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Recently, The Deal’s Rhonda Schaffler spoke with Jeremy I. Levy, an attorney in the corporate and securities practice at Pepper Hamilton, about allegations of fraud in private equity portfolio companies. Current law puts the...more

Will incentive time bombs blow up your company?

Marc Hodak, an NYU Adjunct Professor and compensation consultant, spoke at the Ethical Systems event in New York a few months ago. He talked about “incentive time bombs,” where “bad behavior can hide behind good performance,” and how those behaviors can go unnoticed and unobserved by management until it’s too late. Originally published on the FCPA Blog on September 1, 2016.more

Top Ten International Anti-Corruption Developments for July 2016

In order to provide an overview for busy in-house counsel and compliance professionals, we summarize below some of the most important international anti-corruption developments from the past month, with links to primary resources. This month we ask: Which companies reached resolutions with the Department of Justice (DOJ), the Securities and Exchange Commission (SEC), the Serious Fraud Office (SFO), and a host of Brazilian authorities? What aspect of Mexico's new anti-corruption regime was called a “game changer”? Which Asian country saw the release of a new set of anti-corruption compliance guidelines? The answers to these questions and more are here in our July 2016 Top Ten list: 1. South American Airline Resolves Argentina FCPA Accounting Provision Allegations. In February 2016, SEC announced that Ignacio Cueto Plaza, the CEO of South America-based LAN Airlines, had agreed to settle claims that he violated the FCPA’s accounting provisions by authorizing payments to a third-party consultant in 2007 despite knowing that the consultant might pass money onto union officials in Argentina to help resolve a labor dispute. On July 25, 2016, DOJ and SEC announced that they had reached resolutions with the company for a combined penalty of approximately $22.2 million based on the same allegations. There were some notable aspects of the corporate resolutions. Although neither agency alleged that the union officials were “foreign officials” under the FCPA, both agencies characterized the consultant as an “advisor” to Argentina’s Ministry of Transportation. This suggests that they might have viewed the consultant as a person “acting in an official capacity for or on behalf of” the Ministry and, therefore, a “foreign official” under the FCPA. Read this way, any money that the consultant kept for himself in exchange for intervening in a labor dispute within the scope of his Ministry could arguably be characterized as a bribe under the FCPA. However, the SEC Order notes that the consultant held an “ad-honorem” position given to him “pursuant to an unpublished Resolution.” This further suggests that the agencies might not have been willing to test this “foreign official” theory, which they were able to avoid by bringing accounting charges instead... Please see full Alert below for more information. more

Board Interlocks On Antitrust Enforcement Hot Seat: A Must-Read Guide for Board Members and Officers

Recent enforcement activity by the Department of Justice (that required restructuring a live transaction) and the Federal Trade Commission makes clear that enforcement of Section 8 of the Clayton Act, the prohibition against interlocks between competitors, is alive and well. Board members and officers must be on alert to avoid any instance of serving on the Boards or executive teams of competitors. Failure to follow Section 8’s prohibitions can lead to costly government investigations and management distraction, not to mention potential legal exposure. This alert provides a refresher on Section 8’s elements, as well as best practices to ensure compliance. more

Can Emerging Markets Counter the Corrupt Narrative?

In this ten-minute video interview, Frank Brown, Anti-Corruption Program Team Leader for the Center for International Private Enterprise (CIPE), addresses the value of collective compliance solutions in emerging markets, as part of how leadership can “counter the corrupt narrative.” In this interview (part II or II), Frank also addresses: * What are the political reasons why foreign leadership might embrace international anti-bribery norms? * How western multinationals can better identify third parties in emerging markets that take anti-bribery laws seriously. * How small to mid-sized companies in emerging markets can organize the compliance function. * The value of collective compliance solutions in emerging markets. * How collective action can raise the “water level” of compliance efforts in emerging markets to a serious critical mass.more

A View from the Front-Lines of Compliance in Mexico

Today, I am pleased to welcome back Patrick Henz as a guest contributor. I welcome Patrick’s perspective, as he shares his real-world approach and experience with respect to anti-corruption compliance in Mexico. The Transparency International Corruption Perception Index (2015) presents Mexico as 95 of a total of 167 countries. In comparison to 2014, this was no change of the perceived corruption level, as the score stayed at 35. If we analyze the index starting in 2002 (36), we see that the country had the best value in 2008 (36) and the worst in 2011 (34), Thus, with a given statistic uncertainty, we can say that even with the different initiatives, everything stayed the same since the beginning of the millennium.more

Second UK Deferred Prosecution Agreement Has Implications for US Corporates

“Innocent” US parent pays £6.25 million for UK subsidiary’s secret bribery. On July 11, the UK’s Serious Fraud Office (SFO) announced that it had secured its second deferred prosecution agreement (DPA). The first DPA was secured in November 2015 when Standard Bank agreed to meet financial penalties of US$25.2 million. The second concerns an as-yet-unidentified UK company (referred to as “XYZ Limited” for purposes of the case) that secured a number of contracts in various parts of the world through bribery. The bribery was said by the judge to be “part of XYZ’s established business conduct” and that within XYZ it was “an accepted way of doing business.” The bribery took place over a period of eight years, and subterfuge and deception were employed to keep the truth secret from auditors and XYZ’s US parent.more

Laws and Legal Reforms against Corruption Are Approved

Derived from the historic constitutional reform which created the National Anticorruption System (“SNA”) in May 2015, the Mexican Congress approved a group of laws that comprises the legal framework that will make effective the public strategies and policies for fighting corruption and impunity. The objective of these laws is to achieve full coordination of the efforts of the Federation, the States of the Federation, municipalities and the government of Mexico City, in order to prevent, investigate and punish administrative violations and corruption from public officers, companies and individuals. Please see full publication below for more information.more

"China and the Foreign Corrupt Practices Act"

Recent U.S. Department of Justice (DOJ) policies on corporate crime prosecutions, coupled with the Chinese government’s robust anti-corruption campaign, are proving challenging for U.S. corporations with business operations in China. As U.S. and Chinese law enforcement authorities zero in with increasing frequency on similar conduct, companies may find themselves having to respond to authorities from multiple jurisdictions.more

Recent Trends and Patterns in the Enforcement of the Foreign Corrupt Practices Act (FCPA) / FCPA Digest

Shearman & Sterling’s bi-annual Trends & Patterns report provides insightful analysis of recent enforcement trends and patterns in the US, the UK, and elsewhere as well as helpful guidance on emerging best practices in FCPA and global anti-corruption compliance programs. Please see full Digest below for more information. more

Global Trends and Business Ethics

The following is part one of a two-part guest post by Alison Taylor and James Cohen. 2016 is only half-complete, but it’s already been a pivotal year in ethics and compliance. The Panama Papers and Unaoil data leaks have ushered in a transformed transparency environment. Due diligence approaches have come under particular pressure as it came clear that standard tools and approaches are not fit for purpose. Leading thinkers in compliance have called for Compliance 2.0, a boost to the power and authority held by compliance functions, to match its rising accountability. Corporate responsibility and ethics teams are working more closely together in recognition that issues of strategy, incentives, and culture require organizational change, as well as thinking and approaches that cut across internal teams. Governments, the media, and civil society organizations have become increasingly aware of the systemic drivers of corruption.more

UK Bribery Act – 5 lessons in 5 years: No. 5 – What does the future hold?

UK Prosecutor sees Bribery Act offence as a template for fighting other forms of financial crime. The Serious Fraud Office would like to extend the strict liability "failure to prevent bribery" offence that is currently encapsulated in Section 7 of the Bribery Act. Its thinking is that this will make its job as a prosecutor much easier when it comes to taking criminal enforcement action against companies. At a time when the United States are shifting towards a greater focus on individuals (as set out in the Yates Memo) why is the UK seeking to move in the opposite direction? And more importantly, to what end?more

D&O Insurance—Issues to Consider Before a Claim Arises

In Depth - Directors and officers (D&O) liability insurance remains a vital issue for companies and their directors and officers as potential sources of liability continue to evolve. More securities lawsuits were filed in the past year than in any year since 2008, reflecting increased liability risks surrounding mergers and acquisitions, and IPOs. And on September 9, 2015, the US Department of Justice (DOJ) issued the so-called “Yates Memo,” which reaffirmed the DOJ’s policy prioritizing enforcement against individuals allegedly involved in corporate crime. Beyond these headline-grabbing exposures, individual directors and officers at even relatively small companies and nonprofits remain subject to a variety of potential claims, from alleged fiduciary liability to shareholders, partners or donors, to claims by suppliers, customers or competitors. more

UK Bribery Act – 5 lessons in 5 years: No. 3 – Incentivising Self-Reporting

Bribery by its very nature is generally a secret matter. Self-reporting is therefore a useful tool by which the SFO can learn of, and take action against, wrongdoing. But what are the incentives for a company to self-report? The total immunity afforded in some cartel cases is unlikely to ever be considered a satisfactory resolution for a company self-reporting bribery. There are some drivers, particularly in the financial services sector, but could more be done to make self-reporting a more attractive option? What are the potential drivers for a company to self-report?more

UK Bribery Act – 5 lessons in 5 years: No 2 – Unheard Voices

The corporate bribery offence has brought in a new age of enforcement, but at what cost to individuals who may be implicated? In the last few weeks of 2015, the enforcement landscape for corporate entities carrying on business in the United Kingdom changed forever. On 30 November 2015, Sir Brian Leveson approved the UK's first Deferred Prosecution Agreement ("DPA") between the Serious Fraud Office ("SFO") and Standard Bank plc ("Standard Bank"). The DPA suspended an indictment against Standard Bank alleging failure to prevent bribery contrary to the Bribery Act 2010 (the "Bribery Act"). Just days later, on 18 December 2015, Sweett Group plc ("Sweett Group") pleaded guilty to a charge of failing to prevent an act of bribery intended to secure and retain a contract, contrary to the Bribery Act.more

DOJ Announces First Declinations After Implementing FCPA Pilot Program

The U.S. Department of Justice (DOJ) issued its first set of public declinations since its April unveiling of a new self-reporting Foreign Corrupt Practices Act (FCPA) pilot program. On June 7, 2016, Akamai Technologies, Inc., a Massachusetts-based internet services provider, and Nortek, Inc., a Rhode Island-based residential and commercial building products manufacturer, both avoided criminal prosecution for illicit payments the companies paid to Chinese officials in independent bribery schemes conducted through Chinese subsidiaries. In connection with the declination announcements, the U.S. Securities and Exchange Commission (SEC) entered into rare non-prosecution agreements (NPAs) with the companies, stipulating that the companies are not charged with violations of the FCPA and do not face additional monetary penalties.more

UK Bribery Act – 5 lessons in 5 years

Love it or loathe it, the Bribery Act has put anti-corruption compliance on the boardroom agenda like nothing has done before. More than just ‘box ticking’- When the Bribery Act was introduced into the UK in 2011, the most significant change to the pre-existing law was the establishment of the corporate offence of failing to prevent bribery - an organisation is liable to prosecution if an associated person (who performs services for or on behalf of the company) bribes another, intending to obtain or retain business or an advantage in the conduct of business for that organisation. Significantly, where organisations can prove that they have ‘adequate procedures’ in place designed to prevent such unlawful conduct, a full defence is available. But five years on, the question remains – how can a company ensure its ‘adequate procedures’ are adequate? What has become clear is that this is far more than just a ‘box ticking’ exercise... Please see full alert below for more information.more

A COSO Look at Control Objectives

Brian Christensen, in an article in Corporate Compliance Insights (CCI) entitled “The Updated COSO Framework: Time for a Fresh Look at Internal Control”, said that the updated 2013 COSO Framework retained the core definition of internal controls; those being control environment, risk assessment, control activities, information and communication, and monitoring activities. Further, these five operational concepts are still visually represented in the well-known three-dimensional “COSO Cube”. However, it is the emphasis on the principles, which is new to the 2013 Framework. Today I want to explore in some detail the first Objection-the Control Environment.more

Want to Work in Compliance – Learn How to Read a Balance Sheet

One of the most interesting tag lines I heard at Compliance Week 2016 was the following, if you want to work in my compliance department; you need to learn how to read a balance sheet. I thought that single line encapsulated the change in the compliance function over the past few years more than any other. Why, because it speaks to the change of compliance from being centered in the legal department, run by lawyers as a rules based program, to fully understanding that compliance is a business process that needs to centered in its own discipline. For if you cannot read a balance sheet you cannot bring a positive value to a business unit.more

Red Notice Newsletter - May 2016

ANTICORRUPTION DEVELOPMENTS - Former Securency Manager Convicted of Corruption - On May 11, 2016, Peter Michael Chapman, former manager of polymer banknote manufacturer Securency PTY Ltd. (“Securency”), was convicted on four of six counts relating to corrupt payments he made to a foreign official in violation of the U.K.’s Prevention of Corruption Act 1906. Please see full Newsletter below for more information. more

Joe Spinelli on Corruption Risk & FCPA Due Diligence

In part II of our interview, Joe Spinelli, Senior Managing Director, Kroll, addresses a number of issues which were shared in the Kroll-Ethisphere 2016 Anti-Bribery and Corruption Benchmarking Report. In this interview, Joe focuses on: *The role of the Board and CEO in paying an active role in compliance programs and initiatives. *The perils of using contract provisions in third party management without complementary ethics and compliance based training. *The challenges of a centralized compliance function. In the concluding part of the interview, Joe reflects on areas of progress and continued compliance challenges since Kroll started publishing the Benchmark Reports in 2011.more

ISO 37001: A New Measuring Stick for Corporate Compliance Programs

The International Organization for Standardization is developing a certifiable international standard for “anti-bribery management systems” that could influence how the US Department of Justice, US Securities and Exchange Commission, and other regulators evaluate and grade corporate compliance programs.more

The Pen is Mightier than the Compliance Sword

Nicole Rose brings a breath of fresh air to compliance. 6 years ago she swapped her legal practicing certificate for her pen and has been thriving ever since. She founded Create Training almost 3 years ago, and over this time has penned over 150 animated compliance training videos. Her work reaches 100’s thousands of learners worldwide. As a regular contributor to leading compliance publications, Nicole has written about everything you wouldn’t expect to read about in relation to compliance. She passionately believes that creativity, cartoons, animation, emotions, and neuroscience are all essential ingredients in any compliance diet. She is now serving up some much needed creative inspiration with her new book, Compliance With Attitude. Here are a few questions to Nicole about her new book and her methods, in general.more

10 Takeaways from Deputy Attorney General Sally Q. Yates’ Remarks at the 2016 New York City Bar Association White Collar Crime Conference

This week, Deputy Attorney General Sally Q. Yates delivered remarks at the New York City Bar Association reflecting on the eight months since the release of the “Yates Memo,” or as Deputy AG Yates prefers, the “Individual Accountability Policy” (“the Policy”).  The Policy’s release in September 2015 followed prolonged criticism over a perceived lack of…more

FCPA (and my) Failure

I haven’t thought too much about failure lately, until I read Roy Snell’s piece, “We Are All Victims…Except Richard Bistrong.” Roy’s article took me by surprise, as his blog piece addresses a primary foundation of my work: embracing failure, and making sure to be transparently clear that I was no victim- to my former employer, to culture, or even to drug addiction. I can’t get to the lessons of how my crucible might be a learning moment for others if that doesn’t come across unfettered and unfiltered.more

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