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FCPA: Internal Investigations of FCPA: Internal Investigations of Suspected ViolationsEvaluating Whether to Investigate and Best Practices for a Self‐Assessment

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1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific

WEDNESDAY, NOVEMBER 17, 2010

Today’s faculty features:

Kimberly A. Parker, Partner, WilmerHale, Washington, D.C.

John F. Wood, Partner, Hughes Hubbard & Reed, Washington, D.C.

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Strategies for Conducting Investigations of Suspected FCPA Violations

November 17, 2010

Kimberly A. Parker, WilmerHaleJohn F. Wood, Hughes Hubbard & Reed

Strafford Publications

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To Investigate or Not To InvestigateTo Investigate or Not To Investigate

Receiving and documenting an allegation or complaintDetermining credibility of an allegationDetermining credibility of an allegationDetermining whether an investigation is neededDealing with whistleblowers

Oft f i ti l i FCPA i i iOften foreign nationals in FCPA inquiriesNew Dodd-Frank whistleblower provisions

Documenting the handling of an initial allegation (especially if d t i ti t )if you do not investigate)

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Preserving the EvidencePreserving the Evidence

Preserving documents/evidenceScope of preservationPreservation norms may differ in different marketsPreservation norms may differ in different marketsRisks of sending document hold notices without taking

immediate physical preservation stepsPreservation steps can become a focus of enforcementPreservation steps can become a focus of enforcement

agency attention

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Planning the investigationPlanning the investigation

Choosing the investigation team and resourcesLocal investigators, HQ investigators, or a mixture?

In-house or external investigators? European Union restrictions on privilege for in-house

counsel

Accountants or auditors (internal or external)?

Other specialists (e.g., IT)?

E-discovery vendors – considerations in emerging markets

Strategies for increasing efficiency in international investigations

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Determining the Investigation ScopeDetermining the Investigation Scope

How far do you have to go beyond the initial t ti ?transaction?Looking laterally and vertically

F i i /k l / i il b i d lFocusing on regions/key employees/similar business model

Balancing what is necessary vs. what is achievable

What does DOJ/SEC expect?What does DOJ/SEC expect?

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Application of Multiple Jurisdictions’ LawsApplication of Multiple Jurisdictions Laws

Attention is required to the anti-corruption laws of:United States: FCPA has particularly broad jurisdictionUnited States: FCPA has particularly broad jurisdictionCountries where customers, agents, or projects are locatedAny other countries where the corporation has operations,

especially OECD countriesespecially OECD countries

Laws in many countries now have broad jurisdictional reach and may differ in important respects, e.g.,

Criminal Intent

U.S. FCPA French Anti-Corruption Law

U.K. Bribery Act(April 2011)

Actual knowledge or Intent Strict corporate liability for

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“firm belief” acts of third parties, unless existing procedures are

“adequate”

Collecting EvidenceCollecting Evidence

Collecting and Handling Documents/EvidencePaperElectronicElectronicHidden sources (PDAs, mobile phones, back up drives)Moving documents across jurisdictions

Data privacy and personal informationNot just an EU issuejPracticalities of obtaining consents

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Conducting InterviewsConducting Interviews

Conducting InterviewsAddressing language issues/use of translatorsCommunicating purposeLocal cultural issuesConflicts of interest

Do Upjohn warnings have meaning abroad? Do employees understand them? – Resonance of “Upjohn Warnings” in pj gemerging markets?

Seeking confidentiality Interviewee requests for legal advice or representationq g p

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Dealing with Special ConsiderationsDealing with Special Considerations

Employment law issues Limits on compelled cooperation in some jurisdictions

Confidential business informationState secretsState secrets

China Former Soviet countries

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Concluding the InvestigationConcluding the Investigation

Communicating with managementCommunicating with Audit Committee and outside

AuditorsAuditorsWritten report or not?

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Determining Corrective ActionDetermining Corrective Action

Employee discipline Employment law issues in emerging markets

Correcting books and recordsCorrecting books and recordsUpgrading compliance programTraining?Enhancing policies and procedures?Enhanced audit and monitoring plan?

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Disclosure ConsiderationsDisclosure Considerations

Considering disclosing to:Regulators – local, US, other?ShareholdersShareholdersOther stakeholders

Relevant factors include:Whether there is a government investigation related to the

industry, market, or type of transactionWhether there are potential litigantsWhether there might be whistleblowersWhat weight to give to U.S. authorities’ statements

regarding the benefits of voluntary disclosure

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g g y

Special Issues in ChinaSpecial Issues in China

Ownership structureOwnership structureState ownershipJoint venture I t t Investment

Special data considerationsBusiness practices and customs – “The China Way”Business practices and customs The China WayLanguage issues and verbal cuesConfidentiality considerationsyCost containment

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Special Issues in Africa

High-risk compliance environmentAbundance of natural resourcesEndemic corruption According to Transparency International’s 2010 Corruption

Perceptions Index (CPI), of the 47 countries in Sub-Saharan Africa: Nearly 66% scored below 3.0 on a 10.0 scale, a level prior CPIs have

described as “indicating rampant corruption” Another 28% failed to score above 5.0, which prior CPIs have described

as “indicating a serious corruption problem”g p p

Squarely in enforcement authorities’ crosshairsMassive fines, penalties, and disgorgement: B I l d LNG (Ni i ) $1 3 billi Bonny Island LNG (Nigeria): $1.3 billion

From 3 out of 4 joint venture partners, with the 4th partner reportedly in negotiations with U.S. authorities

Customs cases (Nigeria): $236.5 million

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Daimler AG (incl. Nigeria & West Africa): $184.6 million

Special Issues in Africa – Cont’dSpecial Issues in Africa – Cont d

High risk arrangements include:Local content requirementsRequired social projectsMandated joint venture partnersj pMandated third partiesCash payments or payments in foreign currencyFacilitation paymentsFacilitation payments

Risk mitigation techniques:Thorough and ongoing due diligence where risks warrantUnderstanding and monitoring applicable anti-corruption

laws – not just the FCPAGoing beyond paper compliance

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g y p p p

Special Issues in RussiaSpecial Issues in Russia

Challenging employment law issuesRequirement for formal order of investigationNo obligation for employees to participateConsent and cooperation of employees is requiredConsent and cooperation of employees is required

Data privacy – employee consentStrict definition of legal entities – parent vs. subNo use of covert methodsUse of local resources for background

i ti ti i f l t kinvestigations – informal networksRestrictions on discipline that can be imposed due

to investigation results

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to investigation results

Special Issues in Russia – Cont’dSpecial Issues in Russia – Cont d

Common fact patterns in corruption investigations in Russia Commission payments to shell companies in secrecy jurisdictions outside p y p y j

Russia (e.g. Daimler) 2008 research study: bribery “price list” in which hopeful purchaser must

pay 20% or 30-40% of the project’s total value (Researchers Study the “Nature and Structure” of Russian Corruption Eurasia Daily MonitorNature and Structure of Russian Corruption, Eurasia Daily Monitor Volume: 5 Issue: 26 (February 11, 2008).

Benefits passed to public officials in the form of tenders, public procurement, kickbacks, inflated project costs, and “conditional remuneration” (transferring some company shares to a person’s closeremuneration (transferring some company shares to a person s close relatives or offering preferential treatment) (http://report.globalintegrity.org/Russia/2008/scorecard)

How far should you go to uncover facts/trace payments/find ownership information – striking a balance between necessity and what is achievable

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Special Issues in Latin AmericaAccording to the 2010 CPI, of 26 Latin American

countries (incl. Central America & Caribbean)Nearly 70% failed to score above 5.0, a level prior CPIs haveNearly 70% failed to score above 5.0, a level prior CPIs have

described as “indicating a serious corruption problem”More than 34% scored below 3.0, a level prior CPIs have

described as “indicating rampant corruption”

Recent enforcement actions include: PECC (Panama): U.S. persons jailed for scheme that reportedly involved a

former Panamanian President Nature’s Sunshine Products (Brazil): $600,000 & Section 20(a) control person

liability Helmerich & Payne (Argentina & Venezuela): $1.35 million in fines and

disgorgement Haiti Telco: Several individuals prosecuted, including foreign officials for money

laundering Latin Node (Honduras): $2 million fine following pre-acquisition due diligence

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Special Issues in India

Overall Environment/ Cultural Issues

Special Issues in India

Large number of Bureaucrats and governmental layersLack of robust local enforcement of tighter localLack of robust local enforcement of tighter local

anti bribery rules (low thresholds for violations) Impact on Investigative team of local POCA lawGifting Issues - Diwali and other festivals - gold

jewelry exchanges C h i KiCash is King economy Facilitation paymentsSpecial Challenges in customs clearing

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Special Challenges in customs clearing

Questions

Kim Parker

Questions

(202) 663 6987Kimberly.parker@wilmerhale.com

John Wood(202) 721-4720(202) 721 4720woodj@hugheshubbard.com

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