anti-corruption enforcement and compliance in the us, uk, and china

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Anti-Corruption Enforcement and Compliance in the US, UK and China: Trends from 2014 and Forecast for 2015

January 30, 2015


Chelsie ChmelaEvents [email protected]

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SPEAKING TODAY

John P. CunninghamPartner, Washington, DC

Vivian WuSpecial Counsel, Beijing

Geoff MartinAssociate, London, UK/Washington, DC

Baker & McKenzie LLP is a member firm of Baker & McKenzie International, a Swiss Verein with member law firms around the world. In accordance with the common terminology used in professional service organizations, reference to a "partner" means a person who is a partner, or equivalent, in such a law firm. Similarly, reference to an "office" means an office of any such law firm.© 2015 Baker & McKenzie LLP

Anti-Corruption Enforcement and Compliance in the US, UK and China: Trends from 2014 and Forecast for 2015

January 30, 2015

John P. Cunningham: Washington, DCVivian Wu: Beijing, ChinaGeoff Martin: London, UK; Washington, DC

© 2015 Baker & McKenzie LLP 6

Global Enforcement and Compliance Trends - Overview

‒ Burgeoning global enforcement of anti-corruption laws US, UK, China, Brazil, Russia, Canada

‒ Increased multi-country enforcement actions‒ Proactive cross-border investigative cooperation (sharing) ‒ Keying in on individual prosecutions‒ Heavy involvement by agents or intermediaries (75%) [Source =

OECD Foreign Bribery Report, Dec. 2014]‒ Majority of global matters in four sectors (67%): extractive,

construction, transportation, and information‒ Greater compliance awareness among companies and employees

(e.g., whistleblower risk, monitoring)


2014 Transparency Int’l CPI Index*From 1 (least corrupt) to 174 (most corrupt), the countries of particular interest in this specific presentation rank as follows:‒ USA: Rank 17, Score 74 (Score of 100 = least corrupt; 1 = most)‒ UK: Rank 14, Score 78‒ China: Rank 100, Score 36

Other Countries of Note in the TI 2014 CPI Index (i.e., top and bottom rankings) ‒ Denmark (Rank 1, Score 92)‒ New Zealand (Rank 2, Score 91)‒ Note: Singapore (Rank 7, Score 84) is only ASEAN country in top 10‒ North Korea (Rank 174, Score 8)‒ Somalia (Rank 174, Score 8)

*The TI Corruption Perceptions Index (CPI) measures how one country compares to others included in the Index based on the perceived level of public-sector corruption in each country

United States


Top 20 FCPA Settlements (US millions)

Siemens AG $800Alstom S.A. $772KBR/Halliburton $579BAE $400Total S.A. $398Alcoa $384ENI S.p.A. $365Technip S.A. $338JGC Corporation $219Daimler AG $185Weatherford $152Alcatel-Lucent $137Avon $135Hewlett-Packard $108Deutsche / Magyar Telekom $95Marubeni Corporation $88Panalpina $82Johnson & Johnson $70Pfizer / Wyeth $60ABB $58

2008

2009

2010

2013

2011

2012

2014


US - Enforcement and Compliance Trends in 2014 and Outlook for 2015: Overview ‒ US ranked 17 out of 174 on TI’s 2014 Corruption Perceptions Index ‒ FCPA still by far most actively enforced anti-corruption law in the world‒ Cost of settling FCPA enforcement actions continues to rise –

accompanied by big global headlines‒ Emergence of more active cross-border cooperation between US

authorities and other countries involving FCPA matters‒ FCPA enforcement against non-US companies continues‒ Self-reporting, cooperation, and remediation increasingly important

factors in reducing anti-corruption settlement penalties‒ Prosecution of individuals involved in FCPA misconduct on the rise‒ Continued emphasis on benefits of an effective compliance program

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US - Key Trends 2014‒ Increased role in global enforcement and cooperation

Sharing information Joint prosecutions More countries: UK, Brazil, China, Russia, Canada

‒ Expanded charges Combining anti-corruption with export violations,

money laundering, mail and wire fraud, other charges


US - Key Trends 2014‒ Greater corporate awareness

Self-reporting and cooperation Front page media reports Whistleblowers

‒ Higher expectations for compliance programs Third party due diligence M&A, JVs due diligence Investigation protocols and rapid response


US – Key Trends 2014‒ Aggressive expansion of FCPA jurisdiction to non-

domestic concerns and non-issuers Exerting extra-territorial jurisdiction Enforcement based on abetting and conspiracy theories

‒ Higher expectations for compliance programs to be comprehensive and premised on company-specific risk profile

‒ Immense penalties and collateral consequences (legal fees, compliance program costs, shareholder derivative actions, debarment, negative publicity)


US - Key Trends 2014

“The prosecution of individuals – including corporate executives – for white-collar crimes is at the very top of the Criminal Division’s priority list under Assistant Attorney General Caldwell.”

--Marshall Miller, US Principal Deputy Assistant Attorney General for the Criminal Division, September 17, 2014


US – Key Trends 2014: Increased Focus on Asia‒ Of the five 2014 settlements in the top 20:

Alstom and Marubeni both relate to corrupt payments in Indonesia -- schemes to procure officials’ assistance in securing power projects for Alstom and its subsidiaries; and to secure a contract to provide power-related services in Indonesia (Marubeni)

Avon involved allegations of corrupt conduct in China, including improper gifts, entertainment, and hospitality provided to public officials


US – Key Trends 2014:Increased Focus on Asia (cont’d)‒ Other 2013 and 2014 FCPA resolutions with allegations

of corrupt payments to officials in SEA / Asian countries include: Bio-Rad Products (Vietnam & Thailand) Smith & Wesson Holding Corporation (Indonesia) Bruker Corporation (China) Diebold Inc (China)


US – Looking Ahead in 2015‒ Hiring practices abroad

US government investigating major financial firms including Morgan Stanley and Citigroup, Inc.

‒ Travel issues Recent FCPA matters demonstrate continued interest

and significantly increased fines in connection with travel-related improprieties

‒ Third parties 70-80% of FCPA cases involve third parties committing

violations on or behalf of main corporate entity


US – Looking Ahead in 2015‒ M&A

DOJ opinion release: DOJ will not penalize a company subject to the FCPA for acquiring a foreign target with corruption issues, provided certain conditions were met

‒ Commercial bribery Diebold (2013) – SEC folding commercial bribery into its

FCPA enforcement realm


US – Looking Ahead in 2015‒ Sep. 2014 – $30 million USD award to a foreign

whistleblower in a fraud case (largest ever) ‒ November, 2014: SEC released annual Dodd Frank

whistleblower report covering FY’14: 3,620 tips, 20% increase over two years 9 whistleblower awards (5 in all previous years

combined)


US – Looking Ahead in 2015‒ Increased prosecution against individuals

DOJ: Corporate cooperation credit will depend on disclosure of evidence of individual culpability, more aggressive tactics will be used to investigate individuals

Creation of 3 new and dedicated FBI units to focus on FCPA matters

United Kingdom


UK - Enforcement and Compliance Trends in 2014 and Outlook for 2015: Overview ‒ Tooling-up for corporate prosecutions‒ Building a head of steam - more cases brought‒ Significant firsts on the horizon? ‒ A pipeline of cases for 2015‒ The future of the Serious Fraud Office


UK – Gearing Up for Corporate Prosecutions‒ Introduction of Deferred Prosecution Agreements‒ New Sentencing Guidelines‒ Proposals for a broader ranging Corporate Offence of a

Failure to Prevent Fraud/Economic Crimes‒ UK Anti-Corruption Plan


UK - Building a Head of Steam in 2014‒ Enforcement of pre-Bribery Act legislation

Smith and Ouzman (December) Innospec (August) Alstom - Charged (July) Bruce Hall (July)

‒ Bribery Act enforcement Bio Fuel fraud & bribery convictions (December)


UK - Significant Firsts on the Horizon? ‒ First Deferred Prosecution Agreement ‒ First corporate conviction under Bribery Act s.7 ‒ First Bribery Act conviction for foreign bribery


UK - Pipeline of Cases for 2015 (selected)‒ Rolls Royce‒ GlaxoSmithKline‒ Alstrom‒ Barclays


UK - Future of the Serious Fraud Office‒ Continued challenges

Tchenguiz and Dahdaleh cases HM Crown Prosecution Service Inspectorate

report (November 2014)‒ Home Office considers disbanding SFO and rolling into

the National Crime Agency


China - Enforcement and Compliance Trends in 2014 and Outlook for 2015: Overview

‒ Greater scrutiny from Chinese authorities‒ Surge in prosecutions and higher penalties‒ Strengthened administrative enforcement ‒ New legislation focusing on bribery


China - PRC Anti-Bribery LawPRC law prohibits and penalizes both the giving and receiving of “bribes” in exchange for “improper benefits”.

Legislation Context Authority

Criminal Law • Criminal Law Judiciary Interpretation • Regulates both official bribery and

commercial bribery

Public Security BureauProcuratorate; People’s courts;

Anti-Unfair Competition Law (AUCL)

• Regulations Concerning the Prohibition of Commercial Bribery Acts

• Regulates commercial bribery

State Administration for Industry and Commerce and its local counterparts

CPC Rules • Communist Party of China (CPC) polices and rules

Commission for Discipline and Inspection of the Central Committee of CPC (CCDI)


China - General Enforcement Trends ‒ Increasing scrutiny of SOEs ‒ Industry sweeps

Energy Telecommunications Media Automobile Banking

‒ Dawn raids frequently used by regulators Criminal prosecution Administrative enforcement


China - Highlights in Anti-Corruption Campaign‒ Enforcement against Chinese government officials

‒ Prosecution against foreign invested enterprises GSK – a record fine of US$489 million

“Tigers”30 transferred to criminal charges

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“Flies”penalized for breaking disciplinary rules

71,748

“Fox Hunt”illegal assets recovered from abroad

US$ 500million


China - Legislation Development‒ New rule on enterprise information publication ‒ Draft 9th Amendment to Criminal Law

New crime of offering bribes to close relatives of government officials

Impose fines to corruption/bribery related crimes Replacement of amount-based standards for sentencing

bribe-taking crimes with more general criteria‒ Intensified international cooperation

2014 APEC Beijing Declaration on Fighting Corruption


China – Looking Ahead in 2015‒ Continuation of the country’s anti-corruption compaign

Establish and Improve Punishment and Prevention of Corruption System Work Plan (2013-2017)

‒ Strengthen prosecution of bribery crimes A new anti-corruption agency within the Supreme

People’s Procuratorate is to be established in 2015‒ Industry sweeps

Industries concerning people’s livelihood will continue to be enforcement targets


Baker & McKenzie - Additional ResourcesFollow ongoing developments in global anti-corruption enforcement and compliance via:

http://globalcompliancenews.com/

Baker & McKenzie’s acclaimed “Inside the FCPA” Newsletter http://www.bakermckenzie.com/insidethefcpa/

http://globalcompliancenews.com/

http://www.bakermckenzie.com/insidethefcpa/

Thank you!Any questions?


Contact Information for Presenters

John P. Cunningham, Partner, Washington, DC Email: [email protected] Phone: + 1 202 835 6148

Vivian Wu, Special Counsel, Beijing Email: [email protected] Phone: + 86 10 6535 3860

Geoff Martin, Associate, London, UK/Washington, DC Email: [email protected] Phone: + 1 202 835 1677


Wednesday, February 4, 2015Corruption and Corporate Risk: How to Integrate Anti-Corruption Practices into Existing Business

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