FCPA Guidance: Understanding Key Issues and Ensuring Compliance LIVE Webcast

Speaker Firms and Organization:

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Presented By:

Jeffrey A. Udell
Partner
Olshan Frome Wolosky LLP
James Slear
Partner
Thompson Coburn LLP
Walter Ricciardi
Partner
Paul, Weiss, Rifkind, Wharton & Garrison LLP

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1

January 24, 2014

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January 24, 2014

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January 24, 2014

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January 24, 2014

Sponsored By:

Olshan, a law firm based in New York, represents major
businesses and entrepreneurs for their most significant
transactions, problems and opportunities. Olshan’s
clients range from public companies, hedge, venture
capital, private equity and other investment funds to
entrepreneurs and private companies worldwide. Clients
choose Olshan for innovative strategies and
sophisticated, game-changing advice in corporate,
securities law and shareholder activism, complex
commercial, corporate and securities litigation,
bankruptcy and creditors’ rights, real estate, intellectual
property and advertising. Since its founding, Olshan has
offered an alternative to the AmLaw 50 law firm
business model with responsive, independent and clientfocused legal counsel provided by the firm’s senior
lawyers.

Thompson Coburn attorneys represent clients from
nearly every industrial and corporate sector, including
manufacturing, banking, transportation, energy, and
communications. Companies choose to work with our
firm because of our results-oriented approach, staffing
that is appropriate for each assignment, and our
understanding of their business. Thompson Coburn was
recently named as one of the top 30 firms in the nation
for client service in 2014 by BTI Consulting, which also
named the firm among the nation's top firms at providing
exceptional value. With 360 attorneys and 40 practice
areas, we serve clients nationally and internationally.

6
January 24, 2014

Sponsored By:

Paul, Weiss is a firm of more than 800 lawyers with
diverse backgrounds, personalities, ideas and interests
who collaboratively provide innovative solutions to our
clients' most critical and complex legal and business
challenges. We represent some of the largest publicly
and privately held corporations and financial institutions
in the world as well as clients in need of pro bono
assistance.

7
January 24, 2014

Media Partner:

bestattorneysonline.com, a premium service provided by
bestattorneysonline.com LLC, started in 2009, ranks law
firms through research and evaluation to identify the
most respectable and dedicated law teams in the United
States.
Our goal is to provide our users with a new way to locate
and contact an attorney or a law firm while providing
firms a way to get their image out and into the open. We
advertise and provide access to the best law firms
around the country and in specific areas and also list a
directory showing many opportunities for a client to get
in touch with legal help.

8
January 24, 2014

Brief Speaker Bios:
Jeffrey A. Udell
Jeffrey A. Udell is a partner in the Litigation Group at Olshan, with experience litigating a wide variety of matters in both federal and
state courts. His practice focuses on white-collar criminal defense, regulatory enforcement and internal investigations, and he
represents both corporations and individuals in some of their most sensitive, complex and high-stakes matters. He also represents
hedge funds, investors and companies in complex commercial litigations. He has tried cases in a variety of forums, including federal
district courts in New York and Ohio, New York State court, FINRA, New York’s Judicial Conduct Commission and the New York City
Police Department Trials Commission. For three years (2008-2011), Jeff chaired the New York City Bar Association’s Professional
Responsibility Committee.

James Slear
Jim Slear is a partner in Thompson Coburn's International Trade practice. He focuses his practice on international trade compliance
and enforcement, including the FCPA, the economic and trade sanctions administered by the OFAC, ITAR, and the EAR. He advises
domestic, foreign and multinational clients in a wide array of industries, including aerospace, biomedicine, defense, financial services,
insurance, Internet services, manufacturing, semiconductor and telecommunications. Jim has more than 25 years of experience
conducting investigations and has conducted internal investigations for numerous clients in international trade and other matters--such
as antitrust and securities--both domestically and abroad, including Europe, the Middle East, Japan, the People's Republic of China
and Malaysia. Prior to entering private practice, Jim was a Judge Advocate with the U.S. Air Force.

9
January 24, 2014

Brief Speaker Bios:
Walter Ricciardi

Walter G. Ricciardi is a partner in the Securities Litigation and Enforcement Group at Paul, Weiss. Walter has extensive experience
defending a broad variety of investigations conducted by the U.S. Securities and Exchange Commission and other regulatory
authorities. Prior to joining Paul, Weiss Walter was the Deputy Director of the SEC's Division of Enforcement, where he supervised
many of the Commission's most significant investigations related to financial fraud, Foreign Corrupt Practices Act, insider trading and
broker-dealer and mutual fund compliance issues.
Prior to joining the SEC, Walter spent 20 years with PricewaterhouseCoopers and its predecessor, Coopers & Lybrand, where he was
in charge of defending the firm's litigation and regulatory matters. While at PwC, he was elected by his partners to serve on the firm's
board, which is responsible for overseeing the management of the firm, and to serve on the Global Oversight Board of the PwC global
organization.

► For more information about the speakers, you can visit:

http://www.knowledgecongress.org/speakers_2013_Ensuring_Compliance.html

10
January 24, 2014

The joint Department of Justice and Securities and Exchange Commission, “A Resource Guide to the
U.S. Foreign Corrupt Practice Act”, highlights the agencies intention and approach to halt corrupt
practices and bribery of U.S companies to foreign officials.
Aside from addressing enforcement issues, (1) Definition of Foreign Official; (2) Issues on Gifts, travel
and Entertainment; (3) Mergers and Acquisition and Successor Liability; and (4) Effective Compliance
Program, were also discussed as they are deemed relevant to FCPA. But, above all, the guidance aims
to help U.S companies comply with FCPA rules, mitigate potential pitfalls and prevent costly errors.
Join us in this two-hour Live webcast as our panel of distinguished leaders and practitioners provide an
in-depth discussion of the significant issues included in the guidelines, along with training and other best
practices in complying. The panel will also be available to answer questions and illuminate the latest
regulations for participants.

11
January 24, 2014

Featured Speakers:

SEGMENT 1:

SEGMENT 2:

Jeffrey A. Udell
Partner

James Slear
Partner
Thompson Coburn LLP

SEGMENT 3:
Walter Ricciardi
Partner
Paul, Weiss, Rifkind, Wharton &
Garrison LLP

12
January 24, 2014

SEGMENT 1:
Jeffrey A. Udell
Partner

Introduction
Jeffrey A. Udell is a partner in the Litigation Group at Olshan, with experience litigating a wide variety of matters in both federal and
state courts. His practice focuses on white-collar criminal defense, regulatory enforcement and internal investigations, and he
represents both corporations and individuals in some of their most sensitive, complex and high-stakes matters. He also represents
hedge funds, investors and companies in complex commercial litigations. He has tried cases in a variety of forums, including federal
district courts in New York and Ohio, New York State court, FINRA, New York’s Judicial Conduct Commission and the New York City
Police Department Trials Commission. For three years (2008-2011), Jeff chaired the New York City Bar Association’s Professional
Responsibility Committee.
Prior to joining Olshan, Jeff served for six years as an Assistant U.S. Attorney in the Criminal Division of the U.S. Attorney's Office for
the Southern District of New York. He was also a public defender for two years at the Office of the Appellate Defender. Jeff began his
legal career by clerking for the Honorable Edward R. Korman, U.S. District Judge for the Eastern District of New York.
• Email – judell@olshanlaw.com
• T:212.451.2238
• F:212.451.2222

13
January 24, 2014

SEGMENT 1:
Jeffrey A. Udell
Partner

FCPA: The Basics
I.
II.
III.
IV.
V.

History and Purpose of the FCPA
Key FCPA Provisions
Anti-Bribery Provisions
Accounting and Internal Controls Provisions
The DOJ & SEC FCPA Resource Guide

14
January 24, 2014

SEGMENT 1:
Jeffrey A. Udell
Partner

I. History and Purpose of the FCPA
•
•
•

FCPA enacted in 1977
Drafted in response to:
 Watergate scandal
 SEC report of widespread payments to foreign and domestic officials to secure business
Congress found that corruption:
 Created market inefficiencies and instability
 Lead to sub-standard products
 Created unfair playing field for honest companies
 Tarnished image of United States business

Source: DOJ/SEC Guide at 3-4

15
January 24, 2014

SEGMENT 1:
Jeffrey A. Udell
Partner

I. History and Purpose of the FCPA (cont’d)
•

•

Fluctuation in DOJ FCPA enforcement:
 1977 − 2004: minimal enforcement
 2004 − 2006: 3 − 6 actions per year
 2007 − 2009: 20 − 25 actions per year
 2010: over 35 actions
 2011 − 2012: 10 − 20 actions per year
 January to June, 2013: 17 actions
Several reasons for fluctuation

16
January 24, 2014

SEGMENT 1:
Jeffrey A. Udell
Partner

II. Key FCPA Provisions
•
•

Anti-bribery provisions prohibit payments or offers to pay money or anything of value to foreign
officials, or third parties acting on their behalf, if payment made to assist in obtaining or retaining
business (15 U.S.C. § 78dd-1)
Accounting and internal controls provisions require public U.S. companies to maintain
accurate books and records and internal controls (15 U.S.C. § 78m)

17
January 24, 2014

SEGMENT 1:
Jeffrey A. Udell
Partner

III. Anti-Bribery Provisions
What Persons and Entities Are Covered?
Anti-bribery provisions apply to:

•

All U.S. companies, citizens or residents, whether or not they act within or outside of the U.S.

•

All foreign companies listed on U.S. stock exchanges

•

All foreign companies or individuals who execute any part of a bribery scheme from within the U.S.

•

Officers, directors, employees or agents of the above


18
January 24, 2014

SEGMENT 1:
Jeffrey A. Udell
Partner

III. Anti-Bribery Provisions (cont’d)
Elements of an FCPA Bribery Offense
Anti-bribery provisions prohibit:

•
•
•
•

Offer, promise, or payment of a thing of value
To a foreign official
Made with corrupt intent
To assist in obtaining or retaining business

Source: 15 U.S.C. § 78dd-1 (a)

19
January 24, 2014

SEGMENT 1:
Jeffrey A. Udell
Partner

What Is an Offer, Promise, or Payment?

•
•
•
•

Broadly defined: offering or giving anything of value
Payment need not be made; attempts count
No de minimus exception
Can include:

Money or gift cards

Gifts (e.g., a holiday bottle of whiskey)

Charitable contributions or donations

Travel or entertainment (e.g., flights, dinners, a show)

Anything else of value (e.g., tuition, loan, services)

Source: DOJ/SEC Guide at 14-16.

20
January 24, 2014

SEGMENT 1:
Jeffrey A. Udell
Partner

Who Is a Foreign Official?

•
•
•

•

Any official regardless of rank or title
Not always obvious, sometimes investigation is required
Any officer or employee of:
 Any “foreign government”
 “[A]ny department, agency, or instrumentality” of a foreign government (e.g., the Ministry of
Energy)
 Any state-owned or controlled company
 Any “foreign political party”
 Any “public international organization” (e.g., the U.N.)
Any candidate for foreign political office

Source: DOC/SEC Guide at 19-21

21
January 24, 2014

SEGMENT 1:
Jeffrey A. Udell
Partner

Use of Third Parties or Knowing Avoidance

•
•

It is unlawful to make a payment to a third party while knowing all or a portion of that payment will go
directly or indirectly to a foreign official
 Knowledge = actual knowledge OR conscious avoidance
Many types of payments to third parties can put a company at risk, including those to:





Subsidiary or other affiliate
Agent, sponsor, distributor, consultant 

Freight forwarder

Customs broker
Joint venture partner
Relative of a foreign official


22
January 24, 2014

SEGMENT 1:
Jeffrey A. Udell
Partner

Corrupt Intent

•
•

A violator must intend to induce the foreign official to misuse his/her official position
Intent includes acting willfully and intending to do something unlawful
 Awareness of the specific law violated by the conduct is not required
 Even if you do not know you are violating the FCPA, you can still be liable

Source: DOJ/SEC Guide at 14

23
January 24, 2014

SEGMENT 1:
Jeffrey A. Udell
Partner

Business Purpose

•

Payment or offer or thing of value must be made to assist in:
 Obtaining business
 Retaining business
 Directing business to any person or entity

•

Very broad and covers payments intended to:




Obtain a contract
Reduce taxes
Reduce customs duties





Gain non-public information
Influence a lawsuit
Create exceptions in regulations


24
January 24, 2014

SEGMENT 1:
Jeffrey A. Udell
Partner

Narrow Exception: Gifts and Facilitation Payments

•

FCPA does not prohibit reasonable gifts to foreign officials as tokens of esteem or gratitude where:
 Made openly and transparently
 Properly recorded in a company’s books
 Appropriate under local law, customary where given and reasonable for the occasion (e.g.,
moon cakes)

•

Grease or facilitation payments not prohibited
 FCPA exempts small payments to further “routine governmental action” that involve nondiscretionary acts

Source: DOJ/SEC Guide at 15, 25

25
January 24, 2014

SEGMENT 1:
Jeffrey A. Udell
Partner

Bona Fide Business Expenses
Affirmative defense to FCPA enforcement where payment:

Reasonable and bona fide; and

Directly related to either:
o
Promotion, demonstration, or explanation of products or services, or
o
Execution or performance of a contract
Examples of bona fide business expenses:



Travel to a factory
Travel for training




Product Demonstrations
Promotional Activities

Source: DOJ/SEC Guide at 24

26
January 24, 2014

SEGMENT 1:
Jeffrey A. Udell
Partner

IV. Accounting and Internal Controls Provisions
Books and Records Provision

•
•
•
•

Applies only to public companies
Issuers must maintain books, records and accounts which in reasonable detail accurately reflect the
transactions and dispositions of their assets
“Books and records” is very broadly defined
No materiality requirement


27
January 24, 2014

SEGMENT 1:
Jeffrey A. Udell
Partner

IV. Accounting and Internal Controls Provisions (cont’d)
Internal Controls Provision

•
•

Also applies only to public companies
Issuers must have a system of internal accounting controls to provide reasonable assurance that
 Transactions are authorized by management and
 Financial statements are in conformity with GAAP


28
January 24, 2014

SEGMENT 1:
Jeffrey A. Udell
Partner

Oracle Settlement

•

•

•

In August 2012, SEC alleged in a complaint:
 Oracle’s Indian subsidiary structured transactions with India’s
government so that distributors placed $2.2 million of proceeds in unauthorized side funds, all
unknown to parent
 Funds were used to pay local vendors on false invoices
SEC alleged Oracle violated FCPA’s books and records and internal controls provisions by:
 Failing to properly record the side funds on its books
 Failing to “audit and compare the distributor’s margin against the end user price” and failing to
“seek transparency in or audit third party payments made by distributors”
Oracle agreed to a $2 million penalty to settle matter

Source: SEC Press Release , Aug. 16, 2012

29
January 24, 2014

SEGMENT 1:
Jeffrey A. Udell
Partner

Oracle Settlement
The Oracle settlement shows:
• SEC may seek to apply the books and records and internal controls provisions under what is
tantamount to a strict liability standard. There was no claim that:
 Oracle ever paid any bribes to officials or otherwise
 Parent had knowledge of the side funds
 Parent saw any red flags
• SEC appears to believe that companies must proactively audit all distributors

Source: FCPA Blog, Nov. 25, 2013

30
January 24, 2014

SEGMENT 1:
Jeffrey A. Udell
Partner

V. DOJ & SEC FCPA Resource Guide
•

Guide provides:
 Centralized compendium of current FCPA law and policy written in lay terms
 Practical guidance for companies establishing compliance programs
 Numerous examples and hypotheticals
 Extensive appendix of FCPA related references

•

Guide does not provide:
 No new policies
 No new bright-line rules to make it easier for companies to comply with FCPA

31
January 24, 2014

SEGMENT 2:
James Slear
Partner
Thompson Coburn LLP

Introduction
Jim Slear is a partner in Thompson Coburn's International Trade practice. He focuses his practice on international trade
compliance and enforcement, including the FCPA, the economic and trade sanctions administered by the OFAC, ITAR,
and the EAR. He advises domestic, foreign and multinational clients in a wide array of industries, including aerospace,
biomedicine, defense, financial services, insurance, Internet services, manufacturing, semiconductor and
telecommunications. Jim has more than 25 years of experience conducting investigations and has conducted internal
investigations for numerous clients in international trade and other matters--such as antitrust and securities--both
domestically and abroad, including Europe, the Middle East, Japan, the People's Republic of China and Malaysia. Prior to
entering private practice, Jim was a Judge Advocate with the U.S. Air Force.

32
January 24, 2014

SEGMENT 2:
James Slear
Partner
Thompson Coburn LLP

Recurring Theme: Third Party Liability
 “DOJ’s and SEC’s FCPA enforcement actions demonstrate that third parties, including agents,

consultants, and distributors, are commonly used to conceal the payment of bribes to foreign officials
in international business transactions.”

33
January 24, 2014

SEGMENT 2:
James Slear
Partner
Thompson Coburn LLP

Prohibition on Indirect Payments
 FCPA expressly prohibits corrupt payments made through third parties or intermediaries.
 Specifically covers payments made to “any person, while knowing that all or a portion of such money

or thing of value will be offered, given, or promised, directly or indirectly” to a foreign official.

34
January 24, 2014

SEGMENT 2:
James Slear
Partner
Thompson Coburn LLP

Liability for Third Party Payments
How much do you need to “know”?
“Substantially certain” corrupt payment will be made
Aware of “high probability” corrupt payment will be made
Liable if there is . . . .

“Reckless disregard”

“Conscious avoidance”

“Deliberate Ignorance”

35
January 24, 2014

SEGMENT 2:
James Slear
Partner
Thompson Coburn LLP

SEC/DOJ First Guiding Point
 As part of risk-based due diligence, companies should understand the third-party’s:





Qualifications
Associations
Business reputation
Relationship, if any, with foreign officials

 Scrutiny should increase as red flags surface

36
January 24, 2014

SEGMENT 2:
James Slear
Partner
Thompson Coburn LLP

SEC/DOJ Second Guiding Point
 Understanding business rationale for including the third party, including its role and necessity, and the

timing of its introduction.
 Ensure contract terms specifically describe services to be performed.
 Compare payment terms to typical terms in industry and country and confirm compensation is
commensurate with services provided.
 Confirm actual performance of contracted services.

37
January 24, 2014

SEGMENT 2:
James Slear
Partner
Thompson Coburn LLP

SEC/DOJ Third Guiding Point
 Undertake some form of ongoing monitoring of third-party relationships.
 Where appropriate may include:





updating due diligence periodically
exercising audit rights
providing periodic training
requesting annual compliance certifications

38
January 24, 2014

SEGMENT 2:
James Slear
Partner
Thompson Coburn LLP

SEC/DOJ Final Guiding Point
 Inform third parties of the company’s compliance program and commitment to ethical and lawful

business practices.
 Where appropriate, seek assurances from third parties, through certifications and otherwise, of

reciprocal commitments.

39
January 24, 2014

SEGMENT 2:
James Slear
Partner
Thompson Coburn LLP

Takeaways from SEC/DOJ Guidance
 All third parties present risk
 Focus on risk-based due diligence, with increasing scrutiny as red flags are uncovered
 An effective compliance program will include mechanisms to reduce risk at all stages of the third party

relationship

40
January 24, 2014

SEGMENT 2:
James Slear
Partner
Thompson Coburn LLP

Red Flags
 High risk country
 Excessive commissions
 Unreasonably large discounts to distributors
 Vaguely described services
 Different line of business than that for which engaged
 Related to or closely associated with foreign official
 Express request or insistence of the foreign official
 Shell company incorporated in offshore jurisdiction
 Requests for payment to offshore bank accounts
 Required prepayment in advance of work
 Lack of adequate resources to do work

41
January 24, 2014

SEGMENT 2:
James Slear
Partner
Thompson Coburn LLP

Third Parties
 Local agents/sales representatives
 Consultants/advisors
 Subcontractors
 Subsidiaries
 JV Partners
 Distributors
 Freight forwarders
 Attorneys
 Other intermediaries

42
January 24, 2014

SEGMENT 2:
James Slear
Partner
Thompson Coburn LLP

Agents
 UTStarcom, Inc. (2009):
o

U.S. telecom company allegedly paid $1.5 million to agent in Mongolia for a “license fee.”

o

Fee was only $50,000

o

Balance used to make improper payment to foreign official

43
January 24, 2014

SEGMENT 2:
James Slear
Partner
Thompson Coburn LLP

Subsidiaries
 SEC/DOJ Guidance on parent liability for subsidiary’s conduct under agency principles


“evaluate the parent’s control—including the parent’s knowledge and direction of the subsidiary’s
actions, both generally and in the context of the specific transaction”

 Schnitzer Steel Ind. Inc. (2006): Alleged bribes by subsidiaries and employees to obtain business

states: “Schnitzer Steel accepts and acknowledges that it is responsible for the acts
of . . . its wholly owned subsidiary”

44
January 24, 2014

SEGMENT 2:
James Slear
Partner
Thompson Coburn LLP

Consultants/Advisors
 Alcatel-Lucent SA (2010)


French issuer’s senior executives approved retention and payment of millions of dollars to
consultants with no relevant experience or in other cases despite obvious indications that the
consultants were performing little or no legitimate work.

45
January 24, 2014

SEGMENT 2:
James Slear
Partner
Thompson Coburn LLP

Distributors
 Pfizer H.C.P. (2012). Pfizer entered exclusive distribution contract with Kazakh company, believing at

least some value from the contract would be given to a Kazakh government official to ensure
registration of a Pfizer product in Kazakhstan.
 Weatherford Services Limited (2013): Subsidiary provided volume discounts to Iraqi distributor

believing those discounts would be used to create slush fund to make bribes to foreign officials of a
government-owned national oil company.

46
January 24, 2014

SEGMENT 2:
James Slear
Partner
Thompson Coburn LLP

Subcontractors
 Data Systems & Solutions LLC (2012)



Paid bribes to officials at Ignalina Nuclear Power Plant through third-party subcontractors in
exchange for large contracts



Disguised through fictitious scopes of work to subcontractors and paid at above-market rates

47
January 24, 2014

SEGMENT 2:
James Slear
Partner
Thompson Coburn LLP

Joint Venture Partners
 Weatherford Services Limited (2013)


Employees established JV in Africa with two local entities controlled by foreign officials.



JVPs did not contribute capital, expertise or labor.



Sole purpose of JVPs was to funnel payments to the foreign officials controlling them.



Foreign officials awarded JV lucrative contracts, gave WSL inside information about pricing, and
took contracts away from competitors.



Other third party violations were involved.

48
January 24, 2014

SEGMENT 2:
James Slear
Partner
Thompson Coburn LLP

Freight Forwarders/Logistics Companies
 Panalpina World Transport (2010)


Swiss company bribed numerous foreign government officials on behalf of customers to
circumvent local customs processes in various countries.



Customers also were held liable for FCPA violations

49
January 24, 2014

SEGMENT 2:
James Slear
Partner
Thompson Coburn LLP

Ten Steps for Due Diligence
 One: Consider country’s reputation for corruption


Reports (e.g., Transparency International), news, enforcements

 Two: Determine value sought from third party




Why do we need a third party?
Why was this third party selected?
What value is the third party providing?

 Three: Assess competence of third party


Qualifications (expertise, resources) to provide desired services

50
January 24, 2014

SEGMENT 2:
James Slear
Partner
Thompson Coburn LLP

 Four: Determine integrity of third party





Open source research and restricted party lists (U.S. and others)
References, interviews, discreet inquiries
Third party audits
Cooperation (e.g., audit rights)

 Five: Identify relationships with government officials





Interview or Questionnaire
Identify directors / officers / key employees
Require information about past/present relationships with government
List of anticipate non-employee resources

51
January 24, 2014

SEGMENT 2:
James Slear
Partner
Thompson Coburn LLP

 Six: Determine reasonableness of compensation



Is pay commensurate with the effort expected?
Special payment terms (advances, split payment, off shore accounts)

 Seven: Verify due diligence responses


Verify information received from consultant with interviews of business references and background
search or third party diligence

52
January 24, 2014

SEGMENT 2:
James Slear
Partner
Thompson Coburn LLP

 Eight: Integrate FCPA safeguards into the contract



Certifications
Audit rights

 Nine: Provide for continuing oversight of the activities of third party



Develop compliance plan
Assign responsible employee

 Ten: Ensure accurate books and records



Periodic review
Training

53
January 24, 2014

SEGMENT 3:
James Slear
Partner
Thompson Coburn LLP

Final Thoughts
 No one-size fits all solution
 Recognize and mitigate risk
 Adequate due diligence may be costly (e.g., Burma)
 Training is an essential complement to

due diligence

54
January 24, 2014

SEGMENT 2:
James Slear
Partner
Thompson Coburn LLP

Contact Information

Jim Slear
jslear@thompsoncoburn.com
202.585.6981

55
January 24, 2014

SEGMENT 3:
Walter Ricciardi
Partner
Garrison LLP

Introduction
Walter G. Ricciardi is a partner in the Securities Litigation and Enforcement Group at Paul, Weiss. Walter has extensive
experience defending a broad variety of investigations conducted by the U.S. Securities and Exchange Commission and
other regulatory authorities. Prior to joining Paul, Weiss Walter was the Deputy Director of the SEC's Division of
Enforcement, where he supervised many of the Commission's most significant investigations related to financial fraud,
Foreign Corrupt Practices Act, insider trading and broker-dealer and mutual fund compliance issues.
Prior to joining the SEC, Walter spent 20 years with PricewaterhouseCoopers and its predecessor, Coopers & Lybrand,
where he was in charge of defending the firm's litigation and regulatory matters. While at PwC, he was elected by his
partners to serve on the firm's board, which is responsible for overseeing the management of the firm, and to serve on the
Global Oversight Board of the PwC global organization.

56
January 24, 2014

SEGMENT 3:
Walter Ricciardi
Partner
Garrison LLP

FCPA Trends
I.

SEC and DOJ Have Sought Higher Penalties and Disgorgement

II.

Growth of Specialized Government Resources for FCPA Investigations

III.

Brave New World for Whistleblowers

IV.

Government Expectations regarding Cooperation

57
January 24, 2014

SEGMENT 3:
Walter Ricciardi
Partner
Garrison LLP

Disgorgement And Penalties Sought By The SEC And DOJ From Corporations To
Settle Have Grown


Three recent settlements have joined the FCPA top ten all time largest list with total payments
exceeding $100 million
Alcoa Inc.
January 9, 2014
$384 Million
Weatherford International
November 26, 2013
$152.8 million
Total S.A.
May 29, 2013
$382.2 million

58
January 24, 2014

SEGMENT 3:
Walter Ricciardi
Partner
Garrison LLP

Growth Of Specialized Government Resources For FCPA Investigations


“An Embarrassment of Resources”


Charles Duross
Deputy Chief, DOJ Fraud Section
Head of the FCPA Unit
• 20 full time DOJ prosecutors



Kara Brockmeyer
Chief SEC Enforcement FCPA Speciality Unit
Units evolved from “working groups” on January 13, 2010
• Brockmeyer elevated to Chief September 27, 2011
• “Three dozen” SEC Enforcement professionals -- 75% in DC, 25% in the regional offices

59
January 24, 2014

SEGMENT 3:
Walter Ricciardi
Partner
Garrison LLP

Whistleblower Incentives And Protection


Section 21F of the Dodd-Frank Act (2010), “Securities Whistleblower Incentives and Protection”



Mandatory for SEC to award 10-30% of the monetary sanctions collected to whistleblowers who:



that leads to a successful Commission Enforcement action;




voluntary provide original information;
resulting in sanctions exceeding $1 million

Office of the Whistleblower





Sean X. McKessy, Chief since February 18, 2011
Jane A. Norberg, Deputy Chief since January 17, 2012

SEC Final Rules effective August 12, 2011

60
January 24, 2014

SEGMENT 3:
Walter Ricciardi
Partner
Garrison LLP

Whistleblower Incentives And Protection, (con’t)


Number of Complaints


FY 2011 - 334

FY 2012 - 3001 FY2013 - 3238



149 FCPA tips in FY 2013, up from 115 in FY 2012



Whistleblower submissions received from individuals in all 50 states and 68 foreign countries – 66
from UK; 62 from Canada; 52 from PRC



Six awards, including $14 million awarded on October 1, 2013



SEC Investor Protection Fund balance at FY 2013 -- $439 million



Confidentiality


Whistleblowers entitled to confidentiality



Breach of duty of confidentiality could be retaliation



Intangible harm could be actionable – Menendez v. Halliburton, Inc.
61
January 24, 2014

SEGMENT 3:
Walter Ricciardi
Partner
Garrison LLP

Government Expectations Regarding Cooperation


Ralph Lauren Corporation - Settlement April 22, 2013


SEC and DOJ Non-prosecution agreement



$700,000 disgorgement and interest



$882,000 penalty



“The NPA shows the benefit of implementing an effective compliance program. Ralph Lauren
Corporation discovered the problem after it put in place an enhanced compliance program and
began training its employees. That level of self-policing along with its self-reporting and
cooperation led to this resolution.”

62
January 24, 2014

SEGMENT 3:
Walter Ricciardi
Partner
Garrison LLP

Government Expectations Regarding Cooperation, (con’t)


What is expected?


Controls and due diligence to avoid infractions



Credible response to “red flags”



Prompt remedial action



Self-Report?

63
January 24, 2014

SEGMENT 3:
Walter Ricciardi
Partner
Garrison LLP

Government Expectations Regarding Cooperation, (con’t)


Impact on Weapons in government arsenal

Any charges?

Financial penalty and disgorgement

Bribery or books and records charges

Admissions

Criminal plea, deferred prosecution agreement, non-prosecution agreement

Entity - parent or subsidiary

Monitor

Individuals

64
January 24, 2014

Q&A:

SEGMENT 1:

SEGMENT 2:

Jeffrey A. Udell
Partner

James Slear
Partner
Thompson Coburn LLP

SEGMENT 3:
Walter Ricciardi
Partner
Garrison LLP

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► Questions will be answered in the order they are received.

65
January 24, 2014

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