This document summarizes a presentation on managing international risks and conducting international corporate investigations. It discusses the various risks companies face in international business like market, regulatory, socio-political, economic, operational, and management risks. It also outlines when and why companies conduct internal investigations, both with and without government involvement. Key points covered include establishing an ethics policy and compliance programs, triggers for investigations, principles of prosecution for corporations, potential consequences of criminal liability, conducting investigations, importance of remedial measures, disclosure obligations, and risks of disclosure versus non-disclosure.

1. z
Managing International Risks
+ Corporate Investigations
presented by Luis M. Alcalde
Corporate Corruption + Fraud Seminar
January 16, 2014

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. 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. 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. 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

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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

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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

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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

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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. 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

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Corporate Criminal Liability
Agent acting
within scope
of authority
Agent
motivated at
least in part
to benefit
corporation
Agent’s
knowledge
imputed to
corporation

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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

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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. 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.

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Disclosure of Investigation
Certain
Government
Involvement
Self
Disclosure
Possible
Leniency

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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. 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. z

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Thank You!
Luis M. Alcalde, Of Counsel
Kegler Brown Hill + Ritter
lalcalde@keglerbrown.com
keglerbrown.com/alcalde
614-462-5480