National Retail Federation National Retail Federation Generals - PowerPoint PPT Presentation

Venable LLP National Retail Federation National Retail Federation Generals Counsel Forum Generals Counsel Forum July 15, 2010 July 15, 2010 FCPA FCPA OFAC & IATs OFAC & IATs Value Added, Values Driven ™ 1

FCPA & OFAC: What & Why? FCPA & OFAC: What & Why? • Cross Border Financial Misfeasance V E • Two Statutes that can ruin a company’s N reputation A B • General Counsel’s Role: L • Establishing and selling policy E • Overseeing internal controls to prevent violations L • Mitigating and choosing risk, and L • Limiting impact of violations P 2

FCPA & OFAC: Risk Based Solutions FCPA & OFAC: Risk Based Solutions • Both Statutes Require Risk Based Solutions V E • There are almost no safe harbors N • “Unfortunately, people define risk as A B something you avoid rather than something L you take.” Anne Mulcahy, McKinsey Quarterly, March, E 2010 L • Objective is to give businesses a measured L way to take risks P 3

FCPA & OFAC: Venable’s Background FCPA & OFAC: Venable’s Background • Risk is an integral part of business. Profit V center, not a cost center E • Venable views several laws together: N A • Office of Foreign Assets Control (“OFAC”) B • Foreign Corrupt Practices Act (“FCPA”) L • Anti-Money Laundering (“AML”)(Tax) E • Export Controls (Commerce & State) L • Anti-boycott L • Foreign Agents Registration Act (“FARA”) P • Over 20 Attorneys in this field 4

Foreign Corrupt Practices Act Foreign Corrupt Practices Act A Brief History A Brief History • Product of Watergate V • Investigation revealed payments to foreign officials E to obtain/retain business N A • Books and record keeping requirement B • Internal procedures requirement evolved over time L • Civil and criminal penalties apply E • Civil: $10,000 for company, $100,000 for individual. L • Criminal: L • $100,000 plus 5 years for individual. P • $2 million for company 5

FCPA: Evolution of International FCPA: Evolution of International Regime Regime • U.S. alone for a number of years. V E • Legal in FRG to deduct foreign bribes from N corporate income tax A • Development of Multilateral Agreements B L • Organization for International Cooperation E and Development (OECD) • Organization of American States L L • United Nations P 6

FCPA/OECD FCPA/OECD • OECD Anti-Corruption Convention V (1999) E N • Leading instrument A • Increasing number of countries signing on every B year (38 so far) L • Requires signatory countries to E � Enact conforming laws � Allow compliance inspection L • Cautions L • Signatory country laws unique P • Multiple countries’ laws may apply 7

UK Bribery Act UK Bribery Act • Effective 2010 V • Not limited to “foreign officials” E • Applies to both offering or receiving a bribe N • Corporate offense for failure to prevent bribe A • No facilitation payment exception B L • Jurisdiction over all companies doing any E business in UK • Criminal enforcement only L • Affirmative defense that company had adequate L compliance program P • Unlimited penalties 8

FCPA: To Whom It Applies FCPA: To Whom It Applies • All U.S. Citizens, wherever located. V E • Includes real persons and fictitious entities N • Overseas subs not included if no U.S. control A • Anyone in the U.S. B L • Permanent residents of the U.S. E • Note on U.S. companies: L • Applies to all officers, directors, employees L and agents P 9

FCPA: Actions to Which Applies FCPA: Actions to Which Applies • Any payment, offer or promise to pay, or V gift E N • To a foreign official, political party, or A candidate for public office B L • For the purpose of E • Obtaining or retaining business L • Securing an improper advantage L P 10

FCPA: Red Flags FCPA: Red Flags • U.S. Company may not ignore actions of • Offshore employees V E • Agents, wherever located. N • Commissions greater than industry norm A B (over 10% is suspect) L • Payments to third countries without E reason L • Unnecessary or unusual middle men L P • “Special” Invoices • Charitable contributions 11

FCPA: Due Diligence FCPA: Due Diligence • Establish corporate compliance policy V • Establish internal controls E • Compliance Officer N A • Two signature rule B • Due diligence check list L • Assess risk of doing business in each country E � Check for status under OECD anti-bribery convention � Transparency International � U.S. Embassy L • Assess risk of line of business L • Match degree of due diligence to risk P • Engage Internal Audit 12

FCPA: Affirmative Assent FCPA: Affirmative Assent • U.S. & Overseas Employees V E • Annual Training N • Sign training certificate A • Agents B L • Affirmative obligation by contract to comply E with anti-bribery laws. L • Consider annual certification L • Audit Training, Payments, Invoices P 13

FCPA: Employee Responsibilities FCPA: Employee Responsibilities • Understand and fulfill responsibilities V • Complete regular training E N • Willful blindness = liability A • Conduct appropriate due diligence on B agent(s) L • Use standard form contract E • Know “red flags” L • If in doubt, ask company management. L • Keep good records. P 14

FCPA Enforcement: FCPA Enforcement: Focus on Individuals Focus on Individuals V E 2009, 40 individuals charged with N A FCPA crimes. 2010, 23 charged B through Q1, 2010 L 140 active investigations in 2009 E L Let’s look at a few of these cases. L P 15

Gerald and Patricia Green Gerald and Patricia Green Facing a maximum penalty of 10 years in prison V for FCPA violations E N A B L E L L P 16

Former Congressman William Jefferson Former Congressman William Jefferson Sentenced to 13 years imprisonment V E N A B L E L L P 17

Jeffrey Tesler Jeffrey Tesler Charged with crimes that could lead to a prison V sentence of 55 years, fines and forfeiture of E millions of dollars. N A B L E L L P 18

Jack Stanley Jack Stanley Faces a possible sentence of seven years in prison V E N A B L E L L P 19

Horst Vigener & Andreas Kley Horst Vigener & Andreas Kley Sentenced to 87 months in prison and $15,000 Fines V E N A B L E L L P 20

Foreign Corruption: How Does it work? Foreign Corruption: How Does it work? • H-P V • Russia, Germany, the US and too much money. E N • German auditor finds €22 million paid between 2004- A 06 to a small software company in Leipzig for B services performed in Russia. L • “It [payment] didn’t make sense,” to make such big E payments to accounts controlled by small businessmen. But “I assumed the deal was OK L because senior officials also signed off on the L paperwork.” Junior employee at H-P WSJ, April 16, 2010, B1 & B5. P 21

OFAC: Office of Foreign Assets Control OFAC: Office of Foreign Assets Control • Part of the Office of Intelligence and V Terrorism Finance, U.S. Treasury: E N • Director Appointed by Secretary A B • Reports to Undersecretary for Intelligence L and Terrorism Finance E • “Economic Warriors” of the U.S. L L P 22

OFAC’s Mission OFAC’s Mission • Enforce economic sanctions programs V imposed by the President or Congress against E N • Countries (Iran, Sudan, Cuba, N. Korea) A • Foreign Groups or Persons B L • Terrorist Organizations & Terrorists E • Political Parties • Drug Kingpins & Drug Traffickers L • Which or Who “pose a threat to the National L P Security of the United States” 23

OFAC Compliance: Coverage OFAC Compliance: Coverage • All U.S. Persons, wherever located: V E • Legal Entities N • U.S. Government and Government sponsored A enterprises. B • U.S. Company, Partnership, wherever operating L • Non-U.S. Subsidiaries of U.S. companies as to Cuba and North Korea only E • U.S. Citizens, wherever located L • U.S. Permanent residents, wherever located L • Anyone in the U.S. P • Property in U.S. of Anyone on “List” 24

OFAC “Programs” OFAC “Programs” • Multiple Sanctions Programs V • 14 Federal Statutes E • Each Program Unique N • Block or Seize (Cuba) A • Reject (Iran) B • Complete v. partial (Cuba v. Myanmar) L • Five Categories E • Country Programs (12) • Anti-Terrorism Sanctions (4) L • Counter Narcotics Trafficking (2) L • Non-proliferation (2) P • Diamond Trading Sanctions 25

OFAC: Private Sector Responsibilities OFAC: Private Sector Responsibilities • Private Sector as Government Agent V • SDN List E N • “Specially Designated Nationals List” A • Frequent Amendments (Over 150 in 2008) B • SDN List only a start L E • Civil and Criminal Fines, Jail Terms • Greater of $250,000 or 2X transaction amount L L • Publicity and related crimes P 26