Presenting a live 90-minute webinar with interactive Q&A Anti-Corruption Reform in Mexico: FCPA Compliance is No Longer Enough Understanding Key Provisions, Ensuring Compliance and Mitigating Legal Risks WEDNESDAY, DECEMBER 9, 2015 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: Matteson Ellis, Member, Miller & Chevalier , Washington, D.C. Diego Sierra, Partner, Von Wobeser & Sierra, México City, México The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .
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Anti-Corruption Reform in Mexico: FCPA Compliance is No Longer Enough Diego Sierra Matteson Ellis Partner Member Von Wobeser & Sierra Miller & Chevalier Chartered dsierra@vwys.com.mx mellis@milchev.com
Entry to Market in a High-Risk Country MEXICO RANK UNITED STATES 103 RANK 22 COUNTRIES 175 COUNTRIES 175 SCORE 35 SCORE 74 6
Countries of Focus Countries Implicated Most Frequently in Corporate FCPA Enforcement Actions (combined) 2009-2015 23 14 13 8 8 7 7 6 6 6 6 6 6 5 5 5 5 3 3 3 3 3 3 3 3 7
Companies Subject to FCPA Actions based on Mexico Activities 8
Bribery Risks – Mexico 85% of cases 28% of cases in 25% of cases in in Latin America Latin America Mexico involved involved third involved the gifts, travel and parties oil & gas sector entertainment 67% of cases in Mexico involved payments through business partners 25% of cases in Mexico involved payments through fictitious vendors/invoices Statistics from PwC Latam 2000-2015 Anti-Corruption Enforcement Results in Latin America Report and 2015 Mexico Energy Reform Report 9
Mexico’s National Anti -Corruption System (SNA): Key Provisions Federal New Functions Coordinated System Administrative Established for between Authorities Court Jurisdiction Superior Auditor of Established Created for Anti- the Federation Corruption Matters Creation of Local New Rules for Public Administrative Official Violations Justice Courts 10
Mexico’s SNA: Key Provisions Corporate Public Official Asset New Monetary Intervention and and Conflict of Sanctions for Private Dissolution Explicitly Interest Declaration Parties Established Requirements Statute of New Federal Limitations Legislative Powers Extended Established 11
Mexico Public Procurement Regulation Federal Anti-Corruption Law in Public Procurement (FALPP) – Enacted in June 2012 – Responsibilities and sanctions for bribery acts committed in public procurement proceedings – Applies to: • National and foreign individuals and corporations • Third parties – agents – Takes into consideration international standards for compliance best practices 12
Mexico Public Procurement Regulation Federal Anti-Corruption Law in Public Procurement – Anti-bribery provisions – Fines • Individuals: up to USD $20,000 • Corporations: up to USD $12 million if serious violation or up to 35% of contract price – Debarment • Individuals: up to eight years • Corporations: up to ten years – Disclosure benefits 13
SNA: Main Distinctions with FCPA SNA FCPA Subject persons Individuals and Individuals and corporations corporations Scope Foreign and local officials Only foreign officials Prohibited acts Bribery of public officials, Briber y of “foreign as defined by secondary officials,” as defined by Act legislation Facilitation payments The proposed legislation Exception for facilitating does not make this payments distinction 14
SNA: Main Distinctions with FCPA SNA FCPA Strict liability Unclear whether it will be Anti-Bribery provisions require contemplated by secondary corrupt intent; Accounting legislation provisions approach strict liability Books and records Unclear whether it will be Yes, Accounting provisions cover contemplated by secondary books and records legislation Corporate liability Yes, corporations can be Yes, corporations can be held held liable liable under respondeat superior Sanctions Established by secondary Up to USD$2 million per violation legislation; under FALPP, up (Anti-Bribery provisions); up to to USD$12 million, up to 10 USD$25 million (Accounting years debarment provisions), plus possible disgorgement of profit 15
SNA: Main Distinctions with FCPA SNA FCPA Credit for compliance May be established by Not statutorily, but U.S. programs secondary legislation; Sentencing Guidelines under FALPP, no explicit provide credit for credit but possible benefit compliance programs Credit for self-disclosure Proposed legislation Not statutorily, but U.S. and cooperation provides mitigated Sentencing Guidelines economic sanctions provide credit for self- disclosure Indirect liability May be established by Permits indirect liability for secondary legislation; acts of third parties already in FALPP Statute of Limitations 7 years 5 years 16
Main Distinctions with FCPA SNA FCPA Jurisdiction Individuals and corporations - U.S. individuals and corporations acting in Mexico, including worldwide; non-Mexican companies - Foreign individuals and registered in Mexico corporations acting within U.S.; - Companies listed on U.S. exchanges (U.S. issuers) and their employees acting worldwide; and - Agents acting on behalf of a covered individual / corporation Enforcement Administrative and criminal Civil and criminal Negotiated plea Proposed legislation provides Corporate settlement agreements agreements that under certain conditions are negotiated and entered into agreements can be entered regularly 17
Anti-Corruption Enforcement in Mexico: OECD Working Group Findings of OECD Working Group: Follow-Up to Mexico Phase 3 Report & Recommendations (June 2014) Has no foreign bribery prosecutions or convictions Anti-corruption law does not create corporate liability for foreign bribery without identification or conviction of relevant individual and without proof that the bribery was commitment with the means of the corporate entity Made meaningful updates to MLA procedures Begun training prosecutors in anti-corruption techniques 18
Anti-Corruption Enforcement in Mexico: OECD Working Group Findings of OECD Working Group: Follow-Up to Mexico Phase 3 Report & Recommendations (June 2014) Efforts to use FALPP to implement OECD recommendations unsuccessful – Does not expressly address jurisdiction to prosecute legal persons incorporated or headquartered in Mexico criminally for extraterritorial foreign bribery – Does not cover some types of foreign bribery – Parallel criminal and administrative enforcement regimes raise questions about coordination – multiple bodies could be involved in investigation of the same case – Questions over whether administrative enforcement body has sufficient enforcement expertise 19
Enforcement of the SNA: Corporate Intervention PEMEX Off-shore Services Provider Oceanografía USD $585 million fraud Case Intervened since 02/2014 20
Enforcement of the SNA: Politicized? Coordination Investigation bodies Committee: executive balanced by and judicial branches, Administrative Justice citizens Courts Checks and Balances Attorney General’s Office Attorney General’s Office Anti-Corruption Division as independent and balanced by Criminal autonomous body Courts 21
Enforcement of the SNA: International Cooperation Not mentioned in Constitutional Amendment and proposed legislation México’s international obligations to cooperate (e.g., OECD) Basic rules for international cooperation expected in secondary legislation 22
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