The FCPA Report

The definitive source of actionable intelligence covering the Foreign Corrupt Practices Act

Articles By Topic

By Topic: Third Parties

  • From Vol. 6 No.5 (Mar. 15, 2017)

    Repeat FCPA Offender Orthofix Settles Brazilian Bribery Charges With the SEC 

    Medical device company Orthofix has settled FCPA charges again, this time based on its Brazilian subsidiary’s use of commercial representatives and distributors to bribe doctors at state-owned hospitals. Pursuant to an SEC order, Orthofix has agreed to pay $6.25 million and retain an independent consultant. Unlike its previous 2012 FCPA settlement, which involved bribery at its Mexican subsidiary, there is no accompanying DOJ enforcement action. We dissect Orthofix’s FCPA resolution and provide enforcement and compliance lessons, including a comparison to Biomet, another repeat offender in the same industry, whose second FCPA resolution came in 2017. See “After Two Extensions of Its DPA, Zimmer Biomet Settles Further FCPA Charges for $30M” (Feb. 1, 2017).

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  • From Vol. 6 No.4 (Mar. 1, 2017)

    SFO Arrives in the Anti-Corruption Premier League With Rolls-Royce Settlement

    The U.K.’s Serious Fraud Office has struggled for legitimacy in recent years, with a limited number of enforcement actions under its belt and a shrinking budget. But its recent settlement with Rolls-Royce has established it as a force to be reckoned with in global anti-corruption enforcement. “The settlement catapults the SFO into the Premier League of global anti-bribery law enforcement,” said London-based Barry Vitou, head of Pinsent Masons’ corporate crime team. But is it sending mixed messages about the value of cooperation and self-reporting? For more on the settlement, see “Rolls-Royce Settlement Offers Lessons on How to Pay Commissions Without Corruption” (Feb. 15, 2017).

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  • From Vol. 6 No.4 (Mar. 1, 2017)

    A Guide to Enforcing Audit Rights, the Next Third-Party Frontier: Forestalling Problems, Documenting the Audit and Responding Appropriately (Part Three of Three)

    Although third-party audit rights are only effective if the company designs and implements a solid plan for exercising them on a periodic basis, many companies still struggle with enforcing those rights and how, once an audit cycle is concluded, to respond to information the audit uncovered. The FCPA Report’s Guide to Enforcing Audit Rights provides practical guidance for every step of the audit-right enforcement process, from drafting a policy to remediation. This, the third article in our three-part series, discusses how companies can address common auditing challenges, how they should document the audit process and how they might respond to an audit’s results. The first article in the series discussed, in detail, drafting the company’s policy and outlined six steps a company should take prior to conducting an onsite audit of a third party. The second laid out a plan for conducting the actual onsite audit. See also “When and How Should Companies Include Audit Rights in Third-Party Contracts? (Part One of Three)” (Jul. 23, 2014); Part Two (Aug. 6, 2014); and Part Three (Aug. 20, 2014).

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  • From Vol. 6 No.3 (Feb. 15, 2017)

    Rolls Royce Settlement Offers Lessons on How to Pay Commissions Without Corruption

    Rolls Royce’s recent massive settlement with U.S., U.K. and Brazilian authorities is a stark reminder of the anti-corruption risks associated with intermediaries, agents and fixers when negotiating contracts with state-owned entities. Commissions paid by Rolls Royce to its agents – including notorious oil-and-gas “solutions” provider Unaoil – often were eventually passed on to foreign officials to close deals, netting Rolls Royce a global settlement for hundreds of millions of dollars. In this first article discussing the case, we look at the bribes Rolls Royce paid, how its compliance program failed to prevent them and what companies can do to make sure that commissions paid to agents are not used improperly. In a second article, we will look at the implications for cooperative U.S. and U.K. enforcement and what the SFO is looking for in terms of cooperation and remediation. See “Bribery Act Experts Discuss the Impact of Brexit, DPAs and Other U.K. Developments” (Jul. 13, 2016).

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  • From Vol. 6 No.2 (Feb. 1, 2017)

    After Two Extensions of Its DPA, Zimmer Biomet Settles Further FCPA Charges for $30M

    Biomet’s continued misconduct during the term of its 2012 deferred prosecution agreement, including its bribery of Mexican customs agents and persistent use of a third-party distributor known to have paid bribes in Brazil has led to a new resolution with the DOJ and SEC. The DOJ extended Biomet’s 2012 deferred prosecution agreement twice while the investigation was pending, and now the company (purchased in 2015 by Zimmer, which also bought the DPA obligations) will pay $30 million dollars to resolve the claim in a new settlement, and will take on another monitor for three years. See also “Dan Newcomb Discusses the Unusual Second Extension of Biomet’s DPA” (Apr. 20, 2016).

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  • From Vol. 6 No.1 (Jan. 18, 2017)

    General Cable Pays $75 Million to Settle Wide-Ranging Bribery Scheme Based on Agents and Distributors

    General Cable Corporation (GCC) has resolved FCPA charges with the SEC and DOJ based on a bribery scheme that spanned more than 10 years and half a dozen subsidiaries on two continents, and resulted in $51 million in profits. GCC, which self-reported, cooperated and remediated, will pay combined fines of more than $75 million pursuant to a DOJ non-prosecution agreement and an SEC order. The figure includes a significant discount off the Sentencing Guidelines, with no SEC fine separate from the disgorgement. A former senior vice president will pay $20,000 pursuant to a separate agreement with the SEC. The FCPA Report spoke with Ayoka Akinosi, an international specialist at Hughes Hubbard & Reed, and Kathleen Hamann, a partner at Pierce Atwood, to delve into the details of the case and the lessons the case holds for other companies, including identifying key performance indicators that may have mitigated the extent of the bribery scheme. See “Developing Key Performance Indicators and Tracking Metrics Using ISO 37001 (Part One of Two)” (Nov. 9, 2016); Part Two (Nov. 23, 2016).

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  • From Vol. 6 No.1 (Jan. 18, 2017)

    Attorney-Consultant Privilege? Structuring and Implementing the Kovel Arrangement (Part Two of Two)

    So-called “Kovel arrangements” provide unique opportunities for companies and their legal counsel to extend the attorney-client privilege to consultants, such as those performing anti-corruption investigations or audits. After deciding to use the arrangement, the next (and most important) step is ensuring that the entire Kovel engagement is performed correctly so that the privilege will be recognized by regulators and courts, and documents detailing the company’s operational deficiencies are not unnecessarily made available. This article, the second in a two-part series, provides practical guidance regarding the provisions that need to be included in an engagement letter with a consultant, details daily steps a company must take to ensure it remains Kovel-compliant and examines circumstances under which it is and is not appropriate for companies to employ Kovel arrangements. The first article in this series detailed the legal requirements of the Kovel doctrine, as well as considerations for companies when deciding whether to invoke or waive the privilege. See also “When Are Reports of Internal Investigations Protected by Attorney-Client Privilege?” (Apr. 30, 2014).

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  • From Vol. 5 No.25 (Dec. 21, 2016)

    Attorney-Consultant Privilege? Key Considerations for Using the Kovel Doctrine (Part One of Two)

    Most companies are comfortable that their interactions with outside counsel during investigations, audits and compliance assessments are covered by privilege. However, whether that protection also applies to the range of non-attorney consultants who also help attorneys with those efforts, such as forensic accountants and investigators, is less clear. The Second Circuit’s Kovel decision in 1961 extended the attorney-client privilege to third parties assisting attorneys in representing clients under certain circumstances. This two-part series discusses how companies can most successfully make use of so-called “Kovel arrangements.” This first article describes the requirements of the Kovel privilege as established by case law. The second article will detail the requisite features of a fully compliant Kovel arrangement and when they are appropriate. See also “Preserving the Attorney-Client Privilege in Cross-Border Internal Investigations” (Jun. 26, 2013).

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  • From Vol. 5 No.25 (Dec. 21, 2016)

    Opportunity in Expansion: A Logistical Look at FCPA Compliance in Third-Party Relationships

    Expanding into a new market can be a moment of great risk for any company. These risks are heightened in the shipping and logistics industry where spreading geographic reach and reliance on consultants and independent contractors is necessary for success. In a guest article, Catherine Muldoon, the chief legal officer of BDP International, Inc., a leading privately held global logistics and transportation services company, and legal intern Caitlin Smith discuss the challenges BDP faced when opening new offices in Casablanca, Morocco, and how the company leveraged its culture of compliance to achieve both its business and ethical goals. See “Ten Steps A Company Can Take to Mitigate Corruption Risk When Entering a New Market (Part One of Two)” (Jun. 24, 2015); Part Two (Jul. 8, 2015).

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  • From Vol. 5 No.24 (Dec. 7, 2016)

    A Guide to Enforcing Audit Rights, the Next Third-Party Management Frontier: Conducting an Onsite Audit (Part Two of Three)

    To protect themselves from anti-corruption violations caused by third-party partners, more and more companies are including audit rights in their third-party contracts. Those rights, however, are useless – and even potentially dangerous – if a company does not regularly enforce them. The FCPA Report’s three-part guide to enforcing audit rights is designed to assist companies in building and implementing effective third-party audit policies and procedures. The first article in the series discussed drafting the company’s policy and outlined six additional steps a company should take prior to conducting any onsite audits of third parties. This article lays out a plan for conducting the actual onsite audits, including 10 specific areas the audit should address. The third article in the series will tackle some of the challenges companies will face while auditing and outline measures companies should take after an audit is complete. See “EY’s Rick Sibery Outlines a Seven-Step Process for Monitoring Third Parties” (Oct. 20, 2016).

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  • From Vol. 5 No.24 (Dec. 7, 2016)

    Embraer Global Settlement Presages a New Paradigm in International Enforcement and Next-Level Compliance

    Embraer, the world’s largest manufacturer of mid-size jets, recently settled FCPA allegations. The settlement is a striking example of how the SEC and DOJ are working with foreign governments all over the world to investigate and prosecute corruption in a coordinated manner. The case also illustrates how companies need a next level of compliance beyond basic policies and procedures to prevent individuals from finding ways around internal controls. In this, our second article analyzing Embraer’s historic settlement, we discuss the enforcement implications as well as the compliance takeaways of the case. For details on the facts underlying the case and the terms of the settlement see our companion article “Embraer Uses Sleight-of-Hand Payments to Third-Party Agents to Sell Planes Around the World, Landing It More Than $200M in U.S. Fines” (Nov. 9, 2016).

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  • From Vol. 5 No.22 (Nov. 9, 2016)

    A Guide to Enforcing Audit Rights, the Next Third-Party Management Frontier: What to Do Before an Audit (Part One of Three)

    While companies, recognizing the significance of third-party risk, have become increasingly sophisticated about vetting their business partners before an engagement, many still struggle with monitoring those relationships. Ongoing third-party management, including conducting regular third-party audits, is the next frontier in anti-corruption compliance. The FCPA Report’s three-part guide to enforcing audit rights is designed to meet companies where they are, helping them to tackle third-party audits while being mindful of the potential landmines inherent in the process. In this, the first article in the series, we discuss drafting third-party audit procedures and policies and outline seven steps a company should take prior to conducting an onsite audit of a third party. Upcoming installments of the series will discuss how to perform an onsite audit of a third party, address some of the challenges companies will face while auditing and outline measures companies should take after an audit is complete. See “EY’s Rick Sibery Outlines a Seven-Step Process for Monitoring Third Parties” (Oct. 20, 2016.) 

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  • From Vol. 5 No.22 (Nov. 9, 2016)

    Embraer Uses Sleight-of-Hand Payments to Third-Party Agents to Sell Planes Around the World, Landing It More Than $200M in U.S. Fines

    Embraer, one of Brazil’s leading exporters and the world’s largest manufacturer of mid-size jets, has settled bribery allegations with both the SEC and DOJ related to its use of third-party agents in transactions spanning the globe. According to Karlis Novickis, a regional compliance officer at Whirlpool LatAm based in São Paolo, the fines in this case show that compliance “is one of the best investments” a company can make. In this article, we synthesize the SEC and DOJ’s divergent papers to provide a coherent narrative of how Embraer employees skirted the company’s internal controls. In a companion article in a future issue, we will look at the compliance and enforcement implications of the settlement. 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.21 (Oct. 26, 2016)

    EY’s Rick Sibery Outlines a Seven-Step Process for Monitoring Third Parties

    Despite consistent warnings about the corruption risks associated with engaging third parties in foreign locations, the vast majority of FCPA settlements continue to involve such relationships. Moving beyond traditional due diligence to a more robust, ongoing approach to third-party management is one of the best ways to show regulators that the company is serious about compliance. Effectively monitoring third parties requires more than just performing data analytics, EY partner Rick Sibery said during a recent interview with The FCPA Report. He suggested that a company adopt a holistic approach to monitoring, considering not only its full third-party compliance process but also leveraging other areas of its anti-corruption compliance program. During our conversation, Sibery outlined a seven-step process for optimizing a company’s third-party monitoring program. See “Using Data Analytics to Meet the Government’s Anti-Corruption Compliance Expectations” (May 4, 2016).

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  • From Vol. 5 No.21 (Oct. 26, 2016)

    Mitigating the Corruption Risk Posed by Vendors in China 

    Some of the more difficult issues for businesses with operations in China arise from the activities of third parties and vendors in that country. The attenuated lines of supervision at many China operations, the lack of transparency in obtaining due diligence information on vendors, the changing and sophisticated nature of corrupt practice schemes, and increased pressure from regulators in the U.S. – and increasingly Chinese and other foreign jurisdictions – all put multinationals at risk. In a guest article, Ronald Cheng, a partner at O’Melveny & Myers based in both Los Angeles and Honk Kong, explains how companies can mitigate these risks while doing business in China. See “The Emperor Is Far Away: The Evolving Nature of Third-Party Risk in China” (Sep. 9, 2015).

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  • From Vol. 5 No.15 (Jul. 27, 2016)

    Credit Suisse, Goldman Sachs and Defense Counsel Discuss Corruption Issues Troubling Financial Institutions

    Over the past several years, anti-corruption regulators have consistently focused on financial institutions. From the Morgan Stanley declination in 2012, to the 2015 U.K. prosecution of Standard Bank, to the recent SEC sweep of sovereign wealth funds, financial institutions are facing enforcement risks in multiple jurisdictions. During a recent PLI seminar, Credit Suisse’s global head of anti-corruption and economic sanctions, a VP in Goldman Sachs’ Financial Crime Compliance group and top FCPA defense counsel from Gibson Dunn, Wilmer Hale and Sullivan and Cromwell discussed the FCPA issues faced by financial institutions, including a regulatory focus on hiring and internships, due diligence, the impact of the so-called “Panama Papers” and third-party risks. For more on this subject, see “Mayer Brown Attorneys Discuss Global Corruption Risk in the Financial Services Industry” (Aug. 19, 2015); and “Compliance Leaders from Citigroup and Morgan Stanley Examine FCPA Risks and Solutions for Financial Institutions” (May 14, 2014). 

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  • From Vol. 5 No.13 (Jun. 29, 2016)

    Regional Risk Spotlight: Luis Ortiz of OCA Law Firm Discusses New Legislation and Anti-Corruption Challenges in Mexico

    The manufacturer and exporter of a wide range of products, including electronics and cars, Mexico is an economic powerhouse and an attractive target for foreign investment – albeit one with a long history of corruption that permeates all aspects of its society. In the past several years, however, the public has called for legal reform to address this corruption, and Mexico’s Congress responded with the passage of new anti-corruption legislation. The FCPA Report recently spoke with Luis Ortiz, a partner at OCA Law Firm, about the corruption risks associated with doing business in Mexico, the popular groundswell for reform and the resulting legislation. Since our discussion, the legislation passed by Congress has been vetoed by Mexican President Enrique Pena Nieto, leaving the future of the country’s laws in flux and making it all the more important for companies to be aware of the corruption risks they may face in this market. See also “Regional Risk Spotlight: Reed Smith’s Calvin Chan Discusses Singapore’s Vigorous Anti-Corruption Enforcement” (May 18, 2016).

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  • From Vol. 5 No.13 (Jun. 29, 2016)

    The DOJ Deploys Carrots and Sticks in Analogic FCPA Settlement

    The SEC and DOJ’s recent FCPA settlements with health care and security technology company Analogic reveal how the government is treating self-reporting and cooperation after the announcement of the Pilot Program and the Yates Memo. The combination of Analogic’s voluntary disclosure of its bribery scheme involving Russian slush funds, and its failure to fully cooperate in the investigation, netted benefits (the lack of a parent-level DOJ plea) yet also less-than-optimal results (a lower discount than the Pilot Program provides for). We analyze the more than $11 million settlement with Analogic and its Danish subsidiary BK Medical and BK Medical’s former CFO. See also “From Discounts to Slush Funds: Red Flags to Heed and Eight Steps to Take to Avoid SAP’s $3.9 Million Mistakes” (Feb. 10, 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.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)

    Kevin Abikoff of Hughes Hubbard Discusses the Benefits and Risks of African Local Content Laws

    Foreign investment in a country has historically been a double-edged sword. While investment may allow elites to prosper, often the benefits do not flow to the general population. In response to this pattern, many countries have adopted “local content laws” that require a certain level of reinvestment by foreign companies into the countries where they operate. While these programs can have clear benefits in terms of technology transfer and local ownership, they can also be a source of corruption risk, as Japanese conglomerate Hitachi learned in 2015 when it was fined $19 million for corruption related to its local partner. The FCPA Report discussed how to navigate these programs when doing business in African countries, where they are prevalent, with Hughes Hubbard partner Kevin Abikoff. He explained why local content laws are beneficial but also how they can lead to corruption, and what companies can do to avoid problems when working with local partners. See “Lack of Training and Due Diligence Leads to $19 Million Penalty for Hitachi” (Oct. 7, 2015).

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  • From Vol. 4 No.23 (Nov. 4, 2015)

    Customs Corruption Risks: Four Ways to Limit the Risks of Working with Customs Brokers, Freight Forwarders and Other Third Parties (Part Two of Three)

    Importing and exporting goods across borders exposes companies to corruption risks on a number of fronts.  Third-party risks are particularly prevalent because international trade often requires that a company work with agents such as customs brokers and freight forwarders.  This second article in The FCPA Report’s series on customs risks examines the risks posed by third parties in the customs process and identifies four key strategies for mitigating those risks.  The first article in the series examined how the customs system works and the risks associated with that system, including books and records violations for inaccurate customs forms and the temptation for employees to make illegal payments to customs officials to ensure that their paperwork is approved as quickly as possible.  The third article will discuss facilitation payments in the customs context, including whether companies should allow such payments and, if so, how they can structure their compliance policies to minimize risks.  See also “Anti-Corruption and Trade Regulations: Identifying Common Elements and Streamlining Compliance Programs (Part One of Two),” The FCPA Report, Vol. 3, No. 14 (Jul. 9, 2014); and Part Two, Vol. 3, No. 15 (Jul. 23, 2014).

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  • From Vol. 4 No.21 (Oct. 21, 2015)

    Fighting the Dynamic War on Corruption in China

    Corruption poses a constant risk to companies operating in China, but the nature of that risk is always shifting.  Creative ways to create slush funds that can be used for bribery proliferate in China – travel agents, marketing companies and distributors have all been involved in funneling corrupt funds to foreign officials on behalf of businesses.  In that environment, a company must have a dynamic and comprehensive compliance program.  The FCPA Report, Paul Hastings and EY recently hosted a roundtable discussion about how companies can address and uncover new corruption issues in China while continuously monitoring old issues.  The panel was moderated by The FCPA Report’s Editor-in-Chief, Nicole Di Schino.  The panelists, all recognized experts in Chinese anti-corruption, included: Nat Edmonds, a Paul Hastings partner and former FCPA prosecutor; Ananda Martin, a partner in Paul Hastings’ Shanghai office; and John Auerbach, a partner and former Greater China managing partner in EY’s fraud investigation and dispute services group.  This article summarizes the highlights of the panel discussion.  For more insight from these experts, see “The Emperor Is Far Away: The Evolving Nature of Third-Party Risk in China,” The FCPA Report, Vol. 4, No. 18 (Sep. 9, 2015); and “Responding to China’s Aggressive Anti-Corruption Enforcement,” The FCPA Report, Vol. 4, No. 19 (Sep. 23, 2015).

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  • From Vol. 4 No.18 (Sep. 9, 2015)

    The Emperor Is Far Away: The Evolving Nature of Third-Party Risk in China

    The sheer volume of dollars that flow through the Chinese economy, combined with the evolving nature of corruption risk, make it essential that companies operating there remain ever vigilant and frequently re-evaluate the risk profile of their Chinese operations.  On September 30, Paul Hastings, EY and The FCPA Report will host a symposium in Washington, D.C. addressing how companies can mitigate risk when operating in China.  The FCPA Report’s Editor-in-Chief, Nicole Di Schino, will moderate the event.  The panelists, all recognized experts in Chinese anti-corruption, include: Nat Edmonds, a Paul Hastings partner and former FCPA prosecutor; Ananda Martin, a partner in Paul Hastings’ Shanghai office; and John Auerbach, a partner and former Greater China managing partner in EY’s fraud investigation and dispute services group.  In advance of the September 30 symposium, The FCPA Report spoke with Edmonds, Martin and Auerbach regarding one of the biggest risk areas facing companies operating in China – third parties.  For more information on the symposium please contact Nicole Di Schino at ndischino@fcpareport.com.

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  • From Vol. 4 No.16 (Aug. 5, 2015)

    Mitigating Corruption Risk in the Middle East (Part Two of Two)

    Business is booming in the Middle East, with many foreign investors seeking to take advantage of these rapidly expanding markets.  Doing so, while avoiding entanglement with anti-corruption regulators, requires careful risk assessment and planning.  The first article in this two-part series discussed the high incidence of corruption throughout the region, highlighting which countries and industries are the riskiest, and the legal and cultural diversity that can complicate a company’s assessment of corruption risk.  This, the second article of our two-part series, looks at three specific attributes of doing business in the Middle East that pose their own unique risks:  (1) the dominance over many economic sectors by state-owned entities and royal families; (2) the prevalence of third parties in business transactions in the region; and (3) the culture of gift-giving in Middle Eastern countries.  We draw from the knowledge of a panel of experts, organized by Strafford Publications and including Tom Best, a partner at Steptoe & Johnson in Washington, D.C.; Marc Alain Bohn, counsel at Miller & Chevalier in D.C.; John Vincent Lonsberg, a partner with Baker Botts based in Dubai, U.A.E.; and Daniel P. Chung, of counsel with Gibson Dunn in D.C.

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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)

    Prosecutors and Defense Lawyers Discuss FCPA Risk Areas, Government Expectations and the Length of Investigations

    At ACI’s 9th Advanced Forum on FCPA and Anti-Corruption for the Life Sciences Industry, FCPA experts opined on enforcement for the second half of 2015 and the speed of government investigations, and warned that third parties and mergers and acquisitions still pose major risks.  The panel was moderated by Bret Campbell, a partner at Cadwalader, Wickersham & Taft, and included Daniel Kahn, assistant chief of the DOJ’s FCPA Unit and Timothy Peterson, a partner at Murphy & McGonigle and previously senior counsel in the SEC’s Division of Enforcement.  See also “Top FCPA Officials Talk Compliance Tips and the Defense Bar Weighs In,” The FCPA Report, Vol. 3, No. 25 (Dec. 17, 2014).

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  • From Vol. 4 No.6 (Mar. 18, 2015)

    Social Media: Navigating the Next Generation of FCPA Compliance (Part Two of Two)

    Social media can help and hurt compliance efforts – providing the opportunity to spread the compliance message and aid in due diligence efforts, but also potentially exposing the company to harm caused by inappropriate posts.  In this, the second article in our series on the advantages and pitfalls of social media, we discuss best practices for including social media in compliance policies, such as in training, messaging, and monitoring compliance programs; how social media use can help demonstrate good behavior to the government; and how to handle the risks that including social media as part of a compliance program pose.  The first article discussed how companies can use social media to aid with due diligence of third parties and target companies; the limits of using social media for those purposes; government expectations; and how to use social media during internal investigations.  See also “In-House Experts Discuss Social Media Pitfalls and Compliance Opportunities,” The FCPA Report, Vol. 3, No. 15 (Jul. 23, 2014).

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  • From Vol. 4 No.6 (Mar. 18, 2015)

    Taking Third Party Diligence Beyond the FCPA and the U.K. Bribery Act

    An active third-party due diligence program protects a company from a host of dangers, including anti-corruption violations, sanctions issues and forming relationships with destructive business partners.  A recent program presented by the Society of Corporate Compliance and Ethics highlighted the continued importance of third-party due diligence for anti-corruption compliance and the impact of economic sanctions regimes on that due diligence.  The program featured Candice D. Tal, founder and Chief Executive Officer of security and risk management consulting firm Infortal Worldwide Inc.; and Cordery Compliance Limited’s principal adviser André Bywater and partner Jonathan P. Armstrong.  See also “Risk-Based Solutions to Complying with Anti-Money Laundering, Export Controls, Economic Sanctions and the FCPA,” The FCPA Report, Vol. 3, No. 2 (Jan. 22, 2014).

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  • From Vol. 4 No.5 (Mar. 4, 2015)

    Social Media: Navigating the Next Generation of FCPA Compliance (Part One of Two)

    As employees spend more time personally and professionally posting on social media sites, companies urgently need to understand how to restrict such use to mitigate corruption risk while at the same time maximizing the compliance benefits social media can offer.  In this, the first article in our series on the advantages and pitfalls of social media, we discuss how companies can use social media to aid with due diligence of third parties and target companies; the limits of using social media for those purposes; government expectations; and how to use social media during internal investigations.  The second article will discuss: best practices for including social media in compliance policies, such as in training, messaging and monitoring compliance programs; how social media use can help demonstrate good behavior to the government; and how to handle the risks that including social media as part of a compliance program pose.  See “In-House Experts Discuss Social Media Pitfalls and Compliance Opportunities,” The FCPA Report, Vol. 3, No. 15 (Jul. 23, 2014).

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  • From Vol. 4 No.5 (Mar. 4, 2015)

    Checklist of Issues to Consider When Negotiating, Drafting and Enforcing Audit Clauses in Third-Party Contracts

    Securing audit rights in contracts with third parties is one specific way to mitigate the corruption risk that doing business with third parties poses.  Audit rights allow a company to monitor third parties’ activities – activities which could result in FCPA charges for the company.  These rights can be challenging to obtain and enforce, and may not be appropriate for all third parties.  This checklist assists companies with structuring negotiations, drafting audit clauses and enforcing agreements.  See “When and How Should Companies Include Audit Rights in Third-Party Contracts? (Part One of Three),” The FCPA Report, Vol. 3, No. 15 (Jul. 23, 2014); Part Two and Part Three

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  • From Vol. 4 No.3 (Feb. 4, 2015)

    Checklist of Issues to Consider When Negotiating Anti-Corruption Representations and Warranties in Third-Party Contracts

    Third-party relationships continue to vex many companies operating internationally.  In fact, nearly every 2014 corporate FCPA resolution highlighted company liability for bribes made to foreign officials by third parties.  Anti-corruption reps and warranties in third-party contracts are one way to mitigate third-party corruption risk.  This checklist can help companies design a template to use when drafting provisions for specific third parties.  See also “A Guide to Anti-Corruption Representations in Third-Party Contracts: Nine Clauses to Include (Part One of Two),” The FCPA Report, Vol. 3, No. 13 (Jun. 25, 2014); “Clauses for High-Risk Situations and Enforcement Strategies (Part Two of Two),” Vol. 3, No. 14 (Jul. 9, 2014).

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  • From Vol. 3 No.21 (Oct. 22, 2014)

    Qui Facit Per Alium, Facit Per Se: Best Practices for Third-Party Due Diligence

    Intermediaries are a critical part of most business operations, and, as recent DOJ and SEC FCPA enforcement actions – nearly all of which involved intermediaries – demonstrate, they pose significant corruption risk.  In a guest article, Dechert partners Mauricio A. España and Hector Gonzalez detail best practices for mitigating and managing third-party corruption risk before and after an intermediary is hired.  See also The FCPA Report’s two-part series on representations in third-party contracts, “Nine Clauses to Include (Part One of Two),” The FCPA Report, Vol. 3, No. 13 (Jun. 25, 2014); “Clauses for High-Risk Situations and Enforcement Strategies (Part Two of Two),” Vol. 3, No. 14 (Jul. 9, 2014).

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  • From Vol. 3 No.17 (Aug. 20, 2014)

    When and How Should Companies Include Audit Rights in Third-Party Contracts? (Part Three of Three)

    Significant corruption risks continue to stem from the actions of third parties that companies hire.  As detailed in our series about anti-corruption reps and warranties in third-party contracts (Part One and Part Two), appropriate reps and warranties help to mitigate those risks.  Clauses pertaining to audit rights are some of the most difficult to get right, and can be some of the most important.  Our three-part series provides guidance on when and how companies should include audit rights in their third-party contracts.  This third and final article in the series discusses when conditions are ripe for a third-party audit; best practices to use when performing the audit; and what to do about issues uncovered by the audit.  The first article discussed how companies should determine which third-party relationships require audit rights and outlined the benefits and drawbacks of including audit rights provisions in contracts.  The second article provided strategies for securing audit rights during negotiations; discussed situations where companies should or should not proceed without audit rights; and provided advice regarding drafting audit rights provisions. 

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  • From Vol. 3 No.16 (Aug. 6, 2014)

    When and How Should Companies Include Audit Rights in Third-Party Contracts? (Part Two of Three)

    Lawyers, accountants, customs brokers, sales agents and distributors are just a few of many third parties an organization typically retains that can cause serious FCPA problems.  Regularly auditing appropriate third parties is a key tool for decreasing third-party corruption risk.  To assist companies in drafting and using audit rights clauses in third-party contracts, The FCPA Report is publishing a three-part series. This, the second article in the series, provides strategies for securing audit rights during negotiations; discusses situations where companies should or should not proceed without audit rights; and provides advice regarding drafting audit rights provisions.  The first article discussed how companies should determine which third-party relationships require audit rights and outlined the benefits and drawbacks of including audit rights provisions in contracts.  The final article will explore when a company should conduct a third-party audit; provide advice on performing a third-party audit; and discuss what a company should do about issues raised during an audit.

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  • From Vol. 3 No.15 (Jul. 23, 2014)

    When and How Should Companies Include Audit Rights in Third-Party Contracts? (Part One of Three)

    In November 2013, Kara Brockmeyer, Chief of the SEC's FCPA Unit, reported that 60%-70% of the SEC's FCPA cases in the past two years have involved third-party intermediaries.  As detailed in our series about anti-corruption reps and warranties in third-party contracts (Part One and Part Two), including the appropriate reps and warranties in contracts can be a key tool to mitigate the risks caused by employing third parties.  Clauses pertaining to audit rights are some of the most difficult to get right, and can be some of the most important.  To assist companies in optimizing this compliance tool, The FCPA Report is publishing a three-part series on when and how companies should include audit rights in their third-party contracts.  This, the first article in the series, discusses how companies should determine which third-party relationships require audit rights and outlines the benefits and drawbacks of including audit rights provisions in contracts.

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  • From Vol. 3 No.14 (Jul. 9, 2014)

    A Guide to Anti-Corruption Representations in Third-Party Contracts: Clauses for High-Risk Situations and Enforcement Strategies (Part Two of Two)

    Doing business with third parties – whose actions may subject companies to FCPA liability – remains one of the most challenging aspects of anti-corruption compliance.  An effective way to mitigate the corruption risk posed by third parties is to include FCPA reps and warranties in third-party contracts.  This, the second article in our series examining the optimal ways to incorporate those clauses, suggests specific reps and warranties for special situations and discusses techniques for enforcing the rights associated with the reps and warranties.  The first article described nine basic reps and warranties to include in third-party contracts.  See also “Mitigating FCPA Risks Associated with Incentive Awards to Third Parties,” The FCPA Report, Vol. 3, No. 12 (Jun. 11, 2014).

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  • From Vol. 3 No.13 (Jun. 25, 2014)

    A Guide to Anti-Corruption Representations in Third-Party Contracts: Nine Clauses to Include (Part One of Two)

    Liability for third-party activities remains one of the most challenging FCPA risks.  “A company needs to have mechanisms in place to ensure that its third parties are complying with the law and not creating liability for the company,” Matteson Ellis, special counsel at Miller & Chevalier, said.  One of the most effective ways to mitigate this risk is by including FCPA reps and warranties in third-party contracts.  This, the first article in our series examining the optimal ways to incorporate those clauses, discusses: the types of relationships that require reps and warranties; the risks and benefits of including such clauses in third-party contracts; and nine examples of the types of reps and warranties companies may wish to include in their contracts.  The second article will discuss advanced reps and warranties for special situations and will suggest techniques for enforcing the rights associated with the reps and warranties.  See also our four-part series on Audit Committee Responsibilities Before, During and After an Anti-Corruption Investigation: “Five Steps to Take Before the Investigation Begins (Part One of Four),” (Feb 19, 2014); “Determining When and How to Proceed (Part Two of Four),” (Mar. 5, 2014); “Retaining Counsel, Gathering Information and Documenting the Investigation (Part Three of Four), (Mar. 19, 2014); and “Remediating and Disclosing the Investigation to the Government and the Public (Part Four of Four), (Apr. 4, 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.12 (Jun. 11, 2014)

    Doing Business in India: Avoiding Corruption Risks and Monitoring Compliance Programs

    India presents companies not only with tremendous business opportunities but also an entrenched culture of corruption at virtually every government “touchpoint.”  Strafford Publications recently hosted a panel discussion highlighting some of the unique challenges facing companies trying to navigate India’s notorious bureaucracy.  The discussion examined FCPA cases with Indian connections as well as the anti-corruption enforcement climate in India and offered guidance on third-party due diligence and on monitoring the effectiveness of an anti-corruption compliance program.  The panel featured Jay Holtmeier, a partner at Wilmer Hale; Elizabeth D. Keating, Global Compliance Counsel – Investigations of Johnson Controls, Inc.; and Michael Stavridis, a partner at Ernst & Young.  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.12 (Jun. 11, 2014)

    FCPA Compliance Strategies for Hedge Funds and Private Equity Firms

    Given today's investment environment, with an unabated government focus on the private fund industry and significant opportunities developing in emerging markets, private equity fund managers are hard-pressed to ignore corruption risks in their businesses.  Molo Lamken, together with The FCPA Report and The Hedge Fund Law Report, recently hosted a panel that addressed hot topics in FCPA enforcement and compliance for this industry.  The panelists, including outside and in-house counsel, discussed, among other things: the current FCPA enforcement climate for private equity and financial services firms; strategies for mitigating the risk associated with third parties and service providers in high-risk countries; handling facilitation payments; self-reporting violations; and the importance of continuously monitoring compliance programs.  See “Corruption Considerations for Private Fund Managers: An Interview with Molo Lamken Partner Justin Shur,” The FCPA Report, Vol. 3, No. 11 (May 28, 2014).

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  • From Vol. 3 No.2 (Jan. 22, 2014)

    $384 Million Alcoa Civil and Criminal FCPA Settlement Highlights the Risks of Third-Party Relationships

    Alcoa World Alumina LLC, a majority-owned and controlled sales company of Alcoa, Inc., a global provider of primary aluminum and fabricated aluminum, has resolved criminal and civil charges that it violated the FCPA.  The $384 million settlement, resolved via a plea agreement and SEC cease and desist order, is one of the largest in FCPA enforcement history.  It involves a decades-long scheme in which a third party – a company Alcoa hired to facilitate sales of alumina to a Bahraini aluminum smelter – used middlemen and shell companies to funnel $110 million to Bahraini foreign officials to secure business for Alcoa.  See “Sample Questions to Ask Third Parties When Initiating Anti-Corruption Due Diligence,” The FCPA Report, Vol. 2, No. 20 (Oct. 9, 2013).

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  • From Vol. 2 No.24 (Dec. 4, 2013)

    Charles Duross and Kara Brockmeyer Discuss Five FCPA Enforcement Trends That Matter to Regulators: Individual Prosecutions, Administrative Proceedings, Global Coordination, Corporate Monitors and Third Parties (Part One of Two)

    At ACI’s International Conference on the Foreign Corrupt Practices Act in Washington D.C., 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 candid and detailed insight into elements of FCPA enforcement that matter to leading regulators.  They discussed the government’s charging philosophies, investigative techniques and enforcement priorities, and dispensed advice about how companies can avoid or decrease FCPA penalties.  This article summarizes the most noteworthy insights shared by Duross and Brockmeyer, and discusses the practical implications of the regulators’ points.  See also “Five Lessons from 2013 FCPA Enforcement: Transaction Monitoring, International Cooperation, Documenting Hiring Decisions, Risk Assessments and Individual Prosecutions,” The FCPA Report, Vol. 2, No. 22 (Nov. 6, 2013).

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  • From Vol. 2 No.23 (Nov. 20, 2013)

    Construction Industry Experts Discuss Crucial Steps in Internal Corruption Investigations, Due Diligence Best Practices and the Value of Cooperation

    Could the construction industry be the next target of anti-corruption enforcement action in the U.S. and abroad?  The industry is rife with risk – in the U.K., for example, 49% of corruption professionals say corruption is widespread, and law firm Reed Smith LLP predicts that at least two large U.K. Bribery Act investigations are in the works in the next two years for international construction firms.  How can construction companies, and others similarly situated, anticipate and mitigate what may be a gathering enforcement storm?  The Practising Law Institute recently sponsored a panel of attorneys with extensive experience in construction contracting who discussed the best ways to enhance compliance for the construction industry, offering lessons applicable to a range of industries.  The panelists analyzed the current global anti-corruption enforcement climate, detailed best practices with regard to due diligence when contracting with third parties in foreign countries, provided steps that a company should take when faced with an FCPA issue, including investigation mistakes companies make, and examined the value of cooperation and voluntary disclosure.  See also “Survey Reveals the Contours and Content of Bribery in the U.K. Construction Industry,” The FCPA Report, Vol. 2, No. 20 (Oct. 9, 2013).

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  • From Vol. 2 No.23 (Nov. 20, 2013)

    Six Steps to Reduce Third-Party Anti-Corruption Risk

    A central theme running through many recent FCPA enforcement actions is the involvement of third parties in illegal activities.  The role third parties play (whether agents, resellers, distributors, subcontractors or consultants) make them the ideal facilitators for the transfer of funds, and companies can be liable for the bribes those third parties make.  Some companies may think they have it covered with a “no FCPA violations” clause and audit rights in the contract.  In today’s climate, however, that is simply not enough, nor is a “notice” in a partner program or guide that requires that the partner be familiar with the FCPA or U.K. Bribery Act.  Companies need a comprehensive approach to third-party risk reduction that includes more than just due diligence, but also risk assessments, training, business justification and monitoring.  This guest article by Farzad Barkhordari, CEO of Click 4 Compliance, discusses the dangers of doing business with third parties and outlines steps companies should take when engaging third parties, including examples of how the steps can be implemented in common scenarios.

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  • From Vol. 2 No.23 (Nov. 20, 2013)

    Seven Issues to Address When Performing Pre-Acquisition Due Diligence

    Protecting a company from anti-corruption liability is a paramount concern during any cross-border merger or acquisition.  In a recent seminar hosted by the Practising Law Institute, FCPA expert Sharie Brown, partner at Troutman Sanders LLP and a former prosecutor and compliance officer, identified seven critical issues to address when performing pre-acquisition due diligence, and discussed due diligence best practices generally.  See also “Checklist of Actions to Take and Factors to Consider When Conducting Pre-Merger Anti-Corruption Due Diligence,” The FCPA Report, Vol. 2, No. 19 (Sep. 26, 2013).

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  • From Vol. 2 No.20 (Oct. 9, 2013)

    Sample Questions to Ask Third Parties When Initiating Anti-Corruption Due Diligence

    This guest article, by Nardello & Co., provides an example of a questionnaire to be completed by third parties when a company is performing FCPA due diligence on such parties.  This questionnaire can be customized to specific circumstances, industries or geographies, and can serve as the basis for a risk assessment, further anti-corruption diligence or on-the-ground investigations.  The questionnaire includes corporate questions as well as individual questions.  For further insight on third-party due diligence, see “Conducting Effective Anti-Corruption Due Diligence on Third Parties: An Interview with the Principals of Nardello & Company,” The FCPA Report, Vol. 2, No. 19 (Sep. 26, 2013).

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  • From Vol. 2 No.20 (Oct. 9, 2013)

    Conducting Effective Due Diligence on Third Parties:  An Interview with Gwen Romack, Director of Global Anti-Corruption at Hewlett-Packard

    Many companies rely heavily on third parties when operating internationally.  Among other things, third parties serve as sales agents, handle customs issues, distribute product and educate the company on local practices.  Hiring third parties helps increase revenue, but also puts the company at significant risk of violating the FCPA.  If a third party bribes a foreign official, the company that hired the party can be held liable.  Effective initial due diligence is crucial in avoiding FCPA liability based on the acts or omissions of third parties, as is continuous monitoring of third parties.  Recognizing this, The FCPA Report is publishing a series of interviews with experts from different disciplines – from an outside law firm, an in-house compliance department and an investigative firm – on best practices when handling due diligence on third parties.  This article, the third in the series, includes our interview with Gwen Romack, Director, Global Anti-Corruption and U.S. Public Sector Compliance, at HP.  The first article in the series contained an interview with Alice Fisher, a partner at Latham & Watkins and former head of the Criminal Division at the DOJ.  The second article in the series contained an interview with Nardello & Co.’s FCPA team, a group of seasoned investigators with extensive experience in anti-corruption initiatives.

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  • From Vol. 2 No.19 (Sep. 26, 2013)

    Conducting Effective Anti-Corruption Due Diligence on Third Parties: An Interview with Principals at Nardello & Co.

    Most companies doing business multi-nationally must engage third parties to operate on the company’s behalf overseas, but in the current anti-corruption landscape, third parties can be a necessary evil.  Under the FCPA, a company can be held responsible for any improper payments made on its behalf by a third-party agent or partner, and many recent FCPA enforcement actions by the SEC and DOJ have involved the actions of third parties.  To best protect themselves from the risks associated with retaining third parties, companies must devote significant resources to the critical and complicated task of conducting due diligence.  How should a company efficiently allocate its due diligence resources?  How can a company effectively gather information in challenging jurisdictions?  What should a company do if it does not wish to inform a prospective agent that it is conducting due diligence?  The FCPA Report is publishing a series of interviews with experts from different disciplines on best practices for conducting anti-corruption due diligence on third parties.  This article, the second in the series, includes our interview with Nardello & Co.’s FCPA team: Daniel Nardello, Tara MacMillan, Nicholas Peck and Michael Ramos.  Nardello, MacMillan, Peck and Ramos are all seasoned investigators with extensive experience in anti-corruption initiatives.  Nardello and Ramos also both formerly served as prosecutors in the Southern and Eastern Districts of New York, respectively.  The first article in the series contained an interview with Alice Fisher, a partner at Latham & Watkins and former head of the Criminal Division at the DOJ.

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  • From Vol. 2 No.18 (Sep. 11, 2013)

    Conducting Effective Anti-Corruption Due Diligence on Third Parties: An Interview with Alice Fisher, Partner at Latham & Watkins

    Engaging third parties is necessary for most global businesses, but rife with corruption risk.  Under the FCPA, a company can be held responsible for any improper payments made on its behalf by a third-party agent or partner, and most of the recent FCPA enforcement actions by the SEC and DOJ have involved the actions of third parties – making the task of conducting due diligence on third parties one of the most critical and complicated issues in FCPA compliance.  How should a company efficiently allocate its due diligence resources?  What should a company do when its third-party partner is less than forthcoming?  Can a party engage a third party even if due diligence raises red flags?  The FCPA Report is publishing a series of interviews with experts from different disciplines on best practices for conducting anti-corruption due diligence on third parties.  This article, the first in the series, includes our interview with Alice Fisher, partner at Latham & Watkins.  Fisher specializes in white collar criminal investigations, internal investigations and advising clients on a range of criminal matters, including the FCPA.  She formerly served as Assistant Attorney General in charge of the Criminal Division of the DOJ.  See also “Designing Effective FCPA Compliance Programs and Monitoring Third Parties After the Guidance: An Interview with H. David Kotz, Michael Volkov and Paul Zikmund,” The FCPA Report, Vol. 2, No. 2 (Jan. 23, 2013).

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  • From Vol. 2 No.18 (Sep. 11, 2013)

    Anti-Corruption Professionals from GE, Abbott Laboratories and Navistar Share Proven Strategies on Third-Party Due Diligence, M&A, Training, Nepotism and Regional Risk

    Anti-corruption compliance can feel like a battlefield, with potential landmines at every turn.  But what do practicing in-house compliance professionals view as their biggest challenges?  What issues keep them up at night?  And, most importantly, what have they done to address those issues?  In a panel hosted by the American Conference Institute, three in-house compliance experts shared their practical experience.  They discussed specific challenges they have faced and outlined the strategies they used to effectively address those challenges.  The expert panelists included Matthew Hsu, Senior Counsel, Global Fraud and Anti-Corruption at Abbott Laboratories; Shannon Masson, Senior Counsel at Navistar, Inc.; and Kevin Matthews, Associate General Counsel at GE Oil and Gas.  See also “Insight from Top Companies and Practitioners on How They Are Addressing Current Anti-Corruption Issues, from Self-Reporting to Risk Assessments to Training,” The FCPA Report, Vol. 2, No. 10 (May 15, 2013).

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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.5 (Mar. 6, 2013)

    Six Steps for Converting a “Paper” FCPA Compliance Program into a Pervasive Culture of Anti-Bribery Compliance (Part Two of Two)

    Breathing life into even a comprehensive compliance manual is a challenge for most companies.  How can a company ensure that its program is proactive and dynamic, and that it is working at every level of the company?  How can the company ensure that third parties are being vetted at every stage of the process?  A recent webinar featuring H. David Kotz, Director at Berkeley Research Group and former Inspector General of the SEC, and Paul Zikmund, Director of Global Ethics and Compliance at Bunge Limited, tackled these and other hard questions head on, incorporating their long and relevant experience, as well as lessons from the recently-issued FCPA Guidance.  This article, the second in a two-part series, discusses the panelists’ advice regarding the best path forward after a risk score is assigned to a third party, including details about a “boots-on-the-ground” approach to due diligence; ways to monitor third parties on an ongoing basis; compliance advice for smaller companies; and how to incentivize employees to report complaints internally before going to the government.  The first article in the series discussed how the hypotheticals in the Guidance provide insight into the government’s enforcement strategy and what the “flavor of the month” FCPA cases are; six ways to ensure an FCPA compliance program is best-in-class; and integral steps to take when conducting risk assessments of third parties.  See “Six Steps for Converting a ‘Paper’ FCPA Compliance Program into a Pervasive Culture of Anti-Bribery Compliance (Part One of Two),” The FCPA Report, Vol. 2, No. 4 (Feb. 20, 2013).

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  • From Vol. 2 No.5 (Mar. 6, 2013)

    Knowing Your Partners: Three Steps to Reduce FCPA Risk from Third Party Intermediaries

    The failure to pre-screen and monitor third party intermediaries (TPI) are the root causes of many recent FCPA investigations.  Thus, devising and implementing a consistent process for TPI due diligence and auditing, as well as understanding regulatory differences across the globe, are “must do” items for companies operating overseas.  Marc Miller, a partner in the New York forensic and risk consulting practice of KPMG LLP, recently shared his advice on identifying and mitigating risks involving TPIs in a webinar sponsored by compliance software developer Aravo Solutions, Inc. entitled “The Increasing Business Risk of FCPA Failures.”  Miller suggested that companies focus on three steps when it comes to third parties, each of which is described in detail in this article.  Miller also discussed his view on recent enforcement trends, informed by the Guidance.

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  • From Vol. 2 No.4 (Feb. 20, 2013)

    Six Steps for Converting a “Paper” FCPA Compliance Program into a Pervasive Culture of Anti-Bribery Compliance (Part One of Two)

    Recent enforcement actions have highlighted the bribery risk inherent in retaining third parties in foreign countries.  To adequately address such risks, companies need more than a compliance manual sitting on the shelf – they need a culture of compliance that pervades the organization.  Drafting a thorough and customized compliance manual is the first step in this process.  But how can companies bring a complete compliance program to life?  A recent webinar tackled this hard question head on, incorporating the long and relevant experience of the webinar participants, as well as lessons from the recently-issued FCPA Guidance.  This is the first article in a two-part series summarizing the key takeaways from the webinar.  This article discusses: how the hypotheticals in the Guidance provide insight into the government’s enforcement strategy and what the “flavor of the month” FCPA cases are; six ways to ensure an FCPA compliance program is best-in-class; and integral steps to take when conducting risk assessments of third parties.  The second article will address: steps to take after a risk score is assigned to a third party, including details about a “boots-on-the-ground” approach; ways to monitor third parties on an ongoing basis; compliance advice for smaller companies; and how to incentivize employees to report complaints internally before going to the government.  See also “Five Themes for General Counsel to Monitor with Respect to Dodd-Frank Whistleblowers and the FCPA,” The FCPA Report, Vol. 1, No. 9 (Oct. 3, 2012).

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  • From Vol. 2 No.3 (Feb. 6, 2013)

    Strategies for Implementing the U.K. Bribery Act’s Requirement of Adequate Procedures for Intermediaries

    Intermediaries are crucial to many businesses, sometimes even mandatory, and are replete with corruption risk – under both the FCPA and the U.K. Bribery Act, they can generate criminal liability for their principals if they bribe to win business.  In many jurisdictions, intermediaries are routinely used to enter markets; to identify opportunities; to access and build relationships with decision-makers responsible for awarding contracts, including public officials; to assist with navigating complex local laws, regulations and customs; and to win business.  How can a company mitigate the risks these ubiquitous third parties pose?  In a guest article, James Maton, a partner in Edwards Wildman Palmer UK LLP’s London office, provides strategies to that end by reference to the requirements of the U.K. Bribery Act, one of the most comprehensive anti-bribery statutes in the world, with broad application to global activities connected to the U.K.  It requires companies and partnerships to have adequate procedures intended to prevent bribery in both their private and public sector business activities.  Maton’s article considers the key principles that should underpin those procedures, and the steps an organisation can take to reduce the bribery risks posed by intermediaries.

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  • From Vol. 2 No.2 (Jan. 23, 2013)

    Designing Effective FCPA Compliance Programs and Monitoring Third Parties After the Guidance: An Interview with H. David Kotz, Michael Volkov and Paul Zikmund

    Relationships with third parties are a constant pressure point for companies trying to comply with the FCPA.  How should the recently-issued FCPA Resource Guide change a company’s strategy for dealing with third parties, during and after initial due diligence?  On February 6, 2013, LeClairRyan, Berkeley Research Group (BRG) and The FCPA Report will host a complimentary CLE-eligible webinar that will address this and other pressing regulatory questions.  The webinar, entitled “After the Guidance: Designing Effective Compliance Programs and Monitoring Third Parties,” will feature three FCPA experts: former SEC Inspector General and current BRG Director H. David Kotz; LeClairRyan Partner Michael Volkov; and Paul Zikmund, Director of Global Ethics and Compliance at Bunge Limited.  Rebecca Hughes Parker, Editor-In-Chief of The FCPA Report, will moderate the webinar.  Topics to be covered include the FCPA Resource Guide’s specific requirements for compliance programs; how to review and enhance compliance programs to get maximum credit; and best practices for monitoring third parties in a cost-effective manner following initial due diligence.  To register for the webinar, click here.  As a preview of the webinar, The FCPA Report interviewed the three participants on topics including: the elements of an effective third party risk assessment and the categories it should include; the utility of open source databases; common mistakes companies make when designing risk assessments; streamlining risk assessments and due diligence; the differences between due diligence for third parties and for M&A transactions; and effective ways to monitor third parties after they are “on board.”  An edited transcript of our interview is included in this issue of The FCPA Report.

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  • From Vol. 2 No.1 (Jan. 9, 2013)

    How Private Fund Managers Can Manage FCPA Risks When Investing in Emerging Markets

    Anti-corruption enforcement efforts have dramatically increased over the last few years.  Every day it seems there is a new headline about an investigation involving alleged violations of the FCPA.  Federal authorities have indicated that their FCPA enforcement efforts are increasingly focused on the financial services industry and, in particular, private fund managers that invest in emerging markets.  Given this heightened level of government scrutiny, it is important that private equity firms, hedge fund managers and other investors that conduct business in foreign markets understand the associated FCPA risks.  Such risks can arise in the context of raising funds overseas, working with joint venture partners and third party agents, and investing in companies that operate in countries known for corruption.  A potential misstep in these areas can result in a fund manager and its employees facing significant civil penalties and possible criminal prosecution or, at a minimum, having to respond to government subpoenas or requests for information in connection with an investigation by federal authorities, thus resulting in the unnecessary expenditure of time and money and the attraction of unwanted attention.  In a guest article, Justin V. Shur and Joel M. Melendez, partner and associate, respectively, at Molo Lamken LLP, consider some of the important and recurring FCPA risks that arise for investors in emerging markets, and offer practical guidance to help private fund managers and their employees avoid or minimize liability in this area.

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  • From Vol. 1 No.14 (Dec. 12, 2012)

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

    On November 14, 2012, the SEC and DOJ jointly issued long-awaited guidance on the FCPA (Guide or Guidance), spurred in part by the Organisation for Economic Cooperation and Development’s recommendation, and business pressures for more clarity about the FCPA and the government’s enforcement of it.  This article continues our extensive coverage of the Guidance and the practical implications of it, offering concrete suggestions to anti-bribery professionals on avoiding, handling and settling enforcement actions, conducting internal investigations and executing mergers and acquisitions.  This article – the second in a two-part series – uses input from leading FCPA experts to extract practical lessons from the Guide, including what it says about compliance programs and internal controls; whether the Guide sheds any light on what constitutes a facilitation payment and who constitutes a foreign official, and whether those distinctions are important; the Guide’s insight on third-party due diligence, successor liability and statute of limitations issues; and whether the Guide affects the self-reporting calculus.  The first article in this series addressed the backstory of the Guide and why it was issued; how companies and their counsel can use the Guide and the hypotheticals included in it; 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 Guide’s declination section.  See “Top Practitioners Analyze the DOJ & SEC FCPA Guidance (Part One of Two),” The FCPA Report, Vol. 1, No. 13 (Nov. 28, 2012).

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  • From Vol. 1 No.12 (Nov. 14, 2012)

    Managing FCPA and Other Risks After Onboarding a Third Party

    A November 7, 2012 webinar sponsored by compliance and investigative software provider Catelas Inc. (Catelas) addressed steps that companies can take to manage FCPA and other compliance risks after they have “onboarded” a third party, i.e., conducted due diligence and formalized a business relationship with that party.  The webinar was moderated by Eddie Cogan, CEO & founder of Catelas.  The other speakers were Alan Morley, president of compliance risk consulting firm Adsideo LLC, and Michael Volkov, a shareholder at LeClairRyan.  This article summarizes the key points from that presentation.

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