the uk bribery act: its global reach on us and other ... · the uk bribery act: its global reach on...

The UK Bribery Act: Its Global Reach on US and

Other International Businesses

October 5, 2010The Harvard Club

SPONSORED BY

THE UK BRIBERY ACT: ITS GLOBAL REACH ON US AND OTHER INTERNATIONAL BUSINESSES

THE HARVARD CLUB OCTOBER 5, 2010

CONTENTS

TAB A: AGENDA TAB B: PROGRAM OUTLINES � A Regulator’s Perspective � A Counsel’s Perspective � A Compliance Officer’s Perspective � A Stateside Perspective TAB C: PRESENTER PROFILES � Vivian Robinson QC, General Counsel of the UK Serious Fraud Office � Neill Blundell, Eversheds LLP � Marc Miller, KPMG LLP � Barry Mandel, Foley & Lardner LLP � Seth Levine, Foley & Lardner LLP � Sandy Winer, Foley & Lardner LLP TAB D: FURTHER READINGS � Bribery Act of 2010: An Overview (Eversheds) � Corruption clampdown: An Eversheds report on the Bribery Bill 2010 - Time running out for change (Eversheds) � Comparison of bribery laws - UK v USA (Eversheds) � Concise Guide to the UK Bribery Act 2010 and the US FCPA (Eversheds) � Eversheds Fraud Group International Investigations (Eversheds) � Focused on fraud: Protecting your business and your reputation (Eversheds) � Best Practices For Fcpa Due Diligence In The International Mergers And Acquisitions Context (Foley & Lardner) � Elements Of An Effective FCPA Corporate Compliance Program (Foley & Lardner) � Minimizing FCPA Compliance Risks Of Conducting Business Abroad Through Third Parties (Foley & Lardner)

THE UK BRIBERY ACT: ITS GLOBAL REACH ON US AND OTHER INTERNATIONAL BUSINESSES

THE HARVARD CLUB OCTOBER 5, 2010

AGENDA

Time Topic Presenter 8:30 – 8:35 (5 minutes)

Welcome & Introductions � Presenters & agenda

Barry Mandel, Foley & Lardner

8:35 – 9:05 (30 minutes)

A Regulator’s Perspective � Principal offenses of the Bribery Bill � New corporate offense of "failing to prevent"

bribery � How “self-reporting” can prevent prosecution � Grey areas of the Act � How the SFO intends to target businesses with

the help of other national law enforcement agencies

Vivian Robinson QC, General Counsel of the UK Serious Fraud Office

9:05 – 9:35 (30 minutes)

A Counsel’s Perspective � New criminal liability for the worldwide acts of

both employees and agents, intermediaries, joint venture partners, and subsidiaries

� Potential penalties such as large fines, disqualification from bidding for European public contracts, and imprisonment for directors

Neill Blundell, Eversheds LLP

9:35 – 9:55 (20 minutes)

A Compliance Officer’s Perspective � Scope and importance of "adequate

procedures" to a company’s defense � How you can ensure that your company

standards address these new requirements

Marc Miller, KPMG LLP

9:55 – 10:15 (20 minutes)

A Stateside Perspective � Ways in which the scope of the Bribery Bill

exceeds that of the FCPA � Stepped-up dual enforcement actions by US

and UK law enforcement

Sandy Winer and Seth Levine, Foley & Lardner

10:15 -10:30 Panel Q&A Wrap – up

Q&A Barry Mandel, moderating

The UK Bribery Act: Its Global Reach on US and Other International Businesses

The Harvard ClubOctober 5, 2010

The UK Bribery Act 2010:A Regulator’s Perspective

Vivian Robinson, QC, General Counsel of the UK Serious Fraud Office

UK Bribery Act of 2010

• This Act is expected to come into force in April 2011

• Its provisions are not retrospective

Principal Offences

The Act creates 3 basic offences of Bribery, as follows:

1. Bribing another person (section 1)

2. Being bribed (section 2)

3. Bribing of Foreign Public Officials (section 6)

Principal Offences

• The first two offences – bribing another person and being bribed - cover bribery in both the public and the private sectors.

• Bribery is defined as being the offer, promise or giving of an advantage to another intending that it should induce the improper performance of a relevant function or activity or to reward such improper performance.

• ‘Improper performance’ means performance which amounts to a breach of an expectation that a person will act in good faith and impartially.

• The test of what is expected is a test of what a reasonable person in the UK would expect in relation to performance of that function or activity.

• Where the performance of the function or activity takes place in a country outside UK jurisdiction, then any local custom or practice must be disregarded unless permitted or required by the written law applicable to that particular country.

Bribery of Foreign Public Officials• This offence requires proof that the offer, promise or giving of an advantage is

intended to influence the official in the performance of their official functions and intended thereby to obtain or retain business or an advantage in the conduct of business.

• The offence is not committed if an official is permitted or required by the applicable written law to be influenced by the offer, promise or gift.

• By contrast with sections 1 and 2, section 6 does not contain the word 'improper' with regard to the performance of the official's functions.

• Territorial Application:

– Proceedings under Section 1, 2 or 6 may be taken in the UK against any person who has 'a close connection with the United Kingdom' and irrespective of where the act or omission constituting where the bribery took place (section 12(2))

– The Act defines those categories of person with a close connection to the UK and, apart from the obvious, includes 'an individual ordinarily resident in the UK‘ (section 12(4))

Individual Accountability of Senior Officers

• If it can be proved that any of these offences was committed by a corporate body, then a senior officer of that body will also be guilty of the same offence if it can be proved that the offence has been committed with that persons consent or connivance. (Section 14(2))

Failing to Prevent Bribery• The Bribery Act creates a new corporate offence of Failing to Prevent Bribery. (Section 7)

• This will make a 'relevant commercial organisation' guilty of an offence (and subject to unlimited fines) if 'a person associated with it' bribes another person, intending to obtain or retain business or an advantage in the conduct of business for the company.

• ‘[R]elevant commercial organisation' is defined in the Act and includes any body corporate which carries on at least part of its business in any part of the United Kingdom. (section 7(5))

• An ‘associated person’ is defined as one who performs services for or on behalf of a company. (section 8(1))

• This will include a company's employee, agent or subsidiary. (section 8(3))

• For the purposes of section 7, a person associated with the company will be considered as having bribed another person if their actions would be capable of constituting an offence under sections 1 or 6 of the Act. It is not necessary for such a person to have been convicted of the offence.

• Territorial Application: The corporate offence under section 7 may be committed irrespective of whether the acts or omissions which form part of the offence take place in the United Kingdom or elsewhere. (section 12(5))

Self-Reporting of Corruption• The Serious Fraud Office will be the lead agency in enforcing the

provisions of the new Act.

• There will no longer be a requirement for the consent of Attorney General before the SFO can institute proceedings for an offence under the Act.

• It will therefore be a matter for our discretion whether to pursue criminal proceedings or whether the case may be suitable for a civil disposal.

• The exercise of such discretion will depend upon all the circumstances but in particular whether a corporate, having discovered corruption, has reported it to the SFO.

Increased Risk of Discovery

• The traditional role of the Serious Fraud Office was to wait for cases to be referred to it for investigation and prosecutions.

• These days there is a considerably increased chance that the SFO will themselves discover significant corporate misbehaviour. This is a result of:

– Increased sharing of information between regulating agencies.

– Greater cross-border cooperation.

– The work of our own investigators.

– Information from 'whistleblowers'.

Disadvantages of Failing to Report

• If the SFO uncovers conduct which a corporate could and should have reported to it, then:

– There is less likelihood of the SFO considering a civil disposal.

– A subsequent investigation by the SFO would lead to reputationaldamage.

– A subsequent conviction would likely to result in institutional damage.

Grey Areas of the ActThe Bribery Act and 'Associated Parties’:

• It is clear from the Act that companies may be criminally liable under section 7 through the acts of their associates and these will include employees, agents or subsidiaries.

• But the Act is widely drawn and the courts may well determine that it applies equally to consortium or joint venture partners, contractors and suppliers.

• It is suggested that for present purposes, companies should adopt a policy and procedure of anti-bribery due diligence and monitoring in respect of any party with whom they have a business relationship. This should constitute 'adequate procedures' for the purposes of a defence to an allegation under section 7.

Grey Areas of the ActFacilitation Payments:

• In general, these are small, unofficial payments made to foreign officials for the performance of some routine action, such as processing payments, issuing permits and other actions of an official nature. Such payments are intended to influence timing rather than outcome.

• The Bribery Act makes no exception with regard to such payments, which remain unlawful and which are most likely to have the potential of triggering the section 6 offence (Bribery of Foreign Public Officials).

• The question of enforcement will depend upon the circumstances of each individual case but a major consideration will be whether the public interest is likely to be served by taking action. The more serious the offence, the more likely that the public interest would require the institution of criminal proceedings.

• Even if small and unsystemic payments of this nature are unlikely to reach the courts, it is recommended that companies take all reasonable steps to prohibit and eliminate them.

Grey Areas of the ActPromotional Expenses:

• These include gifts, hospitality and expenses.

• Concern has been expressed in the business community, that such payments may trigger the provisions of the Bribery Act, and clarification is sought on when this might occur.

• As with Facilitation Payments, all will depend upon the circumstance of each individual case.

• Reasonable and proportionate hospitality or promotional expenditure which seeks to improve the image of commercial organisation or better present products or services or to establish cordial relations is recognised as an established and important part of doing business. Such expenditure is unlikely to trigger the section 1 or the section 6 offence.

• But the higher the expenditure and the more lavish the hospitality, the greater will be the inference that it was intended to influence the recipient to grant business or a business advantage in return.

• In all such cases, the exercise of prosecutorial discretion will provide the flexibility required to ensure the just and fair operation of the Act.

International Co-Operation

• The SFO has strong links with law enforcement agencies within the UK and overseas.

• Our senior operational staff are in regular communication with their counterparts in other countries. Our Head of Anti-Corruption and our Chief Investigator are in constant contact with the DoJ and our case teams speak on a daily basis with law enforcement authorities in other parts of the world.

• We expect that when the Bribery Act comes into force, communication and co-operation will increase, because of the wide territorial scope of some of the Act's provisions. (sections 7(5) & 12(5))

• We also anticipate that an increasing number of cases will have to be resolved by way of global settlement, which underlines the paramount importance of finding the most effective way in which the US and UK authorities can work together.

The UK Bribery Act 2010:A Counsel’s Perspective

Neill BlundellHead of Fraud Group

Eversheds LLP

Three things you need to know…

• Ever increasing regulation in this area

• Conflicting global mandates

• Agencies now geared to enforcement

• Overseas Corruption Unit set up in December 2007

• New management at the SFO in April 2008 – “open door” policy

• New self-reporting guidelines issued by SFO in July 2009

• Closer international co-operation and birth of “global settlements”

• Use of Civil Recovery Orders

– Balfour Beatty: £2.25 million for failure to keep accurate records on Egyptian project

– AMEC: £4.9 million for failure to keep accurate records in relation to Korean project

– BAE: £30 million for failure to keep accurate records in relation to its activities in Tanzania (not yet sanctioned by the UK courts)

The UK Threat – An increased interest in Bribery

• But still some criminal prosecutions:

– Mabey & Johnson pleaded guilty to overseas corruption and to breaching UN sanctions. They were fined £3.5million, ordered to pay £1.1million in confiscation and £1.4million as reparation to Ghana, Jamaica and Iraq (September 2009)

– Robert Dougall (past Vice President of DePuy International) was first “co-operating defendant” jailed for overseas corruption (14 April 2010) but this was overturned on appeal (13 May 2010)

• SFO encounters problems with plea bargain arrangements in R v Innospec and R v Dougall

• The new Bribery Act

Recent background

• Working closely with foreign counterparts including SFO. A proactive approach

• More multi jurisdictional cases (Siemens)

• Reorganisation of the SEC enforcement division with a specialised FCPA unit

• SEC’s first use of a “control person” to hold US based executives responsible for corrupt payments made at foreign subsidiary level when US executives did not authorise or have knowledge of the payments

• Increased focus on individual liability – often groups of individuals from the same company and the same industry

• Increased activity in past 18 months

The US threat

U.S. Enforcement: Recent Cases

$330 million approx**

July 2010Oil and Gas *SnamprogettiNetherland BV

$338 millionJune 2010Construction, engineering and oil fields services

*Technip

$185 millionApril 2010Automobile Manufacturing*Daimler

$40.2 million**March 2010Chemical*Innospec Inc

$400 million**March 2010Aerospace and Defense Systems Contractor*BAE Systems Plc

$137 millionFebruary 2010Telecommunications*Alcatel-Lucent

22 individuals from 16 companies charged**

January 2010Military and Law Enforcement Products‘SHOT Show’ sting

$3 millionDecember 2009TelecommunicationsUTStarcom

$579 millionFebruary 2009Oil Fields ServicesHalliburton

$800 millionDecember 2008Electronics and Electrical Engineering Products

*Siemens

SettlementDateIndustryCompany

* : European companies** : Involved UK authorities

Ramifications of breach: Siemens example

• Criminal prosecutions

€395m$450m DOJ

• Disgorgement of profits

€201m$350m SEC

• Debarment: UN

6 months

• Independent monitor

4 years

• Multiple investigation costs

2008 - €510m

• Back taxes/interest

€179m

• Diversion of management

• Civil litigation

• Royal Assent on 8 April 2010

• To be implemented on 6 April 2011

• Three month consultation period on “adequate procedures” from September 2010

• Draft guidance published

• Guidance from Ministry of Justice on “adequate procedures” will be finalised in January 2011

• Act is not retrospective

The Bribery Act - timetable

The key offences – A reminder• General offence

– Active bribery– Passive bribery

• Specific offence– Bribing a foreign public official

• Corporate offence– Commercial organisation failing to prevent active bribery by employees,

agents or subsidiaries – includes foreign incorporated entities• Wider than the US Foreign Corrupt Practices Act

– Not just overseas trading– Covers all trading – not just public officials– Facilitation payments not permitted– Need for “adequate procedures” to cover all transactions

Active bribery - scenarios

• Your employee takes the procurement officer of a customer on holiday to Florida with his family (and pays)

• Your agent in Korea receives increased commission so that he can“help secure business with tips of happiness”

• You are asked by customs officials in Brazil to pay $3,000 to release your cargo from the docks

• You ignore a tip off about corrupt payments by the director of asubsidiary, dismissing it as malicious gossip – consent and connivance test

Passive bribery - scenarios

• Your procurement team accept an invitation to the Monaco Grand Prix from a bidder 2 weeks before awarding a high value contract

• A public official has a porch built in return for “having a word in the right ears” of the planning committee on an application submitted by a local builder

• Your senior manager turns a blind eye to one of your junior colleague’s boasts that he has had £5,000 “on the side” from an agent – consent and connivance test

Personal liability of directors and the company for the general and specific offences

• Must be a British citizen, resident in the UK

• Company must be incorporated in the UK

• For active or passive bribery or bribing a FPO

• “Consent or connivance”

– If the company is guilty of one of the above offences, then senior managers / directors can also be guilty if they

� Consented or connived

� Turned a blind eye?

� Chose not to investigate?

The “failure to prevent” offenceThis is the new weapon of choice for prosecutors

• Foreign incorporated companies are caught

• Strict liability subject to limited defence

• Knowledge / culpability irrelevant

• Relates to active bribery or bribery of foreign public official

• By your employee, agent or subsidiary

• Bribe paid to retain or obtain business or benefit for your organisation

• Subject to adequate procedures defence

Jurisdiction and penalties

• Unlimited fine

• Debarment from bidding from public contracts

• Imprisonment (general and specific offences)

• Director Disqualification Proceedings

• Up to 10 years imprisonment and unlimited fine

Are you ready?

• Eversheds Corruption Clampdown report of 700 directors and senior managers revealed:

– 91% respondents unaware of potential for ten years imprisonment under the Bill

– 60% unaware of new offence of failing to prevent bribery

– 45% directors admitted no systems to prevent bribery and corruption

Adequate procedures?

• Draft Ministry of Justice Guidance:

– Risk assessment

– Top level commitment

– Due diligence

– Clear, practical and accessible policies and procedures

– Effective implementation

– Monitoring and review

Adequate procedures: general viewpoints• US and German experiences show how rapidly the compliance

landscape can change over a few years

• FCPA compliance does not necessarily entail Bribery Act compliance

• Because of poor enforcement record in the UK, many businesses (that did not need to be FCPA compliant) are only now addressing the compliance challenge and US firms need to ensure their policies and procedures are updated to include commercial to commercial transactions

• As the Act is broadly drawn with few loopholes or exceptions, a narrow “technical” compliance approach cannot work; businesses need to embrace the approach of good business practice reflected in the guidance

Adequate procedures: general viewpoints

• Accountability is a key element of effectiveness and most businesses struggle with it

• Many enforcement actions (US and UK) are for failures of accounting and controls and not bribery

• Materiality is irrelevant (c.f. Sarbanes-Oxley)

• Businesses tend to focus less on “inbound” bribery

• Supervising activities of subsidiaries is a key challenge, especially in remote or “difficult” locations

Adequate procedures: general viewpoints

• Businesses tend to focus on “front end” of compliance (policies and training) and overlook the need to demonstrate the procedures are effectively implemented (a “genuinely proactive” approach per the SFO) and not merely that they exist in a manual

– More emphasis required on monitoring and auditing

– Compliance should be seen as a continuous process and not a one-off implementation

• No assurance standard at present (c.f. audit of financial statements) to “certify” adequate procedures: boards will have to develop their own approach to get comfort – independent review should be considered.

The UK Bribery Act 2010:A Compliance Officer’s Perspective

Marc L MillerPartner

KPMG LLP

Six Principles for Bribery PreventionCompliance Officer and Compliance Committee

• Officer is focal point for compliance and has authority to review documents.

• Risk Assessment

• Top Level Commitment

• Due Diligence

• Clear, Practical and Accessible Policies and Procedures

• Effective Implementation

• Monitoring and Review

Anti-Bribery and Corruption Compliance “Defensible Position”

Compliance Officer and andCompliance Committee

• Officer is focal point for compliance and has authority to review documents.

Policies, procedures & practices

• Policies developed under the direction of the compliance officer and committee.

• Policies provided to all affected employees and business partners.

Education & training• Require affected employees to

participate in appropriate training programs.

• Retain records of training programs including attendance.

Communication• Hotline or other reporting process so employees can make

complaints or ask questions.

• Procedures to protect the identity of complainants and to protect them from retaliation.

• Risk evaluation to monitor compliance, identify problem areas and reduce identified problems.

• Compliance officer to document the monitoring and report suspected breaches to senior management and the compliance committee.

Monitoring & Auditing

• Develop and enforce policies and procedures to address compliance breaches including sanctions.

Enforcement

• Develop and implement a response plan and policies to investigate alleged non-compliance.

Investigation

The UK Bribery Act 2010:A Stateside Perspective

Seth LevinePartner

Foley & Lardner LLP

Samuel WinerPartner

Foley & Lardner LLP

• Strict liability. Under the Bribery Act, a company is liable if any person associated with that company commits bribery for purposes of obtaining any sort of advantage for that company. The only defense is proof that the company has “adequate procedures” in place to prevent bribery.

• Extraterritorial jurisdiction. The Bribery Act applies to any company that is either incorporated in the United Kingdom or is “carrying on business” in the United Kingdom, regardless of where the corrupt activity occurs.

• No distinction between public and private sectors. The Bribery Act does not distinguish between public and private sector bribery.

Differences Between FCPA and the U.K. Bribery Act

• Even the intent to influence a foreign official to gain an advantage is sufficient

– The FCPA requires that payments to a foreign official be made “corruptly.”

– Under the Bribery Act, even the intent to influence an official for the purpose of obtaining or retaining an advantage is sufficient.

• The party making the bribe and the party receiving the bribe recipient are liable

– The FCPA does not hold actual or would-be recipients of a bribe liable.

– The Bribery Act holds both the party making a bribe and the party receiving a bribe liable.


• There is no exception for facilitation payments

– The FCPA antibribery provisions explicitly exclude facilitation payments.

– The Bribery Act contains no express exception for facilitation payments.


• There are no express affirmative defenses for reasonable business expenses or lawful payments

– The FCPA provides two affirmative defenses against alleged violations of its antibribery provisions for :

� payments given to foreign officials that are reasonable and bona fide, and related to the promotion, demonstration or explanation of products or services, or the execution or performance of a contract with a foreign government or agency; or

� payments that are allowed under the written laws of the relevantforeign country.

– Under the Bribery Act, any advantage given or promised to another could be considered a bribe if a reasonable person in the United Kingdom would regard that action as improper, or if it is an inducement or reward for something that a reasonable person in the United Kingdom would regard as improper.


• Penalties

– Penalties under the Bribery Act include:

� up to 10 years imprisonment per offense

� unlimited fines

� disqualification from tendering for government contracts


• Companies with business interests in the United Kingdom should review and possibility revise their internal policies and procedures to ensure that they are in compliance with the Bribery Act.

– Since failure to prevent bribery is a new strict liability offense, it presents a heightened risk to companies with business interests in the United Kingdom. A company is liable unless it can demonstrate that it had adequate policies and procedures in place to prevent improper conduct.

– Companies with business interests in the United Kingdom that are also subject to enforcement under the FCPA in the United States, or under the antibribery laws of other countries, face an increased prospect of dual prosecution.

– In addition to reviewing and revising existing internal antibribery controls, companies should perform appropriate due diligence to assess who they are doing business with around the world. It is also important to train and educate personnel and perform ongoing assessments of a company’s activities to manage its compliance risks.

Compliance Program Implications

Questions?

Biography

Vivian Robinson QC

Vivian Robinson QC, was appointed as the first General Counsel at the Serious Fraud Office in the spring of 2009. The appointment was prompted by the de Grazia Report which was published in June 2008. Previously, Vivian was in practice at the criminal bar from QEB Hollis Whiteman Chambers, acting for both prosecution and defence; he also undertook regulatory work for the General Medical Council. Vivian is a noted specialist in all aspects of criminal legal work, and particularly in the field of commercial fraud. Vivian was educated at Queen Elizabeth Grammar School, Wakefield; The Leys School, Cambridge and Sidney Sussex College, Cambridge. Career Timeline:

1966: Graduated from Cambridge with a Law Degree 1967: Called to the Bar by Inner Temple 1986: Took Silk, and became Recorder of the Crown Court 1991: Master of the Bench, Inner Temple 2004-2007: Head of Chambers at QEB Hollis Whiteman Chambers 2008: Reader, Inner Temple 2009: Treasurer, Inner Temple and appointed first General Counsel at the Serious Fraud Office

Vivian has been a Liveryman of the Worshipful Company of Gardeners since 1976 and was their Master in 2000/01.

Neill Blundell - Head of Fraud Group

Title: Partner Office: London Email: [email protected] Tel: +44 (0) 845 497 4533 Mobile: +44 (0) 784 341 1967 Fax: +44 (0) 845 497 4919 Biography Neill Blundell is recommended in Chambers 2010 Guide as an “unflappable, pragmatic lawyer with a calm, collected approach.” Neill is a highly experienced fraud and regulatory lawyer who is able to advise clients on the interface between business and regulatory practice and the criminal law. He has particular expertise in advising and representing individuals, corporate clients, professional firms and financial organisations in areas such as market abuse and insider dealing, corruption, money laundering, extradition, fraud and financial compliance. He has advised on high profile investigations and proceedings brought by the Financial Services Authority (“FSA”), Serious Fraud Office, Revenue & Customs Prosecution Office, the Crown Prosecution Service, Department for Business Enterprise & Regulatory Reform and the Office of Fair Trading. He has advised individuals who have become the subject of a disciplinary investigation in their professional capacity. Neill has been instructed on some of the largest UK fraud investigations including an £85 Million VAT fraud, the “Kieran Fallon” race fixing case, the SFO investigation into corruption between BAE and the Saudi Royal Family, “Cash for Honours” as well as being involved in a whole host of complex investigations by other bodies such as the FSA, the Health & Safety Executive and the Security Industry Authority. Neill also offers compliance advice and the development of bespoke compliance programmes in areas such as bribery and corruption and money laundering. In particular, he has advised several corporate clients on the US Foreign Corrupt Practices Act and its implications for their business, particularly where they perform public contracts in “red flag” countries like Nigeria and China. He is also advising on the impact of the UK Bribery Act and is helping clients devise suitable anti-corruption programmes. He has also provided extensive training on the subject world-wide. He also sits on the CBI Anti-Bribery Working Committee. Neill regularly lectures on fraud related issues and has published many articles in various publications including the Financial Times and Fraud Intelligence. He is author of the chapter on “Overseas Assets”, in the Sentencing & Confiscation Section of “Fraud: Law, Practice & procedure”. He is also a contributor to Mitchell Taylor & Talbots “Confiscation & the Proceeds of Crime”. He is on the legal panel for the BBC News, Channel 4 News, BBC Radio 4, Sky News, CNN and Newsnight where he has appeared and been asked to comment on various issues including the investigation into MP’s expenses. Neill is also a Solicitor Advocate in the criminal courts where he represents both individuals and companies facing criminal charges.

© 2

010

KPM

G L

LP, a

U.S

. lim

ited

liabi

lity

partn

ersh

ip a

nd a

mem

ber

firm

of t

he K

PMG

net

wor

k of

inde

pend

ent m

embe

r fir

ms

affil

iate

d w

ith K

PMG

Inte

rnat

iona

l, a

Swis

s co

oper

ativ

e.

All r

ight

s re

serv

ed. P

rinte

d in

the

U.S

.A.

Mar

c L.

Mill

erP

artn

er

Pro

fess

ion

al a

nd

Ind

ust

ry E

xper

ien

ce

Mar

c L.

Mill

er is

a P

artn

er in

KP

MG

LLP

’s F

oren

sic

prac

tice

and

is b

ased

in N

ew Y

ork

City

. M

arc

prov

ides

ad

viso

ry s

ervi

ces

to c

lient

s in

the

are

as o

f fo

rens

ic in

vest

igat

ions

, fra

ud r

isk

man

agem

ent,

con

trac

t co

mpl

ianc

e se

rvic

es a

nd li

tigat

ion

supp

ort.

He

has

exte

nsiv

e fo

rens

ic a

ccou

ntin

g in

vest

igat

ion

expe

rienc

e in

con

nect

ion

with

al

lega

tions

of

earn

ings

man

agem

ent a

nd p

oten

tial v

iola

tions

of t

he F

orei

gn C

orru

pt P

ract

ices

Act

(FC

PA

). H

e ha

s al

so b

een

invo

lved

with

sev

eral

inve

stig

atio

ns in

volv

ing

alle

ged

impr

oper

pra

ctic

es a

nd g

ener

al f

raud

and

m

isco

nduc

t mat

ters

.

Mar

c ha

s m

any

year

s of

exp

erie

nce

prov

idin

g au

ditin

g, f

oren

sic

acco

untin

g, in

vest

igat

ions

, fin

anci

al a

naly

sis

and

litig

atio

n su

ppor

t ac

ross

a v

arie

ty o

f in

dust

ries,

with

a p

artic

ular

foc

us in

the

life

sci

ence

s in

dust

ries.

�Le

ads

glob

al in

vest

igat

ive

and

fore

nsic

sup

port

ser

vice

s fo

r a

lead

ing

glob

al m

edic

al d

evic

e m

anuf

actu

rer.

To

date

, KP

MG

has

ass

iste

d on

a v

arie

ty o

f mat

ters

tha

t ha

ve in

clud

ed in

vest

igat

ions

into

pot

entia

l brib

ery

and

corr

uptio

n co

ncer

ns, e

arni

ngs

man

agem

ent,

con

flict

s of

inte

rest

and

vio

latio

ns o

f co

mpa

ny p

olic

ies.

KP

MG

ha

s as

sist

ed w

ith m

ore

than

25

mat

ters

acr

oss

appr

oxim

atel

y 20

cou

ntrie

s in

clud

ing

but n

ot li

mite

d to

Mex

ico,

A

rgen

tina,

Bra

zil,

Gre

ece,

Spa

in, C

hina

, Tha

iland

, Vie

tnam

, Ind

ia a

nd R

ussi

a. I

n ad

ditio

n, K

PM

G h

as a

lso

assi

sted

with

pre

-acq

uisi

tion

FCP

A-f

ocus

ed d

ue d

ilige

nce,

cor

pora

te in

telli

genc

e, fo

rens

ic f

ield

tech

nolo

gy

serv

ices

, e-d

isco

very

, and

dis

trib

utor

aud

its f

ocus

ed o

n br

iber

y an

d co

rrup

tion

com

plia

nce.

�O

vers

ees

glob

al in

vest

igat

ive

and

fore

nsic

sup

port

ser

vice

s fo

r a

Fort

une

100

phar

mac

eutic

al, m

edic

al d

evic

e an

d co

nsum

er m

arke

ts c

ompa

ny.

To d

ate,

KP

MG

has

ass

iste

d w

ith in

vest

igat

ions

in B

razi

l, C

olom

bia,

M

exic

o, S

pain

and

Ital

y. T

hese

mat

ters

hav

e in

volv

ed p

oten

tial e

arni

ngs

man

agem

ent,

brib

ery

and

corr

uptio

n an

d co

nflic

t of

inte

rest

con

cern

s. I

n ad

ditio

n, K

PM

G h

as p

rovi

ded

exte

nsiv

e pr

e an

d po

st-a

cqui

sitio

n co

rpor

ate

inte

llige

nce

and

FCP

A-f

ocus

ed d

ue d

ilige

nce

serv

ices

.

�C

ondu

cts

due

dilig

ence

of

acqu

ired

anti-

brib

ery

and

corr

uptio

n co

mpl

ianc

e pr

ogra

ms

incl

udin

g te

stin

g of

tr

ansa

ctio

ns p

erce

ived

to b

e of

pot

entia

lly h

ighe

r ris

k fo

r vi

olat

ing

the

FCP

A.

�A

ssis

ts in

tern

al a

udit

deve

lop

and

exec

ute

FCP

A m

onito

ring

revi

ews

at f

orei

gn lo

catio

ns.

Pro

cedu

res

also

in

clud

ed a

ssis

ting

clie

nts

enha

nce

anti-

brib

ery

and

corr

uptio

n po

licie

s an

d pr

oced

ures

.

MA

RC

L. M

ILLE

RPartner

KP

MG

LLP

345

Par

k A

venu

eN

ew Y

ork

City

, NY

1015

4-01

02

Tel

212

-872

-691

6Fa

x 2

67-6

04-0

506

Cel

l 61

0-32

2-70

89E

mai

l mar

cmill

er@

kpm

g.co

m

Fun

ctio

n a

nd

Sp

ecia

lizat

ion

Mar

c sp

ecia

lizes

in in

tern

al in

vest

igat

ions

, FC

PA

rela

ted

serv

ices

and

dis

pute

adv

isor

y se

rvic

es.

Ed

uca

tio

n, L

icen

ses

& C

erti

fica

tio

ns

•BSB

A, S

hipp

ensb

urg

Uni

vers

ity�

Cer

tifie

d P

ublic

Acc

ount

ant

�C

ertif

ied

Fina

ncia

l For

ensi

cs

©2010 Foley & Lardner LLP • Attorney Advertisement • Prior results do not guarantee a similar outcome • 321 North Clark Street, Chicago, IL 60654 • 312.832.4500

BARRY J. MANDEL

PARTNER

[email protected]

90 PARK AVENUE

NEW YORK, NY 10016-1314 (212) 338-3564

Barry J. Mandel is a partner at Foley & Lardner LLP, where he is chair of the Securities Enforcement & Litigation Practice and a member of the Securities, Commodities & Exchange Regulation Practice.

Prior to joining Foley, Mr. Mandel served as senior vice president and general counsel for Global Litigation, Employment and Regulatory Affairs at Merrill Lynch & Co., Inc., where he managed all litigation, employment and regulatory matters, evaluated litigation risk and supervised over 50 lawyers. He also held a variety of other legal management roles at Merrill Lynch during his 17 year tenure at the company. Mr. Mandel personally handled Merrill Lynch’s largest, most sensitive and most complex regulatory, criminal and civil matters, including the municipal crisis, Sumitomo, Codelco, Enron, research analysts, market timing and auction rate securities.

Prior to joining Merrill Lynch, Mr. Mandel was a litigator with Baer Marks & Upham LLP where he practiced for 15 years and also served on the firm’s management committee. He handled a wide variety of civil, criminal, and regulatory matters, including investigations by securities, commodity futures and law enforcement authorities, securities litigation, the "silver" commodity futures litigation on behalf of the Commodity Exchange, Inc. ("Comex"), criminal commodity futures tax fraud trials and gender discrimination litigation.

Mr. Mandel began his career as an attorney with the U.S. Securities and Exchange Commission (SEC) and also served as branch chief in its Division of Enforcement, New York Regional Office, where he handled various investigations, and civil, criminal contempt and administrative trials, including cases that went to the U.S. Supreme Court and U.S. Court of Appeals for the Second Circuit. Mr. Mandel’s cases also involved cutting edge issues such as the definition of a security, scienter, Fifth Amendment rights and the first NYSE firm to be liquidated by SIPC.

Mr. Mandel received his J.D., from Brooklyn Law School in 1971 and his BBA in accounting from the City College of


SETH L. LEVINE

PARTNER

[email protected]

90 PARK AVENUE

NEW YORK, NY 10016-1314 (212) 338-3407

Seth L. Levine is a partner with Foley & Lardner LLP and vice chair of the Securities Enforcement & Litigation Practice. He represents companies and individuals in complex civil and criminal litigation and counseling matters, with a focus on white collar defense, SEC enforcement, internal investigations, antitrust, and securities matters. He has represented clients in federal and state courts throughout the United States and in connection with investigations and inquiries by various government entities. He is also a member of the Government Enforcement, Compliance & White Collar Defense and Antitrust Practices.

Prior to joining Foley, Mr. Levine served for more than five years as a federal prosecutor in the Criminal Division of the United States Attorney’s Office for the Eastern District of New York. As an assistant United States attorney, he successfully conducted criminal trials, argued appeals, and directed complex investigations into a wide range of matters, including securities, accounting, bank, wire, healthcare and tax fraud, racketeering, money laundering, narcotics trafficking, extortion, and murder. As a member of the Business and Securities Fraud section, he successfully investigated and prosecuted public and private entities and individuals for corporate and financial fraud.

Mr. Levine received the Director’s Award from the United States Department of Justice for superior performance as an assistant United States attorney.

Prior to the United States Attorney's Office, Mr. Levine practiced for five years at Cravath, Swaine & Moore LLP, where he focused on antitrust and business litigation.

Mr. Levine served as a law clerk for the Honorable Barbara B. Crabb, Chief Judge, United States District Court for the Western District of Wisconsin.

©2010 Foley & Lardner LLP

2

Mr. Levine earned his law degree from the University of Chicago Law School (J.D., 1993) and his bachelor’s degree (B.A., magna cum laude, 1990), from the University of Rochester.

Mr. Levine is admitted to practice in New York; before the United States District Courts for the Eastern and Southern Districts of New York; and before the United States Court of Appeals for the Second Circuit.


2

New York in 1967. He is a former member of the SIFMA Compliance and Legal Division Executive Committee. Mr. Mandel is a frequent and regular speaker at various seminars and conferences, including the annual SIFMA Law and Compliance meeting on topics in regulatory and criminal enforcement, handling regulatory matters, securities litigation, ethics and internal investigations.

Recent Presentations and Publications:

� "Civil Litigation Developments: The "Lehman" Bankruptcy," Derivatives and Futures Law Committee, Meeting of the ABA Business Law Section

� "Enforcement and Litigation: The Aftermath," SIFMA Fall Conference

� "Litigation Update: Regulatory and Criminal," SIFMA Annual Conference

� "Current Ethical Issues for In-House Counsel and Those Who Advise Them," Association of the Bar of the City of New York

� "Predicting SCOTUS In Merck V. Reynolds," Appellate Law 360

Mr. Mandel is admitted to practice in New York, before the United States Supreme Court, the United States Court of Appeals for the Second Circuit, and before the United States District Courts for the Southern and Eastern Districts of New York.


SAMUEL J. WINER

PARTNER

[email protected]

3000 K STREET N.W. SUITE 600 WASHINGTON, DC 20007-5109

(202) 672-5508

Samuel J. Winer, partner, is a member of the firm’s Securities Litigation, Enforcement & Regulation and Transactional & Securities Practices. He previously served on the firm’s management committee. Mr. Winer counsels securities broker-dealers and other clients on compliance with the federal and state securities laws and rules of the various self-regulatory organizations (SROs) and represents those clients in SEC enforcement proceedings and SRO disciplinary and other proceedings, litigation and grand jury investigations, and assists special committees of boards of public companies in investigations of financial reporting and related conduct. He has represented various securities broker-dealers in SEC and SRO investigations of sales practices, municipal securities business, equity, fixed income and financial futures trading, and back office compliance and related supervision. He has represented various broker-dealers in significant investigations of the NASDAQ market, municipal securities offerings, sales of derivatives, and financial reporting and net capital compliance. He also represents public companies and individuals, including corporate officers and directors and outside accountants, in SEC investigations, including investigations into the adequacy of financial and other reporting and internal controls and insider trading and related shareholder litigation.

Mr. Winer has been named a "Leading Lawyer" in Securities and Corporate Governance by the Legal Times. He was recently named to the BTI Client Service All-Star Team, who Corporate Counsel identified as providing outstanding client service. Mr. Winer has also been selected by his peers to be included in the Best Lawyers in America® since 2006 and he was rated to be one of the top securities regulation attorneys in the nation by Chambers USA for 2010 and one of the top regionally in the District of Columbia for 2007, 2008 and 2009. In 2008, 2009 and 2010, Mr. Winer was selected for inclusion in the Washington, D.C. Super Lawyers® lists.


2

A former staff attorney and special counsel with the Securities and Exchange Commission's Division of Enforcement, Mr. Winer is a frequent speaker and has authored various publications on the defense of SEC investigations and topical issues under the federal securities laws (see list below).

Mr. Winer’s professional affiliations include membership in the American Bar Association (Broker-Dealer Subcommittee of the Securities Litigation Committee, Market Regulation Subcommittee of the Committee on Federal Regulation of Securities) and the Securities Industries and Financial Markets Association (Legal and Compliance Section).

Mr. Winer graduated from Wesleyan University (B.S., economics, with honors, 1971) and Boston University School of Law (J.D., 1974), where he was an editor of the Law Review. He is admitted to practice in the District of Columbia and in Massachusetts. Mr. Winer was a law clerk to Chief Justice Thomas H. Roberts of the Supreme Court of Rhode Island from 1974 to 1975.

Publications

� "A New Burr Under the SEC’s Saddle: Changing Standards for SEC Enforcement Remedies," Insights, Vol. 21, No. 7, July 2007, with Kenneth B. Winer

� Co-author: "Treatise: Securities Enforcement: Counsel and Defense," Lexis-Nexis, September 2005

� Co-author: "Research Analyst Conflicts of Interest: Implementing the Rules," Journal of Investment Compliance, Vol. 4, No. 4, p. 82 (Spring 2004)

� Co-author: "SEC Enforcement Investigation: What You Need to Know," ACC Docket, Vol. 21, No. 10, November/December 2003

� Author: "Should I Stay or Should I Go? Deciding Whether to Serve on the Board of a Public Company," D&O Advisor, Fall 2003

� Co-author: "Preliminary Steps to Establishing Research Analyst Independence," Journal of


3

Investment Compliance, Vol. 4, No. 1, p. 13 (Summer 2003)

� Co-author: "What Directors Should Know about SEC Enforcement Investigations," The Corporate Governance Advisor, Vol. 10, No. 1, January/February 2002

� Co-author: "Questions You Are Likely to Be Asked When Your Corporation Becomes the Subject of an SEC Enforcement Inquiry," BNA Corporate Practice Series 2001

� Co-author: "Effective Representation in the SEC Wells Process," The Review of Securities & Commodities Regulation Vol. 34, No. 6 (Standard & Poor's, March 28, 2001

� Co-author: "Responding to an Inquiry from the SEC Division of Enforcement," BNA Corporate Practices Series 1998

� Co-author: "Defending the Insider Trading Probe," The Practical Lawyer, Sept. 1995

� "Reducing the Liability Exposure of Derivatives Dealers," The Review of Securities and Commodities Regulation, Vol. 27, No. 22 (Standard & Poor’s Dec. 21, 1994)

� Co-author: "Ex Parte Contacts with Officers and Employees in SEC Investigations," 8 Insights: The Corporate and Securities Law Advisor 13 (Prentice Hall Law and Business, November 1994)

� Co-author: "When the SEC Comes Calling: A Step-by-Step Guide by Former Enforcers," 3 Business Law Today 13 (ABA July/August 1994), reprinted in Bowne Digest, Vol. 8, No. 10, p.5 (October 1994)

� "Prompt Action Taken in Response to SEC Investigation May Ease Impact of Potentially Long, Burdensome Process," 9 BNA’s Corporate Counsel Weekly 8 (February 2, 1994)

� "Anticipating and Responding to an Inquiry by the SEC Enforcement Division’s Working Group on Insurance Companies," 14 Insurance Litigation Reporter 581 (Shephard’s, December 1992)

� "Liability of Accountants for Audits of Savings and Loan Associations," 7 The Review of Banking and Financial Services 199 (Standard & Poors, December 7, 1991)


4

� "Corporate Disclosure: When and How Do the Securities Laws Require Public Companies to Announce Merger Negotiations," Legal Times, Vol. IX, No. 43, 1987

� "New Limitations on the Scope of Discretion of the Commissioner of Internal Revenue," 54 Boston University Law Review 425, 1974

“Advisers need to talk to their clients about the forthcoming Bribery Act and the procedures they need to have in place to comply. A really strong anticorruption culture is important and training for all staff is a critical part of this.”

Richard AldermanDirector of the Serious Fraud Office

The Bribery Act received Royal Assent on 8 April 2010 and will come into force in April 2011 but will not have retrospective effect. The Act makes sweeping changes to UK bribery and anti-corruption legislation and will have a huge impact on UK companies in all sectors and companies operating a branch or subsidiary in the UK.

The existing legal framework relating to corruption is complex, antiquated and fragmented, which is why new legislation in the form of the Bribery Act has been introduced. It will make the UK anti-bribery regime one of the strictest in the world and is far wider than the US Foreign Corrupt Practices Act 1977. By way of example only, facilitation payments are prohibited under the Bribery Act whereas under US legislation they are permitted in certain circumstances.

Key areas

The key areas for UK companies to be aware of are:

�� The offences of bribing another person (section 1) or being bribed (section 2);

�� The corporate offence of “failing to prevent” bribery (section 7) and the defence of “adequate procedures”;

�� Bribery of a Foreign Public Official (“FPO”) (section 6);

�� The illegality of facilitation payments;

�� The extra territorial scope of the Bribery Act;

�� The potential criminal liability of senior officers and managers; and

�� The potential for debarment from public procurement contracts if convicted of an offence under the Bribery Act.

A summary of the key offences

The Bribery Act will introduce four new criminal offences, including a strict liability corporate offence of “failing to prevent bribery”.

Active bribery

This is the giving, promising or offering of a bribe, which can include hospitality or gifts, with intent to induce improper conduct by the recipient of the bribe.

This definition is intentionally broad and applies not only to cash inducements, but also to gifts, hospitality and other “advantages”

The Bribery Act 2010An Overview

Passive bribery

This is the requesting, accepting or agreeing to receive a payment or other advantage in return for the improper performance of a function or activity.

The offence is committed even if the person requesting the bribe does not benefit personally.

Failure to prevent bribery

This corporate offence is one of strict liability, meaning that if a company fails to prevent an “Associated Person” (such as an employee, agent or intermediary) from paying a bribe for its benefit, the offence is committed. It is irrelevant that the company was unaware of the bribe being paid. Controversially however this offence does not include any notion of improper conduct. It simply requires a payment or other advantage for the winning or retention of business. Thus, paying for overseas officials to attend premises in the UK for a site visit or facility inspection would, on a strict interpretation, amount to an offence. This places a very high burden on companies to comply with the Bribery Act and ensure that they have adequate procedures (for which see below) in place to prevent and discover acts of bribery and corruption.

The Bribery Act allows for a defence in circumstances where the company can show it had “adequate procedures” in place to minimise the risk of bribery. The onus will be on the company to prove, on the balance of probabilities, that it had “adequate procedures”. The Ministry of Justice is due to publish guidelines in early 2011, in relation to adequate procedures in order to assist companies in combating bribery.

Bribery of a Foreign Public Official

This offence covers “active” bribery of an FPO. The definition of FPO is very wide and includes anyone in a legislative, administrative or judicial position, whether elected or appointed, anyone who performs a public function and any official of a public international organisation.

As it only relates to active bribery, the person giving the bribe must intend to obtain or retain business or an advantage in the conduct of business. In addition, the intention must be to influence the FPO in his official capacity.

Facilitation or “grease” payments These are usually small payments made to officials to ensure they perform or expedite their routine duties. By way of example, a $100 payment is made to an overseas official to have goods released from the docks. Facilitation payments are illegal under the Bribery Act. In certain jurisdictions such facilitation payments are commonly requested and some legislation (including in the US) include a specific exemption or defence for small facilitation payments in certain circumstances. The Bribery Act does not include any such an exemption.

During the consultation process surrounding the Bribery Act the SFO said it will exercise “prosecutional discretion” in relation to such facilitation payments.

Extra territorial scope In relation to the corporate offence of failure to prevent bribery this applies to all UK companies and all overseas companies which carry on a business, or part of a business, in any part of the UK. In relation to the other offences, it applies to bribes paid in the UK. It also applies to bribery and corruption outside the UK where the individual concerned has a close connection with the UK.

Senior officer liability

The Bribery Act includes a provision that allows for the prosecution of senior officers (which includes directors, managers, company secretaries or a person purporting to act in that capacity) if the corporate is being prosecuted. If a senior officer is deemed to have consented or connived in active or passive bribery or in bribery of a FPO, they are also guilty of a criminal offence. Senior officers therefore need to be aware that by ignoring or by turning a blind eye to suspected corruption, it might be alleged that they consented or connived in the activity. Senior officers who are prosecuted are subject to a prison sentence of up to 10 years and/or an unlimited fine. In addition, where a director is convicted of bribery, they may also be disqualified from holding a director position for up to 15 years.

It is of note that senior officers cannot be prosecuted for the corporate offence of failing to prevent bribery. They will not be held personally liable for a company’s failure to maintain adequate procedures to prevent bribery and corruption.

Consequences

A violation of anti-corruption laws may result in:

�� Criminal penalties and possible unlimited fines for the company;

�� Directors and employees of the company facing huge fines themselves and/or jail sentences of up to 10 years;

�� Directors may be disqualified from holding a director position for up to 15 years;

�� Disgorgement of the company’s profits;

�� Loss of reputation, public trust and business for the company;

�� Debarment from public procurement contracts (Article 45 of the EU Public Sector Procurement Directive 2004);

�� Investigation costs; and

�� Diversion of valuable management time.

What do you need to do? The Serious Fraud Office is determined to enforce the new legislation aggressively, with additional resource now allocated to investigating and prosecuting corruption by UK businesses.

In order to meet the requisite standard of “adequate procedures”, which is not defined in the Bribery Act, UK companies need to have a fully integrated and effective anti-corruption compliance regime.

UK companies will need to consider the following:

�� Appoint a senior person, who reports into the Board, and who will have responsibility for the company’s anti-corruption programme;

�� A “risk based” audit of corruption risks faced by the company;

�� Review its current relationships with agents, intermediaries and joint venture partners;

�� Ensure adequate due diligence is undertaken on all new business relationships (including agents, intermediaries and joint venture partners) and that those relationships are properly monitored on an on-going basis;

�� Develop an anti-corruption programme which will include an anti-corruption policy, procedures around gifts and entertainments, whistle-blowers, sponsorship and charitable donations. These policies and procedures need to be integrated and visible throughout the organisation;

�� “Risk based” training of staff throughout the organisation on corruption risk and on the new policies and procedures; and

�� Consult with employees/agents in worldwide sites and obtain advice on local laws and customs.

Corruption clampdown:

An Eversheds report onthe Bribery Act 2010

�� Businesses are unprepared for tough new bribery laws.

�� One in five companies have no policy to address corrupt practices.

�� One in four board directors are unaware that they could face a 10 year prison sentence.

According to research conducted by Eversheds earlier this year, many businesses are in the dark over the new Bribery Act, with 60% of businesses unaware that failing to prevent bribery will be a criminal offence. To see Neill Blundell discussing the report,and to request a copy, please visitwww.eversheds.com/briberybill

www.eversheds.com©EVERSHEDS LLP. Eversheds LLP is a

limited liability partnership

How Eversheds can help

Eversheds’ Fraud Group can work with you to ensure that you are ready for the Bribery Act. We have assisted many of our clients in responding to fraud and corruption issues in recent years, so we know from experience where the problems can lie.

With a large team of experienced criminal and regulatory lawyers, we are ideally placed to support you in your review of your processes and systems. We have already provided many clients with Bribery Act related advice, usually for an agreed fixed fee. In particular we can:

�� develop or review your policies relating to anti-corruption, gifts and hospitality, whistleblowing, and procurement

�� work with you to undertake a thorough risk assessment of your anti-bribery and corruption risks

�� advise on corruption-related due diligence issues for M&A activity and/or joint ventures

�� develop and deliver structured training programmes for your board/senior management/staff (including bespoke online training solutions): and

�� support your team on fraud and corruption related internal investigations.

We would be delighted to meet you in person to discuss the implications for your business.

For further information please contact:

Paul WorthPartner0845 497 [email protected]

Neill BlundellPartner0845 497 [email protected]

Corruption clampdown:

An Eversheds report on

the Bribery Bill 2010

Time running out for change

Corruption clampdown report

Introduction

The Bribery Bill completely overhauls current criminal laws in dealing with

bribery and corruption and introduces a tough new regime for business in

the UK. The new law will go far beyond the scope of the US Foreign Corrupt

Practices Act as it covers all business transactions, not just payments to foreign

officials or state owned businesses.

The new law also targets businesses directly by introducing a corporate offence,

which makes a business criminally liable for failing to prevent bribery,

subject to an ‘adequate procedures’ defence. This includes culpability for acts

of bribery and corruption committed by agents and intermediaries as well

as employees.

It is therefore essential for all businesses to have adequate anti-bribery systems

and controls in place.

Every employee also has a responsibility to understand and adhere to the

new law as the penalties for non-compliance are severe, with up to 10

years imprisonment for those found guilty and unlimited fines for

businesses convicted.

So, how prepared are businesses for the new rules?

Eversheds engaged with businesses of all sizes across a number of sectors to

canvas awareness, understanding and, importantly, attitudes towards the new

legislation. Even at board level, the results paint a picture of limited knowledge

with little preparation in place. Worryingly, almost half of directors admitted

that they don’t have robust systems in place to prevent bribery and corruption.

Eversheds’ Corruption Clampdown report provides a full overview of the

research and we hope that it will provide interesting reading and useful insight

for you and your business. If you would like to discuss how the new law affects

your business or have a view on the findings, please get in touch.

Neill Blundell, Head of Fraud Group, Eversheds LLP

[email protected]

www.eversheds.com

1

“The Bribery Bill aims to reform the criminal law toprovide a new, modern and comprehensive scheme of bribery offences that will enable courts andprosecutors to respond more effectively to bribery at home or abroad.” Ministry of Justice,

www.justice.gov.uk/publications/bribery-bill.htm


Contents

1.0 Overview of legislation 3

2.0 Key findings 4

3.0 Awareness 5

4.0 Understanding 6

5.0 Preparation 7

6.0 Attitudes 8

7.0 Conclusion 9

2


1.0 Overview of legislation

The legislation comprises the following:

1 a general offence of offering or receiving bribes;

2 a specific offence of bribing a foreign public official; and

3 a corporate offence of failing to prevent bribery.

3

The introduction of the new corporate offence of

failing to prevent bribery by individuals acting on

behalf of an organisation clearly places

responsibility on businesses to ensure their

employees, agents and intermediaries are acting

within the law. It is this area that presents the

biggest challenges for business. Whilst this is a

strict liability offence, organisations will have a

defence if they can show that they have ‘adequate

procedures’ in place to prevent corrupt business

practices.

What are adequate procedures?

While the legislation does not provide a

definition of these ‘adequate procedures’,

businesses should consider the following:

• Reviewing existing policies and ensuring

there is an integrated anti-corruption policy

in place which is visible and properly

communicated throughout the

organisation – from Board level down;

• Delivering a suitable training programme

on bribery and corruption across the

organisation;

• Conducting adequate and detailed due

diligence when establishing new

relationships with intermediaries and

agents;

• Conducting a risk-based ‘corruption audit’

of the organisation’s global activities;

• Applying clear accountability for anti-

bribery and corruption policy and

processes at senior management level;

• Monitoring the activity of agents and

intermediaries acting on behalf of the

organisation;

• Importantly – ensuring enough time and

resource is dedicated to understanding the

actions required by the business to comply.

BACK TO CONTENTS

2.0 Key findings

2.1 Sample

Eversheds engaged with 694 executives from

organisations of all sizes across all sectors. The

majority of respondents (86%) were based within

UK organisations, with the remainder (14%) at

organisations headquartered outside of the UK.

2.2 Key findings

Awareness

• 60% of businesses are unaware that failing to

prevent bribery is a corporate offence under the

new legislation.

• 91% of businesses do not know that there is a

maximum jail term of 10 years.

Understanding

• One in three respondents (34%) does not know

that company directors can face prosecution.

• One in four directors is not aware that they

could face prosecution.

BACK TO CONTENTS

Preparation

• One in five (20%) admit that their organisation

doesn’t have any systems in place to prevent

bribery.

• This rises to 45% of board directors who admit

they have not implemented any provisions to

prevent bribery occurring.

Attitudes

• Almost a third (29%) believe that the new

legislation goes too far and presents unnecessary

challenges in a difficult economic climate.

• Opinion is split on whether the legislation will

make the UK a more attractive place to do

business, with a quarter (26%) in favour and

24% against.

• A quarter (25%) of the businesses questioned

believe that the UK needs a new financial crime

regulator to enforce the legislation. This decreases

to just 8% among directors and board members.

4Corruption clampdown report

62%

11%

10%

9%

5%

4%

0 10 20 30 40 50 60 70

Don’t know

5 years imprisonment





Figure 1 – What is the maximum jail term

for a bribery conviction?


3.0 Awareness

3.1 Scope of legislation

There is a significant lack of knowledge on the scope

of the new legislation at all levels within business.

While the majority understand bribery as a payment

in cash, there is less awareness of more discreet

forms of bribery, such as lavish gifts or a promise

of additional business.

• 41% are unaware that under the legislation it is

illegal to give, promise or offer an advantage to

help secure business.

• 30% of respondents are not aware that the

legislation covers transactions with commercial

organisations as well as public bodies.

• 60% of respondents are unaware that failing

to prevent bribery is a corporate offence.

3.2 Penalties

The research uncovered a worrying lack of

knowledge of the penalties associated with being

found guilty of bribery.

• 91% of businesses do not know that there is

a maximum jail term of 10 years under the

legislation.

• The level of awareness around penalties

increases with seniority, but only slightly,

with 19% of directors and board members

aware of the penalties under the new legislation.

5

3.3 Sector View

Looking at the results by sector, there were somekey areas for concern:

• 54% in the financial services sector are unaware it

is illegal to give, promise or offer an advantage to

help secure business compared to just 32% in the

energy sector.

• There is a particularly low level of awareness

in the healthcare sector of the new corporate

offence, with 75% of those admitting they are

unaware of it, compared to just 46% in the

financial services sector.

BACK TO CONTENTS

4.0 Understanding

4.1 Liability

The research highlighted that there is confusion about liability and

exactly who in an organisation can face prosecution.

• One in three respondents (34%) does not know that company

directors can face prosecution.

• One in four directors is not aware that they could face prosecution.

• 43% of respondents are unaware that employees, agents and

intermediaries could face prosecution under the new laws.

4.2 Sector view

Again, there were striking differences in the level of understanding when

comparing different industry sectors:

• There is a strong level of awareness in the financial services sector,

with 74% of respondents aware that directors could face prosecution

and 64% aware that employees, intermediaries and agents could also

be liable. This is compared to the IT and telecoms sector, where only

59% are aware directors could face prosecution.

BACK TO CONTENTS6Corruption clampdown report


5.0 Preparation

5.1 Policies and procedures

The research found that few organisations have

policies and procedures in place to minimise corrupt

practices and there is a limited appetite to train

employees:

• One in five (20%) organisations say they do not

have systems in place to prevent bribery in the

workplace.

• This rises to 45% of board directors who admit

they have not implemented any provisions to

prevent bribery occurring.

• 49% of respondents have not received or been

offered training on bribery and corruption issues.

• Companies headquartered outside of the UK are

better prepared, with 34% of the respondents

who work for international companies having

received or been offered training on bribery

and corruption issues.

5.2 Sector view

• The financial services sector is the best prepared,

with 51% stating they already have systems in

place to prevent bribery. This falls to just 22%

in the education sector.

7

46%

34%

20%

0 5 10 15 20 25 30 35 40 45 50

Figure 2 – Does your organisation have

adequate policies in place to prevent bribery?

Don’t know

Yes

No

BACK TO CONTENTS

6.0 Attitudes

6.1 A step too far?

The research highlights some opposition to the new legislation in light of the

current economic climate:

• Almost one third (29%) believe that the new legislation goes too far and

presents unnecessary challenges in a difficult economic climate.

• Opposition increases to 39% among senior managers and leaps significantly

among small to medium enterprises (54%).

6.2 Enforcement

• One quarter (25%) of those surveyed believe that the UK needs a new

financial crime regulator to enforce the legislation. This decreases to just

8% among directors and board members.

• Over half (52%) think that the Serious Fraud Office would be the most

effective in enforcing the legislation.

6.3 Sector view

• Opposition to the legislation is particularly high in the financial services

sector (38%).

• There is broad support for the Serious Fraud Office as the most effective

organisation to enforce the new regulations. The Financial Services Authority

(FSA) was deemed least effective by all industries, particularly the financial

services sector.

BACK TO CONTENTS8Corruption clampdown report


7.0 Conclusion

Our research shows that from a junior level right up to the board, there is a

lack of awareness, understanding and training around the new law and many

businesses do not have the systems in place to minimise their exposure to

corrupt business practices.

There is a worryingly relaxed attitude towards the legislation, with a distinct

lack of training for employees and little evidence that businesses are prepared.

The new legislation contains tough penalties and businesses need to take a

more proactive approach to improving their processes to minimise their risk.

For further information, please contact:

Neill Blundell, Head of Fraud Group, Eversheds LLP

[email protected]

www.eversheds.com

9BACK TO CONTENTS

©Eversheds LLP 2010. Eversheds LLP is a limited liability partnership, registered in England and Wales, registered number OC304065, registered office One Wood Street, London

EC2V 7WS. Please note that when we refer to “a partner” or “partners” of Eversheds LLP, the term “partner” indicates a member of Eversheds LLP. It should not be construed as

indicating that the members of Eversheds LLP are carrying on business in partnership for the purposes of the Partnership Act 1890.

www.eversheds.com

ELIT.423

For a full list of our offices and contact details please visit

The Bribery Act has now replaced the UK’s old anti-bribery legislation, which was widely held to be insufficient to tackle corruption in the global market place. The Act creates

�� bribe; and receiving or requesting a bribe where the recipient is intended to act improperly.

�� with the intention of influencing the performance of their duties, to obtain or retain business or a business advantage.

�� by employees/agents.

The Act has received royal assent and will enter into force in Autumn 2010. It will apply to any bribery committed within the UK and to individuals and corporations carrying on business in the UK, regardless of where the bribery occurs. The two general offences apply to bribing those performing a public function or any activity connected with a business or done in the course of a person’s employment.

The corporate offence of failing to prevent bribery is subject to a defence of “adequate procedures” - i.e. the organisation must show it had adequate procedures in place to prevent bribery being committed on its behalf. Guidance as to what constitutes such adequate procedures is currently being drafted and due to be published prior to the Act entering into force.

The United States Foreign Corrupt Practices Act has, by contrast, been in place since 1977, giving US anti-corruption laws a global reach. It prohibits

��

�� !�� "�� issue securities registered in the US

�� #!��

making or offering to make corrupt payments or “anything of value” to foreign government officials, foreign political parties or candidates, or other person knowing that the payment will be made directly or indirectly to foreign government officials for the purpose of influencing any act in violation of their duty, or to secure an improper advantage in order to obtain or retain business.

There is also a corporate “books and records” requirement, which addresses accounting transparency. This requires that companies that issue securities registered in the US must maintain books, records and accounts to accurately and fairly reflect their transactions and to have sufficient internal accounting controls to prevent corruption and other unethical behaviour. US issuers must also ensure that their wholly owned subsidiaries comply with the requirements.

Unlike the Bribery Act, the FCPA applies to bribery of foreign officials only and not to

�� '�� *�*��!��!��"*

�� '�� #!��+ ��<��"*

�� =��>� �� !��"*

Under the FCPA the Department of Justice will give an opinion as to whether certain specified prospective conduct conforms with the DoJ’s enforcement policy. These opinions are then published on its website. The UK currently has no such similar facility.

Comparison of bribery laws - UK v USA Concise Guide to the UK Bribery Act 2010 and the US FCPA

www.eversheds.com©EVERSHEDS LLP. Eversheds LLP is a limited liability partnership

Comparison table

Primary Offences Private Sector BriberyBribing foreign officials

Not applicableBribing foreign officials

Governance Offences Failure to Prevent Bribery Books & Records

Accessory Offences '��Q��similar senior manager consents or connives he/she will be guilty of the same offence

Individuals and firms can be penalised if they order, authorise or assist someone else, or conspire, to violate anti-bribery provisions

Defences Adequate Procedures in respect of Failure to PreventV�� !��!��the written laws of the foreign official’s country

Facilitation Payment

Payment was lawful under the written laws of the foreign official’s country

Payment was reasonable and bona fide expenditure for the promotion of products or execution of the contract

Persons Covered -Individuals

Corporations

Agents

Subsidiaries

Where primary offence committed in the UK - AnyoneBritish citizens/ordinarily resident, regardless of where offence committed

��X �� incorporated in the UK =��!��Y��Z�� !��in UK

Offence where the act of giving or receiving is done through an agent or third party intermediary=��!��Y��!��!��committed the bribery offence to obtain/retain business for parent

“Domestic Concerns” - US citizens, nationals, residents“Persons other than issuers or domestic concerns” - Foreign nationals who cause an act in furtherance of corrupt payments to take place within US“Domestic Concerns” - business entity organised under US law/having its principle place of business in US“Issuers” - Corporations that have securities registered in the US“Persons other than issuers or domestic concerns”- Foreign company which causes an act in furtherance of corrupt payments to take place within USOffence to make payments to a third party knowing that all/a portion will go to a foreign officialUS parent may be liable for acts of foreign subsidiaries where it authorised, directed or controlled the activity

Bribe Location Worldwide V��!�� Q�so does not include officials that are US citizens/��"

Penalties -Individuals

Corporations

10 years imprisonment and/orunlimited fine

Unlimited fine

Disqualification from tendering for government contracts

'�� [��Z��\][^Q^^^�� \_^Q^^^��fine*'��{�|�� ]^��Z��\[Q^^^Q^^^�� \_^^Q^^^�civil fine*'�� \]Q^^^Q^^^�� $10,000 civil fine* '��{�|�� \][Q^^^Q^^^� ��\[^^Q^^^�� }Disqualification from tendering for government contractsDisgorgement of profitsIndependent compliance monitor

Enforcement Serious Fraud Office, Overseas Anti-Corruption Unit of the City of London PoliceCurrent indications are that the Failure to Prevent offence will not be proactively regulated - only where bribery has been suspected to occur will this aspect be investigated

Securities Exchange Commission, Department of JusticeThe SEC has indicated that it will enforce the books and records offence even where there is no jurisdictional basis for an FCPA bribery case.

* Under the Alternative Fines Act, the actual fine may be up to twice the benefit that the defendant sought to obtain by making the corrupt payment. Fines are levied per violation

UK Bribery Act 2010 US FCPA

The Eversheds Fraud Group has a truly international reach, with 47 offices in 29 jurisdictions offices across the world in all major European jurisdictions as well as the Middle East, Asia & Africa. In the US we work closely with a small number of firms who specialise in white collar crime and fraud matters.

Fraud and corruption issues are rarely constrained by international boundaries. Businesses investigating a fraud or corruption issue often need to extend the investigation into other jurisdictions. Whether you are facing suspected insider fraud, internal or external corruption or FCPA issues it is often essential for a company to be able to conduct a multi-jurisdictional investigation quickly and effectively.

Advising on projects across multiple jurisdictions is something we do every day. We have a proven track record of success in such global investigations.

How we can help you

�� With an international team of specialist fraud lawyers we can provide a “one-stop” solution to clients’ needs. This has the benefit of ensuring better project management, knowledge of local regulators/prosecutors and better control of costs. Our international team can deal with the differing approaches to privilege, privacy, and data protection in the affected jurisdictions. Conducting investigation interviews in local languages is also a major advantage in many cases, helping to put witnesses at ease with an unfamiliar process.

�� We can assist with all actions arising out of investigations including civil recovery, obtaining emergency injunctive relief, criminal prosecutions, and any HR issues in this multi-jurisdictional environment.

�� We regularly advise companies and directors facing potential criminal prosecution abroad and can deal with extradition and related issues. We can assist with requests for documents and interviews from local enforcement agencies and have experience of requests for international mutual assistance and money laundering issues.

How we have helped others

�� Working alongside US law firms in undertaking FCPA compliance audits for European clients. One recent example is a major global pharmaceutical company, headquartered in the US, where we assisted in the context of a merger and acquisitions process to undertake FCPA compliance audits in several jurisdictions.

�� Acting for a Fortune 500 company on a worldwide FCPA investigation in relation to issues of bribery arising out of a Department of Justice investigation into the client’s activities. We led investigations in several jurisdictions including in Indonesia, China, Australia, South Africa and in England to assess FCPA compliance across the world.

�� Advising on corruption issues for clients in jurisdictions such as Saudi, Iran, Korea, Russia, Spain and the UK.

Key contacts

If you would like a quote or an informal first discussion, please first contact :

Neill BlundellHead of Fraud Group+44 (0) 845 497 4533 [email protected] Paul WorthHead of Financial ServicesDispute Resolution +44 (0) 845 497 7623 [email protected]

Eversheds Fraud Group International Investigations

Abu DhabiAl Bateen Tower (C6), Office B905 9th Floor, Bainunah Street 34PO Box 42182, Abu Dhabi, UAETel +971 2 494 3600

AmsterdamEversheds FaasenWibautstraat 224, 1097 DN AmsterdamPostbus 12929, 1100 AX AmsterdamTel +31 20 5600 600

BarcelonaEversheds Lupicinio Avda Diagonal 52008006 Barcelona, SpainTel +34 93 488 28 02

BerneEversheds Schmid MangeatSchwanengasse 13001 Berne, SwitzerlandTel +41 31 328 75 75

Birmingham115 Colmore Row, BirminghamB3 3AL, United KingdomTel See note below

BratislavaBalcar Polanský Eversheds s.r.oAdvokatska kancelaria Pribinova 25, 811 09 BratislavaSlovak RepublicTel +421 220 251 311

Brussels Pegasus Park, De Kleetlaan 12A,1831 Diegem, Brussels, BelgiumTel +32 2 737 9340

BudapestSándor Szegedi Szent-Ivány Komáromi EvershedsPasaréti út 59, 1026 Budapest, HungaryTel +36 1 394 3121

CambridgeKett House, Station Road, CambridgeCB1 2JY, United KingdomTel See note below

Cardiff1 Callaghan Square, Cardiff CF10 5BT, United KingdomTel See note below

Copenhagen Østergade 27, 1100 CopenhagenDenmarkTel +45 33 75 05 05

DohaQatar Financial Centre, PO Box 24148 Office 1101, QFC Tower, Diplomatic Area, West Bay, Doha, QatarTel +974 496 7396

DublinEversheds O’Donnell Sweeney One Earlsfort Centre, Earlsfort TerraceDublin 2, IrelandTel +353 1 6644200

Edinburgh3-5 Melville Street, Edinburgh, EH3 7PEUnited KingdomTel See note below

GenevaEversheds Schmid MangeatRue du Marché 20, 1204 GenèveSwitzerlandTel +41 22 818 45 00

Hong Kong21/F, ICBC Tower, Citibank Plaza3 Garden Road, Hong KongTel +852 2273 5376

IpswichFranciscan House, 51 Princes StreetIpswich IP1 1UR, United KingdomTel See note below

JeddahHani Qurashi Law Firm Saudi Business Center, 6th floor Suite 609-610, Madinah RoadP.O Box 51679, Jeddah-21553Kingdom of Saudi Arabia Tel +966 2 6574525

JohannesburgEversheds22 Fredman DriveSandton 2146, JohannesburgSouth AfricaTel +27 11 286 6900

Kuala LumpurShahrizat Rashid & LeeLevel 12 & 13, Menara Millenium8 Jalan Damanlela, Damansara Heights50490 Kuala Lumpur, MalaysiaTel +60 3 2710 5555

LeedsBridgewater Place, Water Lane Leeds LS11 5DR, United KingdomTel See note below

LondonOne Wood Street, LondonEC2V 7WS, United KingdomTel See note below

MadridEversheds Lupicinio Villanueva 29, 28001 Madrid, SpainTel +34 91 436 00 90

ManchesterEversheds House, 70 Great Bridgewater Street, Man-chester M1 5ES, United KingdomTel See note below

MauritiusEvershedsSuite 330, 3rd floor Barkly WharfLe Caudan Waterfront, Port LouisMauritiusTel + 230 211 0550

MilanEversheds BianchiniVia Albricci 10, Milan 20122ItalyTel +39 02 89 28 71

MunichHeisse Kursawe EvershedsMaximiliansplatz 5, 80333 MunichGermanyTel +49 89 54 56 50

NewcastleCentral Square South, Orchard Street Newcastle upon Tyne NE1 3XXUnited KingdomTel See note below

Nottingham1 Royal Standard Place, NottinghamNG1 6FZ, United KingdomTel See note below

OstravaBalcar Polanský Eversheds��Sokolska trida 104/2702 00 Ostrava 1, Czech RepublicTel: +420 591 128 010

Paris 8 place d’Iéna, 75116 Paris, FranceTel +33 1 55 73 40 00

PragueBalcar Polanský Eversheds��Elišky Peškové 735/15, 151 00 Praha 5Czech RepublicTel +420 251 009 111

Riga��'�� 20a Lacplesa Street, 3rd FloorRiga, LV 1011, LatviaTel +371 6 728 0102

RiyadhHani Qurashi Law Firm Arceed Center, 1st Floor Suite 12-13 P.O Box 300200, Riyadh - 11372Kingdom of Saudi Arabia Tel +966 1 2011911

RomeEversheds BianchiniVia Pompeo Magno 1Rome 00192, ItalyTel +39 06 32 25 844

RotterdamEversheds FaasenBahialaan 400, 3065 WC RotterdamPostbus 4030, 3006 AA RotterdamThe NetherlandsTel +31 10 2488 027

ShanghaiUnits 501-502, Platinum, No. 233 Taicang Road, Luwan DistrictShanghai 200020, PRCTel +86 21 6137 1088

SingaporeEversheds LLP1 Finlayson Green, Singapore 049246Tel +65 6572 5555

StockholmEversheds, Norrlandsgatan 16111 43, Stockholm, SwedenTel +46 8 545 322 00

TallinnEversheds Ots & Co15 Pärnu Road, 10141 Tallinn, EstoniaTel +372 614 1990

TiranaEversheds BianchiniABA Business CenterLeke Dukagjini, 13th FloorTirana, AlbaniaTel +355 443 0212 3

ValladolidEversheds Lupicinio Estación 12 - 3º D, 47004 - Valladolid SpainTel +34 983 36 08 36

ViennaLambert EvershedsKärntner Ring 12, 1010 ViennaAustriaTel +43 1 516 20

Vilnius��!�Victoria Tower, J.Jasinskio str. 16BLT-01112 Vilnius, LithuaniaTel +370 5 239 2391

WarsawWierzbowski EvershedsCentrum Jasna, ul. Jasna 14/16A Warsaw 00-041, PolandTel +48 22 50 50 700

WroclawWierzbowski Eversheds!�*�|�� ]Z��[^>_�^�V��PolandTel +48 71 71 93 500

ZurichEversheds Schmid MangeatStadelhoferstrasse 22CH-8001 Zürich, SwitzerlandTel +41 44 204 90 90

DIALLING OUR ENGLISH/WELSH OFFICESWhen calling from the UK: 0845 497 9797 When calling from the US:011 44 20 7919 4500For every other country outside the UK, it is:+44 20 7919 4500

DIALLING OUR SCOTTISH OFFICEWhen calling from the UK: 0845 498 0370 International:+44 131 476 8370

Eversheds Global Offices

Focused on fraud

Protecting your business and your reputation

The challenges to your business

In today’s economic climate many companies are worried

about fraud and the effect it can have on their business.

A company may be the victim of fraud perpetrated by

its employees, suppliers or customers and this could lead

to significant losses. Equally, a company may find itself

caught up in a fraud investigation by a regulator or law

enforcement agency and may need practical advice in

dealing with the investigation process. More generally,

issues of fraud will often give rise to compliance,

governance and brand protection issues.

For listed companies, allegations of fraud or corruption

can also have a significant impact on share price and

investor relations. The UK Listing Authority may have

to be notified and any serious financial irregularity will

often attract the attention of the media. Handling the

competing demands of regulators, shareholders, the

media, your bankers and your staff can be extremely

challenging when a major fraud issue arises.

How we can help

The Eversheds fraud group has considerable experience

of responding to fraud and financial irregularity issues. We

can help you take action swiftly and decisively so that your

loss is minimised, assets recovered, regulatory or criminal

sanctions avoided and your reputation preserved.

Our areas of expertise include:

• internal investigations

• emergency injunctions and asset recovery

• international criminal investigations and mutual

legal assistance

• corruption/bribery

• investigations and prosecutions by the FSA, SFO,

HMRC and other regulators

• money laundering

• extradition

• corporate governance and directors’ disqualification

• sanctions

• corporate training in areas such as anti-corruption

programmes and fraud response plans

• fraud and corruption risk management and

policy reviews.

We have a team of specialist lawyers that is experienced in

all aspects of fraud and corruption investigations. Many of

our team have spent time working in-house with the fraud

teams at major financial institutions or with regulators

such as the FSA. We understand the civil, criminal and

regulatory aspects of a fraud case, and can offer you

a fully co-ordinated approach across all disciplines.

Whether you are looking to investigate an internal fraud

and trace the stolen assets, or need advice and assistance

in relation to an investigation by a regulator or law

enforcement agency, we can help you. We can also help

you with reputation management and media strategy as

well as any related employment law matters.

We have dedicated teams throughout our network of

international offices that can assist with cross border asset

tracing and investigations.

We have particular experience in the energy, financial

institutions, retail, transport, healthcare, construction and

education sectors.

Key contact:

Neill Blundell

Partner

0845 497 4533

[email protected]

www.eversheds.com

©Eversheds 2009. Eversheds LLP is a limited liability partnership.

ELIT.406

Civil fraud claims

We have helped businesses trace and recover millions

of pounds of misappropriated assets, often from overseas

jurisdictions. Emergency court injunctions are used to

locate, preserve and recover assets. We regularly obtain

court orders freezing the assets of suspected fraudsters

and have a good track record of working alongside the

police if you wish to prosecute alongside the civil claim.

Our experience includes:

• advising the liquidator of a financial services group

on a $300m international fraud leading to emergency

injunctions and asset tracing in a number of

international jurisdictions

• acting for the investors (and subsequently the liquidator)

of a financial services business in a multi-million Ponzi

scheme fraud

• acting for the UK subsidiary of a US listed business on

a $20m revenue recognition fraud and related claims

and regulatory compliance issues

• advising an overseas financial institution in connection

with a £100m+ cross border fraud and related asset

tracing

• conducting numerous internal fraud and corruption

investigations alongside clients’ internal audit teams

and reporting to audit committees

• advising on FSA, FSMA and related governance issues

arising from fraud claims and investigations.

Criminal/regulatory investigations

We have extensive experience in advising and defending

companies and individuals in criminal investigations,

whether undertaken by a regulator or law enforcement

agency. Clients are advised through the entire process

from initial disclosure request or interview to the criminal

proceedings themselves. We have been involved in some

of the most high profile fraud investigations and regularly

deal with bodies such as the FSA, the SFO, Revenue &

Customs Prosecution Office, the Crown Prosecution

Service, the Department for Business Enterprise &

Regulatory Reform and the NHS Counter Fraud Service.

Our experience includes:

• advising on the investigation by the SFO into BAE and

the Al Yamamah arms deal

• acting for a large company in the SFO investigation

into alleged price fixing of NHS products

• advising a large insurer in an investigation by the

Asset Freezing Unit into sanctions violations

• advising both individuals and companies on

investigations by the FSA into market abuse and

insider dealing

• advising and representing a lead defendant in the

‘Kieran Fallon’ race fixing case

• advising and representing a businessman charged with

an £85m VAT fraud

• acting on the financial crime panel for several banks,

responding to disclosure requests from SOCA, the SFO,

HMRC and other investigators, including assisting

employees with compelled interviews.

How we have helped others

Key contact:

Paul Worth

Partner

0845 497 7623

[email protected]


BEST PRACTICES FOR FCPA DUE DILIGENCE IN THE INTERNATIONAL MERGERS

AND ACQUISITIONS CONTEXT

Any company located in the United States or a company with securities traded on a U.S. stock exchange (Issuer) is subject to the Foreign Corrupt Practices Act (FCPA). The FCPA generally prohibits U.S. companies, their subsidiaries, and their officers, directors, employees, and agents from offering anything of value to a foreign official in order to obtain or retain business or to secure any improper business advantage. This is in addition to rules that apply similar restrictions to “domestic concerns” (i.e., U.S. citizens and firms), which means that the FCPA can, in some situations, be implicated even for U.S. firms that are not Issuers. The statute also requires Issuers to keep books and records that accurately reflect the disposition of company assets and to maintain sufficient internal controls.

Both the U.S. Department of Justice (DOJ) and the U.S. Securities Exchange Commission (SEC) have been aggressively asserting claims (generally based on theories of successor liability) against purchasing corporations for pre-merger conduct of the target that violated the FCPA. Thus, it is imperative that an acquirer conduct FCPA-specific due diligence of a target, particularly if the target has a high FCPA risk profile. As explained below, FCPA compliance in the mergers and acquisitions context is not something that can be dealt with just by drafting an allocation of the risk through representation and warranty provisions.

Due Diligence Best Practices

Early Target Evaluation An acquirer should consider a target’s FCPA risk profile early in the transaction. In making such an assessment, an acquirer should consider whether the target does business in FCPA high-risk countries such as China, India, Russia, or those in the Middle East. Additionally, an acquirer should determine if the target’s industry is one with foreign government customers or substantial government contact (keeping in mind that employees of state-owned or state-controlled enterprises may be deemed “foreign officials”), or if the industry is subject to heavy government regulation (e.g., aerospace, defense, telecommunications, or health care). An acquirer also should assess whether the target has increased FCPA risk because of its ownership structure and/or based on its overall reputation.

To learn this information, the acquirer should require prospective targets to complete a detailed FCPA questionnaire. An acquirer can engage a reputable investigative firm and/or consult with the U.S. Department of Commerce, the U.S. Department of State, or the relevant U.S. embassy to learn more about the target. Information from these sources is best


2

analyzed by an experienced FCPA practitioner knowledgeable about the FCPA and the current state of FCPA enforcement.

Due Diligence Plan If an acquirer determines that a target presents a potential FCPA risk, the acquirer should prepare a comprehensive FCPA due diligence work plan focused on the target’s risk profile. It is critically important that FCPA due diligence include more than just a review of the target’s financial statements. Comprehensive FCPA due diligence programs also should include a review of the following:

� The ownership structure of the target, including whether any individual who may be deemed a foreign official owns or is involved in the operation of the business

� The target’s relationships with third parties, including agents, vendors, joint-venture partners, distributors, and so forth

� The target’s dealings with any foreign officials or commercial dealings with state-owned or state-controlled customers

� The target’s tax, customs, and immigration matters and its government licenses, permits and certifications, and its procedures for dealing with these issues

� The target’s political activities, community development programs, and charitable activities

� The target’s anti-corruption compliance program, with a focus on how it is implemented, monitored, and audited, including details on reported potential violations and information on the current status/disposition of any such matters

� The target’s policies regarding entertainment of government officials, including a list of all such expenses and the officials involved

� An accounting of all payments made to reimburse government officials for any reason, including visits to conferences or elsewhere

� Any suspected FCPA violations that have been investigated by the target, and any investigation results

� Any inquiries from any government regarding potential bribes, whether current or settled

� The target’s financial and accounting records, including a detailed analysis of third-party expenses such as commissions and travel, entertainment, and marketing expenses

� Any concerns raised by an audit of the company books or inquiry by the government into the accuracy of the company’s books and records or the adequacy of the target’s internal controls


3

� The target’s financial and accounting controls

� Any FCPA “red flags” uncovered during the due diligence process

What If a Potential Violation Is Uncovered?

Discovery of a potential FCPA issue during due diligence should not, as a general matter, kill the deal. How the acquirer deals with the information obtained from FCPA due diligence, however, will have significant implications on the acquirer’s potential FCPA exposure.

Based on a number of DOJ FCPA Opinion Procedure Releases, it is clear that the DOJ expects acquiring companies to be vigilant and to identify FCPA issues prior to closing. The Opinion Procedure Releases, though not precedent, offer useful benchmarks for acquiring companies and identify the following factors the DOJ will consider in analyzing an acquirer’s potential FCPA exposure for a target’s pre-closing conduct. The DOJ is less likely to hold the acquirer responsible if it:

� Discloses the conduct at issue to the DOJ/SEC and to the public

� Issues instructions to all affected affiliates and employees to cease all illicit payments or other questionable conduct

� Suspends the most senior officers and employees implicated in the potentially violative conduct, pending the conclusion of the investigation

� Implements a system of internal controls at the target designed to detect and prevent FCPA violations

The DOJ also is likely to look favorably on an acquiring company that:

� Continues to cooperate with the DOJ, SEC, and foreign law enforcement authorities with respect to the conduct at issue

� Appropriately disciplines any employees or officers of the target found to have made or authorized illicit payments, including cutting all ties to employees, agents, or other actors associated with the FCPA violations

� Discloses to enforcement agencies any additional pre-acquisition payments to foreign officials made by the target or its subsidiaries that are discovered after the completion of the acquisition

� Extends to the target the acquirer’s existing FCPA compliance program, and modifies the program as appropriate to ensure that it is reasonably designed to detect and deter violations of the FCPA and foreign anti-bribery laws


ELEMENTS OF AN EFFECTIVE FCPA CORPORATE COMPLIANCE PROGRAM1

Corporate Policy

A compliance program should begin with a clearly articulated corporate policy prohibiting violations of the Foreign Corrupt Practices Act (FCPA) and other applicable anti-corruption laws. It also should reflect the promulgation of a compliance code, standards, and procedures designed to detect and deter violations of the FCPA and other anti-corruption laws, and should otherwise promote an organizational culture that encourages ethical conduct and a commitment to compliance.

Standards and Procedures

At a minimum, a corporate FCPA compliance program should include standards and procedures that address the following areas:

� Transactions involving “things of value” given or promised, directly or indirectly, to “foreign officials”

� Facilitating or “grease” payments involving foreign officials

� Promotional or marketing expenses involving foreign officials, including policies addressing expenditures for gifts, meals, travel, and entertainment

� Political contributions to foreign candidates, parties, or other political activity

� Donations, scholarships, internships, sponsorships, or other charitable contributions

� Transactions indirectly involving foreign officials through third parties and intermediaries, including pre-transactional due diligence, representations, warranties, contractual clauses, and defined “red flags”

� Investments in international joint ventures, international mergers/acquisitions, or other international investments

� Requests for “split” or “offshore” payments

� Payments otherwise lawful under the FCPA, but nevertheless impermissible under foreign local law

� A system of financial and accounting procedures, including a system of internal accounting controls, designed to ensure the maintenance of fair and accurate books, records, and accounts

1 These elements are based on the components of an effective compliance and ethics program set forth in the

U.S. Sentencing Guidelines § 8B2.1 and incorporate FCPA-specific compliance metrics found in recent U.S. Department of Justice non-prosecution and deferred prosecution agreements (e.g., Willbros Group Inc. (May 2008), AB Volvo (March 2008)).


2

Certifications

The FCPA policies, standards, and procedures should apply to all directors, officers, and employees, and certain business partners in foreign jurisdictions such as agents, consultants, representatives, distributors, and joint venture partners (collectively, Third Parties). Directors, officers, employees, and Third Parties should be required to certify annually and in writing that the signing party: (a) has read, understands, and will comply with the company’s FCPA policies, standards, and procedures; and (b) has not participated in any unreported or prohibited transactions or activities within the reporting period, and knows of no participation in prohibited activity by any other director, officer, employee, or Third Party.

Oversight

The board of directors (or other organizational governing authority) should have overall responsibility for the compliance program and must remain knowledgeable about the content and operation of the program. One or more senior corporate officials within the organization should have day-to-day responsibility for the implementation and oversight of the FCPA policies, standards, and procedures. The person(s) responsible for the day-to-day compliance program must be given adequate resources and authority, must periodically report to senior officials within the organization and the board of directors, and must be given direct access to the board of directors (or a designated sub-group such as an audit committee).

Communications

Mechanisms should be designed to ensure that the FCPA policies, standards, and procedures are effectively communicated to all directors, officers, employees, and Third Parties, including: (a) periodic training; and (b) periodic written communications concerning the requirements of the FCPA.

Reporting Procedures

The program should include an effective system for reporting (both directly and anonymously) suspected criminal conduct and/or violations of the FCPA compliance policies, standards, and procedures for directors, officers, employees, and Third Parties.

Responding to Possible Violations

The compliance program should include policies, standards, and procedures that allow an organization to respond reasonably to any violations detected, including appropriate investigative procedures and mechanisms, and, upon completion of an investigation, analysis to determine what modifications to the compliance program are necessary to prevent future similar misconduct.


3

Disciplinary Procedures

Appropriate disciplinary procedures should be developed and implemented to address, among other things, conduct that violates the FCPA and other applicable anti-corruption laws as well as the failure to take reasonable steps to prevent and detect misconduct by others.

Due Diligence of Third Parties

The compliance program should include appropriate pre-retention due diligence and post-retention oversight of Third Parties and the maintenance of complete records and files relating to such due diligence and oversight.

Standardized Agreements for Third Parties

The company should include standard provisions in contracts with Third Parties that are reasonably calculated to prevent and detect FCPA violations. These provisions may, depending on the circumstances, include: (a) FCPA representations and undertakings relating to compliance with the FCPA; (b) the right to conduct audits of books and records; and (c) termination rights if there is any breach of any anti-corruption law or a breach of representations and undertakings related to such matters, including the ability to disclaim and reverse any economic benefit that would otherwise be received based on the actions of the Third Parties.

Periodic Audits and Risk Assessments

The compliance program should include periodic audits and risk assessments to ensure compliance with, and the successful implementation of, FCPA policies, standards, and procedures.


MINIMIZING FCPA COMPLIANCE RISKS OF CONDUCTING BUSINESS ABROAD

THROUGH THIRD PARTIES

Every U.S. company that conducts or seeks business abroad is subject to the Foreign Corrupt Practices Act (FCPA). The FCPA’s antibribery provisions generally prohibit U.S. citizens or firms, or people operating in U.S. territory, from offering, paying, promising or authorizing the payment of money or “anything of value” to a “foreign official” in order to “obtain or retain business” or to secure an improper advantage.1

Set forth below are our suggested “best practices” for minimizing an often-overlooked FCPA risk — conducting business abroad indirectly through third-party representatives, agents, or distributors. A common FCPA misconception is that the FCPA’s antibribery provisions do not apply if a company does business in a foreign country indirectly through third parties. The FCPA’s antibribery provisions, however, prohibit not only direct payments to a foreign official to obtain or retain business, but also indirect payments made through third parties. The third-party payment provisions of the FCPA prohibit 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 any foreign official.”

Like many other elements of the FCPA, this knowledge requirement is broadly interpreted. It can be satisfied not only if a company has actual knowledge that a third party is making an improper payment to a foreign official, but also if a company is willfully blind or consciously disregards facts that suggest an improper payment is being made by a third party to a foreign official on its behalf.

A parent company should employ best practices due diligence not just to its own agents, but also to agents engaged by all subsidiaries and affiliates over which the parent company exercises control and supervision. In cascading FCPA due diligence policies down throughout the corporate organization, a parent company should not be guided by traditional notions of corporate law (i.e., when are the acts of a subsidiary or affiliate attributable to the parent company for liability purposes?).

1 These elements of an FCPA antibribery violation are broadly interpreted. “Anything of value” includes more than

just the payment of cash; it has been interpreted to include, among other things, gifts and excessive travel and entertainment expenditures. “Foreign official” includes more than just traditional government officials or individuals employed by government departments or agencies; it has been interpreted to include individuals employed by a commercial enterprise that is owned or controlled by a foreign government. The “obtain or retain business” also is broadly interpreted; it can be satisfied not only when a thing of value is given to a foreign official to secure a government contract, but also when the thing of value influences a foreign official to take action or refrain from taking action that benefits the payor in conducting business generally such as in seeking reduced tax payments or custom duties or obtaining a government-issued license or permit.


2

This is true because, when it comes to enforcement of the FCPA’s books and records and internal controls provisions, the enforcement authorities seem to have adopted a “substance over form” enforcement approach. This approach is illustrated by the Halliburton enforcement action, where the involvement of KBR (itself a subsidiary of Halliburton) in the company used by the joint venture to engage agents was indirect rather than direct.

Policing such a tangled web of risks requires care and discipline on the part of the company. The following offers a number of practical steps a company can take to minimize its FCPA third-party risks:

Pre-Engagement Due Diligence of Third Parties

Prior to engaging a third party, a company should:

� Conduct due diligence using publicly available databases to determine if there are known worrisome facts regarding the third party

� Require the third party to complete a detailed FCPA questionnaire

� Have the third party execute an FCPA acknowledgment letter

� Use these materials, and other information, to assemble a complete and thorough due diligence file on the third party

FCPA Questionnaire

The FCPA questionnaire should be designed to trigger certain FCPA “red flags.” At a minimum, the third party should provide:

� Contact information of its owners/principals and board of directors, including percentage of ownership by each, and other businesses in which each might have an interest

� Information on related companies

� Business, banking, and credit references

� Information on relationships with current or former government officials or political parties, including relationships of close family members with the government

All of this information must be examined and any red flags addressed and resolved before agreeing to a formal business relationship.

FCPA Acknowledgment Letter

A company should secure the third party’s pledge to abide by the company’s FCPA policies and procedures. The company should send prospects an acknowledgment


3

letter that generally explains the FCPA requirements and the company’s commitment to FCPA compliance. At a minimum, the third party should acknowledge, in writing, that it:

� Has been made aware of, understands, and agrees to comply with the FCPA

� Understands that the company is subject to the FCPA and that its actions can subject the company to FCPA scrutiny

� Acknowledges that the third party will be required to provide proof of the disposition of funds received under the arrangement, and will be required to open its books and records if there is any reasonable suspicion of violation of the FCPA

� Acknowledges that any violation of the FCPA will constitute grounds for immediate termination of the relationship, with full return of fees paid under the arrangement to the company

FCPA Due Diligence File

The first question U.S. regulators will likely ask in an enforcement action is: What due diligence did the company conduct prior to engaging the third party? While due diligence is not a legal defense to an FCPA violation, the amount of due diligence conducted has a close bearing on whether the U.S. company will be assumed to have “knowledge” of a violation, and also the level of fines/sanctions that the U.S. government will consider imposing. A company will be in the best possible position to answer this question if it has created a complete pre-engagement due diligence file.

In addition to the completed FCPA questionnaire and an executed FCPA acknowledgement letter, a thorough FCPA due diligence file should include a report summarizing the company’s due diligence efforts, the resolution of any red flags raised during the due diligence process, and a list of company personnel or counsel who performed specific due diligence activities. At a minimum, the due diligence report should discuss:

� Why third-party services are necessary and whether its fees are reasonable

� The third party’s business experience and qualifications

� A summary of the third party’s business, banking, and credit references

� The identification and resolution of any FCPA red flags

Common FCPA red flags include the following:

� The third party is related or otherwise connected to a foreign official

� The third party places reliance on political/government contacts as opposed to knowledgeable staff and investment of time to promote company interests


4

� The third party is unwilling to agree in writing to abide by the FCPA and other relevant laws and company policies

� The third party is unwilling to agree in writing to subject its books and records to audit by the company

� The third party wants to keep the representation secret

� The third party wants payment through convoluted or suspicious means

Formal Engagement of a Third Party

Every relationship with an international third party should be memorialized in a written agreement. Willful blindness or conscious disregard of facts that suggest a third party might make an improper payment cannot be remedied by mere contractual language prohibiting such payments. Even so, a company should include in its written agreement with the third party certain contractual provisions, including the following:

� Third-party representations and warranties that it is not owned or controlled by a foreign government, that no foreign official holds an ownership interest in it, and that it will abide by the company’s FCPA compliance policies and procedures

� The right of the company to audit, at its discretion, the third party’s books and records and other business records2

� The right of the company to terminate the agreement if it has a good-faith belief that the third party has made improper payments, and to have all funds previously paid under the arrangement be returned

� The right of the company to disclose the third party’s conduct to U.S. regulators

� The right of the company to require annual certifications of prior and future compliance with the FCPA, to be signed by all significant members of the third party (sales people, people with regular contact with the government, and so forth)

Post-Engagement Monitoring of the Relationship

Vigilance over a third party’s activities does not end when the third party is engaged. Rather, it continues during the period the third party is engaged by the company. At a minimum, and as warranted by the circumstances of the third party’s engagement (for instance, is the third party dealing with foreign government officials or operating in a notoriously corrupt country?), a company should have its third-party business partners certify, on an annual basis, that they are in compliance, and

2 While the enforcement agencies have long suggested that audit rights should be included in third-party

contracts, they have nevertheless recognized that there may be “non-red flag” business reasons for why such provisions may not be practicable.


5

will continue to comply, with the company’s FCPA policies and procedures. The arrangement should continue to be monitored, to ensure that the amount of the payment is commensurate with the value of known, legal work that the third party is conducting. In addition, regular audits of the books and records of the third party should be considered, even if no suspicious circumstances present themselves. Any red flags raised by the third party’s activities should be fully investigated and the relationship reevaluated based on the results.

the uk bribery act: its global reach on us and other ... · the uk bribery act: its global reach on...

Documents