Webcast: FCPA Trends in the Emerging Markets of Asia, Russia, Latin America and Africa 9th Annual Complimentary Webcast Briefing

F. Joseph Warin Joel M. Cohen Kelly S. Austin Benno Schwarz Sacha I. Harber-Kelly Oliver D. Welch January 8, 2019 MCLE Certificate Information

MCLE Certificate Information

• Most participants should anticipate receiving their certificate of attendance in four weeks following the webcast.

• Virginia Bar Association members should anticipate receiving their certificate of attendance in six weeks following the webcast.

• All questions regarding MCLE Information should be directed to Jeanine McKeown (National Training Administrator) at 213–229-7140 or [email protected].

Gibson Dunn 2 Topics to Be Discussed

• An Overview of FCPA Enforcement • Emerging Market Trends: Asia, Russia, Latin America, and Africa - China: Anti-Corruption Enforcement & Trends - Russia: Anti-Corruption Enforcement & Trends - Latin America: Anti-Corruption Enforcement & Trends - South Korea: Anti-Corruption Enforcement & Trends - India: Anti-Corruption Enforcement & Trends - Africa: Anti-Corruption Enforcement & Trends • Global Trends and Risk Mitigation Strategies • Appendix: The FCPA

Gibson Dunn 3 An Overview of FCPA Enforcement

Gibson Dunn 4 FCPA Enforcement Actions Per Year (2009-2018)

Number of FCPA Enforcement Actions Per Year

50 48 DOJ Actions

45 SEC Actions

40

35 32 29 30 26 26 25 25 23 21 21 19 20 17 17 14 15 12 11 10 10 10 9 10 8

5

0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Gibson Dunn 5 Number of FCPA Enforcement Actions by Country (1978 to Present*)

China 97 Nigeria 75 Mexico 60 Indonesia 51 Iraq 49 Brazil 45 Saudi Arabia 37 Argentina 35 India 33 Russia 31 Venezuela 26 Business conduct in China remains Angola 24 Kazakhstan 23 the largest source of FCPA actions in Thailand 22 Egypt 18 Malaysia 18 the history of the statute. Guinea 16 South Korea 16 Panama 15 Ivory Coast 15 Vietnam 15 Haiti 15 Costa Rica 14 Uzbekistan 14 Azerbaijan 14 DRC 13 Uganda 13 Greece 12 Iran 12 UAE 11 Ecuador 11 Colombia 11 Dominican Rep. 11 Honduras 10 Poland 10 Taiwan 10 Chile 10 Turkey 9 Bangladesh 9 Niger 8 Gabon 8 Nicaragua 8 Algeria 8 0 20 40 60 80 100 120

* Minimum eight enforcement actions. Gibson Dunn 6 Enforcement of the FCPA: Criminal Penalties

Anti-Bribery Provisions • Corporations: USD 2 million fine or twice the pecuniary gain or loss. • Individuals: Up to five years’ imprisonment, and a USD 250,000 fine or twice the pecuniary gain or loss. Books and Records Provisions • Corporations: Criminal penalties up to a USD 25 million fine. • Individuals: Up to 20 years’ imprisonment, and a USD 5 million fine. Total Value of Corporate FCPA Monetary Resolutions (2004 – 2018)

$2,500,000,000

$2,000,000,000

$1,500,000,000

$1,000,000,000

$500,000,000

$0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Gibson Dunn 7 Leading FCPA Enforcement Actions: Top Ten Monetary Settlements

No. Company Total Resolution DOJ Component SEC Component Date

1 Siemens AG* $800,000,000 $450,000,000 $350,000,000 12/15/2008

2 Alstom S.A. $772,290,000 $772,290,000 -- 12/22/2014

3 Société Générale S.A. $585,000,000 $585,000,000 -- 6/4/2018

4 KBR/Halliburton $579,000,000 $402,000,000 $177,000,000 2/11/2009

5 Teva $519,000,000 $283,000,000 $236,000,000 12/22/2016

6 Telia** $483,103,972 $274,603,972 $208,500,000 9/21/2017

7 Och-Ziff $412,000,000 $213,000,000 $199,000,000 9/29/2016

8 BAE Systems*** $400,000,000 $400,000,000 -- 2/4/2010

9 Total S.A. $398,200,000 $245,200,000 $153,000,000 5/29/2013

10 VimpelCom**** $397,700,000 $230,200,000 $167,500,000 2/18/2016

Gibson Dunn 8 Global Dimension of Enforcement Actions

In addition to record-setting monetary penalties in the U.S., several companies also have paid significant fines to non-U.S. regulators. Total US Company Non-US Resolution Resolution

Siemens’s U.S. FCPA resolutions were coordinated with a Siemens AG USD 800,000,000 EUR 395 million (USD 569 million) anti-corruption settlement with the Munich Public Prosecutor. Odebrecht and Braskem agreed to pay a total of USD 3.5 Odebrecht S.A. & billion for a global settlement with authorities in the U.S., USD 419,800,000 Braskem S.A. Brazil, and Switzerland.

The combined total amount of U.S., Dutch, and Swedish Telia USD 483,000,000 penalties was USD 965.8 million.

Petróleo Brasileiro S.A. – Petrobras entered into agreements with U.S. and Brazilian USD 170,000,000 Petrobras authorities to pay a total fine of USD 853.2 million.

Gibson Dunn 9 Global Dimension of Enforcement Actions (cont’d)

Other Date Company United States Total Jurisdictions Involved Jurisdiction • Agreements: U.S., Germany 12/15/2008 Siemens AG $800,000,000 $800,000,000 $1,600,000,000 • Cooperation: Not identified in press release • Agreements: U.S., Netherlands 2/18/2016 VimpelCom $397,750,000 $397,750,000 $795,000,000 • Cooperation: Norway, Sweden, Switzerland, Latvia • Agreements: U.S., Brazil, Switzerland 12/21/2016 Odebrecht $253,000,000 $3,077,000,000 $3,330,000,000 • Cooperation: U.S., Brazil, Switzerland • Agreements: U.S., U.K., Brazil Rolls-Royce 1/17/2017 $170,000,000 $630,000,000 $800,000,000 • Cooperation: Austria, Germany, Netherlands, Singapore, PLC Turkey • Agreements: U.S., Netherlands, Sweden Telia Company 7/21/2017 $699,000,000 $266,000,000 $965,000,000 • Cooperation: Austria, Belgium, Cyprus, France, Ireland, AB Isle of Man, Latvia, Luxembourg, Norway, U.K. • Agreements: U.S., Netherlands, Brazil SBM Offshore 11/29/2017 $238,000,000 $582,000,000 $820,000,000 • Cooperation: Austria, Belgium, Cyprus, France, Ireland, NV Isle of Man, Latvia, Luxembourg, Norway, U.K. Keppel • Agreements: U.S., Brazil, Singapore 12/22/2017 Offshore & $105,000,000 $316,000,000 $421,000,000 • Cooperation: N/A Marine Ltd Société • Agreements: U.S., France 6/4/2018 $292,000,000 $293,000,000 $585,000,000 Générale SA • Cooperation: U.K., Switzerland Petróleo • Agreements: U.S., Brazil 9/27/2018 Brasileiro S.A. $170,640,000 $682,560,000 $853,200,000 • Cooperation: N/A – Petrobras* * Petrobras entered into an NPA with DOJ and an administrative resolution with the SEC. The SEC resolution Gibson Dunn included FCPA and other charges. As part of that resolution, the SEC ordered Petrobras to pay an additional 10 $933,473,797, which was deemed satisfied by Petrobras’s payments in a related class action settlement. Corruption Trends: Asia, Russia, Latin America, and Africa

Gibson Dunn 11 China

Gibson Dunn 12 China: Market Characteristics

1.4 billion Estimated population of China in 2018. Median age of 37.

USD 299.6 China’s annual foreign trade billion surplus through November 2018. USD 2.27 Total value of exports through November 2018. trillion China’s projected GDP growth rate 6.3% for 2019.

China’s projected inflation for 2.61% 2019. USD 7.95 Off-balance-sheet debt by Chinese local governments. trillion

Sources: Worldometers, China Population 2018 (retrieved on December 15, 2018) http://www.worldometers.info/world-population/china-population/; Hong Kong Trade Development Council, Economic and Trade Information on China (December 14, 2018) http://china-trade-research.hktdc.com/business-news/article/Facts-and-Figures/Economic-and-Trade- Gibson Dunn Information-on-China/ff/en/1/1X000000/1X09PHBA.htm; China: inflation rate from 2012 to 2023 (retrieved on December 15, 2018) https://www.statista.com/statistics/270338/inflation- 13 rate-in-china/; China GDP Annual Growth Rate (retrieved on December 15, 2018) https://tradingeconomics.com/china/gdp-growth-annual. Photo credit: The top image was originally posted Flickr by Kim Sklinar at https://www.flickr.com/photos/17266413@N00/253479003. It was uploaded to Wikimedia Commons using Flickr upload bot on January 15, 2009 by Quatro Valvole. This file is licensed under the Creative Commons Attribution-Share Alike 2.0 Generic license (https://creativecommons.org/licenses/by-sa/2.0/deed.en). China: Corruption Landscape

th th China ranks 77 out of 180 China ranks 66 out of 140 According to World Bank’s countries in Transparency countries in the World Economic Global Governance Indicators, rd International’s Corruption Forum’s Corruption Index. China improved from the 33 th Perceptions Index. percentile in 2007 to the 47 percentile in 2017 on control of corruption.

As Xi Jinping’s highly political anti-corruption campaign continues, more than 1.5 million officials have been sanctioned over the past six years as part of the crackdown. Since January 1, 2018:

Number of officials disciplined by CCDI in China for violations of the “Eight Rules” 48, 589 (embezzlement, bribery, abuse of power, misappropriation, dereliction of duty, and malpractice).

48, 456 Number of cases investigated by CCDI in China for violations of the “Eight Rules.”

68, 509 Number of officials investigated by CCDI in China for violations of the “Eight Rules.”

Sources: Xinhua, 央企正风反腐怎么抓 ——访中央纪委国家监委驻国资委纪检监察组组长陈超英 (August 28, 2018) http://www.xinhuanet.com/fortune/2018- 08/28/c_1123337914.htm; CCDI, 2018年10月全国查处违反中央八项规定精神问题 5585起 (November 27, 2018) http://www.ccdi.gov.cn/toutiao/201811/t20181127_184069.html; Gibson Dunn The Global Competitiveness Report 2018 (October 16, 2018) http://www3.weforum.org/docs/GCR2018/05FullReport/TheGlobalCompetitivenessReport2018.pdf; Worldwide 14 Governance Indicators Project (September 21, 2018) http://info.worldbank.org/governance/wgi/index.aspx#reports; Transparency International, Corruption Perceptions Index 2017 (February 21, 2018) https://www.transparency.org/news/feature/corruption_perceptions_index_2017. China: Anti-Corruption Campaign and Domestic Enforcement

2018 saw a tide of investigations, arrests, and prosecutions of high-level officials:

• Former Interpol President and Vice Minister of China’s • Former Vice Governor of Liaoning stood trial in Ministry of Public Security Meng Hongwei was November 2018 and pleaded guilty to accepting money detained by Chinese authorities in September 2018. and property worth more than USD 1.53 million Meng is being investigated for accepting bribes, and the between 2000 and 2017. Ministry of Public Security announced that it would set up a task force to go after Meng’s associates. • Former Chairman of the China Insurance Regulatory Commission Xiang Junbo pleaded guilty to taking bribes worth over USD 3 million. • In October 2018, former Head of the Cyberspace Security Administration Lu Wei pleaded guilty to charges of accepting bribes, taking advantage of his official position and using other officials to seek profits. He was expelled from the CCP in February 2018. • Former Party Secretary of Chongqing and Politburo member Sun Zhengcai, once seen as a potential successor to Xi Jinping, pleaded guilty in April 2018 to accepting cash and gifts worth nearly USD 27 million. Meng Hongwei (November 2017)

Sources: SCMP, China accuses former Interpol chief Meng Hongwei of taking bribes (October 8, 2018) https://www.scmp.com/news/china/politics/article/2167451/china-accuses-former-interpol-chief-meng-hongwei- taking-bribes; SCMP, China’s disgraced insurance regulator pleads guilty to taking US$3 million in bribes (June 14, 2018) https://www.scmp.com/news/china/policies-politics/article/2150832/chinas-disgraced- Gibson Dunn insurance-regulator-pleads-guilty; SCMP, China’s former internet tsar Lu Wei pleads guilty to corruption (October 19, 2018) https://www.scmp.com/news/china/politics/article/2169329/chinas-former-internet-tsar- 15 pleads-guilty-corruption; Reuters, Former top Chinese official admits taking 170 million yuan in bribes (April 12, 2018) https://www.reuters.com/article/us-china-corruption/former-top-chinese-official-admits-taking- 170-million-yuan-in-bribes-idUSKBN1HJ090; Xinhua, Former vice governor of NE China province stands trial (November 22, 2018) http://www.xinhuanet.com/english/2018-11/22/c_137625030.htm. Photo credit: This image was originally posted to Flickr by Web Summit at https://www.flickr.com/photos/74711243@N06/38207298162. It was reviewed on November 8, 2017 by FlickreviewR 2 and was confirmed to be licensed under the terms of the Creative Commons Attribution 2.0 Generic license (https://creativecommons.org/licenses/by/2.0/deed.en). China: Anti-Corruption Campaign and Domestic Enforcement (cont’d)

• Former Chairman of China Huarong Asset • Former Chairman of the Shanghai Airport Authority was Management Co. Lai Xiaomin was under investigation placed under investigation in connection with corruption in April 2018 on accusations of accepting a total of USD allegations. The Shanghai Airport Authority is a state- 39.5 million in bribes. Huarong is the biggest of China’s owned enterprise. four state-run distressed debt managers. Huarong withdrew plans for a listing in China in September 2018 • China has extradited from Bulgaria the former Deputy after reporting a 90% plunge in first-half profit. Head of a Zhejiang County, Yao Jinqi, who fled China in 2005 after being investigated for taking bribes. This is the • Former Xinjiang Governor and Vice Chairman of the first time China has successfully extradited a corruption National Development and Reform Commission Nur suspect from a member state of the EU. Bekri, who is a member of China’s ethnic Uighur minority, has been placed under investigation in connection with corruption allegations.

• Former Party Secretary of Gansu Province pleaded guilty to taking a total of USD 9.7 million in bribes. He was accused of taking bribes from Ye Jianming, the former Head of CEFC China Energy, a private company and the country’s fourth-largest oil conglomerate, who was in turn detained since early 2018 for suspected economic crimes.

Sources: SCMP, Vanished Chinese oil tycoon linked to senior official’s bribery case (October 12, 2018) https://www.scmp.com/economy/china-economy/article/2168239/vanished-chinese-oil-boss-linked-senior-officials-bribery-case; Reuters, China’s CEFC founder Ye named in corruption case – state media (October 12, 2018) https://af.reuters.com/article/energyOilNews/idAFL4N1WS26I; Bloomberg, Huarong Woes Worsen as Firm Withdraws Its China Listing Plan (September 11, 2018) https://www.bloomberg.com/news/articles/2018-09-11/huarong-woes-worsen-as-firm-withdraws-its-china-listing-plan; SCMP, Chinese corruption inquiry finds US$29 million in cash at homes of ex-boss of Huarong Asset Management Gibson Dunn (August 11, 2018) https://www.scmp.com/news/china/policies-politics/article/2159221/chinese-corruption-inquiry-finds-us39-million-cash; Chinadaily, China extradites duty crime suspect from Bulgaria (November 30, 2018) 16 http://www.chinadaily.com.cn/a/201811/30/WS5c00ab61a310eff30328c0d3.html; Reuters, China says graft suspect extradited from EU state for first time (November 30, 2018) https://www.reuters.com/article/us-china-corruption-bulgaria/china- says-graft-suspect-extradited-from-eu-state-for-first-time-idUSKCN1NZ0A8; Caixin, Shanghai Airport Authority Boss Probed for Graft (August 7, 2018) https://www.caixinglobal.com/2018-08-07/shanghai-airport-authority-boss-probed-for-graft- 101312265.html; Reuters, China places top energy official, a senior Uighur, under investigation (September 21, 2018) https://www.reuters.com/article/us-china-corruption/china-places-top-energy-official-a-senior-uighur-under-investigation- idUSKCN1M104H. Photo credit: This image was published by Krokodyl and is licensed under the Creative Commons Attribution-Share Alike 3.0 Unported license (https://creativecommons.org/licenses/by-sa/3.0/deed.en). China: Enforcement – National Supervision System

China’s new National Supervision System is an indication that the anti-corruption campaign will continue into Xi Jinping’s second term. Structure of the National Supervision System • National Supervision Commission (“NPC”) • Came into effect in March 2018 with the election of its first leader. • Consolidates anti-corruption powers from the National Bureau of Corruption Prevention, Ministry of Supervision and the anti-corruption department of the People’s Procuratorate.

• Expands the scope of China’s existing anti-corruption agencies, which previously extended only to the executive branch. The CCDI covers Party members only. The new Commission covers all public servants, regardless of branch of government or Party membership, including SOE executives. • Constitutionally, the new National Supervision Commission is at the same level as the State Council, the Supreme People’s Court and the Supreme People’s Procuratorate and has been described as a new “fourth branch” of government. • Local Supervision Commissions: Being established at the provincial, prefecture, city, and county levels.

Sources: SAIC, 市场监管总局关于开展反不正当竞争执法重点行动的公告 (May 24, 2018) http://home.saic.gov.cn/fldyfbzdjz/gzdt/201805/t20180524_274291.html; Reuters, China sacks top official over vaccine scandal, firm may de-list (August 16, 2018) https://www.reuters.com/article/us-china-vaccines/china-sacks-top-official-over-vaccine-scandal- Gibson Dunn firm-may-de-list-idUSKBN1L11BQ; CCDI, 上海:整治医疗卫生系统腐败和作风问题 (May 14, 2018) http://www.ccdi.gov.cn/yaowen/201804/t20180427_170804.html. 17 China: Anti-Corruption Enforcement Agencies Post-March 2018

Offenses Commercial Involving Offenses Bribery Party Officials Involving All Involving Non- at a Lower “Public Public Level Than Officers” Officials Investigators Supervisory Suggestions / Disciplinary Measures CCDI NSC AIC

PSB

Administrative Sanctions Party Disciplinary Measures People’s Procuratorates Criminal Prosecution

Gibson Dunn 18 China: Enforcement Trend – Industry Alert

The State Administration for Market Regulation (“SAMR”) and the National Supervisory Commission (“NSC”) have launched campaigns targeting specific sectors as part of their anti- bribery and anti-corruption efforts. • In May 2018, the SAMR announced that it would target Key Takeaways: While the five-month the pharmaceutical, medical devices, and educational window for targeting pharmaceutical, sectors between May and October 2018 in the medical devices and educational enforcement of the revised Anti-Unfair Competition sectors has ended, it is likely that Law (“AUCL”), which clarified the scope of, and Chinese regulators will continue to focus on these industries in their increased the penalty for, commercial bribery offenses. enforcement efforts. Companies • The NSC announced in May 2018 that it would operating in these sectors may find themselves the subjects of inquiries implement specific measures to fight corruption in and should prepare for heightened Shanghai’s healthcare system, noting the widespread enforcement activity. Given the practice of medical personnel receiving bribes. The vicarious liability provision in the NSC has also launched a corruption investigation revised AUCL, companies should also ensure adequate vetting, training, and against the former Deputy Director of the China Food monitoring of third parties. and Drug Administration in relation to reports of faulty vaccines.

Sources: SAIC, 市场监管总局关于开展反不正当竞争执法重点行动的公告 (May 24, 2018) http://home.saic.gov.cn/fldyfbzdjz/gzdt/201805/t20180524_274291.html; Reuters, China sacks top official over vaccine scandal, firm may de-list (August 16, 2018) https://www.reuters.com/article/us-china-vaccines/china-sacks-top-official-over-vaccine-scandal- Gibson Dunn firm-may-de-list-idUSKBN1L11BQ; CCDI, 上海:整治医疗卫生系统腐败和作风问题 (May 14, 2018) http://www.ccdi.gov.cn/yaowen/201804/t20180427_170804.html. 19 China: Legislative Developments

Amendments to the Criminal Procedure Law (“CPL”) • The CPL amendments became effective on October 26, 2018 and are closely aligned with the government’s anti-corruption efforts. The following amendments will likely impact domestic anti-corruption enforcement:

The revised CPL codifies In light of the National The amendments introduce leniency rules that Supervision System that has trials in absentia procedures encourage suspects to been in place since March 2018, for certain crimes, including cooperate in government the revised CPL removes all bribery and corruption. In the investigations. For references to crimes relating to past, suspects who fled the example, suspects who abuse of public office because country could only be tried plead guilty may receive a such misconduct is now after they returned to China, lesser or mitigated governed by the Supervision requiring costly extradition sentence, and in some Law. The revised CPL also procedures. Under the cases be exempted from establishes procedures where revised CPL, courts may now prosecution if they make supervision commissions may deliver judgments in cases “major meritorious transfer cases to procuratorates involving absentee contributions.” for prosecution. defendants.

Gibson Dunn 20 China: Legislative Developments (cont’d)

International Criminal Judicial Assistance Law (“ICJA Law”) The ICJA Law, which became effective on October 26, 2018, governs mutual assistance between China and foreign countries in criminal cases. More significantly, the ICJA Law stipulates that no individual or entity within Chinese territory is allowed to provide foreign countries with evidence, materials, or assistance in connection with criminal cases without the consent of the Chinese government. Approval from the government is required before any person or entity in China can comply with a foreign subpoena in relation to a criminal matter.

Key Takeaways: The ICJA law has caused considerable confusion in the market as there is currently no guidance on the process by which approval from the PRC government may be obtained. Coupled with existing States Secrets laws, responding to subpoenas and document requests when material is in the PRC is becoming increasingly difficult.

Photo credit: This image was originally posted to Flickr by Michel Temer at https://flickr.com/photos/52454189@N07/35644403331. It was reviewed on July 9, 2017 by FlickreviewR and was confirmed to be licensed under the terms of the Creative Commons Attribution 2.0 Generic license (https://creativecommons.org/licenses/by/2.0/deed.en). Gibson Dunn 21 China: Legislative Developments (cont’d)

ICJA Law—Key Questions Going Forward Prepare for ICJA Law

The ICJA Law is ambiguous on several key points, and China has • Ensure relevant employees and third yet to issue guidance or regulations providing additional clarity. parties are made aware of the law. Key questions going forward include the following: • Implement a system whereby • What are the penalties for violations? documents originating in the PRC are • What is the process for obtaining government permission to not transferred to foreign criminal cooperate? enforcement agencies without approval from Legal. • Will there be liability under the statute where an agency conducting a civil or administrative enforcement investigation • Secure local counsel in the PRC to (such as the SEC) shares (or states an intention to share) provide regular updates on the status materials with the DOJ or other criminal enforcement of ICJA Law implementation and authorities? enforcement. • How broadly will the term “assistance” be construed? • If you are currently under criminal investigation, consider alerting enforcement authorities to the new law and its current level of ambiguity.

Gibson Dunn 22 China: FCPA Enforcement Actions

Since 2002, the DOJ and the SEC have brought enforcement actions against 51 corporations relating to business activities in China. Automotive • Mead Johnson Nutrition, 2015 Technology • Daimler AG, 2010 • Bristol-Myers Squibb, 2015 • Paradigm BV, 2007 Aircraft • SciClone Pharmaceuticals, 2016 • Faro Technologies, 2008 • Nordam Group, Inc., 2012 • Novartis AG, 2016 • RAE Systems, Inc., 2010 Cosmetics/Personal Care • AstraZeneca, 2016 • Rockwell Automation, 2011 • Avon Products (China) Co., Ltd, 2014 • GlaxoSmithKline, 2016 • IBM Corp., 2011 • Nu Skin Enterprises, 2016 • Stryker Corporation, 2018 • PTC Inc., 2016 Data and Analytics Infrastructure • Akamai Technologies Inc., 2016 • Dun & Bradstreet, 2018 • Schnitzer Steel Industries, 2006 • Panasonic, 2018 Mining/Energy • Watts Water Technologies, Inc., 2011 • United Technologies Corp., 2018 • Maxwell Technologies, 2011 • General Cable, 2016 • Polycom Inc., 2018 • BHP Billiton, 2015 Manufacturing Telecommunications Finance • Control Components, Inc., 2009 • Alcatel-Lucent, 2007 • JPMorgan, 2016 • InVision Technologies, 2004 • UTStarcom, Inc., 2009 • Credit Suisse, 2018 • York International, 2007 • Veraz Networks, Inc., 2010 Gaming • Siemens AG, 2008 • Qualcomm Inc., 2016 • Las Vegas Sands, 2016 & 2017 • ITT Corporation, 2009 Tobacco Healthcare/Life Sciences • Avery Dennison, 2009 • Alliance One International, 2010 • Diagnostic Products Corp., 2005 • Diebold, Inc., 2013 • AGA Medical, 2008 • Tyco, 2012 • Biomet, Inc., 2012 • Keyuan Petrochemicals, Inc., 2013 • Pfizer/Wyeth, 2012 • Nortek Inc., 2016 • Eli Lilly, 2012 • Johnson Controls, 2016 • Bruker Corp., 2014

Gibson Dunn 23 China: Lessons Learned from 2018 FCPA Enforcement Actions Involving China

Background: Hong Kong unit Background: Alleged to have Background: Two subsidiaries alleged to have hired over 100 ignored obvious red flags when allegedly made improper employees at the request of engaging third-party sales agents payments to Chinese officials in government officials in in China. The company order to obtain non-public exchange for lucrative business allegedly used these sales agents information. The company deals. to engage sub-agents that would falsely recorded the payments as legitimate business expenses. Lesson: Hiring should not favor not have otherwise qualified per Lesson: Ensure that employees those with familial connections company policy. of subsidiaries in high risk or be driven by business Lesson: Ensure employees locations commit to ethical opportunities. Ensure all recognize third party red flags, business practices. While a applicants are subject to the and are aware of channels for centralized set of internal same screening process, and are reporting. Third-party controls may be appropriate, required to disclose any close screening, qualification and tailor your compliance program government connections. “Wall monitoring should account for to account for local risks and off” employees with conflicts. risks posed by subagents hired by those third parties. cultural differences.

Gibson Dunn 24 China: Lessons Learned from 2018 FCPA Enforcement Actions Involving China (cont’d)

Background: In its second FCPA Background: Allegedly Background: Senior managers enforcement action, the company provided trips and gifts to in China allegedly provided allegedly failed to maintain Chinese officials, and provided discounts to distributors while internal controls sufficient to payments through its joint knowing that the distributors detect over 20 Chinese third venture to an official in would use them to make parties that were not vetted and exchange for non-public improper payments to approved in accordance with information. employees at Chinese state- company policy. Lesson: Gifts and sponsored owned enterprises. Lesson: Third-party vetting travel remain a significant area Lesson: Rebates, discounts and processes not only help detect of risk for companies operating excessive margins are all problems before they occur, but in China. Implement a gift, common methods for obtaining also are an essential part of a entertainment and travel policy off-book funds, which are often robust compliance program that clearly communicates used to make bribe payments. under the FCPA’s internal acceptable limits to employees Ensure that pricing and controls provisions. and provides clear approval discounting is transparent and processes. tightly controlled.

Gibson Dunn 25 China: U.S.-China Trade Dispute Driving FCPA Enforcement?

There are indications that the FCPA may be used alongside U.S. trade sanctions as a weapon in the intensifying U.S.-China trade dispute.

The DOJ launched the “China “We know that Chinese companies Initiative” in November 2018 to and individuals also have bribed safeguard U.S. national security and government officials in other economic interests against threats from countries in order to win contracts. China. One of the Initiative’s goals is The Criminal Division is committed to “identify Foreign Corrupt Practices to fully enforcing the Foreign Corrupt Act cases involving Chinese companies Practices Act. Bringing these that compete with American offenders to justice will help create a businesses.” level playing field for American companies in foreign markets”. - Brian A. Benczkowski, Assistant Attorney General, Criminal Division (November 2018)

Sources: Department of Justice, Attorney General Jeff Session’s China Initiative Fact Sheet (November 1, 2018) https://www.justice.gov/opa/speech/file/1107256/download; Department of Justice, Assistant Attorney General Brian A. Benczkowski of the Criminal Division Delivers Remarks Regarding Chinese Economic Espionage (November 1, 2018) Gibson Dunn https://www.justice.gov/opa/speech/assistant-attorney-general-brian-benczkowski-criminal-division-delivers-remarks-regarding. 26 RUSSIA

Gibson Dunn 27 Russia: Market Characteristics

146 million Estimated population of Russia in 2018. Median age 39.8.

USD 826 billion Consumer spending (2017).

1.8% Projected GDP growth rate for 2019.

Average inflation for 2018, but 2.8% projected to rise up to 5.1% in 2019.

Capital outflows in % of GDP 3.4% increased compared to 1.1% in 2017.

Political stability and stagnation expected until 2024, when current term of President Putin expires.

Sources: World Bank 2018 Russia Economic Report; International Monetary Fund World Economic Outlook; Russian Central Gibson Dunn Bank; https://data.worldbank.org/indicator/NE.CON.PRVT.CD; https://data.oecd.org/price/inflation-cpi.htm 28 Russia: Corruption Landscape

CORRUPTION PERCEPTIONS 135 INDEX COUNTRY RANK 2017 Anti-Bribery Convention

2018 CORPORATE REPORTING STUDY: Recommendations implemented • 80% of the companies have not banned facilitation payments. • Only 5 companies have a confidential reporting line for corruption and other violations. 34/50 • 42% of the companies declare their intolerance for 2018 corruption. • 26% of the companies extend their anti-corruption policies to third parties. OUTSTANDING RECOMMENDATIONS • 28% of companies do not disclose any information Measures and rules: about their affiliates. • to protect private sector employees. 75% of companies operating abroad do not disclose • • to address money laundering by legal persons. any financial information on the countries of • on reporting of suspected foreign bribery. operation.

Sources: Transparency International “Transparency in Corporate Reporting- Assessing Russia’s Largest Companies”; 2018 OECD Gibson Dunn Phase 2 Follow-up: Additional Written Report by Russia 29 Russia: Latest Regulatory Trends Impacting the Compliance Landscape

Trends Related to Companies • Recent amendments to the KoAP exempt companies from corporate liability for bribery upon self-reporting the wrongdoing to state agencies. • Russian prosecutors can obtain a court-ordered freeze of company assets in corruption- related cases. Russian Counter-Sanctions Trends Related to Bribery Import Substitution • Public register of legal entities sanctioned for violations of corruption related provisions at: https://www.genproc.gov.ru/anticor/register-of-illegal-remuneration/ (in Russian). • New law to cover bribery in the interest of a third party. • Draft law to cover immaterial forms of bribery – project stage. Other Trends • New legislation on enforcement of foreign confiscation decisions.

Sources: http://publication.pravo.gov.ru/Document/View/0001201808030084; Gibson Dunn http://regulation.gov.ru/projects/List/AdvancedSearch#npa=63259; 30 http://www.consultant.ru/document/cons_doc_LAW_34661/129f980be4f92fc0233197a7bac89ebc4024ede8/; Russia: Anti-Corruption Legislative Landscape

Anti-Corruption Laws General Prosecutor’s Office • National Anti-Corruption Plan (adopted every two years by the Russian President) • Federal Law No. 273-FZ “On Combatting Corruption” • Administrative Offenses Code and Criminal Code • Enforcement: General Prosecutor’s office; local prosecutor’s offices; Russian Counter-Sanctions Investigative Committee of the Russian Federation; police. Import Substitution Competition Laws Federal Anti-Monopoly Service • Federal Law No. 135-FZ “On Protection of Competition” • Enforcement: Federal Antimonopoly Service (FAS) Public Procurement Laws • Federal Law No. 44-FZ: state and municipal entities • Federal Law No. 223-FZ: state-controlled or state-owned companies. • In 2018, all open purchasing should be conducted in electronic form. • Enforcement: FAS; General Prosecutor’s office; local prosecutor’s offices.

Gibson Dunn 31 Russia: 2018 FCPA Enforcement Actions Involving Russia

Transport Logistics International Inc., DOJ, March 2018 • Deferred Prosecution Agreement (“DPA”) between Maryland-based transportation company Transport Logistics International (“TLI”) and DOJ regarding an alleged scheme of corrupt payments to an official of a Russian state-owned supplier of uranium and uranium-enrichment services (“TENEX”). Russian Counter-Sanctions • Three year DPA, USD 2 million criminal penalty, as well as agreement to Import Substitution self report the state of TLI’s compliance program.

United Technologies Corporation, SEC, September 2018 • United Technologies Corporation payed USD 13.9 million to settle FCPA offenses in China (aircraft engine business) and Azerbaijan (elevator business). • Otis Elevator unit in Azerbaijan hired agents without any adequate experience from, inter alia, Russia without doing any due diligence and the Otis Russia Manager sent an Otis Russia stamp to officials in Baku to falsify documents.

Sources: https://www.justice.gov/opa/press-release/file/1043216/download; https://www.sec.gov/news/press-release/2018-188; Gibson Dunn http://www.fcpablog.com/blog/2018/9/13/six-compliance-failures-at-united-technologies.html 32 Russia: Special Focus — Financial Transparency

• Banking sector concentration: state-owned entities represent nearly 70% of Russian bank assets. Russian private offshore wealth amounts to • 73.1% nearly 50% of GDP. 64.1% • In 2018, Russia joined the OECD’s Standard for Automatic Exchange of Financial Account Information in Tax 46.9% Matters • Current development undermining financial transparency: Federal Law 482- FZ allows insurance companies and banks 9.8% in certain instances to avoid public 7.3% disclosure of information about their USAUS WorldWorld average Average RUSSIARUSSIA VenezuelaVenezuela UAE executives, obviously with the goal, to avoid exposing them to foreign sanctions. Table data: Alstadsæter, Johannesen and Zucman 2018

Sources: IMF Piercing the Veil - Some $12 trillion worldwide is just phantom corporate investment; World Bank; World Bank RER, p. 9. Gibson Dunn 33 http://www.fcpablog.com/blog/2018/11/30/due-diligence-in-russia-a-public-register-of-bribe- payers.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+fcpablog%2FsLbh+%28The+FCPA+Blog%29 https://www.ey.com/gl/en/services/tax/international-tax/alert--russia-joins-standard-for-automatic-exchange-of-financial-account-information Russia: Special Focus — U.S. and EU Sanctions

• Increase in the use of sanctions under President • The EU financial sanctions against Russia were Trump: issued due to the situation in the Ukraine. Recent extension of EU sanctions for another six months. • More than one sanctions action per week. • Significant extension unlikely due to requirement • 1474 additions to the SDN list. By far the for unanimity for such decisions. largest annual addition in history. • The EU economic sanctions against Russia • Until 2018, EU and US sanctions against include arms embargo, approval requirement and Russia were aligned. Since 2018, US restrictions for the export of Dual-Use goods and sanctions have unilaterally tightened, in energy-related equipment and technology. particular additional SDN Listings. • Regarding Crimea: Extensive economic sanctions, • Further tightening of U.S. sanctions against Russia especially related to investments, imports and seems likely. exports in the transport, telecommunication, energy • Current threats include excluding Russia from sectors, as well as the exploration of oil, gas, and international payments systems. mineral resources.

Sources: https://www.theguardian.com/us-news/2018/aug/19/trump-money-wars-economic-sanctions-trade-tariffs-backfiring, https://ec.europa.eu/fpi/what-we- Gibson Dunn do/sanctions_en, https://www.treasury.gov/resource-center/sanctions/Pages/default.aspx, https://www.washingtontimes.com/news/2018/dec/10/russia-may-end-visa- 34 mastercard-payment-network-con/, EU Regulation Nr. 208/2014 and EU Regulation Nr. 269/2014. https://eur-lex.europa.eu/legal-content/en/TXT/?uri=CELEX:32014R0208, https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32014R0269 and https://eeas.europa.eu/headquarters/headquarters- homepage_en/8442/Consolidated%20list%20of%20sanctions). Russia: Special Focus — Counter-Sanctions by Russia

Focus on goods • Import bans for certain goods from, inter alia, U.S., EU, Canada and Ukraine extended. • Violations of embargo regulations are administrative offenses and can result in seizure and destruction of goods. Focus on individuals • Travel ban for 89 EU officials, as well as persons from the U.S., Canada and Japan. • Amendment to Criminal Code considered: Prohibition to obey foreign sanctions. Further empowerment of the executive branch • Law enabling the government and the President to issue counter-sanctions according to a non-exhaustive list of measures (June 2018).

Sources: http://www.mid.ru/ru/foreign_policy/news/-/asset_publisher/cKNonkJE02Bw/content/id/69698; Gibson Dunn http://kremlin.ru/acts/bank/43117; http://kremlin.ru/events/president/news/46404; 35 https://www.gtai.de/GTAI/Content/DE/Trade/_SharedDocs/Pdf/Maerkte/Russland-Sanktionen/visasperrliste-einreiseverbote- russland.pdf?v=2; http://www.mid.ru/ru/foreign_policy/news/-/asset_publisher/cKNonkJE02Bw/content/id/69698; https://ria.ru/20140320/1000408274.html; http://asozd2c.duma.gov.ru/main.nsf/(Spravka)?OpenAgent&RN=464757-7 Russia: Key Takeaways

• Ongoing geopolitical and trade tensions are expected to continue. • The U.S. is increasingly focusing its foreign policy against Russia on sanctions that impact the Russian economy. Recent political developments, including the current posture by the U.S. Congress and President Trump, make it likely that U.S. sanctions against Russia will be further tightened. • Russia is responding with counter-sanctions and taking financial measures to prepare for further Western sanctions. • Companies with significant Russia exposure, especially in the oil and gas sector, must remain vigilant to timely respond to changes and fluidity in regards to sanctions covering business partners, goods or industrial sectors. • Regarding local corruption efforts, Russia’s recent legislative actions and the enhanced enforcement of foreign confiscation decisions following cases of corruption are positive steps. • Developments with regard to financial transparency are underway. Companies should monitor this process.

Gibson Dunn 36 LATIN AMERICA

Gibson Dunn 37 Latin America: Market Characteristics for Latin American & the Caribbean

The regional Comprises The regional Estimated 8.55% of the The median age economy is expected to level of inflation population is world is 29.5 years. is projected to 654.9 million. population. grow 2.8% in 2019. be 5.7%.

Brazil Argentina Colombia Mexico • Population: 210.9 • Population: 44.7 • Population: 48.7 • Population: 122.3 million. million. million. million. • GDP: USD 1.91 • GDP: USD 475.43 • GDP: USD 282.4 • GDP: USD 1,046.0 trillion. billion. billion. billion. • Brazil ranks 96th • Argentina ranks 85th • Colombia ranks 96th • Mexico ranks 135th of of 180 countries of 183 countries on of 180 countries on 180 countries on the on the Corruption the Corruption the Corruption Corruption Perceptions Perceptions Index. Perceptions Index. Perceptions Index. Index.

Sources: Latin America and the Caribbean Population, WORLDOMETER (Dec. 14, 2018); World Economic Outlook, INTERNATIONAL MONETARY FUND (Dec. 14, 2018); Latin America and Caribbean: Seizing the Momentum (May 11, 2018); Global Competitiveness Report 2018, WORLD ECONOMIC FORUM (Oct. 16, 2018); 2017 Corruption Gibson Dunn Perceptions Index, TRANSPARENCY INTERNATIONAL (Feb. 21, 2018). 38 Latin America: Significant Corruption News

Brazil • Lava Jato continues to combat corruption, launching new phases in 2018. • In April, Keppel announced the finalization of its USD 422 million settlement agreement. • In September, the former CEO of SBM Offshore, N.V. was sentenced to prison. • Eike Batista, once an oil and mining tycoon, was sentenced to 30 years in July, following a trial in Brazil that found him guilty of bribing the former governor of Rio de Janeiro. • Last month, Brazilian prosecutors announced charges against global oil traders Vitol, Trafigura, and Glencore for allegedly paying bribes to Petrobras employees. • Petrobras, a foreign state-owned entity, presented unique facts and an unprecedented resolution. • In September, U.S. authorities resolved with Petrobras in connection with charges under the FCPA’s books-and-records and internal-controls provisions. • “Operation Weak Flesh” exposes bribery in the meatpacking industry. • In June, Joesley Batista was charged with corruption for paying a former federal prosecutor to assist him and another JBS executive to obtain plea deals. In November, Batista was arrested again in connection with a separate investigation of bribery and illegal campaign contributions. • In October, the former CEO and former board president of BRF were indicted, along with 41 others. BRF, the entity, is reportedly negotiating a leniency agreement with authorities. • Most recently, the SEC charged Eletrobras, which is 51% owned by the Brazilian government, with FCPA violations, alleging that the company failed to detect a widespread bribery scheme related to the construction of a nuclear power plant.

Sources: Inside the Petrobras FCPA Resolution, LAW360 (Oct. 10, 2018); Brazil Greenlights Keppel’s Petrobras Bribery Settlement, GLOBAL INVESTIGATIONS REVIEW (April 10, 2018); Oil Services CEO and Executive Sentenced to Prison for Roles in Foreign Bribery Scheme, U.S. DEP’T OF JUSTICE (Sept. 28, 2018); Mining Tycoon, Once Brazil’s Richest Man, Is Sentenced to 30 Years in Prison, N.Y. TIMES (July 3, 2018); World’s Biggest Oil Traders Paid Bribes in Brazil Scandal, REUTERS (Dec. 5, 2018), 39 Gibson Dunn Brazil Prosecutors Charge JBS Shareholder Batista with Corruption, REUTERS (June 25, 2018); Brazil’s Top Appeals Court Orders Release of JBS’s Batista, Ricardo Saud, REUTERS (Nov. 12, 2018); Brazilian Federal Police Indicts Abilio Diniz During New Phase of Operation Weak Flesh, FOLHA DE S.PAULO (Oct. 16, 2018); Brazilian Billionaire Abilio Diniz Indicted Over Contaminated Chickens, FORBES (Oct. 15, 2018); Eletrobras Pays $2.5 Million to Resolve FCPA Offenses, THE FCPA BLOG (Dec. 26, 2018). Latin America: Significant Corruption News

Argentina • In August 2018, the “notebooks scandal” filled the headlines as “the Lava Jato of Argentina.” • Prosecutors estimate that nearly USD 200 million was exchanged to win public works contracts as part of a bribery scheme spearheaded by former president Cristina Fernández de Kirchner and her husband.

• On September 17, 2018, Fernández was indicted on bribery charges.

• Several former government officials and executives have also been indicted, including the CEO of Techint.

• Argentina’s investigation of Odebrecht is ongoing. In July, Brazil agreed to share information with Argentinian authorities, a significant showing of international cooperation.

• In April, Julio de Vido, former Planning Minister, was charged with corruption related to Odebrecht.

Sources: Bags of Cash in Argentina: Driver’s Notes Propel Corruption Inquiry, N.Y. TIMES (Aug. 3, 2018);“Corruption Notebooks” Scandal in Argentina Gets Attention Gibson Dunn from U.S. Enforcement Authorities, JD SUPRA (Nov. 13, 2018); Former Argentina President Indicted on Corruption Charges, REUTERS (Sept. 17, 2018); Techint CEO 40 Charged with Graft in Notebooks Scandal, REUTERS (Nov. 27, 2018); Prosecutors Question Macri’s Cousin in Argentina ‘Notebooks’ Graft Scandal, BUSINESS INSIDER (Aug. 6, 2018); In Argentina, Why Is All Quiet on the Odebrecht Front? AMERICAS QUARTERLY (April 9, 2018). Latin America: Significant Corruption News

Mexico • While Odebrecht was fined nearly USD 60 million and is prohibited from transacting business with federal institutions and state governments until 2020, Mexican officials remain untouched by the scandal. • With the July 2018 election of Andres Manuel López Obrador, many are hopeful about the future of Mexico’s anti-corruption movement. Implementation of the 2016 approved National Anti-Corruption System (“NAS”) was stalled under former President Peña Nieto. López Obrador’s administration must summon the necessary political might to guarantee the efficacy and materialization of NAS’s important anti-corruption reforms. • The adoption of the United States-Mexico-Canada Agreement (“UMSCA”), which will replace NAFTA, was a significant development in anti-corruption enforcement in Mexico this year. Chapter 27 of the Agreement is dedicated solely to anti-corruption. The signing parties have agreed to fight corruption through, among other strategies, inter-party cooperation, legislation, and anti-bribery measures. • Pemex, Mexico’s state-owned energy company, also rolled out a comprehensive anticorruption compliance program in late 2017, including protocols for third party due diligence, compliance-related disclosure obligations for contractors, and conflict-of-interest disclosures. In May 2018, Pemex issued new procurement rules requiring contractors to commit to adhere to Pemex’s compliance program and to implement their own adequate compliance programs.

Sources: Mexican Government Shields Officials from Corruption Probe, AP NEWS (Oct. 18, 2018); Mexico’s New President Moves to End His Own Immunity- but Seems to Gibson Dunn Shield His Predecessor, THE GLOBE AND MAIL (Dec. 4, 2018); Mexico Could Press Bribery Charges. It Just Hasn’t, NEW YORK TIMES (Jun. 11, 2018); Mexico Bans 41 Government Institutions from Doing Business with Odebrecht, THE SANTIAGO TIMES (Apr. 20, 2018); Mexico Plans to Enforce Odebrecht Fines via Seizure: Official, REUTERS (Oct. 10, 2018); Lawyers Call on AMLO to Outline Anti-Corruption Strategy,LACCA (Jul. 6, 2018); USCMA: United States- Mexico-Canada Agreement, Nov. 30, 2018 [pending final adoption]. Latin America: Significant Corruption News

Venezuela • Venezuela’s new attorney general reported that in his first year, his office had convicted 616 individuals—including former government officials—for corruption. • In November, the Supreme Tribunal of Justice—a group of jurists who fled Venezuela after President Nicolás Maduro refused to recognize their appointment by the National Assembly—asked Interpol to issue an international arrest warrant for President Maduro. The Supreme Tribunal averred that Maduro had accepted money from illicit activities. Peru

• President Pablo Kuczynski resigned in March after incriminating video footage surfaced that showed Kuczynski’s allies vote buying. Congress had previously moved to impeach Kuczynski due to his involvement in Odebrecht-related transactions. Just ahead of the impeachment vote, videos documented Kuczynski’s allies bribing government officials to vote against his impeachment.

Sources: Tarek William Saab: In a Year 616 People Have Been Convicted of Corruption, ARCHY WORLDYS (Aug. 2, 2018); Venezuela’s Exiled Justice Department Calls Gibson Dunn for Interpol Arrest of Maduro and 18 Years for Corruption, BUSINESS INSIDER (Nov. 19, 2018); The Downfall of Pedro Pablo Kuczynski and the Future of Peru, THE NEW 42 YORKER (Mar. 24, 2018). Latin America: New Legislative Developments

Brazil: New Guidelines Aim to Enhance Transparency

• In 2014, the Clean Companies Act expanded corruption liability to corporations. • Prosecutors, other agencies, and state governments maintain the momentum with efforts to enhance transparency, including publishing guidance on plea bargains and promoting whistleblowing. • In January 2018, the legislature passed a federal law permitting states to establish anonymous hotlines for reporting crime and encouraging states to create incentives for whistleblowing. • State authorities have adopted regulations requiring companies that enter into contracts with the government to implement effective compliance programs. • This includes companies involved in public construction or sales, as well as entities cooperating with the government. • Companies not in compliance receive daily sanctions. • The new requirement is more demanding than the Clean Companies Act, which rewards companies for compliance programs with reduced fines but does not require them. • In September, authorities published a practical guide on the evaluation of “integrity programs.”

Sources: 2014 Mid-Year FCPA Update, GIBSON, DUNN & CRUTCHER (July 7, 2014); Brazilian Federal Prosecutors Issue Guidance on Leniency Agreements, FCPAMERICAS Gibson Dunn BLOG (Oct. 18, 2017); Brazil’s New Guidelines for Leniency Agreements in Corruption Investigations, LEXOLOGY (Sept. 15, 2017); The Rise of Anti-Corruption 43 Whistleblowers in Latin America, GLOBAL INVESTIGATIONS REVIEW (Dec. 6, 2018); More Brazil Agencies Require Mandatory Compliance Programs, THE FCPA BLOG (March 8, 2018); Ministry of Transparency And Comptroller-General of the Union Announces Practical Guide for the Evaluation of Integrity Programs of Legal Entities, MONDAQ (Sept. 25, 2018). Latin America: New Legislative Developments

Argentina: New Law Introduces Corporate Criminal Liability

• In March, Law 27.401 came into force, imposing strict liability for companies that commit bribery and participate in the illicit enrichment of public officials, among other crimes. • The new legislation complements existing anti-bribery laws, which only apply to individuals. • Distinct from the FCPA, the law does not impose liability for acts committed by subsidiaries. • Failure to comply may result in harsh penalties, including the imposition of fines up to five times the amount of illegally obtained profits, exclusion from public contracts or benefits, and compulsory dissolution. • Companies may avoid prosecution by voluntarily self-disclosing, implementing a compliance program, and disgorging illegally obtained profits. • Compliance programs are not mandatory, but voluntary “integrity guidelines” issued in October explain the requirements of an effective program. • Leniency agreements are available, but the effect of such agreements is not yet clear.

Sources: In Argentina, A New Statute on Corporate Criminal Liability for Corruption, THE FCPA BLOG (Jan. 9, 2018); Argentina Enacts Sweeping Corporate Anti- Gibson Dunn Corruption Law, THE FCPA BLOG (Dec. 6, 2017); New Corporate Criminal Liability Act – How to Protect Your Organisation,GLOBAL INVESTIGATIONS REVIEW (Aug. 21, 44 2018); Guidelines for Implementation of Compliance Programs, GLOBAL COMPLIANCE NEWS (Nov. 9, 2018). Latin America: New Legislative Developments

Peru: Law Regulating Administrative Liability of Legal Entities for the Commission of Active Transnational Bribery (“Ley 30424”)

• Law 30424, which became effective on January 1, 2018, represents an important step in Peru’s battle against corruption. This law has introduced corporate liability for corruption crimes. • While originally slated to take effect in July 2017, Legislative Decree No. 1352 postponed the law’s effective date and expanded the scope of chargeable offenses. • Under Law 30424, legal entities may be held liable for local and global bribery of public officials, money laundering, and terrorism financing. In addition to direct liability, a legal entity may be held accountable on the basis of actions conducted in the entity’s name, for its benefit, or on its behalf. • The law will impose two kinds of penalties: • Fines: Based either off the benefit wrought by the bribery or the entity’s annual income. • Disqualification: Can assume one of several statutorily enumerated forms, including dissolution, debarment, and license nullification.

Sources: Peru Introduces Corporate Liability for Corruption Offenses with a Compliance Program Defense, FCPAMERICAS (Feb. 4, 2018); Amid Oedbrecht Fallout, Peru Gibson Dunn Enacts World-Class Anti-Bribery Law, GAN BUSINESS ANTI-CORRUPTION PORTAL (Jan. 11, 2018); Ley Nº 30424, EL PERUANO. 45 Latin America: Enforcement Actions

Brazil: Operation Lava Jato (Operation Car Wash) • The broader initiative of Lava Jato has resulted in: • More than 200 convictions, 346 individuals accused of crimes, and numerous plea bargains. • Countless foreign leaders have been impacted, including five of the six living former presidents of Brazil, the former presidents of Colombia and Peru, and President Maduro of Venezuela. • In early 2018, Luiz Inácio Lula da Silva, former president of Brazil, received an extended sentence following an unsuccessful appeal. He will serve 12 years in prison. • As of January 2019, former president Michel Temer no longer enjoys special immunity.

Sources: Inside the Petrobras FCPA Resolution, LAW360 (Oct. 10, 2018); Brazil’s Corruption Fallout, COUNCIL ON FOREIGN RELATIONS (Nov. 7, 2018); Ex-President Gibson Dunn ‘Lula’ of Brazil Surrenders to Serve 12-Year Jail Term, N.Y. TIMES (April 7, 2018). 46 Latin America: Enforcement Actions

Implications of Lava Jato: Empowered Enforcement, but Uncertainty Remains • Lava Jato marked a new age of accountability in Brazil. • Brazilian prosecutors have demonstrated their robust commitment to combat corruption at all levels. • President Bolsonaro’s victory in part arises from a shifting climate and desire to dismantle corruption. • However, effective implementation of Bolsonaro’s anti-corruption campaign hinges on transforming a long-entrenched culture of impunity, and the attitudes of judges and prosecutors on the ground. • Interestingly, Petrobras itself was characterized as a victim. • The NPA lacks any statement that Petrobras benefited from misconduct, and it does not impose a monitor. • Petrobras does not expect its consent agreement to attribute liability under Brazilian law. Payments to Brazil will fund social and educational programs to promote transparency and compliance. • Global enforcement strategy – “No Piling On” • DOJ is willing to coordinate with foreign peers like Brazil in multi-jurisdictional investigations, even where the foreign jurisdictions do not find wrongdoing. • Petrobras highlights the importance of cooperation and remediation for companies in both the U.S. and Brazil. • Increased International Cooperation • DOJ and SEC have increased Spanish and Portuguese language attorneys and staff. • More frequent meetings, witness interviews by prosecutors across borders.

Sources: Brazil’s Corruption Fallout, COUNCIL ON FOREIGN RELATIONS (Nov. 7, 2018); Old Politics Dies Hard in Brazil Despite Sweeping Corruption, BLOOMBERG (Sept. 4, Gibson Dunn 2018); Sérgio Moro Appointment: Business to Continue As Usual, GLOBAL INVESTIGATIONS REVIEW (Nov. 5, 2018); Petrobras Press Release (Sept. 27, 2018); In Petrobras 47 Settlement, U.S. Follows Policy of Not Piling On Offenders, WALL ST. J. (Sept. 28, 2018); Deputy Assistant Attorney General Matthew S. Miner of the Justice Department’s Criminal Division Delivers Remarks at the 5th Annual GIR New York Live Event, U.S. DEP’T OF JUSTICE (Sept. 27, 2018). Latin America: FCPA Actions

Petróleos de Venezuela S.A. (“PDVSA”)

• This year, the DOJ charged five new Venezuelan defendants with money laundering in a corrupt pay-to-play scheme involving Venezuela’s state oil company, PDVSA. All five men were either current officials of PDVSA and its subsidiaries or former officials of other Venezuelan government agencies. Two of the five defendants were additionally charged with FCPA conspiracy. • In October, Matthias Krull, a former Julius Baer Group wealth manager, was sentenced to ten years in prison for his role in the PDVSA money laundering scheme. Krull’s punishment was the most severe among all those involved in the scheme. • In December, Alfonso Eliezer Gravina pled guilty to obstructing the DOJ’s investigation into corruption at PDVSA. Gravina, a former PDVSA procurement officer, had already pled guilty in December 2015 to conspiracy to launder money and making false statements on his income tax return. After entering his first plea, Gravina agreed to assist the DOJ by providing information about graft at PDVSA. • With recent pleas, 15 of the 18 individuals charged in connection with the investigation have now pled guilty.

Sources: 2018 Mid-Year FCPA Update, GIBSON, DUNN & CRUTCHER (July 9, 2018); Texas Business Executive Pleads Guilty in Scheme to Bribe Venezuelan Official, ICE NEWSROOM (Sep. 13, 2018); Texas Businessman Pleads Guilty to Conspiracy to Obstruct Justice in Connection with Venezuela Bribery Scheme, ICE NEWSROOM (Dec. 10, 2018); Former Venezuelan National Treasure Sentenced to 10 Gibson DunnYears in Prison for Money Laundering Conspiracy Involving Over $1 Billion in Bribes, DEPARTMENT OF JUSTICE (Nov. 27, 2018); Venezuelan Billionaire News Network Owner, Former Venezuelan 48 National Treasurer and Former Owner of Dominican Republic Bank Charged in Money Laundering Conspiracy Involving Over $1 Billion in Bribes, DEPARTMENT OF JUSTICE (Nov. 20, 2018); Former Owner of Dominican Republic Bank Sentenced to Three Years in Prison for Money Laundering Conspiracy, DEPARTMENT OF JUSTICE (Nov. 29, 2018); Richard L. Cassin, DOJ Cooperator Admits Obstruction in Venezuela Bribery Case, THE FCPA BLOG (Dec. 11, 2018); Swiss Banker Admits Role in Venezuela Money Laundering Ring, THE FCPA BLOG (AUG. 23, 2018). Latin America: Key Trends

Enhanced enforcement practices: • Across Latin America, citizens discouraged by rampant corruption are calling for increased accountability. • In response, investigation practices and resources in Latin American countries, particularly Brazil, have improved dramatically over the past several years, as local governments work hard to hold both corporate and individual actors accountable. Legislative developments: • Following a global shift to targeting the supply side of bribery, many of the new anti-corruption laws expand liability to include corporations.

• Statutory reforms incentivize self-disclosure and whistleblowing. • Across Latin America, whistleblower reports to U.S. authorities have increased. For example, as of December 6, 2018, the SEC had received 19 reports from Brazil in 2018 (as compared to six reports in 2017).

Gibson Dunn Gibson Dunn 49 Latin America: Key Trends

Heightened perception of corruption: • Despite increased enforcement and new legislation to target corruption in Latin America, serious distrust of politicians among local populations remains. • While new legal frameworks are promising, many are rightfully hesitant to cry victory any time soon, noting the difficulty of breaking the long-established culture of impunity. • Judges, prosecutors, politicians, and corporate actors alike must buy into a new regime to foster a culture of compliance. Multi-jurisdictional cooperation: • U.S. enforcement agencies and local authorities in Latin America continue to demonstrate remarkable collaboration in pursuing cross-border violations and resolutions. • Increased information sharing across agencies results in more efficient investigations. President Morales’s decision not to renew CICIG’s mandate is thus a significant setback for anti-corruption efforts. • Coordination among peer agencies in crafting corporate resolutions ensures that corporations do not pay for the same conduct twice.

Sources: In Petrobras Settlement, U.S. Follows Policy of Not Piling On Offenders, WALL ST. J. (Sept. 28, 2018); Anti-Corruption Efforts: Brazil 2018 Understanding the Issues, Gibson Dunn WILSON CENTER (Aug. 14, 2018); Guatemalan President Shuts Down Anti-Corruption Probe, NPR (Sep. 3, 2018); Constitutional Standoff Pushes Guatemala Toward 50 Authoritarianism, N.Y. TIMES (Sep. 10, 2018); Guatemala Accusations Amp Up Tensions Between Presidency, AG’s Office, INSIGHT CRIME (May 16, 2018). INDIA

Photo courtesy Sam Hawleywood Gibson Dunn 51 India: Market Characteristics

India will surpass China as the 1.37 billion most populous country in the world in the next decade.

Expected consumer spending USD 4 Trillion (2025) – Third largest globally.

India’s projected real GDP growth rate between 2018-2022. One of 7.3% the fastest growing global economies.

Expected Private Investment +8.8% Growth (April 2018 – March 2019).

Share of population living at or 86.8% below USD 5.5 a day (poverty line for India as established by the World Bank).

Sources: Population Reference Bureau, India Rising (August 2018); OECD, Economic Outlook for South East Asia, China and India (2018); CMIE, Private Investment to Gibson Dunn Lead India’s Growth by FY19 (June 2018); World Bank, Poverty & Equity Data Portal (November 2018) (Note: Data is as of 2010); Photo Credits: Pranav Bhasin and 52 Nicholas Jones India: Are Anti-Corruption Efforts Working?

India’s corruption situation has improved marginally:

81 50% 111

Control of Corruption (2006-2016)

India saw a modest fall in the One study has estimated that According to the World Bank’s Global latest CPI results, claiming the the total amount of bribes paid Governance Indicators, India managed 81st spot (down from 79th), in order to avail key public to improve its ranking in relation to the ranking below China. services has fallen by about control of corruption by 13 (from 124) 50% between 2005 and 2018. positions between 2006 and 2016. However, corruption and bribery continue to present significant risks in India: 69% 40% 20%

Almost seven out of every ten persons One survey reported that 40% of Indian respondents surveyed in India had to pay a bribe to feel that bribery and corruption are widespread in access key public services, indicating business, and 20% of Indian respondents stated that it a very high bribery rate (at least for would be justified to offer bribes to win or retain petty corruption). business.

Sources: Transparency International, Corruption Perceptions Index (2016, 2017); Transparency International, “People and Corruption: Asia Pacific – Global Corruption Gibson Dunn Barometer” (March 2017); Ernst & Young, “Global Fraud Survey 2018” (April 2018); CMS-India, “CMS-India Corruption Study 2018” (April 2018). 53 India: Historic Amendments to the Prevention of Corruption Act

The Prevention of Corruption Act, 1988 (“PCA”) as originally written focused on bribe recipients. § 7 Prohibits Indian public servants from obtaining (or attempting to obtain) “any undue advantage” with the intention of (or as a reward for) performing or causing performance of a public duty “improperly or dishonestly” or forbearing or causing forbearance to perform such duty. § 7A Prohibits any person from accepting any “undue advantage” from anyone in order to cause a public servant to perform his public duties in an improper or dishonest manner. § 2(d) “Undue Advantage” is very broadly defined to include any gratification whatsoever other than legal remuneration. Long-awaited amendments passed in 2018 shift the focus to the supply side of corrupt payments. § 12 Prior to the 2018 Amendment, bribe giving could only be prosecuted as abetment to the main offense by a public servant. Now there is a specific provision dealing with the provision of the payment. § 8 Prohibits the giving of (or the promise to give) an ‘undue advantage’ to anyone with the intent of inducing or rewarding the improper performance of a public duty by a public servant. Exception: Bribe giver will not be liable if (a) she can prove that she was compelled to give the bribe; and (b) she reports the bribe within seven days to law enforcement authorities. Proving that one has been compelled to provide a bribe to a public servant will be difficult and may cause the person involved to have to participate in lengthy legal proceedings.

Note on Facilitation Payments: The amended PCA specifically clarifies that facilitation payments (i.e., speed money) are also prohibited. (§ 7)

Gibson Dunn 54 India: Historic Amendments to the Prevention of Corruption Act (cont’d)

The Amendments to the PCA have profound implications for corporations and executives. § 9 A commercial organization can be held liable “if any person associated with the commercial organization gives or promises to give any undue advantage to a public servant” with an intent to obtain or retain business or any advantage for that commercial organization. • Commercial organizations can be held liable for the actions of their employees, agents, service providers, and professional advisers. • A foreign parent company can be held liable for the actions of its Indian subsidiary. Note: Commercial organizations can avoid liability for a bribe provided by a person associated with them by demonstrating that the bribe was provided to the public servant despite the organization putting in place “adequate procedures designed to prevent” it. The Indian Government is expected to provide guidelines regarding such procedures. § 10 Managerial personnel of a commercial organization will be liable if the prosecution is able to establish that such personnel consented to or connived with the person committing the offence under the PCA. Managerial personnel may face up to seven years imprisonment and/or monetary fines.

India’s Companies Act places additional obligations on companies and their management.

§ 134(5) Requires directors of all companies to certify annually that “proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively” are in place. §§ 134(8), 447 Significant penalties for fraud and non-compliance, which include fines and prison for “officers of the company.”

Gibson Dunn 55 India: 2018 – A Year of High Profile Cases

Punjab National Bank (“PNB”) (2018) In January, PNB filed a complaint with India’s Central Bureau of Investigation in relation to fraudulent banking transactions. The bank alleged that officials in a Mumbai branch of PNB bypassed the bank’s core banking system and fraudulently issued several letters of undertaking (through SWIFT) to foreign branches of other Indian banks. The CBI has alleged a criminal conspiracy to defraud the bank involving these individuals, employees of entities associated with these entities, and employees of PNB. Individuals named in the chargesheets filed by the CBI in May include a former managing director and senior officers of PNB. Air Asia India (2018) In May, the CBI registered a case alleging that senior officers linked with AirAsia India, had conspired with Indian government officials to expedite approvals and change Indian aviation policies to suit the airline. The first information report names, amongst others, senior functionaries of the shareholders of the airline. The first information report registered by the CBI also alleges that India’s foreign direct investment policies (which prohibited foreign control of an Indian airline) were knowingly violated by AirAsia. The CBI has so far undertaken raids and recovered documents in relation to its investigations in the case.

Gibson Dunn Sources: India Today, “ED attaches Nirav Modi, Choksi properties in India and abroad worth Rs 218 cr”, https://www.indiatoday.in/india/story/ed-attaches-nirav-modi- 56 choksi-properties-in-india-and-abroad-worth-rs-218-cr-1370109-2018-10-17 (October 2018); The Hindu, “AirAsia Group refutes charges made by CBI”, https://www.thehindu.com/business/Industry/airasia-group-refutes-charges-made-by-cbi/article24203931.ece (June 2018). India: 2018 – FCPA Enforcement Actions

Beam Suntory (2018) In July 2018 the SEC announced an FCPA resolution with Beam Suntory (a spirits producer) relating to allegations of improper payments to several government officials in India. According to the SEC, from 2006 through 2012 senior executives at Beam India directed efforts by third parties to make improper payments to increase sales, process license and label registrations, obtain better positioning on store shelves, and facilitate distribution. Without admitting or denying the allegations, Beam agreed to disgorge USD 5.26 million of profits, plus USD 917,498 in prejudgment interest, and pay a USD 2 million civil penalty.

Stryker (2018) In September 2018, Stryker Corporation, a medical device manufacturer, agreed to pay a USD 7.8 million penalty to resolve FCPA books and records and internal accounting controls offenses relating to India and other jurisdictions. According to the SEC, Stryker’s Indian subsidiary made potentially problematic payments to its dealers and to health care professionals that lacked any supporting documentation reflecting a clear business purpose. Stryker had also not addressed deficiencies that had been identified in a 2012 audit (e.g., its dealers over-billing a hospital upon the hospital’s request) until 2015.

Gibson Dunn Sources: Securities and Exchange Commission (July, 2018 & September, 2018) 57 SOUTH KOREA

Gibson Dunn 58 Korea: Market Characteristics

51.2 million Estimated population of Korea in 2018. Median age of 41.

USD 66.31 Korea’s annual foreign trade billion surplus through November 2018. 2.6% Korea’s projected GDP growth rate for 2019. USD 600 Projected value of exports for billion 2018. Expected decline in Korea’s working-age population (between 15 and 60 years old) from 2018 to 18.9% 2037, primarily due to low fertility rate. Percentage of all business assets 27% in Korea which are owned by the top 10 chaebols.

Sources: Worldometers: Korea Population 2018, http://www.worldometers.info/world-population/south-korea-population/ ; Trading Economics: South Korea Balance of Trade, https://tradingeconomics.com/south- korea/balance-of-trade ; Reuters, South Korea says 2018 exports likely to exceed $600 billion to record (October 29, 2018), https://in.reuters.com/article/southkorea-economy-exports/south-korea-says-2018-exports- Gibson Dunn likely-to-exceed-600-billion-to-record-idINKCN1N3183 ; Hankyoreh, State think tank projects 2.6% growth rate for S. Korean economy in 2019 (November 27, 2018), 59 http://english.hani.co.kr/arti/english_edition/e_business/872014.html ; The Korea Times, Working age population to drop by 19% over two decades (January 3, 2018), https://www.koreatimes.co.kr/www/nation/2018/09/119_241836.html ; Bloomberg, Quicktake: South Korea’s Chaebol (October 5, 2018), https://www.bloomberg.com/quicktake/republic-samsung . Korea: Landmark Legislation Transforms Korean Enforcement Landscape

• The Improper Solicitation and Graft Act (informally known as the “Kim Young-Ran” Law) came into force on September 28, 2016. • The Act prohibits (1) any person from directly or indirectly (through a third party) soliciting “Public persons;” and (2) “Public persons” who receive an improper solicitation from performing his or her duties as directed - they must clearly express an intention to refuse the solicitation. • The Act also prohibits: • “Public persons” from accepting any financial or advantage in excess of KRW 1 million (~USD 900) per event/ KRW 3 million (~USD 2,700) per year from the same person, regardless of the relationship between such offer and his or her duties, and the motive for such offer. • “Public persons” from accepting any financial or other advantage in excess of KRW 10 million (~USD 9,000) in connection with his or her duties, regardless of whether such offer is given in exchange of any favors. • Exceptions include food and drink below KRW 30,000 (~USD 25), gifts below KRW 50,000 (~USD 45), congratulatory or condolence money below KRW 100,000 (~USD 90), financial or other advantages offered by relatives, all of which are offered to facilitate performance of duties or for social relationships or rituals. • “Public persons” include: civil servants, private persons performing public duties, heads and employees of public service-related organizations, public institutions, schools (public and private), media companies and their spouses.

Gibson Dunn 60 Korea: Historic Enforcement Against Former Presidents

Former President PARK Geun-Hye • President Park Geun-Hye was impeached in December 2016 amid allegations of influence peddling and corruption. In April 2018, Park was convicted of 16 corruption-related offenses, including abuse of power, bribery, and coercion. She was sentenced to 24 years’ imprisonment and a fine of KRW 18 billion (~USD 16 million). • In August 2018, the Seoul High Court increased her prison sentence to 25 years and her fine to KRW 20 billion (~USD 18 million) for collecting more bribes than previously believed.

• Choi Soon-Sil, Park’s friend and advisor who was accused of coercing Korean conglomerates into donating millions of dollars to charitable organizations connected to the former President, was sentenced in February 2018 to 20 years’ imprisonment for influence peddling, abuse of power, and corruption. Former President LEE Myung-Bak • In March 2018, former president Lee Myung-Bak was arrested on multiple charges of corruption, including bribery, embezzlement, tax evasion, and abuse of power. Lee allegedly received more than KRW 11 billion (~USD 10 million) in bribes from various sources, including Samsung and the Korean National Intelligence Service, before and during his presidency. In October 2018, Lee was sentenced to 15 years’ imprisonment and a fine of KRW 13 billion (~USD 11.5 million) for bribery and embezzlement.

Sources: Chicago Tribune, Disgraced South Korean ex-president gets 24 years in prison for massive corruption scandal (April 6, 2018), http://www.chicagotribune.com/news/nationworld/ct-korean-president- sentenced-park-geun-hye-20180406-story.html ; BBC, Park Geun-hye: South Korea's ex-leader jailed for 24 years for corruption (April 6, 2018) https://www.bbc.com/news/world-asia-43666134 ; FT, “South Korean Gibson Dunn former president Park Geun-hye sentenced to 24 years in prison (April 6, 2018), https://www.ft.com/content/c1e98636-3929-11e8-8b98-2f31af407cc8 ; New York Times, Park Geun-hye, Ex-South Korean Leader, 61 Gets 25 Years in Prison (August 24, 2018), https://www.nytimes.com/2018/08/24/world/asia/park-geun-hye-sentenced-south-korea.html ; BBC, Park Geun-hye: More jail time for South Korea ex-leader (July 20, 2018), https://www.bbc.com/news/world-asia-44897094 ; New York Times, South Korean Court Sentences Ex-President’s Confidante to 20 Years (February 13, 2018), https://www.nytimes.com/2018/02/13/world/asia/choi-soon-sil-park-geun-hye-south-korea.html ; BBC, South Korea jails Choi Soon-sil, friend to Park Geun-hye, for corruption (February 13, 2018), https://www.bbc.com/news/world-asia-43042862. Korea: Enforcement Trend – Chaebols

President Park’s impeachment and conviction also shed light on the actions of Korean conglomerates, known as the chaebol. Samsung • In August 2017, Samsung Electronics Vice Chairman Lee Jae-Yong was convicted of bribery and related charges and sentenced to five years in prison. • In an unexpected turn of events, in February 2018, the Seoul High Court found Lee not guilty on five of the eight charges, one of which is involves the payment to the foundations associated with President Park and Choi Soon-Sil. The High Court halved his jail term to 2.5 years and suspended his sentence on appeal. The court denied that there was implicit understanding of bribery between the parties, a key element to the charges.

Lotte • In December 2017, Lotte Group Chairman Shin Dong-Bin was arrested on charges of embezzlement and breach of trust. In February 2018, he was convicted of bribery and sentenced to 30 months’ imprisonment and a fine of KRW 7 billion (~USD 6.5 million). • In October 2018, the Seoul High Court sentenced Chairman Shin to 2.5 years in prison but suspended the sentence for four years, resulting in his immediate release.

Sources: Bloomberg, Samsung’s J. Y. Lee Set Free in Unexpected Court Reversal (February 5, 2018), https://www.bloomberg.com/news/articles/2018-02-05/samsung-heir-jay-y-lee-goes-free-after-court-suspends-jail- term ; Bloomberg, Korean Tycoon Jailed in Bribery Case That Toppled a President (February 13, 2018), https://www.bloomberg.com/news/articles/2018-02-13/lotte-chairman-jailed-for-bribing-former-president-s- Gibson Dunn confidante ; FT, South Korea jails Lotte chair for bribery (February 13, 2018), https://www.ft.com/content/1b344338-1090-11e8-8cb6-b9ccc4c4dbbb ; Straits Times, Lotte chairman Shin Dong-bin freed as court 62 suspends corruption sentence (October 5, 2018), https://www.straitstimes.com/asia/east-asia/south-koreas-appeals-court-suspends-lotte-group-chiefs-jail-sentence-yonhap ; Reuters, South Korea's appeals court suspends Lotte Group chief's jail sentence (October 5, 2018), https://www.reuters.com/article/us-lottecorp-chief/south-koreas-appeals-court-suspends-lotte-group-chiefs-jail-sentence-idUSKCN1MF0O2. Korea: Güralp Case Highlights International Enforcement Trends

Güralp Systems Limited • On October 2, 2017, Heon-Cheol Chi, the director of a government-run earthquake research center, was sentenced to 14 months in U.S. federal prison for using a U.S. bank account to launder bribes received from two seismology companies, including UK-based Güralp Systems Limited. In exchange for the payments, Mr. Chi advocated the purchase of equipment from Güralp to his employer and to other South Korean customers. • On August 20, 2018, DOJ issued a declination letter to Güralp. While the letter noted evidence of corrupt payments to Mr. Chi, it stated that its declination decision was based, in part, on the fact that Güralp is a UK company and is “the subject of an ongoing parallel investigation by the UK’s Serious Fraud Office for violations of law relating to the same conduct and has committed to accepting responsibility for that conduct with the SFO.”

Güralp highlights trends in international anti-corruption enforcement. • Use of AML statutes to prosecute where evidence of bribery exists. • Increased coordination among international enforcement agencies such as DOJ and SFO. • Granting of significant credit to companies that cooperate with government investigations.

Gibson Dunn 63 Korea: Korea FCPA Case Shows the Pitfalls of Entertainment and Sponsored Travel

United Technologies Corporation • On September 12, 2018, SEC announced a settled enforcement action against United Technologies Corporation (“UTC”), a multinational conglomerate. UTC was alleged to have engaged in improper conduct in a variety of countries, including Azerbaijan, China, Kuwait, Pakistan, South Korea and Thailand. • In Korea, a UTC division allegedly provided entertainment and travel benefits to five officials of the Korean Air Force in hopes of securing a long-term procurement contract. The SEC alleged that UTC’s internal controls had failed on a number of levels: § The travel was approved with little or no review, Lessons Learned from UTC: even though company policy required it. • Ensure review and sign-off at appropriate level are required for sponsored travel. Travel benefits § When review did occur, UTC’s Legal Department should also be subject to periodic audits. failed to note red flags, such as travel to popular • Train employees to recognize potential issues, such as travel to tourist destinations or recipients tourist destinations. who are in a position to award business to the § Trips included senior officials who would attend company. • Travel agendas should be subject to pre-trip one meeting only and spend the remainder of the clearance and post-trip verification (through trip sightseeing. photos, receipts, attendance lists, etc.).

Gibson Dunn 64 AFRICA

Gibson Dunn 65 Africa: Market Characteristics

54 countries • Global and domestic shocks in 2016 (e.g. commodity prices crash) slowed the pace Population of real GDP growth in Africa, but the recovery since 2016 has been faster than envisaged: growth increased from 2.2% in 2016 to a projected 4.1% for 2019. of 1.3 billion • Commodity prices (mainly oil and metals) have recovered since 2016 and provided 16.6% of global relief to both government budgets and current accounts. population • Most African currencies have lost about 20-40% of their value against the dollar (fastest growing) since the beginning of 2015. • Estimated infrastructure needs amount to USD 130-170 billion a year, with a Expected financing gap in the range of USD 68-108 billion. growth of 4.1% • Tax-to-GDP ratios are below the 25% threshold deemed sufficient to scale up for 2019 infrastructure spending. Inflation rate • Foreign direct investment inflows slumped to USD 42 billion in 2017 (down 21% projected to from 2016), and this decline was concentrated in the larger commodity exporters. rise to 5.2% in 2019 (from 5% • Intraregional trade in intermediate goods stands at 4.1% of GDP (compared to in 2018) 24.2% in Asia and 16.6% in the EU).

Sources: “African Economic Outlook 2018, African Development Bank 2018; Africa’s Development Dynamics 2018: Growth, Jobs and Inequalities”, AUC.OECD 2018; Gibson Dunn “World Investment Report 2018: Investment and New Industrial Policies”, United Nations Conference on Trade and Development, 6 June 2018; ‘Inflation rate, end of period 66 consumer prices’ IMF DataMapper, World Economic Outlook (October 2018). Africa: Local Corruption Climate

Corruption remains a concern at all levels in African countries.

USD 50 billion USD 4.3 million -25% In September 2018, the UK froze Widespread lack of development is Estimate of the amount lost in aid funding to Zambia, after its reinforced by extensive corruption schemes, Africa per year due to illicit government admitted that USD 4.3 which discourage further development. financial flows. million earmarked the poor had Misappropriated funds account for a 25% gone missing. loss of development resources in Africa.

38/54 50% 38 out of 54 countries have ratified the African Union Convention to In Sub-Saharan Africa, 1 in 2 Prevent and Combat Corruption citizens reported paying a bribe for (adopted in 2003). Those that have land services (such as registering ratified have not reported progress property) and to stop their family on implementation. homes from being taken away.

Sources: “Letter to the African Union on African Anti-Corruption Day”, Transparency International, 11 July 2018; “Zambia aid: UK suspends funding over corruption fears”, Gibson Dunn BBC News, 18 September 2018; “Illicit Financial Flows: The Economy of Illicit Trade in West Africa”, OECD, 2018; “Exporting Corruption, Progress report 2018: 67 assessing enforcement of the OECD Anti-Bribery Convention”, Transparency International, 2018; “How to win the fight against corruption in Africa”, Transparency International, 11 July 2018. Africa: Challenging Corruption Environment

Transparency International Corruption Perceptions Index 2017

6 of the 10 lowest- ranked countries in South Africa (71) and Nigeria the world are in (148), the two largest economies Africa (Somalia, in Africa, have shown no South Sudan, Sudan, significant change in their Libya, Equatorial- rankings since 2012. The Guinea, and Guinea- significant economic nations of Bissau). Tanzania (103) and Kenya (143) remain deep in the bottom half.

Several African countries have shown notable The top-performing African countries are progress in their rankings since 2012 such as said to have a “political leadership that is Cote d’Ivoire (130 to 103) and Senegal (94 to consistently committed to anti- 66). corruption,” whereas the lowest-scoring Some African countries maintain stronger countries are “often those where there is rankings appearing in the top third (Botswana conflict or war.” (34); Seychelles (36); Cape Verde and Rwanda (48); and Namibia (53))

Sources: Transparency International Corruption Perception Index 2017; “A redefining moment for Africa”, Transparency International, 21 February 2018. The scores for each Gibson Dunn country are calculated with a scale of 0 to 100, where 0 is highly corrupt and 100 is very clean. 68 Africa: Regional Anti-Corruption Efforts

“By declaring 2018 the African Anti-Corruption Year, the African Union policy-making organs have given a strong push forward in our collective efforts toward a peaceful and secure Africa. Indeed corruption kills.” – Statement by the Chairperson of the African Union Commission on Corruption (January 2018) The African Union (“AU”)

• The AU earmarked July 11 as “African Anti-Corruption Day” and declared 2018 as the “African Anti-Corruption Year,” with the theme “Winning the Fight Against Corruption: A Sustainable Path to Africa’s Transformation.” • Intended outcomes for the African Anti-Corruption Year included doubling the number of citizen-led and AU-backed anti-corruption initiatives. For example, in December 2018, the Anti-Corruption Academy of Nigeria piloted a three-day Corruption Risk Assessment (“CRA”) training program for heads of anti-corruption agencies. • In July 2018, Transparency International submitted several recommendations to the AU on issues such as procurement, illicit financial flows, and education. Whilst commending the AU for dedicating 2018 to the fight against corruption in Africa, the AU was urged to “move from slogans to actions.”

Sources: “Winning the Fight Against Corruption: A Sustainable Path to Africa’s Transformation”, African Union Advisory Board on Corruption, 2018; “Reinvent anti-graft Gibson Dunn war, Buhari urges Africa”, The Guardian Nigeria, 11 December 2018; “Letter to the African Union on African Anti-Corruption Day”, Transparency International, 11 July 69 2018. Africa: National Developments

Nigeria: In November 2017 “Special Courts” were designated to try corruption and financial crime cases. In June 2018, the National Judicial Council announced that in 6 months, those courts had delivered 324 judgments, struck out 12 cases, and reserved 62 cases for judgment.

Rwanda: In September 2018, a new anti-corruption law N°54/2018 came into force, aimed at preventing and punishing corruption in public bodies, private entities, and international organizations operating in Rwanda. The law makes corruption a felony crime (with no statute of limitations), and removes criminal liability for whistleblowers who inform the authorities about illegal benefits they have given or received.

Kenya: The Bribery Act 2016 came into force on January 13, 2017. It introduced offenses of failing to prevent bribery and criminalizes a failure to implement anti-bribery policies and procedures. Since July 2017, 49 persons have been convicted of corruption and related offences, three under the Bribery Act. In addition USD 45 million has been recovered. No corporate enforcement has occurred.

International Partnerships In 2016 the UK announced that bodies such as the National Crime Agency (“NCA”) would launch practitioner partnerships with anti-corruption institutions in Nigeria, Tanzania, and Kenya. As of August 2018, the “Partnerships for Development” program, formerly “GREAT for Partnership,” had delivered three partnerships (with the NCA, British Geographical Survey, and Oxford Policy Fellowships) and is still being implemented. The UK Prosperity Fund has supported UNODC in promoting the implementation of the UN Convention Against Corruption, including whistleblowing recommendations and legislation for five countries in East Africa (Burundi, Kenya, Rwanda, Tanzania, and Uganda) to improve procurement practice and financial investigation.

Sources: “Special Anti-Corruption Courts Deliver Judgment in 324 cases in 6 Months”, National Judicial Council (Press Release), 28 June 2018;“Partnerships for Development”, Annual Review, August 2018; “What’s new in the new a United Kingdom Anti-Corruption Strategy 2017-2022: Year 1 Update, HM Government, 12 December Gibson Dunn 2018; EACC official figures, accessed 3 January, 2019 - http://www.eacc.go.ke/achievements/ . 70 Africa: National Enforcement Trends

Nigeria: The Nigerian Economic and Financial Crimes Commission (“EFCC”) continues its investigations into the “Malabu Oil Scandal,” involving Shell and ENI’s purchase of an oilfield through an alleged USD 1.3 billion corrupt deal made in 2011. In September 2018, the Italian court sentenced two middlemen, Emeka Obi and Gianluca Di Nardo, each to four years’ imprisonment for their role in connecting the parties and transferring funds through international bank accounts. On November 30, 2018, the Acting Chairman of the EFCC gave assurances that the investigation was ongoing and that those complicit will be prosecuted. Allegedly, Nigeria stands to lose at least USD 4.5 billion as a result of the deal.

South Africa: Since President Cyril Ramaphosa took office in February 2018, he has overseen the establishment of four commissions of inquiry all related to the abuse and "capture" of state resources in South Africa. The inquiries investigate the breakdown in good governance and the corruption at key South African institutions such as the South African Revenue Service (“SARS”) and the National Prosecuting Authority (“NPA”) during the presidency of Jacob Zuma. • In March 2018, the director of public prosecutions charged Zuma with 16 charges of fraud, corruption, and money laundering stemming from hundreds of payments made to him in relation to a 1990s arms-procurement deal. • In April 2018, law enforcement officials seized USD 21 million of assets owned by the Gupta family, as part of an investigation into corruption at a government dairy farm project. Since then, various hearings have been conducted by the judicial commission of inquiry that have exposed the depth of influence that the Gupta family had over Zuma’s government. • Separately in June 2018, South Africa's Directorate for Priority Crime Investigation (“the Hawks”) raided the offices of MTN, one of Africa's largest mobile telecommunications companies, and MTN's law firm, Webber Wentzel. The search and seizure operation was connected to allegations that MTN paid bribes in 2005 to Iranian officials to secure an operating license to provide services in Iran worth USD 4.2 billion. Iran is MTN’s third biggest market, via its 49% stake in Irancell.

Gibson Dunn Sources: “Nigeria to Lose $4.5 Billion in Malabu Oil Deal .…As EFCC Receives Document from Experts”, Economic and Financial Crimes Commission, 30 November 2018; “JP Morgan says it knew ex-minister linked to firm in Nigeria oilfield deal”, Reuters, 6 April 2018; “Hawks raid offices of Bank of Baroda”, ENCA 9 June 2018; “Hawks 71 raid MTN, top law firm in decade-long Turkcell battle”, News 24, 5 June 2018; “$21 Million in Assets Seized in South African Corruption Inquiry”, NY Times, 16 April 2018; “Zuma corruption claims: South Africa state capture inquiry opens”, BBC News, 20 August 2018.; Africa: National Enforcement Trends

Kenya: In August 2018, Kenyan authorities arrested former Nairobi governor, Evans Kidero, on suspicion of corrupt activities. Kidero was one of 11 government officials named by Kenya’s senior prosecutor as being “criminally culpable” for embezzlement of public funds.

The same month, the Ethics and Anti-Corruption Commission arrested National Lands Commission (“NLC”) Chairman Muhammad Swazuri and six other officials. Swazuri is accused of paying more than USD 2 million in dubious land compensation claims to individuals and companies in connection with the Standard Gauge Railway project, the largest infrastructure project since the country won its independence. The project also involved Chinese investment. In November 2018, seven individuals including three Chinese nationals, all of whom were employees of a Chinese company responsible for running the railway, were charged with bribing investigators regarding a ticketing fraud.

Tanzania: In April 2018, the Prevention and Combating of Corruption Bureau (“PCCB”) sought the extradition from Kenya of Kenya Pipeline Company Chairman John Ngumi and ex- Stanbic Bank Tanzania CEO Bashir Awale. The allegations against the executives involve USD 6 million in bribes paid to government officials in exchange for favourable treatment when Tanzania floated a government sovereign bond in 2012. Three other defendants have been remanded since 2016 pending the investigations. Their case was recently adjourned until May 2019. In October 2018, criminal charges were brought by the PCCB against several employees of the UK-listed Acacia mining company in relation to corruption and money laundering. The PCCB stated that the arrests formed part of the “ongoing investigation into natural resources exploitation.” Rumors that the SFO also is investigating have been refuted by the company.

Sources: “Former Nairobi governor arrested on corruption allegations”, Reuters, 8 August 2018; “Kenya: Officials accused of corruption in flagship rail project”, Al Gibson Dunn Jazeera, 12 August 2018; “Seven officials held as detectives probe SGR tickets scandal”, Daily Nation, 25 November 2018; “Senior Manager of Acacia’s Tanzanian Businesses Charged’, Press release from Acacia, 23 October 2018, “Stanbic bribery case takes new turn”, IPP Media, 23 April 2018; “Britain’s Fraud Office 72 Investigates Acacia Mining”, Wall Street Journal, 14 December 2018. Africa: North America Enforcement Actions

Société Générale S.A.: In June 2018, Société Générale S.A. agreed to a DPA while a subsidiary pleaded guilty to charges in relation to bribes of over USD 90 million paid to senior Libyan officials throughout 2004 to 2009 through a Libyan “broker.” In exchange for the bribes, the bank received over USD 3.6 billion in investments from Libyan state-owned financial institutions and earned profits over USD 500 million. The Company agreed to pay a total of USD 292.8 million to resolve both matters. This was also the first coordinated resolution between the DOJ and the French authorities in a foreign bribery case in which the bank agreed to pay an equal sum to the French authorities. Separately, the bank resolved unrelated LIBOR allegations with both the DOJ and CFTC.

Legg Mason Inc.: In June 2018 Legg Mason Inc. agreed concurrently with Société Générale S.A. to pay a criminal penalty of USD 32.6 million and disgorgement of USD 31.6 million as part of a NPA arising out of the same allegations, where Legg Mason Inc. managed a number of the corruptly obtained investments. Subsequently, in August 2018, the Company agreed to pay over USD 34 million to the SEC to settle civil offenses, negating the DOJ disgorgement and consistent with the piling-on policy.

Kinross Gold Corporation: On March 26, 2018 Kinross Gold Corporation agreed to pay USD 950,000 to the SEC to settle, by way of Administrative Order, allegations initiated by a whistleblower relating to a failure to implement adequate accounting controls over two of its African subsidiaries in Mauritania and Ghana. The SEC stated it took Kinross Gold three years to implement adequate controls, despite problems having been flagged during multiple internal audits. The SEC also stated that Kinross Gold failed to maintain these controls. The DOJ declined to charge Kinross Gold.

Sources: “Société Générale S.A. Agrees to Pay $860 Million in Criminal Penalties for Bribing Gaddafi-Era Libyan Officials and Manipulating LIBOR Rate”, DOJ Press Gibson Dunn Release, 4 June 2018; “Kinross Gold Charged With FCPA Violations”, Securities and Exchange Commission Press Release, 26 March 2018; “Legg Mason Charged With 73 Violating the FCPA”, Securities and Exchange Commission Press Release, 27 August 2018. Africa: North America Enforcement Actions (cont’d)

Glencore: In July 2018, the mining company announced that the DOJ had issued a subpoena for documents relating to its business in Nigeria, the Democratic Republic of Congo (“DRC”), and Venezuela. The investigation is related to payments to a third party who has been subject to U.S. sanctions since December 2017 due to ties to the DRC and its president. On July 9, 2018, Glencore shareholders filed lawsuits against the company in U.S. federal court, accusing Glencore of misleading statements and concealing documents.

Katanga Mining: On December 2018, Katanga Mining agreed to a settlement with the Ontario Securities Commission (“OSC”), relating to its failure to maintain adequate financial reporting and disclosure controls and procedures. Katanga agreed to a payment of CAD 30 million, and to pay for an independent consultant to review of its policies and procedures. Four senior individuals also agreed to pay a total of CAD 5.9 million in administrative penalties.

Credit Suisse: In December 2018 and January 2019, DOJ charged five people, including three former Credit Suisse bankers, with FCPA, money laundering, and fraud charges. DOJ alleged that the individuals facilitated USD 200 million in bribes and kickbacks paid to government officials in Mozambique. In November 2018, the UK’s Financial Conduct Authority announced it had decided to drop its criminal probe and would pursue exclusively a regulatory investigation of the bank and individuals.

Chi Ping Patrick Ho: On December 2018 Patrick Ho, a former Hong Kong government official, was convicted of seven counts of FCPA and money laundering violations in a scheme to bribe high level public officials in Chad and Uganda in return for business advantages on behalf of China Energy Company Limited.

Sources: “Glencore faces lawsuits over U.S. subpoena stock drop”, Reuters 12 July 2018; “OSC Panel approves settlement with Katanga Mining Limited, Gibson Dunn former and current directors and officers for misleading disclosure and internal control failures”, OSC Press Release 18 December 2018;“Credit Suisse 74 escapes criminal action over $2bn Mozambique scandal,” Financial Times, 12 November 2018; “Credit Suisse escapes UK criminal charges over Mozambique’s debt”, Further Africa, 14 November 2018; “DOJ goes after ex-Credit Suisse bankers in Mozambique corruption case,” Global Investigations Review, 4 January 2019. Africa: SFO Enforcement Actions

Griffiths Energy International Inc. • On March 22, 2018, the SFO obtained an USD 6 million Civil Recovery Order against Ikram Saleh, the wife of Chadian diplomat Mahamoud Adam Bechir, in a corruption case involving Griffiths Energy International Inc., a Canadian oil and petroleum company. • The Court found Griffiths bribed senior Chadian diplomats with discounted share deals and ‘consultancy fees’ using a front company “Chad Oil.” Chad Oil was a vehicle used by senior diplomats at the Chadian Embassy in the United States to facilitate a deal in which the wife of the former Deputy Chief, Mrs. Ikram Saleh, purchased shares at a considerable discount. She later sold these shares for a significant profit. • The SFO became involved following a mutual legal request made by the DOJ in July 2014. The High Court decision granting the SFO’s order marked the first time that money will be returned overseas in a Civil Recovery Case.

Ongoing investigations: • ENRC Ltd: The SFO formally opened an investigation into ENRC in April 2013 for its activities in Kazakhstan and the Democratic Republic of Congo relating to the acquisition of mining projects. The investigation is ongoing and in December 2018, an Israeli businessman lost an appeal in the Swiss Federal Criminal Court to transfer documents relevant to the investigation to the SFO. • British American Tobacco: BAT remains under investigation by the SFO into allegations of corruption. • Rio Tinto: In July 2017 the SFO announced that it had opened an investigation into suspected corruption by the Rio Tinto group in the Republic of Guinea. Rio Tinto is suspected to have paid USD 8.1 million to a former investment banker to negotiate with the government when it risked losing rights to a multibillion dollar iron-ore project in Guinea. In March 2018, the SFO raided the London home of the investment banker for evidence connected to the investigation.

Sources: “SFO recovers £4.4m from corrupt diplomats in ‘Chad Oil’ share deal,” Serious Fraud Office, 22 March 2018; “SFO wins Chad oil corruption case,” Economia, 23 Gibson Dunn March 2018. 75 Africa: SFO Enforcement Actions (cont’d)

Afren PlC / Oriental Energy Resources Ltd. • On October 24, 2018, Osman Shahenshah and Shahid Ullah, former Chief Operating Officer and Chief Executive Officer of Afren Plc respectively, were convicted of fraud and money laundering over Nigerian oil deals worth USD 300 million. • Shahenshah and Ullah recommended that the Afren Board agree to a USD 300 million payment to Oriental Energy Resources Ltd, the company’s oil field partner in Nigeria. Unknown to the Afren board, Shahenshah and Ullah had arranged a kickback scheme with Oriental which led to USD 45 million being paid out to a Caribbean shell company controlled by the defendants. • On October 29, 2018, Shahenshah was sentenced to 6 years in prison and Ullah to 5 years for fraud and money-laundering offenses.

Ultra Electronic Holdings PLC In April 2018, the SFO confirmed that it had opened a criminal investigation into suspected corruption involving dealings in Algeria by Ultra Electronic Holdings PLC, its subsidiaries, employees, and associated persons following a self-report.

Sources: “Osman Shahenshah & Shahid Ullah sentenced to 30 years for Afren fraud & money laundering,” Serious Fraud Office, 29 October 2018. Gibson Dunn 76 Africa: European Enforcement

France In June 2018, concurrent with the broader U.S. enforcement action, Société Générale S.A. announced a CJIP agreement with the Parquet National Financier (“PNF”) to settle claims that it had paid bribes to obtain investments from Libyan state-owned financial institutions. Under the CJIP, Société Générale S.A. agreed to penalties of approximately USD 292.8 million, the implementation of a compliance program, and a two-year compliance monitorship supervised by L'Agence Française Anticorruption (“AFA”).

In April 2018, French billionaire Vincent Bolloré was placed under formal investigation by a French judge amid accusations that Havas, an advertising-agency subsidiary of his holding company, provided discounted media advice to the Guinean and Togolese Presidents during the election period in return for his Bolloré Africa Logistics company winning certain lucrative licenses to operate container ports.

Sources: “Société Générale S.A. Agrees to Pay $860 Million in Criminal Penalties for Bribing Gaddafi-Era Libyan Officials and Manipulating LIBOR Rate”, Department of Gibson Dunn Justice Press Release 4 June 2018; “Vincent Bollore under formal investigation in Africa corruption probe,” BBC News, 25 April 2018 77 Africa: European Enforcement (cont’d)

Italy: In September 2018, an Italian court acquitted Italian energy firm Eni and its ex-CEO of bribery in relation to payments made by its subsidiary Saipem to Algerian officials between 2007 and 2010 to win energy contracts worth EUR 8 billion. Saipem however, was fined EUR 400,000, had a further EUR 197.9 million seized by the authorities, and its former CEO was sentenced to four years in jail.

In the same month, Nigerian Emeka Obi and Italian Gianluca Di Nardo, accused of receiving bribes in relation to a separate Eni corruption case in Nigeria referred to locally as the “Malabu Oil Scandal” were found guilty and sentenced to four years in jail. This was the first ruling in a major trial related to alleged misconduct by Eni and Shell in relation to over USD 1 billion in bribes allegedly paid to various Nigerian politicians in 2011, including former oil minister Dan Etete, in order to obtain the rights to a major offshore Nigerian oil block. A separate trial of the companies and 13 others continues.

Switzerland: In November 2018, a Swiss court dismissed an attempt to prevent the opening of a suitcase belonging to Obi containing documentation and digital material thought to have relevance to the Malabu case. A prosecutor will now decide whether there is material relevant for transmission for the Italian proceedings.

In August 2018, a former Geneva-based oil trader was found guilty of bribing officials in the DRC and Ivory Coast in exchange for oil shipments. The Swiss Federal Criminal Court gave Pascal Collard an 18-month suspended sentence and ordered him to pay USD 33,850 in court costs.

Sources:“Update 3- Italy court finds Saipem guilty in Algeria graft case but acquits Eni”, Reuters, 20 September 2018; “Update 2- Italian judge jails two in Nigerian oil graft Gibson Dunn case”, CNBC News, 20 September 2018; “Eni, Shell knew of ‘sharks’ in Nigeria graft case – judge”, Reuters, 17 December 2018; “Switzerland: Oil trader sentenced for 78 Africa bribes”, FCPA Blog, 30 August 2018; Swiss Close to Revealing Nigerian Beneficiaries of $1.1b Malabu Oil Bribes, Signal, 22 December 2018. Africa: Enforcement Trends 2018

• There continues to be significant enforcement in or relating to Africa in 2018, although the majority of the corporate cases are brought by foreign authorities. • Significant numbers of domestic enforcements are occurring with substantial monetary recoveries. • Enforcement authorities in the UK and the U.S. continue to collaborate, build capability, and cooperate with local enforcement authorities. • Foreign enforcers continue to focus on extractive industries including oil, gas, and on financial services institutions. • The use of “intermediaries” remains a significant area of risk and therefore a focus of enforcers. That too is likely to continue.

Gibson Dunn 79 Africa: Key Lessons

• Despite regional campaigns and proclamations focused on reducing corruption in Africa, the exposure to corruption risks for foreign companies conducting business in Africa remains significant. • While there are exceptions, the majority of African nations, including the most economically significant, have low rankings in the Transparency International Corruption Perception Index. • The risks of corruption vary significantly across the Continent. Sophisticated advisers can help discern risks specific to a transaction, leading to more effective mitigation efforts. • Enhanced Due Diligence on new business partners and agents and funds flows are particularly important. Extra care is required when conducting business with governments and state agencies.

Gibson Dunn 80 GLOBAL TRENDS AND RISK MITIGATION STRATEGIES

Gibson Dunn 81 Trend: Recent Enforcement Shows Intersection Between FCPA and AML

The DOJ has found the money laundering statute to be an effective tool for holding individuals criminally liable when they use the U.S. financial system to launder the proceeds of corruption. PDVSA Bribe Payers and Recipients: In 2018, DOJ unsealed charges against five new defendants in a corrupt pay-to-play scheme involving Venezuelan state-owned oil company Petroleos de Venezuela S.A., all of which have a money laundering nexus where the bribe payers were charged with substantive or conspiracy FCPA offenses and the bribe recipients were charged with money laundering offenses.

1MDB: In connection with the investigative activity related to Malaysian sovereign wealth fund 1MDB, the DOJ unsealed criminal FCPA charges against Malaysian businessperson Low Taek Jho and two former employees of an international bank. One of the bankers has pleaded guilty to a dual FCPA conspiracy as well as money laundering conspiracy, and both were implicated in FCPA bribery and money laundering charges.

Patrick Ho: In December 2018, Mr. Ho was found guilty of seven of the eight counts of bribery and money laundering. Mr. Ho will be sentenced in March 2019, and is facing a maximum of five years imprisonment for each bribery count and 20 years for the money laundering counts.

Gibson Dunn 82 Trend: Courts Limit Conspiracy and Accomplice Liability

On August 24, 2018, the Second Circuit rejected the DOJ’s attempt to use conspiracy and accomplice liability to prosecute an individual who would not otherwise be covered by the FCPA. • Lawrence Hoskins was one of four Alstom executives charged with facilitating bribes to help Alstom win a lucrative power plant contract in Indonesia. Hoskins was a British national and based in Paris. He worked for Alstom UK, while the other three executives worked for Alstom’s U.S. subsidiary. • The government charged Hoskins under two theories: • he aided or abetted or conspired with the U.S. subsidiary to violate the FCPA; and • he was acting as an agent of the U.S. subsidiary. • The court affirmed an earlier ruling that Hoskins could not be held criminally liable for conspiring to violate or for aiding or abetting violations of the FCPA as the crimes took place outside the United States, and Hoskins did not have sufficient ties to a U.S. company. • The court reviewed FCPA’s legislative history and concluded that Congress did not intend for persons outside the statute’s carefully defined categories to be subject to conspiracy or complicity liability. • The Second Circuit assumed for the appeal that Hoskins was not an agent of Alstom’s U.S. subsidiary, but the scope of “agency” remains an open question.

“The FCPA does not impose liability on a foreign national who is not an agent, employee, officer, director or shareholder of an American issuer or domestic concern — unless that person commits a crime within the territory of the United States.…The government may not expand the extraterritorial reach of the FCPA by recourse to the conspiracy and complicity statutes.” - U.S. Court of Appeals for the Second Circuit, United States v. Hoskins

Gibson Dunn 83 Trend: Recent Enforcement Shows Aggressive Jurisdictional Theories

In 2018, the SEC leveraged the accounting provisions to bring cases predicated upon aggressive theories of FCPA liability

Kinross Gold: Alleged violations include the slow implementation or failure to put in place compliance controls at two acquired African subsidiaries, failure to respond to internal audits flagging the inadequate controls, and inadequate efforts to ensure that payments to vendors and consultants were used appropriately. There was no direct allegation of specific corrupt payments.

Elbit Imaging: The violation alleged by the SEC was payments to third parties on whom due diligence was not performed and for whom there was no evidence of work performed. Similar to Kinross Gold, there was no direct allegation of specific corrupt payments.

Stryker Corp: The allegations relate to the company’s internal controls purportedly being insufficient to detect the risk of improper payments in India, China, and Kuwait. Among other charges, the SEC alleged that an internal forensic review of Stryker’s Indian subsidiary identified no supporting documentation for many high-risk transactions, and that Stryker’s Chinese subsidiary used sub-distributors that were not vetted, approved, or trained as required by company policy.

Gibson Dunn 84 Trend: Regulators Continue to Ramp Up Individual Enforcement

“The most effective deterrent to corporate criminal misconduct is identifying and punishing the people who committed the crimes.” “Focusing on individual wrongdoers is an important aspect of the Department’s FCPA program. Over the past year, we announced charges against more than 30 individual defendants and convictions of 19 individuals.” – Deputy Attorney General Rob Rosenstein at the 35th International Conference on the Foreign Corrupt Practices Act

Venezuelan Currency Exchange Scheme In July 2018, the DOJ announced the first of nine charges against individuals involved in a USD 1.2 billion alleged money laundering scheme. The co-conspirators allegedly 60% entered into contracts to convert PDVSA bolivars into dollars DOJ’s 12 individual FCPA at the unofficial rate and then, with the assistance of corrupt prosecutions represent more payments to government officials, converted the purchased bolivars back into dollars at the official rate. In so doing, co- than 60% of its 2018 FCPA conspirators allegedly were able to receive as much as 10 enforcement docket. times their investment by effectively embezzling money from PDVSA.

Gibson Dunn 85 Mitigation: Understand the Strategy Behind Enforcement Against Individuals Revised DOJ Policy on Individual Accountability in Corporate Cases (November 29, 2018) In a recent speech, Deputy Attorney General Rod Rosenstein announced revisions to the DOJ’s policy concerning individual accountability in corporate cases. Under the revised policy, which restores some of the positions prior to the 2015 Yates Memorandum, several principles will guide criminal and civil attorneys at the DOJ, including: 1) Absent extraordinary circumstances, a corporate resolution should not protect individuals from criminal liability. 2) Any company seeking cooperation credit in criminal cases must identify every individual who was substantially involved in or responsible for the criminal conduct. The DOJ’s focus is on the individuals who played significant roles in setting a company on a course of criminal conduct, including those who authorized the misconduct. 3) A company must identify all wrongdoing by senior officials if it wants to earn any cooperation credit in a civil case. In order to earn maximum credit in civil cases, it must identify every individual who was substantially involved in or responsible for the misconduct. 4) Retreating from the “full credit or no credit” approach to cooperation in civil cases, civil attorneys now have discretion to offer some credit even if the company does not qualify for maximum credit but has honestly and meaningfully assisted the government’s investigation. 5) Civil attorneys are permitted to negotiate civil releases for individuals who do not warrant additional investigation in corporate civil settlement agreements. 6) Civil attorneys are permitted to consider an individual’s ability to pay in deciding whether to pursue a civil judgment.

Gibson Dunn 86 Trend: Expansion of the FCPA Corporate Enforcement Policy

DOJ’s revised enforcement policy solidifies the Pilot Program previously in place and creates clear incentives for self-reporting, full cooperation, and timely remediation. To Qualify for Presumption of Declination: No Declination If: Voluntary Self-Disclosure: Must disclose No Self-Disclosure: But if fully cooperated and timely misconduct “prior to an imminent threat of disclosure and appropriately remediated, eligible for up to 25% or government investigation.” reduction off the low end of the Sentencing Guidelines fine range. Full Cooperation: Including proactive cooperation, timely preservation, collection, disclosure of relevant Aggravating Circumstances: Involvement by information, and making witnesses available. executive management of the company in the misconduct, significant profits to the company from the Timely & Appropriate Remediation: Includes an misconduct, pervasiveness of the misconduct, and effective compliance and ethics program, discipline criminal recidivism may result in a criminal resolution for employees responsible for the misconduct, of the case. May still receive 50% reduction in fine if appropriate retention of business records, and other company self-disclosed, fully cooperated, and steps to reduce the risk of further misconduct. appropriately remediated the conduct.

DOJ extends FCPA corporate enforcement policy to M&A: “We intend to apply the principles contained in the FCPA Corporate Enforcement Policy to successor companies that uncover wrongdoing in connection with mergers and acquisitions and thereafter disclose that wrongdoing and provide cooperation, consistent with the terms of the Policy.” - Deputy Assistant Attorney General Matthew S. Miner

Gibson Dunn 87 Mitigation: Ensuring Effective Response to FCPA Matters

Practical measures a company may consider taking to benefit from the revised FCPA enforcement policy:

• Promptly and thoroughly address and investigate • Identify key individuals who the government may internal reports or suspicions of misconduct, so as consider interviewing. to allow the company to have sufficient information • Assist the government in interviewing key to make self-disclosures. individuals by de-conflicting witnesses, and • Preserve and collect documents from relevant making witnesses not in the United States individuals in a timely manner. available for interviews. • Produce and identify key documents helpful to the • Hire external counsel with the expertise and government’s understanding of the case. experience to help the company navigate the process and evaluate what actions should be taken.

DOJ Issues Four Declinations in 2018 Under the FCPA Corporate Enforcement Policy DOJ declined prosecution against Dun & Bradstreet, Güralp Systems Limited, Insurance Corporation of Barbados Limited, and Polycom, Inc. based on: (1) prompt voluntary disclosure; (2) thorough internal investigation; (3) full cooperation with the investigation; (4) enhanced internal compliance program and accounting controls; (5) full remediation; and (6) full disgorgement.

Gibson Dunn 88 Trend: Dodd-Frank Whistleblower Protection Case May Encourage External Reporting

Legislation: According to the whistleblower provisions of the Dodd-Frank Act (15 U.S.C. §78u-6), the SEC will make a financial award (pay a Dodd-Frank Goes Global bounty) to whistleblowers who (1) voluntarily (2) provide original In FY 2018, the SEC Office of the information (3) to the Commission (4) that leads to (5) a Whistleblower received tips from “successful enforcement [action].” The provisions also provide 72 non-U.S. countries: protections from retaliation against whistleblowers, although courts have declared that the anti-retaliation provisions do not • Canada: 89 complaints apply to foreign whistleblowers in some situations. • UK: 85 complaints Statistics: • Of the 5,200 tips received by the SEC Office of the • Australia: 45 complaints Whistleblower in FY 2018, 202 pertained to FCPA allegations (down from 210 in FY 2017). • China: 40 complaints • Whistleblower tips have increased 76% since FY 2012. • Germany: 29 complaints • In FY 2018, the government paid USD 168 million in awards to 13 individuals. • India: 26 complaints • The ten highest individual awards issued by the SEC each totaled more than USD 5 million, with the largest being a • Israel: 25 complaints USD 50 million award issued in March 2018 to two individuals.

Gibson Dunn 89 Trend: Dodd-Frank Whistleblower Protection Case May Encourage External Reporting (cont’d) Digital Realty Trust v. Somers confirmed Dodd-Frank’s anti-retaliation protection applies only where whistleblowers have reported their concerns to the SEC. Digital Realty Trust v. Somers Case Background • Somers was a Vice President of Portfolio Management for REIT Digital Realty Trust from 2010 to 2014. • Somers reported alleged securities law violations to management and was thereafter terminated. • Somers filed a DFA anti-retaliation lawsuit against Digital Realty in the U.S. District Court for the Northern District of California alleging retaliatory discrimination. • Digital moved to dismiss on grounds Somers did not report to the SEC and was thus not a “whistleblower” under the statutory definition of Dodd-Frank. U.S. Supreme Court Ruling • In February 2018, the Court unanimously held that Dodd-Frank’s anti-retaliation provision applies only to individuals who report violations of securities laws to the SEC and not to individuals who only make internal reports.

The decision potentially could encourage employees to bypass internal reporting processes in favor of first reporting potential misconduct to the SEC to ensure they are covered by Dodd-Frank’s whistleblower protections.

Gibson Dunn 90 Mitigation: Implement an Effective Whistleblower Response Protocol

Before reports are made, companies should ensure that they have a system in place to respond to whistleblowers and investigate allegations. • Review compliance and HR policies and procedures to ensure internal reporting is easy, accessible, and perceived as a corporate priority. Implement a comprehensive and organized system to catalogue and track complaints. • Ensure that there are robust, comprehensive investigative protocols pursuant to which investigations are handled by appropriate personnel. • Make clear that all employees, including foreign employees, who report will be treated with respect. Adopt a strict “no-retaliation policy” and communicate the results of investigations to whistleblowers to the extent possible. • The SEC has chosen 120 days as a key milestone for investigations: the Commission will not consider information for award eligibility unless the reporter waited at least 120 days after making an internal report. Internal investigations that place a company in a position to make a disclosure decision within 120 days should be deemed presumptively reasonable. • Consider retaining counsel. Non-lawyer personnel conducting internal investigations (e.g., compliance or internal audit personnel or external investigators) are permitted to claim awards for information gleaned from investigations in certain circumstances. The SEC has made clear that the fact that a • Go beyond Dodd-Frank: In recent years, key markets whistleblower is a foreign national does not prevent an such as India, China, and Canada have implemented or award. Indeed, the fourth largest whistleblower award to considered implementing new whistleblower protection date (USD 30 million) went to a foreign whistleblower laws. who provided the SEC with key, original information about an ongoing fraud.

Gibson Dunn 91 Trend: Third Parties Remain the Single Greatest Area of Corruption Risk

Issues involving third parties have been at the core of recent enforcement actions conducted by the SEC, the DOJ, and local enforcement agencies. High-risk third parties may include:

China: Consultants, Design Institutes, PR/Marketing Firms, Event Organizers, Travel Agents, or Distributors India: Sales Agents, Distributors, Tendering/Procurement Agents, Government Liaison Agents, Logistics Providers, Joint Venture Partners, or Fictitious Vendors

Korea: Distributors, Customs SBM Offshores Uses Sales Agents to Secure Winning Bids Clearance Agents, Travel Agents, Event According to the DOJ, SBM Offshores pleaded guilty to conspiracy to violate the Planners FCPA in a scheme to bribe officials in Brazil, Angola, and Equatorial Guinea to secure oil drilling bids and agreed to pay a criminal penalty of USD 238 million. Russia: Distributors, State-Owned Customers, Fictitious Service Providers, The company’s CEO admitted that he authorized payments to individuals whom he Vendors, or Private Customers knew had a high risk of being government officials or their agents, and that he paid a portion of the intermediary’s commission to an account in Brazil and another portion to accounts in Switzerland held in the name of shell companies, while deliberately Latin America: Sales and Marketing avoiding learning that the payments to shell companies were ultimately received by Agents, Customs Brokers, Lobbyists, or government officials. Tendering Agents A sales and marketing executive of SBM Offshores admitted that he engaged in a Africa: Joint Venture Partners and conspiracy to use a third-party sales agent to pay bribes to foreign officials at Consultants Petrobras in exchange for their help in securing winning bids.

Gibson Dunn 92 Mitigation: Carefully Monitor High-Risk Third Parties

Third parties are often an inevitable part of doing business in an emerging market. Pre- engagement screening, as well as close monitoring, can help offset the decreased transparency, and control that comes with agents and intermediaries.

BEST PRACTICES • Identify the specific functions that are prone to corruption and handled by third parties. • Involve legal and compliance in contract negotiations/drafting to ensure that services are specifically and accurately described and allow for an efficient control (e.g., finance) to assess whether the services have actually been rendered and whether prices are reasonable in light of those services and are in line with market rates. • Include audit rights with a trigger in third-party agreements to allow for audits when indicated. • Conduct specific training for employees working with third parties and with end customers. • Use a risk-based approach to periodically select third parties for an audit review. • Ensure that rebates, credit notes, and other payments provided to the third party are made to the contracting entity, including identifying any offshore arrangements. • Understand interaction between sales force in emerging markets, involved third parties (e.g., distributors, agents) and end-customers, and conduct function-specific compliance training with these employees. • Understand whether margins of intermediaries are passed on to end-customers by reviewing publically available tender materials or conducting audit reviews.

Gibson Dunn 93 Upcoming Gibson Dunn Webcast

January 29, 2019, 12:00 pm – 2:30 pm EST 15th Annual Challenges in Compliance and Corporate Governance Panelists: Joe Warin, Kendall Day, Stuart Delery, Sacha Harber-Kelly, Adam Smith, Lori Zyskowski Topics to be discussed include: – Global Enforcement and Regulatory Developments – How to Effectively Identify and Address Key Compliance Risks – Practical Tips for Improving Corporate Compliance – DOJ and SEC Priorities, Policies, and Penalties – Update on Core Governance Issues and Regulatory Requirements Click Here to Register: https://gibsondunnevents.webex.com/mw3300/mywebex/default.do?siteurl=gibsondunnev ents&service=6

Gibson Dunn 94 Contact Information

F. Joseph Warin Kelly S. Austin Joel M. Cohen

Partner Partner Partner Washington, D.C. Office Hong Kong Office New York Office Tel: +1.202.887.3609 Tel: +852.2214.3788 Tel: +1.212.351.2664 Fax: +1.202.467.0539 Fax: +852.2214.3710 Fax: +1.212.351.5264 [email protected] [email protected] [email protected]

Sacha I. Harber-Kelly Benno Schwarz Oliver D. Welch

Partner Partner Associate London Office Munich Office Hong Kong Office Tel: +49.89.1893.3210 Tel: +44.20.7071.4205 Tel: +852.2214.3716 Fax: +49.89.1893.3333 Fax: +44.20.7070.9205 Fax: +852.2214.3710 [email protected] [email protected] [email protected]

Gibson Dunn 95 Our Offices

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Gibson Dunn 96 APPENDIX: THE FCPA

Gibson Dunn 97 Overview: FCPA

What is the Foreign Corrupt Practices Act?

The FCPA was enacted in 1977 in the wake of reports that numerous U.S. businesses were making large payments to foreign officials to secure business.

• Anti-Bribery Provisions: The FCPA prohibits corruptly giving, promising, or offering anything of value to a foreign government official, political party, or party official with the intent to influence that official in his or her official capacity or to secure an improper advantage in order to obtain or retain business.

• Accounting Provisions: The FCPA also requires issuers to maintain accurate “books and records” and reasonably effective internal controls.

Gibson Dunn 98 FCPA: Who is Covered by the FCPA?

• Issuers: Any company whose securities (including American Depository Receipts and registered debt) are registered in the United States or that is required to file periodic reports with the SEC. • The FCPA also applies to stockholders, officers, directors, employees, and agents acting on behalf of the issuer. • Issuers must adhere to both the FCPA’s Anti-Bribery and Accounting Provisions.

• Domestic Concerns: Any individual who is a U.S. citizen, national, or resident of the United States (not just U.S. citizens), or any business organization that has its principal place of business in the United States or which is organized in the United States. • The FCPA also applies to stockholders, officers, directors, employees, and agents acting on behalf of the domestic concern. • Domestic Concerns must adhere to the FCPA’s Anti-Bribery Provisions.

• Other Persons: Anyone who takes any act in furtherance of a corrupt payment while within the territory of the United States. • “Other Persons” must adhere to the FCPA’s Anti-Bribery Provisions.

Gibson Dunn 99 Definition of “Foreign Official”

The FCPA prohibits corrupt payments to “foreign officials,” which is defined expansively to include: Eleventh Circuit Adopts Broad Definition • Any officer or employee (including of “Instrumentality” low-level personnel) of a foreign In U.S. v. Esquenazi,* the 11th Circuit defined an “instrumentality” as an government department or agency; entity that 1) is controlled by the foreign government and 2) performs a function the government treats as its own. • Personnel of an “instrumentality” of a foreign government, which has been According to the court, characteristics of a “controlled” entity may construed to include employees of include: government-owned or government- • Government’s formal designation; • Government ownership stake; controlled businesses and enterprises; • Government’s ability to hire and fire the entity’s principals; • Personnel of public international • Extent to which the entity’s profits go to the government; and organizations, such as the United • Extent to which government funds the entity. Nations, World Bank or other international financial institutions, the Characteristics of an entity that performs a government function may include: Red Cross, and others; • Whether the entity has a monopoly over the function; • Political party officials and • Whether the entity receives government subsidies; candidates; and • Whether the entity provides services to the public at large; and • Whether the public and the government perceive the entity to be • Members of royal families. performing a public function.

*752 F.3d 912 (11th Cir. 2014); see also U.S. v. Duperval, 777 F.3d 1324 (11th Cir. 2015). Gibson Dunn 100 FCPA: What Types of Payments are Prohibited?

• The FCPA prohibits not only actual payments, but also any offer, promise, or authorization of the provision of anything of value. — No payment needs to be made nor benefit bestowed for liability to attach. — An offer to make a prohibited payment or gift, even if rejected, is a violation of the FCPA.

• The FCPA also prohibits indirect corrupt payments. — The FCPA imposes liability if a U.S. company authorizes a payment to a third party while “knowing” that the third party will make a corrupt payment. — Third parties include local agents, consultants, attorneys, subsidiaries, etc.

• Political or charitable contributions can violate the FCPA.

Gibson Dunn 101 FCPA: What Constitutes a “Thing of Value”?

• There is no “de minimis” exception. “As part of an effective compliance • It is not limited to tangible items of program, a company should have economic value. clear and easily accessible guidelines • It can include anything a recipient and processes in place for gift-giving would find interesting or useful, by the company’s directors, officers, including: employees, and agents.” -A Resource Guide to the U.S. Foreign Corrupt Practices Act (p.16).

• Gifts • Trips • Sporting Event Tickets • Loans • Entertainment • Employment • Food and Wine • Consulting Fees • Meals • Mobile phones and electronic devices • Internships • Education • Professional Training • Political or Charitable Contributions

Gibson Dunn 102