presents presents Foreign Corrupt Practices Act in India Compliance Strategies for India's Unique Cultural and Governmental Compliance Strategies for India s Unique Cultural and Governmental Intricacies A Live 90-Minute Teleconference/Webinar with Interactive Q&A A Live 90-Minute Teleconference/Webinar with Interactive Q&A Today's panel features: Anjali Chaturvedi, Partner, Nixon Peabody LLP , Washington, D.C. Jay Holtmeier, Partner, Wilmer Cutler Pickering Hale and Dorr LLP , New York Elizabeth D Keating Vice President Legal Compliance/ Building Efficiency Johnson Controls Milwaukee Wis Elizabeth D. Keating, Vice President, Legal Compliance/ Building Efficiency, Johnson Controls , Milwaukee, Wis. Thursday, July 8, 2010 The conference begins at: The conference begins at: 1 pm Eastern 12 pm Central 11 am Mountain 10 am Pacific 10 am Pacific You can access the audio portion of the conference on the telephone or by using your computer's speakers. Please refer to the dial in/ log in instructions emailed to registrations.
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FCPA Compliance in India: Compliance Strategies Given India’s Compliance Strategies Given India s Unique Cultural and Governmental Intricacies Strafford Publications Teleconference July 8 2010 July 8, 2010 Anjali Chaturvedi Nixon Peabody Jay Holtmeier Wilmer Cutler Pickering Hale and Dorr LLP Elizabeth D Keating Elizabeth D. Keating Johnson Controls, Inc.
OVERALL FCPA ENFORCEMENT TRENDS OVERALL FCPA ENFORCEMENT TRENDS “One can say without exaggeration that this past year was probably the most dynamic single year in the more than thirty probably the most dynamic single year in the more than thirty years since the FCPA was enacted.“ – Assistant Attorney General Lanny Breuer (Nov. 2009) “A primary mission of this Unit is to devise ways for us to be more proactive in our enforcement of the FCPA. Members of the FCPA Unit will gain in-depth knowledge of industries and regional practices so we can uncover corrupt practices that might otherwise go undetected. We will also conduct more targeted sweeps and sector-wide investigations, alone and with other regulatory counterparts both here and abroad.” – Cheryl J. Scarboro, Chief of the SEC Foreign Corrupt Practices Act Unit (Jan. 13, 2010) 5
FCPA – WHO DOES IT COVER? FCPA WHO DOES IT COVER? Anti-Bribery Provisions U.S. companies and citizens; foreign subsidiaries; and anyone in the world (even • non U.S. entities and people) if they take acts in furtherance of an improper payment while within the U.S. Accounting Provisions Companies that trade on U.S. exchanges (securities or debt), including public • companies and foreign companies with shares registered in the U.S. Places burden on parent company to ensure that all subsidiaries in which it • maintains a voting interest comply with requirements (if issuer holds 50 percent g p y q ( p or less of a subsidiary, then it is required only to, in good faith, use its influence to comply with the accounting provisions). 6
FCPA – WHAT DOES IT COVER? FCPA WHAT DOES IT COVER? Anti-Bribery Provisions U.S. companies and citizens, or anyone acting within the territory of the U.S., U S i d iti ti ithi th t it f th U S • cannot : (i) directly or indirectly, (ii) corruptly offer, pay, promise to pay or authorize a payment of, (iii) “anything of value”, (iv) to a “foreign official”, (v) for the purpose of obtaining or retaining business or securing any improper business advantage. Accounting Provisions Accounting Provisions Issuers must make and keep books, records, and accounts, which in reasonable • detail, accurately and fairly reflect the transactions and dispositions of assets. Reasonable detail is the level of detail that would “satisfy prudent officials in the conduct of their own affairs”. 7
WHAT ARE THE PENALTIES? WHAT ARE THE PENALTIES? Anti-Bribery Provisions Corporation Corporation Up to $2 million criminal fine (or higher under alternative penalty provisions, • including twice the amount of gain to the violator or loss to the victim) Debarment from government contracts • $10,000 civil penalty • Compliance Monitor • Individual Prison (up to five years) • Up to $100,000 criminal fine (or higher under alternative penalty provisions, • including twice the amount of gain to the violator or loss to the victim) (cannot be indemnified by company) 8
WHAT ARE THE PENALTIES? WHAT ARE THE PENALTIES? Accounting Provisions Range of civil penalties Range of civil penalties • • Criminal liability can only be imposed for knowingly circumventing or knowingly • failing to implement a system of internal controls or knowingly falsifying any book, record, or account Criminal penalty of up to $5 million and/or imprisoned for 20 years (individuals) • Criminal penalty of up to $25 million (entities) • Fines could be higher under alternative penalty provisions, including twice the • amount of gain to the violator or loss to the victim g 9
OVERALL FCPA ENFORCEMENT TRENDS OVERALL FCPA ENFORCEMENT TRENDS Prosecutions/settlements continue at a rapid pace p p Reported FCPA Proceedings Reported FCPA Proceedings – Prosecutions have risen steadily since 2005 – Over 130 pending enforcement matters – 40 cases brought by DOJ 40 cases brought by DOJ and/or SEC in 2009, another record year – Continued coordination between DOJ/SEC – Dedicated units at DOJ, SEC and FBI 10
OVERALL FCPA ENFORCEMENT TRENDS OVERALL FCPA ENFORCEMENT TRENDS Focus on individuals – Use of undercover agents/informants (Las Vegas sting) U f d t /i f t (L V ti ) – Broad interpretation of “knowledge” (Bourke) – SEC “control person” liability (Nature’s Sunshine) Heightened focus on the due diligence (or lack thereof) on business partners -- agents, JV partners, acquisition targets Increase in multi-jurisdiction investigations and cooperation Increase in multi jurisdiction investigations and cooperation among government authorities in different countries Major increase in penalties Companies also subject to internal compliance enforcement through the use of independent monitors at the company’s expense 11
PERCEIVED LEVEL OF CORRUPTION IN INDIA Transparency International – 2009 Corruption Perceptions Index – India ranks 84 out of 180 countries with a score of 3.4 • United States (19) • Pakistan (130) • Pakistan (130) • Mayanmar (178) Transparency International – 2009 Global Corruption Barometer p y p – Indian political parties are perceived to be most affected by corruption, followed by public officials/civil servants – 9% of respondents in India reported paying a bribe in last 12 months – 42% of respondents reported that the Indian government is “effective” in the fight against corruption in the fight against corruption – up from 25% in 2007 up from 25% in 2007 12
REGULATORY ENVIRONMENT IN INDIA Despite the end of the License Raj, bureaucracy remains a key impediment to India’s economic growth key impediment to India s economic growth The World Bank – Doing Business 2010 – Out of 183 countries India is ranked: Out of 183 countries, India is ranked: • 133 in “Ease of Doing Business” • 169 in “Starting a Business” g • 175 in “Dealing in Construction Permits” • 182 in “Enforcing Contracts” • 138 in “Closing a Business” • 169 in “Paying Taxes ” 13
INDIAN ANTI-CORRUPTION LEGISLATION INDIAN ANTI CORRUPTION LEGISLATION 1947 Prevention of Corruption Act (“PCA”) (amended in 1988) – Imposes criminal liability on public and private corruption – Section 7 makes it a crime for public officials to accept (or agree/attempt to accept) “gratification” as a “motive or reward” for agree/attempt to accept) gratification as a motive or reward for doing or from refraining from doing anything in their official capacity – Section 8 imposes criminal liability on the perpetrators of bribery – Section 11 makes it illegal to aid and abet a violation of section 7 – No exception for facilitation payments 14
INDIAN ANTI-CORRUPTION LEGISLATION INDIAN ANTI CORRUPTION LEGISLATION Criticisms of the PCA – Not enforced regularly by Indian authorities Not enforced regularly by Indian authorities – The politics of prosecutions India has not signed the OECD Anti-Bribery India has not signed the OECD Anti Bribery Convention India signed the UN Convention Against Corruption and the UN Convention Against Transnational Organised Crime, but has yet to ratify the treaties ratify the treaties India has no law punishing bribery of foreign public officials 15
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