Foreign Corrupt Practices Act in Latin America Implementing FCPA - PowerPoint PPT Presentation

Presenting a live 90 ‐ minute webinar with interactive Q&A Foreign Corrupt Practices Act in Latin America Implementing FCPA Compliance Programs and Mitigating Legal Risks TUES DAY, DECEMBER 7, 2010 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: T d ’ f l f James G. Tillen, Member, Miller Chevalier , Washington, D.C. Isabel Franco, Attorney, Koury Lopes Advogados , S ão Paulo, Brazil Marcus S . Quintanilla, Counsel, O'Melveny & Myers , Newport Beach, Calif. 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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Foreign Corrupt Practices Act in Latin America Strafford Publications Teleconference Strafford Publications Teleconference James G. Tillen Isabel Franco Marcus Salvato Quintanilla December 7, 2010

FCPA Risk Factors: Background • Since passage of Act in 1977, approximately 76 FCPA enforcement actions involving activity in Latin America enforcement actions involving activity in Latin America • Actions involved 14 countries in the region • Multiple cases in Mexico Brazil Venezuela Argentina • Multiple cases in Mexico, Brazil, Venezuela, Argentina • Wide range of industries:  Telecom  Telecom  Infrastructure  Energy Energy  Agriculture  Technology gy 5

Examples of FCPA Cases Involving Latin America • Pride (2010): payments to PDVSA employees for contract extensions and legitimate receivables; payments to customs officials in Mexico and Brazil. t ffi i l i M i d B il • ABB (2010): payments through sales rep. to Mexican electric utility company for contracts electric utility company for contracts. • Paradigm (2007): excessive T&E for PEMEX employee and job for his brother. • Syncor (2007): benefits to doctors at state-owned hospitals in exchange for use of products • BellSouth (2002): hiring wife of Nicaraguan legislator to B llS th (2002) hi i if f Ni l i l t t lobby legislature to pass legislation allowing increased foreign ownership; payment of fictitious invoices by g p p y y Venezuelan subsidiary to off-shore entities. 6

Transparency International Corruption Perceptions Index 2010 p p Results by Region: Americas Regional CPI Rank Rank Rank Rank Country/Territory Country/Territory 2010 Score 2010 Score 6 1 Canada 8.9 17 2 Barbados 7.8 21 3 Chile 7.2 22 4 United States 7.1 24 5 Uraguay 6.9 33 6 Puerto Rico 5.8 41 7 Costa Rica 5.3 44 8 Dominica 5.2 69 9 Brazil 3.7 69 9 Cuba 3.7 73 11 El Salvador 3.6 73 11 Panama 3.6 73 11 Trinidad and Tobago 3.6 78 14 Columbia 3.5 78 14 Peru 3.5 87 16 Jamaica 3.3 91 17 Guatemala 3.2 98 18 Mexico 3.1 101 19 Dominican Republic 3.0 105 20 Argentina 2.9 110 21 Bolivia 2.8 116 22 Guyana 2.7 127 23 Ecuador 2.5 127 23 Nicaragua 2.5 134 25 Honduras 2.4 146 26 Haiti 2.2 146 26 Paraguay 2.2 164 28 Venezuela 2.0 7

FCPA Risk Factors: TI Backgrounder • 28 Countries in Americas included in 2010 TI Index  20 scored under 5 points (“serious corruption”) 20 d d 5 i t (“ i ti ”)  9 scored under 3 points (“rampant corruption”)  Canada Barbados Chile ranked highest  Canada, Barbados, Chile ranked highest  Haiti, Paraguay, Venezuela ranked lowest 8

FCPA Risk Factors: M&C 2008 Survey • 200 respondents in 7 countries, representing a mix of multinationals and region based companies multinationals and region-based companies  48% say corruption is a significant obstacle to doing business in the region g  More than 80% believe local anti-corruption laws are NOT effective  55% rank addressing corruption risk as a top priority  77% have taken steps to address corruption risk  55% of region-based companies, 82% of multinationals 55% f i b d i 82% f lti ti l  30% of respondents whose companies are clearly subject to the FCPA said they were not aware of it subject to the FCPA said they were not aware of it 9

FCPA Risk Factors: Culture and Practice • Studies suggest particular corruption risk from:  Interactions with local police and municipal government I t ti ith l l li d i i l t officials (violations, permitting processes)  Interactions with judiciary Interactions with judiciary  Interactions with customs officials  Mixed picture for legislative and executive branches, p g , country-by-country • “Facilitating payments”/extortion a perennial issue 10

FCPA Risk Factors: Definition of Official • State ownership of key infrastructure and major industries varies across countries industries varies across countries • Partial privatization common, creating uncertainty as to “official” status – e g official status e.g., Petrobras Petrobras • Exercise of government role in companies ebbs and flows, further complicating picture – e.g., PDVSA , p g p g , 11

FCPA Risk Factors: Third Parties • Many third parties have prior exposure to compliance due diligence requirements due diligence requirements • Generally favorable response to process, within usual limits limits • Local culture and in some countries local law may restrict questions related to family members/political q y p affiliations • Transparency challenges in joint ventures and with some third parties; family-owned conglomerates 12

Local Laws • OAS Inter-American Convention Against Corruption  33 countries have ratified 33 t i h tifi d  Criminalizes official corruption  Requires cooperation in investigations  Requires cooperation in investigations • Local law may address gifts, travel and entertainment, for example: for example:  Costa Rica – officials may receive courtesy gifts. Gifts over approx. $300 are property of state. (Law No. 8422) 13

14 BRAZIL BRAZIL

Presentation Outline  Cases in Brazil  Main norms  Definition of Government Official (“ GO ”)  Forms of Corruption  The Commission of Public Ethic (“CPE”)  Application of HFACode and Resolutions  Higher Federal Administration Code of Conduct  The participation of GOs in seminars and events  Recommendations to minimize risks  Gifts  Combat to Violations  Punishments  Red Flag  Final Recommendation a eco e da o 15

Examples of Cases in Brazil Baker Hughes: grease payment to the Rio de Janeiro Board of Commerce Tyco: payment of bribes, through lobbyists, to workers at a water treatment company Bridgestone: payment of bribes to state owned companies B id t t f b ib t t t d i Nature’s Sunshine Products: payments to “despachantes” at customs to import products not registered in Brazil Pride: payment of bribes to resolve difficulties at customs Sitel: payment of bribes to resolve tax issues Gtech: payments to government officials as “incentive” to extend lottery contract with Caixa Econômica Federal 16

Combat to Violations 2009 CGU Report 116 Disciplinary Procedures 1471 Preliminary Investigations (after denunciations) Procedures P d i i i initiated d by b SisCOR Si COR (F d (Federal l E Executive i Power P II.1 II 1 Correction System Acts Acts 2006 2006 2007 2007 2008 2008 2009 2009 Total Total Procedures initiated by 4.869 6.201 4.763 5.377 21.210 SisCOR 17

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Legislation of Brazil  Sparse legislation governing the subject of Ethics & Compliance and Corporate Hospitality  Main Brazilian legislation applicable to Government Officials (“GO”s): 19

Brazilian Criminal Code - 1940 Brazilian Criminal Code - 1940 Applicable to all citizens and foreigners in Brazil Statute of the Federal Civil Public Servant– 1990 Applicable to all Gos Administrative Improbity Law – 1992 Applicable to all Gos Professional Code of Ethics for Civil Servants of the Federal E ec ti e Po er Federal Executive Power - 1994 1994 Applicable to all GOs of the Federal Executive Power 20