown LLP, a limited liability partnership established in the United States;
Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales; Mayer Brown JSM, a Hong Kong partnership, and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which
Mayer Brown is associated. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.

2. Overview
• Current Enforcement Picture
• Legal Elements of the Offense
• UK Bribery Act Effective Date
• Designing and Implementing a Compliance Program
• Third Party Agents and Due Diligence
2

3. Current
Enforcement
Picture
3

4. Current Enforcement Picture
FCPA Enforcement Trends
• Corporate mega fines fueled by voluntary disclosure process.
• DOJ has dedicated additional prosecutors to FCPA cases and is
increasing use of industry-wide investigations.
• FBI has dedicated FCPA squad and is using aggressive
investigative tactics.
• Dodd-Frank whistleblower bounty program will increase
prosecutions by exponential factor.
4

5. Current Enforcement Picture
FCPA – DOJ Priority
“*T+he Department’s enforcement of the FCPA is
aggressive, and it’s on the rise… This year alone,
we’ve collected well over $1 billion already…
[L]ast year and this year combined, we’ve
charged over 50 individuals. Moreover, last year
we tried three FCPA cases successfully to
verdict… and approximately 35 individuals
currently await trial on FCPA charges in the
United States. In all, our message to companies
and individuals who would bribe foreign
officials is clear: foreign bribery is not an
acceptable way of doing business, and we
won’t tolerate it.”
— Lanny Breuer, Assistant Attorney General, Nov. 4, 2010
5

6. Current Enforcement Picture
Increase in FCPA Enforcement Actions
2010 witnessed an 85% increase in FCPA enforcement actions over 2009, which itself was a record year.
60
DOJ
50 48
SEC
40
30 26 26
20 20
20 18
13 14
10 7 7 8
5
2 3
0
2004 2005 2006 2007 2008 2009 2010
6

7. Current Enforcement Picture
Blockbuster FCPA Settlements
* Eight of the top ten monetary settlements in FCPA history were reached in 2010.
$900
Siemens 2008
$800 2009
$700 2010
KBR/Halliburton 2011
$600
$500 BAE Systems
ENI/Snamprogetti
$400 $800 Technip
$300 $579 JGC Corporation
Daimler
$200 $400 Alcatel-Lucent $218.8
$365 $338
Panalpina Johnson & Johnson
$100 $185
$137
$82 $70
$0
7

8. Current Enforcement Picture
Most Severe Jail Sentences for FCPA Violations
David Kay,
American Rice, Inc. 37 months
John Warwick,
Ports Engineering 37 months
Consultants Corporation
Robert Antoine,
Haiti Telco 48 months
Juan Diaz,
Third party consultant 57 months
to Haiti Telco
Douglas Murphy,
American Rice, Inc. 63 months
Albert Jack Stanley,
KBR 84 months
Charles Paul Edward Jumet,
Ports Engineering 87 months
Consultants Corporation
0 10 20 30 40 50 60 70 80 90 100
8

9. Current Enforcement Picture
Aggressive
Law Enforcement Tactics
• DOJ is employing strategies and tactics typically
used for violent gangs, drug trafficking
organizations and organized crime
• Developing intelligence pool based on
cooperating witness information gathered
across all white collar cases (e.g. antitrust, fraud)
• Undercover Officers and Confidential Informants
• Search Warrants
• Wiretaps
• Seizure of assets and forfeiture
9

10. Current Enforcement Picture
Industry-Wide Investigations
Oil and Oil-Services Industry – Panalpina Investigation – Vetco settled FCPA case in
2007 based on illegal bribes made through Panalpina. Following settlement, DOJ
issued at least 11 letters to oil and oil services companies, requesting information
about their dealings with Panalpina.
On Nov. 4, 2010, DOJ and the SEC announced settled FCPA enforcement actions
against Panalpina plus six of these oil and oil services firms (most of which were
Panalpina customers) totaling $236.5 million in disgorgement, fines, and penalties.
10

11. Current Enforcement Picture
Industry-Wide Investigations
• Medical Device and Pharmaceutical Industry
− Biomet, DePuy, Diagnostic Products, Medtronic, Micrus, Smith &
Nephew, Stryker, Syncor, Wright Medical, Zimmer Holdings
− Eli Lilly, Merck, Astra Zeneca, Bristol-Myers Squibb, GlaxoSmithKline, SciClone
• Military and Law Enforcement Products Industry
− SHOT Show Sting targets, Armor Holdings, DynCorp, Smith & Wesson, Allied
Defense, Blackwater/Xe
• Telecommunications Industry
− Alcatel-Lucent, Haiti Teleco, ITXC, Latin Node, Magyar Telekom, Siemens
entities, UTStarcom, Veraz
SEC recently launched industry-wide investigation against global financial
companies focusing on dealings with sovereign wealth funds.
11

12. Current Enforcement Picture
Whistleblower Bounty
• Dodd-Frank bill created whistleblower bounty
program which authorizes whistleblowers to
recover between 10 and 30 percent of any
settlement that exceeds $1 million.
• SEC has issued regulations, selected chief of
program and requested funding for 43 new
positions.
• SEC has been inundated with whistleblower
complaints and recently disclosed it has received
1-2 credible complaints each day.
• Businesses have filed comments opposing
regulations claiming that program creates
incentives for whistleblowers to avoid internal
reporting programs.
12

13. Elements of the
Elements of the
Offense
Offense
13

14. Elements of the Offense
Elements of an FCPA Violation
• A payment, offer, authorization, or promise to pay money or anything of value to
a foreign government official
– Includes a party official or manager of a state-owned company, or public
organizations such as World Bank or UN), or to any other person,;
• Knowing that the payment or promise will be passed on to a foreign official
• With a corrupt motive for the purpose of (i) influencing any act or decision of
that person, (ii) inducing such person to do or omit any action in violation of his
lawful duty, or (iii) securing an improper advantage;
• Corrupt” payments extend to business advantages such as tax refunds and
reductions; government inspection reports and certifications; customs clearance
for improperly or illegally imported goods and equipment; expedited
government registration certifications; and beneficial changes to laws and
regulations
14

15. Elements of the Offense
Elements of an FCPA Violation
Accounting / Recordkeeping
Provisions
Under the books and records
provisions, issuers must keep
accurate books and records and
maintain adequate internal controls.
15

16. Elements of the Offense
Who is liable under the FCPA?
Domestic:
• All US “issuers” and private companies (“domestic concerns”)
• Any US corporation or national or any foreign bribery-related conduct
• US citizens or foreign nationals operating in the US or using
instrumentalities
Foreign:
• Foreign corporations subject to SEC regulation (e.g., via ADRs) and using
instrumentalities
• All foreign corporations when in US territory, whether or not they use
instrumentalities of interstate commerce
Includes directors, officers, employees,
and agents of entities subject to the statute
16

17. Criminal Penalties
For companies, criminal violations can result in:
• $2 million fine for an anti-bribery violation; and
• $25 million fine for a books and records violation.
Individuals face up to:
• 5 years in jail with a maximum $250,000 fine for an anti-bribery
violation; and
• up to 20 years in jail with a maximum $5 million fine for a
books and records violation.
Under a federal alternative fine provision,
companies and individuals may be fined up to
twice the benefit sought or received.
17

18. Elements of the Offense
Civil Penalties
• In the civil context, the SEC and DOJ can impose a
$10,000 fine per violation upon individuals and
companies.
• The SEC may also impose further civil penalties ranging
between $7,500 to $150,000 upon individuals and
$75,000 to $725,000 upon companies.
Alternatively, the SEC may impose a civil penalty equal to the
gross pecuniary gain to an individual or company and equitable
relief, such as disgorgement of profits.
18

19. Elements of the Offense
“Foreign Official”
• A “foreign official” includes any officer
or employee of a non-U.S.
government, agency, or
“instrumentality” of a non-U.S.
government
• The SEC and DOJ liberally construe the
term “instrumentality” to cover
employees of private company where
foreign government owns controlling
interest or exercises control.
• District court recently upheld DOJ
interpretation of statute in Noriega
case. Issue pending in two other cases
19

20. Elements of the Offense
Facilitation Payments
• FCPA exempts “facilitation” payments (small “grease”
payments) to expedite routine governmental action”.
• Limited to payments that “merely move a particular matter
toward an eventual act or decision” – applies only when the
government official has no discretion in performing duties.
• Payment must be for something to which the payor was
already entitled, e.g., the mere receipt of an application, as
opposed to approval of the application.
• Best practices counsel to prohibit facilitation payments
entirely – 80% of U.S. companies have banned them.
20

21. Elements of the Offense
Affirmative Defense:
Reasonable Bona Fide Marketing and Promotion Payments
• Reasonable and bona fide expenditures, such as travel and lodging
expenses directly related to (A) the promotion, demonstration, or
explanation of products or services, or (B) the execution or performance
of a contract with a foreign government or performances of a contract
with a foreign government or agency thereof.
• Travel expenses to United States (FCPA Op. Proc. Rel. 07-01)
• Product samples for testing (FCPA Op. Proc. Rel. 09-01)
• Journalist stipends (FCPA Op. Proc. Rel. 08-03)
• Trips to tourist destinations (US v. Metcalf & Eddy, Inc)
21

22. Elements of the Offense
UTStarcom Incorporated (2009)
• Arranged and paid employees of Chinese state-owned
telecommunications companies to travel to popular tourist
destinations in the United States, including Hawaii, Las Vegas
and New York City, and making improper payments to
consultants in China and Mongolia while knowing that they
would be used to pay bribes to foreign government officials.
• UTSI voluntarily disclosed the violations, and agreed to pay a
$1.5 million penalty to the DOJ, plus $1.5 million to the SEC.
22

23. Elements of the Offense
Liability for Subsidiaries — Nature Sunshine
• In 2009, CEO and CFO of Nature’s Sunshine, a manufacturers of
nutritional products, were held responsible under books and
records provision for bribes made by employees of a wholly-owned
subsidiary in Brazil.
• SEC alleged that they had overall responsibility for the
international operations of the company and that the people who
would know about the relevant issues were under their control.
• This was the first time the SEC imposed liability on individuals
under a theory of "control person" liability in an FCPA case. Under
that theory, the SEC may charge an individual who manages a
company absent evidence that he or she knew about or
participated in a bribery scheme.
23

24. Elements of the Offense
Expanding Enforcement Theories
Travel Act prohibits the use of interstate or foreign commerce or the U.S.
mails to further an activity that violates state or federal bribery laws and can
be used to criminalize bribes to private parties if they violate state or
federal law (Control Components Inc.)
• Money laundering charges permit DOJ to prosecute foreign officials—the
bribe takers, intermediaries and third-party agents (Haiti Teleco)
• Export control laws (Shu Quan-Sheng)
• Charging a non-issuer based on theories of aiding and abetting and its
role as an agent of a U.S.-issuer (Panalpina)
• Control person liability for an executive’s failure to supervise
(Nature’s Sunshine)
• False certifications and redactions of references to bribery as part of an
internal audit (Bobby Benton)
24

25. Elements of the Offense
Cooperation Credit and Voluntary Disclosure
• Voluntary reporting, cooperation, and a pre-existing compliance program will
result in “meaningful credit” to companies in setting fine amounts.
• In Panalpina, DOJ and the SEC declined to prosecute Global Industries for any
possible FCPA violations because it had a strong, pre-existing internal compliance
program that allowed it to identify and disclose the issues to DOJ.
• Noble Corp. received a steeply discounted fine and a non-prosecution
agreement (“NPA”) in recognition of its “early voluntary disclosure, thorough self-
investigation… , full cooperation with *DOJ,+ and extensive remedial measures…”
• Pride, Tidewater, and Transocean also received substantial discounts of
55%, 30%, and 20%, respectively, from the low end of the applicable sentencing
guidelines range, in part, for disclosing the suspected violations before being
contacted by DOJ.
• Universal Leaf received credit from DOJ for its pre-existing compliance
program, specifically its compliance hotline, that helped identify certain FCPA
violations.
25

26. Elements of the Offense
Cooperation Credit and Voluntary Disclosure
(cont’d)
At the same time, DOJ officials’ comments suggest that they expect
disclosure in nearly every case:
“If there is a bribe we want to hear about it, even if it is small.”
—Charles Duross, Deputy Chief, DOJ’s Fraud Section and Head of its FCPA Unit, Sept. 16, 2010
“I can assure you that if you do not voluntarily disclose your
organization’s conduct, and we discover it on our own,… the
result will not be the same.”
—Lanny Breuer, Nov. 16, 2010
26

27. Elements of the Offense
Asset Forfeiture
Asset Forfeiture and Recovery Remains “A Global Imperative”:
Continuing its focus on this topic, on July 25, 2010, DOJ announced
the creation of the Kleptocracy Asset Recovery Initiative, a team of
prosecutors dedicated to combating large-scale foreign official
corruption, and recovering and repatriating public funds.
• DOJ has already filed civil forfeiture complaints to seize U.S.-based assets
of the former president of Taiwan, who was convicted of bribery there.
• DOJ now routinely includes a forfeiture count in every FCPA-related
charging document.
27

28. Elements of the Offense
Mergers and Acquisitions:
Buying an FCPA Violation
Acquiring company can be held liable for FCPA
violations which occurred prior to the acquisition
unless the acquiring company conducts a “due
diligence” review:
• Due diligence review will identify the past FCPA
violations and the target will need to make a
disclosure to the Justice Department.
• Companies will have to address past FCPA
violations: change in price, structure, additional
warranties and indemnifications; deal could
terminate or be delayed.
• Similar procedure occurs in joint ventures.
28

29. Elements of the Offense
Mergers and Acquisitions:
Buying an FCPA Violation
• Failure to identify and remediate can expose
acquiring company or joint venture partner to
FCPA liability.
• Due diligence is not a legal defense but it can
minimize risk of successor liability when coupled
with acquiring company’s FCPA compliance
commitment.
• Timing of voluntary disclosures should be
carefully considered since DOJ involvement
raises stakes.
• Due diligence has to be tailored to transaction –
whether it is merger, asset acquisition, joint
venture or minority stake purchase.
• Overall strategy should be flexible as information
is learned.
29

30. Elements of the Offense
International Anti-Corruption Enforcement
is on the Rise
• UK Anti-Bribery Act – effective July 1
• Costa Rica: Alcatel-Lucent paid $10 million to settle local corruption
charges, the first time in Costa Rica’s history that it has recovered “social
damages” from a foreign corporation for corruption of its own
government officials.
• Nigeria: Its Economic and Financial Crimes Commission (“EFCC”) reached
several settlements with former FCPA defendants, including Siemens
($46.5 million), Halliburton ($35 million), and Snamprogetti ($32.5
million). On Jan. 13, 2011, the EFCC reportedly arrested 12 oil executives
from firms including Noble Corp, Tidewater, and Transocean in a series of
raids in connection with an alleged $100 million bribery scheme.
30

31. Elements of the Offense
International Anti-Corruption Enforcement
• Vietnam: A Vietnamese official convicted of receiving bribes from a
Japanese company was sentenced to life imprisonment and ordered to
disgorge $262,000 in bribe proceeds.
• Spain, Netherlands, and the Czech Republic all updated their anti-
bribery laws. (Spanish created criminal liability for corporations).
• China recently enacted new law prohibiting bribery of foreign officials.
• Russia is considering adopting new legislation.
• Canada has a robust law but enforcement is lax. OECD recently criticized
Canada’s enforcement efforts and Canada is expected to icnrease
enforcement.
31

32. UK Bribery Act:
Effective this Year
32

33. UK Bribery Act: Effective this Year
UK Bribery Act:
Basics
• Two general offenses for bribing
or taking a bribe
• A discrete offense of bribing a
foreign official
• A new corporate offense for
failure to prevent bribery
33

34. UK Bribery Act: Effective this Year
UK Bribery Act:
Corporation’s Failure to Prevent Bribery
• Person associated with a commercial organization bribes another:
– The term “associated persons” includes any person who “performs services
for or on behalf of the relevant commercial organisation” – and may include
subsidiaries, employees, agents, JV partners, consortium members.
• Defense to liability if the commercial organization has “adequate
procedures” to prevent such bribery from occurring:
– A “commercial organization” includes UK entities and those
companies and partnerships incorporated or formed overseas that “carry on a
business or part of a business in the UK.”
• The bribery may occur anywhere in the world – a conviction for
bribery in the local jurisdiction is not required.
34

35. UK Bribery Act: Effective this Year
FCPA v. Bribery Act Comparison
Similarities FCPA & Bribery Act
Covered: payment of money or anything of value:
Bribery Act: “financial or other advantage”
Broadly third parties (agents, consultants and distributions)
Applied to: and have broad extraterritorial reach
Distinctions: FCPA Bribery Act
Persons: bribery of foreign official public and private
Intent: “corrupt intent” “intention to influence
Exceptions and facilitation exception for corporate offense for
Defenses: “grease payment, affirmative failing to prevent bribery’
defenses for reasonable bona Affirmative defense:
fide expenses or legal under had “adequate
written local law. procedures”
35

36. UK Bribery Act: Effective this Year
UK Bribery Act Guidance Issued On March 30
• UK Bribery Act effective date is July 1 – Ministry of
Justice sought to address business concerns and restrain
Serious Fraud Office
• Guidance addressed four key issues:
– Jurisdiction over foreign corporations for failing to prevent
bribery of a foreign official
– The definition of “associated persons”
– Adequate procedures as a defense to the corporate offense
for failure to prevent a bribe
– Corporate hospitality
36

37. UK Bribery Act: Effective this Year
Jurisdiction Over Non-UK Companies
• Extends to non-UK companies that carries on a business
or part of a business in the UK
• Guidance defines to require “demonstrable business
presence”
• UK stock listing is not sufficient by itself to satisfy this
requirement, nor is a UK subsidiary if it acts
“independently” of the parent
• Key issue will be harm to UK business interests
37

38. UK Bribery Act: Effective this Year
Associated Persons
• An “associated person” includes a person who performs services for or on behalf of the
company, e.g. an agent, subsidiary or employee if the payment is Intended to obtain or
retain business, or a business advantage, for the commercial organization (not solely for the
associated person or a third party)
• Employees are presumptively associated persons. Bribes by a subsidiary only create liability
if the subsidiary intended the parent to benefit.
• A supplier performing services probably is an associated person; a seller of goods probably is
not
• Joint ventures and joint venture partners are not automatically “associated” with their
members and co-venturers. A member will only have liability for JV payments if the JV
performs services for the member, AND a bribe was paid with the intention of benefiting the
member. Indirect benefit to the member is not enough.
• In some JVs, the member’s degree of control over the payor determines if the payor was
performing services for the member. So, a bribe paid by a JV partner’s employee or agent
will probably implicate the JV partner alone, and not the co-venturers
38

39. UK Bribery Act: Effective this Year
Adequate Procedures – 6 Principles
1. Proportionate procedures: Procedures to prevent bribery by persons associated with the
organisation are proportionate to the bribery risks it faces and to the nature, scale and
complexity of the organisation’s activities. They are clear, practical, accessible, effectively
implemented and enforced.
2. Top level commitment: Top level management should issue statement of commitment to
counter bribery in all parts of the organisation’s operation.
3. Risk Assessment: Regular and comprehensive assessment of the nature and extent of the
organisation’s risks relating to bribery (more detail on later slide)
4. Due-diligence: Polices and procedures cover all parties to a business relationship, including
the organisation’s supply chain, agents and intermediaries, all forms of joint venture and
similar relationships Business partners: Reputation for bribery, Linked to public office
holders or Politically Exposed Persons (“PEPs”)
5. Communication (including training): Policy and Procedures, training, and support and
operational procedures
6. Monitoring and Review
39

40. UK Bribery Act: Effective this Year
Corporate Hospitality
• “Reasonable and proportionate” hospitality is legal
• Legitimate purposes: Improving your image, Presenting products and
services, and Establishing cordial relations
• Use of limits and pre-approval is recommended
• MoJ examples of acceptable hospitality (private sector): Wimbledon, Grand
Prix, Airport transfers, and Dining and tickets to an event
• MoJ examples of acceptable hospitality (FPOs):
– Reasonable travel and accommodation to visit mining operations
– Flights and hotel in New York, along with fine dining and baseball(“match”) for FPO and partner, as
long as there is “genuine mutual convenience”
– Ordinary travel and lodgings to enable a visit to a hospital
• But, if hospitality is not clearly connected with business activity, or is excessively
lavish, the likely inference is that it is a disguised bribe
40

41. UK Bribery Act: Effective this Year
The Risks of FCPA and UK Bribery ACT
Enforcement Action
• DOJ intends to increase “joint” enforcement actions;
will coordinate information sharing and enforcement
actions.
• No company wants to be the “guinea pig” for initial UK
Bribery Act enforcement actions.
• Companies need to review and revise FCPA compliance
programs to address Bribery Act.
• Enforcement and interpretation of Bribery Act will be
dynamic and require companies to keep up with
requirements.
41

42. Designing and
Designing and
Implementing an
Anti-corruption an
Implementing
Anti-corruption
Compliance Program
Compliance Program
42 4
2

43. Designing and Implementing an Anti-corruption Compliance Program
Basic Elements of FCPA Compliance Program
FCPA Compliance Policy and Tone at the Top.
• The Company should develop and promulgate a clearly
articulated and visible corporate policy against violations of
the FCPA and a strong commitment from senior
management.
• Strong policy statement should be adopted by the Board.
• Board and senior management should be required to make
commitment to anti-corruption compliance.
• Compliance commitment must be demonstrated by actions.
43

44. Designing and Implementing an Anti-corruption Compliance Program
Anti-Corruption Policies and Procedures
The Company should develop and promulgate compliance standards
and procedures which shall include policies governing:
• gifts;
• hospitality, entertainment, and expenses;
• customer travel;
• political contributions;
• charitable donations and sponsorships;
• facilitation payments; and
• solicitation and extortion.
44

45. Designing and Implementing an Anti-corruption Compliance Program
Use of Risk Assessment
The Company should develop its compliance standards
and procedures using a risk assessment.
• The risk assessment should be a formal and documented
review which examines:
− the nature and extent of corruption in each country in which
the company does business relying on public and internal
sources of information (Transparency International, OECD, etc);
− the extent of government interactions and the persons in the
company responsible for such interactions; and
− the use of third-party agents, consultants in each country.
45

46. Designing and Implementing an Anti-corruption Compliance Program
Corruption Risks
46

47. Designing and Implementing an Anti-corruption Compliance Program
Ongoing Assessment
• Annual Review. The Company should review its anti-
corruption compliance standards and procedures, on no
less than an annual basis to ensure they are working.
• Ongoing Assessment. The Company should conduct
ongoing assessments of its FCPA compliance program.
− During the year, spot checks and quarterly audits of the
compliance program should be conducted.
− Dynamic process for modifying the compliance program should
be made as new information is learned.
47

48. Designing and Implementing an Anti-corruption Compliance Program
Senior Management Oversight and Reporting
• The Company should assign responsibility to one or
more senior corporate executives of the Company for
the implementation and oversight of its Company's
anti-corruption policies.
• Company should designate a compliance officer in
senior management and provide adequate resources to
compliance office.
− Compliance officer should be separate from General Counsel
and internal auditing functions.
48

49. Designing and Implementing an Anti-corruption Compliance Program
Internal Controls
The Company should ensure that it has a system of internal
controls for the purpose of foreign bribery or concealing
bribery.
• Internal controls are key to identifying and preventing bribery.
• Internal audits must be supplemented with forensic audits since
internal audits hinge on “materiality” and may not catch bribery
schemes.
• Every expenditure of money where bribery may occur should have
specific controls and management procedures to prevent bribery
(e.g. gifts and hospitality, review form for certain amounts and
review by compliance and legal offices).
49

50. Designing and Implementing an Anti-corruption Compliance Program
Training
• FCPA training which shall include: (a) training for all
directors and officers, and, where necessary and appropriate,
employees, agents, and business partners; and (b) annual
certifications, certifying compliance with the training
requirements.
• Training programs should be tailored to different audiences
and risks. Offices that have interactions (sales and
regulatory) with foreign officials should have different
program from senior management.
• Legal and compliance staff throughout organization should
have separate training program.
50

51. Designing and Implementing an Anti-corruption Compliance Program
Ongoing Advice and Internal Reporting
• The Company should establish or maintain an effective system
for
− Providing Guidance;
− Internal Reporting; and
− Response to such internal reporting
• Internet-based guidance and reporting systems
• Hot-line reporting system for employees to make anonymous
reports
• Detailed procedure for review and response to internet
and hot-line reports
51

52. Designing and Implementing an Anti-corruption Compliance Program
Discipline
The Company should have appropriate disciplinary
procedures to address violations of the anti-corruption
laws and the Company's anti-corruption compliance
code, policies, and procedures.
• Specific disciplinary procedure should be adopted for
employees who commit corruption offense.
• No tolerance policy should be adopted and enforced.
52

53. Designing and Implementing an Anti-corruption Compliance Program
Foreign Business
• Foreign Business Representatives.
The Company shall:
− Perform appropriate due diligence on foreign business
representatives;
− Inform foreign business partners of its FCPA compliance
program;
− Seek reciprocal written anti-corruption and anti-bribery
commitments from its foreign business partners.
• Compliance Terms and Conditions.
The Company should include FCPA terms and conditions
in its contracts with foreign business partners.
53

54. Third Party Agents
And Due Diligence
54

55. Third Party Agents and Due Diligence
Due Diligence Screening of Third Party Agents
• Screen the Initial Terms of Relationship with Third Party:
− Review the creation of relationship, or any subsequent changes to
responsibilities or countries where agent operates.
− Establish procedure for centralized review of contracts to ensure
consistent standards.
− Depending on size of company, should establish review at highest
level within the company.
• Develop a Different Screening Procedures for Review of
Individual Transactions.
55

56. Third Party Agents and Due Diligence
Guidelines for Due Diligence Process
• Do not over-standardize procedure.
− Need to tailor to individual circumstances in each country based
on risk.
• Need to conduct background check to determine (5-10 year
history).
− Existence of ties to foreign government officials and employees.
− Existence of any pending or prior investigations of bribery or other
criminal conduct or civil violations.
• Create written package and record of review and approval
process to demonstrate compliance.
56

57. Third Party Agents and Due Diligence
Basic Issues to Cover
• Existence of relationships with foreign government officials
− Purchasing authority
− Licensing or other regulatory authorities
• Prior history of bribery and other crimes
• Nature of services, compensation and payment method
• Written contract
− Representations and warranties on compliance
− Right to inspect and audit third-party books
− Right to terminate contract if believe violation has or will occur
57

58. Third Party Agents and Due Diligence
Red Flags
Due diligence review of relationship or individual transactions
must include red flags which require additional investigation
before approval.
• Red flags are facts and circumstances that raise serious
questions of an FCPA violation.
• Companies which ignore red flags run the risk of FCPA
enforcement actions, criminal fines and the need for costly
remedial measures.
• A red flag only means that further scrutiny is warranted.
58

59. Third Party Agents and Due Diligence
Red Flag Procedure
• Red flags should be tailored
to each country and the
relevant risks.
• Red flags should be
categorized based on risk
factors (some are significant
and require more
investigation than others).
59

60. Contact
Michael Volkov
Direct: (202) 263-3288
Cell: (240) 505-1992
mvolkov@mayerbrown.com