The FCPA Report

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

Recent Issue Headlines

Vol. 1, No. 1 (Jun. 6, 2012) Print IssuePrint This Issue

  • Welcome to The FCPA Report

    We are launching The FCPA Report because the stakes are too high not to.  If you are reading this introductory note, you already know that FCPA enforcement is on the upswing, that sanctions can be draconian and that ambiguity is the order of the day.  Some areas of law – tax, for example – look hard at first, but get easier with diligent study.  (Easier, though never easy.)  The FCPA is the opposite: it looks straightforward at first blush, but the closer you get, the more confusing it becomes.  The same broad statutory proscriptions mean different things in different industries and different geographies; authoritative guidance is hard to come by; and experience, custom and practice play an unusually large role in assessing the legality of business conduct.

     

    In short, the FCPA is uniquely well suited to our particular approach to content.  In fact, the FCPA in 2012 looks much like hedge fund law in 2008 – shifting, underserved and mission-critical.  We responded to those dynamics in 2008 by launching The Hedge Fund Law Report (HFLR) to fill the information void with what we call “expertise-based journalism” – a hybrid of proprietary legal expertise and rigorous reporting.  And that formula has added real, identifiable value for HFLR subscribers.  On more occasions than we can count, we have heard from subscribers that something they read in the HFLR – and that they did not learn from any other source – enabled them to avoid a major, potentially catastrophic, mistake that they otherwise would have made.  On the upside, subscribers routinely report that insights in the HFLR have led directly to revenue, for example, by illustrating – point by point – best practices in operational due diligence.

     

    The FCPA Report will take the same approach to anti-bribery law that the HFLR takes to hedge fund law – combining domain expertise with deep research and reporting to yield “actionable” insight, insight that actually changes your day-to-day decision-making for the better.  Mechanically, we will publish an issue every two weeks.  Each issue will contain articles on the most pressing subtopics under the general topics of the FCPA and global anti-bribery law.  In the course of an annual subscription, you will learn something you did not know – probably many things: facts, insights, angles, frameworks, best practices, etc.  In all likelihood, you will read something that changes the way you do your job.

     

    We are in the business of bringing clarity to complex legal areas, and we approach the law from a business perspective, as it were, the “general counsel” perspective (although many of our current and anticipated subscribers are business-minded lawyers at law firms).  We care about legal questions inasmuch as they have direct bearing on the bottom line of your business, we work relentlessly and we talk to everybody in the field.  The results are “law reports” that are integrated into your professional activities – tools with consequences every bit as tangible as a carpenter’s hammer.

     

    We are thrilled to be publishing the first issue of The FCPA Report today.  Have a look, please, and let us know what you think.  We will continuously adjust our specific approach based on feedback while always holding tenaciously to our core principles: quality, relevance, depth, accuracy and editorial independence.

     

    Best regards,

     

    The Law Report Group

     

     

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

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

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

    A company that discovers an FCPA violation by one of its employees faces a fundamental question with potentially profound business consequences: Should the company self-report the violation to the government?  Generally, the rationale for self-reporting is that companies may receive “credit” for doing so, for example, reduced or eliminated sanctions.  However, in the uncertain world of self-reporting, there are no guarantees.  Whether a company receives credit at all, how that credit is measured and applied, whether that credit mitigates other risks arising out of the same violations – these and related questions are fact-specific, guided but not governed by precedent and practice.  In short, self-reporting is an inherently ambiguous process.  This is squarely at odds with the data-driven decision-making that corporate boards and management teams engage in, or at least aspire to.  Accordingly, corporate decision-makers and the in-house and outside lawyers who advise them have been groping for a reliable framework for thinking through self-reporting questions.  To date, no generally accepted framework has been forthcoming.  The purpose of this two-part article series is to fill that gap.  To do so, this article: provides a detailed definition of self-reporting; discusses relevant precedent, including plea agreements, settlements, speeches and fines; identifies six questions that a company must answer before deciding whether or not to self-report; highlights three of the chief arguments in favor of self-reporting; then discusses whether and how the value of self-reporting can be quantified.  The second article in this series will address: the risks inherent in self-reporting; the effect that new FCPA insurance products may have 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.  The analysis in this article is a combination of proprietary domain expertise and extensive interviews with leading practitioners, who are quoted in depth.  In addition, this article contains numerous links to relevant documents and authority.  While this article cannot conclusively answer the question with which it opened – Should a company self-report an FCPA violation to the government? – it can help practitioners avoid missing a critical question or issue that should be part of a thorough analysis.

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  • Training, Certification, Due Diligence, Customs Clearance and Facilitation Payments: An Interview with Leaders of Ernst & Young’s Fraud Investigation & Dispute Services Practice

    Brian Loughman is the Americas Leader of the Fraud Investigation & Dispute Services Practice at Ernst & Young LLP (E&Y), and Richard Sibery leads E&Y’s Fraud & Investigations Group within the Fraud Investigation & Dispute Services Practice.  In those roles, Loughman and Sibery have amassed deep, detailed and current experience with global anti-bribery investigations and remediation – the sort of practical know-how that only comes with extensive, on-the-ground experience.  The FCPA Report recently had the privilege of conducting a wide-ranging interview with Loughman and Sibery.  The general intent of the interview was to identify the most pressing anti-bribery issues facing global companies and specific strategies for addressing those issues.  In this sense, our interview sought to paraphrase some of the more important points made in the book recently written by Loughman and Sibery, Bribery and Corruption: Navigating the Global Risks (Wiley, 2012).  In particular, our interview covered: the challenges of designing an effective FCPA training program; the utility of certification programs; techniques of effective third party due diligence and risk assessments; issues surrounding customs payments, including the difficult issue of facilitation payments; the dangers of petty cash; the nuts and bolts of transaction testing; why M&A transactions pose unique due diligence challenges; whether an anti-corruption audit and a general audit plausibly may be combined; and best practices for interviewing and communications.  We are publishing the full transcript of our interview with Loughman and Sibery in two parts: the first part is included in this issue of The FCPA Report and the second part will be included in the next issue.

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  • Defendants in Haiti Teleco Case Urge the Eleventh Circuit to Limit “Instrumentalities” to Entities that Perform Government Functions

    The elusive definition of a foreign official under the Foreign Corrupt Practices Act may finally get some clarity.  Two defendants have brought the issue squarely in front of the 11th Circuit.  Their appeals, filed May 9, 2012, mark the first time in the history of the FCPA that an appellate court has been asked to define what constitutes an instrumentality of a foreign government.  This article summarizes the background of the case and legal arguments made in the defendants’ briefs, with an emphasis on the arguments surrounding the definition of instrumentality.

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  • Non-FCPA Liability for Alleged FCPA Violations

    Undiscovered bribes can yield a finite number of business benefits, which generally can be grouped under the rubric of increased revenue.  Discovered or even suspected bribes, on the other hand, can generate a seemingly limitless number of legal detriments.  One of the more frequently cited categories of detriments is the possibility of being subject to multiple global anti-bribery regimes based on the same or similar conduct.  Siemens is the paradigm case here.  A less frequently cited – but no less forbidding – bad outcome is the possibility of non-FCPA liability for actual or alleged FCPA violations.  A lawsuit recently filed by the County of York Retirement Plan (York County) against Avon Products, Inc. (Avon or the Company) illustrates the ability of an FCPA investigation to metastasize into something else entirely.  In this case, York County generally seeks to inspect Avon’s books and records in order to substantiate a breach of fiduciary duty claim; in turn, that underlying breach of fiduciary duty claim is generally premised on the idea that Avon had inadequate or nonexistent FCPA compliance policies and procedures in place during the relevant period, leading to apparent FCPA violations in China.  Those apparent violations have led to internal and regulatory investigations which to date have cost Avon almost a quarter of $1 billion.  This article describes the factual background and legal claims alleged in York County’s complaint and related litigation.

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  • As Part of Wal-Mart Investigation, House Members Question the Efforts of the Chamber of Commerce to Amend the FCPA

    The U.S. Chamber of Commerce’s Institute for Legal Reform (ILR) and the Retail Industry Leaders Association (RILA), among other business groups, have been pushing hard for amendments to the FCPA.  Now, as part of the congressional investigation into Wal-Mart’s alleged bribery of Mexican officials, Oversight and Government Reform Committee Ranking Member Elijah E. Cummings (D. Maryland) and Energy and Commerce Committee Ranking Member Henry A. Waxman (D. California) are asking for more information about the relationship between Wal-Mart executives and other companies represented by the Chamber’s ILR and RILA and the groups’ efforts to “weaken” the FCPA.

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  • Reed Smith Adds Former SEC Senior Assistant Chief Litigation Counsel

    On June 4, 2012, Reed Smith LLP announced the addition of Terence Healy as a partner in its Global Regulatory Enforcement Group in the firm’s Washington, D.C. office.

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  • Litigation Partner Bruce Casino Joins Sheppard Mullin’s Washington, D.C. Government Contracts and Investigations Practice

    Bruce J. Casino recently joined the Washington, D.C. office of Sheppard, Mullin, Richter & Hampton LLP as a partner in the firm’s Government Contracts, Investigations & International Trade practice group.

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