New FCPA Compliance Guidance DOJ Issues Long-Awaited Guidance - PowerPoint PPT Presentation

Presenting a live 90-minute webinar with interactive Q&A New FCPA Compliance Guidance DOJ Issues Long-Awaited Guidance Clarifying Agency Enforcement Policies and Approaches THURSDAY, DECEMBER 13, 2012 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: John E. Davis, Member, Miller & Chevalier , Washington, D.C. Kathryn Cameron Atkinson, Member, Miller Chevalier , Washington, D.C. 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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New FCPA Compliance Guidance December 13, 2012 John E. Davis and Kathryn Cameron Atkinson Miller & Chevalier Chartered Washington, DC

Overview • FCPA Basics • Enforcement Trends • Background on Efforts to Obtain Guidance or Changes to FCPA • Primary Aspects of New FCPA “Resource Guide” • Key Takeaways 5

Two Primary FCPA Elements • Anti-Bribery Provisions • Accounting Provisions  Books and Records Requirements  Internal Controls Requirements 6

FCPA Anti-Bribery Provisions: Elements of a Violation • No issuer , domestic concern , person with a U.S. nexus • May corruptly • Take any action in furtherance of payment or a promise, offer, or authorization of payment • Of a bribe or anything of value • Directly or indirectly (with “knowledge” ) • To a foreign official • To obtain or retain business or improper advantage 7

FCPA Accounting Requirements • Maintain books, records, and accounts that, in reasonable detail, accurately reflect transactions and the disposition of assets • Maintain a system of internal accounting controls sufficient to reasonably assure that transactions are:  Consistent with management authorizations  Recorded so that financials can conform with GAAP • Primarily civil/administrative penalties, but criminal for willful violations 8

FCPA Penalties • Corporate penalties: Criminal and civil fines, disgorgement of profits, prejudgment interest, imposition of monitorship or reporting requirements  BAE – $400 million (plus $45 million in UK)  Halliburton/KBR – $579 million  Siemens – $800 million (plus $800 million in Germany) • Potential for individual incarceration: Individuals can be independently charged • Conspiracy, aiding and abetting, money laundering • Parallel foreign penalties 9

Enforcement Trends • Cases more frequent, penalties higher • More criminal prosecutions • More individual prosecutions • International cooperation / enforcement abroad • Industry-focused investigations • Intrusive compliance requirements 10

Sustained Increase in FCPA Enforcement Total Resolved FCPA Enforcement Actions (DOJ and SEC) 1977 through 3Q 2012 120 100 80 60 40 20 0 Note : The 2012-14 totals are estimated based off of the current pace of enforcement through 3Q 2012. 11

Trends: Prosecutions of Individual Corporate Officials Note : Updated through September 30, 2012. 12

Sources of FCPA Guidance • Historic sources of FCPA guidance  Statute and its legislative history (no regulations)  Government enforcement manuals  DOJ Opinion Procedure  Settled dispositions  Court cases (mostly in last 4-5 years, as individuals seek their day in court) • Many key FCPA issues remain untested in court • Questions about transparency and consistency in FCPA enforcement practices have led to calls for formal guidance and/or statutory amendments to the Act 13

FCPA Guidance Timeline • Aug. 23, 1988 – 1988 FCPA amendments call for U.S. Attorney General (“AG”) to consider issuing FCPA guidelines. In 1990, DOJ declined, calling guidelines “unnecessary” • Oct. 2010 – OECD “Phase 3” working group recommends that DOJ/SEC consolidate publicly-available information on FCPA and raise awareness of anti-corruption issues for small- and medium-sized companies • Nov. 30, 2010 – Senate Judiciary Committee hearing examining FCPA enforcement • Jun. 14, 2011 – House Judiciary Committee hearing on FCPA • Nov. 8, 2011 – Assistant AG Breuer promises “ detailed new guidance” on FCPA’s criminal and civil enforcement provisions • Feb. 2012 – Stakeholder groups release letters and comments stipulating expectations for forthcoming FCPA guidance 14

Release of FCPA Resource Guide • On Nov. 14, 2012, DOJ and SEC jointly issued 120-page “Resource Guide on the U.S. FCPA” (“FCPA Guide”) • Agencies asserted that there is “no other area of the law” where the DOJ/SEC have “provided the public with as much information about our enforcement approach and priorities” • Agencies highlighted hypotheticals and attempts to provide “practical tips” regarding various compliance issues • Overall, FCPA Guide does not fundamentally change key enforcement positions (including those currently being challenged in court), but expressly clarifies current agencies practices, while confirming and consolidating public guidance and some “lore” in detail 15

Legal Status of FCPA Guide • Key language behind cover page • FCPA Guide is "non-binding, informal, and summary"  "does not constitute rules or regulations"  would have little legal authority if cited in court  “not intended to substitute for the advice of legal counsel on specific issues related to the FCPA” or as a definitive guide on “specific prospective conduct” • However, agency representatives have stated publicly that statements in Guide may reasonably be relied on and cited when negotiating with the agencies, which intend to abide by the Guide’s terms 16

Overview of FCPA Guide • Key Issues Covered in FCPA Guide  Foreign Official / “Instrumentality”  Gifts/Hospitality  3 rd Party Vetting and Vicarious Liability  Facilitating Payments / Extortion  Successor Liability / M&A Due Diligence  Jurisdiction Issues and Related Statutes  Accounting Provisions and Internal Controls  Hallmarks of Successful Compliance Program 17

Who Is a “Foreign Official”? • FCPA covers broad range of officials, including employees of “foreign government…or instrumentality thereof” • Past dispositions have involved, e.g., judges and legislators ( Lockheed ); customs officials ( Panalpina ); employees of government-owned refining joint venture ( KBR ); official of a public international organization ( Titan ); royal family member ( BAE ); employee of government- controlled tobacco monopoly (Alliance One); relative of official ( BellSouth ) • Recent court cases have focused on breadth of term “instrumentality” – especially state-owned companies and other “quasi - governmental” entities 18

FCPA Guide: Who Is an Official? • Requires “fact - specific analysis of entity’s ownership, control, status, and function” – no definitive list of instrumentalities • Discusses 11 “non - exclusive” relevant factors – some from rulings and jury instructions in recent court cases • Notes that “as a practical matter” entities are “unlikely to qualify” as instrumentalities “if a government does not own or control a majority of its shares” • However, cites 2010 Alcatel-Lucent disposition as exception, and notes other factors can apply • Reminds that commercial bribery can violate FCPA accounting provisions or other criminal laws 19

Gifts & Hospitality: Basics • Key considerations under FCPA:  Bribes can be “anything of value”  Gifts & hospitality must not be given “corruptly” for the purpose of influencing an official act or decision  Affirmative defense for gifts & hospitality that are “reasonable and bona fide ” and directly related to:  Promotion, demonstration, or explanation of products or services, or  Performance of a contract with a government entity 20