The Anti-Corruption Report

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

Recent Issue Headlines

Vol. 1, No. 2 (Jun. 20, 2012) Print IssuePrint This Issue

  • When and How Should Companies Self-Report FCPA Violations? (Part Two of Two)

    Companies and individuals frequently face the question of whether to self-report FCPA violations.  Generally, parties self-report where they expect that the “credit” received for doing so will outweigh the various detriments (e.g., revealing a legal violation that otherwise might have gone unnoticed, losing control of an investigation, etc.)  Accordingly, implicit in any self-reporting determination is an estimate of the value of credit to be obtained.  Parties making such an estimate are, at least in theory, assigning a value to anticipated credit, then discounting that credit by the likelihood of obtaining it.  In practice, however, quantifying the value of credit to be obtained for self-reporting FCPA violations is a challenging exercise.  Various categories of credit – declinations and dropping of charges, for example – are hard to quantify; and assigning probabilities to government action is an infamously imprecise errand.  So, what are companies and individuals considering self-reporting to do?  The answer is to think through the self-reporting calculus in a structured, methodical way – to approach such decision-making with a workable framework.  To assist our subscribers in doing so, we have provided the building blocks of such a framework in this two-part article series.  In particular, part one of this series: provided a detailed definition of self-reporting; discussed relevant precedent, including plea agreements, settlements, speeches and fines; identified six questions that a company must answer before deciding whether or not to self-report; highlighted three of the chief arguments in favor of self-reporting; and analyzed whether and how the value of self-reporting can be quantified.  See “When and How Should Companies Self-Report FCPA Violations (Part One of Two),” The FCPA Report, Vol. 1, No. 1 (Jun. 6, 2012).  This part two addresses: the risks inherent in self-reporting; the likely effect of new FCPA insurance products on self-reporting; the mechanics of self-reporting (e.g., timing, to whom, who decides, etc.); and the impact on self-reporting determinations of the whistleblower provisions in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

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  • When and How Can Insurance Policies Offset the Costs of FCPA Investigations?

    Recently announced probes into the foreign business practices of several major U.S. corporations highlight that we are in an era of heightened FCPA enforcement.  The SEC and the DOJ together conducted more than 250 FCPA-related investigations in the past two years, and a significant jump in enforcement actions is expected in 2012.  Renewed vigilance has brought with it increased consequences.  The government levied penalties totaling more than $1.2 billion from 2002 through 2008, and it has become more aggressive in recent years.  In 2010, for example, U.S. companies paid out a record of nearly $1.8 billion in fines and disgorgement.  Beyond the monetary liabilities associated with FCPA violations, the ancillary costs of investigating and defending such claims can be quite significant.  Depending upon the complexity of the allegations and the size of the company facing them, these costs can accumulate for years and grow to truly staggering proportions.  In light of the heightened FCPA enforcement environment and the potentially significant costs of investigating, defending and settling claims, companies need to understand how insurance policies and principles interact with the FCPA.  In a guest article, John A. Gibbons, a partner and deputy leader of Dickstein Shapiro LLP’s insurance coverage practice, along with Andrew N. Bourne and Jonathan Ari Zakheim, both associates in Dickstein Shapiro’s insurance coverage practice, provide the analysis on which such an understanding can be built.  The article starts with a brief background of the FCPA, then discusses four of the chief insurance issues implicated by the FCPA, namely: FCPA investigations as a “claim” under typical directors and officers insurance policies; reliance by insurance companies on policy exclusions; coverage for restitution and disgorgement; and FCPA-specific insurance products.  In the course of their analysis, the authors offer a comprehensive discussion of the relevant case law.

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  • Anti-Corruption Audits, Risk Assessments, Transaction Testing and the Dangers of Petty Cash: An Interview with Leaders of Ernst & Young’s Fraud Investigation & Dispute Services Practice

    This article includes the second part of The FCPA Report’s in-depth interview with Brian Loughman and Richard Sibery, leaders of the Fraud Investigation and Dispute Services Practice at Ernst and Young LLP (E&Y).  Our interview focused on the critical decision points for global companies confronting anti-bribery issues when operating abroad.  We covered a lot of ground and, in the process, conveyed much of the key substance of the recent book by Loughman and Sibery, Bribery and Corruption: Navigating the Global Risks (Wiley 2012).  In light of its length and depth, we have published our interview as a two-part series.  This second part covers topics including: the dangers of petty cash; the nuts and bolts of transaction testing; FCPA-specific due diligence considerations for mergers and acquisitions; whether a company should combine an anti-corruption audit with a general audit; and best interviewing and communication techniques.  The first part of the interview dealt with the challenges of designing an effective FCPA training program, techniques of effective third party due diligence and risk assessments and other actionable topics.  See “Training, Certification, Due Diligence, Customs Clearance and Facilitation Payments: An Interview with Leaders of Ernst & Young’s Fraud Investigation & Dispute Services Practice,” The FCPA Report, Vol. 1, No. 1 (Jun. 6, 2012).

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  • Watts Water Technologies Sues Sidley Austin LLP for Malpractice Arising out of Alleged Failure to Reveal Chinese Target Company’s Written “Kickback” Policy

    In 2002, Watts Water Technologies, Inc. (Watts) retained global law firm Sidley Austin, LLP (Sidley) to advise it in connection with its operations in the People’s Republic of China (PRC).  From 2004 to 2005, Sidley conducted due diligence on a company Watts proposed to acquire in the PRC.  Sidley did not raise any red flags about FCPA compliance.  After the acquisition, Watts learned that the acquired company’s sales policies violated the FCPA.  Watts self-reported the problem to the DOJ and the SEC.  See “When and How Should Companies Self-Report FCPA Violations? (Part Two of Two),” above, in this issue of The FCPA Report.  It eventually consented to the entry of a cease-and-desist order by the SEC, whereby it disgorged $3.57 million in profit and paid a $200,000 fine.  Watts has now sued Sidley for malpractice, claiming that Sidley neglected to tell Watts of the target’s written “kickback” policy that Sidley had received during due diligence.  This article details the factual allegations and legal claims in Watts’ Complaint.

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  • Kroll Benchmarking Report Surveys State of FCPA Compliance at U.S. Multinationals

    Risk management firm Kroll Advisory Solutions (Kroll), a division of Altegrity, recently released its 2012 FCPA Benchmarking Report, including and analyzing the results of its annual survey of FCPA preparedness.  The survey report is “an in-depth study designed to take the pulse of corporate compliance officers at U.S.-based multinationals and to provide benchmarks for the current state of anti-bribery preparedness,” according to Kroll.  This article conveys the key points from the benchmarking report and offers critical insights for companies looking to measure their FCPA compliance programs against best practices.

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  • Data Systems and Solutions LLC Enters into Deferred Prosecution Agreement with the DOJ, Paying $8.82 Million in Fines for Bribing Foreign Officials in Lithuania

    Data Systems & Solutions LLC (DSS), a Virginia-based company that provides design, installation, maintenance and other services at nuclear and fossil fuel power plants, has agreed to a deferred prosecution agreement (DPA) with the DOJ.  This article explains the bribery scheme, DSS’s cooperation with the government and the penalty imposed.  Also, this article highlights two new mergers and acquisitions-related provisions included in this DPA that have not been present in recent DPAs.

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  • Seventh Defendant in CCI Case Pleads Guilty, Leaving One Defendant for Trial

    David Edmonds, the former vice president of worldwide customer service at California-based Control Components Inc. (CCI), pleaded guilty on June 14, 2012 to a one-count FCPA charge.  He is the seventh individual charged in the CCI bribery scheme to plead guilty.

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  • Reed Smith Expands China Compliance Investigation and Litigation Capabilities with Arrival of Former Pfizer In-House Counsel in Shanghai Office

    On June 18, 2012, Reed Smith announced the appointment of John Tan as counsel to the firm’s Global Regulatory Enforcement Group.  Based in Shanghai, Tan joins the firm following two years as China Regional Compliance Director for Pfizer, three years in private practice in Shanghai and over a decade of criminal defense and criminal investigation experience in the U.S.

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  • BuckleySandler Adds Andrew W. Schilling from the U.S. Attorney’s Office for the Southern District of New York and Thomas A. Sporkin from the SEC

    BuckleySandler LLP recently announced that Andrew W. Schilling, former Chief of the Civil Division of the U.S. Attorney’s Office for the Southern District of New York, has joined the firm as a partner in its New York office.  Schilling’s arrival coincides with that of Thomas A. Sporkin, former Chief of the Office of Market Intelligence at the SEC, who joins the firm in D.C.

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