FRAUD AND CORPORATE CRIME WilmerHale

Global trends in THERE CAN SURELY BE FEW ENTERPRISES has, in the past, been a universal and carrying on a business in the UK who remain necessary fact of doing business. As local anti-: unaware of the provisions of the UK Bribery regimes start to bite, the ultimate goal of 655 Act 2010 (the Bribery Act). That such requiring all market participants to play is the OECD levelling enterprises may be prosecuted in the UK by the rules will begin to gain traction. courts for their failure to prevent bribery Those that, when confronted with the DLA Piper UK LLP the playing field? committed on their behalf, however far requirements of the Bribery Act, ask the flung the location, has been the hot legal inevitable question, ‘But what about my topic for at least the last 18 months. competitors from “X” country?’ should feel reassured that those competitors, wherever Indeed, the UK, in the form of the domiciled, will have to clean up their act too. Serious Fraud Office (SFO), has now come further in line with the requirements and In this article we examine this global trend BY BRIDGET recommendations of the Organisation for in the context of three markets that PETHERBRIDGE Economic Co-operation and Development currently enjoy high volumes of foreign direct counsel, WilmerHale (OECD), announcing on 9 October 2012 that investment, but that are widely viewed as there will no longer be any presumption hotbeds of corruption and bribery. Brazil in favour of civil settlement for those and Russia, the powerhouses of the BRIC organisations that self-report breaches of countries, and , one of the the Bribery Act; nor will there be any further up-and-coming CIVETS countries,1 confidentiality agreements on offer to respectively score 2.4 (rank 143 out of 183 those seeking settlement. Both changes countries), 3.8 (rank 73) and 3.4 (rank 80) on BY ALISON are in accordance with the concerns and a scale of 0 (highly corrupt) to 10 (very clean) GEARY recommendations of the OECD working in Transparency International’s 2011 Index associate, WilmerHale group, which reported in March this year of Corruption Perceptions. All have, however, on the UK’s progress towards compliance significantly developed their anti-corruption with the Convention on Combating Bribery regimes recently in an effort truly to of Foreign Public Officials in International integrate into global markets and eradicate Business Transactions (the Convention) the terrible costs of corruption to their local and found it lacking in the SFO’s then populations. All three demonstrate that the predilection for non-criminal disposals and OECD’s influence is being felt on a global lack of transparency. scale, not just at the SFO.

UK organisations operating overseas BRAZIL should, however, be careful not to succumb Brazil, while not a member of the OECD, to Bribery Act-induced myopia and fail to is a signatory to the Convention, meaning heed the extent to which other jurisdictions that its anti-corruption regime is subject to are now implementing OECD-led anti-bribery review by the OECD. Most recent criticisms legislation. The movement to eradicate have focused on its lack of provisions to bribery and corruption is moving towards hold companies liable for foreign bribery.2 a truly comprehensive global regime, such Transparency International’s 2012 progress that any entity operating in overseas report on the implementation of the markets must pay close regard not just to Convention also noted the lack of provisions ‘UK organisations their home country legislation, and often relating to bribery in the private sphere the far-reaching legislation of the US, but and recommended stronger sanctions for operating overseas also to that of the local markets they breaches of current provisions, as well operate in – even in countries that have, as protection for whistleblowers.3 Focus should be careful... to until now, been seen as the ‘wild west’ of has inevitably intensified given Brazil’s business compliance. hosting of the FIFA World Cup in 2014 and heed the extent to which the Olympic Games in 2016, and the large While the trend may present additional infrastructure projects that these events other jurisdictions are now complications for organisations seeking will bring in their wake. to implement a comprehensive, global implementing OECD-led anti-bribery package, it should provide Events inside Brazil have also brought some comfort to those who are concerned corruption issues into focus. In October anti-bribery legislation.’ that the Bribery Act has hampered the this year, José Dirceu (Chief of Staff to competitiveness of UK businesses operating former president Luiz Inácio Lula da Silva in more difficult markets where corruption from 2003 to 2005) was convicted by the

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Brazilian Supreme Court on charges of using public funds to buy support from opposition parties in congress, otherwise known as the ‘OECD-led legislation should provide some comfort Mensalão (‘big monthly payment’) scandal. to those who are concerned that the Bribery Act Brazil’s anti-corruption regime has has hampered the competitiveness of UK businesses been subject to a number of significant developments in recent years. Legislative operating in more difficult markets.’ efforts to combat corrupt activities have included the Brazilian freedom of information law of 16 May 2012. By obliging the government to publish key information, The first step in implementing the The 2011 legislation also substantially respond to citizens’ requests to access National Plan was a suite of reforms, increased the penalties for corruption non-classified information and declassify introduced in 2009, revising Russia’s offences. Under the previous regime, fines information after a fixed period, light may civil, criminal and administrative codes were limited to three times the amount of be shed on any suspected government relating to the bribery of public officials. the bribe, subject to a prescribed minimum corruption. Brazil’s October 2012 election Despite the significant reforms made by of RUB1m (approximately US$350,000). was also the first since its ‘clean record’ law the 2009 revisions, Russia’s anti-corruption The revised law establishes a scale of became effective, preventing individuals regime still lacked elements required penalties depending on the value of the convicted of a serious criminal offence from under the Convention. Most notably, bribe paid, with the minimum fine for running for public office. the bribery of foreign officials was not bribes over RUB20m being set at RUB prohibited. This issue was addressed in 100m (approximately US$3.2m at the The Brazilian legislature is currently 2011, with the introduction of further time of writing). While there is a cap on considering a bill that could dramatically reforms which applied Russia’s anti-bribery the maximum fine for individuals, there is change Brazil’s anti-corruption regime in line laws extraterritorially to bribes paid to no such cap on the administrative fine for with its Convention commitments. The draft non-Russian public officials. companies. bill proposes direct civil and administrative liability for commercial organisations by The 2011 legislation introduced a number Much like the Bribery Act, there has, to making them responsible for the acts of of other notable changes by extending the date, been little enforcement action their representatives from which they prohibition to bribery in the private sphere under Russia’s new regime. However, the benefit.4 The bill specifically covers bribery and making corporates liable for payments ongoing investigation into government of both foreign and domestic officials. It made on their behalf or in their interest. defence contractor Oboronservice may is intended that tough financial penalties However, unlike the Bribery Act and the provide clues as to Russia’s position on will accompany any finding of liability. proposed Brazilian legislation, there is no enforcement going forward. Moreover, However, the draft bill contains provisions available ‘adequate procedures defence’. the 2011 legislation has paved the way to give credit to organisations that have a Nor is there any exception for facilitation for greater co-operation between Russian compliance programme in place, voluntarily payments as found in the US Foreign and authorities and their counterparts in disclose wrongdoing and co-operate with Corrupt Practices Act. other countries. The legislation directs regulators. These provisions echo the so-called ‘adequate procedures defence’ in the Bribery Act. NOTES

The chairman of the special committee 1) BRIC: Brazil, Russia, India, China. CIVETS: Columbia, , , , , reviewing the bill, Carlos Zarattini, recently . stated his intention that the bill ‘become law by the end of the year’.5 2) OECD, ‘Brazil: Phase 2, Follow-Up Report On The Implementation Of The Phase 2 Recommendations’, June 2010. RUSSIA Russia is a recent signatory of the 3) Transparency International, ‘Exporting Corruption? Country Enforcement of the OECD Anti- Convention and is currently following an Bribery Convention Progress Report 2012’. agreed roadmap to accession to the OECD. Prior to signing the Convention on 4) Although the convention requires criminal sanctions to be put in place, such sanctions 17 February 2012 Russia had already made are not consistent with the legal status of corporations in Brazil. Article 3(2) of the significant reforms to its anti-corruption convention allows for sanctions to be non-criminal in such situations provided they are laws, beginning shortly after the election of effective, proportionate and dissuasive. (former) President Medvedev in July 2008 with the adoption of the National Plan to 5) www.trust.org/trustlaw/news/qa-brazilian-lawmaker-zarattini-on-anti-bribery-bill/. Counteract Corruption (the National Plan).

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the Russian authorities to provide legal new legislation containing 140 separate the corruption pervading locally procured assistance to foreign agencies and puts in articles aimed at tackling corruption. projects. There are also provisions in the place a process for requesting information The new law contains a raft of provisions new legislation preventing those convicted from foreign agencies to facilitate domestic involving procedural as well as substantive of corruption offences contracting with the investigations. This important addition, changes, but there are some key state in future. combined with the visit of Richard Alderman developments. There is no doubt that Colombia is serious about taking its place in the global economy. Further legislative developments planned ‘Colombia, having enacted its anti-bribery legislation for 2014 will impose international standards of auditing and accounting, with the aim almost simultaneously with the UK, has been quicker of further reducing the scope for corrupt to take significant enforcement action.’ conduct. Perhaps most tellingly, Colombia, having enacted its anti-bribery legislation almost simultaneously with the UK, has been quicker to take significant enforcement (who was at that time Director of the SFO) For the first time, criminal liability will action. A former mayor of Bogota and three and Lanny Breuer (the assistant attorney extend to corruption in the private as members of a construction ‘dynasty’ are general for the criminal division of the US well as public arena. Penalties for private already serving jail sentences under the Department of Justice) to Russia in April corruption will range from four to eight provisions of the 2011 legislation. This sits 2011, suggests that Russia may have years’ imprisonment, extending to six to in stark contrast with the one conviction a greater part to play in international 10 years if the entity in question suffers secured by the UK authorities to date under enforcement in the future. economic detriment. Corporates as well as the Bribery Act of a magistrates court clerk individuals will now incur criminal liability who received a four-year prison sentence for COLOMBIA for corruption offences. The offence of receiving bribes in the course of his duties Colombia has become a market of bribing a foreign public official is also dealing with motoring offences. considerable interest to UK corporates criminalised for the first time, carrying a and investors, following the easing of the penalty of nine to 15 years’ imprisonment. It is clear that many of the fastest growing security situation there. The presence of Previously widely used measures such as economies, led by the OECD, have begun huge natural resources continues to attract suspended sentences or sentences to be to step up their anti-bribery measures in multinationals, and government plans to served at home will end, to be replaced by a concerted effort to stamp out corrupt invest 3% of GDP in upgrading infrastructure imprisonment. practices that threaten to jeopardise their are accompanied by a substantial interest in position on the world stage. While it is UK expertise in public-private partnerships. Measures to eradicate corruption in public the Bribery Act that has attracted most However, Colombia has long been plagued procurement include prohibitions on donors attention in recent months, it may not be by corruption and this has reduced certain to election campaigns subsequently long before it becomes simply one of many sectors such as health and public works to contracting with successful candidates, anti-bribery regimes interacting with its crisis point. and former senior officials entering overseas counterparts to outlaw corruption private sector concerns that contract wherever, and by whomever, it is practised. Now keen to benefit from its many natural with government for two years upon This would allow companies complying advantages and the hard-won easing of leaving office. The practice of moving from with the Bribery Act to enjoy a somewhat its security issues, Colombia is working government office to executive levels in levelled playing field without actually towards membership of the OECD and contracting companies, known as ‘the needing to blow the whistle themselves. in November 2011 was invited to join revolving door’, has been responsible the OECD Working Group on Bribery, a for considerable scandal in the past and By Bridget Petherbridge, counsel, and precursor to signing the Convention. It is has led to the setting up of a National Alison Geary, associate, WilmerHale. against this backdrop that, in July 2011, Infrastructure Agency (Agencia Nacional de E-mail: bridget.petherbridge@wilmerhale; President Santos of Colombia approved Infrastructura), in an attempt to eradicate [email protected].

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