fcpa, sanctions, export, & antiboycott compliance sanctions, export, & antiboycott...
TRANSCRIPT
FCPA, Sanctions, Export, & Antiboycott Compliance
Charlie Parker 713-632-8000
Cam Barker 512-533-0150
The Law
• US PERSONS CANNOT: – Bribe foreign government officials –
FCPA – Enter into transactions with
Sanctioned Countries – Sanctions Regulations
– Enter into transactions with specific individuals and entities – Sanctions Regulations
– Export or disclose controlled goods, services, software or technology without a license – ITAR & EAR
– Participate in non-US sponsored embargos - Antiboycott
Tone at the Top
• Sentencing Guidelines – “to have an effective compliance and
ethics program…an organization shall…promote an organizational structure that encourages ethical conduct and a commitment to compliance with the law.”
Tone at the Top
• No paper Compliance Program • Training, Training, Training
Penalties -FCPA
• Business – Maximum fine of $2,000,000 per violation or twice the gross loss or gain
• Individuals – Maximum fine of $250,000 or twice the gross loss or gross gain; imprisonment of not more than five years; or both
Penalties –Sanctions & Exports
• Administrative – Civil:
• > of $250,000 or 2x value of the transactions Denial of export privileges
– Criminal: • $1,000,000; 20 years
Penalties • KBR
– $559 million settlement – Monitor 3 years – CEO – 84 month prison sentence
• Baker Hughes – $44 million in sanctions – Monitor and organizational probation for
3 years
• Willbros Group – $32.3 million settlement – Monitor 3 years
• Dresser – Energy equipment to Iran, Libya & Cuba
• $1.1 million settlement
DOJ Focus
• DOJ Fraud Division is actively investigating FCPA
• DOJ created National Export Control Coordinator to improve the investigation and prosecution of illegal exports
US Foreign Corrupt Practice Act
• Two different approaches – Anti-bribery Sections – Books and Records Sections
FCPA- Anti-bribery
• Unlawful: – To offer or anything of value – To a foreign official
• To influence an official act, • induce to do or omit to do any act in
violation of lawful duty, • to secure an improper advantage, or • to use influence with the government to
affect or influence any act or decision of the government
• To obtain, retain or direct business to any person
Obtain or Retain Business
• DOJ/SEC view of what violates FCPA includes payments beyond those directly related to any contract or business;
• “obtain or retain business” includes all payments that provide a competitive advantage;
• Could include incentives to officials for favorable customs/sales tax rulings (i.e., to reduce payments your company would otherwise have to make)
FCPA – Who is Covered
• Issuer – essentially any company whose stock is traded in the U.S.
• Domestic concern – U.S. citizen, national, resident, or a U.S. company or a company with its principal place of business in the U.S. or officers, directors, stockholders, employees, and agents of such an entity
• Any person, if acting in U.S. territory • Any U.S. national or U.S. company
acting outside the U.S. – requires no use of interstate commerce
FCPA- Foreign Official • Any officer or employee of a foreign
government, department, entity or instrumentally of such government
INCLUDING: – Any person acting in an official capacity – Third parties hired to review and accept bids for
government agency; – Uncompensated honorary/ceremonial officials
if they have actual influence in award of business;
– Government owned corporation/company
• Any foreign political party or official or candidate for foreign political office
• Any officer or employee of a public international organization: World Bank, IMF, Olympic Committee
FCPA Exception
• Facilitating payment • Small Payment to expedite the
performance of non-discretionary, legitimate and customary duties such as mail delivery, electricity, visas.
FCPA Affirmative Defenses
• Payments permitted by local law; – Limited government statutes –
something that is customary is not sufficient
• Gifts/promotional expenses – but must be: – Customary and reasonable; – Directly related to either the
promotion or explanation of the company’s products or services;
– Not directly related to obtaining/ retaining business
FCPA – Books and Records
• Keep books, records and accounts, that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the issuer – Record-Keeping provision do not
require any showing of materiality, regardless of the amount of any transactions
– All transactions must be recorded
FCPA – Books and Records
• No person shall knowingly – Circumvent or fail to implement a
system of internal accounting controls or
– Knowingly falsify any book, record, or account
• Criminal liability applies
Problem Areas
• Facilitating/Grease Payments • Use of Agents/Representatives • Shipping Agents • Promotional Activities • Gifts and Entertainment • Travel Expenses • Taxes
Compliance Strategies Facilitating/Grease Payments
• Place complete or other restrictions to keep employees from blanket acceptance of country culture;
• Require employees to make formal written request to make payments;
• Monitor and properly record facilitation payments.
Compliance Strategies for Agents
• Perform due diligence on Agent/Reps/Contractors including shipping agents) – Require completion of the questionnaire – Check reference – Check whether compensation is
reasonable – May need to conduct interview
• Require a written agreement with specific anti-corruption clauses
• Require annual certification of compliance – No ownership by public official – No violation of anti-corruption laws
Compliance Strategies for Promotional Activities/ Gifts and
Entertainment • Where possible pay for expenses (e.g.,
airfare) directly • Per diem payments should not be
excessive and should be tied to a standard or reasonable estimate where possible
• If possible pay per diem’s to the government, not the individual
• Let the government select the individual that will be traveling and notify you in writing
• Properly documents the reason for any trip and all costs
• Set approval limits
Political Contributions
• Company should consider whether political contributions will be allowed
Compliance Strategies for Donations to Charities/Community
Development
• Perform due diligence on the charities – Verify that not owned or controlled by
public officials (or their relatives) or terrorist organization, etc.
– Is this a reputable charity
• The donation should generate publicity and goodwill for the company and demonstrate commitment to the community
• Get written commitment from government that the funds will only be used for the project.
Sanctions Basics
• In general, Sanctions programs require: – Blocking of property – No imports from or through the
sanctioned country – No exports to or through the
sanctioned county – No facilitation of such transactions
Who Licenses Exports?
• Bureau on Industry and Security (BIS) • Directorate of Defense Trade Controls
(DDTC) • Offices of Foreign Assets Control (OFAC) • Arms & Control & Disarmament Agency • Nuclear Regulatory Commission • Department of Energy • Defense Technology Security Administration • Department of the Interior • Drug Enforcement Administration • Food and Drug Administration • Patent and Trademark Office • Environmental Protection Agency
Bureau of Industry and Security
• Department of Commerce • Most comprehensive source • All items not controlled elsewhere • Maintains the Commerce Control
List • Export Control Classification
Numbers • Denial List, Entity List; Unverified
List • Antiboycott Compliance
Offices of Foreign Assets Control
• Enforce Economic and Trade Sanctions
• Specific Countries • Anti-Terrorism • Narcotics Traffickers • Non-proliferation • Diamond Trading • Specifically Designated Nationals
and Blocked Persons List (SDN List)
Country Based Sanctions
• US Person cannot provide its goods, technology, or services to the following without a license(s): – Cuba, any Cuban national, company
organized in Cuba, or any other person entity if US Person knows it will be used to benefit Cuba
– Burma (natural resources related contracting)
– Iran – Syria – Sudan – North Korea (impacts imports, vessels,
exports subject to EAR)
Facilitation
• USA Persons, wherever located, may not be involved in transactions associated with Sanctioned countries persons or entities, such as: – Business planning – Legal planning – Decision making – Approval of transaction – Designing, ordering, transporting goods – Financial, insurance, warranties,
guarantees or backing other risks – Change its or subs policies or operating
procedures – Refer POs, RFPs, or other business
opportunities
Sanctions Checklist
• Written Sanctions Policy • Written procedures for checking
representatives, customers • Sales to Sanctioned destinations • OFAC Licenses • Interdiction Software • Non-US Affiliates with US Persons • Product mix (e.g., Oilfield equip or
service?)
Export Controls What is an Export?
• “An actual shipment or transmission of items out of the United States”
• Disclosure of technology to foreign national
• Transmission of electronic data that will be received abroad
• Items produced abroad using US technology
• Reexport of previously exported items
• Making technology available on the Internet
What is Controlled?
• Commodities, products, tangible things
• Software • Technology • Technical data • Technical Know-how • Services
Deemed Export Rule
• Any release of technology or source code to a foreign national – Visual inspection of U.S. –origin
equipment or facilities – Oral exchanges of information in US or
abroad – The application to situations abroad of
personal knowledge or technical experience acquired in the U.S.
Commercial Goods or Technology
• Commerce Controlled List Items – Identifies items controlled for national
security, missile tech, non-proliferation, antiterrorism
• Export Control Classification Number (ECCN) determines if license in required – Some Exceptions apply
• Can I ship this product to this person in that country?
Export Checklist
• Documented policy and procedures • ECCN Classification • Technology transfer issues
– H1B Visa holders – Affiliates (IT access restrictions, global
engineering)
Antiboycott - Prohibitions
• Agreements to refuse to do business with or furnishing info about your relationships with Israel or blacklisted companies
• Agreements to discriminate or furnish info concerning race, religion, sex, national origin, nationality
• Implementing letters of credit that contain prohibited boycott terms or conditions
Antiboycott – 2 Laws • EAR §760
– Same penalties as above – Quarterly reporting requirements
• IRS – Lose foreign tax credit – Annual tax form must be submitted
Antiboycott – Look for:
• Contract Clauses • Purchase order clause • Tender documents • Letter of Credit • Customs Forms • Power of attorney form • Trademark application form
Antiboycott – Yes, it is a problem
• 7/13/07 – Dresser, Inc. failed to report 9 requests from Pakistan.
• 5/16/07 - Cooper, Inc. transmitted info regarding relationship with Israel to Kuwait and UAE
• 11/17/05 – Oceanic Container Line, Inc. eligibility of vessel to enter port of Qatar.
Constraints
• Foreign Blocking Statutes – Canada – Must report to Canadian
government any restraint or trading with Cuba; Can’t agree to restraint on trade on Cuba;
– EU – Each EU country has implemented blocking statutes;
– Mexico
Constraints
• U.K./E.U. Privacy Laws – Can’t share personal information with a US person.
Constraints
909 Fannin Street, Suite 3600 Houston, Texas 77010 phone 713.632.8026
fax 713.632.8002
221 West 6th Street, Suite 750 Austin, Texas 78701 phone 512.533.0150
fax 512.533.0120
[email protected] www.yettercoleman.com