Presenting a live 90-minute webinar with interactive Q&A Foreign Corrupt Practices Act in Latin America Implementing FCPA Compliance Programs and Mitigating Legal Risks TUES DAY, FEBRUARY 14, 2012 1pm East ern | 12pm Cent ral | 11am Mount ain | 10am Pacific Today’s faculty features: Jay Holtmeier, Partner, Wilmer Cutler Pickering Hale and Dorr , New Y ork Matteson Ellis, Founder/ Principal, Matteson Ellis Law , Washington, D.C. Matthew J. Feeley, S hareholder, Buchanan Ingersoll & Rooney , Miami The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .
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Foreign Corrupt Practices Act in Latin America: Enforcement Developments and Trends February 14, 2012 Jay Holtmeier Wilmer Cutler Pickering Hale and Dorr LLP
Key FCPA Trend: Increased Enforcement – FCPA enforcement activity has been exploding over the past several years. Reported FCPA Proceedings Over 150 pending enforcement 90 matters with DOJ and SEC. 80 – The DOJ, FBI, and SEC have increased 70 their FCPA resources: 60 50 • SEC formed specialized nationwide FCPA enforcement unit in 2010 40 30 • Increased coordination among DOJ, SEC, and foreign enforcement authorities 20 • FBI has doubled the number of agents 10 in its FCPA unit 0 2004 2005 2006 2007 2008 2009 2010 2011 • Use of aggressive law enforcement techniques (informants, stings, wiretaps) – Increased focus on charges against individuals. WilmerHale 5
Key FCPA Trend: Increased Penalties Top 10 FCPA Settlements (millions) Siemens (2008) $800 KBR/Halliburton (2009) $579 BAE Systems (2010) $400 Snamprogetti/ENI (2010) $365 Technip (2010) $338 JGC (2011) $219 Daimler (2010) $185 Alcatel-Lucent (2010) $137 Magyar Telekom/Deutsche Telekom (2011) $95 Panalpina (2010) $82 The magnitude of penalties is increasing The third through tenth largest collective FCPA settlements all occurred in the past two years (including some with Latin American components). WilmerHale 6
Key Trend: Increased Focus on Individuals – DOJ has stated that the prosecution of individuals, particularly senior executives, is an enforcement priority • “Our focus on individuals will not change.” Deputy Chief, Fraud Section, Head of FCPA Unit (November 8, 2011) • “The prospect of significant prison sentences for individuals should make clear to every corporate executive, every board member, and every sales agent that we will seek to hold you personally accountable for FCPA violations. As we focus on the prosecution of individuals, we will not shy away from tough prosecutions, and we will not shy away from trials.” Chief of the DOJ Criminal Division (2009) • “The department has made the prosecution of individuals a critical part of its FCPA enforcement strategy. We understand well that it is an important and effective deterrent.” Deputy Assistant Attorney General of the DOJ Criminal Division (2010) – Longest FCPA-related prison sentence ever: 15 years (Oct. 2011, Haiti Telco case) – Charges brought against numerous Siemens employees and agents in connection with bribery in Argentina (Dec. 2011) WilmerHale 7
Key Trend: Increase in Judicial Opinions -- Definition of “Foreign Official” Two recent court opinions, Lindsey Manufacturing and Carson, out of C.D. Cal., clarify that key FCPA term “instrumentalities” includes state- owned companies. In Lindsey Manufacturing, prosecutors alleged that the defendants bribed employees at the Mexican government-owned electricity utility Comisión Federal de Electricidad (“CFE”). See also , US v. O’Shea . In Carson, the government charged the defendants with paying bribes to government-owned (and non-government owned) oil and power companies in China, Korea, Malaysia, and the UAE. Courts found sufficient government nexus to conclude that companies were “instrumentalities,” and therefore their employees were “foreign officials.” WilmerHale 8
Definition of “Foreign Official” (cont’d) Opinions looked to non-exclusive factors that assess both level of governmental ownership and control, such as: – Entity is financed, at least in large measure, through government appropriations or taxes – Entity provides services to citizens of country – Key officers/directors are or appointed by government officials – Entity is vested with and exercises exclusive or controlling power to administer its designated functions – Entity is widely perceived to be performing governmental functions WilmerHale 9
Recent FCPA Cases Involving Latin America Bridgestone (Sept. 2011): Mexico – payments to Mexican state employees; anti-trust issues Ball Corporation (Mar. 2011): Argentina – payments to customs officials Tyson Foods, Inc. (Feb. 2011): Mexico – payments to Mexican state employees Alcatel-Lucent (Dec. 2010): Costa Rica – payments through intermediaries Pride Int’l./Panalpina (Nov. 2010): Mexico, Venezuela, Brazil – payments through intermediaries ABB Ltd. (Sept. 2010): Mexico – payments through intermediaries WilmerHale 10
Lessons From Recent Cases: Bridgestone (Mexico and Other Latin American Countries) Intersection of FCPA and Anti-trust: • In Sept. 2011, Bridgestone, a Tokyo-based manufacturer of marine hose (used to transfer oil between tankers and oil storage facilities) and other industrial products, agreed to plead guilty to conspiring to violate the Sherman Act and the FCPA by conspiring to rig bids, fix prices, and allocate market share of marine hose, and conspiring to make corrupt payments to government officials in Latin America to obtain and keep business. • DOJ asserted jurisdiction over the Tokyo manufacturer based on the allegation that emails or faxes were sent to or from Japan to the United States in connection with the bribery scheme. • DOJ agreed to a substantially-reduced fine of $28 million, in part because of Bridgestone’s cooperation with investigations, conducting a worldwide internal investigation, analyzing and providing voluminous evidence and information to DOJ, and undertaking extensive remediation efforts and committing to enhance its compliance program and internal controls. WilmerHale 11
Lessons From Recent Cases: Ball Corp. (Argentina) Merger & Acquisition Risk: • In Mar. 2011, Ball Corporation (“Ball”), a Colorado-based household product manufacturer, settled SEC civil charges that it had violated the FCPA’s books and records and internal controls provisions. • Ball discovered that the target had made improper payments to customs officials. Despite knowledge of the improper payments, Ball neglected to implement post-acquisition internal controls designed to detect and prevent such payments. • Its Argentinean subsidiary continued to make over $100,000 in payments to Argentinean customs officers and payments were disguised on the subsidiary’s books and records as legitimate customs expenses; president and vice president of subsidiary allegedly aware of improper payments and bookkeeping. • The Ball settlement is a reminder that acquirers should conduct sufficient due diligence prior to closing and that due diligence findings should not be ignored. Post-closing integration of the new business into the parent compliance program is also a key component of M&A process. WilmerHale 12
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