1. Anticorruption Enforcement
FARA, FCPA, UK Bribery Act & Russia
Anticorruption Act
Presented by
Brian E. Dickerson, Esq. Lee L. Piovarcy, Esq.

2. Global Anticorruption Laws
• Foreign Agents Registration Act (FARA) United States
• NGO Foreign Agents Registration Act (121 -FZ) Russian
Federation
• Foreign Corrupt Practices Act (FCPA) United States
• UK Bribery Act (UKBA) United Kingdom
• Countering Corruption Act (FL 273) Russian Federation
2

3. Global Impact of Bribery Enforcement
3
• The DOJ filed a three-count criminal investigation charging
Total with FCPA conspiracy and internal controls and books-
and-records violations. Total agreed to resolve the FCPA
charges by paying a $245.2 million criminal penalty, which was
at the bottom of the $235.2 to $470.4 million range of fines
available under the US Sentencing Guidelines.
Total SA, Frances Largest Oil and Gas
Producer agreed on May 29, 2013 to settle its
FCPA civil and criminal investigations for $398
Million
• U.S. authorities said that between 1995 and 2004, Total paid
about $60 million in bribes to induce an Iranian government
official to help the company obtain lucrative development rights
in three oil and gas fields. Total Funneled the illegal payments to
Swiss bank accounts at request of two intermediaries.

4. • The French prosecutor said Total and its Chief Executive
Christophe de Margerie should face trial for allegedly
corrupting foreign public officials over contracts with Iran in
the 1990s and early 2000s.
• The company also settled a related civil case with the US
Securities and Exchange Commission for $153 million in
disgorgement of its profits in the scheme. The criminal case
will be dismissed after three years if Total complies with the
deferred prosecution agreement, which requires Total to (i)
retain a corporate compliance monitor, who will conduct
annual reviews; (ii) cooperate with authorities and (iii)
implement an enhanced compliance program designed to
prevent and detect FCPA violations
Global Impact of Bribery Enforcement

5. Global Impact of Bribery Enforcement
5
• The compliance program requires, among other things, that
Total’s Board of Directors and senior management “provide,
strong, explicit and visible support and commitment” to the
company’s anti-corruption policy and that they appoint a
senior executive to oversee the program and report directly to
an independent authority, such as internal audit, the Board or
a committee thereof. Total’s problems, however, are not over.
French prosecutors have recommended that the company and
its chief executive officer be brought to trial on violations of
French law, including France’s foreign bribery law.

6. Global Impact of Bribery Enforcement
6
• In May 2013, three members of the
U.K. House of Lords were accused in
two undercover investigations by
journalists of agreeing to carry out
Parliamentary work for payment.
Ulster Unionist Lord Laird and
Labor's Lord Mackenzie of Framwellgate
and Lord Cunningham were filmed by the Sunday Times
striking a deal to allegedly host events at Parliament in
exchange for money and provide personal lobbying.
Separately, the BBC and Daily Telegraph secretly filmed Lord
Laird discussing a retainer to ask parliamentary questions
about Fiji. The two Labor peers have been suspended from
the party and Lord Laird has resigned the party ship pending
an investigation.

7. 7
Global Impact of Bribery Enforcement
(Reuters) – Microsoft Corp said on
Tuesday that allegations of potential
bribery by employees in China,
Romania and Italy should be
reviewed by U.S. agencies and its
own compliance unit, but declined to
address the specifics of any cases.
March 19, 2013
• The software giant's comments came after the Wall
Street Journal reported that the U.S. Department of
Justice (DOJ) and U.S. Securities and Exchange
Commission (SEC) had launched investigations over tips
from a former Microsoft employee in China that the
company handed kickbacks to foreign government
officials in return for software contracts. Microsoft
claims to have conducted a 10 month internal
investigation and found no wrongdoing.

8. 8
Global Impact of Bribery Enforcement
• Investigations of potential violations
of the U.S. Foreign Corrupt Practices
Act (FCPA) are fairly common among
U.S. companies. Microsoft rival
International Business Machines
Corp agreed in 2011 to pay $10 million to resolve SEC
charges over improper gifts to government officials in
South Korea and China, but is still waiting for a judge to
sign off on the deal.

9. 9
Global Impact of Bribery Enforcement
• Russian contractors and others who
have been involved in the building
boom to prepare for the Sochi Games
have complained of widespread
corruption, but government officials have dismissed such
reports and defended the cost overruns.
• Russian opposition leader Boris Nemstov told reporters in
preparing for they Sochi Winter Olympics that $25 to 30
Billion US Dollars has been stolen.
• No Charges have been filed.

10. 10
Global Impact of Bribery Enforcement
• Russian Interior Ministry said
on May 16, 2013 they had
opened an official criminal
investigation against CEO of
SocGen’s Russian unit, Vladimir Golubkov,
who was detained on Wednesday, and his senior vice
president, Tamara Polyanitsyna - a final step before formally
charging them
• Golubkov was in charge of a turnaround strategy at Rosbank,
into which SocGen's other Russian banking interests were
folded in 2011. But, plagued by high costs and declining
market share, Russia's ninth-largest bank lost money last year.
• Golubkov's lawyer, Dmitry Kharitonov, told Reuters he denied
committing the crime. "He is being held for 48 hours by the
Investigative Committee and faces up to seven years if
convicted," Kharitonov said.

11. 11
• TeliaSonera is under investigation
for allegedly paying more than
$300 million in bribes to a middleman
for Karimova to win access to the Uzbek
telecom market in 2007.
• Documents leaked to Swedish investigative
journalists appear to offer fresh evidence
of a link between Swedish telecom giant
TeliaSonera and Gulnara Karimova, the
daughter of the president of Uzbekistan.
And the documents suggest that TeliaSonera
agreed to pay bribes as recently as the
summer of 2012.
• Some documents appear to show Karimova 'personally
dictating the terms of the negotiations through a series of
scribbles, complaints, and queries handwritten on the
documents,' the report said. May 24, 2013
Global Impact of Bribery Enforcement

12. DOJ Increasing Civil and Criminal Enforcement
12
• Attorney General Holder announced
President Obama’s FY 2012 budget
proposal totaling $28.2 billion for DOJ
• President Obama’s 2013 proposed
budget for DOJ is $36.5 billion
• The Obama administration has increased
health care fraud enforcement by more than 75%
• Increase of $71.7 million proposed for a total of $294.5
million for expansion and increased staffing of Medicare
fraud strike forces

13. DOJ Increasing Civil and Criminal Enforcement
13
• $700 million to investigate and prosecute financial crimes –
increase of $55 million over 2012 (FCPA)
• $8 billion to the FBI
• $2 billion to the DEA
• $2 billion for prosecutors

14. DOJ Prosecution Key Trends
14
• Dodd/Frank Whistleblowers
• In FY 2012, the SEC received
3,001 whistleblower complaints;
115 were FCPA related
• Focus on specific industries
• Pharmaceutical
• Energy
• Technology
• Financial Services

15. DOJ Prosecution Key Trends
15
Lanny A. Breuer (Assistant Attorney General) stated the
Department of Justice, Pharmaceutical and Medical Devise
Industries are The Top Targets for Foreign Corrupt Practices Act
(“FCPA”) Enforcement Meeting (Nov. 2009)
“will be intensely focused on rooting out foreign
bribery in your industry. That will mean
investigation and, if warranted, prosecution of
corporations, to be sure, but also it will involve
investigation and prosecution of senior executives.”

16. DOJ Prosecution Key Trends
16
“You don’t get a free pass by saying, “We’re doing
business in a country where we believe bribery is
rampant,’… If you’re in a country that … poses greater
challenges, I’m going to want to know what did your
compliance program do to deal with that …If it’s state-
of-the-art and you truly were prepared for the
environment you were in, that will be helpful to
you.”
Lanny A. Breuer, Assistant Attorney General for the Criminal
Division, U.S. DOJ, “DOJ Warns on Heightened Fraud
Enforcement.” Compliance Week

17. DOJ Prosecution Key Trends Corruption
Perceptions Index
17

18. DOJ Prosecution Key Trends Corruption
Perceptions Index
18
Russia improved to 133

19. DOJ Prosecution Key Trends Corruption
Perceptions Index
19

20. DOJ Prosecution Key Trends Corruption
Perceptions Index
20

21. DOJ Prosecution Key Trends
21
• Prosecution of individuals remains enforcement
priority
• “Our focus on individuals will not change.” –
Deputy Chief, Fraud Section, Head of FCPA Unit
(November 8, 2011)
• Global cooperation e.g., DOJ, SEC, UK SFO
• M&A Due Diligence
• Inadequate M&A diligence can result in
inheritance of target’s liability and/or allow a
course of bribery to continue, resulting in liability
for the acquiring company due to ongoing FCPA
violations

22. DOJ Prosecution Key Trends Largest
Settlements To Date
22
• Siemens paid $800 million to
resolve allegations of widespread
bribery in 2008
• KBR and its former parent
Halliburton paid $579 million
in 2009
• BAE Systems paid $400 million
in 2010

23. DOJ Prosecution Key Trends / Wal-Mart
23
• Wal-Mart’s legal department
received reports of corruption,
allegedly conducted an investigation
that found hundreds of suspect payments
totaling more than $24 million, and evidence that Wal-Mart
de Mexico’s top executives knew of, and concealed, payments
from Wal-Mart U.S. executives
• Internal investigation was initially shut down, a move that
proved costly
• The company's costs to conduct the entire investigation -
which already stand at $250 million - could be larger than its
eventual fines

24. DOJ Prosecution Key Trends / Wal-Mart
24
• The company has spent some
$35 million to update its
anti-corruption program
and has named a new chief compliance officer for Wal-
Mart International and a new vice president of global
investigations – both new positions for the company
• Stiff penalties and massive fallout from charges are
pending.
• Investigation now expands into the jurisdictions of Brazil,
India, China and South Africa.

25. DOJ Prosecution Key Trends / Eli Lilly
25
• Between 2006 and 2009,
employees of Eli Lilly’s China
subsidiary falsified expense
reports to provide improper
gifts and cash payments to
government-employed physicians
• In 2007, a pharmaceutical distributor hired by Lilly in Brazil
paid bribes to government health officials in a Brazilian
state to assure sales of a Lilly product to state government
institutions

26. Eli Lilly and Company - $29 Million FCPA Fine
26
• In Poland, between 2000 and 2003,
Lilly’s subsidiary made eight payments
totaling approximately $39,000 to a
small charitable foundation that was
founded and headed by one of the
regional government health authorities at the same time
that the subsidiary was seeking the official’s support for
placing Lilly drugs on the government reimbursement list
• Lilly’s Russian subsidiary paid millions to off-shore entities
for “alleged services” beginning in 1994 through 2005 for
pharmaceutical distributors and government entities to
purchase Lilly’s drugs

27. Eli Lilly and Company - $29 Million FCPA Fine
27
• In some instances, the off-shore
entities appear to have been used
to funnel money to government
officials or others with influence
in order to obtain business for the
subsidiary – these off-shore entities rarely provided for the
contracted-for services
• Between 2005 and 2008, contemporaneous with requests
to government officials to support the purchase or
reimbursement of Lilly’s products, the subsidiary in Russia
made proposals to government officials about how the
company could donate to, or otherwise support various
initiatives that were affiliated or important to, the
government officials

28. DOJ Prosecution Key Trends Bridgestone
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• Bridgestone a Japanese corporation,
entered into a plea agreement in the
U.S. regarding FCPA violations for contracts with sales agents
who would then develop relationships with foreign stated-
owned customers throughout the world and as a result,
payments were made to foreign officials for the purpose of
gaining business advantage
• Bridgestone originally objected the FCPA jurisdiction however,
it had a U.S. subsidiary which assisted in the contracts with
sales agents and thus entered into a CPA, paid $28 million
dollar fine and agreed to continue to cooperate with DOJ on
other FCPA investigations

29. Global Bribery Enforcement
29
• Siemens former employees and officers,
Germany & Argentina: Former executive
convicted in Munich Court for role in bribery of foreign
officials in Argentina. Fined 30,000.00 Euros.
• Siemens in August 2012 agreed to pay the Greece
Ministry of Finance 330 Million Euros to resolve bribery
allegations of Greek Subsidiary.
• Central European Distribution Corp.
(CEDC),Poland: Disclosed to DOJ in
October of 2012 of improper payments to foreign
officials to gain business advantage. Investigation
ongoing.

30. Global Bribery Enforcement
30
• German private company
FERROSTAAL imposed a fine of
140 million Euros by Munich Court
for bribery allegations related to
contracts with Greece and Portugal
through sham “consulting agreements”. Facts also revealed
FERROSTAAL arranged bribe payments through consulting
agreements for other German companies in exchange for fees
• Two former FERROSTAAL company managers were sentenced
in Munich Criminal Court to a two year suspended sentence
and fined 36,000 Euros

31. Foreign Agents Registration Act
22 U.S.C. § 611
“The Foreign Agents Registration Act (FARA)
was enacted in 1938. FARA is a disclosure
statute that requires persons acting as agents
of foreign principals in a political or quasi-
political capacity to make periodic public
disclosure of their relationship with the
foreign principal, as well as activities, receipts
and disbursements in support of those
activities. ”
www.fara.gov Department of Justice controlled website
31

32. Foreign Agents Registration Act
22 USC § 611 Definitions
• (b) The term ‘‘foreign principal’’ includes—
• (1) a government of a foreign country and a foreign
political party;
• (2) a person outside of the United States, unless it is
established that such person is an individual and a
citizen of and domiciled within the United States, or
that such person is not an individual and is organized
under or created by the laws of the United States or of
any State or other place subject to the jurisdiction of
the United States and has its principal place of business
within the United States; and
• (3) a partnership, association, corporation,
organization, or other combination of persons
organized under the laws of or having its principal place
of business in a foreign country.
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33. Foreign Agents Registration Act
33
22 U.S.C. § 611
(c) Expect 1 as provided in subsection (d) of
this section, the term ‘‘agent of a foreign principal’’
means—
(1) any person who acts as an agent, representative, employee, or servant, or any person
who acts in any other capacity at the order, request, or under the direction or control,
of a foreign principal or of a person any of whose activities are directly or indirectly
supervised, directed, controlled, financed, or subsidized in whole or in major part by a foreign
principal, and who directly or through any other person—
(i) engages within the United States in political activities for or in the interests of
such foreign principal;
(ii) acts within the United States as a public relations counsel, publicity agent,
information-
service employee or political consultant for or in the interests of such foreign
principal;
(iii) within the United States solicits, collects, disburses, or dispenses contributions,
loans, money, or other things of value for or in the interest of such foreign principal; or
(iv) within the United States represents the interests of such foreign principal before
any agency or official of the Government of the United States; and
(2) any person who agrees, consents, assumes
or purports to act as, or who is or holds himself
out to be, whether or not pursuant to contractual
relationship, an agent of a foreign
principal as defined in clause (1) of this subsection.

34. Foreign Agents Registration Act
34
22 U.S.C. § 611
(d) The term ‘‘agent of a foreign principal”
does not include any news or press service
or association organized under the laws of
the United States or of any State or other
place subject to the jurisdiction of the United States, or any newspaper, magazine,
periodical, or other publication for which there is on file with the United States Postal
Service information in compliance with section 3611 2 of title 39, published in the
United States, solely by virtue of any bona fide news or journalistic activities, including
the solicitation or acceptance of advertisements, subscriptions, or other compensation
therefor, so long as it is at least 80 per centum beneficially owned by, and its officers and
directors, if any, are citizens of the United States, and such news or press service or
association, newspaper, magazine, periodical, or other publication, is not owned,
directed, supervised, controlled, subsidized, or financed, and none of its policies are
determined by any foreign principal defined in subsection (b) of this section, or by any
agent of a foreign principal require

35. Foreign Agents Registration Act Enforcement
35
• "Cuban Five" (1998–2000) five Cuban
intelligence officers were convicted of
acting as an agents of a foreign
government under FARA, as well as various conspiracy
charges after entering the United States to spy on the U.S.
Southern Command and various Cuban-American groups
thought to be committing terrorist acts in Cuba.
• United States v. Samir A. Vincent (2005) included a charge of
conspiracy to act as an unregistered agent of a foreign
government in the "oil-for-food" scandal helping Saddam
Hussein's government. Samir was fined $300,000 and
sentenced to probation.
• Syed Ghulam Nabi Fai, a Pakistani
from Kashmir, was arrested in 2011
by the Federal Bureau of Investigation
for lobbying secretly for Pakistan's Inter-Services Intelligence
agency. He later pled guilty to tax evasion and making false
statements.

36. Foreign Agents Registration Act Enforcement
36
United States vs. Mark Deli Silajander (2010)
A. Defendant Mark Deli Siljander (Siljander) is United States
citizen and was, at all times relevant, a resident of Virginia. Siljander is a
former member of the United States House of Representatives, from
the State of Michigan. At all times relevant, Siljander operated a
consulting business known as Global Strategies, Inc. At no time relevant
was Siljander a registered agent of any “foreign principal,” as that term
is defined in 22 U.S.C. § 611(b), and that no lawful exemption existed
permitting him to act as such an agent without registering with the
Attorney General.
B. Defendant Abdel Azim El-Siddig (El-Siddig) is, and was at all
times relevant, a naturalized United States citizen and resident of
Illinois. At all times relevant, El-Siddig was associated with, and worked
as a fund-raiser for, the Islamic American Relief Agency.
C. The Islamic American Relief Agency (IARA) was an Islamic
charitable organization based in Columbia, Missouri, that was the
United States office of an international organization headquartered in
Khartoum, Sudan. Originally, the Columbia, Missouri office of IARA was
known as the Islamic African Relief Agency-United States Affiliate, or
IARA-USA. On May 25, 2000, IARA legally changed its name to the
Islamic American Relief Agency.

37. Foreign Agents Registration Act Enforcement
37
United States vs. Mark Deli Silajander (2010)
H. On January 24, 2004, with the assistance of El-Siddig and
Siljander, Hamed, on behalf of IARA, hired a former United States
Congressman and registered lobbyist, hereinafter identified by the initials
“R.P.H.,” to advocate for IARA’s removal from the list and reinstatement as
an approved government contractor, by gathering information and meeting
with individuals and agencies of the United States government. On January
24, 2004, Hamed signed a $15,000 check that was issued to R.P.H., drawn on
IARA’s principal bank account. For his assistance in brokering the
transaction, Siljander received $6,000 in referral fees from R.P.H.
• Siljander, sentenced to 12 months and one day in prison, pleaded
guilty to obstruction and acting as an unregistered foreign agent.
Prosecutors said Siljander received $75,000 from the charity to
push for its removal from the list, and that $50,000 of it was part
of unused grant money that was supposed to have been
returned to the U.S. Agency for International Development after
it terminated its grants for two relief projects in Mali, Africa, with
the charity in 1999.
• Prosecutors said Siljander, lied to the FBI about being hired to
lobby for the charity. He told investigators that the money he
received was a donation to help him write a book about Islam
and Christianity.

38. Foreign Agents Registration Act Penalties &
Registration
38
Any person who willfully violates any provisions of this Act or any regulations
thereunder, or in any registration statement or supplement thereto or in any
other documents filed with or furnished to the Attorney General under the
provisions of this Act willfully makes a false statement of a material fact or
willfully omits any material fact required to be stated therein or willfully omits a
material fact or a copy of a material document necessary to make the
statements therein and the copies of documents furnished therewith not
misleading, shall, upon conviction thereof, be punished by a fine of not more
than $10,000 or by imprisonment for not more than five years. For some
offenses the punishment shall be a fine of not more than $5,000 or
imprisonment for not more than six months, or both.
Any alien who shall be convicted of a violation of, or a conspiracy to violate, any
provisions of this Act or any regulation thereunder shall be subject to
deportation
A public official of the United States in the executive, legislative, or judicial
branch of the Government or in any agency of the United States, including the
District of Columbia, is or acts as an agent of a foreign principal required to
register under the Foreign Agents Registration Act of 1938 or a lobbyist required
to register under the Lobbying Disclosure Act of 1995 in connection with the
representation of a foreign entity, as defined in section 3(6) of that Act, shall be
fined not more than $10,000 or imprisoned for not more than two years, or
both.
http://www.fara.gov/forms.html

39. NGO Foreign Agents Registration
39
Federal Law No. 121-FZ
“Introducing Amendments to Certain Legislative Acts of the
Russian Federation Regarding the Regulation of Activities of
Non-commercial Organizations Performing the Function of
Foreign Agents.” NCO signed by President Putin in July 2012
• The Foreign Agents Registration Act came into force in Russia
in November 2012. According to the law, non-profit
organizations that conduct political activities in Russia on the
funds they receive from abroad should be registered with
the Ministry for Justice as foreign agents.

40. NGO Foreign Agents Registration
40
• The primary requirements are that NCOs, whatever their
type, do not have the generation of profit as their primary
objective and do not distribute any such profit among their
participants (Article 50(1), Civil Code).
• The Federal Law on Public Associations builds upon this
framework and carves out a sub-category of NCOs called
"public associations" which consist of public organizations,
mass movements, public foundations, public institutions,
and several other forms.
• Some 220,000 NCOs are registered in Russia; approximately
50% of them are public associations.

41. NGO Foreign Agents Registration
41
Russian law defines certain restrictions regarding potential
founders of NCOs. Regarding non-citizens, only those foreign
nationals and stateless persons who are “legally domiciled in
the Russian Federation” may be founders, members, or
participants in public associations or NCOs. Certain persons
may not become founders, members or participants, including:
• Foreign nationals or stateless persons whose stay is deemed
“undesirable”;
• Persons appearing on a money laundering and anti-terrorist
financing watch list maintained by the Russian government;
• Organizations that have been suspended under the Law
Countering Extremist Activities;
• Persons found by court decision to show signs of
participating in extremist activity; and
• Persons who are currently incarcerated as a result of
conviction of a crime.

42. NGO Foreign Agents Registration
42
• According to these amendments, NCOs carrying out
“political activities” and receiving foreign funding, or, even
intending to do so, are required to register in a special
registry maintained by the Ministry of Justice.
• Such registration, and, especially, being labeled as a “foreign
agent” may result in additional administrative burdens for
NCOs, as well as in damaging the reputation of NCOs.
• The threat of being labeled a “foreign agent” may
discourage many organizations to seek foreign funding.

43. NGO Foreign Agents
43

44. NGO Foreign Agents Registration
44
Prosecutors claim some Russian NGOs
violate ‘Foreign Agents law’
• Alexander Buksman,
First Deputy Prosecutor General
(RIA Novosti/Vladimir Pesnya)
A senior Russian law enforcer has told the press that
some Russian non-government organizations are
receiving their funding from abroad, but failed to register
as foreign agents. He warned these organizations could
face sanctions in the future.
• “The current situation is as follows: the finances keep
coming from abroad, but no organization is
registered,” First Deputy Prosecutor General Aleksandr
Buksman said on Thursday.

45. NGO Foreign Agents Enforcement
45
• “The wave of inspections [of NGOs] by prosecutors checking
their adherence to the foreign agents law included many
analysis centers and the Association of Independent Centers
of Economic Analysis. It showed that any NGO receiving
funding from abroad and involved in anything remotely
connected to politics is at risk,” the economists wrote,
referring to checks carried out at hundreds of NGOs earlier
this year. RIA Novosti 30/05/2013
• In late April, election monitoring NGO Golos was fined
300,000 rubles (around $10,000) by a Moscow court for
failing to register as a “foreign agent,” in the first case of an
NGO facing administrative penalties following the
introduction of the law. RIA Novosti 30/05/2013
• “We may discuss the elimination of the organization by a
court ruling if it [Golos] fails to comply with the law,”
Konovalov said, adding that an earlier fine imposed by a court
on the organization justifies the ministry’s action against
Golos. RIA Novosti 15/05/2013

46. Foreign Corrupt Practice Act (FCPA) Overview
• The Foreign Corrupt Practice Act of 1977 was enacted for the
purpose of making it unlawful for certain classes
of persons and entities to make
payments to foreign government
officials to assist in obtaining or
retaining business.
• Anti-bribery provisions of the FCPA
prohibit the willful use of the mails or
any means of instrumentality of inter-state commerce
corruptly in furtherance of any offer, payment or promise to
pay, or authorization of payment of money or anything of
value to any person
46

47. Foreign Corrupt Practice Act (FCPA) Overview
47
• The U.S. Foreign Corrupt Practices Act (“FCPA”) is aimed at
the prevention of bribery of foreign officials. The FCPA is
enforced by the Department of Justice (DOJ) and the
Securities and Exchange Commission (SEC) and contains both
anti-bribery and accounting provisions. Violations of the
FCPA can lead to civil and criminal penalties, sanctions, and
remedies, including fines, disgorgement, and/or
imprisonment.

48. Foreign Corrupt Practice Act (FCPA) Overview
48
• Who is COVERED by the FCPA?
Employees and Officers Board of Directors Employees of Foreign Subsidiaries
Officers of Foreign Subsidiaries Agents

49. Foreign Corrupt Practice Act (FCPA) Overview
49
• Intermediaries and Representatives
Freight Forwarders Distributors Others

50. Foreign Corrupt Practice Act (FCPA) Overview
50
• In general, the FCPA prohibits offering to pay, paying,
promising to pay, or authorizing the payment of money or
anything of value to a foreign official in order to influence
any act or decision of the foreign official in his or her official
capacity or to secure any other improper advance in order
to obtain or retain business.
• Congress used the phrase “anything of value” because it
recognized that bribes can take on many different forms,
such as cash, travel, entertainment, gifts, and even
charitable donations. The FCPA does not contain a
minimum threshold amount for corrupt gifts or payments.
The Anti-Bribery Provisions

51. FCPA Background Jurisdiction
51
• The FCPA’s anti-bribery provisions can apply to conduct both
inside and outside the United States. Issuers and Domestic
Concerns (and their officers, directors, employees, agents,
and stockholders) may be prosecuted for using U.S. mails or
any means or instrumentality of interstate commerce in
furtherance of a corrupt payment to a foreign official. The
FCPA defines “interstate commerce” broadly.

52. FCPA Background Jurisdiction
52
• Examples of conduct of Issuers or Domestic Concerns that
triggers the FCPA’s anti-bribery provisions include:
• placing a telephone call or sending an e-mail, text
message, or fax from, to, or through the United States;
• traveling across state borders or internationally to or
from the United States; or
• sending a wire transfer from or to a U.S. bank or
otherwise using the U.S. banking system.

53. FCPA Background Jurisdiction
• Two provisions – anti-bribery and books/records/internal
controls
• Applies to Issuers U.S. or foreign companies with
securities listed on the U.S. exchanges
• Includes officers, directors, employees, agents, or
stockholders acting on behalf of issuers, as well as
subsidiaries and affiliates in some circumstances
• Applies to Domestic Concerns – U.S. companies and
citizens, nationals, and residents
• Applies to Territorial Jurisdiction – foreign persons that
engage in any act in furtherance of a corrupt payment
“while in the territory of the United States
53

54. FCPA Background
• Increased enforcement activity – over 260 reported
proceedings in the last 5 years
• Over 150 pending enforcement matters with DOJ and SEC
• 88 publically traded companies disclosed pending
investigation at the end of 2012 – up from 78 in 2011
• Top 10 settlements range from $82 million to $800 million
54

55. FCPA Background
55

56. FCPA Background
• 88% of corporate FCPA violations filed since 2008 have been
brought against publicly traded companies, roughly 78% of
individuals charged have been representatives and/or
employees of privately held companies. Public company will
pay with money as they don’t want to harm the shareholders
more, and private companies pay through the persons
involved in the activity.
• Increased enforcement activity – over 260 reported
proceedings in the last 5 years
• Over 150 pending enforcement matters with DOJ and SEC
• 88 publically traded companies disclosed pending
investigation at the end of 2012 – up from 78 in 2011
• Top 10 settlements range from $82 million to $800 million
56

57. FCPA Accounting Provisions
57
• The FCPA requires companies whose securities are listed in
the U.S. to meet accounting provisions – see 15 U.S. C. § 78m
• These accounting provisions, which were designed to operate
in tandem with the anti-bribery provisions of the FCPA,
require corporations covered by the provisions to:
• Make and keep books and records that accurately and
fairly reflect the transactions of the corporation
• Devise and maintain an adequate system of internal
accounting controls

58. Definition Of A “Foreign Official”
58
• FCPA defines a foreign official:
“Any officer or employee of a foreign
government or any department,
agency, or instrumentality thereof, or
of a public international organization,
or any person acting in an official capacity for or on behalf
of any such government or department, agency, or
instrumentality or for or on behalf of any such public
international organization”

59. Definition Of A “Foreign Official”
59
• Related term instrumentality is not defined
• Of concern, the DOJ and SEC have broadly interpreted
instrumentality to mean not only heads of state or persons
holding official titles but also individuals who work for
government-owned or controlled private businesses

60. FCPA – State Controlled Index
60

61. Third Party Relationships
61
“Third party risk still remains the most
significant FCPA risk.”
- Charles E. Duross, Deputy Chief, Fraud
Section, Criminal Division, U.S. Department of
Justice, November 8, 2011

62. Third Party Relationships
62
• Agents, consultants and distributors
• Local reputation and background check
• FCPA certification
• Provision of sample contracts and contract language

63. Merger & Acquisitions – Due Diligence
63
• Protect against “Successor Liability”
• Inform valuation – how?
• Evaluate target’s existing systems and controls
• Analyze target’s risk
• Specific audit
• Risk can be managed by
• Adjusting deal price
• Allocating responsibility for potential fines
• Indemnification agreements

64. FCPA Intent
64
• In order for an individual to be criminally liable under the
FCPA, he or she must act “willfully.” “Willfully” means an act
committed voluntarily and purposely, and with a bad
purpose, i.e., with knowledge that the individual was doing
a “bad” act under general rules of law. Courts require the
government to prove that the defendant acted with
knowledge that his conduct was unlawful, though it need
not be established that the defendant was specifically
aware of the FCPA or knew that his or her conduct violated
its provisions. Proof of willfulness is not required to
establish corporate criminal or civil liability.

65. FCPA Case Study
65
• Orthofix (2012): Mexico
• Agreed to pay $7.8 million to resolve DOJ and SEC FCPA
enforcement actions
• Improper payments were made by Orthofix’s
wholly owned Mexican subsidiary, Promeca S.A.
de C.V.
• DOJ alleged that Orthofix purchased existing
companies like Promeca, in high risk markets and
failed to engage in any form of corruption related
due diligence

66. FCPA Intent Knowing & Deliberate Ignorance
66
• FCPA prohibits corrupt payment knowing that it
will go to a foreign official, even if routed through
any
intermediary
• Any intermediary, including agent, a distributor, a
consultant, or any unaffiliated third party
• “knowing” includes conscious
disregard and deliberate ignorance
(ignoring duties or knowledge)

67. FCPA Intent Knowing & Deliberate Ignorance
67
• Companies encouraged to conduct due diligence
on third parties
• Knowing use of agents, distributors, consultants,
or anyone to make illegal payment is equivalent to
making it yourself
• Analysis of size and why payment of third party is
justified by businesses
• Is the intermediary related to the government?
• Any other red flags?

68. DOJ/SEC FCPA Guidance – Impacts On Your
Company
68
• Issues that stakeholders want the enforcement agencies to
address are:
• Element of required intent in criminal
actions to prove an entity violated the
FCPA
• Proof of a corrupt intent to hold
someone liable for providing small
gifts or entertainment (e.g., a bottle of
wine)
• Scope of the “facilitating payments” exception
• Definition of an “instrumentality” under FCPA
November 2012 DOJ SEC Guidance

69. Whistleblower – SEC Program
69
• Created under Dodd-Frank Act
in July 2010
• Program produced big response
- SEC received tips in record
numbers
• In it’s first year of operations, SEC received 2,870 tips –
approximately 8 tips per day
• Contrasts with the dozen every six months allotted by
previous program
• Retaliatory Claims

70. Whistleblower
70
• UBS
• IRS awarded ex-banker
$104 million for providing
information about overseas tax cheats – largest amount
ever rewarded
• Exposed tax evasion at UBS AG that resulted in $780
million fine and unprecedented agreement to turn over
American tax dodgers to IRS
• Case led to erosion of use of Swiss bank secrecy by
wealthy Americans to cheat IRS

71. Retaliatory Provisions
71
• h) Any employee who is discharged, demoted, suspended,
threatened, harassed, or in any other manner discriminated
against in the terms and conditions of employment by his or
her employer because of lawful acts done by the employee on
behalf of the employee or others in furtherance of an action
under this section, including investigation for, initiation of,
testimony for, or assistance in an action filed or to be filed
under this section, shall be entitled to all relief necessary to
make the employee whole…
− (31 USC § 3730(h))
• Relief:
− (h) … Such relief shall include reinstatement with the same
seniority status such employee would have had but for the
discrimination, 2 times the amount of back pay, interest on
the back pay, and compensation for any special damages
sustained as a result of the discrimination, including
litigation costs and reasonable attorneys’ fees. (31 USC §
3730(h))

72. FCPA Cases
72
2010 – General Electric, Ionics Inc., and Amersham plc
– SEC charged GE and two subsidiaries for illegal kickback
payments made in the form of cash, computer equipment,
medical supplies, and services to the Iraqi government in
order to obtain U.N. Oil for Food Program contracts.
GE paid $23 million to settle the charge.
2011 – Tenaris – SEC sanctioned the global
manufacturer of steel pipe products for bribing
Uzbekistan government officials during a bidding
process to supply pipelines for transporting oil
and natural gas. Tenaris agreed to pay $5.4 million under a Deferred
Prosecution Agreement, and paid a $3.9 million criminal fine.

73. FCPA Cases
73
• Tyson Foods, Inc. (2011): Mexico
• Food processor made payments,
including through sham jobs, to relatives of Mexican
veterinarians in charge of certifying products for export
• Alcatel-Lucent (2010):
Costa Rica, Honduras,
Nicaragua and Educador
• French telecom company made payments, through
intermediaries, to government officials at state-owned
telecom authorities for contracts

74. FCPA Cases
74
• Bizjet (2012): Mexico, Panama
• Agreed to pay $11.8 million criminal fine, entered
three-year DPA with DOJ
• Through a shell company and also via direct “referral”
and “incentive” payments made directly to officials,
Bizjet bribed Mexican Federal Police, presidential fleet
officials, and Panamanian Aeronautic Authority
officials in connection with aircraft service and repair
projects

75. FCPA Cases
75
• In court filings in 2011, the DOJ
said that Johnson & Johnson
(J&J) bribed doctors in Europe
stretching back to 1998 and
paid kick-backs in Iraq to
obtain business
• The SEC and DOJ accused the company of giving cash and
trips to doctors and administrators at state run hospitals in
Greece, Poland, and Romania in exchange for the
prescribed use of J&J medical devices and pharmaceuticals

76. FCPA Cases
76
• J&J used sham contracts, slush funds
and off-shore companies in the
Isle of Man to process the bribes
• The company admitted the conduct
outlined by the DOJ, but neither denied or admitted the
allegations by the SEC
• To avoid a conviction, the J&J may have been the source of
a wide ranging probe that resulted in the investigation of
AstraZeneca, Baxter International, Eli Lilly & Co, and Bristol-
Meyers-Squibb

77. FCPA Cases
77
• DOJ Allowed Deferred Prosecution Agreement because:
• J&J voluntarily disclosed majority of misconduct
• J&J conducted thorough internal investigation of
misconduct
• J&J cooperated fully with DOJ investigation
• J&J undertaken substantial remedial measures
• J&J continues to cooperate with DOJ related to violations of
FCPA

78. FCPA Cases
78
• 2012 – Allianz SE – SEC charged the Germany-
based insurer with violating the FCPA’s accounting
provisions in conjunction with improper
payments to government officials in individuals
that resulted in $5.3 million in profits. Allianz
agreed to pay more than $12.3 million to settle
the SEC’s charges.
• 2012 – Tyco International – SEC charged the
Swiss-based global manufacturer with violating
the FCPA when subsidiaries arranged illicit
payments to foreign officials in more than a
dozen countries. Tyco agreed to pay $26 million
to settle the SEC’s charges and resolve a criminal
matter with the DOJ.

79. FCPA Cases
79
• 2012 – Pfizer – SEC charged the
pharmaceutical company for illegal
payments made by its subsidiaries to
foreign officials in Bulgaria, China, Croatia, Czech
Republic, Italy, Kazakhstan, Russia, and Serbia to obtain
regulatory approvals, sales, and increased
prescriptions for its products. Pfizer and recently
acquired Wyeth LLC – charged with its own FCPA
violations – agreed to pay a combined $45 million in
their settlements.
• 2012 – Smith & Nephew –
SEC charged the London-based
medical device company with violating the FCPA when
its U.S. and German subsidiaries bribed public doctors
in Greece for more than a decade to win business. The
company and its U.S. subsidiary agreed to pay more
than $22 million to settle civil and criminal cases.

80. FCPA - Russia
80
• Damiler AG and certain of its subsidiaries resolved DOJ and
SEC FCPA enforcement actions in April 2010. Daimler
escaped FCPA antibribery charges and did not have to plead
guilty to anything (it was offered a deferred prosecution
agreement), DaimlerChrysler Automotive Russia SAO
("DCAR")(now known as Mercedes-Benz Russia SAO)
pleaded guilty to a criminal information charging conspiracy
and FCPA antibribery violations. The charged conduct
focused on Daimler's and DCAR's relationships with: "the
Russian Ministry of Internal Affairs ("MVD") a department
and agency of the Russian government principally
responsible for police, militia, immigration and other
functions" including supervising the "Russian traffic police;
"the Special Purpose Garage ("SPG") an 'instrumentality' of
the Russian government"; "Machinoimport a Russian
government-owned and controlled purchasing agent for the
City of Moscow," an "instrumentality of the Russian
government"; and "Dorinvest a Russian government-owned
and controlled purchasing agent for the City of Moscow," an
"instrumentality of the Russian government."

81. FCPA - Russia
81
• Diebold, a security systems and automated teller machine
company, disclosed in July 2010 that it was investigating
payments by its Russian subsidiary that may have been in
breach of the FCPA. At the end of October 2010, it revealed
that the SEC issued a subpoena and the Justice Department
requested documents. In November 2010, the company
fired its Russian leadership amid the probe, and by February
2011, Diebold discovered possible violations in the Asia-
Pacific region as well. By July of 2011, it appeared the
internal probe was winding down. The company has spent
more than $5 million on expenses related to the FCPA
investigation, according to regulatory filings. In January
2013, the company said that it had set aside roughly $18
million for the eventual resolution of the FCPA investigation.

82. FCPA Penalties
82
Criminal
For each violation of the anti-bribery visions,
the FCPA provides that corporations and other
business entities are subject to a fine of up
to $2 million. Individuals (including officers,
directors, stockholders, and agents of companies) are subject to a
fine of up to $100,000 and up for five years imprisonment.
Civil
For each violation of the anti-bribery visions, the FCPA provides
that corporations and other business entities are subject
forfeiture of the benefit of the bribe, not just the amount of the
bribe. This is most often the revenue that resulted from the
bribe, gift or benefit.

83. Enforcement Landscape 2013
83
• Increased enforcement – corporate and
individual
• Government continues to exercise an
extensive jurisdictional power
• More Deferred Prosecution Agreements
• Focus on sales force training & monitoring
• Voluntary disclosures and self-policing

84. DOJ – Investigative Tools
84
• DOJ using traditional criminal investigation tools in
white collar and health care fraud cases
• Wire tapping and email recovery
• Trash removal and recovery
• Informants and undercover tracking
• Wire tap warrants

85. DOJ and Compliance Programs
85
• DOJ recognizes that no compliance program can ever
prevent all criminal activity by a corporation’s employees
• Critical factors in evaluation any compliance program
• Program adequately designed fro maximum
effectiveness in preventing and detecting wrongdoing
by employees?
• Corporate management enforcing the program or is
tacitly encouraging or pressuring employees to engage
in misconduct to achieve business objectives?

86. DOJ and Compliance Programs
86
• DOJ encourages self-policing, including voluntary
disclosures to the government of any problems that a
corporation discovers on it own
• Existence of a compliance program is not sufficient, in and
of itself, to justify not charging a corporation for criminal
misconduct undertaken by its officers, director

87. DOJ and Federal Sentencing Guidelines
87
• 2010 Federal Sentencing Guidelines
Manual – Chapter 8, Sentencing of
Organizations
• Part B – Remedying Harm from Criminal
Conduct, and Effective Compliance and Ethics Program
• United States Attorney Manual 9-28-800
• Sets forth what a United States Attorney has to review
in the process of determining whether a company has
viable compliance program and to criminally or civilly
prosecute the company or individuals

88. Compliance Programs
88
• Why effective compliance programs
are needed
• Exercise due diligence to prevent
and detect criminal behavior
• Promote an organization culture that encourages
ethical conduct and a commitment to compliance with
law
• Program shall be reasonably designed, implemented, and
enforced to it is generally effective in preventing and
detecting criminal conduct

89. Compliance Programs
89
• Three main problems compliance programs are designed to
address
• Bad people who do bad things
• Good people who make bad decisions under pressure
• How are employees compensated or evaluated
• Evaluate how supervisors manage divisions
• Good people who make bad decisions because they are
poorly informed

90. Compliance Programs
90
• Seven components of effective compliance program
1. Standards and Procedures
2. Strong Leadership
3. Education & Training
4. Monitoring & Auditing
5. Reporting Abilities
6. Enforcement and Discipline
7. Risk Assessment, Response & Prevention

91. Compliance Programs

92. Compliance Programs

93. Compliance Programs
93
“…having an effective compliance
program will be taken under
consideration when you talk to the
government about a criminal violation. We take it
seriously and it will have a positive impact on
negotiations. ”
- Gary Grindler, Acting Deputy Attorney General, U.S. DOJ,
“DOJ Warns on Heightened Fraud Enforcement,” Compliance
Week

94. Morgan Stanley Compliance Program
Prevented Prosecution
94
• In a first-of-its-kind case, DOJ and
SEC opted not to bring an enforcement
action over FCPA violations, citing the
company’s robust compliance program
as the reason for declining to prosecute
• “This case illustrates the SEC’s commitment to holding
individuals accountable for FCPA violations, particularly
employees who intentionally circumvent their company’s
internal controls.” – SEC’s Division of Enforcement Director,
Robert Khuzami

95. Morgan Stanley Compliance Program
Prevented Prosecution
95
• Top factor to winning exoneration was how quickly the
company moved to launch a full internal investigation
• The company conducted a thorough internal investigation to
determine the scope of the improper payments and other
misconduct involved
• Morgan Stanley frequently trained its employees on its
internal policies, the FCPA, and other anti-corruption laws
• Between 2002 and 2008, the company trained various
groups of Asia-based personnel on anti-corruption policies
on at least 54 occasions

96. Compliance Programs - Leadership
96
• Tone at the top is imperative
• Senior Management
• Depending on scope, consider compliance officer that
directly reports to Board’s audit committee
• Program oversight and reporting relationship

97. Compliance Programs – Risk Assessment
97
• What are the risk areas
• Are they changing or evolving
• Where are companies in similar industries getting into
trouble
• What are areas of significant government regulation
• Is the company doing business in high-risk countries
• Has there been a high turnover in personnel
• Due diligence in relation to pertinent business function
(consultants/directors/agents)
• Should a company wide risk survey be conducted

98. Compliance Programs – Risk Assessment
98
• Large aggregate payments/benefits
to consultants
• Conferences/training are not appropriate
to vendor or customer.
• Extensive or inappropriate entertainment/dinner/travel
• Unusual increase in product purchases

99. Compliance Programs – Risk Assessment
99
• Inadequate, generic or otherwise
questionable descriptions on
invoices/requests
• Missing or incomplete documentation
• Substantial activity for new vendor
• Invoices paid too quickly; payments
in cash or check

100. Compliance Programs – Risk Assessment
100
• High commissions or unusually large
fees/gifts
• Insufficient/incomplete due diligence
(i.e. government relationship, credit)
• Distributor/agent lacks expertise or
track record
• Distributor/agent unusually successful in
obtaining government contracts/benefits
• Payments into offshore accounts

101. Compliance Programs – Risk Assessment
Third Parties
101
• Unusual payments
• History of corruption
• Lack of experience
• Refusal to provide FCPA certification
• Unusually high commissions or discounts
• Lack of transparency in records
• Lack of quality recommendations

102. Compliance Programs – Standards and
Controls
102
• Review standards and controls
• Given an organization’s risk areas, what standards and
procedures address those areas
• Document standards and procedures regularly to reflect
changes in governmental requirements
• If any compliance and ethics issues arose in the recent
past, could standards and procedures be changing to
prevent those issues from recurring
• Ensure a screening process for individuals who have
engaged in past misconduct prior to their being hired or
promoted

103. Compliance Programs – Standards and
Controls
103
• Maintain accurate financial record keeping
• Particularly in regard to travel and entertainment expense
• Train finance staff on precise entries
• Retain documents
• Integration with local laws
• Specific guidelines for gifts, travel and entertainment

104. Compliance Programs – Training and
Communication
104
• Review the training and internal communication plans
• Does the company have a plan for its compliance and ethics
standards and expectations
• Who receives training and how often
• How does the training and communication plan focus on
the company’s risks
• Document internal communication and training program
attendance
• Train business partners

105. Compliance Programs – Monitoring, Auditing,
and Response
105
• Annually reexamine the process for verifying compliance
and evaluating the overall program effectiveness
• What controls are in place to verify compliance and ethics
standards are being followed (or not)
• Identification of sensitive individuals/functions
• Are incentives for compliance and ethics in place
• Is discipline levied for violations
• Reassess the response and remediation process annually

106. Compliance Programs – Monitoring, Auditing,
and Response
106
• What is the company’s procedure if it concludes that
misconduct has occurred
• Does the procedure include consideration of both
remediation of harm and prevention of recurrence
• Include mechanism for reporting violations (e.g.
whistleblower hotline)
• Perform periodic audits in high-risk markets

107. Compliance Programs – Monitoring,
Auditing, and Response
107
• What is the company’s procedure if it concludes that
misconduct has occurred
• Does the procedure include consideration of both
remediation of harm and prevention of recurrence

108. CONTACT INFORMATION
108
Brian E. Dickerson, Partner
202.570.0248
bdickerson@ralaw.com
Lee L. Piovarcy, Chairman
901.522.9000
lpiovarcy@martintate.com
The content of the presentation cannot be applied as legal counselling as this will
always be subject to actual and specific knowledge of the client’s situation.