Foreign Corrupt Practices Act Compliance Guidebook

MARTIN T. BIEGELMAN has been fighting fraud and corruption for more than thirty-five years in various roles in law enforcement, consulting, and the corporate sector. He is currently Director of Financial Integrity for Microsoft Corporation, where he built and leads a worldwide fraud prevention and anti-corruption program. DANIEL R. BIEGELMAN is an attorney with the law firm of Baker Hostetler. He is a member of the Litigation Practice Group in their New York office. Daniel is a Certified Compliance and Ethics Professional and a member of the Society of Corporate Compliance and Ethics. He is a contributing author to Building a World-Class Compliance Program: Best Practices and Strategies for Success (Wiley). He is also the author of articles on the FCPA and corporate compliance.

• Foreword xixPreface xxiAcknowledgments xxv1 BRIBERY, CORRUPTION, AND THE FOREIGN CORRUPT PRACTICES ACT 1Global Crackdown 3Devastating Cost of Corruption 4Government’s Commitment to FCPA Enforcement 6FBI’s Laser Focus on Anti-Corruption 7Watergate and the Birth of the FCPA 8Securities and Exchange Commission Enters the Fight 9Senate Investigations 10Kissinger’s Resistance 11Lockheed’s Defiance 12Questionable Corporate Payments Task Force 13FCPA Enactment 14Compliance Insight 1.1: First FCPA Prosecution 15Criticism of the FCPA 17A Culture of Compliance 182 OVERVIEW OF THE FOREIGN CORRUPT PRACTICES ACT 23FCPA Provisions 23Leveling the Playing Field 25Antibribery Provisions 25Jurisdiction 29Facilitating Payments 29Affirmative Defenses 30FCPA Elements Summary 30Compliance Insight 2.1: Metcalf and Eddy Civil FCPA Settlement 31Books, Records, and Internal Controls Provision 34Books and Records Elements Summary 35Sarbanes-Oxley and the FCPA 35Opinion Procedure 36Penalties 37Third-Party and Successor Liability 39Compliance Insight 2.2: Self-Disclosure Follows M&A Activity 40Why Corruption Matters 41Compliance Insight 2.3: Afghanistan: A Case Study in Corruption 42Increased Enforcement 453 GOVERNMENT GUIDANCE AND SIGNIFICANT CASES 49Filip Memorandum 50FCPA Compliance Programs: Case Law Guidance 52A Lesson in Overseas Compliance 53Compliance Insight 3.1: Rogue Employee Does the Crime, Company Does the Time 54Cold Cash: U.S. v. Jefferson 56Voluntary Disclosure 58Evaluating the Seaboard Criteria in Mitigating Enforcement Actions 58Compliance Insight 3.2: Appointment of Corporate Monitor Results in Charges of Cronyism 62Selecting a Monitor: The Morford Memo Standards 63Thought Leader in Corporate Compliance: George Stamboulidis 65Government Procurement Fraud and the FCPA 68Federal Acquisition Regulations Disclosure Requirements and the FCPA 68Business Ethics Awareness and Compliance Program 704 GLOBAL ANTI-CORRUPTION EFFORTS 75Globalization of Law Enforcement Cooperation 76International Antibribery Efforts 77OECD Convention on Combating Bribery 77Inter-American Convention Against Corruption 79European Union Convention on the Fight Against Corruption 81African Union Convention on Preventing and Combating Corruption 81Council of Europe Criminal Law Convention on Corruption 82United Nations Convention Against Corruption 84United Nations Global Compact 86Canada’s Corruption of Foreign Public Officials Act 86Compliance Insight 4.1: INTERPOL Fights Corruption 87International Anti-Corruption Organizations 89Transparency International 89Corruption Perceptions Index 89Compliance Insight 4.2: 2009 Corruption Perceptions Index: Top 20 Countries 90Compliance Insight 4.3: 2009 Corruption Perceptions Index: Bottom 20 Countries 91Other Transparency International Resources 91Compliance Insight 4.4: Foreign Bribery Enforcement in OECD Convention Countries 92Compliance Insight 4.5: Foreign Bribery Cases and Investigations 93Compliance Insight 4.6: Status of Foreign Bribery Cases 94 World Bank 95International Monetary Fund 97Asian Development Bank 97World Trade Organization 98Partnering Against Corruption Initiative 99Thought Leader in Corporate Compliance: Alan Boeckmann 100Global Anti-Corruption Enforcement Trends 102The Good Fight Against Corruption 1035 SIEMENS: A NEW COMMITMENT TO A CULTURE OF COMPLIANCE 107Company Overview and History 108The Road to Corruption 108Munich Public Prosecutor’s Office Investigation 110Self-Disclosure and Subsequent Internal Investigation 111Legal and Fair Internal Investigation 112Project Office Compliance Investigation 113Amnesty and Leniency Programs 113Cooperation with Law Enforcement 114Compliance Comeback 114Criminal Charges, Plea Agreements, and Fines 115Compliance Insight 5.1: Key Elements of Siemens’ Compliance Program: Prevent–Detect–Respond 116New Corporate Compliance Program 119Corporate Compliance Monitor 121Siemens’ Remedial Efforts 122Replacement of Top Management 122Comparison of Old and New Compliance Programs 123Clear Reporting Lines 124Training and Communication 125Anti-Corruption Training Program 125Anti-Corruption Handbook 126Ombudsman Program 126Strengthened Internal Audit Function 126Enhancing Internal Controls 127Enhanced Policies and Procedures 128Compliance Insight 5.2: Enhancement of Policies and Procedures 128Compliance Helpdesk 129Anti-Corruption Toolkit 129Compliance Insight 5.3: Siemens’ Anti-Corruption Toolkit Focus Areas 130Business Partner Review and Approval 131Supplier Code of Conduct 132Compliance Insight 5.4: Business Partner Review and Approval Process 133Corporate Disciplinary Committee 134Compliance Element of Senior Management Compensation 134Compliance Progress Report 134Compliance Insight 5.5: Siemens’ Compliance Progress Report from Q2 FY 2009 135Becoming a Recognized Leader in Compliance 136Compliance Insight 5.6: Siemens’ Compliance Objectives for 2009 136Partnering with the World’s Anti-Corruption Community 136Partnering Against Corruption Initiative 137Business Guide on Fighting Corruption 137The Road Forward 1386 WORLDWIDE HOTSPOTS FOR CORRUPTION: UK, RUSSIA, AFRICA, THE MIDDLE EAST, AND LATIN AMERICA 143Overview 144Thought Leader in FCPA Compliance: Scott Moritz 145The Natural Resource-Corruption Link 147UK Tackles International Corruption 148Compliance Insight 6.1: Weak Internal Controls Leads to Fine for Insurance Giant 149UK Bribery Bill 151Mabey & Johnson Prosecution 152Strong Message from the SFO 153Russia 154Doing Business in Russia 156Africa 157Nigeria 158Middle East 160The Oil-for-Food Scandal 161Compliance Insight 6.2: Companies Implicated in Oil-for-Food Scandal 162Iraq Today 163Latin America 163Cases of Corruption 164Multinational Company As Victim 1657 WORLDWIDE HOTSPOTS FOR CORRUPTION AND BRIBERY: CHINA, CENTRAL ASIA, INDIA, AND ASIA PACIFIC 171China 172The Dangers of Agents: Avery Dennison 172Heightened Anti-Corruption Enforcement Efforts in China 174Corruption and Societal Discontent 176Criminal Law of the People’s Republic of China 176Company Law of the People’s Republic of China 177Anti-Unfair Competition Law of the People’s Republic of China 177Invitation and Submission of Bids Law of the People’s Republic of China 178Interim Provisions on the Prohibition Against Commercial Bribery Acts 179China Enforcement Agencies 179Commission for Discipline Inspection of the Communist Party 179Supreme People’s Procuratorate of the People’s Republic of China 179Ministry of Public Security of the People’s Republic of China 180State Administration for Industry and Commerce of the People’s Republic of China 180The Dangers of Doing Business in China 180Central Asia 182‘‘Mr. Kazakhstan’’ 182Head in the Azeri Sand 184Baker Hughes 185India 186Asia Pacific 187Indonesia 188Vietnam 188South Korea 189Taiwan 1908 BAE SYSTEMS: PAST BEHAVIOR HAUNTS THE COMPANY 197Al Yamamah Deal 198Compliance Insight 8.1: Suspicious Activity Report, January 30, 2004 199FBI Scrutiny 200BAE’s Denial 200Serious Fraud Office Inquiry 201Tony Blair Quashes the Investigation 201DOJ’s Hard-Line Approach 204BAE Response 204Compliance Insight 8.2: Types and Numbers of Calls to BAE’s Ethics Helpline 205Woolf Committee 206BAE Follows a Different Path 2079 DESIGNING AN EFFECTIVE ANTI-CORRUPTION COMPLIANCE PROGRAM 211Federal Sentencing Guidelines for Organizations 213The Seven Steps to an Effective Compliance Program 214DOJ Guidance on Anti-Corruption Compliance Programs 217Compliance Program Design 219Red Flags and Risk Areas 221Department of Justice’s FCPA Red Flags 221Red Flags When Doing Business With Third Parties 222Travel and Entertainment 223Gifts 225Mergers and Acquisitions 225Compliance Insight 9.1: Inherent Compliance Risk in Acquisitions and New Business Lines 226Autonomous International Business Units 227Don’t Ignore Small Payments 228Facilitation Payments 228Corrupt Payments 229Anti-Corruption Design Never Ends 229Thought Leaders in FCPA Compliance: Joseph Spinelli, Scott Moritz, and Jay Perlman 23010 IMPLEMENTING AN EFFECTIVE ANTI-CORRUPTION COMPLIANCE PROGRAM 237Anti-Corruption Standards and Procedures 238Training and Communication 241Red Flags Training 243Anti-Corruption Training Best Practices 244Compliance Insight 10.1: Driving Home the Impact of Corruption 245Delivery Methods for Training 246Specific Anti-Corruption Reporting Mechanism 246Communicating the Compliance Program 247Evaluating Your Anti-Corruption Training Program 248M&A Due Diligence 250Risk Assessments 251Thought Leader in FCPA Compliance: Leslie McCarthy 252Internal Accounting Controls 256Role of Internal Audit 256Anti-Corruption Audit Program 257Other Compliance Program Best Practices 260Field-Based Compliance Officers 260FCPA Enforcement Database 261Benchmarking 261Commitment to Anti-Corruption Compliance Programs 261Compliance Insight 10.2: Sample Compliance Activities Checklist 26211 MONSANTO: FIGHTING CORRUPTION FOR A BETTERWORLD 265A Commitment to Agriculture 266DOJ and SEC FCPA Investigation 266Acceptance of Responsibility and Remedial Actions 268Compliance Insight 11.1: Monsanto Compliance Program Overview 269Tone at the Top and a Revamped Code of Conduct 269Messages from Senior Leaders 271Business Conduct Office 272Training 273Regional Working Groups 274FCPA Working Group Guidelines 275Compliance Insight 11.2: Monsanto Business Conduct Policy Employee Guidelines 276Gifts, Entertainment, and Other Promotional Expenditures 278Per Diem Payments 280Facilitating Payments 280Political Donations 281Charitable Donations and Donations to Governments 281Trade Associations 282Doing Business with Foreign Officials and Their Relatives 283Dealing with Third Parties 283Training Third Parties 285Joint Ventures 286Contractual Safeguards and Oversight 287Audit 288Opinion from Outside Counsel 289Local Law Advice 290Response to Possible Violations 291Internal and Independent Investigations 291Internal Coordination and Training 291The Monsanto Pledge 29212 INTERNAL INVESTIGATIONS 293Consequences of Failing to Act 294Preparing for the Investigation 296Preserving Documentary and Electronic Information 297Assembling the Investigative Team 298Investigations Code of Conduct 299Investigative Plan 301Conducting Interviews 303Thought Leader in Internal Investigations: David Z. Seide 304Employee Legal Representation 307Interviewing and Reporting 308Employee Cooperation with Company Investigations 309International Investigations 310Anti-Corruption Enforcement Trends 310Siemens Internal Investigation Approach 311Determining Systemic Corruption and FCPA Violations 312Self-Disclosure of FCPA Violations 313Compliance Emergency Preparedness Kit 31513 PAST, PRESENT, AND FUTURE OF THE FCPA 319The Past 320The Present 321Thought Leader in FCPA Compliance: Marjorie Doyle 323Corporate Ignorance Is Not Bliss 328It’s Not Rocket Science 329On the Horizon 330The Future 330Battling the Disease of Corruption 331Appendix Opinion Procedure Releases 335About the Authors 347Index 351