Foreign Corrupt Practices Act in India in 2013 Compliance Strategies - PowerPoint PPT Presentation

Presenting a live 90-minute webinar with interactive Q&A Foreign Corrupt Practices Act in India in 2013 Compliance Strategies for India's Unique Cultural and Governmental Intricacies TUESDAY, MAY 14, 2013 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: Elizabeth D. Keating, Global Compliance Counsel - Investigations, Johnson Controls , Milwaukee, Wis. Jay Holtmeier, Partner, Wilmer Cutler Pickering Hale and Dorr , New York Michael Stavridis, Partner, Ernst & Young , Chicago 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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FCPA Compliance in India: Compliance Strategies Given India’s Unique Cultural and Governmental Intricacies Strafford Publications Teleconference May 14, 2013 Jay Holtmeier Wilmer Cutler Pickering Hale and Dorr LLP Elizabeth D. Keating Johnson Controls, Inc. Michael Stavridis Ernst & Young LLP

OVERALL FCPA ENFORCEMENT TRENDS  US authorities continue DOJ and SEC Enforcement Actions strong enforcement 2004-2012 efforts – FCPA Investigations declined in 2012 – Activity peaked in 2010, but still very active – Over 90 publicly disclosed pending enforcement matters – Continued coordination between DOJ/SEC – Dedicated units at DOJ, SEC, and FBI 6

OVERALL FCPA ENFORCEMENT TRENDS  Large FCPA Sanctions Continue; Recent Settlements: – JGC (Japan; $219M), 2011 – Magyar Telekom/Deutsche Telekom (Hungary/Germany; $95M), 2011 – Pfizer (US; $60M), 2012  Prosecution of Individuals Is Continued Priority  Third-Party Risks (e.g., sales agents, intermediaries, consultants)  Travel and Entertainment in High-Risk Markets  Industry- Specific Risks (e.g., SEC probe of banks’ business with sovereign wealth funds)  New Tools at the SEC – Deferred Prosecution Agreements and Non- Prosecution Agreements  Shift Away from Compliance Monitors; Increased Use of Alternatives  New Development – A Resource Guide to the U.S. FCPA 7

A Resource Guide to the U.S. FCPA  In November 2012, the SEC and DOJ jointly issued long-promised guidance on the FCPA.  The Guide provides unprecedented, detailed information on federal law enforcement approach and priorities but does not pronounce revamped enforcement priorities or alter previously stated positions.  Guide reinforces DOJ/SEC interpretations of the FCPA found in prior settlements and cases.  Although it failed to clarify some of the more controversial aspects of the government’s enforcement approach, the Guide is a helpful document, and will likely be much-cited resource for years to come. 8 8

A Resource Guide to the U.S. FCPA Key topics addressed in the Guide:  Jurisdiction under the FCPA  Corrupt Intent, Knowledge, and Willfulness  Business Purpose  Gifts, Travel, and Entertainment Expenses  Charitable Contributions  Definitions of Foreign Officials and Instrumentalities  Use of Third Parties  Facilitating Payments  Successor Liability  The FCPA’s Accounting Provisions  Compliance Programs 9

Enforcement by Indian Authorities  India saw more high-profile scandals and anti- corruption protests led by popular activists in 2012.  India's Central Bureau of Investigation filed corruption charges against 5 companies and 17 individuals in connection with the "Coalgate" scandal.  Prime Minister Singh has stated that his government is seeking to amend the Prevention of Corruption Act to make failure to prevent bribery by a corporation an offense. 10

FCPA ENFORCEMENT ACTIONS RELATED TO INDIA  Oracle (2012) – Oracle, a California-based computer technology company, was charged with failing to prevent a subsidiary from secretly setting aside money off the company’s books, monies which were eventually used to make unauthorized payments to phony vendors in India. The SEC alleged that on more than a dozen occasions Oracle and its India subsidiary held over $2.2 million in unauthorized “side funds.” – Oracle settled SEC books and records and internal controls charges for $2 million. – No anti-bribery or DOJ case. 11

FCPA ENFORCEMENT ACTIONS RELATED TO INDIA  Diageo (2011) – Diageo is one of the world’s largest producers of alcoholic beverages, such as Johnnie Walker and Windsor Scotch whiskeys. From 2003 to mid- 2009, Diageo’s Indian subsidiary made hundreds of illicit payments to government officials responsible for purchasing or authorizing the sale of its beverages in India and disguised those payments in Diageo’s records. The payments, routinely made through third parties, totaled an estimated $1.7M. – Diageo settled SEC books and records and internal controls charges for $16M, including $11.3M in disgorgement, prejudgment interest of $2.1M, and a further civil penalty of $3M. – No DOJ case. 12

FCPA ENFORCEMENT ACTIONS RELATED TO INDIA  Pride International (2010) – Pride International is an oil and gas services company. Pride’s Indian subsidiary paid $500K to judges of the Indian Customs, Excise, and Gold Appellate Tribunal for a favorable determination in a customs duties and penalties dispute. The estimated value of the favorable decision was approximately $10M. – Pride’s Indian subsidiary pleaded guilty to criminal charges for conspiring to violate and violating the anti-bribery and books and records provisions of the FCPA and paid a $32M criminal penalty. Pride International entered into a Deferred Prosecution Agreement. Pride International settled similar civil charges with the SEC and agreed to pay disgorgement of $19.3M plus pre-judgment interest of $4.2M. 13

FCPA ENFORCEMENT ACTIONS RELATED TO INDIA  Control Components, Inc. (2009) – CCI designs and manufactures valves used in the power, oil and gas, and nuclear industries. CCI made payments of at least $4.9M from 2003 – 2007 to employees of state-owned companies in several countries, including in India to the Maharashtra State Electricity Board. – CCI pleaded guilty to criminal anti-bribery and Travel Act charges and paid an $18.2M fine. Additionally, the company was placed on organizational probation for three years and ordered to create and implement a compliance program and retain an independent compliance monitor for three years. – No SEC case. 14

FCPA ENFORCEMENT ACTIONS RELATED TO INDIA  Westinghouse Air Brake Technologies (2008) – WABTEC manufactures brake subsystems and related products for locomotives, freight cars, and passenger transit vehicles. From 2001 through 2005, WABTEC’s subsidiary paid approximately $137K in cash to Indian Railway Board officials to obtain contracts, schedule inspections, obtain certificates, and avoid tax audits. – WABTEC and its subsidiary entered into a non-prosecution agreement with the DOJ and a civil settlement with the SEC. WABTEC paid a $300K criminal penalty, $288K in disgorgement of profits including pre-judgment interest, and $89K in civil penalties (a total of approximately $677K) for violating the anti-bribery, books and records, and internal controls provisions of the FCPA. 15

FCPA ENFORCEMENT ACTIONS RELATED TO INDIA  Dow Chemical (2007) – Dow Chemical is one of the world’s largest chemical manufacturers; its fifth-tier Indian subsidiary manufactured and marketed pesticides and other products. The subsidiary paid an estimated $200K in payments and gifts to Indian government officials. Payments were made to a Central Insecticides Board official, state inspectors, and other officials. The subsidiary also made improper payments for gifts, travel, and entertainment to Indian government officials. – Dow settled SEC books and records and internal controls charges and agreed to pay a $325K civil penalty. – No allegation that Dow itself was aware of the illegal conduct. – No DOJ case. 16