Foreign Corrupt Practices Act Compliance Guidebook shows readers how the Foreign Corrupt Practices Act (FCPA) has grown to critical importance to any U.S. company that does business in a global environment, as well as foreign companies that supply or have agency agreements with U.S. companies. It provides an overview of the business risks and guidance on spotting potential red flags regarding FCPA violation. Business professionals are provided with practical guidance on managing FCPA requirements as part of an overall compliance program.
Table of Contents:
Foreword xix
Preface xxi
Acknowledgments xxv
1 BRIBERY, CORRUPTION, AND THE FOREIGN CORRUPT PRACTICES ACT 1
Global Crackdown 3
Devastating Cost of Corruption 4
Government’s Commitment to FCPA Enforcement 6
FBI’s Laser Focus on Anti-Corruption 7
Watergate and the Birth of the FCPA 8
Securities and Exchange Commission Enters the Fight 9
Senate Investigations 10
Kissinger’s Resistance 11
Lockheed’s Defiance 12
Questionable Corporate Payments Task Force 13
FCPA Enactment 14
Compliance Insight 1.1: First FCPA Prosecution 15
Criticism of the FCPA 17
A Culture of Compliance 18
2 OVERVIEW OF THE FOREIGN CORRUPT PRACTICES ACT 23
FCPA Provisions 23
Leveling the Playing Field 25
Antibribery Provisions 25
Jurisdiction 29
Facilitating Payments 29
Affirmative Defenses 30
FCPA Elements Summary 30
Compliance Insight 2.1: Metcalf and Eddy Civil FCPA Settlement 31
Books, Records, and Internal Controls Provision 34
Books and Records Elements Summary 35
Sarbanes-Oxley and the FCPA 35
Opinion Procedure 36
Penalties 37
Third-Party and Successor Liability 39
Compliance Insight 2.2: Self-Disclosure Follows M&A Activity 40
Why Corruption Matters 41
Compliance Insight 2.3: Afghanistan: A Case Study in Corruption 42
Increased Enforcement 45
3 GOVERNMENT GUIDANCE AND SIGNIFICANT CASES 49
Filip Memorandum 50
FCPA Compliance Programs: Case Law Guidance 52
A Lesson in Overseas Compliance 53
Compliance Insight 3.1: Rogue Employee Does the Crime, Company Does the Time 54
Cold Cash: U.S. v. Jefferson 56
Voluntary Disclosure 58
Evaluating the Seaboard Criteria in Mitigating Enforcement Actions 58
Compliance Insight 3.2: Appointment of Corporate Monitor Results in Charges of Cronyism 62
Selecting a Monitor: The Morford Memo Standards 63
Thought Leader in Corporate Compliance: George Stamboulidis 65
Government Procurement Fraud and the FCPA 68
Federal Acquisition Regulations Disclosure Requirements and the FCPA 68
Business Ethics Awareness and Compliance Program 70
4 GLOBAL ANTI-CORRUPTION EFFORTS 75
Globalization of Law Enforcement Cooperation 76
International Antibribery Efforts 77
OECD Convention on Combating Bribery 77
Inter-American Convention Against Corruption 79
European Union Convention on the Fight Against Corruption 81
African Union Convention on Preventing and Combating Corruption 81
Council of Europe Criminal Law Convention on Corruption 82
United Nations Convention Against Corruption 84
United Nations Global Compact 86
Canada’s Corruption of Foreign Public Officials Act 86
Compliance Insight 4.1: INTERPOL Fights Corruption 87
International Anti-Corruption Organizations 89
Transparency International 89
Corruption Perceptions Index 89
Compliance Insight 4.2: 2009 Corruption Perceptions Index: Top 20 Countries 90
Compliance Insight 4.3: 2009 Corruption Perceptions Index: Bottom 20 Countries 91
Other Transparency International Resources 91
Compliance Insight 4.4: Foreign Bribery Enforcement in OECD Convention Countries 92
Compliance Insight 4.5: Foreign Bribery Cases and Investigations 93
Compliance Insight 4.6: Status of Foreign Bribery Cases 94 World Bank 95
International Monetary Fund 97
Asian Development Bank 97
World Trade Organization 98
Partnering Against Corruption Initiative 99
Thought Leader in Corporate Compliance: Alan Boeckmann 100
Global Anti-Corruption Enforcement Trends 102
The Good Fight Against Corruption 103
5 SIEMENS: A NEW COMMITMENT TO A CULTURE OF COMPLIANCE 107
Company Overview and History 108
The Road to Corruption 108
Munich Public Prosecutor’s Office Investigation 110
Self-Disclosure and Subsequent Internal Investigation 111
Legal and Fair Internal Investigation 112
Project Office Compliance Investigation 113
Amnesty and Leniency Programs 113
Cooperation with Law Enforcement 114
Compliance Comeback 114
Criminal Charges, Plea Agreements, and Fines 115
Compliance Insight 5.1: Key Elements of Siemens’ Compliance Program: Prevent–Detect–Respond 116
New Corporate Compliance Program 119
Corporate Compliance Monitor 121
Siemens’ Remedial Efforts 122
Replacement of Top Management 122
Comparison of Old and New Compliance Programs 123
Clear Reporting Lines 124
Training and Communication 125
Anti-Corruption Training Program 125
Anti-Corruption Handbook 126
Ombudsman Program 126
Strengthened Internal Audit Function 126
Enhancing Internal Controls 127
Enhanced Policies and Procedures 128
Compliance Insight 5.2: Enhancement of Policies and Procedures 128
Compliance Helpdesk 129
Anti-Corruption Toolkit 129
Compliance Insight 5.3: Siemens’ Anti-Corruption Toolkit Focus Areas 130
Business Partner Review and Approval 131
Supplier Code of Conduct 132
Compliance Insight 5.4: Business Partner Review and Approval Process 133
Corporate Disciplinary Committee 134
Compliance Element of Senior Management Compensation 134
Compliance Progress Report 134
Compliance Insight 5.5: Siemens’ Compliance Progress Report from Q2 FY 2009 135
Becoming a Recognized Leader in Compliance 136
Compliance Insight 5.6: Siemens’ Compliance Objectives for 2009 136
Partnering with the World’s Anti-Corruption Community 136
Partnering Against Corruption Initiative 137
Business Guide on Fighting Corruption 137
The Road Forward 138
6 WORLDWIDE HOTSPOTS FOR CORRUPTION: UK, RUSSIA, AFRICA, THE MIDDLE EAST, AND LATIN AMERICA 143
Overview 144
Thought Leader in FCPA Compliance: Scott Moritz 145
The Natural Resource-Corruption Link 147
UK Tackles International Corruption 148
Compliance Insight 6.1: Weak Internal Controls Leads to Fine for Insurance Giant 149
UK Bribery Bill 151
Mabey & Johnson Prosecution 152
Strong Message from the SFO 153
Russia 154
Doing Business in Russia 156
Africa 157
Nigeria 158
Middle East 160
The Oil-for-Food Scandal 161
Compliance Insight 6.2: Companies Implicated in Oil-for-Food Scandal 162
Iraq Today 163
Latin America 163
Cases of Corruption 164
Multinational Company As Victim 165
7 WORLDWIDE HOTSPOTS FOR CORRUPTION AND BRIBERY: CHINA, CENTRAL ASIA, INDIA, AND ASIA PACIFIC 171
China 172
The Dangers of Agents: Avery Dennison 172
Heightened Anti-Corruption Enforcement Efforts in China 174
Corruption and Societal Discontent 176
Criminal Law of the People’s Republic of China 176
Company Law of the People’s Republic of China 177
Anti-Unfair Competition Law of the People’s Republic of China 177
Invitation and Submission of Bids Law of the People’s Republic of China 178
Interim Provisions on the Prohibition Against Commercial Bribery Acts 179
China Enforcement Agencies 179
Commission for Discipline Inspection of the Communist Party 179
Supreme People’s Procuratorate of the People’s Republic of China 179
Ministry of Public Security of the People’s Republic of China 180
State Administration for Industry and Commerce of the People’s Republic of China 180
The Dangers of Doing Business in China 180
Central Asia 182
‘‘Mr. Kazakhstan’’ 182
Head in the Azeri Sand 184
Baker Hughes 185
India 186
Asia Pacific 187
Indonesia 188
Vietnam 188
South Korea 189
Taiwan 190
8 BAE SYSTEMS: PAST BEHAVIOR HAUNTS THE COMPANY 197
Al Yamamah Deal 198
Compliance Insight 8.1: Suspicious Activity Report, January 30, 2004 199
FBI Scrutiny 200
BAE’s Denial 200
Serious Fraud Office Inquiry 201
Tony Blair Quashes the Investigation 201
DOJ’s Hard-Line Approach 204
BAE Response 204
Compliance Insight 8.2: Types and Numbers of Calls to BAE’s Ethics Helpline 205
Woolf Committee 206
BAE Follows a Different Path 207
9 DESIGNING AN EFFECTIVE ANTI-CORRUPTION COMPLIANCE PROGRAM 211
Federal Sentencing Guidelines for Organizations 213
The Seven Steps to an Effective Compliance Program 214
DOJ Guidance on Anti-Corruption Compliance Programs 217
Compliance Program Design 219
Red Flags and Risk Areas 221
Department of Justice’s FCPA Red Flags 221
Red Flags When Doing Business With Third Parties 222
Travel and Entertainment 223
Gifts 225
Mergers and Acquisitions 225
Compliance Insight 9.1: Inherent Compliance Risk in Acquisitions and New Business Lines 226
Autonomous International Business Units 227
Don’t Ignore Small Payments 228
Facilitation Payments 228
Corrupt Payments 229
Anti-Corruption Design Never Ends 229
Thought Leaders in FCPA Compliance: Joseph Spinelli, Scott Moritz, and Jay Perlman 230
10 IMPLEMENTING AN EFFECTIVE ANTI-CORRUPTION COMPLIANCE PROGRAM 237
Anti-Corruption Standards and Procedures 238
Training and Communication 241
Red Flags Training 243
Anti-Corruption Training Best Practices 244
Compliance Insight 10.1: Driving Home the Impact of Corruption 245
Delivery Methods for Training 246
Specific Anti-Corruption Reporting Mechanism 246
Communicating the Compliance Program 247
Evaluating Your Anti-Corruption Training Program 248
M&A Due Diligence 250
Risk Assessments 251
Thought Leader in FCPA Compliance: Leslie McCarthy 252
Internal Accounting Controls 256
Role of Internal Audit 256
Anti-Corruption Audit Program 257
Other Compliance Program Best Practices 260
Field-Based Compliance Officers 260
FCPA Enforcement Database 261
Benchmarking 261
Commitment to Anti-Corruption Compliance Programs 261
Compliance Insight 10.2: Sample Compliance Activities Checklist 262
11 MONSANTO: FIGHTING CORRUPTION FOR A BETTERWORLD 265
A Commitment to Agriculture 266
DOJ and SEC FCPA Investigation 266
Acceptance of Responsibility and Remedial Actions 268
Compliance Insight 11.1: Monsanto Compliance Program Overview 269
Tone at the Top and a Revamped Code of Conduct 269
Messages from Senior Leaders 271
Business Conduct Office 272
Training 273
Regional Working Groups 274
FCPA Working Group Guidelines 275
Compliance Insight 11.2: Monsanto Business Conduct Policy Employee Guidelines 276
Gifts, Entertainment, and Other Promotional Expenditures 278
Per Diem Payments 280
Facilitating Payments 280
Political Donations 281
Charitable Donations and Donations to Governments 281
Trade Associations 282
Doing Business with Foreign Officials and Their Relatives 283
Dealing with Third Parties 283
Training Third Parties 285
Joint Ventures 286
Contractual Safeguards and Oversight 287
Audit 288
Opinion from Outside Counsel 289
Local Law Advice 290
Response to Possible Violations 291
Internal and Independent Investigations 291
Internal Coordination and Training 291
The Monsanto Pledge 292
12 INTERNAL INVESTIGATIONS 293
Consequences of Failing to Act 294
Preparing for the Investigation 296
Preserving Documentary and Electronic Information 297
Assembling the Investigative Team 298
Investigations Code of Conduct 299
Investigative Plan 301
Conducting Interviews 303
Thought Leader in Internal Investigations: David Z. Seide 304
Employee Legal Representation 307
Interviewing and Reporting 308
Employee Cooperation with Company Investigations 309
International Investigations 310
Anti-Corruption Enforcement Trends 310
Siemens Internal Investigation Approach 311
Determining Systemic Corruption and FCPA Violations 312
Self-Disclosure of FCPA Violations 313
Compliance Emergency Preparedness Kit 315
13 PAST, PRESENT, AND FUTURE OF THE FCPA 319
The Past 320
The Present 321
Thought Leader in FCPA Compliance: Marjorie Doyle 323
Corporate Ignorance Is Not Bliss 328
It’s Not Rocket Science 329
On the Horizon 330
The Future 330
Battling the Disease of Corruption 331
Appendix Opinion Procedure Releases 335
About the Authors 347
Index 351
About the Author :
MARTIN T. BIEGELMAN has been fighting fraud and corruption for more than thirty-five years in various roles in law enforcement, consulting, and the corporate sector. He is currently Director of Financial Integrity for Microsoft Corporation, where he built and leads a worldwide fraud prevention and anti-corruption program.
DANIEL R. BIEGELMAN is an attorney with the law firm of Baker Hostetler. He is a member of the Litigation Practice Group in their New York office. Daniel is a Certified Compliance and Ethics Professional and a member of the Society of Corporate Compliance and Ethics. He is a contributing author to Building a World-Class Compliance Program: Best Practices and Strategies for Success (Wiley). He is also the author of articles on the FCPA and corporate compliance.
