ANTI-CORRUPTION Quarterly

2nd Quarter 2015

IN THIS ISSUE: FCPA IMPLICATIONS OF RECENT DODD-FRANK WHISTLEBLOWER AWARDS FEATURES Under the Dodd-Frank Act, whistleblowers who provide information that helps the SEC recover money for violations of federal securities laws—including FCPA IMPLICATIONS OF RECENT the FCPA—can receive as much as 30 percent of the amount recovered. This DODD-FRANK WHISTLEBLOWER whistleblower bounty creates a strong financial incentive to report potential AWARDS ...... 1 violations. Recent whistleblower awards show just how strong that incentive is. And the rise in whistleblower tips related to potential FCPA violations, IMPACT OF THE CURRENT FIFA SCANDAL: DOJ TARGETS combined with an increase in awards to individuals abroad, suggests that the INTERNATIONAL CORRUPTION whistleblower provision is likely to have an increasing influence on corporate BEYOND THE FCPA ...... 1 FCPA compliance. CONTINUED ON PAGE 4 COLUMNS

GLOBAL WATCH ...... 1 IMPACT OF THE CURRENT FIFA SCANDAL: DOJ TARGETS INTERNATIONAL CORRUPTION BEYOND THE FCPA IN THE INTERIM ...... 2 On May 27, 2015, the Department of Justice announced an indictment against nine high-ranking Fédération Internationale de Football Association (FIFA) COMPLIANCE CORNER: officials and five corporate executives on corruption charges. The 164-page COMPLIANCE OFFICERS BEWARE: INDIVIDUALS PAYING THE PRICE indictment alleges that the defendants took advantage of their positions in UNDER THE FCPA AND NON-U.S. organized soccer to unlawfully enrich themselves. While none of the current ANTI-CORRUPTION LAWS ...... 4 allegations gives rise to an FCPA violation, the FIFA indictment, together with other recent enforcement actions against Goodyear Tire & Rubber Company OF NOTE ...... 8 and Diebold, Inc., demonstrates that federal prosecutors are pursuing aggressively all forms of corrupt payments, not just those that violate the FCPA.

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GLOBAL WATCH

HIRING FAMILY MEMBERS OF FOREIGN OFFICIALS COMES WITH A RISK The U.S. government recently increased scrutiny of companies’ hiring of the children of foreign officials, alleging that such practices could amount to bribery under the FCPA. The SEC and DOJ reportedly are investigating whether the hiring of children of prominent foreign officials was done for the purpose of assisting companies in winning lucrative business. The VISIT SIDLEY.COM FOR MORE INFORMATION ON SIDLEY’S investigations initially focused on U.S. banks, but in 2014 the government FCPA/ANTI-CORRUPTION PRACTICE began widening its net, asking global companies in a range of industries for information on their hiring practices, with a focus on Asia. This Sidley update has been prepared by Sidley Austin LLP for informational purposes only and does not constitute While these investigations are ongoing, some believe the DOJ sent mixed legal advice. This information is not intended to create, and receipt of it does not constitute a lawyer-client relationship. signals at the June 2015 International Bar Association Anti-Corruption Readers should not act upon this without seeking advice from Conference, where Assistant Chief Matthew Queler of the DOJ’s FCPA professional advisers. Attorney Advertising—For purposes of compliance with New unit told the audience that hiring children of foreign officials does York State Bar rules, our headquarters are Sidley Austin LLP, 787 Seventh Avenue, New York, NY 10019, 212.839.5300; One not necessarily run afoul of the FCPA. Queler added that, if a foreign South Dearborn, Chicago, IL 60603, 312.853.7000; and 1501 K Street, N.W., Washington, D.C. 20005, 202.736.8000. Sidley official’s child is the best qualified for the job and the employment offer Austin refers to Sidley Austin LLP and affiliated partnerships as explained at sidley.com/disclaimer. CONTINUED ON PAGE 7 Prior results described herein do not guarantee a similar outcome. ANTI-CORRUPTION Quarterly

IN THE INTERIM

4/1/2015 – The SEC 4/17/2015 – The UK 4/27/2015 – Connecticut- 5/4/2015 – An Austrian announced its first Serious Fraud Office (SFO) based United Technologies court refused to extradite enforcement action against brought new charges Corp. disclosed that it had the pro-Russian Ukrainian a company for using against a UK subsidiary of received a second subpoena energy executive, Dmytro restrictive language in Paris-based Alstom S.A. from the SEC seeking Firtash, to the U.S., confidentiality agreements for alleged corruption in a information about potential claiming FCPA and related in violation of Dodd- project to supply trains to payments by a company charges against him were Frank’s whistleblower the Budapest Metro in 2006 agent in China that might politically motivated. protection Rule 21F-17. and 2007. In December, have violated the FCPA. Austrian authorities had KBR, a Houston-based Alstom pleaded guilty in The SEC issued its first detained Firtash in March technology and engineering the U.S. to violating the subpoena in April 2014. 2014 on an arrest warrant firm, had required FCPA by bribing officials issued by the U.S. Firtash 4/29/2015 – The SEC witnesses in certain in Indonesia, Saudi Arabia, subsequently paid $174 awarded the former head internal investigations Egypt and the Bahamas. million to post bail. trader at Paradigm Capital to sign confidentiality 4/27/2015 – Brazil’s state- Management, who was 5/12/2015 – The UK statements that warned owned oil and gas giant, demoted and marginalized Serious Fraud Office them of possible discipline Petrobras, put a $2 billion by the broker-dealer (SFO) charged Jean- or even termination if price tag on corruption- after reporting conflicts Daniel Lainé, a French they discussed the matters related expenses in its of interest to the SEC, national and former with anyone outside KBR. 2014 earnings report. more than $600,000 in the senior vice president of 4/17/2015 – Shi Tao, the The company booked a agency’s first enforcement ethics and compliance at former executive deputy $7 billion loss for 2014, action based on retaliation Alstom International, for general of FAW-Volkswagen primarily due to a $14 against a whistleblower. Last bribing foreign officials in Sales Co. Ltd., a subsidiary billion impairment charge year, Paradigm Capital and connection with a contract of Volkswagen AG’s China and a $2 billion write-down its owner, Candace King to supply trains to the joint venture, was sentenced for “improperly capitalized Weir, paid $2.2 million to Budapest Metro. Lainé is to life in prison for accepting additional spending” settle the retaliation charges. the sixth individual the bribes totaling $5.3 million tied to the ongoing SFO has charged in its in connection with building corruption investigation. investigation of Alstom. new car dealerships. CONTINUED ON PAGE 3

1885.12 FCPA-Related Cases* 116 Corporate FCPA-Related 1569.71 95 Penalties* (in U.S. millions) DOJ SEC

803.0 49 731.1 644.6 502.7 28 26 25 22 21 19 20 20 19 16 260.3 14 15 11 12 11 155.1 5 61.25 3 2 2007 2008 2009 2010 2011 2012 2013 2014 2015 Pending 2007 2008 2009 2010 2011 2012 2013 2014 2015 Pending Investigations** Settlement**

* New criminal or civil cases (settled or contested) instituted by year * Includes disgorgement; does not include non-U.S. fines ** Based upon public disclosures of investigations ** Includes publicly disclosed reserves for future FCPA settlements

ANTI-CORRUPTION Quarterly 2Q/2015 • 2 ANTI-CORRUPTION Quarterly

IN THE INTERIM CONTINUED FROM PAGE 2

5/15/2015 – The retaining concession rights into potential violations system. Former vice Texas Supreme Court and its relationship with of the FCPA and Brazilian president of IAP, James issued an opinion in charitable organizations. anti-corruption laws. Rama, also pleaded guilty Shell Oil Co. v. Writt, In its declination letter, the Because Eletrobras is 52 to one count of conspiracy holding that an internal DOJ noted the value of the percent owned by the to violate the FCPA. investigation report Shell company’s cooperation. Brazilian government, its 6/26/2015 – South African provided to the DOJ about employees likely would be 5/27/2015 – The DOJ mining company Gold potential FCPA violations is considered foreign officials issued a 47-count Fields Ltd. announced that “absolutely privileged” and for purposes of the FCPA. indictment charging 14 the SEC had closed its FCPA cannot be used to form the defendants, including 6/16/2015 – Joseph investigation and would not basis of a defamation claim. high-ranking officials of Sigelman, the former recommend enforcement The Texas Supreme Court FIFA, with racketeering and co-CEO of PetroTiger, action be taken against the said the fact that Shell had bribery offenses as part of a pleaded guilty to conspiracy company. In 2013, the SEC been the target of a DOJ “24-year scheme to enrich to violate the FCPA and was launched its investigation FCPA investigation satisfied themselves through the sentenced to probation into alleged improprieties the standard of absolute corruption of international with no jail time. This associated with the privilege applicable to soccer.” Police in followed the DOJ’s sudden granting of a mining defamation suits. Switzerland, at the request decision to drop all other license to Gold Fields and 5/20/2015 – BHP Billiton, of the U.S., arrested at least charges against Sigelman, a nine percent stake in Australia-based mining six officials the same day, as apparently driven in large the operation granted by company, paid $25 million FIFA was holding its annual part by an admission by Gold Fields to the ruling to settle SEC charges meeting near Zurich. the Government’s star African National Congress that it violated the FCPA witness that he made party chairwoman, 6/11/2015 – Net 1 UEPS when it sponsored foreign false statements to the Baleka Mbete. Technologies, a South government officials as jury during his testimony. African-based payment guests at the 2008 Summer Following Sigelman’s plea, processing company, Olympics in Beijing. BHP the DOJ announced—for announced that it received invited 176 government only the second time a declination decision from officials, mainly from in FCPA history—that the SEC in connection with Africa and Asia, who it wouldn’t prosecute a an investigation into possible enjoyed three- and four- company because of its FCPA violations related to day hospitality packages cooperation in building a payments to South African worth between $12,000 case against its former CEO. government officials to and $16,000, including win a contract with the 6/16/2015 – Florida- event tickets, luxury hotel Social Security Agency. based defense contracting accommodations and Net 1 said that the DOJ company, IAP Worldwide sightseeing excursions. investigation is ongoing. Services Inc., agreed to 5/21/2015 – pay a $7.1 million penalty 6/15/2015 – Brazilian- Hyperdynamics and enter into a non- owned electric company, Corporation, a Houston- prosecution agreement Centrais Elétricas based oil and gas company, to resolve the DOJ’s Brasileiras SA (Eletrobras), received a declination investigation into an alleged disclosed in an SEC filing decision from the DOJ conspiracy to bribe Kuwaiti that the company retained in an FCPA investigation officials to win a contract Hogan Lovells to assist in related to the company’s for the development of a a corporate investigation activities in obtaining and nationwide surveillance

ANTI-CORRUPTION Quarterly 2Q/2015 • 3 ANTI-CORRUPTION Quarterly

FCPA IMPLICATIONS OF RECENT DODD-FRANK WHISTLEBLOWER AWARDS COMPLIANCE CORNER: CONTINUED FROM COVER PAGE Compliance Officers Beware: Individuals Paying the Price When Congress passed Dodd-Frank in 2010, one of the components that had the Under the FCPA and Non-U.S. potential to have a significant impact on FCPA compliance was the whistleblower Anti-Corruption Laws bounty provision in Section 922 of the Act. Under Section 922, a whistleblower who provides original information about violations of the securities laws that In the enormity of penalties levied leads to a successful SEC enforcement action and monetary sanctions, exceeding against corporations for FCPA $1 million, is entitled to an award of between 10 and 30 percent of the total violations, it is easy to forget about recovery. Unlike the previous law, which generally limited the SEC’s ability to the individuals who are at the make whistleblower payments to insider trading cases, Section 922 applies center of the violations. Those broadly to “any judicial or administrative action brought by the [SEC] under individuals sometimes include the securities laws,” including the FCPA. As noted at the time, the potential for compliance officers who can face massive whistleblower rewards incentivizes employees who think they are criminal liability for their role in aware of a violation to err on the side of disclosure and to disclose to the SEC, the violations themselves, or even rather than internally. When combined with the SEC’s sustained focus on anti- absent a direct role in the violations, corruption compliance, the effect this has on companies operating overseas can be held responsible by corporate cannot be overstated. management and boards for failing to Payments under this provision, in general, are increasing. Just in the last ensure a compliant environment. few months, the SEC has announced three whistleblower awards totaling Most in the compliance community approximately $2.5 million. Although this provision, to date, has not led to any are well aware of Alstom’s December whistleblower payouts for FCPA violations, it is only a matter of time before it 2014 guilty plea in connection with does. a widespread scheme involving the In March, the SEC awarded between $475,000 and $575,000 to a former payment of millions of dollars in corporate officer who disclosed information about a securities fraud. Although bribes to government officials in SEC rules typically do not permit whistleblower awards to officers of a company several countries around the world, who learn of a securities violation from other employees, there is an exception which resulted in the largest criminal when a company’s responsible compliance officer possesses the information for FCPA fines ever levied against a more than 120 days and fails to adequately address the problem. This was the company—$772 million. What fewer SEC’s first whistleblower award under that exception. compliance professionals are aware of, however, is that many individual In April, the SEC awarded $600,000 to the former head trader at Paradigm Alstom employees, including the Capital Management who reported potential misconduct to the SEC and was chief compliance officer, faced then subjected to a series of retaliatory actions by Paradigm. The misconduct personal liability stemming from the the employee reported involved conflicts of interest concerning Paradigm’s activities underlying the company’s failure to disclose its ownership interest in a broker-dealer doing business with plea deal. While Jean-Daniel Lainé, Paradigm when trading on behalf of a hedge fund client. The whistleblower Alstom’s chief compliance officer, has award, however, was not based on conflicts of interest, but rather on the not yet been indicted in the U.S., he retaliatory actions Paradigm took in response to the employee’s disclosure to is currently facing two corruption the SEC, which included a change in job function and removal of supervisory charges under the UK Prevention of responsibilities. This was the first whistleblower award based on the anti- Corruption Act and two charges of retaliation provisions of Dodd-Frank. conspiracy to corrupt under the UK Finally, the SEC announced in April an award of $1.4 to $1.6 million to a Criminal Law Act. compliance officer whose report, according to the SEC, prevented imminent In another case back in 2009, the and substantial harm to the company and its investors. This announcement SEC brought a complaint against marked only the second time the SEC has issued an award to an employee with Bobby Benton, a vice president of internal audit or compliance responsibilities, and could signal the potential for a Houston-based offshore drilling increased tips from compliance personnel in the future. These three recent company, who was responsible for announcements reflect a growing trend of larger and more frequent awards ensuring that the company’s Western under Dodd-Frank.

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ANTI-CORRUPTION Quarterly 2Q/2015 • 4 ANTI-CORRUPTION Quarterly

FCPA IMPLICATIONS OF RECENT DODD-FRANK WHISTLEBLOWER AWARDS COMPLIANCE CORNER CONTINUED FROM PAGE 4 CONTINUED FROM PAGE 4 One helpful feature of Dodd-Frank, from a compliance perspective, is that the Hemisphere operations were in SEC Office of the Whistleblower (OWB) is required to make annual reports to compliance with the FCPA. Benton Congress detailing OWB’s activities, whistleblower complaints and the SEC’s authorized payment of money to response to such complaints. The SEC’s FCPA enforcement activities can thus a third party, allegedly knowing be monitored and analyzed, and companies can evaluate compliance priorities that the money would be used by accordingly. the third party to obtain favorable On November 17, 2014, OWB released its 2014 Annual Report to Congress treatment from a government official (the “Report”). While this was only the fourth such report and only the third in Mexico, and also learned of other covering a full-year period, we can begin to see trends develop as the law bribery payments made by company becomes an established feature of the compliance landscape. The biggest employees in Venezuela and Mexico. takeaway, the Report notes, is that “Fiscal Year 2014 was historic . . . in terms of Despite this knowledge and personal both the number and dollar amount of whistleblower awards.” In particular, the involvement, Benton signed audit nine whistleblower awards in 2014 exceeded all previous years combined and certifications denying any knowledge included one $30 million award that was the largest award ever issued. of bribery and even redacted Although none of the awards to date have been based on FCPA violations, references to bribery payments the whistleblower tips relating to the FCPA have increased dramatically. For in an action plan responding to an example, the Report discloses the number of whistleblower tips by allegation internal audit report. To settle the type. Overall, the Report notes that OWB received 3,620 tips in FY 2014, an charges against him, Benton agreed increase of over 20 percent in the last two years. But the number of FCPA tips to pay a civil penalty of $40,000. In has risen even faster, from 115 in 2012, the first full year of reporting, to 159 in the complaint against Benton, the 2014—an increase of 38 percent over two years. SEC specifically noted that Benton was “responsible for, among other The FCPA implications are also highlighted by the extraterritorial scope of the things, ensuring that [the company] awards and tips. For example, the $30 million award (the largest ever) was to an conducted its Western Hemisphere individual living in a foreign country, and the Report expressly states that this operations in compliance with the award was intended to incentivize potential whistleblowers “both in the U.S. FCPA, that adequate controls were and abroad.” This is the fourth award to whistleblowers abroad, reflecting “the in place to prevent illegal payments, Commission’s view [that] there is a sufficient U.S. territorial nexus whenever a and that the company’s books and claimant’s information leads to the successful enforcement of a covered action records were accurate.” brought in the United States concerning violations of the U.S. securities laws.” Since Dodd-Frank, OWB has received whistleblower tips from individuals in In another recent, non-U.S. case, 83 countries outside the United States. And in FY 2014 alone, tips came in to a former compliance officer for the SEC from 60 different foreign countries. Moreover, while 40 percent of all the Bank of Beirut (UK) was fined whistleblower awards have been made to current or former employees, 20 £19,600 (approximately $30,000) for percent have been to actual or prospective contractors, consultants and other misleading the UK Financial Conduct agents, which also raises a risk for companies that operate abroad through local Authority and concealing the bank’s partners or agents. failure to implement required controls to prevent financial crime, The rise in whistleblower tips and awards, and the amount of recent awards, including money laundering and will only increase the attention on the bounty program and the likelihood terrorist financing. that would-be whistleblowers will seek to take advantage of it. This possibility should serve as a reminder to companies of the benefits of implementing an In addition to potential criminal effective internal reporting program for would-be whistleblowers. Developing liability, compliance officers may a corporate culture and reporting mechanisms that encourage employees to also face internal consequences for report internally rather than to the SEC can help blunt the financial incentives failing to maintain a robust FCPA that Dodd-Frank creates. compliance program. Consider the example of Optimer Pharmaceuticals, which asked its general counsel and chief compliance officer to resign

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ANTI-CORRUPTION Quarterly 2Q/2015 • 5 ANTI-CORRUPTION Quarterly

IMPACT OF THE CURRENT FIFA SCANDAL: DOJ TARGETS INTERNATIONAL CORRUPTION BEYOND THE FCPA COMPLIANCE CORNER CONTINUED FROM COVER PAGE CONTINUED FROM PAGE 5 According to the indictment, the defendants and their co-conspirators in the face of an investigation into perpetrated different schemes for decades to personally enrich themselves potential violations of the FCPA, through wire fraud, honest services fraud, money laundering, tax evasion and including a potentially improper obstruction of justice. Most of the alleged schemes relate to bribes and kickbacks $300,000 payment to a research paid by sports marketing executives to soccer officials for media and marketing laboratory. After an internal rights associated with various soccer tournaments, including the World Cup. investigation, Optimer stated that the As the DOJ and SEC’s Resource Guide to the FCPA has noted, “the FCPA does independent members of its board not cover every type of bribe paid around the world for every purpose.” The of directors decided to request the anti-bribery provisions of the FCPA apply only to corrupt payments offered resignation of the general counsel to “foreign officials” for the purpose of obtaining or retaining business. FIFA and chief compliance officer, among executives do not qualify as “foreign officials” under the FCPA, and thus the FIFA others, as a part of its “remedial indictment currently does not include an FCPA charge. Nonetheless, federal action . . . in light of prior compliance, prosecutors are using a variety of other statutes to target corruption that is not record-keeping and conflict-of- within the reach of the FCPA. interest issues surrounding the The FIFA defendants are charged under the Racketeer Influenced and Corrupt potentially improper payment.” Organizations (RICO) statute. Enacted to provide federal prosecutors with In late 2009, DynCorp International enhanced tools to pursue organized crime syndicates, RICO prohibits an fired its chief compliance officer individual from conducting the affairs of an “enterprise” through a “pattern of without explanation shortly after racketeering activity.” RICO requires at least two predicate crimes within 10 the company revealed that some of years of each other to demonstrate a pattern of racketeering activity. its subcontractors may have violated Using RICO to pursue commercial bribery allows federal prosecutors to the FCPA. DynCorp admitted that it reach crimes that might otherwise be time-barred so long as one predicate had discovered payments of about racketeering act occurred within the five-year statute of limitations period. In $300,000 that were used to expedite the FIFA indictment, this allowed the DOJ to allege crimes dating back nearly visas and licenses from foreign 25 years. RICO also allows prosecutors to pursue multi-faceted and diversified governments. The DOJ conducted conduct. The FIFA indictment includes charges against FIFA officials and sports an inquiry but eventually declined marketing executives from ten different countries, many of whom participated in to pursue any prosecutions because a dozen separate schemes. of DynCorp’s voluntary disclosure, Even though the FCPA anti-bribery provisions have not yet been implicated internal investigation, and steps taken in the FIFA investigation, one scheme has the potential to fall under the to enhance its compliance programs, FCPA’s books and records and internal controls provisions. According to the which included the removal of its indictment, in 1996, a U.S. sportswear company, which is unnamed and referred compliance officer. to as “Sportswear Company A,” agreed to a 10-year sponsorship contract By virtue of their position in the with the Brazilian soccer federation, a national association of FIFA. The $160 company, compliance officers million deal included the right to be the federation’s exclusive footwear, apparel, may be expected to take actions accessories and equipment supplier. As part of the arrangement, the company beyond what is expected of other also agreed to pay the federation’s marketing agent an additional $40 million for management employees in order to “marketing fees.” The agent, in turn, promised to pay half of the money he made stop actions that violate the FCPA from the sponsorship as a kickback to officials in the Brazilian soccer federation. and other compliance laws. For The FCPA’s anti-bribery provisions likely do not apply because officials at the example, when compliance officers at Brazilian soccer federation are not “foreign officials” under the FCPA, but a bank discovered that the bank was FCPA charges indeed could arise out of the FIFA investigations if “Sportswear assisting entities in Sudan to clear Company A” is an issuer subject to the FCPA’s books and records and internal transactions through U.S. banks, controls provisions. Violations of these provisions do not require violations of some of them raised the issue with the FCPA’s anti-bribery provisions. Because the agreement with the sportswear their colleagues and upper level company terminated in 2002, however, the statute of limitations may present a management.

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ANTI-CORRUPTION Quarterly 2Q/2015 • 6 ANTI-CORRUPTION Quarterly

IMPACT OF THE CURRENT FIFA SCANDAL: DOJ TARGETS INTERNATIONAL CORRUPTION BEYOND THE FCPA COMPLIANCE CORNER CONTINUED FROM PAGE 6 CONTINUED FROM PAGE 6 hurdle for federal prosecutors. The hurdle may not be insurmountable. There • One senior compliance officer are a variety of ways in which the DOJ might pursue this conduct, including reminded other high level com- sweeping it into a RICO conspiracy charge. pliance and legal personnel that While we will have to wait to see if the FCPA is implicated in the FIFA investigation, particular Sudanese banks “play the DOJ’s prosecution underscores its commitment to pursue all forms of a pivotal part in the support of corruption, not just activity that falls under the FCPA. It also highlights the variety the Sudanese government which of tools available for prosecutors to pursue such conduct. The FIFA investigation . . . has hosted Osama Bin Laden provides another example of why companies should ensure that their anti- and refuses the United Nations corruption compliance programs and trainings focus on all corrupt activities, intervention in Darfur.” including commercial bribery, in addition to conduct that falls under the FCPA. • Another compliance officer cautioned, “As I understand it, we have a number of Arab Banks (nine identified) on our books that only carry out clear- ing transactions for Sudanese banks in dollars. … This practice effectively means that we are cir- cumventing the U.S. embargo on transactions in USD by Sudan.” However, when these concerns were ultimately expressed to upper management in a meeting, they were not acted upon. In a speech given at the 22nd Annual Ethics and Compliance Conference in Atlanta, Assistant Attorney General Leslie Caldwell criticized the bank’s compliance officers: “[U]nfortunately, GLOBAL WATCH rather than push back, the compliance personnel backed down, HIRING FAMILY MEMBERS OF FOREIGN OFFICIALS COMES WITH A RISK and continued to allow the illegal CONTINUED FROM COVER PAGE transactions. … [I]f the compliance team had insisted on raising their is not extended in order to seek a business advantage, hiring the child is concerns to a higher level, such as acceptable. These comments, however, are not particularly surprising; the company’s board, the company intent is always a factor in any bribery violation. Thus, Queler’s comments may have avoided at least some should not be viewed as a retreat on the part of the government from closely of [a record $8.8 billion monetary examining companies’ hiring practices. penalty].” Instead, what the comments and investigations shed light on is the fact that, All of these examples highlight while the government believes there are situations in which the hiring of a the risks and responsibilities that family member of a government official may be legitimate, this is also an area compliance officers must manage. the government believes may be ripe for potential abuse. Thus, companies Ultimately, compliance officers bear are well advised to treat any such hiring with caution. the responsibility for developing and These cases are also a reminder that the SEC and DOJ tend to define bribery carrying out compliance programs very broadly under the FCPA. While cash and expensive gifts are the most that prevent FCPA violations and, by obvious forms of bribery, the prohibition against providing “anything of value” to foreign officials may extend beyond that, and may be viewed by the government, in specific cases, to extend to the hiring of family members. CONTINUED ON PAGE 8

ANTI-CORRUPTION Quarterly 2Q/2015 • 7 ANTI-CORRUPTION Quarterly

OF NOTE COMPLIANCE CORNER CONTINUED FROM PAGE 7

DOJ Cites Voluntary Disclosure, Cooperation and Remediation in so doing, prevent the criminal and Public FCPA Declination civil fines that dominate the headlines In June 2015, the DOJ announced that it declined to prosecute PetroTiger in FCPA enforcement actions. Ltd., an oil and gas services company involved in a scheme to secure a $39 To reduce both the company’s million oil services contract through improper payments to Colombian and employee’s potential liability, officials which was self-reported to U.S. and Colombian authorities. DOJ compliance officers with overall officially announced this decision after PetroTiger co-founder and CEO responsibility for a company’s Joseph Sigelman pleaded guilty last month to one count of conspiring to compliance program should regularly violate the FCPA. PetroTiger’s other co-founder and its former general examine all aspects of the business counsel had previously pleaded guilty to conspiracy, as well. Sigelman and the industries in which it admitted to conspiring with the two other executives to make payments operates to identify the particular totaling more than $333,000 to a former employee of a state-owned oil and high-risk areas of non-compliance. gas company in Colombia. In declining to prosecute PetroTiger, the DOJ Compliance departments should cited the company’s “voluntary disclosure, cooperation, and remediation, regularly revise the company’s among other factors.” anti-corruption policies to match This case marks only the second time that the DOJ has publicly the evolving needs and operations announced its decision to decline to prosecute a cooperating company of the business, and they should after prosecuting individuals within the company. Multiple DOJ attorneys conduct training programs with have publicly cited the PetroTiger declination as an example of the regularity to ensure that employees Department’s favorable treatment of companies that choose to cooperate remain educated about the policies with DOJ investigations. In May 2015, the Assistant Attorney General and emerging risks. They should also for the Criminal Division noted that, when companies cooperate with maintain the integrity of reporting a government investigation, they have “a real chance that the company procedures by responding quickly might not be prosecuted at all—not just an NPA or DPA—but a declination.” and appropriately to all reports of But another DOJ official noted last fall that “if there is no cooperation, potentially illegal activity. Compliance we will continue to investigate and prosecute the old-fashioned way. And officers with responsibility for companies will face the consequences.” PetroTiger was represented before responding to reports should the DOJ by Sidley Austin attorneys Tim Treanor and John Kuster. also ensure that accurate documentation is kept of the report and all actions taken in response to those reports. Additionally, chief compliance officers should initiate and direct periodic business-wide reviews in order to assess whether or not employees are complying with the law.

ANTI-CORRUPTION Quarterly 2Q/2015 • 8 ANTI-CORRUPTION Quarterly

THE FCPA/ANTI-CORRUPTION PRACTICE OF SIDLEY AUSTIN LLP

Our FCPA/Anti-Corruption practice, which involves over 90 of our lawyers, includes creating and implementing compliance programs for clients, counseling clients on compliance issues that arise from international sales and marketing activities, conducting internal investigations in more than 90 countries and defending clients in the course of SEC and DOJ proceedings. Our clients in this area include Fortune 100 and 500 companies in the pharmaceutical, healthcare, defense, aerospace, energy, transportation, advertising, telecommunications, insurance, food products and manufacturing industries, leading investment banks and other financial institutions. For more information, please contact:

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