1. Anti-Corruption
Compliance Solutions
in an Aggressive
Enforcement Era
Michael Volkov, Partner
(202) 263-3288
mvolkov@mayerbrown.com
Vince Connelly, Partner
(312) 701-7912
vconnelly@mayerbrown.com
© Copyright Mayer Brown LLP, 2011

2. Overview I. Trends in Anti-Corruption
Enforcement
II. Playing Well With Others:
Acquisitions, Joint Ventures and Agents
III. Third Parties
IV. Compliance Programs
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3. Trends in
Anti-Corruption
Enforcement
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4. Trends in Anti-Corruption Enforcement
Major Risk Factors for Corruption
How much does your business depend on:
 Government sales;
 Dealings with state-owned enterprises;
 Regulatory approvals, visas, and inspections/audits;
 Hiring of third party agents and consultants.
Do you have an existing policy:
 To conduct due diligence of third party agents and consultants;
 To conduct due diligence of prospective target company to acquire
or joint venture partner;
 To prospectively approve expenses for gifts, meals, entertainment
and travel.
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5. Trends in Anti-Corruption Enforcement
Anti-Corruption Enforcement
GLOBAL enforcement is on the rise.
In the past three years, In response to international
US prosecutors have pressure, Canada its increasing
enforced the FCPA to enforcement of its
the tune of $3.6 billion. anti-corruption law.
Germany, Spain and other
The UK Bribery Act became EU countries are
effective on July 1, 2011. increasing enforcement.
China and the US are increasing
Asia and Latin American countries cooperation and beginning to establish
have been slower to enact tough, new a framework for information sharing
anti-corruption laws and begin and enforcement; China enacted
aggressive enforcement programs. its own foreign bribery law.
Risk of anti-corruption multi-jurisdictional, “piggy-back” actions is growing.
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6. Trends in Anti-Corruption Enforcement
Enforcement Trends
Aggressive FCPA enforcement
has resulted in corporate mega-fines:
 For 2010, fines total over $1.6 billion
- more than half of all federal criminal fines collected.
 Fueled by voluntary disclosures and industry-wide investigations
- oil, pharmaceuticals and medical devices, military and law
enforcement equipment, and telecommunications.
 FBI has dedicated FCPA squad which is using aggressive
investigative tactics - consensual recordings, ambush interviews,
undercover officers, informants, search warrants and wiretaps.
 SEC Dodd-Frank whistleblower bounty program will increase
number of credible complaints, investigations and prosecutions.
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7. Trends in Anti-Corruption Enforcement
FCPA Enforcement at a Glance: Increase in Actions
2010 witnessed an 85% increase in FCPA enforcement actions
over 2009, which itself was a record year.
60
DOJ
50 48
SEC
40
30 26 26
20 20
20 18
13 14
10 7 7 8
5
2 3
0
2004 2005 2006 2007 2008 2009 2010
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8. Trends in Anti-Corruption Enforcement
FCPA Enforcement at a Glance: Blockbusters
Eight of the top ten monetary settlements in FCPA history were reached in 2010.
$900
Siemens 2008
$800 2009
$700 2010
KBR/Halliburton 2011
$600
$500 BAE Systems
ENI/Snamprogetti
$400 $800 Technip
$300 $579 JGC Corporation
Daimler
$200 $400 Alcatel-Lucent $218.8
$365 $338
Panalpina Johnson & Johnson
$100 $185 $137
$82 $70
$0
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9. Trends in Anti-Corruption Enforcement
FCPA Enforcement at a Glance: Prison Sentences
Jorge Granados, CEO
Latin Node
46 months
Robert Antoine, Director 48 months
Haiti Telco (2010)
Juan Diaz, Owner
Third party consultant 57 months
to Haiti Telco (2010)
Douglas Murphy, President 63 months
American Rice, Inc. (2002)
Carlos Rodriguez, VP 84 months
Terra Telecomm
Albert Jack Stanley, CEO 84 months
and Chairman, KBR (2009)
Charles Paul Edward Jumet,
President, Ports Engineering 87 months
Consultants Corporation (2009)
Joel Esquenazi, Pres.
Terra Telecomm (2009)
180 months (15 Years)
0 10 20 30 40 50 60 70 80 90 100
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10. Trends in Anti-Corruption Enforcement
FCPA: Whistleblower Bounty
 Whistleblower Bounty program offers
rewards of 10 to 30 percent of any
settlement over $1 million. SEC’s
Whistleblower Office opened on
8/12/2011.
 SEC regulations have been adopted
(pending appeal).
 SEC estimates it will receive 30,000
complaints a year; 1-2 credible
complaints each day.
 With certain exceptions, whistleblowers
must first file complaint internally with
company and wait for 120 days before
filing with SEC.
 Companies will increase self-reporting
to pre-empt whistleblowers.
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11. Trends in Anti-Corruption Enforcement
FCPA: Partnerships
“Partnerships like the one we have with the Serious Fraud
Office are critical to our transnational approach to
combating foreign bribery, and we intend increasingly to rely
on our foreign partners in future cases.”
— Lanny Breuer, Assistant Attorney General, Nov. 4, 2010
SFO
Serious Fraud Office
THE UNITED STATES
of
www.sfo.gov.uk
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12. Trends in Anti-Corruption Enforcement
FCPA v. UKBA: Offenses and Defenses
FCPA UK Bribery Act
Bribery of foreign government officials Bribery of public and private sector
(including state enterprise employees, political individuals – includes a discrete offence
parties, party officials, political candidates, of bribing a foreign public official
public international organization employees)
Only penalizes those making bribes Accepting bribes is also punishable
Prosecutes active participation in bribery, No accounting offence in the Bribery Act but
though internal controls requirement is Companies Act 2006 includes an offence of
independent of any bribery activity failing to keep adequate accounting records
Consideration of compliance programs at “Adequate procedures” is the only potential
prosecution and sentencing stages defense available against failing to prevent bribery
Statutory exception for “facilitation Facilitation payments only permitted if local
payments” narrowly defined written law so permits
Reasonable and bona fide expenditure on travel, No express exception for corporate
lodging and entertainment expenses permitted if hospitality but Guidance advises that
directly related to promotion of product or service “reasonable and proportionate”
or to performance of government contract hospitality is permissible
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13. Trends in Anti-Corruption Enforcement
FCPA v. UKBA: Territorial Effect and Punishment
FCPA UK Bribery Act
Conduct within the US Conduct (including omissions) within the UK
by anyone by anyone
Conduct outside of the US if by an issuer Conduct (including omissions) outside of the UK
of US Securities or a “domestic concern” by persons (natural and legal) with a close
(e.g. a company organized under US law connection to the UK, if that conduct would
or having its principal place of business in form an offence if committed in the UK. If a
the US) – or anyone acting on its behalf; commercial organization “carries on a business
foreign persons who commit an act in the or part of a business in the UK” then may be
United States in furtherance of a subject prosecuted for “failing to prevent” bribery even
act are also covered if the bribery occurs entirely outside of the UK
Up to 5 years prison sentence for bribery, 20 Up to 10 years prison sentence – accounting
years for accounting offences offences may be prosecuted under other Statutes
Criminal fine for entities up to $2m for bribery Unlimited fine; additionally Serious
or $25m for violation of accounting provisions, Crime Prevention Orders, Confiscation
or twice the benefit sought, and debarment; for Orders, Winding up proceedings,
individuals, fines of up to $100,000 (bribery) or debarment, director disqualification
$5 million (accounting offences) and regulatory/disciplinary action
Civil penalties up to $10,000 per bribery violation Civil Recovery Orders – no criminal conviction
or $500,000 per corporate accountancy violation required (lower threshold of proof)
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14. Playing Well
With Others:
Acquisitions,
Joint Ventures
and Agents
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15. Playing Well With Others: Acquisitions, Joint Ventures and Agents
Case Study: Damn the Torpedoes, Full Speed Ahead!
After months of negotiation,
CEO reaches deal to acquire target
company. For various business
reasons, CEO insists on closing the
deal within 2 weeks.
What anti-corruption risks
are created?
In such a situation, what
should Chief Compliance
Officer do?
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16. Playing Well With Others: Acquisitions, Joint Ventures and Agents
Buying into an Anti-Corruption Violation
An acquiring company can be held liable for FCPA violations
committed by a target company prior to the acquisition:
 Alliance One: $4.2 million fine and $10 million disgorgement for
pre-acquisition FCPA violations.
 Saipem: $240 million fine for conduct of an acquired subsidiary of
ENI, Snamprogetti, where the FCPA violations occurred over 2 years
prior to the acquisition.
NOTE: Not only may liability be inherited for a company's past
action, but a firm may be liable for ongoing corruption even if
there is no direct evidence that the company or its officers
knew of the corrupt acts.
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17. Playing Well With Others: Acquisitions, Joint Ventures and Agents
Due Diligence of Target Companies
Basic Risk Assessment
(countries of operation, industry, extent of foreign government interactions)
Overall Compliance Structure
Prior History of Bribery or Internal Investigations
Internal Controls
Use of Third Party Intermediaries
Anti-Corruption Training
Employee Discipline/Hot-Line Reporting
Assessment and Review Procedures
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18. Playing Well With Others: Acquisitions, Joint Ventures and Agents
Risk Assessment: The Foundation for Compliance
The risk assessment should be a formal and documented
review which examines:
 The geographic and industry risks: nature and extent of corruption
(countries reputation for corruption) and history of corruption in
industry;
 The level of government interactions – business and regulatory,
and specific interactions and relationships with former government
officials and relatives;
 The use of third party agents and consultants;
 The level of gifts, entertainment, meals and other benefits given to
foreign officials and/or their relatives;
 Mergers, acquisitions and joint ventures.
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19. Playing Well With Others: Acquisitions, Joint Ventures and Agents
Who Are the Real Parties in Interest?
Complex corporate relationships or the presence of former
government officials raise risk that government officials may be
real party in interest:
 Due diligence must dig as far as possible.
 Interviews and site visits of parties are
important.
 Such steps combined with specific
representations and warranties
may tip the balance in going forward.
 A detailed document outlining investigation
is important to avoiding liability.
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20. Playing Well With Others: Acquisitions, Joint Ventures and Agents
Partnering with a Government Enterprise
Companies are often required to partner with foreign
government enterprises (e.g. China joint ventures).
 Due diligence of foreign enterprise is critical.
 Building in controls for interactions with foreign state-owned
enterprise.
 Contractual provisions in joint venture agreement including
representations and warranties governing compliance and
requiring training.
 Policies for gift giving, dealings with foreign officials and other
proactive measures should be developed.
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21. Playing Well With Others: Acquisitions, Joint Ventures and Agents
How Much Diligence is Required to Avoid Liability?
 Justice Department appears to have modified its policies governing
pre- and post-acquisition due diligence requirements, relaxing its
policy outlined in 2008 Halliburton Opinion Release (08-02).
 In Halliburton, Justice Department decided not to impose successor
liability on Halliburton on condition that Halliburton complied with
specified stringent conditions relating to due diligence, and reporting
requirements.
 Halliburton was prevented by UK law from obtaining information from
target company before the acquisition.
 In recent enforcement settlement involving Johnson & Johnson,
Justice Department imposed “enhanced compliance” obligations
which relaxed timing obligations on pre- acquisition due diligence and
post acquisition FCPA compliance by newly-acquired companies.
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22. Playing Well With Others: Acquisitions, Joint Ventures and Agents
Case Study: Gift Giving in Asia
One of the most prevalent areas for violations
is operating in a gift-giving business culture.
 Chinese business culture is based on
relationships, or guanxi, which are formed
in part by giving gifts and doing favors.
 Line between modest gift giving and
illegal intent to influence can be murky.
 Establishing a review protocol which
balances amount of gift, level of
influence of foreign official (or private
in case of UKBA) is helpful.
 Documenting lack of intent and steps
taken to ensure no intent to bribe.
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23. Third
Parties
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24. Third Parties
Case Study: The Critical Agent
 Proposed agent is needed to secure regulatory approval in short period of
time for transaction:
− $1 million 30-day success fee;
− Known in the government but not specifically in the office for approval.
 Due diligence means “reasonable inquiries” but must address red flags:
– Prior history of bribery and other crimes;
– Conduct interview, and interview 3 business references;
– Nature of services, reasonableness of fee in relation to market and overall size
of transaction; and method of payment.
 Written contract with representations and warranties on compliance; right
to inspect and audit third-party books; and right to terminate contract if
believe violation has or will occur.
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25. Third Parties
Due Diligence Screening of Third Party Agents
Screen the Initial Terms of Relationship with Third Party:
 Develop a different screening procedures for review of individual
transactions.
 Do not over-standardize procedure. Need to tailor to individual
circumstances in each country based on risk.
 Need to conduct background check to determine (5-10 year history)
to determine if:
a) ties to foreign government officials and employees; or
b) existence of any pending or prior investigations of bribery or other
malfeasance.
 Create written package and record of review and approval process
to demonstrate compliance.
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26. Third Parties
Case Study: Obtaining the Necessary Permit
 In order to open a business in Afghanistan,
a company needs a license. Company
applies and wait and waits and nothing
happens.
 Out of frustration, company finds another
agent to help obtain the approval.
Company conducts limited due diligence.
Hires the agent with no success fee or
contingency.
 Within 24 hours, the agent obtains the
license.
 Company learns that agent was relative of
head of licensing office for new businesses.
What should company do?
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27. Compliance
Programs
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28. Compliance Programs
How to Solve Specific Anti-Corruption Compliance Problems?
There is a solution which minimizes
risk in response to every problem
 The ultimate decision whether to go forward in the face of some
risks depends on risk sensitivity versus benefit to the business.
 Some key principles and strategies are:
– Building a record of good faith consideration of issues with
documentation. Such a solution will negate any inference of criminal
intent;
– Good faith attempts to comply based on adherence to procedures and
reasonable interpretations of the law.
 Acquire all of the facts concerning the issue.
 Document your inquiry and reasoning for your action.
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29. Compliance Programs
Principles for a Successful Compliance Program
The key elements of a successful program require:
1) A commitment to compliance from top management and a consistent
message throughout the company.
2) A careful weighing of risk, commitment to compliance and business
needs so that there is “buy-in” at every level of the company.
3) A business-practical approach which is flexible to respond to risks, local
business operations, and effective compliance needs.
4) Avoiding a Dr. No. perception and creating a positive compliance
structure which emphasizes common sense, communication and issue
identification, solutions to common problems; and recognizes
importance of new opportunities.
5) Building in controls and procedures which ensure adequate
documentation of compliance reviews and actions.
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30. Compliance Programs
The Critical Building Block: Tone at the Top
 The company should issue a clear and visible corporate policy
against corruption violations.
 Demonstrate a strong commitment from senior management.
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31. Compliance Programs
Anti-Corruption Policies and Procedures
The company should implement
specific policies for:
 Gifts, hospitality, entertainment,
and travel expenses;
 Political contributions, charitable
donations and sponsorships;
 Facilitation payments,
solicitation and extortion.
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32. Compliance Programs
Train, Train, Train: Train of Fools
Critical to design, implement and
document extensive training program.
Communication and education are keys to compliance.
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33. Compliance Programs
Train, Train, Train: Train of Fools
Training program should include following elements:
 Train board of directors and top management;
 Train the trainers;
 Train gatekeepers who are most likely to detect corruption
(in-house counsel, auditors, HR personnel);
 Train sales and regulatory interaction staffs separately;
 Message should be tailored to audience;
 Records should be maintained of every training program.
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34. Compliance Programs
Keystones
 Senior Management Oversight and Reporting: Designate one or
more senior corporate executives of the company to implement and
monitor compliance.
 Guidance and Monitoring: Establish internal guidance protocol,
internal reporting via hotline or anonymous internet-based.
 Annual Review: Review and assess anti-corruption compliance
program at least annually, and implement, where appropriate,
continuous monitoring procedures (e.g. regular surveys and other
procedures).
 Internal Controls: The company should ensure that it has a system
of internal controls for the purpose of foreign bribery or concealing
bribery.
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35. Compliance Programs
Avoiding Jail: How to Protect Against Criminal Prosecution
The two key principles:
If decisions are made and actions
taken which are transparent and
inconsistent with criminal intent,
companies will avoid criminal
prosecution.
Disguising actions and
intent make criminal prosecution
more likely.
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36. Compliance Programs
Affirmative Defense
Reasonable and Bona Fide Expenditures
Reasonable and bona fide expenditures, such as travel and lodging
expenses that are legal under local law and are directly related to:
The promotion, demonstration, OR The execution or performance(s)
or explanation of products of a contract with a foreign
or services government or agency thereof
 CONTRACT

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37. Contact Information
Michael Volkov, Partner
(202) 263-3288
mvolkov@mayerbrown.com
Vince Connelly, Partner
(312) 701-7912
vconnelly@mayerbrown.com
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