Luis presented to Brazilian law firm Peixoto e Cury Advogados on April 12, 2012, in Sao Paulo, Brazil. Luis discussed the background of the Foreign Corrupt Practices Act, along with the rules, regulations and sanctions.

1. Peixotoe CuryAdvogados
presented by Luis Alcalde
Kegler, Brown, Hill & RitterApril 12, 2012Sao Paulo, Brazil

2. •The FCPA is a USA law known primarily for two of its main provisions, namely:
–Prevention of bribery of (foreign) governmental officials.
–Duty to keep accurate financial books and records and have adequate internal controls to accurately reflect the transactions of the business
•Scope and operation of FCPA is not restricted to USA territorial boundaries.
Foreign Corrupt Practices Act of 1977 –(FCPA)

3. Why Should FCPA Be Of Concern?
1.Siemens (Germany): $800 million in 2008.
2.KBR / Halliburton (USA): $579 million in 2009.
3.BAE (UK): $400 million in 2010.
4.SnamprogettiNetherlands B.V. / ENI S.p.A(Holland/Italy): $365 million in 2010.
5.TechnipS.A. (France): $338 million in 2010.

4. Siemens Case
•USA and German Joint Prosecution
•1.8 billion in total fines and forfeitures
•Guilty Pleas by Siemen companies in Germany, Argentina, Bangladesh & Venezuela
•Siemens made millions in corrupt payments in Latin America and the Middle East to obtain business and obtain favorable treatment from governments

5. Focus on Prosecution of Individuals
•US Justice Continues to Focus on Individuals
•Companies settle, pay fines and forfeit profits
•Guilty Employees go to jail, pay fines and must make restitution.
•Average jail term is two years in federal prison but range is very broad with one sentence up to 15 years.

6. FCPA
•Basic Prohibition: The FCPA makes it unlawful for companies/persons subject to USA jurisdiction to bribe foreign government officials to obtain or retain business, including through intermediary.
•For the basic prohibition, five elements mustbe met for a violation of the Act:

7. 1.Who–PersonssubjecttotheFCPA.
FCPApotentiallyappliestoUScompanies,citizens,
foreignsubsidiary,officer,director,employee,or
agentofaUScompanyoritsforeignsubsidiaryand
anystockholderactingonbehalfofthecompany.
FCPA

8. FCPA
•Companiesand Individualsmay be held liable under the FCPA under two principles, namely:
(i) Territorial Jurisdiction; and
(ii) Nationality Jurisdiction.

9. •Territorial–For acts taken within the territory of the US, Issuers and Domestic Concerns are liable, if the Act is undertaken in furtherance of a corrupt payment to a foreign official using US mails or other means or instrumentalities of interstate commerce.
•Nationality–Issuers and Domestic Concerns are liable for any act in furtherance of a corrupt payment undertaken outside the US. Thus, a US company or national may be held liable for payment authorizedby employees or agents operating entirely outside the US, using money from foreign bank accounts, and without any involvement by personnel located within the US.
FCPA

10. •US parent corporations may also be held liable for the acts of wholly owned foreign subsidiaries where they authorized, directed, or controlled the activity in question, as can US citizens or residents, who were employed by or acting on behalf of such foreign-incorporated subsidiaries.
FCPA

11. 2.Corrupt Intent–The person making or authorizing the payment must have a corrupt intent, and the payment must be intended to induce the recipient to misuse his official position to direct business wrongfully to the payer or to any other person.
FCPA

12. •FCPA does not require that a corrupt act succeed in its purpose. A mere offer or promise can constitute a violation of the statute.
FCPA

13. 3.Payment–FCPA prohibits paying, offering, promising to pay (or authorizing to pay or offer) money or anything of value (i.e. No minimum value).
FCPA

14. FCPA
4.Recipient–The prohibition extends only to corrupt payments to a foreign official, a foreign political party or party official, or any candidate for foreign political office. A “foreign official” means any officer or employee of a foreign government, a public international organization, or any department or agency thereof, or any person acting in an official capacity.
* Could include an employee of a state owned enterprise.

15. 5.Business Purpose Test–The FCPA prohibits payments in order to assist the company in obtaining or retaining business for or with, or directing business to, any person.
The term “obtaining or retaining”business is broadly defined and encompasses more than mere award or renewal of a contract.
FCPA

16. FCPA Books & Records Requirements
•Pursuant to FCPA companies must make and keep books, records, and accounts, which, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company
•Company can be guilty of this independently of anti-bribery provisions

17. Permissible Payments and Affirmative Actions under FCPA.
•Facilitating payments for routine governmental actions (“grease payments”)–An exception to the antibribery prohibition are payments to facilitate or expedite performance of a “routine governmental action”.
•However, “routine governmental action”does not include any decision by a foreign official to award new business or to continue business with a particular party.
FCPA

18. FCPA
•Examples of “grease payments”:
–Obtaining permits, licenses or other official documents;
–Processing governmental papers, such as visas and work orders;
–Providing police protection, mail pick-up, trash collection and delivery;
–Providing phone service, power and water supply; and
–Scheduling inspections associated with contract performance or transit of goods across country.
•Note that these exceptions are extremely narrow and difficult to apply. Therefore all exceptions must be approved by the OMNOVA Law Department, and if approved only applies to the particular circumstances.

19. Affirmative Defenses
•A person charged with a violation of the FCPA may assert as a defense that the payment was lawful under the laws of the foreign country (i.e. Brazil) or that the money was spent as part of demonstrating a product or performing an otherwise lawful contractual obligation.
•Whether a payment was lawful under the laws of a country can be difficult to determine. Therefore, seek advice of counsel experienced in these issues.
•Most importantly, as these are “affirmative defenses”the burden of proof is on the defendant to demonstrate that the payments did not constitute a violation of FCPA.
FCPA

20. FCPA
Sanctions
•Civil and criminal penalties (including high fines and imprisonment).
•Other government actions (e.g., barred from doing business with the Federal Government, ineligible to receive export licenses, suspension from securities business, disallowance as deduction of business expenditures).
•Private cause of action (treble damages under the Racketeer Influence and Corrupt Organization ACT (RICO). For example, an action might be brought under RICO by a competitor who alleges that the bribery caused the defendant to win a foreign contract.

21. FCPA Internal Control Requirements
Pursuant to FCPA, companies must have a system of internal controlsto provide reasonable assurances that:
1.transactions are done as management has authorized
2.transactions are recorded accurately and there is proper accountability for company assets

22. FCPA Definition of Due Diligence
The terms "reasonable assurances" and "reasonable detail" mean such level of detail and degree of assurance as would satisfy prudent officials in the conduct of their own affairs.

23. Dilemma of Due Diligence
•Due diligence must be done as part of a compliance program to maintain a system of internal controls to reasonably assure accurate books and records and that transactions are executed in accordance with management directives.
•Not doing due diligence is a violation of the law.
•Doing due diligence, however, is not a defense to bribery.

24. Due Diligence a Practical Defense to Corrupt Intent
•If one does everything that is reasonably possible, then it is difficult to prove a corrupt intent.
•The terms "reasonable assurances" and "reasonable detail" mean such level of detail and degree of assurance as would satisfy prudent officials in the conduct of their own affairs.

25. Due Diligence-What is Reasonable Under the Circumstances
The degree of due diligence we should do on a consultant will depend on the circumstances
•Has risk analysis identified any general and/or specific risks of corruption?

26. Due Diligence-Risk Analysis
•In what market is the consultant working? Is it a market with a reputation for corruption or is it a transparent market? India has high incidence of corruption, so we know there is high risk.
•Is the consultant going to have to interact with government officials?

27. FCPA Sanctions
•Civil and criminal penalties
•Barred from government contracts, denial of licenses, suspension from selling securities, tax problems for improper deductions in tax filings, disgorgement of profits
•Employees prosecuted and jailed

28. Thank You
Luis M. Alcalde
Kegler, Brown Hill & Ritter Co., L.P.A.
Ste. 1800, 65 E. State St.
Columbus, OH 43215
Direct Dial: 614-462-5480
Fax: 614-464-2634
Email: lalcalde@keglerbrown.com
www.keglerbrown.com
www.keglerbrown.com/people/luis-alcalde