Foreign Corrupt Practices Act (FCPA) Business Guide 2015

CHICAGO | LOS ANGELES | NEW YORK | WASHINGTON, DC | JENNER.COM

We are pleased to present the 2015 edition of Jenner & Block’s Foreign Corrupt Practices Act (FCPA) Business Guide. This Guide provides the most current guidance on how best to confront the reality of corruption in the world’s marketplaces with practical tips for addressing FCPA issues both before and after the government is involved, if that occurs. If you have any questions about this Guide, or the FCPA in general, please contact any of the attorneys listed in the Practice Member Listing at the back of this publication.

In addition, we would like to thank the following individuals for their invaluable contributions to this year’s Guide: Nicholas R. Barnaby, Larry P. Ellsworth, Michael W. Khoo, Jessie K. Liu, Michael K. Lowman, and William C. Pericak.

©2015 Jenner & Block LLP. Jenner & Block is an Illinois Limited Liability Partnership including professional corporations. This publication is not intended to provide legal advice but to provide information on legal matters. Transmission is not intended to create and receipt does not establish an attorney- client relationship. Readers should seek specific legal advice before taking any action with respect to matters mentioned in this publication. The attorney responsible for this publication is Jessie K. Liu. ATTORNEY ADVERTISING. PRIOR RESULTS DO NOT GUARANTEE A SIMILAR OUTCOME.

Table of Contents

Introduction to the Guide ...... 1

Recent Developments and Trends ...... 2

Countries Involved in 2014 FCPA Enforcement Activity ...... 8

2014 FCPA Enforcement Activity ...... 9

2014 DOJ Opinion Releases ...... 23

2014 FCPA-Related Private Litigation ...... 24

2014 International Anti-Corruption Developments ...... 27

The Statutory Framework ...... 30

Consequences of FCPA Violations ...... 37

Frequently Asked Questions ...... 38

Map Of Our FCPA Representations ...... 48

Jenner & Block’s FCPA Experience ...... 49

Practice Member Listing ...... 50

Introduction to the Guide

Both the Department of Justice (DOJ) and the Securities cooperation, though cases that came to the and Exchange Commission (SEC) were quick out of the government’s attention in other ways seem to be gate to act in 2014: barely a week into the new year, a increasing, and companies appear to be going to greater subsidiary of aluminum company Alcoa Inc. (Alcoa) lengths than ever to obtain cooperation credit. The DOJ pleaded guilty to FCPA charges and agreed to pay $223 and the SEC also showed renewed emphasis on million in criminal fines and forfeiture. Alcoa also enforcement against individuals, with the DOJ bringing reached a civil settlement with the SEC in which it 12 new enforcement actions against individuals and agreed to pay another $161 million in disgorgement. obtaining guilty pleas from three individuals who were The total $384 million price tag makes the Alcoa matter indicted in a prior year. For its part, the SEC reached a the sixth costliest FCPA resolution to date. civil settlement, on the eve of a much-anticipated trial, with two executives first charged in 2012. The DOJ and the SEC also closed the year with a bang. In mid-December, they resolved the long-running As with past versions, the 2015 edition of Jenner & investigation of cosmetics company Avon Products, Inc. Block’s FCPA Business Guide describes and analyzes (Avon), with a guilty plea by Avon’s Chinese subsidiary the latest developments in FCPA enforcement and and a deferred prosecution agreement and civil provides practical guidance. We also provide an settlement for the parent company that carried a total of overview of the statute and address typical questions $135 million in penalties, disgorgement, and that a company operating in the international prejudgment interest. Five days later, French power marketplace may have about how to avoid running afoul company Alstom S.A. (Alstom) and its Swiss subsidiary of that law. Naturally, the information presented herein is pleaded guilty to FCPA violations, and two U.S. not intended to be legal advice in any specific situation. subsidiaries entered into deferred prosecution Such advice could be provided only after a full agreements. Alstom’s $772 million penalty is the evaluation of all of the facts and circumstances of a second-largest FCPA resolution ever, behind only the particular matter. $800 million Siemens matter in 2008.

In between, the DOJ brought a total of 25 new FCPA- related criminal actions, and the SEC brought or settled 11 new FCPA-related civil enforcement actions.1 Both agencies continued to credit self-disclosure and

1 This figure counts several enforcement actions against affiliated defendants as separate actions, even where those defendants were charged with participation in the same scheme. It does not include actions initiated in prior years that were resolved in 2014, unless the action was announced for the first time that year, or actions brought in 2014 that, at the time of publication, had not yet been announced. It includes investigations that resulted in non- prosecution agreements.

1

Recent Developments and Trends

Eleventh Circuit Holds that FCPA Covers Bribes to authority to appoint and remove the entity’s principals; Employees of State-Owned Enterprises (4) the extent to which the entity’s profits are returned to the public treasury; (5) whether the government supports On May 16, 2014, the U.S. Court of Appeals for the an entity that is otherwise performing at a loss; and Eleventh Circuit handed down a long-awaited decision in (6) the length of time these indicia have existed. United States v. Esquenazi concerning the FCPA's scope, becoming the first federal appellate court to hold As with control, the Eleventh Circuit also provided a list that the phrase “foreign government . . . instrumentality” of potential factors to weigh in determining whether a is broad enough to include state-owned enterprises that state-owned enterprise performs a public function: provide commercial services as part of a public function. (1) whether the entity has a monopoly over its functions; The court largely approved the government’s reading of (2) whether the government subsidizes the entity; the statute while rejecting the arguments of two (3) whether the entity performs services for the public at defendants convicted for bribing officials of Haiti’s large; and (4) whether the public and the government government-owned telecommunications company. On generally perceive the entity to be performing a October 6, 2014, the U.S. Supreme Court denied the governmental function. certiorari petitions of Joel Esquenazi and co-appellant Carlos Rodriguez.

The DOJ and the SEC have long taken the position that DOJ and SEC Continue to Reward Self-Disclosure the term “instrumentality” covers state-owned and Cooperation enterprises. The Eleventh Circuit’s opinion confirms that position and paves the way for future enforcement Although the DOJ has touted its increasing ability to actions concerning corrupt payments to officials at a investigate and prosecute FCPA cases in the absence of wide array of state-owned entities, which could include a voluntary disclosure and several major enforcement utilities, air carriers, hospitals, and resource extraction actions, such as Alcoa, Alstom, and Marubeni companies. Corporation (Marubeni), apparently did not originate with such a disclosure, many of last year’s enforcement The Eleventh Circuit held that “[a]n ‘instrumentality’ actions involved self-reporting and subsequent under . . . the FCPA is an entity controlled by the cooperation with the government’s investigation. government of a foreign country that performs a function According to the SEC, Smith & Wesson Holding the controlling government treats as its own.” According Company (Smith & Wesson), Layne Christensen to this formulation, there are two critical components of Company (Layne Christensen), and Bruker Corporation an “instrumentality”: government control and public (Bruker) all voluntarily disclosed their conduct. function. Additionally, both the DOJ and the SEC stated publicly that Avon and Bio-Rad Laboratories (Bio-Rad) each had The Court held that assessing control is a fact-bound self-reported. inquiry. But it set forth a non-exhaustive list of factors to guide the analysis: (1) the foreign government’s formal Many companies may be thinking that self-reporting is in designation of the entity; (2) whether the government their best interests, as both the DOJ and the SEC, has a majority ownership interest; (3) the government’s consistent with their public statements, appear to have

2

rewarded disclosure and cooperation with lighter whistleblower informed its CEO of potentially improper penalties. As in prior years, companies that self- payments (albeit several years after its legal and internal disclosed and cooperated with the government’s audit departments became aware of them). investigation received significant credit for their voluntary Subsequently, the company conducted a thorough disclosure and cooperation. For example, the DOJ’s internal investigation and cooperated extensively with Principal Deputy Assistant Attorney General for the the government’s investigation, including making U.S. Criminal Division, Marshall L. Miller, noted in a press and foreign employees available for interviews and release that “no charges of any kind were filed against collecting, analyzing, translating, and organizing PetroTiger,” an oilfield services company, after the evidence. The DOJ cited similar levels of cooperation in company made a voluntary disclosure and “cooperated the Alcoa and HP matters. fully with the department’s investigation.” Likewise, in 2014 enforcement actions, the SEC has Other DOJ actions saw criminal fines below the low end cited concrete evidence of cooperation to support a of the range of fines recommended by the federal reduced penalty. In an administrative settlement Sentencing Guidelines. For example, for Alcoa’s reached with Layne Christensen, the SEC offered one of subsidiary Alcoa World Alumina LLC (Alcoa World its most thorough discussions of cooperation to date, Alumina), the low end of the range was $446 million and observing that the company voluntarily provided the SEC the fine imposed was $209 million; for Hewlett-Packard with real-time reports of its investigative findings and Company’s (HP) Polish subsidiary, the low end of the English language translations of documents; made range was $19.3 million and the fine imposed was $15.5 foreign witnesses available for interviews in the United million; for Avon, the low end of the range was $84.6 States; and shared summaries of witness interviews and million and the fine imposed was $67.4 million. All three analysis of key documents and reports prepared by the companies cooperated extensively. company’s forensic accountants. In its recent settlement with Bruker, the SEC highlighted similar cooperation, These discounts from the Sentencing Guidelines are in including that the company expanded its internal line with what we have observed in the past: defendants investigation at the agency’s request. that have cooperated receive, on average, about a 20% discount off the low-end of the range. In contrast, In an interesting speech about cooperation generally, Marubeni, which the DOJ has cited publicly and Principal Deputy Assistant Attorney General Marshall L. repeatedly as an example of a defendant that neither Miller underscored an additional factor the DOJ will self-disclosed nor cooperated, received a middle-of-the- consider: assistance in prosecuting individual employees Guidelines range fine of $88 million. Similarly, Alstom, involved in the misconduct. Indeed, Miller suggested which did not self-disclose and only began cooperating these efforts were necessary to get credit: “Even the well after the DOJ initiated its investigation, also was identification of culpable individuals is not true sentenced at the middle of the Guidelines range. cooperation, if the company fails to locate and provide facts and evidence at their disposal that implicate those For its part, the SEC stressed the cooperation of Layne individuals.” Christensen, Bruker, and Bio-Rad as a factor in the relatively low penalties in each of those cases. Although the FCPA cases crediting cooperation suggest Miller may have overstated the degree to which assisting individual prosecution is necessary to receive such credit, his emphasis nevertheless bears notice. He DOJ and SEC Set High Bar for Crediting Corporate suggested that the “paradigmatic case” reflecting this Cooperation type of cooperation was 2012's Morgan Stanley matter, in which the DOJ prosecuted an individual employee for While 2014 reinforced that the DOJ and the SEC will wire fraud but declined to prosecute Morgan Stanley continue to reward cooperation and self-disclosure with because of its “internal compliance program and its reduced penalties, last year’s enforcement actions also voluntary disclosure” and because it “assisted the show that the DOJ and the SEC’s cooperation government in identifying” the responsible individual and expectations may be quite high. For example, Avon’s securing evidence supporting his prosecution. This deferred prosecution agreement noted that the company principle has been reflected in recent FCPA actions: had made a voluntary disclosure only five months after a

3

Alcoa World Alumina expressly agreed to cooperate with Smaller Companies in FCPA Crosshairs the DOJ “in the continuing investigation of individuals and institutions involved in the violation.” Functionally In the Smith & Wesson matter, the SEC imposed a $2 similar language concerning investigations of individuals million penalty on the firearms manufacturer after it was included in all non-prosecution agreements, allegedly approved a gift of $11,000 in firearms for deferred prosecution agreements, and guilty pleas with Pakistani officials in exchange for a contract on which it corporate defendants in 2014. earned roughly $100,000 in profit – relatively modest sums in the world of FCPA enforcement. Kara Brockmeyer, the chief of the SEC Enforcement Division’s FCPA Unit, called this settlement “a wake-up DOJ and SEC Increasingly Targeting Individual call for small and medium-size businesses that want to Defendants enter into high-risk markets and expand their international sales.” Brockmeyer added, “When a After a decline in prosecutions of individuals in 2012, company makes the strategic decision to sell its noted in our 2013 Guide, the DOJ’s recent emphasis on products overseas, it must ensure that the right internal prosecuting corporate executives, officers, and agents controls are in place and operating.” Other recent who participate in foreign bribery schemes is clearly enforcement actions from both the DOJ and the SEC evident in 2014’s enforcement actions. The DOJ have likewise targeted relatively small companies, Bio- announced the filing or unsealing of FCPA-related Rad and Bruker. charges against 12 individual defendants and continued to pursue other ongoing individual prosecutions. In This trend underscores the fact that FCPA liability is not November 2014, the head of the DOJ’s Criminal limited to major multinational companies. If a company Division, Assistant Attorney General Leslie Caldwell, does business abroad, especially in parts of the world pointed out that of the 50 convictions of individuals with a relatively high level of corruption risk, it must be obtained since 2009 in FCPA and FCPA-related cases, proactive about understanding the FCPA and putting in 25 have come since 2013. She further noted that the place adequate compliance measures. DOJ is now “better equipped to prosecute individuals who are actually making corrupt payments as well as intermediary entities hired to serve as conduits for bribes.” DOJ Ramps Up Kleptocracy Recovery Efforts and Civil Forfeitures In public statements associated with corporate settlements, the DOJ underscored that it would continue The DOJ’s Kleptocracy Asset Recovery Initiative, which its investigation to pursue individual defendants. In aims to seize assets acquired through corruption, was December 2014, AAG Caldwell noted, in connection with very active in 2014. In April, the DOJ filed a civil this year’s Marubeni matter, that the DOJ is “actively forfeiture complaint against more than $700,000 in continuing to investigate and anticipate[s] additional law proceeds from the sale of a California house allegedly enforcement actions in the near future.” After Alcoa purchased with funds traceable to bribes paid to Chun World Alumina pleaded guilty to one count of FCPA Doo-hwan, the leader of South Korea from 1979 to 1988. bribery, a DOJ official remarked that “an investigation The DOJ obtained a forfeiture judgment in August into individual misconduct continues.” against more than $480 million in corruption proceeds linked to former Nigerian dictator Sani Abacha in bank On the SEC side, the agency last year brought its first accounts in France, the United Kingdom, Ireland, and action against individuals since 2012, reaching Jersey. Then, in October, Teodoro Nguema Obiang settlement agreements with Stephen Timms and Yasser Mangue, the Second Vice President of the Republic of Ramahi in connection with their gifts of luxury watches Equatorial Guinea and the son of that nation’s President, and side travel to Saudi officials. agreed to relinquish more than $30 million in assets allegedly purchased with the proceeds of corruption. Twenty million dollars will be given to a charitable organization to benefit the people of Equatorial Guinea, while $10 million will be forfeited to the United States and used to benefit the people of Equatorial Guinea to

4

the extent lawfully permitted. In November, another wires, undercover agents, confidential informants and foreign corruption-related forfeiture case was unsealed, surveillance, long a fixture of the war on drugs, are being against assets in a bank account controlled by Chad’s employed increasingly in the white collar world of the former Ambassador to the United States that allegedly FCPA. A senior DOJ official recently noted that the DOJ are traceable to bribe payments from a Canadian energy is “vigorously employing proactive investigative tools that company. These cases represent a new tool in the may not have been used frequently enough in white government’s fight against foreign bribery. collar cases in past years,” citing as an example the prosecution of Frederic Cilins, an agent working for a non-U.S. company, for obstruction of an FCPA investigation. The DOJ official recounted that Cilins DOJ Working with Foreign Law Enforcement Bodies “was captured on tape directing a witness to ‘destroy to Develop Cases and Evidence everything, everything, everything,’ . . . ‘we need to urgently, urgently, urgently, destroy all of this,’” and that While government officials over the years have “faced with this damning evidence,” Cilins pleaded guilty. expressed a desire to increase international cooperation in various areas, 2014 saw concrete steps taken in the The lack of publicly available documents reflecting the FCPA arena. A number of the DOJ press releases DOJ’s investigations do not allow us to fairly evaluate discussing recent enforcement actions credited the accuracy of the DOJ’s claim that it regularly employs affirmative cooperation with foreign law enforcement. proactive investigative techniques in FCPA matters. For example, in the Alcoa World Alumina matter, the Outside the FCPA context, readers may recall that in the DOJ noted the “cooperation and assistance of the Office trial of hedge fund manager Raj Rajaratnam, convicted of the Attorney General of Switzerland, the Guernsey of insider trading, some of the most damning evidence Financial Intelligence Service and Guernsey Police, the came from a wiretap. Australian Federal Police, the U.K.’s Serious Fraud Office, and other law enforcement authorities . . . .” Less felicitously for the DOJ, proactive investigative techniques also featured prominently in the 2010 arrest U.S. officials have also emphasized that cooperation of 22 individuals in the now-infamous Gabon sting goes both ways. With U.S. assistance, actions were operation. In that matter, an undercover FBI agent brought against Alstom by British, Swiss, and World posed as an agent for the Gabon Ministry of Defense Bank authorities; likewise, a PetroTiger employee was who was soliciting bribes in exchange for a contract to charged in Colombia, and authorities there are sell military hardware to the Gabonese government. continuing to investigate other participants in the After the dramatic simultaneous arrest of a number of scheme. the defendants and three guilty pleas, the DOJ’s prosecution of the remaining defendants fell apart. This type of transnational cooperation is noteworthy. As Ultimately, in 2012, after two different subsets of the discussed below in the International Developments sting defendants won acquittals in two trials, the DOJ section, attention to corruption enforcement is increasing dismissed charges against the remaining defendants. in a number of jurisdictions around the world. U.S. enforcement agencies appear to be leveraging this momentum to aid their own development of facts and cases. Moreover, these efforts may help the United Increased Scrutiny on Gifts and Entertainment States overcome classic obstacles to investigating Expenses international crimes, such as blocking statutes. The SEC’s 2014 enforcement actions included three cases focused on improper gifts or entertainment provided to government officials. While the FCPA DOJ Commits to Continued Use of Proactive prohibits providing anything of value to a government Investigative Techniques official to obtain or retain business, and improper entertainment has long been understood potentially to According to senior DOJ officials, in addition to stepped- violate the FCPA, most reported cases have focused on up overseas cooperation the DOJ is also employing monetary payments to government officials. This year, proactive investigative techniques. Wiretaps, body however, the SEC brought cases focused on improper

5

gifts. For example, in the Bruker matter, non-business- consulting firm was retained to assist certain companies related travel and side trips provided to government in obtaining financing from a bank headquartered in the officials featured prominently in the SEC’s allegations. United Kingdom and owned by several foreign Likewise, in the Avon matter, the DOJ and the SEC governments. The consultant asked an attorney for alleged that the cosmetics company used improper gifts advice, explaining that he was thinking of paying a and travel expenses, in addition to cash payments, to certain bank employee in order to make sure the induce government officials to award a license. In each, financing was obtained swiftly, as the bank employee the SEC settlement also stressed the companies’ failure was threatening to slow down the process. The attorney to accurately record these gifts in their books and performed preliminary research, found the FCPA, asked records. the consultant whether the bank was a government entity and the banker a government official, and advised the consultant not to make the payment. The consultant insisted that the proposed payment would not violate the SEC Adopts a New “Monitor-Light” Corporate FCPA and proceeded to make it. Undertaking to Monitor Compliance Two of the consultant’s clients were successful, resulting Twice in 2014, the SEC used an administrative in success fees to the consultant of $8 million. Within proceeding to impose a new type of monitoring months of receiving those success fees, the consulting requirement on a corporation settling an FCPA action. firm made payments totaling $3.5 million to the banker’s First in the Smith & Wesson matter, and then in the sister. The bank later conducted an internal Layne Christensen matter, the SEC required the settling investigation into those payments, and thereafter company to agree to a two-year reporting period during disclosed them to the U.K.’s Overseas Anti-Corruption which the corporation would have to provide regular Unit, which arrested the banker and his sister and written updates about its progress implementing informed the FBI. The federal grand jury investigating remedial compliance undertakings and report any the matter subpoenaed the attorney, who refused to credible evidence that “questionable or corrupt testify. The government moved to compel his testimony, payments . . . may have been promised, paid, and the consulting firm and its president intervened. The authorized . . . or that related false books and records district court questioned the attorney in camera and then have been maintained.” granted the government’s motion, finding that the crime- fraud exception applied. While different in scope from an independent monitor, this “monitor-light” requirement may nevertheless The court of appeals affirmed. It determined that the impose a significant burden. It sacrifices a measure of district court’s decision was not an abuse of discretion, independence, requiring a company to provide the SEC because the evidence showed a pre-existing intent by with a detailed description of its compliance program. the client to make the payment, based in part on his The review and preparation associated with the written statement to the attorney that he was going to make the reports likely will require a significant expenditure of payment notwithstanding the attorney’s advice not to do corporate resources. More importantly, this new so. It further found that the consultation was in remedial measure imposes an affirmative duty to furtherance of the alleged crime, noting that the disclose both actual violations as well as any “credible attorney’s questions about whether the bank was a evidence” of a potential FCPA violation. governmental entity and whether the banker was a government official would have informed the consultant

that a governmental connection was key to violating the FCPA, leading the consultant to the idea of routing the Attorney-Client Privilege Pierced in FCPA-Related Cases payment through the banker’s sister.

In February, in In re Grand Jury Proceedings, the Third On January 6, 2015, the consulting firm's president was Circuit held that an attorney involved in an FCPA-related indicted on FCPA, Travel Act, and money laundering internal investigation must testify before a grand jury charges. pursuant to the crime-fraud exception to the attorney- client privilege. In the underlying matter, a Pennsylvania

6

Also, in July, the Delaware Supreme Court held in Wal- Mart Stores, Inc. v. Indiana Electrical Workers Pension Trust Fund IBEW, that shareholders who brought suit against Wal-Mart Stores, Inc. (Wal-Mart) could obtain internal investigation documents protected by the attorney-client privilege and the work product doctrine in the context of a request to examine the corporation’s books and records. We discuss the case in more detail in the FCPA-Related Private Litigation section of this Guide.

7

ctivity A nforcement FCPA E FCPA CountriesInvolved in 2014

8

2014 FCPA Enforcement Activity

The summaries below, presented in alphabetical order, Bahrain. The consultant used the mark-up to pay collect the significant events in FCPA cases during 2014, kickbacks to Bahraini government officials. including new complaints and resolutions of ongoing matters. During 2014, the DOJ brought or unsealed 25 Amount of Alleged Improper Payments: At least $110 new FCPA-related criminal actions, and the SEC million. brought or settled 11 new FCPA-related civil enforcement actions. Benefit Obtained: $175 million in sales.

Type of Resolution and Sanction: Alcoa World Alumina pleaded guilty to a criminal violation of the FCPA’s anti-bribery provisions and agreed to pay a $209 million criminal fine and a $14 million forfeiture to the Internal Revenue Service (IRS). As part of Alcoa World Alumina’s plea agreement, the parent company Alcoa also agreed to implement an enhanced global anti- corruption compliance program. Alcoa also settled an SEC administrative action, agreeing to the entry of a cease-and-desist order and a disgorgement judgment for $175 million, of which $14 million would be satisfied by the IRS forfeiture. In total, the two Alcoa entities agreed to pay $384 million to resolve these matters.

Of Note: The plea agreement and related court filings ALCOA INC. acknowledged Alcoa’s current financial condition, as well ALCOA WORLD ALUMINA LLC as Alcoa and Alcoa World Alumina’s extensive cooperation and subsequent anti-corruption remedial Department of Justice efforts, as factors in determining the size of the criminal Guilty Plea fine. The civil forfeiture to the IRS is a new feature in January 9, 2014 FCPA settlements. Additionally, the SEC order “makes no findings that any officer, director or employee of Securities and Exchange Commission Alcoa knowingly engaged in bribery,” but rests Alcoa’s Settled Administrative Proceeding liability on the theory that its subsidiaries acted as its January 9, 2014 agents. Nature of Conduct: Between 2005 and 2009, Alcoa World Alumina LLC (Alcoa World Alumina), a subsidiary In late 2013, the United Kingdom’s Serious Fraud Office of global aluminum company Alcoa Inc. (Alcoa), used a (SFO) dismissed charges against Dahdaleh because of sham distributorship arrangement with a London-based a lack of evidence after an attorney from Akin Gump consultant, Victor Dahdaleh, to mark up the price of Strauss Hauer & Feld, Alba’s law firm, declined to testify. alumina sold to Aluminum Bahrain B.S.C. (Alba), an aluminum smelter controlled by the government of

9

ALSTOM S.A. anti-bribery provisions of the FCPA. Alstom Power and ALSTOM NETWORK SCHWEIZ AG Alstom Grid each entered into a three-year deferred ALSTOM POWER INC. prosecution agreement. No separate monetary penalty ALSTOM GRID INC. was imposed on any of the subsidiaries beyond the $772 million to be paid by the parent company. Department of Justice Guilty Plea as to Alstom S.A. Of Note: Alstom’s $772 million penalty in this case is the Guilty Plea as to Alstom Network Schweiz AG largest criminal penalty imposed in the history of the Deferred Prosecution Agreement as to Alstom Power FCPA, substantially larger than the $450 million in Inc. criminal fines imposed against Siemens. (Siemens also Deferred Prosecution Agreement as to Alstom Grid S.A. paid $350 million in disgorgement in a related SEC December 22, 2014 action, so it therefore continues to be the costliest overall FCPA resolution to date.) The plea agreement French power and transportation Nature of Conduct: highlighted Alstom’s failure to disclose the misconduct company Alstom S.A. (Alstom), together with a Swiss even though it was aware of related misconduct at a subsidiary, Alstom Network Schweiz AG (Alstom Prom), U.S. subsidiary that previously resolved corruption a Connecticut-based subsidiary, Alstom Power Inc. charges in connection with a power project in Italy; its (Alstom Power), and a New Jersey-based subsidiary, refusal to cooperate fully for several years; the breadth Alstom Grid Inc. (Alstom Grid), bribed government of the corruption; the lack of an effective compliance officials and falsified books and records in connection program; and the company’s prior criminal misconduct, with projects for state-owned entities around the world, including conduct that led to a separate resolution with including in Indonesia, Egypt, Saudi Arabia, the the World Bank and various foreign governments. Bahamas, and Taiwan. In Indonesia, for example, Alstom, Alstom Prom, and Alstom Power made corrupt payments to a high-ranking member of Parliament and senior officials of the state-owned electricity company. AVON PRODUCTS, INC. Similarly, in Egypt, Alstom paid bribes to Egyptian AVON PRODUCTS (CHINA) CO., LTD. officials (including a dual U.S. and Egyptian citizen, Asem M. Elgawhary, who separately pleaded guilty to Department of Justice counts of mail fraud, wire fraud, money laundering, and Guilty Plea as to Avon Products (China) Co., Ltd. tax offenses for his role in accepting improper payments) Deferred Prosecution Agreement as to Avon Products, in order to secure contracts for state-owned enterprises. Inc. In many instances, the bribes were funneled through December 17, 2014 consultants who did little or no actual work. Securities and Exchange Commission Settled Civil Proceeding as to Avon Products, Inc. Amount of Alleged Improper Payments: More than $75 million. December 17, 2014 Nature of Conduct: Between at least 2004 through the Benefit Obtained: $4 billion in projects, resulting in a third quarter of 2008, Avon Products, Inc.’s (Avon) profit of approximately $300 million. subsidiary in China, Avon Products (China) Co., Ltd. (Avon China) gave cash and other things of value, Type of Resolution and Sanction: Alstom pleaded including meals, gifts, travel, and entertainment, to guilty to two counts of FCPA violations, one for Chinese government officials, including officials knowingly falsifying books and records and one for responsible for awarding a test license, and failing to maintain adequate internal controls, and agreed subsequently a direct sales business license, that would to pay a criminal penalty of $772 million. Alstom also allow Avon to conduct door-to-door sales in China. Avon must satisfy the monitoring requirements of a prior China failed to record these expenses accurately and settlement with the World Bank and must report to the completely in its books and records, which were DOJ no less frequently than every 12 months for three consolidated into Avon’s books and records. years regarding remediation and implementation of its compliance program and internal controls. Alstom Prom pleaded guilty to one count of conspiracy to violate the

10

For example, Avon China employees routinely and SEC enforcement action and agreed to pay more than intentionally characterized entertainment of government $67.36 million in disgorgement and prejudgment interest. officials as “business entertainment” or “public relation Together, Avon and Avon China will pay $135 million to entertainment,” and omitted the names of the officials settle these matters. who attended. On other occasions, extensive personal trips for government officials and their family members Of Note: This resolves a long-running FCPA were described as “study trips” or “site visits.” Avon investigation involving Avon. A former Avon China China employees also purchased a sponsorship at a executive who himself had been terminated for state-owned newspaper to induce it not to publish a submitting false expense reports for gifts and negative news story, at the request of an official at the entertainment for government officials reported alleged paper who was in charge of determining whether the improper payments to Avon’s CEO in May 2008, and story should run. Furthermore, Avon China made at least Avon made a voluntary disclosure to the DOJ and the one payment to a government official’s personal bank SEC in October 2008. According to its deferred account to avoid a fine for violating China’s direct selling prosecution agreement, Avon conducted a thorough regulations. internal investigation and cooperated extensively with the government’s investigation, including making U.S. Both Avon’s internal audit and legal departments learned and foreign employees available for interviews and many of these facts as early as 2005. That year, an collecting, analyzing, translating, and organizing internal audit found that monetary payments, gifts, and evidence. Avon also undertook wide-ranging hospitality had been given to government officials remediation. without being accurately recorded in Avon China’s books and records, but Avon executives directed the Significantly, neither the DOJ nor the SEC charged Avon destruction of a draft audit report containing these or Avon China with violating the FCPA’s anti-bribery findings, and instructed auditors not to use the term provisions, even though the SEC alleged that Avon “FCPA” in any documents or emails and not to create China made several payments to state-owned any electronic records when gathering information about publications in order to avoid negative publicity and at the provision of things of value to government officials. least one cash payment to a government official to avoid Although Avon consulted a “major law firm” about a fine. For the most part, however, both agencies’ potential FCPA issues in late 2005, it stopped doing so allegations focused on the failure to maintain accurate after only about a month, telling the firm that it had and complete records of payments, gifts, hospitality, “moved on” from the issues it previously had raised. travel, and entertainment provided to government officials. Both the deferred prosecution agreement and Amount of Alleged Improper Payments: the SEC settlement acknowledge Avon’s cooperation Approximately $8 million in cash, meals, gifts, travel, and remedial measures as a consideration in reaching entertainment, and sponsorships. this resolution.

Benefit Obtained: Obtaining and retaining a direct Finally, both the DOJ and the SEC placed substantial selling permit; goodwill of government officials; emphasis on the fact that Avon’s internal audit and legal avoidance of a fine; and avoidance of negative media departments had learned several years before the coverage. whistleblower report in 2008 that Avon China employees had given substantial gifts and hospitality to Chinese Type of Resolution and Sanction: Avon China pleaded officials without accurately recording them in Avon guilty to one count of conspiracy to violate the books- China’s books and records, but had failed to take and-records provision of the FCPA and to pay a criminal corrective action, and arguably had covered up the penalty of $67.65 million. The parent company Avon issues. entered into a three-year-and-seven-day deferred prosecution agreement with the DOJ, pursuant to which it agreed to engage an outside monitor for at least 18 months, and also agreed to pay a criminal penalty of $67.65 million, which would be satisfied by Avon China’s payment of its own penalty. Avon also settled a related

11

BIO-RAD LABORATORIES INC. being funneled to Russian officials in exchange for government contracts, not actual knowledge of that fact. Department of Justice Non-Prosecution Agreement November 3, 2014 ULRICH BOCK AND STEPHAN SIGNER Securities and Exchange Commission Settled Administrative Proceeding Securities and Exchange Commission November 3, 2014 Default Judgment February 3, 2014 Nature of Conduct: According to the DOJ, a French subsidiary of California-based medical diagnostics and Nature of Conduct: The SEC brought a civil action life sciences company Bio-Rad Laboratories Inc. (Bio- against Ulrich Bock, Stephan Signer, and other Rad) retained and paid intermediary companies former senior executives and agents of Siemens “commissions” of 15% to 30%, purportedly for various AG (Siemens), all foreign nationals, alleging that services in connection with governmental sales in they participated in a scheme from 1996 to 2007 to Russia that were never performed. These payments pay Argentine officials to obtain and retain a were inaccurately recorded in Bio-Rad’s books. Bio-Rad contract to produce national identity cards for also allegedly failed to implement internal controls with Argentine citizens. Bock and Signer both failed to respect to its Russian operations such that it failed to answer the SEC’s complaint or otherwise appear in stop the payments. The SEC made similar allegations and, in addition, alleged that foreign Bio-Rad court, leading to the entry of a default judgment subsidiaries used local intermediaries in Vietnam and against them. Thailand to funnel bribes to officials in those countries in Amount of Alleged Improper Payments: $100 million. exchange for business, which subsequently were inaccurately recorded and consolidated into Bio-Rad’s Benefit Obtained: $1 billion contract to produce national financial statements. identity cards.

Amount of Improper Payments: Approximately $7.5 Type of Resolution and Sanction: Default judgment million. and permanent injunction.

Benefits Obtained: Approximately $35 million in illicit Of Note: Siemens itself resolved FCPA charges in 2008 profits. with the DOJ and the SEC for $800 million, still the largest FCPA settlement ever. In 2013, a federal district Type of Resolution and Sanction: Bio-Rad entered court in New York dismissed the suit against another into a non-prosecution agreement with the DOJ and defendant in the SEC’s civil suit for lack of personal agreed to pay a $14.35 million criminal penalty. It also jurisdiction. consented to the entry of an SEC cease and desist order prohibiting violation of the FCPA’s anti-bribery, internal Both Bock and Signer continue to face related criminal controls, and books-and-records provisions and ordering charges brought by the DOJ in 2011. payment of $40.7 million in disgorgement and prejudgment interest.

Of Note: Both the DOJ and the SEC noted in their BRUKER CORPORATION respective press releases that Bio-Rad had self- disclosed its misconduct and cooperated extensively Securities and Exchange Commission during the ensuing investigation. Although the SEC Settled Administrative Proceeding described Bio-Rad’s alleged bribes to Vietnamese and December 15, 2014 Thai officials in some detail, it rested its FCPA charge only on the Russian conduct. Moreover, it alleged only Nature of Conduct: According to the SEC’s that Bio-Rad’s employees evinced a conscious disregard allegations, from 2005 through 2011, the Chinese for the high probability that payments to agents were operations of Bruker Corporation (Bruker), a life sciences company based in the United States, paid a

12

series of bribes to officials of a Chinese state-owned BENITO CHINEA AND JOSEPH DEMENESES corporation. Bruker’s alleged improper payments fell into two categories: (1) a series of non-business-related Department of Justice travel and side trips during business-related travel Indictments provided to Chinese officials at state-owned enterprises; April 10, 2014 and (2) a series of “collaboration agreements” with Guilty Pleas Chinese officials at state-owned enterprises that did not December 17, 2014 specify the officials’ work to be performed under the agreements. In both instances, the Chinese officials Securities and Exchange Commission who received the non-business-related trips and who Amended Complaint entered into the collaboration agreements were in April 14, 2014 positions to approve, and did approve, contracts between the Chinese state-owned entities and Bruker’s Nature of Conduct: Benito Chinea is the former CEO, China operations. and Joseph DeMeneses is a former managing director, of broker-dealer Direct Access Partners (DAP), which Amount of Alleged Improper Payments: $230,928 in according to Chinea and DeMeneses’s plea agreements travel expenses and collaboration agreement payments. engaged in a scheme to bribe an official at a Venezuelan development bank, Banco de Desarollo Económico y Benefit Obtained: $1.7 million in profits from sales Social de Venezuela (BANDES), in exchange for the contracts with state-owned enterprises. official’s directing BANDES’ trading business to DAP.

Type of Resolution and Sanction: While neither Amount of Alleged Improper Payments: More than $5 admitting nor denying its liability, Bruker agreed to settle million. charges that its books and records improperly reflected the alleged bribes as legitimate business expenses and Benefit Obtained: $66 million in transaction fee revenue that it had failed to implement an adequate system of for DAP. internal controls. Bruker agreed to pay $1.7 million in disgorgement; $310,117 in prejudgment interest; and a Type of Resolution and Sanction: Chinea and civil monetary penalty of $375,000. DeMeneses each pleaded guilty to one count of conspiracy to violate the FCPA and the Travel Act. Of Note: According to the administrative order, Bruker Sentencing for both currently is set for March 27, 2015. received cooperation credit from the SEC due to its On April 14, 2014, the SEC amended its complaint in a “extensive, thorough, and real-time cooperation” with the related action to add Chinea and DeMeneses as SEC. According to the SEC, Bruker promptly self- defendants. reported the potential misconduct, hired independent counsel to conduct an internal investigation, Of Note: Three other DAP employees pleaded guilty last implemented new remedial measures, provided real time year for their participation in the same scheme: Tomás reports of its investigative findings, shared its witness Alberto Clarke Bethancourt, José Alejandro Hurtado, interview summaries as well as its analysis of important and Ernesto Lujan each pleaded guilty to conspiring to documents, and expanded its investigation based on the violate the FCPA, to violate the Travel Act, and to SEC’s request. commit money laundering, as well as to substantive violations of the relevant statutes. The BANDES official The SEC also identified several reasons why Bruker’s who received the improper payments, María de los internal controls were deficient: (1) the failure to translate Ángeles González de Hernandez, also pleaded guilty its FCPA policy and code of ethics into Mandarin; (2) the last year to conspiracy to violate the Travel Act and to failure to conduct FCPA training in Mandarin; (3) the commit money laundering, as well as to substantive absence of an internal audit function with authority to Travel Act and money laundering offenses. DAP itself intervene in the event of observed improprieties; and has not been charged and has filed for bankruptcy. (4) the failure to provide its employee hotline in Mandarin. In addition, as noted above, the SEC has filed a related action against Chinea, DeMeneses, Clarke, Hurtado, and Lujan, as well as against an alleged Panamanian

13

middleman, Iuri Rodolfo Bethancourt, and Hurtado’s was sentenced to 24 months in prison, a $75,000 fine, wife, Haydée Leticia Pabón. The SEC complaint charges and forfeiture of $20,000. several counts of securities fraud, but no FCPA violations. This case reflects the SEC’s willingness to Of Note: Media reports have identified the business creatively prosecute FCPA-type misconduct where the entity for which Cilins worked as BSG Resources Ltd., a defendants are not “issuers” or affiliated with issuers. Guernsey-based company in the mining, metals, and The SEC case is ongoing. energy industries.

FREDERIC CILINS DALLAS AIRMOTIVE INC.

Department of Justice Department of Justice Guilty Plea Deferred Prosecution Agreement March 10, 2014 December 10, 2014

Sentencing Nature of Conduct: The DOJ charged Dallas Airmotive, July 25, 2014 Inc. (Dallas Airmotive), a Texas-based provider of aircraft engine maintenance, repair, and overhaul (MRO) Nature of Conduct: Frederic Cilins, a French citizen, services, with one count of conspiracy to violate the worked as an agent for a non-U.S. business entity FCPA and one substantive violation of the FCPA’s anti- whose Guinean subsidiary allegedly entered into several bribery provisions. According to the statement of facts to contracts with a company owned at the time by a which Dallas Airmotive agreed as part of its deferred Guinean official’s wife, now a cooperating witness. The prosecution agreement, from 2008 to 2012, it funneled contracts provided, among other things, that the wife’s payments to foreign officials in Argentina, Brazil, and company would assist the Guinean subsidiary in Peru who could influence the award of MRO business obtaining permits for mining research. Cilins offered to through third-party agents and front companies that were pay the wife for the original contracts, which were the secretly associated with the officials. Dallas Airmotive subject of a grand jury subpoena, so that he could also paid for a vacation for a Brazilian Air Force official destroy them, and to sign a statement asserting that and his wife. there had been no such contracts. Shortly after the official’s wife asked for an advance payment, Cilins was Amount of Alleged Improper Payments: The arrested carrying $20,000. Cilins was charged by a information describes a “commission” of $5,000 paid to a criminal complaint filed on April 15, 2013, with tampering government official; a “$15,000 commission per engine”; with a witness, obstructing a federal investigation, and an addition of $3,000 to an invoice “for future needs”; a destroying or falsifying documents in a federal request from a government official to “prepare a pre- investigation. budget of $300,000,” to which various expenses would be added “for everything to total around $350,000”; and Amount of Alleged Improper Payments: The Guinean a commission of $20,000 paid to a government official’s subsidiary allegedly entered into contracts with the company. official’s wife’s company through which it paid at least $7 million, in addition to percentages of the Guinean Benefit Obtained: More than $2.5 million, according to subsidiary’s capital and stock. Cilins offered the official’s the sentencing calculation set out in the deferred wife a payment of up to $5 million for the original prosecution agreement. contracts. Type of Resolution and Sanction: Three-year deferred Benefit Obtained: Lucrative mining rights in the prosecution agreement and a $14 million criminal fine. Simadou region of Guinea. Of Note: Dallas Airmotive is the third aircraft MRO Type of Resolution and Sanction: Cilins pleaded guilty company to resolve FCPA charges in the past three to one count of obstructing a federal investigation. He years. In 2012, BizJet International Sales and Support Inc. (BizJet) paid a $11.8 million criminal fine, and its

14

parent company, Lufthansa Technik AG, entered into a clear that Alstom was one of them. Furthermore, the three-year deferred prosecution agreement with the Alstom papers allege payments to “Egyptian officials, DOJ. Several former BizJet employees also were including Asem Elgawhary,” making clear that the DOJ charged with or pleaded guilty to FCPA violations. Also considers Elgawhary a foreign official within the meaning in 2012, Nordam Group Inc. paid a $2 million criminal of the FCPA. fine to resolve allegations that it bribed Chinese officials in exchange for government MRO business.

DMITRY FIRTASH, SUREN GEVORGYAN, ANDRAS KNOPP, GAJENDRA LAL, K.V.P. RAMACHANDRA ASEM M. ELGAWHARY RAO, AND PERIYASAMY SUNDERALINGAM

Department of Justice Department of Justice Indictment Indictments February 10, 2014 Filed June 20, 2013; unsealed April 2, 2014

Guilty Plea Nature of Conduct: The DOJ charged six foreign December 4, 2014 nationals in connection with an alleged scheme to bribe Indian officials in return for titanium mining rights. Five of Nature of Conduct: Asem M. Elgawhary, a dual U.S. the six are charged with conspiracy to violate the and Egyptian citizen, was an employee both of Bechtel FCPA’s anti-bribery provision. All six are charged with Corporation (Bechtel), a California-based global related racketeering and money laundering conspiracies corporation engaged in engineering, construction, and and substantive violations of the Travel Act. project management, and of Power Generation Engineering and Services Company (PGESCo), an According to the indictment, the defendants conspired to Egyptian joint venture among Bechtel; Egyptian pay at least $18.5 million in bribes to state and central Electricity Holding Company (EEHC), the Egyptian state- government officials in India to secure mining licenses in owned and state-controlled electricity company; and an the state of Andhra Pradesh. The defendants allegedly international bank. PGESCo assisted EEHC in used U.S. financial institutions to transmit the bribe funds identifying possible subcontractors to perform work on its and traveled to Seattle and to Greensboro, North behalf, soliciting bids, and awarding contracts. Carolina, for the purpose of advancing the scheme. Elgawhary accepted kickbacks from several non-U.S. companies, including French power company Alstom The alleged ringleader of the scheme is Ukrainian S.A. (Alstom), to favor them in the bidding process and national Dmitry Firtash, who was arrested in March 2014 to enable them to be paid sooner than they otherwise in Vienna, Austria, and is awaiting extradition would have been once they won contracts. proceedings in that country. The other defendants— Suren Gevorgyan of Ukraine, Andras Knopp of Hungary, Amount of Alleged Improper Payments: Elgawhary Gajendra Lal and K.V.P. Ramachandra Rao of India, received more than $5 million in kickbacks. and Periyasamy Sunderalingam of Sri Lanka— remain at large. Benefit Obtained: The companies that paid kickbacks to Elgawhary received more than $2 billion in contracts. Amount of Alleged Improper Payments: At least $18.5 million. Type of Resolution and Sanction: Elgawhary pleaded guilty to mail and wire fraud, money laundering, and tax Benefit Obtained: Unknown. offense charges. As part of his plea, he agreed to serve 42 months in prison and to forfeit approximately $5.2 Type of Resolution and Sanction: Unresolved. million. Sentencing is scheduled for March 23, 2015. Of Note: The group of defendants includes one of the Of Note: Although the charging papers and press alleged bribe recipients, K.V.P. Ramachandra Rao, an release in Elgawhary’s case did not identify any of the Andhra Pradesh official who is said to have used his companies that paid him kickbacks, the Alstom position to influence the award of the mining licenses. As information, plea agreement, and press release make

15

the FCPA does not reach the recipients of improper Of Note: These are the latest in a long line of FCPA payments, Rao faces only charges related to enforcement actions related to the oil industry. Notably, racketeering, money laundering, and Travel Act however, PetroTiger is a relatively small player, at least violations. compared to behemoths like Total S.A. and Weatherford International, which also have recently settled FCPA KNUT HAMMARSKJOLD, JOSEPH SIGELMAN, AND matters. In addition, it is highly unusual for a company’s GREGORY WEISMAN general counsel to be charged as a direct participant in an FCPA conspiracy. Department of Justice Guilty Plea as to Weisman The charging papers also alleged that the defendants November 8, 2013 attempted to secure kickback payments at the expense of PetroTiger and several of its board members. The Guilty Plea as to Hammarskjold defendants allegedly negotiated a higher purchase price February 18, 2014 for a company that PetroTiger sought to acquire in Indictment as to Sigelman exchange for kickback payments from the owners of the May 9, 2014 target company.

Nature of Conduct: The DOJ charged three individuals PetroTiger itself has not been charged. with conspiracy to violate the FCPA’s anti-bribery provisions, to commit wire fraud, and to commit money laundering as well as substantive violations of the FCPA. According to the charging papers, Hammarskjold, HEWLETT-PACKARD COMPANY Sigelman, and Weisman, the former co-CEOs and HEWLETT-PACKARD MÉXICO, S. DE R.L. DE C.V. former general counsel, respectively, of PetroTiger, Ltd. HEWLETT-PACKARD POLSKA, SP. Z.O.O. (PetroTiger), a British Virgin Islands oil and gas services ZAO HEWLETT-PACKARD A.O. company with offices in New Jersey, caused PetroTiger Department of Justice to make several payments in late 2010 to an official of Guilty Plea and Sentencing as to ZAO Hewlett-Packard the Colombian state-owned oil company, Ecopetrol S.A. A.O. (Ecopetrol). In exchange, the official influenced April 9, 2014, and September 11, 2014 Ecopetrol to approve PetroTiger’s contract with another company to perform oil-related services in Colombia. Deferred Prosecution Agreement as to Hewlett-Packard The government alleges that the three executives initially Polska, SP. Z.O.O. attempted to funnel the payments to the official through April 9, 2014 his wife, who submitted invoices to PetroTiger for consulting services that she never performed. After the Non-Prosecution Agreement as to Hewlett-Packard transfer to the wife’s bank account was rejected for México, S. de R.L. de C.V. various reasons, the executives sent the money directly April 9, 2014 to an account in the official’s name. Securities and Exchange Commission Amount of Alleged Improper Payments: More than Settled Administrative Proceeding as to Hewlett-Packard $330,000. Company April 9, 2014 Benefit Obtained: PetroTiger obtained a contract worth $39.6 million, which has generated approximately $3.5 Nature of Conduct: ZAO Hewlett-Packard A.O. (HP million in profits to date. Russia), a wholly-owned international subsidiary of California-based Hewlett-Packard Company (HP), used Type of Resolution and Sanction: Sigelman is a buy-back scheme to finance a slush fund used to bribe contesting the charges against him and is scheduled to Russian government officials in return for a contract with go to trial on April 20, 2015. Weisman and Russia’s Office of the Prosecutor General. The contract Hammarskjold each pleaded guilty to one count of was valued at more than €35 million. Specifically, HP conspiracy to violate the FCPA and to commit wire fraud. Russia sold products to a Russian partner, bought the Both are awaiting sentencing. same products back through an intermediary at a

16

markup, and then sold them to the Office of the discussion of the travel and entertainment expenses in Prosecutor General at the inflated price. The payments their press releases announcing these resolutions shows to the intermediary were transferred through various that the enforcement agencies will pursue actions shell companies to government officials. HP Russia also related to inappropriate benefits in all forms and that maintained two sets of books to conceal the bribery. companies should diligently guard against abuse of corporate travel and entertainment accounts. Two other wholly-owned HP subsidiaries also resolved FCPA charges: Hewlett-Packard Polska SP. Z.O.O. (HP The structure of the criminal resolution is also Poland), a Polish subsidiary, entered into a deferred noteworthy because it allowed the parent company to prosecution agreement to settle FCPA charges in avoid criminal liability but nevertheless required it to connection with a Polish national police agency contract, adopt certain compliance undertakings. This reflects a and Hewlett-Packard México, S. de R.L. de C.V. (HP compromise of sorts between the regulators’ aggressive Mexico), a Mexican subsidiary, entered into a non- approach to vicarious liability through subsidiaries and prosecution agreement to resolve FCPA charges related corporate parent companies’ insistence that they should to its business with Mexico’s state-owned petroleum not be responsible for the actions of rogue individuals at company. foreign subsidiaries.

Amount of Alleged Improper Payments: Combined payments of $3.6 million (across Russia, Poland, and Mexico). MARK JACKSON AND JAMES RUEHLEN Securities and Exchange Commission Benefit Obtained: Combined benefit of $29 million Settled Civil Proceeding (across Russia, Poland, and Mexico). July 3, 2014 Type of Resolution and Sanction: HP Russia pleaded Nature of Conduct: The SEC reached a civil settlement guilty to four FCPA counts: conspiracy to violate the with Mark Jackson, Noble Corporation’s former CEO, FCPA as well as substantive violations of the FCPA’s and James Ruehlen, a current Noble employee and the anti-bribery, books-and-records, and internal controls former director and division manager of Noble’s Nigerian provisions. It was sentenced to pay a criminal penalty of subsidiary. The complaint alleged that Jackson and $58,772,250. HP Poland reached a deferred prosecution Ruehlen had authorized bribes to Nigerian customs agreement pursuant to which it agreed to pay a criminal officials to process paperwork falsely showing that penalty of $15,450,224, and HP Mexico entered into an certain oil rigs had been exported from Nigeria and re- non-prosecution agreement pursuant to which it agreed imported, as required under Nigerian law, although in to forfeit $2,527,650. The Polish and Mexican matters reality the rigs never left Nigeria. settle books-and-records and internal controls charges. The parent company, HP, resolved a separate SEC Amount of Alleged Improper Payments: According to matter for violations of the FCPA’s accounting the SEC, Jackson and Ruehlen participated in paying provisions, and agreed to pay $31,472,250 in hundreds of thousands of dollars in bribes to obtain disgorgement, prejudgment interest, and penalties. about eleven illicit permits and 29 permit extensions.

In total, the HP entities will pay more than $108 million to Benefit Obtained: According to the SEC, the false resolve these matters. As part of its subsidiaries’ criminal paperwork saved Noble Corporation from losing resolutions, HP also committed to the implementation of business and incurring significant costs associated with a global enhanced anti-corruption compliance program exporting rigs from Nigeria and then re-importing them and agreed to make periodic reports about its under new permits, but it did not specify a dollar amount. compliance program. Type of Resolution and Sanction: The settlement, Of Note: The alleged conduct in Poland and Russia entered only six days before the case was to have gone included gifts, entertainment, and leisure travel provided to trial before a jury, did not require a financial penalty, to government officials in order to win new business. but only injunctive relief. The Court entered a final While the charged schemes also included traditional judgment enjoining Jackson from violating the FCPA’s cash payments, the DOJ’s and the SEC’s public

17

books-and-records provision or causing an issuer to do provisions. He was sentenced to time served and a so. Ruehlen agreed to the entry of a final judgment criminal fine of $15,000. enjoining him from aiding and abetting any violation of the books-and-records provision. Of Note: Kowalewski was living abroad when the charges against him were unsealed, but was later Of Note: The complaint against Jackson and Ruehlen arrested in Amsterdam on a provisional warrant, and originally was filed in 2012, followed by amended waived extradition. Two other former BizJet executives complaints in 2013. Previously, Noble Corporation had (Peter DuBois, former vice president of sales and cooperated with and settled FCPA charges brought by marketing; and Neal Uhl, former vice president of the SEC and entered into a non-prosecution agreement finance) previously pleaded guilty for their roles in the with DOJ based on the same conduct and made an $8 scheme and each was sentenced to probation and eight million payment to settle civil and criminal cases. The months of home detention. A fourth individual, Jald alleged violations were uncovered as part of an SEC Jensen, a former BizJet sales manager, was indicted in sweep operation. The SEC also filed settled charges connection with the scheme but reportedly remains against Thomas O'Rourke, who was a former controller abroad. In 2012, BizJet itself entered into a three-year and head of internal audit at Noble, alleging that deferred prosecution agreement with the DOJ under O'Rourke helped approve the bribe payments and which it agreed to pay an $11.8 million penalty. allowed the bribes to be booked improperly as legitimate operating expenses for the company. O’Rourke was enjoined and ordered to pay a $35,000 penalty. LAYNE CHRISTENSEN COMPANY

Securities and Exchange Commission BERND KOWALEWSKI Settled Administrative Proceeding October 27, 2014 Department of Justice Guilty Plea Nature of Conduct: According to the SEC, Layne July 24, 2014 Christensen Company (Layne Christensen), a U.S.- based, publicly traded, global water management, Sentencing construction, and drilling company, made improper November 18, 2014 payments to foreign government officials in Tanzania, the Republic of Mali, the Republic of Guinea, Burkina Nature of Conduct: Along with three former colleagues, Faso, and the Democratic Republic of the Congo to Bernd Kowalewski, the former president and CEO of obtain favorable tax treatment, customs clearance for Oklahoma-based aircraft maintenance, repair, and drilling equipment, expatriate work permits, and relief overhaul (MRO) company BizJet International Sales and from immigration and labor inspections. The payments Support Inc. (BizJet), was charged with FCPA violations also allegedly allowed Layne Christensen to avoid for his participation in a scheme to make improper penalties for delinquent payment of taxes and customs payments to government officials in Mexico, Panama, duties and failing to register immigrant workers. The and Brazil to help secure contracts for MRO services. SEC further alleged that the payments were made with Some of these payments were made directly to the knowledge, and in one case the express approval, of government officials, and others were funneled through the president of Layne Christensen’s mining subsidiary, a shell company operated out of the residence of one of who also was an officer of Layne Christensen and the BizJet executives. reported directly to Layne Christensen’s CEO. In addition, Layne Christensen agreed to settle charges Amount of Improper Payments: More than $500,000. that its books and records improperly reflected the alleged bribes as legitimate business expenses and that Benefits Obtained: The contract obtained was valued it had failed to implement an adequate system of internal at approximately $118 million. controls.

Type of Resolution and Sanction: Kowalewski Amount of Alleged Improper Payments: Over $1 pleaded guilty to conspiracy to violate the FCPA and to a million. substantive violation of the FCPA’s anti-bribery

18

Benefit Obtained: According to the SEC, Layne Third, the SEC faulted Layne Christensen for payments Christensen realized improper tax benefits, secured as small as $4 paid through customs and clearing customs clearance of equipment, avoided assessed agents, noting that the payments had been customs duties and penalties, secured work permits for characterized as “intervention,” “honoraires,” undocumented workers, and avoided penalties for failing “commissions,” and “service fees.” While such small to register these workers. The alleged value of these amounts might arguably have fallen within the FCPA’s benefits was approximately $3.9 million. "grease payment" exception for payments made to facilitate routine government action, the characterization Type of Resolution and Sanction: Layne Christensen of these payments supported the SEC’s books-and- consented to an administrative cease-and-desist order, records charges. while neither admitting nor denying the SEC’s findings, in order to resolve the alleged violations of the FCPA’s anti-bribery, books-and-records, and internal controls provisions. Layne Christensen agreed to pay $3.89 MARUBENI CORPORATION million in disgorgement; $858,720 in prejudgment Department of Justice interest; and a civil money penalty of $375,000. Guilty Plea March 19, 2014 Of Note: There are three noteworthy aspects of this settlement. First, the SEC gave substantial cooperation Sentencing and remediation credit to Layne Christensen in the form May 15, 2014 of a greatly reduced civil money penalty. The SEC noted in its order that Layne Christensen: (1) quickly Nature of Conduct: Japanese company Marubeni initiated an internal investigation and retained outside Corporation (Marubeni) pleaded guilty to violating the counsel and forensic accountants to conduct the FCPA’s anti-bribery provisions. According to the plea investigation; (2) self-reported its preliminary findings to agreement, Marubeni engaged in a seven-year scheme the SEC; (3) publicly disclosed its potential FCPA to pay and conceal bribes to an Indonesian member of violations; (4) terminated four employees, including the Parliament and other government officials in order to win subsidiary president; (5) conducted a comprehensive a $118 million contract for power-related services. risk assessment of its worldwide operations; (6) took affirmative steps to strengthen its internal compliance Amount of Alleged Improper Payments: $2.3 million policies, including its internal training and due diligence (including payments made by Connecticut-based co- procedure concerning third parties with which it conspirator). conducted business; (7) voluntarily provided the SEC with real-time reports of its investigative findings and Benefit Obtained: Contract worth $118 million. English language translations of documents; (8) made foreign witnesses available for interviews in the United Type of Resolution and Sanction: Marubeni pleaded States; (9) shared summaries of witness interviews; guilty to an eight-count information charging conspiracy (10) shared reports prepared by the forensic to violate the FCPA and substantive anti-bribery accountants; and (11) responded to the SEC’s document violations. The company was sentenced to pay an $88 requests in a timely manner. million fine.

Second, the SEC implemented one of its new remedial Of Note: This is the second FCPA enforcement action measures: while not requiring a monitor, it mandated against Marubeni. In 2012, the company resolved that Layne Christensen report to the SEC over a two- bribery charges related to a Nigerian natural gas project year period (in no less than nine-month increments) the and agreed to pay $54.6 million as part of a deferred status of its implementation of remedial steps and prosecution agreement. The Indonesian scheme pre- compliance measures. During that two-year period, dates the settlement of the Nigeria-related charges. As Layne Christensen will be required to report promptly to part of the Nigeria-related deferred prosecution the SEC any questionable or corrupt payments that it agreement, Marubeni agreed to engage a corporate discovers. compliance consultant for a two-year period and to enhance its anti-corruption compliance program. The

19

period ended in January 2014, and the DOJ dismissed Indonesian Parliament. The amount of the payments to the Nigeria-related charges on February 26, 2014. the second consultant are not identified.

In support of the fine amount, the plea agreement Benefits Obtained: The contract obtained was valued specifically cites Marubeni’s previous lack of an effective at approximately $118 million. compliance program, its failure to remediate the alleged conduct, the lack of a voluntary disclosure, and the Type of Resolution and Sanction: Pomponi pleaded company’s initial refusal to cooperate with government guilty to conspiracy to violate the FCPA’s anti-bribery investigators. Public comments by DOJ officials have provisions. No sentencing date has been set. cited this settlement as an example of how the Department will treat companies that fail to cooperate. Of Note: Two of Pomponi’s former colleagues (Frederic Pierucci, former vice president of global boiler sales, and The Indonesian bribery scheme also involved the David Rothschild, Pomponi’s predecessor as vice Connecticut-based subsidiary of French power company president of regional sales) previously pleaded guilty to Alstom S.A, which pleaded guilty to FCPA violations on FCPA charges stemming from the same scheme. In December 22, 2014. Three former executives from both addition, Alstom and a Swiss subsidiary pleaded guilty to Alstom and a subsidiary previously have pleaded guilty wide-ranging FCPA charges, including the Indonesian to related charges (Frederic Pierucci, William Pomponi, scheme; Alstom Power and another U.S.-based Alstom and David Rothschild). Another remains under subsidiary entered deferred prosecution agreements indictment and is scheduled to go to trial in 2015 related to the same conduct. Marubeni Corporation, (Lawrence Hoskins). Alstom’s consortium partner on the Indonesian project, also pleaded guilty to FCPA charges.

WILLIAM POMPONI SMITH & WESSON HOLDING CORPORATION Department of Justice Guilty Plea Securities and Exchange Commission July 17, 2014 Settled Administrative Proceeding July 28, 2014 Nature of Conduct: Along with three former colleagues, William Pomponi, former vice president of regional sales Nature of Conduct: According to the SEC, Smith & at Alstom Power, Inc. (Alstom Power) a U.S. subsidiary Wesson Holding Corporation (Smith & Wesson), a U.S.- of French power company Alstom S.A. (Alstom), was based publicly traded company, made a series of charged with conspiring with a Japanese consortium improper payments to government officials in Pakistan, partner to use outside consultants to bribe a member of Indonesia, Turkey, Nepal, and Bangladesh. The SEC the Indonesian Parliament and high-ranking officials of alleged that Smith & Wesson’s vice president of the Indonesian state-owned and -controlled electricity international sales authorized payments to third-party company in order to secure a valuable power contract. agents knowing that they would be partly used to make Pomponi also was charged with substantive FCPA and corrupt payments to foreign government officials. money laundering violations. According to the DOJ, According to the SEC, the corrupt payments to foreign when Pomponi and his colleagues determined that the officials in four of the countries did not result in business, first consultant they hired was “not effectively bribing key but violated the FCPA because Smith & Wesson Indonesian officials,” they hired a second consultant and attempted to obtain contracts through the improper paid him an unusually large sum up front so he could payments. The SEC further alleged that Smith & “get the right influence.” Wesson lacked adequate internal controls insofar as it failed to vet third-party agents and allowed its vice Amount of Improper Payments: Payments to the first president for international sales almost unfettered consultant allegedly totaled $666,880 between 2005 and discretion in authorizing payments to third parties. 2009, and of that amount, $360,000 allegedly was wired from the consultant’s bank account in Maryland to a Amount of Alleged Improper Payments: The SEC bank account in Indonesia to pay a member of the specified the amount of only one of the payments listed

20

in its cease-and-desist order: a gift of firearms to ELEK STRAUB, ANDRÁS BALOGH, AND TAMÁS Pakistani government officials worth $11,000. The MORVAI values of the other alleged improper payments were not identified. Securities and Exchange Commission Amended Complaint July 17, 2014 Benefit Obtained: One contract for $210,980 resulting in a $107,852 profit. Nature of Conduct: In a complaint filed in December 2011, the SEC alleged that three executives of the Type of Resolution and Sanction: Smith & Wesson Hungarian telecommunications company Magyar agreed to accept an administrative cease-and-desist Telekom, Plc. (Magyar), all foreign nationals, had order, while neither admitting nor denying the SEC’s engaged in a scheme to bribe officials in Macedonia and findings, to resolve the alleged violations of the FCPA’s Montenegro. According to the SEC, the defendants also anti-bribery, books-and-records, and internal controls signed letters falsely asserting that they had disclosed all provisions. Smith & Wesson agreed to pay $107,852 in relevant financial information and were unaware of any disgorgement, $21,040 in prejudgment interest, and a unlawful activity. The SEC claimed that Magyar’s civil money penalty of $1,906,000. auditors relied on these false statements in preparing their audit reports, which became part of Magyar’s Of Note: This settlement is noteworthy in a number of annual SEC filings. In the amended complaint, the SEC respects. First, the SEC charged Smith & Wesson with dropped the allegations related to Montenegro. five alleged corrupt payments in five different countries, only one of which led to actual business. The SEC order Amount of Alleged Improper Payments: $6 million. underscores that the FCPA reaches bribes to government officials regardless of whether the improper Benefit Obtained: Delay in licensing of a competitor of payment resulted in a benefit to the corporation. The Magyar and other regulatory benefits. one contract obtained through bribery resulted in a profit of only $107,852. Despite the limited profit, the SEC Type of Resolution and Sanction: N/A. imposed a civil money penalty of nearly $2 million. The SEC order stated that Smith & Wesson engaged in a Of Note: In February 2013, a federal district court in “systematic pattern of making, authorizing and offering New York denied the defendants’ motion to dismiss on bribes to expand the company’s overseas business” and the ground that they had insufficient minimum contacts that the vice president of international sales had total with the United States to justify the court’s exercise of discretion over the payment of most commissions. personal jurisdiction over them consistent with the Constitution’s Due Process Clause. The court held that Second, the order implements one of the SEC’s new sufficient minimum contacts existed because the remedial measures. The SEC, while not requiring a defendants made false statements to Magyar’s auditors monitor, mandated that Smith & Wesson report over a knowing that those statements likely would affect two-year period (in no less than nine-month increments) Magyar’s financial filings with the SEC in the United the status of its implementation of remedial steps and States. compliance measures. During that two-year period, Smith & Wesson also must report promptly to the SEC any questionable or corrupt payments that it discovers. STEPHEN TIMMS AND YASSER RAMAHI Third, according to Smith & Wesson’s securities filings, it has decided to shutter certain of its foreign operations Securities and Exchange Commission rather than continue to pursue business in high Settled Administrative Proceeding corruption risk areas. November 17, 2014 The SEC reached administrative Earlier this year, the DOJ declined to pursue any Nature of Conduct: settlements with two former employees of the Dubai charges against Smith & Wesson. office of Oregon-based FLIR Systems (FLIR), for their roles in providing improper benefits to officials from the Saudi Arabian Ministry of Interior (MOI). According to

21

the allegations in the settlement, Stephen Timms and Yasser Ramahi helped arrange a trip for the officials to inspect products at FLIR’s Boston facility, which included stops in Casablanca, Paris, Dubai, Beirut and New York City that were not business-related, and also purchased and gave five luxury watches totaling $7,000 to Saudi MOI officials, some of whom were also included on the trip. There were no allegations of cash payments.

The SEC further alleged that following an internal review by FLIR of Timms’ request for reimbursement for the cost of the watches, the former employees worked with a third-party agent to obtain false invoices understating the cost of the watches as 7,000 Saudi Riyal (approximately $1,900), and inaccurately showing direct flights between Riyadh and Boston without the stopovers made by the MOI officials. In addition, the SEC found that Timms and Ramahi acted contrary to FLIR’s policies and took active steps to circumvent them. Indeed, the SEC order noted, the company’s training specifically identified luxury watches and side trips as examples of improper benefits.

Amount of Alleged Improper Payments: The cost of the five luxury watches allegedly totaled about $7,000; the cost of the travel was not identified. Benefit Obtained: According to the SEC’s order, the travel and watches were offered in order to retain $12.9 million in business for thermal binoculars and to obtain a separate $17.4 million order for infrared security cameras.

Type of Resolution and Sanction: Under the settlement, Timms agreed to pay a civil penalty of $50,000 in installment payments, and Ramahi agreed to pay a civil penalty of $20,000, and each consented to the entry of an administrative cease-and-desist order to resolve alleged violations of the FCPA’s books-and- records provisions. The order did not allege violations of FCPA’s anti-bribery provisions.

Of Note: This matter represents the SEC’s first administrative sanction of individuals since 2012.

22

2014 DOJ Opinion Releases

Opinion Release 14-01 Opinion Release 14-02 March 17, 2014 November 7, 2014

In this Opinion Release, the DOJ determined that it would In this Opinion Release, the DOJ indicated that it had no not take enforcement action against the Requestor, a U.S. present intention to bring an FCPA enforcement action financial services company and investment bank that is the against the Requestor, a U.S. company, for potentially majority shareholder of a foreign financial services improper payments that had been made previously by the company whose minority shareholder was appointed to a target of an acquisition and that were discovered during the senior position in his country’s central monetary and due diligence process. The conduct mainly involved banking agency. The Requestor proposed to buy the payments to government officials related to obtaining foreign official’s shares, at a value determined by a third- permits and licenses, as well as gifts and cash donations to party global accounting firm, and the foreign official agreed government officials, charitable contributions and to strict recusal rules prohibiting him from participating in or sponsorships, and payments to members of the state- influencing his agency’s decisions regarding the financial controlled media in order to minimize negative publicity. company of which he formerly was a shareholder until after The Requestor’s due diligence also identified significant the completion of the buyout. He also agreed to recuse accounting weaknesses and poor recordkeeping. In light of himself from any matter between his agency and his former these findings, the Requestor developed a plan that company that was under negotiation, proposed, or included both pre-acquisition remedial measures and post- anticipated at the time of, or prior to, the buyout. acquisition integration steps.

The DOJ concluded that under these circumstances, there The Opinion Release reaffirmed the long-standing principle was no corrupt intent. It noted that “the proffered purpose of that successor liability does not create liability where none the payment is to sever the parties’ existing financial existed before. The DOJ explained that the Requestor relationship, which began before the Foreign Shareholder could not be liable under the FCPA for the target’s pre- held an official position.” Appropriate measures had been acquisition conduct because the payments were not subject taken to assure the fair market value of the shares, and to U.S. jurisdiction. None of the payments occurred within “meaningful disclosure of the parties’ relationship will occur the United States, none involved the participation of any before the sale closes.” Finally, the DOJ noted that only one U.S. person or issuer, and the target was a foreign prior Opinion Release, 00-01, dealt directly with severing a company that had had negligible business contacts with business relationship with a person who was becoming a and never had issued securities in the United States. foreign official, and that that Opinion Release “highlighted Furthermore, the target had not obtained through bribery the very strict recusal and conflict-of-interest avoidance any contracts or other assets that would continue in measures that were put in place.” Similar measures had operation and from which Requestor would derive post- been established here. Accordingly, the DOJ found that the acquisition benefit. Under these circumstances, the DOJ only purpose of the proposed transaction was fair concluded that U.S. authorities had no jurisdiction over the consideration for the shares, and disavowed any present potentially improper conduct. The DOJ specifically declined intent to take enforcement action. to express any view on the adequacy or reasonableness of the Requestor’s plan for integrating the target, remarking that “[t]he circumstances of each corporate merger or acquisition are unique and require specifically tailored due diligence and integration processes.”

23

2014 FCPA-Related Private Litigation

Below are summaries of key developments in FCPA- and its subsidiary Pemex-Refinanción (collectively related suits brought by private litigants in the past year. PEMEX) against Siemens and SK Engineering & Construction Company, Ltd. The suit alleged that the Civil Racketeer Influenced and Corrupt defendants violated RICO by bribing PEMEX officials to Organizations Act (RICO) secure oil refinery projects in Mexico and demanded $500 million in damages. The district court dismissed the Aluminum Bahrain B.S.C. v. Dahdaleh (W.D. Pa.) case on territoriality grounds (i.e., there were not Dismissal of civil RICO suit April 28, 2014 sufficient contacts with the United States to support jurisdiction, and RICO did not apply extraterritorially), The U.S. District Court for the Western District of ruling that the bribery scheme was a “foreign conspiracy Pennsylvania dismissed a civil Racketeer Influenced and against a foreign victim conducted by foreign defendants Corrupt Organizations Act (RICO) and fraud suit brought participating in foreign enterprises.” by Bahrain’s national aluminum company, Aluminum Bahrain B.S.C. (Alba), against Victor Dahdaleh, a consultant who allegedly served as a go-between for The Second Circuit affirmed, observing that the bribes that a subsidiary of Alcoa Inc. (Alcoa) paid extraterritorial application of RICO is “coextensive with Bahraini officials to retain contracts to sell alumina to the extraterritorial application of the relevant predicate Alba at inflated prices. The court ruled that pursuant to statutes.” Because PEMEX relied entirely on the federal those contracts, Alba could pursue its claims against wire fraud statute, which the court previously held cannot Dahdaleh only in arbitration. Alba has appealed to the serve as such a predicate, in pleading predicate acts U.S. Court of Appeals for the Third Circuit. Alcoa, which that would support a RICO violation, it was required to also originally was named as a defendant in Alba’s suit, rely on allegations of domestic activity as the basis for its settled that litigation in 2012, and the company and its RICO claim. The Second Circuit concluded, however, subsidiary resolved DOJ and SEC enforcement actions that the domestic activity alleged (that the financing was early this year. Prosecutors dropped bribery charges obtained in the United States, that the invoices were against Dahdaleh in the United Kingdom after an sent to a bank in the United States for payment, and that attorney from Akin Gump Strauss Hauer & Feld, Alba’s the bank issued payment from the United States) was law firm, declined to testify for the prosecution; the civil “simply insufficient to sustain RICO jurisdiction.” Neither suit had been stayed pending resolution of the criminal the district nor the appellate court addressed the case. question of whether any corrupt activity actually occurred.

Petróleos Mexicanos v. SK Engineering and Construction Company (2d Cir.) Affirmance of dismissal of civil RICO suit July 16, 2014

The U.S. Court of Appeals for the Second Circuit affirmed the dismissal of a civil RICO suit brought by Mexico’s national oil company, Petróleos Mexicanos,

24

Defamation months after he was terminated, Liu reported the alleged bribery to the SEC and subsequently filed a retaliation Shell Oil Co. v. Writt (Tex.) suit against Siemens. The district court granted Oral argument Siemens’ motion to dismiss on the grounds that the November 6, 2014 Dodd-Frank Act’s whistleblower provision does not apply

extraterritorially and that Liu’s complaint did not establish The Texas Supreme Court held oral argument in an that he made a disclosure “required or protected” by FCPA-related defamation action against Shell Oil certain enumerated statutes, as the Act’s anti-retaliation Company (Shell) by a former employee, Robert Writt. In provision requires. The Second Circuit affirmed on the 2007, Shell was contacted by the DOJ regarding its first ground, noting the general presumption against involvement with freight forwarder Panalpina and agreed extraterritorial application of U.S. statutes unless a to launch its own internal investigation of the contrary intent appears, and finding no such intent in the relationship. In February 2009, the company reported to text and structure of the Act. Notably, the court explicitly the government that Writt had recommended held that the fact that Siemens’ securities were listed on reimbursing contractors in Nigeria for what he knew had a U.S. exchange was not enough to bring Liu within the been bribe payments. About twenty months later, in protections of the Dodd-Frank Act's anti-retaliation November 2010, Shell’s Nigerian subsidiary, along with provision. Panalpina and four other oil and gas companies, settled FCPA charges with the DOJ. The Shell subsidiary entered into a deferred prosecution agreement and agreed to pay a $30 million criminal penalty. Writt has Shareholder Litigation not been charged with wrongdoing, but sued Shell for defamation based on the company’s disclosure to the Copeland v. Apotheker (N.D. Cal.) government. After the trial court granted Shell’s motion Complaint for summary judgment, finding that Shell enjoyed February 10, 2014 absolute immunity from suit in these circumstances, the court of appeals reversed, holding that Shell’s A Hewlett-Packard Company (HP) shareholder filed a communications to the DOJ were protected only by a derivative suit in federal court in San Francisco alleging conditional privilege for statements made in the public that members of the company’s board of directors interest. A decision is expected from the Texas Supreme breached their fiduciary duty by neglecting to stop the Court in 2015. payment of bribes to foreign officials despite numerous “red flags,” “stonewall[ing]” investigators, and failing to make a voluntary disclosure. As a result, according to the complaint, “the penalties and fines flowing from such Retaliation violation are likely to be much more severe than if HP management and legal counsel had cooperated with the Liu v. Siemens AG (2d Cir.) investigations from the outset and disclosed these Affirmance of dismissal of retaliation suit violations of the FCPA.” HP first disclosed in SEC filings August 14, 2014 in 2011 that it was under investigation by the DOJ and

the SEC for potential FCPA violations in connection with The U.S. Court of Appeals for the Second Circuit the sale of computer equipment to the Russian General affirmed the district court’s dismissal of a retaliation suit Prosecutor’s Office. In 2012, German authorities brought under the Dodd-Frank Act, holding that the Act’s arrested four former HP executives for paying bribes in anti-retaliation provision does not protect whistleblowers Russia. In 2013, HP disclosed that Polish authorities outside the United States. Liu Meng-Lin, a citizen and were investigating potential bribery of officials in Mexico, resident of Taiwan employed as a compliance officer at Poland, Russia, and other countries by an employee of the Chinese subsidiary of Siemens AG (Siemens), its Polish subsidiary. Following the complaint in this civil alleged in the lawsuit that Siemens fired him in retaliation action, on April 8, 2014, the court granted the parties’ for his reporting internally what he believed to be corrupt motion to stay the case pending the outcome of a related payments to North Korean and Chinese officials in case on appeal to the Ninth Circuit. The case remains connection with the sale of medical equipment. None of stayed. the alleged conduct occurred in the United States. Two

25

Wal-Mart Stores, Inc. v. Indiana Electrical Workers City of Pontiac General Employees’ Retirement System Pension Trust Fund IBEW (Del.) v. Wal-Mart Stores, Inc. & Michael T. Duke (W.D. Ark.) Affirmance of order to produce privileged documents July 23, 2014 Denial of motion to dismiss September 26, 2014 The Delaware Supreme Court held that Wal-Mart Stores, Inc. (Wal-Mart) must produce documents whose content A federal district court in Arkansas denied defendants’ was privileged or protected by the attorney work product motion to dismiss in a securities class action suit filed on doctrine in response to a shareholder request to behalf of shareholders against Wal-Mart and its former examine the company’s books and records. In the chief executive officer. The plaintiff alleged that a aftermath of reports published in the New York Times in statement Wal-Mart filed with the SEC in December 2012 alleging that Wal-Mart had bribed Mexican officials 2011 misled the investing public by omitting the fact that and subsequently had failed to conduct a thorough Wal-Mart learned of suspected corruption in 2005 and internal investigation, the Indiana Electrical Workers conducted an internal investigation in 2006. Without Pension Trust Fund IBEW (IBEW), a major shareholder, making any findings as to the ultimate merits of the sent a demand letter pursuant to Section 220 of the plaintiff’s claim, the court ruled that the plaintiff Delaware Code, requesting inspection of broad sufficiently alleged that the statement’s omission of categories of documents prepared from 2005 to the these facts rendered the statement materially misleading present, including internal investigation materials. The to a reasonable investor and adequately pled facts that parties conducted a Section 220 trial; at the conclusion, could give rise to an inference of scienter. the trial court entered an order requiring the company to provide to IBEW internal investigation documents otherwise protected by the attorney-client privilege and Robbins, Geller, Rudman & Dowd, LLP v. SEC (M.D. the work product doctrine. Tenn.) Complaint November 13, 2014 On appeal, the Delaware Supreme Court affirmed, Securities plaintiffs’ law firm Robbins, Geller, Rudman & holding that the fiduciary exception to the attorney-client Dowd, LLP (Robbins, Geller) sued the SEC for privilege established in the 1970 Fifth Circuit case of documents provided to the agency by Wal-Mart, which Garner v. Wolfenbarger applies in Section 220 the agency had declined to produce in response to a proceedings as well as in “plenary stockholder/ Freedom of Information Act (FOIA) request. The SEC corporation proceedings.” The court explained that the withheld the documents pursuant to FOIA Exemption Garner doctrine is “narrow, exacting, and intended to be 7(A), which protects from disclosure records compiled very difficult to satisfy.” In this case, the court ruled, for law enforcement purposes. In its suit, Robbins, Geller IBEW met its burden of showing good cause by sought a court order enjoining the SEC from withholding demonstrating, among other things, that the information the documents, arguing that because it was requesting was not available through other sources and that the only documents compiled and provided to the SEC by request was targeted at specific documents and was not Wal-Mart, not documents the SEC had collected and a fishing expedition. The Supreme Court also affirmed compiled itself in the course of its law enforcement the trial court’s order that the company produce duties, Exemption 7(a) did not apply. The case is otherwise protected work product. Although the Garner pending. doctrine does not apply to work product, IBEW demonstrated that the documents sought were “necessary and essential,” which also satisfied the requirement for overcoming the work product immunity.

26

2014 International Anti-Corruption Developments

Below are summaries of key international anti-corruption a sex tape involving the company’s former China country developments in the past year. manager and sent by a whistleblower to his bosses along with bribery allegations. The case highlights the BRAZIL risks for foreign companies conducting due diligence in China, which may find themselves caught between New Anti-Corruption Law Enters into Force foreign anti-corruption laws and Chinese state-secrets or privacy statutes. On January 29, 2014, Brazil’s new anti-corruption law, the Clean Companies Act, became effective. The Act, Record Fine for GlaxoSmithKline; Suspended Prison which implements the OECD Convention on Combating Terms for Glaxo Executives Bribery of Foreign Public Officials in International Business Transactions, makes legal entities, such as In September 2014, a Chinese court fined corporations, subject to liability for corruption for the first GlaxoSmithKline nearly $500 million for bribing hospitals time in Brazil’s history. The law applies both to Brazilian and doctors to induce them to purchase its products, and companies and to foreign companies doing business in sentenced the company’s former China country Brazil. Notably, it does not contain a scienter manager, a Briton, and four other executives to requirement; administrative and civil penalties may be suspended prison terms. GlaxoSmithKline issued a imposed on a strict liability basis. It also contains an public statement announcing that its business entity in explicit provision making successor entities liable for the China had been found to have bribed “non-government acts of their predecessors in interest under certain personnel in order to obtain improper commercial gains,” circumstances. acknowledging that it “fully accepts the facts and evidence of the investigation,” and apologizing, including for “harm caused to individuals who were illegally investigated” by the company. According to its third- CHINA quarter 2014 SEC filing, GlaxoSmithKline remains under investigation for potential FCPA violations. Convictions of Foreign GlaxoSmithKline Investigators

In August 2014, a court in Shanghai convicted two foreign investigators – Peter Humphrey, a Briton, and Yu INDIA Yingzeng, his American business partner and wife – of New Anti-Corruption Law Enacted illegally obtaining personal information about Chinese citizens and selling such information to foreign On January 1, 2014, India’s President signed into law companies. Humphrey was sentenced to 2.5 years in the Lokpal and Lokayuktas Act, 2013. The Act, which prison and Yu to two years. Humphrey and Yu ran an went into effect on January 16, 2014, creates an investigative firm, ChinaWhys, that specialized in ombudsman with broad powers to prosecute politicians assisting companies with risk management matters. and government employees for corruption. Shortly before their arrest, they had been retained by GlaxoSmithKline, the British pharmaceutical firm later fined by Chinese authorities for corruption, to investigate

27

UNITED KINGDOM deferred prosecution agreement is in the public interest, which is required before a prosecutor should U.K. Bribery Act Sentencing Guidelines enter into such an agreement. The Code of Practice also covers the substance of any deferred In January 2014, the Sentencing Council for England prosecution agreement, including providing both and Wales issued comprehensive sentencing necessary and permissible terms. guidelines for the punishment of offenses under the U.K. Bribery Act, including foreign bribery, that went into Significantly, the Code of Practice allows prosecutors effect on October 1, 2014. The Definitive Guideline for to enter into a deferred prosecution agreement Fraud, Bribery and Money Laundering Offenses even if the evidence against the corporation does not includes provisions specifically covering corporations. satisfy the usual evidentiary burden required before For corporate offenders, the guidelines provide that in charges may be brought if the prosecutor has a each case the court should consider three monetary “reasonable suspicion based on admissible evidence” sanctions, including “compensation,” disgorgement of that the corporation committed the offense and profits, and an additional criminal fine. reasonably believes that continued investigation would develop further admissible evidence. This could carry As with the U.S. Sentencing Guidelines for business special significance in light of the evidence ordinarily organizations, the U.K. guidelines for corporate required to prosecute corporations. Under U.K. law, offenders provide that the amount of a criminal fine is unlike U.S. law, a corporation can be held criminally based on a combination of the offense’s “harm” and liable only if an individual that represents the the corporation’s “culpability” for such harm. The U.K. organization’s “controlling mind and will” meets the guidelines further provide that the calculated fine is statute’s mens rea requirement. The lighter burden only a “starting point” and that the court must “step of proof under the deferred prosecution agreement back” and evaluate the fine in light of the purposes of guidelines may allow prosecutors to leverage relatively the guidelines, including “the removal of all gain,” weak evidence of control group knowledge into a “appropriate additional punishment,” and “deterrence.” resolution. To be sure, a corporation could insist on putting the SFO to its burden of proof and refuse to Any fine “must be substantial enough to have a real enter into a deferred prosecution agreement, but economic impact which will bring home to both strong incentives, including the cost of a full-scale management and shareholders the need to operate investigation and the reputational risks of trial or within the law.” The guidelines acknowledge that the criminal conviction, may weigh in favor of such an court should consider the effect of the fine on the agreement even where the prosecution’s evidence corporation, including whether it will “put[] the offender is comparatively thin. out of business,” but warns that “in some bad cases this may be an acceptable consequence.” The Under the Code of Practice, a deferred guidelines set no maximum fine amount. prosecution agreement must include a financial component, including disgorgement of ill-gotten gains, U.K. Bribery Act Deferred Prosecutions Agreements victim compensation, and a possible financial penalty. Code of Practice While the prosecutor and defendant have broad In February 2014, the Serious Fraud Office (SFO), the discretion in setting the financial penalty, the ultimate United Kingdom’s prosecutor of violations of the 2010 penalty should be “broadly comparable” to the penalty Bribery Act, formally adopted principles governing that would have resulted from a guilty plea, including deferred prosecution agreements for corporate any discount off the recommended guidelines range for offenders. The Deferred Prosecutions Agreements Code accepting guilt and cooperation. of Practice implements certain provisions of the 2013 Crime and Courts Act that authorize the SFO to U.K. Bribery Act Convictions Against Innospec negotiate deferred prosecution agreements with Executives corporations. The Code of Practice provides a In June 2014, a British jury convicted two former officials comprehensive set of regulations covering deferred of Innospec Corporation, the company’s former CEO, prosecution agreement negotiation, evidentiary Dennis Kerrison, and a former sales manager, Miltiades issues, and other considerations, including whether the Papachristos, for their involvement in a bribery scheme

28

in Indonesia. In August 2014, Kerrison was sentenced to ORGANISATION FOR ECONOMIC CO-OPERATION four years’ imprisonment (reduced to three years on AND DEVELOPMENT appeal); Papachristos was sentenced to 18 months. Two other former Innospec executives who previously OECD Foreign Bribery Report Issued pleaded guilty, Paul Jennings, another former CEO, and On December 2, 2014, the OECD published its Foreign David Turner, a former business unit director, were Bribery Report: An Analysis of the Crime of Bribery of sentenced to two years and a suspended sentence of 16 Foreign Public Officials. The 45-page Report examines months plus 300 hours of community service, all foreign corruption enforcement actions completed respectively. All four sentences were imposed prior to since the entry into force of the OECD Convention on the effective date of the new sentencing guidelines Combating Bribery of Foreign Public Officials in under the 2010 Act. Innospec settled with U.S. International Business Transactions (Convention) in authorities for violations of the FCPA in 2010. 1999, comprising cases from 17 countries.

First Sentences Under U.K. Bribery Act Guidelines In general, the findings are not surprising. The OECD In December 2014, a British court imposed the first determined that the United States was far and away the sentences under the new sentencing guidelines most active nation in terms of foreign corruption applicable to convictions for violating the U.K. Bribery enforcement, having sanctioned individuals and entities Act. The case did not involve bribery of foreign public for bribery of foreign officials in connection with 128 officials; rather, one British businessman, Stuart John separate schemes since the entry into force of the Stone, was convicted of bribing another, Gary Lloyd Convention. Germany, with sanctions in connection with West, to secure his participation in a fraud scheme, and 26 separate schemes, was a distant second, followed West was convicted of taking bribes. Applying the new with South Korea with 11 and Italy, Switzerland, and the guidelines, the court sentenced West to a total of 13 United Kingdom with six each. Other key findings years in prison, of which four were attributable to his included: (1) two-thirds of the cases examined occurred bribery conviction. Stone was sentenced to six years. in the sectors of extraction (e.g., oil and gas, mining), These sentences are considerably harsher than pre- construction, transportation and storage, and information guidelines sentences, including those imposed on the and communication; (2) intermediaries were involved in former Innospec executives, only four months prior. three out of every four cases; and (3) bribe recipients most frequently were employees of state-owned or SFO Obtains First Corporate Conviction for Bribery -controlled enterprises, followed by customs officials, of Foreign Officials health officials, and defense officials.

In December 2014, after less than a week of Somewhat more unexpectedly, the OECD found that deliberations, a British jury convicted Smith and Ouzman only one in three cases came to the attention of Ltd., a printing company that specializes in secure authorities through self-reporting, and that about 13% documents such as ballots and certificates, and two of represented investigations initiated by law enforcement. its employees of making £395,074 in corrupt payments Another 13% were the product of formal or informal between November 1, 2006, and December 31, 2010, to mutual legal assistance between countries. The public officials in Kenya and Mauritania to obtain authorities learned about only 2% and 5% of the cases, contracts for the company. A third employee and a sales respectively, through whistleblower reports and media agent for the company were acquitted of foreign bribery coverage. The companies that did self-report learned of charges. Sentencing is scheduled for February 12, 2015. the bribery primarily through internal audits and merger According to the SFO, this is the first conviction of a and acquisition due diligence. corporation for bribery of foreign officials. Notably, the case was charged under the Prevention of Corruption Act 1906, not the U.K. Bribery Act, which came into force after most of the period during which the corrupt payments were made and does not apply retroactively.

29

The Statutory Framework

The FCPA’s anti-bribery provisions prohibit payments to 3) For the purposes of: foreign officials for the purpose of obtaining or retaining business. See 15 U.S.C. § 78dd-1, 78dd-2, and 78dd-3. (i) influencing any act or decision of such The statute’s accounting provisions require the foreign official in his official capacity; maintenance of reasonably accurate books and records (ii) inducing such foreign official to do or and adequate internal controls. omit to do any act in violation of the lawful duty of such official; The Anti-Bribery Provisions (iii) securing any improper advantage; or Substantive Prohibitions (iv) inducing such foreign official to use his The FCPA’s anti-bribery provisions make it unlawful: influence with a foreign government or instrumentality thereof to affect or 1) Corruptly to make use of the mails or any means influence any act or decision of such or instrumentality of interstate commerce, or, for government or instrumentality; non-U.S. citizens and foreign non-issuers, to commit any act, while in the territory of the 4) In order to assist such issuer or domestic United States; concern in obtaining or retaining business for or with, or directing business to, any person. 2) In furtherance of an offer, payment, promise to pay, or authorization of the payment of any Some comments regarding certain key elements: money, or offer, gift, promise to give, or authorization of the giving of anything of value to Corruptly. The FCPA requires that the pertinent acts be any of the following: committed “corruptly.” The Act’s legislative history states that the payments “must be intended to induce the (i) a foreign official; recipient to misuse his official position.” H.R. Rep. No. (ii) a foreign political party or official thereof; 95-640, at 8 (1977). “An act is ‘corruptly’ done if done voluntarily and with a bad purpose of accomplishing (iii) a candidate for foreign political office; or either an unlawful end or result, or a lawful end or result by some unlawful method or means.” United States v. (iv) any person, while knowing that all or a Liebo, 923 F.2d 1308, 1312 (8th Cir. 1991); see also portion of such money or thing of value Stichting Ter Behartiging Van de Belangen Van will be offered, given, or promised, Oudaandeelhouders In Het Kapitaal Van Saybolt Int’l directly or indirectly, to any of the B.V. v. Schreiber, 327 F.3d 173, 181-83 (2d Cir. 2003) (a 2 above; “bad or wrongful purpose and an intent to influence a foreign official to misuse his official position” satisfy this element).

2 For convenience, the foregoing terms will hereinafter be referred to collectively as “foreign official.”

30

In United States v. Kozeny, 582 F. Supp. 2d 535 Something of Value. In analyzing whether something of (S.D.N.Y. 2008), a federal district court considered value has been offered to a foreign official, the courts whether a defendant may obtain a jury instruction that have looked not only to objective value but also to “the corrupt intent could be absent because the bribe was the value the [official] subjectively attaches to the items result of extortion. The court agreed that “true extortion” received.” United States v. Gorman, 807 F.2d 1299, can be a viable defense to an FCPA charge and held 1305 (6th Cir. 1986). Things of value under the statute that, where a defendant presents sufficient evidence on include both tangible and intangible objects. See, e.g., that point, the court should instruct the jury as to what United States v. Girard, 601 F.2d 69, 71 (2d Cir. 1979). constitutes true extortion such that a defendant cannot In addition to cash and cash equivalents (e.g., stock, be found to have the requisite corrupt intent. The stock options), things of value in the FCPA context have Kozeny court was not called upon to decide the precise included: travel and entertainment, see Information, parameters of “true extortion,” but concluded that it must United States v. Diebold, Inc., No. 5:13 CR 464 (N.D. involve more than a simple demand for payment. Citing Ohio Oct. 22, 2013); charitable contributions, see the FCPA’s legislative history, the court stated: “While Complaint, SEC v. Schering-Plough Corp., No. 04-cv- the FCPA would apply to a situation in which a ‘payment 945 (D.D.C. June 9, 2004); college scholarships, see [is] demanded on the part of a government official as a United States v. McDade, 827 F. Supp. 1153 (E.D. Pa. price for gaining entry into a market or to obtain a 1993), aff’d in part, 28 F.3d 283 (3d Cir. 1994); the contract,’ it would not apply to one in which payment is services of a prostitute, see Girard, 601 F.2d at 71, and made to an official ‘to keep an oil rig from being United States v. Marmolejo, 89 F.3d 1185, 1193 (5th Cir. dynamited’ . . . .” Kozeny, 582 F. Supp. 2d at 539. 1996); and offers of future employment, see Girard, 601 F.2d at 71. Use of . . . Interstate Commerce . . . In Furtherance of an Unlawful Payment. This provision requires a nexus Authorization of Unlawful Payments. The FCPA between an issuer’s or a domestic concern’s use of prohibits not only the making but also the “authorization” 3 interstate commerce and the unlawful payment. In most of any payment or giving of anything of value to a foreign cases it is easily met – for example, by email or official. 15 U.S.C. § 78dd-1(a). As discussed at more telephonic communications relating to the payments, or length at FAQ 3, infra, authorization does not have to be by the wiring of money or other payment mechanisms. explicit. Importantly, the DOJ reads the provision as encompassing a much broader range of circumstances. The Payment Need Not Be Consummated. The statute An example is the 2008 AGA Medical Corporation prohibits not only improper payments but offers or matter, which involved the payment of improper promises to make such payments; thus, the payment “commissions” to doctors and patent agents in China in need not actually be made in order for a violation to connection with sales of and patent approvals for certain occur. medical devices. While the charging documents described email communications relating to the Foreign Official. The statute does not define “foreign payments, the DOJ also alleged that shipping the official.” But this year, the Eleventh Circuit, in United products to China qualified as the use of interstate States v. Esquenazi, became the first federal court of commerce in furtherance of the unlawful payment. More appeals to hold that the term “foreign government . . . recently, a federal district court held that even email sent instrumentality” can mean an entity “controlled by the and received in foreign locations may satisfy the government of a foreign country that performs a function interstate commerce requirement if the messages were the controlling government treats as its own.” Therefore, routed through U.S.-based servers. SEC v. Straub, 921 the court concluded, the term is broad enough to include F. Supp. 2d 244, 262-64 (S.D.N.Y. 2013). state-owned enterprises that provide commercial services as part of a public function.

Knowing. The statute defines the term “knowing”

3 broadly. Knowledge of a relevant circumstance exists “if If the person is a non-U.S. person or the entity a foreign a person is aware of a high probability of the existence non-issuer, the interstate commerce nexus is of such circumstance, unless the person actually unnecessary. Rather, such a defendant can be liable for any act within the United States in furtherance of an believes that such circumstance does not exist.” unlawful element.

31

15 U.S.C. § 78dd-1(f)(2)(B). Willful blindness to 359 F.3d at 756. Thus, the “obtain or retain business” circumstances indicating a high probability of unlawful provision will be read broadly. activity thus will satisfy the knowledge requirement. Exception and Affirmative Defenses Improper Purpose. A promise, payment, or offer to a foreign official must be given for one of four purposes in The breadth of the FCPA is reinforced by the relatively order to violate the FCPA: (1) to influence any act or narrow nature of the exception and affirmative defenses decision of such foreign official in his official capacity; to liability. Kay I, 359 F.3d at 756 (“Furthermore, by (2) to induce such foreign official to do or omit to do any narrowly defining exceptions and affirmative defenses act in violation of the lawful duty of such official; (3) to against a backdrop of broad applicability, Congress secure any improper advantage; or (4) to induce such reaffirmed its intention for the statute to apply to foreign official to use his influence with a foreign payments that even indirectly assist in obtaining government or instrumentality thereof to affect or business or maintaining existing business operations in influence any act or decision of such government or a foreign country.”). instrumentality. Facilitating Payments Exception These purposes encompass nearly every act a foreign The FCPA does not apply “to any facilitating payment or official might take that could benefit the party making the expediting payment to a foreign official, political party, or promise, payment, or offer. The first applies when the party official the purpose of which is to expedite or to foreign official has some sort of discretion within the laws secure the performance of a routine governmental of the pertinent foreign country, and the promise, action.” 15 U.S.C. § 78dd-1(b). This so-called payment, or offer was made in order to influence the “facilitating” or “grease” payment exception is designed exercise of that discretion. The second comes into play to permit companies to accelerate the normal operations when a foreign official breaks the laws of the pertinent of government without receiving special exercises of foreign country. The third purpose, “securing any discretion by foreign officials. As such, it is meant to improper advantage,” broadly concerns “something to cover routine, nondiscretionary “ministerial activities which the company concerned was not clearly entitled, performed by mid- or low-level foreign functionaries,” [such as] an operating permit for a factory which fails to see Kay I, 359 F.3d at 750-51, such as: meet the statutory requirements.” United States v. Kay, 359 F.3d 738, 754 (5th Cir. 2004) (“Kay I”). Any a) Obtaining permits, licenses, or other official advantage that was not readily available to other documents to qualify a person to do business in competitors and that was secured by a payment could a foreign country; be deemed to fall within the scope of this provision. See id. at 750-55. The fourth purpose focuses on the foreign b) Processing governmental papers; official’s use of his or her influence within the foreign government. For example, in the 2006 Statoil matter, c) Providing police protection, mail pickup and U.S. authorities brought an enforcement action against a delivery, or scheduling inspections associated foreign oil company that entered into a $15 million with contract performance or inspections related consulting agreement with an Iranian official, the to transit of goods; purpose of which was to induce the official to use his influence to assist the company in obtaining a contract. d) Providing phone service, power and water See In re Statoil ASA, Securities Exchange Act Release supply, loading and unloading cargo, or No. 54599 (Oct. 13, 2006). protecting perishable products; or e) Actions of a similar nature so long as the To Obtain or Retain Business. The leading case on this official’s decision does not involve whether, or issue is Kay I, in which the Fifth Circuit held that this on what terms, to award new business to or to statutory requirement was satisfied by payments continue business with a particular party. designed “to secure illegally reduced customs and tax liability,” because lower tax payments would “more 15 U.S.C. § 78dd-1(f). generally help[] a domestic payor obtain or retain business for some person in a foreign country.” Kay I,

32

By carving out these narrow categories of payments lawful. “[T]here is no immunity from prosecution under from the FCPA’s coverage, Congress sought to the FCPA if a person could not have been prosecuted in differentiate between those acts “that induce an official the foreign country due to a technicality.” Id. at 539. to act ‘corruptly,’ i.e., actions requiring him ‘to misuse his official position’ and his discretionary authority,” and Second, it is an affirmative defense that the payment or those acts that are “essentially ministerial [and] merely thing of value “was a reasonable and bona fide move a particular matter toward an eventual act or expenditure, such as travel and lodging expenses . . . decision or which do not involve any discretionary and was directly related to . . . the promotion, action.” Kay I, 359 F.3d at 747. The key is discretion – demonstration, or explanation of products or services; a payment that convinces an official to bestow his good or . . . the execution or performance of a contract . . . .” graces upon a company is suspect, whereas a payment 15 U.S.C. § 78dd-1(c)(2). This provision creates a that merely expedites a routine action is less so. limited exception for expenses associated with ordinary product demonstration and testing by companies Those who seek to justify a payment under the seeking government contracts or for ongoing inspections “facilitating payment” exception should focus on the related to the execution of such a contract. amount at issue and whether the official in question must 4 exercise any discretion or judgment in deciding whether What is clear from the DOJ Opinion Releases is that to take the requested action. Companies that permit any expenditures must be closely tailored to the payor’s such payments should ensure that they are reviewed legitimate goals. For example, in connection with a and approved in advance by in-house or other counsel product demonstration, the host may pay for foreign and that they are recorded properly in their books and officials’ non-extravagant travel, lodging, and meals for a records. period closely related to the length of time required to demonstrate the product. See Opinion Release 07-02 Affirmative Defenses (approving expenses paid directly to providers for domestic air travel and other expenses of delegation of The FCPA contains two affirmative defenses to anti- six junior to mid-level foreign officials for educational bribery liability. program at company’s U.S. headquarters); Opinion Release 07-01 (approving domestic expenses for four- First, it is an affirmative defense that “the payment, gift, day trip by six-person delegation of the government of offer, or promise of anything of value that was made, an Asian country). was lawful under the written laws and regulations of the foreign official’s, political party’s, party official’s, or The DOJ may permit some digression for the officials’ candidate’s country.” 15 U.S.C. § 78dd-1(c)(1). Note entertainment. In Opinion Release 07-02, for example, it that the payments must be legal under the written laws approved payment for a modest four-hour city or regulations of the foreign country and that such sightseeing tour for the six visiting foreign officials. But authorization must be express. While a country’s laws expenses cannot resemble added “perks” for the may acknowledge the existence of certain payments – officials. In general, airfare should be economy class, for example, by making provision in the tax code for how see Opinion Release 07-02, but business class travel to treat them – this defense requires something much may be appropriate for higher-ranking officials, see more: an explicit authorization for the payment itself. Opinion Release 12-02. It must also be clear from the overall expense plan that the trip is for the purposes Kozeny addressed the scope of this affirmative defense. outlined in the statute and that the vast majority of In that case, the defendant was alleged to have paid bribes in Azerbaijan related to obtaining business with SOCAR, the state oil company. The defendant argued that the alleged payments were legal under local law because he had reported the payments to Azeri 4 authorities, and under Azeri law, the payor of a bribe is Under 15 U.S.C. § 78dd-1(e), the Attorney General is relieved from punishment if he makes such a report. obligated to have in place an opinion procedure by which See 582 F. Supp. 2d at 538. The court disagreed, the Department of Justice provides “responses to specific concluding that the Azeri legal provision may waive inquiries by issuers concerning conformance of their conduct with the” FCPA. The opinion releases are punishment but does not render the payment itself available on the Department’s website.

33

expenses are advancing those ends.5 Finally, although Another type of territorial-based jurisdiction extends to there may be situations in which an official’s family foreign citizens and foreign companies (or more members may be included, see Opinion Release 83-02 specifically, foreign companies that are not issuers) that, (approving payment of less than $5,000 to pay for the while in the territory of the United States, commit any act wife of a foreign official to travel with the official while in in furtherance of an improper payment or offer. See 15 the United States visiting company sites), that is rarely U.S.C. § 78dd-3(a). appropriate and should be avoided. Finally, nationality-based jurisdiction renders the FCPA Applicability anti-bribery provisions applicable, based on U.S. nationality alone, to acts outside the United States in FCPA jurisdiction is broad and extends to all U.S. furtherance of an improper payment or offer by any of companies or persons, as well as to foreign companies the following: (1) any issuer organized under the laws of that are registered with the SEC and foreign companies the United States; (2) U.S. persons who are officers, or persons that act in furtherance of an improper directors, employees, agents, and stockholders of such payment or offer while in the United States. issuer and are acting on behalf of such issuer; (3) any other corporation, partnership, association, joint-stock Territorial-based jurisdiction extends to any “issuer,” company, business trust, unincorporated organization, or “domestic concern,” officer, director, employee, or agent sole proprietorship organized under the laws of the of such issuer or domestic concern, or stockholder United States; or (4) any other citizen or national of the acting on behalf of such issuer or concern, that makes United States. See 15 U.S.C. § 78dd-1(g); id. § 78dd- use of any instrumentality of interstate commerce in 2(i). Thus, U.S. companies and citizens are subject to furtherance of any improper payment or offer of 6 the FCPA regardless of where the act in furtherance of payment. 15 U.S.C. § 78dd-1(a); id. § 78dd-2(a). An an improper payment or offer takes place, and, if the act “issuer” is any company – American or foreign – that takes place overseas, even if no means of interstate either issues securities within the United States or is commerce is used. required to file reports with the SEC. Id. § 78c(a)(8). A “domestic concern” is a U.S. citizen, national, or The Books-and-Records Provisions resident, or a corporation or other business entity with its principal place of business in the United States or The books-and-records provisions of the FCPA work in organized under the laws of the United States. Id. tandem with the anti-bribery provisions. They require § 78dd-2(h). public companies to accurately account for and report expenditures, as well as to maintain accurate records to support accounting entries and expenditures. The books-and-records provisions apply regardless of whether any improper payments have been made. 5 See also Opinion Release 82-01 (approved reasonable travel, meals, and entertainment); Opinion Release 81-02 Substantive Requirements (approved provision of product samples to government officials for testing and quality assurance); Opinion The books-and-records provisions require that an issuer: Release 83-02 (approved travel and entertainment expenses for official’s wife) (note, however, that more recent enforcement actions suggest that companies (A) Make and keep books, records and accounts, which, should not pay any expenses for an official’s family); in reasonable detail, accurately and fairly reflect the Opinion Release 85-01 (approved payment of travel transactions and dispositions of the assets of the expenses for French ministry inspection tour in United States); Opinion Release 92-01 (approved annual issuer; and expenditures of $250,000 for training expenses of Pakistani officials); and Opinion Release 96-01 (approved (B) Devise and maintain a system of internal accounting $15,000/year training costs for ten officials). controls sufficient to provide reasonable assurances 6 Interstate commerce includes making use of the mail, that – telephones, email, and any form of interstate travel. See, e.g., United States v. Brika, 487 F.3d 450, 455 (6th Cir. i) transactions are executed in accordance 2007) (telephone); United States v. Hausmann, 345 F.3d with management’s general or specific 952, 959 (7th Cir. 2003) (interstate mail and wire communications systems); Doe v. Smith, 429 F.3d 706, authorization; 709 (7th Cir. 2005) (email and internet).

34

ii) transactions are recorded as necessary There is no “jurisdictional” requirement for civil liability for (I) to permit preparation of financial failure to maintain adequate books and records or statements in conformity with generally internal controls pursuant to 15 U.S.C. § 78m(b)(2). Any accepted accounting principles or any “issuer” within the meaning of the statute must comply other criteria applicable to such with the statute’s requirements to maintain accurate statements, and (II) to maintain books and records and adequate internal controls, accountability for assets; wherever the books and records may be kept. Where a subsidiary’s financial results are consolidated with a iii) access to assets is permitted only in parent issuer’s financial statements, these requirements accordance with management’s general have been found to apply to books-and-records or or specific authorization; and internal control deficiencies occurring at the subsidiary. Thus, inaccurate books and records or internal control iv) the recorded accountability for assets is failures at the subsidiary level can trigger civil liability for compared with the existing assets at the parent issuer without any U.S. nexus (beyond issuer reasonable intervals and appropriate status of the parent). See SEC v. Hohol, 2:14-CV- action is taken with respect to any 00041(RTR) (E.D. Wis. Jan. 14, 2014), SEC Litigation differences. Release No. 22906. 15 U.S.C. § 78m(b)(2). These provisions make clear that issuers must compile records in accordance with Knowing violation of the books-and-records or internal generally accepted accounting standards. These controls requirements can trigger both civil and criminal liability. See 15 U.S.C. § 78m(b)(5) (“No person shall requirements are not based on any sense of “materiality” as that term is generally used in securities laws. Rather, knowingly circumvent or knowingly fail to implement a the requirement is grounded in the concept of system of internal accounting controls or knowingly reasonableness and accuracy – what a business falsify any book, record, or account . . . .” of an issuer); manager would reasonably want and expect in the day- 15 U.S.C. § 78m(b)(4) (imposing criminal liability for to-day operation of a business. There is no de minimis books-and-records violations where the defendant exception. The books-and-records provisions apply to knowingly circumvented, or failed to adopt, internal all transactions, both large and small. controls, or falsifies any book, record, or accounting entry). On its face, there is no jurisdictional requirement Because liability under the books-and-records provisions built into this provision. But the jurisdictional limits of this does not depend on an improper payment, they may be section have not been fully tested in the courts; thus, for used to sanction a company in cases involving example, it is not entirely clear whether it would apply to suspected improper payments in which, for whatever a foreign non-issuer defendant who acts entirely outside reason, the government is unable to prove, or chooses the United States to knowingly falsify an issuer’s books not to pursue, an anti-bribery charge. For example, the and records. The government is likely to argue, SEC brought a settled civil enforcement action against however, that a U.S. prosecution of such conduct would Oracle Corporation where an Indian subsidiary of Oracle fall within established principles of extraterritorial created slush funds for the purpose of paying future jurisdiction, insofar as Congress clearly intended this bribes to foreign government officials even though there provision to have extraterritorial reach and that the were no bribes offered or currently contemplated. SEC conduct at issue inherently has an impact on the United v. Oracle Corp., No. CV-12-4310 (N.D. Cal. Aug. 13, States (or the U.S. securities market) because it involved 2012). Companies should avoid all arrangements which the books and records of an issuer. See, e.g., SEC v. cannot be or are not openly recorded in the books. Panalpina, Inc., 4:10-cv-4334 (S.D. Tex. Nov. 4, 2010), SEC Litigation Release No. 21727 (settled enforcement Applicability action against a foreign company that paid bribes for issuers and provided inaccurate invoices to support the The books-and-records provisions apply only to improper payments). issuers – that is, entities that have a class of securities registered pursuant to 15 U.S.C. § 78l and entities that Section 78m(b)(5) was utilized in the 2008 Siemens are required to file reports with the SEC pursuant to 15 FCPA matter to bring criminal charges against Siemens U.S.C. § 78o(d). See 15 U.S.C. § 78m(b)(2). AG, a foreign issuer directly subject to this provision.

35

Specifically, Siemens AG pleaded guilty to failing to address internal controls and books-and-records problems in the face of information that it had grave issues with its internal controls and with accuracy in books and records as a result of its ongoing engagement in bribery. No U.S. jurisdictional nexus was alleged. Undoubtedly, it was deemed unnecessary. In addition, one of Siemens AG’s foreign subsidiaries, Siemens Argentina, pleaded guilty to conspiracy to knowingly falsifying and causing to be falsified the books and records of an issuer (i.e., of its parent corporation, Siemens AG), in violation of 18 U.S.C. § 371 (the conspiracy statute). In order to bring this conspiracy charge, a jurisdictional hook was required, and in this case the DOJ alleged two meetings in the United States and a bank transfer of bribe funds that went through a U.S. correspondent bank account. See, e.g., United States v. MacAllister, 160 F.3d 1304, 1307 (11th Cir. 1998) (the United States may prosecute an extraterritorial conspiracy if there is an overt act within the United States in furtherance of the conspiracy).

36

Consequences of FCPA Violations

Violations of the FCPA’s provisions can result in gotten gains.10 Violations of the books-and-records monetary penalties, extensive costs associated with provisions are civil violations unless they are committed conducting an internal investigation and/or defending willfully, in which case they are punishable as criminal against government inquiries, harm to reputation, offenses. See 15 U.S.C. § 78m(b)(4)-(5). Criminal imposition of onerous compliance programs, and the risk violations carry maximum penalties of a $25 million fine of imprisonment. per violation for entities and a $5 million fine per violation and 20 years’ incarceration for natural persons. See 15 The maximum statutory penalties per violation of the U.S.C. § 78ff(a). anti-bribery provisions are a $2,000,000 criminal fine and a $16,000 civil penalty for a corporate entity. For In some cases, the government also will require the individuals, the maximum criminal fine per violation is appointment of an independent compliance monitor, at $250,000, and the maximum civil penalty per violation is the company’s expense, for some period of time $16,000. In addition, a criminal fine of up to twice the (typically two or three years). The independent monitor amount of the benefit obtained may be levied under the is charged with making recommendations for FCPA Alternative Fines Statute.7 And finally, individuals may compliance with which the company generally must be sentenced to up to five years’ incarceration per comply and with reporting the state of the company's violation.8 See 15 U.S.C. §§ 78ff(c)(1), 78dd-2(g), 78dd- compliance to the government. Unsurprisingly, the 3(e); 18 U.S.C. § 3571. independent monitor requirement is an expensive and burdensome proposition for any company subject to it. There are three tiers of civil penalties for violations of the In other cases, the government will refrain from imposing books-and-records provisions, depending on a series of an outside compliance monitor, but will require a aggravating factors. The penalties range from $7,500 to company to self-review and self-report on its FCPA $160,000 per violation for individuals and $75,000 to compliance for a period of time after a settlement, e.g., $775,000 (these were adjusted for inflation in 2013) per for two or three years. violation for corporate entities or may be calculated based upon the gross amount of the pecuniary gain.9 In addition, the SEC typically seeks disgorgement of any ill-

7 The Federal Sentencing Guidelines also provide that the fine range under the Guidelines may be up to two times 10 the amount of the benefit sought to be obtained. The values of all SEC penalties are subject to periodic 8 This penalty requires a “willful” violation. But, the Fifth inflation adjustments under the Debt Collection Circuit has held that this element requires only that the Improvement Act of 1996; the inflation-adjusted penalties defendant “acted intentionally, and not by accident or are published in 17 C.F.R. § 201.1003. The most recent mistake” and “with the knowledge that he was doing a adjustments to the civil penalties became effective ‘bad’ act under the general rules of law.” United States v. March 5, 2013. See Securities & Exchange Comm’n, Kay, 513 F.3d 432, 447-48 (5th Cir. 2007). Adjustments to Civil Monetary Penalty Amounts, 78 Fed. 9 Reg. 14179 (Mar. 5, 2013), available at 15 U.S.C. § 78u(d)(3)(B)(i)-(iii); 17 C.F.R. § 201.1003. http://www.sec.gov/rules/final/2013/33-9387.pdf.

37

Frequently Asked Questions

1) Who Is Subject To The FCPA? participation by the parent in the subsidiary’s conduct. Rather, liability appeared to be premised on the fact that Potentially anyone. The anti-bribery provisions identify Ralph Lauren Corporation was the sole owner of the three classes of possible offenders: “issuers,” 15 U.S.C. subsidiary and had appointed its general manager. See § 78dd-1, “domestic concerns,” id.§ 78dd-2, and all other DOJ Non-Prosecution Agreement with Ralph Lauren persons, id. § 78dd-3. An “issuer” is any company that Corp. (Apr. 22, 2013); SEC Non-Prosecution Agreement issues securities within the United States or files reports with Ralph Lauren Corp. (Apr. 22, 2013). with the SEC. A “domestic concern” is a U.S. citizen, national, or resident or a business entity that either has Moreover, it is important to be aware that a foreign its principal place of business in the United States or is subsidiary may be considered an “agent” of its parent, a organized under U.S. law. The third, catch-all section situation that could trigger FCPA liability for both the applies to everyone else (which generally means foreign foreign subsidiary and/or the parent corporation. The non-issuers, including non-U.S. nationals) if acting within statute makes “agents” of issuers as well as “agents” of the territory of the United States. domestic concerns subject to the FCPA. In addition, under U.S. common-law principles of vicarious liability, a Liability under the accounting provisions is limited to corporation can be held liable for the conduct of its issuers. agent. For example, in 2014 the SEC held Alcoa Inc. (Alcoa) liable for alleged improper payments by its 2) When Is An American Company Liable For subsidiaries, despite making “no findings that an officer, The Acts Of A Foreign Subsidiary? director or employee of Alcoa knowingly engaged in the bribe scheme.” In re Alcoa Inc., Securities Exchange Act A company can be liable for its subsidiary’s improper Release No. 71261 (Jan. 9, 2014). Rather, the SEC’s payments under two theories: (1) because the parent finding of liability was based on the level of control Alcoa authorized or knew of the payments or (2) because the exercised over its subsidiaries, including its appointment subsidiary acted as the parent’s agent in making the of key leadership for the subsidiaries, its development of payments. The DOJ and the SEC endorse both theories business and financial goals for them, and its of parent liability. See Resource Guide at 27-28. coordination of legal, audit, and compliance functions. This approach is consistent with the statement in the In this context, the parent company’s potential liability Resource Guide that “[t]he fundamental characteristic of does not turn on majority versus minority ownership. agency is control.” Resource Guide at 27. Instead, liability will arise under the anti-bribery provision if the parent authorizes a corrupt payment, or if the Finally, an issuer may be liable for the acts of those parent provides funds to the subsidiary while “knowing” foreign subsidiaries under its control for violations of the that the monies are to be used for a corrupt purpose. books-and-records and internal controls provisions. Recently, both the DOJ and the SEC have taken fairly Even where an issuer owns 50 percent or less of the aggressive positions with respect to a parent’s liability for voting power of a subsidiary, it must make “good faith” its subsidiary’s actions. In 2013, for example, both efforts to “use its influence, to the extent reasonable agencies reached non-prosecution agreements with under the issuer’s circumstances, to cause such Ralph Lauren Corporation for alleged bribes paid by an domestic or foreign firm to devise and maintain a system Argentine subsidiary to expedite customs clearances. of internal accounting controls consistent with” the The government did not allege actual knowledge or FCPA. 15 U.S.C. § 78m(b)(6).

38

3) What Does It Mean To “Authorize” An functionaries,” Kay I, 359 F.3d at 750-51, such as Improper Payment? obtaining permits, licenses, or other official documents to qualify a person to do business in a foreign country; The FCPA does not define the term “authorization,” and processing governmental papers; or providing general as with many aspects of the statute, the case law is governmental services, such as police protection, mail, undeveloped. The legislative history makes clear that power, or water. See 15 U.S.C. § 78dd-1(f). authorization can be implicit or explicit. See H.R. Rep. 95-640 (Sept. 28, 1977) (“[I]n the majority of bribery This narrow exception exempts from liability only those cases . . . some responsible official or employee of the acts that are “essentially ministerial [and] merely move a U.S. parent company had knowledge of the bribery and particular matter toward an eventual act or decision or either explicitly or implicitly approved the practice . . . . which do not involve any discretionary action.” Kay I, [S]uch persons could be prosecuted.”); see also 359 F.3d at 747. In their Resource Guide, the DOJ and Business Accounting and Foreign Trade Simplification the SEC emphasize that the size of a payment is not Act: Joint Hearings on S. 414, 98th Cong., 1st Sess. determinative of whether it qualifies for the facilitating (1983) at 38 (Memorandum from Deputy Attorney payment exception. See Resource Guide at 25. For General Edward C. Schmults) (describing standard for example, in a 2009 matter brought against oilfield implicit authorization under the FCPA, noting that one company Helmerich & Payne, Inc., the DOJ cited a may implicitly authorize a corrupt payment merely by series of infrequent payments to Venezuelan customs pursuing a course of conduct that conveys an intent that officials, each of which was less than $2,000 and which, an illicit payment be made). together, totaled only $7,000. See In re Helmerich & Payne, Inc., Non-Prosecution Agreement (July 29, In past enforcement actions, the government has 2009). In that case, however, the payments were charged parent companies with directly authorizing allegedly made to avoid customs regulations and improper payments. In the 2013 Diebold matter, the inspections rather than to obtain routine, non- SEC explicitly charged the parent company with discretionary action. knowledge and approval of corrupt payments, including for gifts and hospitality, made by its subsidiaries in Even if a payment arguably fits within the exception for China, Indonesia, and Russia. See SEC v. Diebold, Inc., facilitating payments, issuers must be careful to ensure No. 1:13-cv-01609 (D.D.C. Oct. 22, 2013). And yet, in the transactions are properly recorded as such. In the 2011, the DOJ settled charges against Maxwell 2014 Layne Christensen matter, the SEC faulted the Technologies based on a subsidiary’s allegedly corrupt company for some payments as small as $4 where the conduct in China but without clearly alleging prior payments were mischaracterized as “honoraries,” knowledge or approval by the parent. See United States “commissions,” and “service fees,” leading to books-and- v. Maxwell Techs., Inc., No. 3:11-cr-00329 (S.D. Cal. records violations. In re Layne Christensen, Securities Jan. 31, 2011). The government did allege, however, Exchange Act Release No. 73437 (Oct. 27, 2014). that Maxwell executives discovered suspicious payments and that, subsequently, the payments actually Finally, it should be noted that the U.K. Bribery Act of increased, leading to a possible inference of at least 2010 does not contain a facilitating payments exception. implicit authorization. The scope of the U.K. Bribery Act is quite broad, covering not only U.K. concerns but any companies 4) What Is A Facilitating Or “Grease” conducting business in the United Kingdom, even where Payment? the charged conduct occurred elsewhere.

The FCPA does not apply “to any facilitating payment or 5) Are American Companies Liable For The expediting payment to a foreign official, political party, or Prior Illegal Acts Of Companies They party official the purpose of which is to expedite or to Purchase? secure the performance of a routine governmental action.” 15 U.S.C. § 78dd-1(b). This exception for what Yes, in some circumstances. An American company are colloquially referred to as “grease payments” is may be held liable for or suffer other consequences from designed to cover routine, nondiscretionary “ministerial the prior illegal acts of a company that it acquires or with activities performed by mid- or low-level foreign which it becomes associated as the result of a merger.

39

A company may mitigate its risk by conducting due could not be undertaken. The DOJ permitted a “grace diligence prior to an acquisition or merger or, sometimes, period” for the acquiring company to identify and immediately following an acquisition or merger, but that disclose potential risk areas, and required a complex is not a legal defense and the company still may be and far-reaching internal investigation. The DOJ legally susceptible to criminal prosecution because the likewise indicated that it still would hold the company DOJ takes an aggressive approach to successor liable not only for ongoing violations by the target liability. company not uncovered during the first 180 days of due diligence, but also for prior violations by the target The DOJ and the SEC devote substantial space in their company disclosed to the DOJ to the extent that such Resource Guide to this topic, in which they claim that violations were not “investigated to conclusion within one they do not typically take action against acquiring year of closing.” companies in cases where the acquirer discovers and quickly remedies possible violations. Resource Guide at But the mere act of acquisition cannot create liability 29. Rather, actions against the acquiring or successor where none existed before. As the DOJ explained in an company are generally reserved for cases “involving opinion release this year, a U.S. company that wished to egregious or sustained violations or where the successor acquire a foreign target would not be liable for that company directly participated in the violations or failed to target’s past conduct because the prior conduct had no stop the misconduct from continuing after the connection to the United States, putting it beyond U.S. acquisition.” Id. at 28; see, e.g., SEC v. Alliance One jurisdiction in the first place. See Opinion Release 14- Int’l, Inc., No. 1:10-cv-01319 (D.D.C. Aug. 6, 2010) 02. ($19.5 million in penalties and disgorgement paid by successor company and foreign subsidiaries). 6) Can The U.S. Government Prosecute Consequently, the Resource Guide recommends that Foreign Companies Under The FCPA? companies conduct extensive due diligence prior to acquisition and quickly integrate the target company into Yes. Foreign companies that issue securities in the the parent’s compliance program and internal controls. United States or that are required to file reports with the See id. at 28. SEC are considered “issuers” and are treated just as any U.S. issuer would be. And prosecution of foreign Nevertheless, even where enforcement authorities do companies has been a growing enforcement trend. To not take direct action against the acquiring company, date, eight of the top ten largest FCPA enforcement actions against the acquired subsidiary can still have actions, measured by dollar volume of total penalties significant consequences for all parties. In 2007, and disgorgements, have been brought against foreign eLandia International Inc. discovered after the fact that companies. its recently acquired subsidiary, Latin Node Inc., had paid as much as $2.2 million in bribes to officials in Furthermore, even non-issuer foreign companies and state-owned telecommunications firms in Honduras and individuals are subject to the FCPA if they commit any Yemen. As a result of the ensuing investigation and act in furtherance of an improper payment while within remediation, Latin Node’s viability was severely the territory of the United States. See 15 U.S.C. § 78dd- weakened, and the company was eventually wound 3(a). The DOJ has advanced aggressive theories to down. The DOJ brought a single FCPA charge against support jurisdiction over such defendants. For example, Latin Node, which pleaded guilty and agreed to pay a $2 in the 2003 Syncor Taiwan matter, the DOJ asserted million fine. See United States v. Latin Node, Inc., No. jurisdiction over a foreign non-issuer company based on 09-cr-20239 (S.D. Fla. Mar. 23, 2009). Although one of its officer’s sending an email while in the United eLandia was spared a criminal charge and conviction of States that contained a budget referring to the improper its own, it nevertheless was obligated to pay the defunct payments, thereby committing a relevant act “while Latin Node’s fine and, of course, saw its investment in . . . the United States.” But in 2011, a federal court wiped out. rejected an even more aggressive theory that a British national had acted within the United States when he In Opinion Release 08-02, the DOJ advised a company mailed from London to the United States a purchase regarding the post-acquisition due diligence required on agreement related to an alleged bribery scheme. a target company when pre-acquisition due diligence Finding no conduct within the United States under these

40

circumstances, the court dismissed a substantive FCPA pay illegal bribes to employees of the national oil count against the British defendant. See United States company. v. Patel, No. 1:09-cr-00335 (D.D.C. July 7, 2011). In addition, foreign governments often require that a U.S. 7) Can A Company Be Liable For The Acts Of contractor hire a local entity to do some portion of the Third Parties? work on a contract. A company should carefully monitor and document such arrangements because a corrupt Yes. The FCPA prohibits the “authorization” of improper subcontractor easily could pad its subcontract price to payments, 15 U.S.C. § 78dd-1(a), which could include include improper payments. A U.S. company, as the payments made by agents and business partners. original source for those payments, therefore may be Furthermore, the act specifically prohibits payments to liable if some portion is subsequently offered or paid to a third parties “while knowing” that all or a portion of the foreign official. Accordingly, margins should be payment will be used as an illegal bribe. 15 U.S.C. reasonable. § 78dd-1(a)(3). Note that it is not necessary that a company affirmatively Not surprisingly, companies have been held liable for the authorize improper payments by its agents, vendors, acts of their agents and service providers in a number of distributors, or subcontractors in order for liability to past enforcement actions. For example, in 2013, Parker attach. Simple knowledge of such payments will suffice, Drilling Company settled charges that it had channeled and, critically, knowledge is defined broadly enough to more than $1 million to Nigerian officials through an in- include even well-founded suspicions. For purposes of country agent, and Weatherford International was the FCPA, a person’s awareness “of a high probability of charged with sending payments to Angolan government the existence of [a] circumstance” is sufficient to officials through joint ventures and a freight-forwarding demonstrate knowledge of the circumstance. 15 U.S.C. agent. § 78dd-1(f)(2)(B). Companies therefore should be alert to possible warning signs, such as, for example, when a While agents facilitate a company’s own direct sales, government official directs the use of a specific third distributors typically purchase goods and re-sell them to party; where a provider’s services are unclear or ill- other end-users. Because of this distinction, any illegal defined; or where payments are made through non- payments a distributor makes subsequent to taking title traditional channels. to the goods generally cannot be attributed to the original seller, absent a prior specific conspiratorial Thus, while one might believe that it is safest to know as agreement to make the payment or an ongoing little as possible about what service partners and third relationship between the seller and the distributor in parties do with the payments they receive, exactly the which the seller knowingly benefits from the illicit activity. opposite is true. Under the FCPA liability framework, For example, in Opinion Release 87-01, the DOJ took no U.S. companies should closely monitor and document action on a U.S. company’s sale of a product to a foreign their third-party relationships to ensure that they are not company that planned to resell the product to its viewed as taking a “head in the sand” approach should government on terms to be negotiated. The U.S. payments ultimately be redirected to government company represented that it was not aware of any illegal officials. payment plans.

Nevertheless, distributor relationships are not immune to risk. Where a company is aware or reasonably suspects that its distributor is offering or making improper payments to government officials, the company can be liable for the distributor’s actions. In 2013, Weatherford International also settled charges that stemmed in part from a distributor arrangement. The government alleged that Weatherford offered up to $15 million in “volume discounts” to a distributor in an unnamed Middle Eastern country, believing that the discounts would be used to

41

8) What Provisions Should An Agreement customary in the country and be under $500; With A Foreign Representative Contain? and that all reimbursements be on a detailed invoice, subject to company audit); and Agreements with foreign representatives should include the elements outlined in the DOJ’s Opinion Release 81- 9. Provisions demonstrating that representatives 01, its most comprehensive pronouncement on the are well-established entities, with sufficient subject: resources to perform the work. The agreement also should refer to the company’s selection 1. A requirement that all company payments be criteria for representatives, which should (a) by check or bank transfer, (b) to the foreign include: years in operation; size and adequacy representative by name, (c) at its business of support staff; business outlook; reputation; address in-country (or where services were professional and/or technical expertise and rendered), and (d) upon the written instructions familiarity with and willingness to adhere to the of the foreign representative; FCPA. See Opinion Release 97-01 (documenting depth of due diligence). 2. A requirement that the foreign representative independently represent its familiarity with and A country’s reputation for bribery also should be commitment to adhere to the FCPA. In addition considered in assessing the sufficiency of steps taken to to promising to make no illegal payments, the minimize risk in the selection of agents. agreement also should require the representative to notify the company of any In addition to these recommendations, companies request it receives for improper payments from should consider adopting a separate policy containing any company employee; these guidelines and other procedures for conducting due diligence with respect to retaining and working with 3. A provision requiring a representation that no foreign agents. All employees involved with international member of the entity is a government official, an agreements should be familiar with both this policy and official of a political party, a candidate for with the FCPA itself. The policy should contain a political office, a consultant to a government statement from senior management emphasizing the official, or affiliated with the government official company’s commitment to FCPA compliance. (with limited exceptions); Finally, although a company may conclude that it will not 4. A provision confirming that the agreement is undertake the same degree of due diligence for service lawful in the foreign country; providers and distributors, those persons or entities must also be selected and managed so as to address FCPA 5. A requirement that any assignment by the risk, as payments to service providers or distributors can representative of any right, obligation and/or be used as a vehicle for improper payments to foreign services to be performed under the agreement officials. must be approved in writing by the company;

6. A provision permitting the company to terminate 9) If Necessary, How Should A Company the agreement upon a belief that the entity has Make Overseas Payments? violated any of its provisions; Ideally, by wire transfer to a business partner’s bank 7. A provision permitting the company to disclose account in its home country or the location where the the agreement to anyone, including government work was done. See, e.g., Opinion Release 81-01 organizations; (citing these factors in support of a decision against taking enforcement action). The DOJ and the SEC insist 8. Provisions mandating the existence of adequate on visibility and transparency in payments made to controls over reimbursable expenses. See, e.g., agents and other business partners abroad. Therefore, Opinion Release 81-01 (describing provisions wire transfers are preferable to checks because they requiring entertainment and business meetings provide proof that funds were sent to an agent’s primary to occur on the same day; written approval of business account. If checks are used, they should be travel expenses; that gifts be lawful and retained to show the place of deposit. Companies

42

should ensure that payments to business partners are 09-cr-00077 (C.D. Cal. May 18, 2011), and in the joint accurately recorded in their books, and domestic parents Resource Guide. See Resource Guide at 20-21. should require their subsidiaries to follow U.S. accounting rules regarding business expenditures. Members of royal families also present particular difficulty. Often, such individuals have no official role in 10) Who Is A Foreign Official? government, but occupy important ceremonial roles and wield significant influence. In Opinion Release 12-01, Under the FCPA, the term “foreign official” includes the DOJ set out the following factors for assessing elected and appointed government officials; officials of whether a royal is a foreign official: (1) the degree of international organizations such as the International control or influence the individual has over the levers of Monetary Fund, the World Bank, and the Red Cross; governmental power, execution, administration, and employees of any “government instrumentality,” finances, and the like; (2) whether the foreign which the Eleventh Circuit held last year can include government characterizes the individual as having state-owned enterprises that provide what might governmental power; and (3) whether and under what otherwise be thought of as commercial services. United circumstances the individual may act on behalf of, or States v. Esquenazi, 752 F.3d 912 (11th Cir.), cert. bind, a government. Applying these factors, the DOJ denied, 135 S. Ct. 293 (2014). concluded that the royal family member in Opinion Release 12-01 was not a foreign official because he had In determining whether a state-affiliated entity qualifies no official or unofficial role in his country’s government as a “government instrumentality,” the Eleventh Circuit and no authority to bind the relevant governmental focused on two critical features: (1) government control decisionmakers. and (2) public function. Assessing either of the features is a fact-intensive exercise, but the court identified The FCPA also defines “foreign official” as including “any several factors that will often affect the analysis. person acting in an official capacity” on behalf of a foreign government. Thus, consultants and unofficial Regarding government control, the court considered a advisors to government officials, or others outside the non-exhaustive list of six factors: (1) the foreign formal government apparatus, may be deemed to be government’s formal designation of the entity; government officials under certain circumstances, (2) whether the government had a majority ownership particularly where they have decisionmaking authority or interest; (3) the government’s authority to appoint or significant influence with respect to governmental remove the entity’s principals; (4) the extent to which the actions. For example, in the 2006 Statoil ASA matter, entity’s profits are returned to the public treasury; Statoil was charged with making improper payments to (5) whether the entity would perform at a loss absent the President of the National Iranian Oil Company. The government subsidies; and (6) the length of time these DOJ did not allege, however, that this position in itself indicia have existed. rendered him a foreign official, relying instead on assertions that he was an “advisor to the Iranian Oil With respect to whether a state-affiliated entity performs Minister” and a “very important guest”; that his family a public function, the court considered the following non- “controlled all contract awards within oil and gas in Iran”; exhaustive factors: (1) whether the entity enjoys a and that Statoil had tested his influence by having him monopoly over its goods or services; (2) the extent of send a message back to Statoil through the Iranian Oil government subsidies for the entity; (3) whether the Minister. See United States v. Statoil ASA, No. 1:06-cr- entity’s goods and services are available to the public at 00960 (S.D.N.Y. Oct. 13, 2006); Opinion Release 10-03, large; and (4) whether the public and government discussed infra, also touches on this issue. perceive the entity as performing a governmental function. Finally, it is worth noting that the FCPA bans corrupt payments not only to foreign officials, but to foreign The Eleventh Circuit’s ruling in Esquenazi closely tracks political parties, candidates for foreign political office, or the past approach of both the DOJ and the SEC as seen any person (for example, a third party agent or both in their prior enforcement actions, see, e.g., United representative), knowing that any portion of the payment States v. Aguilar, 783 F. Supp. 2d 1108 (C.D. Cal. will be passed on to a foreign official, political party, or 2011); United States v. Carson, 2011 WL 5101701, No. political candidate.

43

11) May A Company Make Charitable/ Nevertheless, caution must be taken to ensure that Educational Contributions At The Request expenses are reasonable, relate to legitimate Of A Foreign Official? educational or training needs, and are not provided in circumstances indicating an attempt to induce favorable Yes, but it should be very careful when doing so. The treatment with regard to the company’s business. In DOJ and the SEC have both advised that legitimate Opinion Release 11-01, the DOJ stated that it would not charitable donations do not violate the FCPA. See take enforcement action against a requestor company Resource Guide at 19; see also Opinion Release 10-02 that planned to provide economy-class airfare and other (declining to take enforcement action where requestor expenses for two foreign officials to travel to the United undertook adequate due diligence of recipient and States to learn more about the company’s business. imposed significant controls on the grant); Opinion The company represented that it had no non-routine Release 97-02 (declining to take enforcement action business before the relevant foreign agencies; its routine where facts demonstrated that donation would be given business was governed by well-established rules and directly to a government entity – “and not to any foreign standards; the foreign government would choose which government official” – for the purposes of building a officials would travel; no expenses would be paid for the school). officials’ spouses or family members; all payments would be made directly to service providers and not to the But the government will nevertheless closely scrutinize officials; souvenirs would be of nominal value and would donations made to charitable organizations or for reflect the company’s business or logo; the company educational purposes to ensure that any officials would not fund side trips, entertainment, or leisure requesting donations, or otherwise associated with the activities; and the duration of the visit would be limited to donees, have no possible role in reviewing matters for, the amount of time necessary to educate the officials or providing preferential treatment to, the donating about the company’s operations. business. For example, in 2012, the SEC brought an FCPA enforcement action against Eli Lilly & Co., alleging The issues surrounding educational trips provide a that a subsidiary of the pharmaceutical company made sound framework to consider gifts and hospitality $39,000 in donations to a Polish charity. The SEC generally. Hospitality and gifts may be extended if they claimed the donation had been made at the request of a are reasonable, have a sound business purpose, and government official who had influence over are not intended to influence a government official to use pharmaceutical purchases in Poland. See SEC v. Eli his authority improperly to the business advantage of the Lilly & Co., No. 1:12-cv-02045 (D.D.C. Dec. 20, 2012). company. These common-sense guidelines dictate that And in 2004, the SEC brought a similar action against reasonable entertainment expenses (e.g., meals) are Schering-Plough Corporation involving donations of usually acceptable if connected to conducting business. $76,000 to the same Polish charity given at the request Similarly, low-value tangible gifts (e.g., marketing items of the same Polish government official. See SEC v. with company logos, such as pens, caps, cups, and Schering-Plough Corp., No. 1:04-cv-00945 (D.D.C. June shirts) may be given, provided such gifts are acceptable 4, 2004). under the applicable government rules of the official’s home country and are permitted by the U.S. company’s 12) May A Company Sponsor An Educational ethics policies. The DOJ and the SEC have advised that Trip For Foreign Officials Or Provide Other “[i]tems of nominal value” are less likely to curry Hospitality? improper influence, while “[t]he larger or more extravagant the gift . . . the more likely it was given with Yes, but only under strict conditions. The FCPA itself an improper influence.” Resource Guide at 15. provides an affirmative defense for “reasonable and bona fide expenditures, such as travel and lodging Certainly, hospitality, travel, and entertainment that are expenses” when directly connected with legitimate unconnected to bona fide business activities or that promotions or product demonstrations or when a include luxurious or extravagant expenses create required part of contract performance. 15 U.S.C. potential risks under the FCPA. In 2013, both the DOJ § 78dd-1(c)(2); see also Resource Guide at 24. and the SEC brought enforcement actions against Diebold, Inc., for providing leisure trips to Las Vegas and Disneyland, entertainment, and gifts to Chinese and

44

Indonesian officials. See SEC v. Diebold, Inc., No. 1:13- his recusal from any matters involving the company’s cv-01609 (D.D.C. Oct. 22, 2013); United States v. business; and local law was not violated. Diebold, Inc., No. 5:13-cr-00464 (N.D. Ohio Oct. 22, 2013). Similarly, last year, the SEC charged that Bruker 14) Can A U.S. Company Make Payments, Corporation provided a series of non-business travel and Contributions, or Donations To Foreign leisure side-trips to Chinese officials at state-owned Government Entities? enterprises. In re Bruker Corp., Securities Exchange Act Release No. 73835 (Dec. 15, 2014). Yes, but it should be very careful when doing so. The FCPA prohibits payments to government officials, but 13) Can A U.S. Company Do Business With not to government entities themselves. Nonetheless, a An Entity In Which A Foreign Official Is A payment to a government entity may be improper where Participant? it appears that it is substantially benefitting a particular government official. For example, in 2013, the SEC Yes, but it should exercise great care in doing so. A brought an enforcement action against medical device U.S. company does not violate the FCPA merely by manufacturer Stryker Corporation. Among the alleged doing business with an entity in which a foreign official is improper payments was a $200,000 donation to a Greek a passive owner. In general, a foreign official’s public university to fund a laboratory for a public official participation in such an entity should be legal under the with influence over the purchase of Stryker products. In laws of his country and transparent to his government re Stryker Corp., Securities Exchange Act Release No. agency, and he should recuse himself from any decision 70751 (Oct. 24, 2013). or transaction involving the U.S. company with which the entity interacts. Moreover, there is an inherent risk that any payment to a foreign government ultimately may be diverted to an The DOJ has issued a number of Opinion Releases individual official. Accordingly, any payments to addressing this issue. For example, in Opinion Release government entities should be made to accounts clearly 08-01, the DOJ took no enforcement action where a U.S. identified as such, in the country where the government company entered into a joint venture with an entity in operates, and supported by clear documentation. Such which a foreign official was a principal, because the U.S. payments should be made only on written direction of company had (1) conducted extensive due diligence and the government entity. Compare Opinion Release 06-01 made disclosures; (2) obtained representations and (approving payments to customs department of African warranties that its joint venture partner had not and nation to develop incentive program for law enforcement would not violate anti-corruption laws; and (3) retained a to improve anti-counterfeiting measures) and Opinion broad contractual right to terminate the joint venture Release 97-02 (permitting $100,000 donation to agreement in the event of a violation of anti-corruption government entity to build a school) with Opinion laws. Similarly, upon assurances of compliance and Release 98-01 (stating DOJ's intention to initiate a other prophylactic measures, the DOJ took no action criminal investigation if proposed payments of “fines” when a U.S. firm sought to establish an agency and “modalities” were made to foreign officials rather agreement with a foreign company whose principals than to an agency account). were related to and managed the affairs of a foreign country’s head of state. See Opinion Release 84-01. Thus, it is important to exercise caution when making payments, contributions, or donations to foreign Indeed, an employee of a U.S. concern even can governments, even when acting with the best of become a foreign official. In Opinion Release 80-02, a intentions. As the DOJ and the SEC warn, “companies foreign employee of a U.S. subsidiary wanted to run for contemplating contributions or donations to foreign an office in his country. The DOJ took no action based governments should take steps necessary to ensure that on assurances that the company would pay him only for no monies are used for corrupt purposes, such as the his work as an employee; his duties at the company did personal benefit of individual foreign officials.” Resource not involve advocacy or representation to the Guide at 20. government; it was customary in that country to hold outside employment; he would notify his government of

45

15) Does The FCPA Forbid Corrupt Payments reporting companies likely receive some benefit, but To Obtain Business Advantages Such as often it is not clear how much. A company that makes a Lower Taxes and Customs Duties? voluntary disclosure is more likely to obtain a deferred or non-prosecution agreement than a company that does Yes. The FCPA forbids corrupt payments to influence not disclose. But there may be many circumstances in foreign officials to use their positions to assist “in which such an agreement will not be afforded even obtaining or retaining business.” This prohibition is not though there has been a disclosure. And, while limited to commercial transactions between a U.S. preferable to a guilty plea, deferred or non-prosecution company and a foreign government, such as the award agreements do not provide ironclad insulation against or renewal of contracts. After a lengthy analysis of the criminal prosecution. Indeed, a 2008 FCPA prosecution statute’s legislative history, the Fifth Circuit held in Kay I, came about because the company – Aibel Group Ltd. – 359 F.3d at 748, that the FCPA prohibits payments was found to have violated an FCPA deferred “intended to assist the payor” either directly or indirectly prosecution agreement from 2004. Furthermore, in obtaining or retaining business, and that it voluntary disclosure does not guarantee protection “encompass[es] the administration of tax, customs, and against substantial monetary penalties. other laws and regulations affecting the revenue of foreign states.” The court thus concluded that payments Moreover, there can be significant downsides to to Haitian officials to understate quantities of imported voluntary disclosures. First, they frequently result in grain so as reduce import taxes violated the FCPA. See potential FCPA violations becoming public even before id. they are resolved, often through SEC filings that are reported in the press. Such publicity can lead to 16) Are There Benefits To Voluntary shareholder suits and reputational damage. Second, Disclosure? self-reporting can increase a company’s legal costs, as the DOJ and the SEC typically require additional Probably, but the extent of these benefits is not entirely investigation in the wake of a disclosure, sometimes clear, and they must be weighed against the potential encompassing business units or geographic areas well costs. The DOJ and the SEC encourage companies to beyond those involved in the potential violations initially come forward with violations of the FCPA and promise identified. Indeed, in its recent settlement with Bruker leniency in exchange. They write in the Resource Guide, Corporation, the SEC specifically cited, as an example of for example, that they “place a high premium on self- the company’s cooperation, the fact that it had expanded reporting, along with cooperation and remedial efforts, in its internal investigation at the agency’s request. determining the appropriate resolution of FCPA matters.” Resource Guide at 54. Even before the publication of Thus, any company contemplating a voluntary disclosure the Resource Guide, the agencies had made increased should ensure that it has conducted an exhaustive efforts to demonstrate that they give credit for voluntary internal investigation, and once it has done so, should disclosures by being somewhat more transparent about carefully weigh the costs and benefits of voluntary the benefits that companies have received for self- disclosure in light of all the relevant facts. reporting. And last year, as we discuss in the Developments and Trends section, both the DOJ and 17) Can Foreign Bribery Violate Any Statutes the SEC emphasized the credit they gave to companies Other Than The FCPA? that self-disclosed their misconduct; conversely, they also pointed out that companies that did not self-disclose Yes. The federal money laundering statutes make it a received harsher penalties. Nonetheless, the rewards of felony to conduct a financial transaction knowing that the voluntary disclosure in the FCPA context are nowhere funds are the proceeds of “specified unlawful activity.” near as clear-cut as those under certain other programs, 18 U.S.C. § 1956(a)(1). The term “specified unlawful such as the DOJ Antitrust Division’s amnesty program, activity” expressly includes “any felony violation of the which can confer amnesty on a company that is “first in” Foreign Corrupt Practices Act.” Id. § 1956(c)(7)(D). to report participation in antitrust activity. Accordingly, financial transactions that involve the proceeds of an FCPA violation (e.g., profits derived from Whether a voluntary disclosure is advisable in any given an illicit payment) or improper payments to an agent that situation is highly fact-specific. As noted above, self- aid or abet money-laundering activities under 18 U.S.C.

46

§ 2, may give rise to criminal liability beyond that • Prompt and thorough internal investigations; imposed by the FCPA itself. The DOJ also has used the mail and wire fraud statutes, 18 U.S.C. §§ 1341, 1343, • Cooperation with the government’s investigation; and the Travel Act, 18 U.S.C. § 1952, to prosecute and bribery of foreign government officials. In addition, the • Travel Act, unlike the FCPA, can reach foreign Significant remedial action, such as improved commercial bribery. training and internal controls and termination of employees and business partners involved in 18) Can An Individual Be Liable Under The wrongdoing. Books-And-Records Provisions? Other factors included the small size of improper payments and potential profits and the strength of the Yes. By their terms, the books-and-records and internal company’s preexisting compliance program. See controls provisions apply to issuers only. But natural Resource Guide at 77-79. persons can be subject to criminal or civil liability as aiders and abettors; for causing an issuer’s books-and- records violations; and for knowingly falsifying books and records or circumventing or failing to implement adequate internal controls. They also can be subject to civil liability as control persons. Individuals have been charged with either criminal or civil violations of the books-and-records or internal controls provisions in a number of recent cases. For example, in 2012, a former managing director of Morgan Stanley pleaded guilty to conspiracy to circumvent internal controls in connection with a scheme to bribe a Chinese official. In 2011, the former CEO of Innospec, Inc. was charged civilly with aiding and abetting violations of the books-and-records and internal controls provisions, circumventing internal controls, falsifying books and records, making false statements to accountants, and signing false certifications. And in 2009, two executives of Nature’s Sunshine Products were charged civilly, as control persons of the company, with violations of the books- and-records and internal controls provisions.

19) Under What Circumstances Will The DOJ And The SEC Decline To Take Enforcement Action In An FCPA Matter?

Obviously, a declination is a highly fact-specific decision, and it is rarely entirely clear why the DOJ and the SEC decide not to take enforcement action in a particular case. But in the Resource Guide, the agencies sought to shed more light on their decision-making process, offering six anonymized examples of past declinations. The examples shared several common features:

• Either a voluntary disclosure or the provision of the results of an internal investigation to the government;

47

Map OfRepresentations Our FCPA

48

Jenner & Block’s FCPA Experience

Jenner & Block has one of the nation’s leading FCPA on the most effective methods to mitigate the impact of practices, representing global companies in defending any alleged misconduct, including the potential benefits FCPA claims and in all phases of compliance with the and risks of voluntary disclosure when appropriate. FCPA and other anti-corruption laws, including development of internal controls, training, compliance Jenner & Block brings longstanding experience in counseling, internal investigations and negotiations with negotiating and resolving matters with the U.S. the U.S. and foreign governments. Department of Justice, the U.S. Securities and Exchange Commission and other authorities. We have The hallmark of a strong FCPA practice is keeping represented many companies before these agencies, in clients out of trouble – by working with in-house lawyers all stages of enforcement actions, from initial and business people to develop appropriate internal investigation by the government to final resolution. We controls that meet the company’s specific needs and that also have a deep understanding of trends in FCPA detect and prevent violations; by designing and/or enforcement and the regulators’ approach to the issues conducting regular training of company personnel; by our clients face. As a result, we understand how to structuring, advising on, and performing anti-corruption advocate effectively for our clients before the relevant due diligence, whether for third-party service providers government agencies to help achieve the best possible or in the context of mergers and acquisitions; and by result. counseling on the resolution of specific compliance issues as they arise in day-to-day business operations. We offer clients a wealth of experience, with two former U.S. Attorneys, the former Associate Attorney General of Our attorneys have developed compliance programs for the United States (the third-ranking official in the U.S. major multinational companies across numerous sectors Department of Justice) and numerous former of the economy, including the defense industry, financial prosecutors from jurisdictions throughout the country. In institutions, oil and gas, media companies, government addition, our practice includes several former U.S. contractors of all kinds and retail establishments, among Securities and Exchange Commission enforcement others. We have provided training to entities with attorneys, including the former Associate Director of the literally tens of thousands of corporate personnel as well SEC’s Division of Enforcement. As a group, our lawyers as for smaller businesses with fewer than 500 have represented dozens of companies in FCPA and employees. Our team also brings a nuanced anti-corruption matters of all types. understanding of the intersections of the FCPA with federal securities laws, Sarbanes-Oxley, Dodd-Frank, export control laws and other anti-corruption laws, including the U.K. Bribery Act.

When issues arise, our clients benefit from Jenner & Block’s world-class reputation and skill in conducting internal investigations. Our range and depth of experience enables us to conduct internal investigations with care and rigor, ensuring that our clients obtain the facts they need and that the investigation will withstand the strictest of scrutiny by regulators. At the same time, we understand how to operate flexibly and expeditiously and appreciate the need to conduct investigations in an efficient and flexible manner that is sensitive to the needs of our clients’ business operations. We also provide our clients with seasoned judgment to assess the gravity and veracity of the allegations and to make informed decisions under difficult, and often time- sensitive, circumstances. In addition, we advise clients

49

Practice Member Listing

Charles H. Abbott, Partner Peter B. Pope, Partner Tel: 213 239-2243 • E-mail: [email protected] Tel: 212 891-1605 • E-mail: [email protected]

Anthony S. Barkow, Partner Reid J. Schar, Partner Tel: 212 891-1662 • E-mail: [email protected] Tel: 312 923-2629 • E-mail: [email protected]

Neil M. Barofsky, Partner Erin R. Schrantz, Partner Tel: 212-8911675 • E-mail: [email protected] Tel: 312 840-8674 • E-mail: [email protected]

Ana R. Bugan, Partner Charles B. Sklarsky, Partner Tel: 312 840-8656 • E-mail: [email protected] Tel: 312 923-2904 • E-mail: [email protected]

Christian R. Bartholomew, Partner Damien C. Specht, Partner Tel: 202 639-6040 • E-mail: [email protected] Tel: 202 639-6892 • E-mail: [email protected]

Matthew D. Cipolla, Partner Robert R. Stauffer, Partner Tel: 212 891-1603 • E-mail: [email protected] Tel: 312 923-2905 • E-mail: [email protected]

Larry P. Ellsworth, Partner Richard F. Ziegler, Partner Tel: 202 639-6032 • E-mail: [email protected] Tel: 212 891-1680 • E-mail: [email protected]

Gabriel A. Fuentes, Partner Cynthia J. Robertson, Department Counsel Tel: 312 923-2808 • E-mail: [email protected] Tel: 202 639-6021 • E-mail: [email protected]

Nancy Jacobson, Partner Sarah S. Ansari, Associate Tel: 312 923-2883 • E-mail: [email protected] Tel: 312 840-7330 • E-mail: [email protected]

Katya Jestin, Partner Nicholas R. Barnaby, Associate Tel: 212 891-1685 • E-mail: [email protected] Tel: 202 637-6318 • E-mail: [email protected]

Jessie K. Liu, Partner Emily S. Deininger, Associate Tel: 202 639-6017 • E-mail: [email protected] Tel: 212 891-1638 • E-mail: [email protected]

Michael K. Lowman, Partner Anouck Giovanola, Associate Tel: 202 639-6018 • E-mail: [email protected] Tel: 212-891-1681 • E-mail: [email protected]

Coral A. Negron, Partner Kara L. Kapp, Associate Tel: 312 840-7563 • E-mail: [email protected] Tel: 312 840-7286 • E-mail: [email protected]

Thomas C. Newkirk, Partner Michael W. Khoo, Associate Tel: 202 639-6099 • E-mail: [email protected] Tel: 202 639-6069 • E-mail: [email protected]

William C. Pericak, Partner Anne Cortina Perry, Associate Tel: 202 639-6070 • E-mail: [email protected] Tel: 212 891-1609• E-mail: [email protected]

Thomas J. Perrelli, Partner Kristin L. Rakowski, Associate Tel: 202 639-6004 • E-mail: [email protected] Tel: 312 840-7614 • E-mail: [email protected]

Tarsha A. Phillibert, Partner Veronica Maldonado, Staff Attorney Tel: 212 891-1686 • E-mail: [email protected] Tel: 312 840-7584 • E-mail: [email protected]

Monica R. Pinciak-Madden, Partner Colleen M. Reddan, Staff Attorney Tel: 312 840-7565 • E-mail: [email protected] Tel: 202 637-6384 • E-mail: [email protected]

50

CHICAGO 353 NORTH CLARK STREET CHICAGO, ILLINOIS 60654-3456 TEL 312 222-9350

LOS ANGELES 633 WEST 5TH STREET SUITE 3600 LOS ANGELES, CALIFORNIA 90071-2054 TEL 213 239-5100

NEW YORK 919 THIRD AVENUE NEW YORK, NEW YORK 10022-3908 TEL 212 891-1600

WASHINGTON, DC 1099 NEW YORK AVENUE NW SUITE 900 WASHINGTON, DC 20001-4412 TEL 202 639-6000