The Anti-Corruption Report

The definitive source of actionable intelligence covering anti-corruption laws around the globe

Articles By Topic

By Topic: Travel and Entertainment

  • From Vol. 7 No.20 (Oct. 3, 2018)

    How Much Golf Is Too Much Golf? Lessons From the UTC SEC Settlement

    United Technologies Corporation, a building systems and aerospace conglomerate, recently settled bribery issues with the SEC after the DOJ declined to prosecute. Despite media reports of the corruption that pre-dated the company’s report to the government, the company won full credit for self-disclosure and cooperation from U.S. authorities and paid a total of just under $14 million. The case illustrates the value of being forthright with the government and offers lessons about what makes entertainment expenses pass SEC muster. See our two-part series on how to answer the question “There’s a problem, now what?”: “Philip Urofsky of Shearman Explains the Logistics of Self-Reporting” (Sep. 14, 2016); and “Richard Smith of Quinn Emanuel Discusses Framing Voluntary Disclosure to Minimize Cost and Maximize Credit” (Mar. 15, 2017).

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  • From Vol. 7 No.18 (Sep. 5, 2018)

    How Hewlett Packard Enterprise Is Using Its GTE Tool to Increase Compliance

    A tool that streamlines a company’s process for approving and tracking gifts, travel and entertainment can decrease the risk of such amenities being used to improperly influence foreign officials. During a recent conversation with The Anti-Corruption Report, Becky Rohr, a vice president and the associate general counsel at Hewlett Packard Enterprise (HPE), discussed how the technology company is updating its GTE tool to increase compliance with its policies and to provide the company with even greater insights into employee behavior. For additional insights from Rohr, see “Addressing Three Unique Challenges of Pre-Acquisition Anti-Corruption Due Diligence in the Technology Industry” (Aug. 2, 2017).

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  • From Vol. 6 No.5 (Mar. 15, 2017)

    Practitioners Take the Pulse of Anti-Corruption Compliance and Enforcement in China

    China’s aggressive but sometimes opaque anti-corruption efforts have been making headlines for the past several years and companies are facing a “fluid enforcement environment,” according to Nathan G. Bush, a partner at DLA Piper. The domestic anti-corruption efforts of President Xi Jinping’s regime and uncertainty over how the Trump administration will enforce the FCPA and interact with Beijing make anti-corruption compliance particularly challenging. A recent Strafford seminar featuring Michael S. Diamant and Michael Li-Ming Wong, partners at Gibson Dunn, and Cindy Hong, a partner at K&L Gates, offered a thorough overview of the current state of the anti-corruption and political climate in China. This article summarizes the key insights from the program. See our two-part series on China’s State Secrets Law: “A Primer for Anti-Corruption Practitioners (Part One)”(Jun. 29, 2016); and “Six Things to Consider When Engaging in Internal Investigations in China (Part Two)” (Jul. 13, 2016).

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  • From Vol. 5 No.18 (Sep. 14, 2016)

    Familiar Schemes Land AstraZeneca $4 Million of Disgorgement and Small Penalty

    Global pharmaceutical company AstraZeneca quietly settled FCPA-related books-and-records allegations with the SEC recently. According to the Commission’s bare-bones cease-and-desist order, the company failed to devise and maintain internal controls relating to interactions with health care practitioners in China and Russia. While details were sparse, familiar schemes such as fapiao fraud and sham speaker contracts played a role in China. To settle the charges, the company agreed to pay disgorgement of more than $4 million as well as a $375,000 penalty. See “Travel Agency Abuse, Falsified Expense Reports and Other Hospitality Blunders Lead to $25 Million Novartis Settlement” (Apr. 6, 2016).

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  • From Vol. 5 No.16 (Aug. 10, 2016)

    Managing Corruption Risk When Hiring and Training Foreign Officials and Their Relatives Overseas: Practical Compliance Guidance (Part Two of Two)

    More than a decade after the overseas anti-corruption enforcement boom began, it is clear that the U.S. government is looking to prosecute corruption that takes non-traditional forms. Providing internships, education, gifts, hospitality and entertainment to, or at the request of, government officials can all lead to anti-corruption troubles. For companies operating in the extractive industry, subject to local content laws that require them to provide such opportunities to the local workforce, compliance is key. In a two-part guest article series, Andrew Costa, the general counsel and assistant secretary of the Atlantic Methanol Companies, along with Jeremy Levin, a partner at Baker Botts, and his associate Louie Layrisson, discuss how to overcome overseas hiring and training challenges. The first article distilled insights from U.S. settlements regarding the government’s expectations for hiring practices and training programs. This second article provides guidance on mitigating risks associated with training foreign officials and hiring their relatives. See “Hiring Practices and FCPA Compliance in the Wake of the BNY Settlement (Part One of Two)” (Jan. 13, 2016); Part Two (Jan. 27, 2016).

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  • From Vol. 5 No.12 (Jun. 15, 2016)

    Addressing Five Major Compliance Issues Posed by Brazil’s 2016 Olympic Games

    Brazil’s president has been stripped of authority and faces impeachment proceedings. High-ranking politicians and major companies stand accused of far-reaching corruption as a result of Operation “Car Wash.” The country is experiencing an economic crisis that enlarges as fast as the political panorama shifts. It is in the midst of this turmoil that Brazil will host the Games of the XXXI Olympiad, the first ever hosted in South America. In a guest article, Giovanni Falcetta, Thaísa Toledo Longo, Shin Jae Kim and Renata Muzzi of Brazilian law firm TozziniFreire outline the five largest corruption risks facing companies that seek economic opportunities connected to the Games and detail the laws and regulations governing Olympic-related anti-corruption compliance. For more insight from TozziniFreire, see “Regional Risk Spotlight: Giovanni Falcetta of TozziniFreire Talks Anti-Corruption in Brazil Beyond the Petrobras Scandal” (Mar. 23, 2016). 

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  • From Vol. 5 No.7 (Apr. 6, 2016)

    Travel and Entertainment Corruption Risks: Internal Controls to Ensure the Program Is Working (Part Three of Three)

    A strong travel and entertainment policy that clearly delineates between an acceptable business expense and an impermissible bribe is critical to keeping a company out of FCPA trouble. But a policy alone is not enough – a company must also have sufficient internal controls in place to ensure that employees understand and follow company policies. In this final installment of The FCPA Report’s three-part series on travel and entertainment expenses, we explore the controls companies should have in place to keep their travel and entertainment programs working effectively. The first article in the series discussed the hallmarks of an appropriate T&E expense and the second looked at T&E policies. See also “Five Stages of Corruption and Myriad Internal Controls Failures: Compliance Takeaways From the VimpelCom Settlement” (Mar. 9, 2016).

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  • From Vol. 5 No.7 (Apr. 6, 2016)

    Travel Agency Abuse, Falsified Expense Reports and Other Hospitality Blunders Lead to $25 Million Novartis Settlement

    In the fourth similar settlement in the last six months, pharmaceutical giant Novartis has agreed to pay $25 million to settle SEC charges that it violated the books and records and internal controls provisions of the FCPA by bribing foreign officials. “The Novartis case is essentially the GSK case, with fewer zeroes and headlines,” Amy Sommers, a partner in K&L Gates’ Shanghai office, told The FCPA Report. Indeed, the scheme underlying Novartis’ troubles is familiar – employees and agents of the company’s Chinese subsidiaries provided travel, gifts and entertainment to health care providers to encourage sales of Novartis’ products. “The Novartis case appears to have arisen by virtue of inquiries made by the SEC in the wake of reporting about the GSK case in 2013,” Sommers explained. See also our coverage of the SciClone, PTC and Bristol Myers Squibb settlements.

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  • From Vol. 5 No.6 (Mar. 23, 2016)

    Travel and Entertainment Corruption Risks: Three Musts for a Strong T&E Policy and Five Ways a Company Can Customize Its Program (Part Two of Three)

    A strong travel and entertainment policy is the bedrock of a compliance program, but a policy that is overly complicated or doesn’t consider business realities may undermine a company’s compliance efforts. In this article, the second in a three-part series on travel and entertainment expenses, we explore three characteristics of a strong T&E compliance policy and five ways companies can customize their policy to their business. The first article in the series outlined five hallmarks of an acceptable T&E expense and the third article will investigate what internal controls a company needs to make sure that its program is functioning properly. See also “How to Build an Anti-Corruption Policy That Allows for Appropriate Business Gifts” (Sep. 19, 2012).

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  • From Vol. 5 No.5 (Mar. 9, 2016)

    Travel and Entertainment Corruption Risks: Five Hallmarks of an Acceptable Hospitality Expenditure (Part One of Three)

    Flying clients to visit factories, putting them up in hotels while they attend meetings and picking up the tab for their dinner can all be regular and acceptable business activities. But when those clients are officials of foreign governments, companies must tread carefully to ensure that genuine business expenses don’t become impermissible bribes. The abuse of travel and entertainment expenses was one of the first areas of focus for the government when it escalated FCPA enforcement over a decade ago and now many companies have established T&E compliance programs. However, as recent settlements involving T&E demonstrate, companies cannot afford to become complacent. This article, the first in a three-part series, sketches in the contours of the boundary between acceptable entertainment and corruption and identifies five hallmarks of appropriate travel and entertainment. Subsequent articles will address what a solid travel and entertainment policy should look like and how companies can actively monitor their T&E programs to prevent fraud and corruption. See also “A Guide to Detecting and Preventing Expense-Reimbursement Fraud (Part One of Three)” (Apr. 16, 2014); Part Two (Apr. 30, 2014); and Part Three (May 14, 2014).

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  • From Vol. 5 No.5 (Mar. 9, 2016)

    Qualcomm’s $7.5 Million Settlement for Princeling Hirings Enabled by Three Key Compliance Failures

    Qualcomm Inc., a major designer of wireless telecommunications products, has agreed to pay a civil monetary penalty of $7.5 million to the SEC to settle FCPA charges. According to the SEC, Qualcomm hired the relatives of Chinese government officials and also provided extensive gifts, travel and entertainment to the foreign officials and their families to influence those officials’ purchasing decisions. The case shows that hiring family members of foreign officials “clearly needs to be on companies’ risk assessment radar,” asserted Jeffrey Kaplan, a partner at Kaplan & Walker. The case is also a reminder that companies still need to be mindful of more traditional corruption risks such as gifts, travel and entertainment and a weak compliance program. See “Hiring Practices and FCPA Compliance in the Wake of the BNY Settlement (Part One of Two)” (Jan. 13, 2016); Part Two (Jan. 27, 2016).

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  • From Vol. 5 No.4 (Feb. 24, 2016)

    Excessive Power for Junior Employees and Lavish Trips for Foreign Officials Lead to $28 Million PTC Settlement

    PTC Inc., a Massachusetts-based software company, will pay more than $28 million to settle parallel civil and criminal FCPA charges. Like FLIR and SciClone, PTC’s corruption troubles stemmed from the provision of improper travel, gifts and entertainment to government officials. By inflating the fees paid to third parties for their services, junior employees of PTC’s China-based subsidiaries created pools of money that were then used to fund sightseeing adventures. Officials visited Honolulu, San Diego, New York and Las Vegas and enjoyed guided tours, golfing and other leisure activities. The SEC also announced its first DPA with an individual in an FCPA case, agreeing to defer prosecution against Yu Kai Yuan, a former employee of a PTC subsidiary, because of the significant cooperation he provided during the SEC investigation of the company. The voluntary disclosure calculus and how to handle relationships with lobbyists were among the key compliance concerns implicated in the PTC matter. See “CEO of LAN Airlines Settles FCPA Charges With SEC Over Union Dispute” (Feb. 10, 2016).

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  • From Vol. 5 No.3 (Feb. 10, 2016)

    Travel Agencies, Fapiao and Hospitality: $12.8 Million SciClone Settlement Highlights Diversity of Risk in China

    The allegations in the recent SciClone Pharmaceuticals’ FCPA settlement read like a “how to” manual for bribing foreign officials in China. SciClone employees paid for foreign officials to attend a beer festival, gave officials language classes as gifts, used travel agencies to disguise entertainment as legitimate conferences, submitted fake fapiao to falsify expense reports and more. To resolve these widespread bribery schemes at SciClone’s Chinese subsidiaries, the company, a U.S.-based, China-focused, specialty pharmaceutical company, agreed to pay $12.8 million and self-report to the SEC for a period of three years. We analyze the key compliance takeaways from the settlement. See also “The Emperor Is Far Away: The Evolving Nature of Third-Party Risk in China” (Sep. 9, 2015).

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  • From Vol. 4 No.17 (Aug. 19, 2015)

    James Tillen of Miller & Chevalier Talks 2015 Enforcement Trends and Predictions

    The first half of 2015 is behind us, providing an opportunity to reflect on new trends in anti-corruption enforcement and what companies can expect going forward.  A number of FCPA actions have made the news this year, but identifying trends and making predictions requires a more careful look at the numbers.  As part of its FCPA Summer Review 2015, Miller & Chevalier has analyzed enforcement data and identified several trends in the first half of 2015, including a noticeable increase in the number of declinations by the DOJ.  The FCPA Report spoke with James Tillen, a member of M&C and vice chair of the firm’s international department, about these trends, how companies should use them to improve their compliance programs and their negotiating strategies with the government and his predictions for the second half of 2015.  See also “Government Officials and Defense Bar Offer Insights on FCPA Enforcement, Voluntary Disclosure and Cooperation,” The FCPA Report, Vol. 4, No. 14 (Jul. 8, 2015).

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  • From Vol. 4 No.13 (Jun. 24, 2015)

    FCPA Enforcement Officials and Defense Bar Advise on Anti-Corruption Compliance Policies

    What does the government really expect from a compliance program?  When will a company get cooperation credit?  These were among the questions tackled by FCPA experts in the private and public sectors during a recent program hosted by Practising Law Institute.  The panelists included Kara N. Brockmeyer, chief of the SEC’s FCPA Unit of the Division of Enforcement and Matthew S. Queler, an assistant chief in the Fraud Section of the DOJ’s Criminal Division.  Sharing the perspective of the defense bar were Kimberly A. Parker, a partner at WilmerHale; Jeffrey D. Clark, a partner at Willkie Farr & Gallagher and former Assistant U.S. Attorney in the District of New Jersey; and Mark F. Mendelsohn, a partner at Paul, Weiss, and former deputy chief of the Fraud Section of the DOJ’s Criminal Division.  A companion article, published in our last issue, contained the panelists’ discussion on hot topics such as international coordination of anti-corruption cases, a rising bar for cooperation credit and the availability of declinations.

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  • From Vol. 4 No.12 (Jun. 10, 2015)

    WilmerHale Partners Discuss How Private Fund Managers Can Address Growing Corruption Risks

    The financial services industry is under increased scrutiny from anti-corruption enforcement authorities both in the U.S. and abroad.  Fund managers face two primary types of corruption risks.  First, employees or third parties engaged by a manager may make improper payments to secure business.  Second, a fund may acquire a stake in a company that is engaging in corrupt practices.  During a recent program hosted by Lawline, Kimberly A. Parker and Erin G.H. Sloane, both partners at WilmerHale, discussed these and other corruption risks faced by fund managers and provided actionable advice on how to address them.  See “Private Equity FCPA Enforcement: High Risk or Hype?,” Vol. 4, No. 4 (Feb. 18, 2015).

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  • From Vol. 4 No.12 (Jun. 10, 2015)

    In-House and Outside Counsel Share Advice on Risk Assessments, Gift Policies and Third-Party Due Diligence

    Effective risk assessments, strong third-party practices and gifts and hospitality procedures that hold up under fire are at the heart of best-in-class anti-corruption compliance programs.  In a recent Practising Law Institute event, moderated by Gibson Dunn partner Richard W. Grime, outside and in-house counsel discussed how they tackle developing, implementing and monitoring those essential features of compliance programs.  The panel included Kathryn Cameron Atkinson, a member at Miller & Chevalier, Patricia M. Byrne, VP and Associate General Counsel for International Compliance at BAE Systems, Inc., and William B. Jacobson, a partner at Orrick.  See The FCPA Report’s Conducting Effective Anti-Corruption Due Diligence on Third Parties Interview Series: Gwen Romack, Director of Global Anti-Corruption at Hewlett-Packard, Vol. 2, No. 20 (Oct. 9, 2013); Principals at Nardello & Co., Vol. 2, No. 19 (Sep. 26, 2013); and Alice Fisher, Partner at Latham & Watkins, Vol. 2, No. 18 (Sep. 11, 2013).

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  • From Vol. 4 No.11 (May 27, 2015)

    Detecting and Mitigating Corruption Risk When Participating in Public Procurements: Steps to Take Prior to Entering into a Procurement Process (Part Two of Three)

    The World Bank estimates that in high-risk countries, public procurement can account for up to 60 to 70 percent of all government expenditures.  As companies continue to expand globally, more view engaging in public procurements as a tremendous growth opportunity.  However, such activity is inherently risky given the necessary interaction with government officials.  How can a company get a slice of the public procurement pie while mitigating bribery risk?  This three-part article series is designed to educate companies on the risks they face when participating in a public procurement process and help provide a framework for an implementable anti-corruption policy relevant to that process.  The first article examined how procurement works and when and how bribery occurs during the procurement process.  This, the second article in the series, details six steps a company should take prior to engaging in a procurement process.  The third article will explore additional actions the company should take during and after the process. 

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  • From Vol. 4 No.11 (May 27, 2015)

    Five Compliance Failures that Led to FCPA Charges for BHP Billiton’s 2008 Olympic Sponsorship Program

    BHP Billiton took its sponsorship of the 2008 Beijing Olympics a step too far, the SEC alleged in an administrative order resolving FCPA charges with the Australian mining giant.  The SEC announced on May 20, 2015 that BHP Billiton entities (BHPB) agreed to pay $25 million to settle charges that in 2008, despite a screening process for invitees to the Olympics designed to mitigate bribery risk, it provided luxury travel and hospitality for foreign government officials from whom it sought business.  The SEC cites five failures of BHPB’s program in its Order, demonstrating how the tension between the marketing and compliance departments can result in compliance programs that may look effective on paper but do not hold up on the ground.  See also Nine Steps to Reduce Corruption Risk When Entertaining Clients at the 2014 Winter Olympics and Beyond,” The FCPA Report, Vol. 3, No. 3 (Feb. 5, 2014).

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  • From Vol. 4 No.8 (Apr. 15, 2015)

    $9.5 Million SEC FLIR Settlement Emphasizes Benefits of Self-Reporting and Importance of Internal Controls

    Employees often ask compliance officers about what is acceptable when entertaining or providing gifts to foreign officials.  How much is too much?  The FLIR fact pattern provides a clear case of “too much.”  Months after two of its employees had been sanctioned for the same behavior, FLIR Systems, Inc., an Oregon-based company that develops infrared technology, has resolved SEC charges that it took key officials of the Saudi Arabia Ministry of Interior on an extensive “world tour” and bought them luxury gifts.  “FLIR’s deficient financial controls failed to identify and stop the activities of employees who served as de facto travel agents for influential foreign officials to travel around the world on the company’s dime,” said Kara Brockmeyer, Chief of the SEC Enforcement Division’s FCPA Unit.  Despite the extravagant travel and gifts, FLIR did escape a DOJ enforcement action.  We discuss the details and takeaways from the case.  See also “A Guide to Preventing and Detecting Travel Agency Corruption (Part One of Three),” The FCPA Report, Vol. 3, No. 1 (Jan. 8, 2014); Part Two of Three, Vol. 3, No. 2 (Jan. 22, 2014); Part Three of Three, Vol. 3, No. 3 (Feb. 5, 2014).

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  • From Vol. 4 No.1 (Jan. 7, 2015)

    Recordbreaking Alstom Criminal FCPA Settlement Results from Wide-Ranging Bribery Scheme and Lack of Cooperation

    The Department of Justice ended 2014 with its largest criminal FCPA enforcement action yet.  On December 22, 2014, Alstom S.A., a French engineering, power and transportation company, agreed to pay $772 million to resolve charges relating to widespread bribery involving tens of millions of dollars paid to foreign officials across the globe.  The bribery schemes included travel for foreign officials, bribes disguised as charitable payments and funds funneled to foreign officials via third parties.  The case brings up questions of jurisdiction, the consequences of failing to cooperate, as well as successor liability, given Alstom’s pending sale to General Electric.  The intersection of U.S. and French law may also have affected the terms of this settlement.  With insight from Edward Kang, a partner at Alston & Bird, The FCPA Report analyzes the salient facts and terms of the resolution, and draws compliance takeaways.  See also “Compliance Lessons from Total S.A.’s $398 Million FCPA Settlement: Foreign Cooperation, Compliance Monitors, Broad Jurisdiction and the Effect of Reluctant Cooperation with the DOJ and SEC,” The FCPA Report, Vol. 2, No. 12 (Jun. 12, 2013).

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  • From Vol. 4 No.1 (Jan. 7, 2015)

    Anti-Corruption Compliance Lessons from the Avon Settlements

    After a six-year investigation that cost the company upwards of $344 million, Avon has resolved FCPA charges with the DOJ and SEC, agreeing to pay $135 million in penalties.  In a guest article, Michelle J. Shapiro and Kiran Patel, partner and associate, respectively, at Dentons, analyze the settlements and draw three anti-corruption compliance lessons from the saga.  See also “Avon Class Action Dismissal Illustrates Challenges of FCPA-Related Shareholder Derivative Suits,” The FCPA Report, Vol. 3, No. 21 (Oct. 22, 2014).

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  • From Vol. 3 No.25 (Dec. 17, 2014)

    Scientific Instrument Company Bruker Settles Civil FCPA Action for $2.4 Million, Raising Recurrent FCPA Themes

    Sightseeing trips around the world for employees of Chinese state-owned enterprises and sham collaboration agreements with those SOEs form the basis the SEC’s FCPA settlement with Bruker Corp., a Massachusetts-based manufacturer of scientific instruments.  The case features many of the recurring elements from past enforcement actions: employees of state-owned entities who may not intuitively be thought of as foreign officials; all-expenses-paid leisure trips disguised as business trips for officials responsible for purchasing decisions; weak compliance measures, including a failure to translate training presentations and hotlines into Chinese and the lack of an independent compliance or internal audit function in China; and no charges based on the anti-bribery provisions of the FCPA.

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  • From Vol. 3 No.23 (Nov. 19, 2014)

    SEC Sanctions Two FLIR Systems Employees for Bribing Saudi Officials

    Two former employees of FLIR Systems, Inc., an Oregon-based defense contractor, sent Saudi Arabian officials on a 20-day, self-described “world tour” and bought them luxury watches to retain business, the SEC says.  When the expenses were flagged by FLIR, the employees covered them up.  In its first administrative action sanctioning individuals for FCPA violations since 2012, the SEC fined one employee $50,000 and the other $20,000 for their actions.  The investigation is continuing.  William Michael, a partner at Mayer Brown, shared his views on the case with The FCPA Report.  See also “Four Hallmarks of Permissible Gifts and Entertainment: Insight from PepsiCo and Paul Hastings,” The FCPA Report, Vol. 3, No. 2 (Jan. 22, 2014). 

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  • From Vol. 3 No.22 (Nov. 5, 2014)

    U.K. Practitioners Discuss Trends and Prosecutions Under the Bribery Act

    The U.K.’s Bribery Act of 2010 has broad extraterritorial reach, and prohibits a wider range of conduct than the FCPA, making awareness of its enforcement and interpretation important for many multi-national companies.  A recent program organized by the Society of Corporate Compliance and Ethics (SCCE) provided an update on the Bribery Act from experienced U.K. practitioners.  Margaret Hambleton, CCO of Dignity Health and SCCE Board Member, hosted the program.  The speakers were Jonathan Armstrong, a partner in U.K. solicitors firm Cordery Legal Compliance, and André Bywater, a principal advisor at that firm.  See also “Corruption Risks and Anti-Corruption Strategies in the E.U.,” The FCPA Report, Vol. 3, No. 10 (May 14, 2014).

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  • From Vol. 3 No.15 (Jul. 23, 2014)

    Five Corruption Risks in the Financial Services Industry

    Given the increased attention from the government, how can principals and employees of private equity firms, hedge fund managers, broker-dealers and other financial services firms – as well as their principals and employees – protect themselves from FCPA violations?  What are the most vulnerable parts of their businesses?  At a recent PracticeEdge session hosted by the Regulatory Compliance Association, “FCPA Regulation and Enforcement for Asset Managers,” Ronald Wood, a partner at Proskauer Rose; Kara Brockmeyer, Chief of the SEC’s FCPA Unit; Andrew Levine, a partner at Debevoise & Plimpton; and Paula Anderson, a partner at Shearman & Sterling, identified five major risk areas for the financial services industry and explained how companies can mitigate those risks.  See also “Compliance Leaders from Citgroup and Morgan Stanley Examine FCPA Risks and Solutions for Financial Institutions,” The FCPA Report, Vol. 3, No. 10 (May 14, 2014).

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  • From Vol. 3 No.12 (Jun. 11, 2014)

    Mitigating FCPA Risks Associated with Incentive Awards to Third Parties

    The use of incentive awards to recognize outstanding sales staff, dealers or downstream business partners who market or sell a company’s goods and services is a well-established business practice.  Such incentive awards can take the form of cash, gifts or vouchers for retail shopping, travel and dining.  For top sales staff or dealers, the incentive may be an off-site retreat that includes both training, promotion of products and services, and hospitality.  In a guest article, Adam Safwat, counsel at Weil, Gotshal & Manges, explains that when transparently administered between commercial parties, such incentive awards can be legitimate promotional activities without any intent on the part of the sponsor to corruptly influence the recipient’s conduct.  When the incentive awards are given to sales staff of state enterprises, however, there is a risk they may transgress the FCPA.  See also Gifts, Travel, Entertainment and Anti-Corruption Compliance: Sources of Authority, Best Practices and Benchmarking,” The FCPA Report, Vol. 2, No. 22 (Nov. 6, 2013).

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  • From Vol. 3 No.11 (May 28, 2014)

    Corruption Considerations for Private Fund Managers: An Interview with Molo Lamken Partner Justin Shur

    Private fund managers are looking with increasing receptivity at emerging markets, and, in some cases, frontier markets where corruption risk is significant.  This has not gone unnoticed by the FCPA units in the SEC and DOJ, which have been focusing on bribery in the financial services industry.  See “Why the Direct Access Partners Case Matters for Financial Sector Anti-Corruption Compliance,” The FCPA Report, Vol. 2, No. 21 (Oct. 23, 2013).  The FCPA Report recently interviewed Justin V. Shur, a former federal prosecutor and now a partner at Molo Lamken LLP, about the enforcement climate, the risks the industry faces and strategies for compliance.  The interview covered, among other things: the relationship between investment control and FCPA risk; contract provisions to limit the FCPA risk raised by third parties; issues presented by deal finders and sovereign wealth funds; hiring risks and best practices; facilitation payments; and successor liability.  Shur will expand on these ideas at a complimentary event (invitation here) at 5 p.m. on June 3 at the CORE: Club in Manhattan.  The event is sponsored by Molo Lamken, The FCPA Report and our affiliated publication, The Hedge Fund Law Report.  In addition to Shur, the event will feature his partner Andrew DeVooght, panelists from Indus Capital, Seward & Kissel, Global Environment Fund and the SEC.  Please RSVP to rsvp@fcpareport.com.  A cocktail reception will follow.

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  • From Vol. 3 No.10 (May 14, 2014)

    Compliance Leaders from Citigroup and Morgan Stanley Examine FCPA Risks and Solutions for Financial Institutions

    Banks and other financial institutions are subject to constant regulatory scrutiny.  Given their global reach and government touchpoints, they face constant challenges in assuring compliance with the FCPA.  At a recent program sponsored by the New York City Bar Association, Chinwe Esimai, Senior Vice President of Global Anti-Bribery & Corruption at Citigroup Inc. and Morgan Heyer, Executive Director and Global Head of Anti-Corruption Group Compliance at Morgan Stanley, considered the most pressing FCPA risks in their industries (including the recent government inquiries into banks’ hiring practices) and how their companies are handling those risks.  The panel was moderated by Kimberly A. Parker, a partner at Wilmer Hale and Claudius O. Sokenu, a partner at Shearman & Sterling.  See “How Can Financial Services Firms and Employees Avoid FCPA Liability?,” The FCPA Report, Vol. 2, No. 16 (Aug. 7, 2013).

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  • From Vol. 3 No.9 (Apr. 30, 2014)

    A Guide to Detecting and Preventing Expense-Reimbursement Fraud (Part Two of Three)

    The manipulation of expense reports is one way to cover up a bribe, and employees can be creative about evading internal controls.  To assist companies in designing, implementing and maintaining best-in-class expense-reimbursement programs, The FCPA Report is publishing a three-part article series on the topic.  This, the second article in the series, explores how different types of expense limits can protect companies from expense-report fraud and how to implement those limits effectively.  The first article in this series discussed risks associated with expense reports; provided advice on using travel and entertainment policies to limit expense-report fraud; and outlined how to use the training process to decrease expense-report fraud.  The third article in this series will provide strategies for reviewing expense reports and addressing problems discovered during the review process.  See also “A Guide to Preventing and Detecting Travel Agency Corruption (Part One of Three),” The FCPA Report, Vol. 3, No. 1 (Jan. 8, 2014), Part Two of Three, Vol. 3, No. 2 (Jan. 22, 2014), Part Three of Three, Vol. 3, No. 3 (Feb. 5, 2014). 

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  • From Vol. 3 No.8 (Apr. 16, 2014)

    A Guide to Detecting and Preventing Expense-Reimbursement Fraud (Part One of Three)

    Employee expense reports can be prime vehicles for bribery schemes, and failing to maintain adequate controls over such reports can put a company in serious FCPA jeopardy.  Employees can manipulate, and have manipulated, expense reports in order to provide improper benefits to government officials in the form of gifts, hospitality or charitable contributions – or simply to generate pools of cash from which employees can pay bribes.  Implementing a risk-based expenditures program, defining appropriate expense limits and training employees can help to limit a company’s risk.  Such policies “help to set the framework for employees regarding company expectations for compliance and ethical business practices,” said Tara Giunta, a partner at Paul Hastings.  The FCPA Report is publishing a three-part series to help companies identify and prevent expense-report fraud.  The series will provide advice from FCPA experts regarding: spotting expense-report fraud, setting appropriate expense-report policies, monitoring expense reports and addressing anti-corruption issues raised by the monitoring process.  This, the first article in the series, will discuss the risks associated with expense reports; provide advice on using travel and entertainment policies to limit expense-report fraud; and provide strategies for utilizing the training process to decrease expense-report fraud.  See also “Ten Strategies for Avoiding FCPA Violations When Making Charitable Donations,” The FCPA Report, Vol. 1, No. 3 (Jul. 11, 2012).

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  • From Vol. 3 No.5 (Mar. 5, 2014)

    Understanding and Tackling China’s Corruption Challenges

    “The FCPA applies with special force in China due to China’s state-dominated economy and pervasive business culture where petty corruption is common and tolerated,” Professor Daniel Chow said at a recent seminar at Fordham Law School sponsored by the Chinese Business Lawyers Association.  Chow and two other panelists, Paul Hastings partner Nat Edmonds, and Dorsey & Whitney partner Thomas Gorman, along with the Honorable Denny Chin of the U.S. Court of Appeals for the Second Circuit (who gave closing remarks), discussed the unique risks companies face in China, the cultural sensitivities that make compliance difficult, the status of China’s enforcement of its own corruption laws and practical recommendations for doing business ethically in a region where many businesses can reap big rewards.  Professor Sean Griffith of Fordham Law School gave opening remarks and Associate Professor Carl Minzner moderated.  See also “Gibson Dunn Attorneys Take the Pulse of Anti-Corruption Risks in Emerging Markets,” The FCPA Report, Vol. 3, No. 3 (Feb. 5, 2014).

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  • From Vol. 3 No.3 (Feb. 5, 2014)

    Nine Steps to Reduce Corruption Risk When Entertaining Clients at the 2014 Winter Olympics and Beyond

    In recent years, the SEC and DOJ have launched multiple anti-corruption investigations relating to corporate hospitality during major sporting events, such as the Olympics and the World Cup.  While anti-corruption laws do not generally prohibit travel, gifts or entertainment of customers for legitimate business purposes, the line between a bona fide business expense and one that might attract scrutiny from U.S. and other regulators can be grey.  In advance of this week’s Olympics in Sochi, Russia and the upcoming World Cup in Brazil, Kimberly A. Parker, Jay Holtmeier, Erin G.H. Sloane, Daniel F. Schubert, partners at WilmerHale, provide nine recommendations to help companies mitigate possible anti-corruption risk attendant to this type of corporate hospitality.  See also “Ten Strategies for Paying for Government Clients to Attend the Olympics or Other Sporting Events without Violating the Foreign Corrupt Practices Act,” The FCPA Report, Vol. 1, No. 1 (Jun. 6, 2012).

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  • From Vol. 2 No.25 (Dec. 18, 2013)

    Charles Duross and Kara Brockmeyer Discuss What Matters to Regulators When Negotiating FCPA Settlements (Part Two of Two)

    What are FCPA regulators and prosecutors looking for during company presentations?  How can a company shorten the time from its first meeting with the government to the resolution of its FCPA issues?  Charles Duross, Deputy Chief of the Fraud Section of the Criminal Division of the DOJ, and Kara Brockmeyer, Chief of the FCPA Unit of the Division of Enforcement of the SEC, provided detailed insight at a recent ACI International Conference in Washington, D.C. on what regulators are looking for, discussing the government’s FCPA charging philosophies, investigative techniques and enforcement priorities, and dispensing advice about how companies can avoid or decrease FCPA penalties.  Among other things, the regulators highlighted the government’s continued focus on problematic travel and entertainment, warned that the DOJ and SEC will pursue matters involving charitable donations and commercial bribery, and provided tips for expediting government investigations and conducting effective settlement negotiations.  The first part of this article series contained insight from Duross and Brockmeyer about five micro trends within the overarching trend of increased FCPA enforcement: prosecution of individuals, SEC administrative proceedings focused on FCPA violations, increasing coordination between global regulators on anti-corruption matters, the persistence of use of corporate monitors following FCPA settlements and the continued FCPA risk posed by use of third parties.  See also “Top Government and Private FCPA Practitioners Discuss Global Enforcement, Self-Reporting, Facilitation Payments, M&A Due Diligence, Jurisdiction and NPAs,” The FCPA Report, Vol. 2, No. 11 (May 29, 2013).

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  • From Vol. 2 No.22 (Nov. 6, 2013)

    Gifts, Travel, Entertainment and Anti-Corruption Compliance: Sources of Authority, Best Practices and Benchmarking

    FCPA experts report that gifts, travel and entertainment expenses are one of the most asked-about areas in anti-corruption compliance and the answers can be surprisingly hard to come by.  A recent Strafford webinar provided experienced practitioners’ insights into navigating the potentially perilous shoals surrounding these expenses.  The program, “FCPA Gifts, Entertainment and Hospitality: Surviving Heightened Enforcement,” featured Margaret M. Cassidy, a principal at Cassidy Law in Washington, D.C., and John E. Davis, a member of law firm Miller & Chevalier.  Cassidy and Davis discussed available sources of guidance on gifts, travel and entertainment expenses, sources of guidance for benchmarking compliance controls and insights on implementing effective policies with regard to gifts, travel and entertainment.  This article summarizes the key takeaways from that presentation.  See “Ten Strategies for Paying for Government Clients to Attend the Olympics or Other Sporting Events without Violating the Foreign Corrupt Practices Act,” The FCPA Report, Vol. 1, No. 1 (Jun. 6, 2012).

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  • From Vol. 2 No.22 (Nov. 6, 2013)

    DOJ FCPA Unit’s John Buretta and Shearman & Sterling’s Dan Newcomb Offer Public and Private Perspectives on Key FCPA Challenges

    At Momentum’s recent Anti-Corruption Experts conference in New York City, John Buretta – Principal Deputy Assistant Attorney General and Chief of Staff for the Criminal Division of the DOJ – reinforced the DOJ’s emphasis on continued vigorous FCPA enforcement.  “There’s no question you will see plenty of activity this year and also next year and into the foreseeable future,” Buretta said.  “You’ll be hearing about both resolutions or charges that involve all different manner of defendants at different levels of companies in various industries.”  In addition, Buretta discussed: increasing FCPA prosecution of individual defendants; enhanced DOJ resources committed to the FCPA; increased cooperation between the SEC and the DOJ, and between the DOJ and its non-U.S. counterparts; the DOJ’s view on explaining declinations; parent-subsidiary liability; and the DOJ’s perspective on travel expenses and foreign officials.  Danforth Newcomb, Of Counsel at Shearman & Sterling LLP, engaged Buretta in a clarifying dialogue on how the DOJ’s policies, perspectives and activities should inform corporate compliance efforts.  See also “Top Government and Private FCPA Practitioners Discuss Global Enforcement, Self-Reporting, Facilitation Payments, M&A Due Diligence, Jurisdiction and NPAs,” The FCPA Report, Vol. 2, No. 11 (May 29, 2013).

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  • From Vol. 2 No.22 (Nov. 6, 2013)

    Four Takeaways from Stryker’s $13 Million Civil Settlement of FCPA Internal Control Violations

    Six years after disclosing the SEC and DOJ investigation into possible FCPA violations, Stryker Corporation, a Michigan-based medical device company, has agreed to an SEC Consent Order that requires it to pay $13.3 million in disgorgement, interest and fines.  Stryker was not charged with violating the anti-bribery provisions of the FCPA, only the accounting provisions.  The SEC found that Stryker made approximately $7.5 million in profits as a result of the improper payments to foreign officials from 2003-2008 in Mexico, Poland, Romania, Argentina and Greece, which were described in Stryker’s books as legitimate expenses such as travel, charitable donations consulting and commissions. As discussed in The FCPA Report’s Guide to Disclosing Corruption Investigations in SEC Filings, Stryker first disclosed the government’s SEC investigation and Stryker’s cooperation in November 2007.  

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  • From Vol. 2 No.19 (Sep. 26, 2013)

    Checklist of Actions to Take and Factors to Consider When Conducting Pre-Merger Anti-Corruption Due Diligence 

    Anti-corruption issues can undermine a merger or acquisition that otherwise would be successful on the economic merits.  Consequently, FCPA due diligence has become a critical component of overall M&A due diligence, and such diligence is not complete before comprehensive FCPA due diligence has been conducted on the target company.  But what constitutes comprehensive FCPA due diligence in connection with a transaction?  What high-level areas should acquirers or merger partners investigate?  What specific questions should they ask, and what should cause them to drill down and ask hard follow-ups?  Perhaps most importantly, what issues should cause a company to walk away from an otherwise meritorious transaction?  This checklist, drafted by Michael Gilbert and Mauricio España, partners at Dechert LLP, addresses these questions, and in the process, helps define the scope and increase the precision of transactional FCPA due diligence.  For more from Gilbert and España on this subject, see “Critical Steps to Take and Questions to Ask When Conducting Pre-Merger Anti-Corruption Due Diligence,” The FCPA Report, Vol. 1, No. 5 (Aug. 8, 2012).

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  • From Vol. 2 No.17 (Aug. 21, 2013)

    Best Practices for Reviewing Anti-Corruption Compliance Programs: Challenges, Preparation and Risk Evaluation (Part Two of Three)

    As the recent joint DOJ/SEC FCPA Resource Guide makes clear, for a company to earn meaningful credit with the government in an anti-corruption investigation, its compliance program must not only be robust, but also periodically reviewed and improved.  However, neither the Guide nor any other government resource provides specific direction on the appropriate frequency or depth of reviews.  In lieu of specific authority, companies typically turn to best practices and industry norms when deciding how frequently to review and update their compliance programs.  Best practices, though, can be hard to discern and difficult to apply.  Recognizing the challenge and importance of actionable information on this topic, The FCPA Report is publishing a series of three articles on best practices for reviewing anti-corruption compliance programs.  This article, the second in the series, discusses the chief obstacles companies face when conducting a review; provides strategies for creating management buy-in; describes four steps a company should take when preparing for a review; and outlines what risk areas the review should address.  The first article in the series discussed the importance of regular anti-corruption compliance reviews; detailed the government’s expectations for reviews; outlined how to create an efficient and effective compliance review schedule; and specified how companies should staff their compliance reviews.  See “Best Practices for Reviewing Anti-Corruption Compliance Programs: Government Expectations, Scheduling and Staffing (Part One of Three),” The FCPA Report, Vol. 2, No. 16 (Aug. 7, 2013).  The third and final article in the series will provide strategies for conducting the actual review; discuss what a company should do post-review; outline issues surrounding documentation of the review; and examine how FCPA settlement agreements affect reviews. 

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  • From Vol. 2 No.7 (Apr. 3, 2013)

    A Guide to Anti-Bribery Issue Spotting in China: Enforcement Trends, Third-Party Risks, Gift Giving, Travel Expenses, Foreign Officials and Due Diligence

    Recent news reports, such as the downfall of Bo Xilai, as well as reports of watchdog groups such as Transparency International, emphasize the heightened corruption risk that companies doing business in China face.  Not only does the Chinese culture value gift giving and relationship building, but, because of the government structure, a large proportion of employees there are foreign officials.  This increases the range of business activity that may give rise to FCPA liability.  Plus, China’s top leaders have been paying more attention to official corruption and have taken steps to strengthen their own laws against bribery and step up enforcement.  A recent webinar focused on the topic of Chinese corruption risk.  The panelists, partners at Gibson Dunn & Crutcher LLP and Herbert Smith Freehills LLP, discussed: the current state of anti-corruption law and enforcement in China; China-specific anti-corruption issues; FCPA enforcement actions stemming from bribery in China; and ways to mitigate the FCPA risks of doing business there.  This article summarizes the key takeaways from the webinar, focusing in particular on the lessons for companies that do business in China and lawyers that represent such companies.

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  • From Vol. 2 No.7 (Apr. 3, 2013)

    SEC’s FCPA Unit Chief and Top Practitioners Address the Role of Financial Controls in FCPA Compliance Policies, Internal Investigations, Self-Reporting and Related Topics

    In a recent panel discussion held at the New York City Bar, Kara Brockmeyer, Chief of the SEC’s FCPA Unit, and Mark Schonfeld, a partner at Gibson Dunn & Crutcher LLP, discussed the SEC’s role in civil FCPA enforcement from a private and public perspective.  The panel was moderated by Wayne Carlin, a partner at Wachtell, Lipton, Rosen & Katz.  The three experts shared useful insights regarding managing the costs of FCPA investigations, creating strong compliance programs, negotiating with the SEC and deciding whether to voluntarily disclose a violation to the government.

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  • From Vol. 2 No.1 (Jan. 9, 2013)

    Judge’s Refusal to Approve Civil FCPA Settlement Raises Concerns for Future FCPA Settlements with the SEC

    A federal judge’s frustration with the SEC’s enforcement policies could have important consequences for companies subject to the civil provisions of the FCPA.  U.S. District Judge Richard J. Leon of the U.S District Court for the District of Washington, D.C. announced in open court in late December that he will not “rubber stamp” a settlement agreement resolving civil FCPA charges brought by the SEC against IBM in 2011, and accused the SEC of “rolling over.”  Judge Leon insisted that IBM agree to more rigorous reporting than the settlement requires.  Judge Leon’s active involvement in the settlement and his imposition of additional reporting demands on IBM could affect how other companies negotiate FCPA (and other) settlements with the SEC.  Sources told The FCPA Report that Judge Leon’s demands could lead to, among other things, more widespread judicial scrutiny of settlements, and ultimately more enforcement actions settled administratively.

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  • From Vol. 1 No.13 (Nov. 28, 2012)

    Top Practitioners Analyze the DOJ & SEC FCPA Guidance (Part One of Two)

    A large part of this issue of The FCPA Report is dedicated to explaining the practical implications of the “Resource Guide to The U.S. Foreign Corrupt Practices Act” (Guide or Guidance), jointly issued on November 14, 2012 by the DOJ and SEC.  Generally, this issue analyzes the Guidance from two perspectives: the practitioner perspective and the regulator perspective.  Specifically, this issue contains two articles from each of the two perspectives.  From the practitioner perspective, this article – the first in a two-part series – surveys a wide range of leading law and accounting firm partners focused on the FCPA on the most important issues covered by the Guidance.  In particular, this article discusses: why the Guide was created and issued; how companies and their counsel can use the Guide, including how the hypotheticals provided can inform decision-making; advice that can be distilled from the Guide on gifts, travel and entertainment; deficiencies in the Guide and which areas of the law remain unclear; and the highlights and lowlights of the declination section of the Guide.  Our multi-perspective coverage is intended to offer a 360-degree view of the Guidance and its practical import.  At a granular level, our coverage is intended to offer specific strategies to law, accounting and compliance professionals seeking to bring their compliance policies into conformity with regulator expectations.  In addition, our coverage of the Guidance is intended to offer concrete suggestions to anti-bribery professionals on avoiding, handling and settling enforcement actions, conducting internal investigations and executing mergers and acquisitions.

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  • From Vol. 1 No.13 (Nov. 28, 2012)

    Comprehensive FCPA Guidance Provides a Roadmap for Companies to Reevaluate and Revise Their Compliance Policies

    On November 14, 2012, the DOJ and SEC jointly published “A Resource Guide to the U.S. Foreign Corrupt Practices Act” (Guidance), their long-awaited and highly anticipated guidance on the FCPA.  The Guidance did not pronounce any new defenses or radically reinterpret any of the FCPA’s provisions, but it does provide useful insights into the government’s enforcement considerations and should serve as a roadmap for companies to reevaluate and revise their FCPA compliance policies.  In a guest article, Paul E. Pelletier and Aaron M. Tidman, member and associate, respectively, at Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., analyze the guidance and outline how practitioners may use the guidance to update their compliance policies and procedures.

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  • From Vol. 1 No.12 (Nov. 14, 2012)

    Finding Clarity in the New U.K. Bribery Act

    The U.K.’s Ministry of Justice has added another tool to its arsenal – like the U.S., it intends to use Deferred Prosecution Agreements (DPAs) for cases of economic crime, following a recent consultation and the overhaul of U.K. Bribery laws in July of last year.  That overhaul replaced elderly bribery laws regarded as ineffective to prosecute modern cases.  The new Bribery Act 2011 (Act) provides a consolidated scheme of offences and, unlike the FCPA, applies to bribery in both the public and private sectors.  Law enforcement agencies in the U.K. had two main mechanisms to deal with bribery and other economic crime by companies: criminal prosecution (followed by confiscation of illicit assets), or civil recovery under legislation which enables prosecutors to make a claim against a company to recover the proceeds of criminal conduct.  DPAs will offer a third option.  In a guest article, James Maton, a partner in Edwards Wildman Palmer UK LLP’s London office, provides details about the provisions of the Act and guidance issued by the U.K., and the government’s new policy on DPAs.  A forthcoming article in The FCPA Report will address specific actions companies can take in light of this new enforcement landscape in the U.K.

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  • From Vol. 1 No.10 (Oct. 17, 2012)

    Britain’s Serious Fraud Office Updates Guidance on the Bribery Act, Reinforcing Its Role as a Crime Fighting Agency

    While much of the U.S. anti-corruption community was focused on the expected arrival of FCPA guidance from the DOJ and the SEC, on October 9, 2012, the Serious Fraud Office (SFO), the U.K.’s agency with primary responsibility for enforcing the Bribery Act, beat them to the punch, releasing new guidelines relating to certain aspects of the Act in a tone that emphasizes the importance the SFO is placing on targeting bribery.  This article details the substance of the guidance and its implications for operating companies.

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  • From Vol. 1 No.1 (Jun. 6, 2012)

    Ten Strategies for Paying for Government Clients to Attend the Olympics or Other Sporting Events without Violating the Foreign Corrupt Practices Act

    Next month, corporate hospitality tents and suites will spring up all over London, and eager corporate hosts will escort willing clients, some of whom may well be government officials, to sporting events, dinners, and concerts associated with the London Olympics.  Are all of these corporations flirting with liability under the U.S. Foreign Corrupt Practices Act (FCPA)?  If the purpose of providing this travel, lodging and entertainment for the clients – which at today’s published prices in London almost certainly qualifies as “anything of value” – is not to “assist in obtaining or retaining business” then why do it?  And if it is to “assist in obtaining or retaining business,” how can it not be a violation of the FCPA?  The answer quite clearly is that the FCPA does not prohibit marketing to clients, and even lavish entertainment may qualify as legitimate marketing.  The trick, of course, is to ensure that marketing intended to build connections, make potential clients feel good about you and demonstrate that your company is a good business partner, both for quality and relationship, does not cross that sometimes imperceptible line between marketing and bribery.  As described in this article, navigating this boundary takes some thought, but it does not have to be difficult or over-lawyered.  Instead, some clear and transparent rules and procedures should be sufficient to protect the corporation and its employees – and its clients – from crossing the line.  In a guest article, Philip Urofsky, a Partner at Shearman & Sterling LLP, provides a comprehensive discussion of gifts and entertainment provisions under the FCPA, discusses relevant enforcement actions and DOJ opinions then describes ten specific strategies for paying for government clients to attend the upcoming London Olympics or other sporting events without violating the FCPA.

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