The Anti-Corruption Report

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

Recent Issue Headlines

Vol. 1, No. 4 (Jul. 25, 2012) Print IssuePrint This Issue

  • Designing a Facilitation Payments Policy to Minimize Liability and Retain Flexibility (Part One of Two)

    The FCPA prohibits bribes to foreign officials, but the statute carves out an exception for bribes that facilitate or expedite a foreign official’s routine tasks.  The U.S. stands nearly alone on the global stage with this exception, yet no changes to the law are in view.  In 2010, Chuck Duross, Assistant Chief in the DOJ Criminal Division’s Fraud Section, said, “We’re not saying you should make facilitating payments, it’s an exception, we’re not encouraging it.”  The tide, strengthened after passage of the U.K. Bribery Act, has been turning against facilitation payments, and more and more companies have begun to rethink allowing any kind of “grease” payment at all.  Compounding the trend are the high-profile troubles of Wal-Mart, in which one prominent issue is whether certain payments constitute bribes or facilitation payments under the FCPA.  The reasons to ban facilitation payments outright are plenty, a significant one being the conflict of laws: Not only do most countries ban these kinds of payments to foreign officials, but most local laws ban these kinds of payments to domestic officials, subjecting the company that makes such a payment to potential prosecution abroad even if the payment is legal under U.S. law.  Further complicating the picture is the need to properly record the facilitation payments or risk an FCPA books and records violation.  Moreover, there is the challenge of employees on the ground determining whether an official receiving a grease payment is using “discretion” or not – that is, determining whether the same dollars are a bribe or a facilitation payment.  Prohibiting facilitation payments completely, however, may not be feasible.  Sometimes the safety of a company’s workers depends on such a payment; sometimes foregoing the payment will shut down the entire business; and sometimes the payment truly is a small payment to expedite a routine government service.  Designing and implementing a policy that protects a company from liability yet is flexible enough to accommodate extenuating circumstances is a difficult task.  This two-part article series takes on that task and sheds light on the nuances of this issue, providing insight from leading practitioners on how to formulate a workable compliance policy on facilitation payments.  Part one of this series discusses: the definition of a facilitation payment, including examples; the differing treatment of such payments under the FCPA and other laws, notably the U.K. Bribery Act; the tension that has resulted from the conflict of laws; cases in which the argument has been made that the payments in question were facilitation payments, including the Wal-Mart investigation; and the trend among companies towards banning facilitation payments outright.  Part two of the series will address: advisable “safety valves” or exceptions to a general ban on facilitation payments; drafting and implementing a facilitation payment policy to accommodate those exceptions and avoid liability; concerns relating to the all-important issue of properly recording facilitation payments; and guidance on training employees about facilitation payments.

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  • Corruption and the Arab Spring: Compliance Implications for International Companies

    To paraphrase Mao, a revolution, not being a dinner party, is a messy and unpredictable affair with winners and losers emerging in chaotic and sometimes haphazard fashion.  For international investors and businesses, the prospects are rarely bright, at least in the near term.  Foreign commercial interests were notable losers in some of the last century’s most important revolutions.  During the Russian Revolution, foreign investors lost their wallets; in Cuba, Americans lost their sugar and their casinos; and after the Islamic revolution in Iran, international oil companies lost their wells.  The recent wave of Arab Spring upheavals that continues to ripple across the southern and eastern shores of the Mediterranean may present the threats common to foreign businesses caught in the midst of revolution, including extortion, nationalization, expropriation, and physical violence against executives and employees.  These modern revolutions also pose new challenges to international firms, as evidence or allegations that they engaged in corrupt behavior may be made public through documents in a ransacked government ministry building, or through an incarcerated former official, an enterprising journalist or prosecutor in the new regime, or a whistleblower within the foreign company itself.  If such allegations come to the attention of U.S. authorities or other governments, the company could face severe criminal and civil penalties for violations of the FCPA, the U.K. Bribery Act, and similar anti-corruption laws, in addition to significant business ramifications.  In a guest article, Peter B. Clark and Bradley J. Bondi, both partners at Cadwalader Wickersham & Taft LLP, and James A. Treanor, an associate at Cadwalader, provide a comprehensive discussion of the corruption risks companies face in the Middle East, North Africa and elsewhere in the world; summarize noteworthy FCPA enforcement actions involving the Middle East and North Africa; and detail strategies companies can employ to protect themselves from the Arab Spring fallout.

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  • An Interview with Judge Stanley Sporkin, the “Father of the FCPA” (Part Two of Two)

    This article includes the second part of The FCPA Report’s extensive interview with the esteemed Judge Stanley Sporkin, who is widely credited with developing the books and records provision of the FCPA when he was Director of the Division of Enforcement of the SEC in the 1970s.  Judge Sporkin was also a federal judge in the District of Columbia and General Counsel of the CIA, and is currently the Ombudsman for BP America.  The second part of our interview includes Judge Sporkin’s comments on: self-reporting; the new FCPA Unit at the SEC; his proposal for amnesty; the biggest mistake companies make when it comes to corruption; the movement to amend the FCPA; the potential importance of ombudsmen; and combining anti-corruption audits with annual audits.  In the first part of the interview, Judge Sporkin offered insight into, among other things: the origins of the FCPA following the Watergate hearings; his contemporaneous view on the difficulty of substantiating anti-bribery claims; the origins of internal investigations; and the pro-business orientation of the FCPA.  See An Interview with Judge Stanley Sporkin, the ‘Father of the FCPA’ (Part One of Two),” The FCPA Report, Vol. 1, No. 3 (Jul. 11, 2012).

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  • International Corruption Risks Facing Financial Institutions

    For many years, financial institutions had not been frequent targets of FCPA enforcement.  However, the past two years have revealed that regulators have not forgotten about this industry.  The financial crisis increased regulatory scrutiny both from an investigative and a legislative perspective.  The SEC and DOJ are investigating financial institutions for violations of securities laws, the FCPA, anti-money laundering rules, and similar regulations.  As discussed in this article, and as the various reviews by regulators reveal, banks, private equity firms, and other financial institutions face several avenues of potential liability due to the nature of their overseas business under a myriad of domestic and international statutes.  To properly navigate this complex regulatory framework requires an effective and regularly updated compliance program, consistent with the recommended government standards (and perhaps building off of their current anti-money laundering procedures), and any responses to regulatory requests demand a carefully structured internal review.  In a guest article, Palmina Fava and Alan Brudner, both partners at Paul Hastings LLP, and Mor Wetzler, an associate at Paul Hastings, discuss: the regulatory focus on financial firms; guidance for anti-corruption compliance derived from anti-money laundering initiatives; the potential for anti-corruption liability without actual knowledge of the relevant corruption; the strict liability provisions of the U.K. Bribery Act; common sources of liability for financial institutions; specific compliance considerations raised by dealings with sovereign wealth funds and state-owned enterprises; and the risk of required offset funds.

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  • Hughes Hubbard Analyzes Trends and Extracts Lessons from Recent FCPA Enforcement

    International law firm Hughes Hubbard recently released a comprehensive and insightful FCPA/Anti-Bribery Alert.  Hughes Hubbard surveyed and summarized dozens of FCPA and anti-bribery enforcement actions, settlements and regulatory actions.  This article summarizes Hughes Hubbard’s overview of anti-corruption enforcement trends and the firm’s perspectives on the practical lessons to be learned from recent FCPA enforcement efforts.

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  • Nordam Agrees to Pay $2 Million – All It Can Pay – in Non-Prosecution Agreement With the DOJ Based on Chinese Bribes

    In another reminder of the treacherous corruption terrain in China, The Nordam Group, Inc. (Nordam), an Oklahoma-based provider of aircraft repair services with over 2,500 employees, has agreed to resolve FCPA violations by paying a $2 million monetary penalty to the U.S. Treasury and strengthening its compliance, bookkeeping and internal control standards and procedures.  The violations stem from a scheme to bribe officials of Chinese airlines to retain their business.  This article summarizes the bribery scheme, the penalty and remedial measures taken by the company, and includes links to relevant documents.

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  • BDO Consulting Expands Litigation and Fraud Investigation Practice with Addition of Daniel Ventricelli

    On July 19, 2012, BDO Consulting announced the growth of its Litigation & Fraud Investigation practice with the addition of Daniel Ventricelli as a Managing Director in its New York office.

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  • April Brooks Named Special Agent in Charge of the Criminal Division in the FBI’s New York Field Office

    April Brooks has become the first woman to head the criminal division of the FBI in New York, the division that investigates many FCPA cases alongside the DOJ and the SEC.  (See, for example, the recent guilty plea of former Morgan Stanley Managing Director Garth Peterson.)

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