1. The Foreign C orrupt
Practices A ct
Michael L. Volkov

2. Basic Overview
Anti-bribery:
• Domestic concerns (defined as a U.S. person or corporate entity) are
prohibited from making corrupt payments or promises to pay foreign
officials for the purpose of obtaining or retaining business.
Accounting/Recordkeeping Provisions:
• Internal control and recordkeeping provisions applicable to corporations
whose securities are registered with the SEC, or who must file regular
reports with the SEC.

3. Increased and A ggressive E nforcement
• Corporate Mega Fines
• Obama Administration's Focus: "HIGH PRIORITY"
• New Tactics
• Industry-Focus

4. The Numbers Tell the Story
[1 ] Gibson, Dunn & Crutcher, LLP Publication "2009 Year-End FCPA Update" (Jan. 4, 201 0)

5. Fines and Penalties
2008: $ 2.8 billion in fines and penalties assessed against
• thirty-six corporations
• sixty-four individuals
Recent Blockbusters:
• December 2008: Siemens A and three subsidiaries pled guilty to alleged FCPA
G
violations and agreed to pay $ 1.6 billion in fines to U.S. and foreign authorities.
[2]
• February 2009: Kellogg Brown & Root pled guilty to a bribery scheme in Nigeria
and agree to pay $ 402 million in criminal fines, and $ 177 million in
disgorged profits. [3]
[2] http:/www.j
/ ustice.gov/ pr/
opa/ 2008/
December/ 08-crm-1 1 05.html
[3] http:/www.j
/ ustice.gov/ pr/
opa/ 2009/
February/
09-crm-1 1 2.html

6. 2010 C orporate Fines and Penalties
• February 201 0: BA Systems plc ends a ten plus year bribery ring involving middle
E
eastern countries and agreed to pay $ 400 million in fines. [4]
• March 201 0: Innospec settled charges with the SEC and DOJ for $ 25 million in
,
fines and penalties. [5]
• J 201 0: Technip, part of a four-company j
uly oint venture that bribed Nigerian
government officials over a 1 0-year period, will pay $ 98 million with an
additional $ 240 million criminal penalty. [6]
• J 201 0: Snamprogetti Netherlands B.V and Eni S.p.A will j
uly . . ointly pay $ 125
million in disgorgement; and Snamprogetti will pay an additional criminal
penalty of $ 240 Million. [7]
[4] http://www.justice.gov/opa/pr/2010/March/10-crm-209.html
[5] http://www.sec.gov/litigation/litreleases/2010/lr21454.htm
[6] http://www.sec.gov/litigation/litreleases/2010/lr21578.htm
[7] http://www.sec.gov/litigation/litreleases/2010/lr21588.htm

7. Individual Prosecution Rates
Prosecutions of Individuals are Increasing
• 2009 – 46 Individuals
• 2008 – 1 6 Individuals
Lanny A. Breuer, Assistant Attorney General for DOJ's Criminal Division:
• Significant sentences
• FBI Investigative Squad
• Strategic partnerships with the US Attorney General's Office
• Partnering with Internal Revenue Service [8]
[8] Comments by Lanny Breuer to the 22nd National Forum on Foreign Corrupt Practices A November 1 7, 2009,
ct,
available at http:/www.j
/ ustice.gov/
criminal/ speeches-testimony/
pr/ documents/ 1 -1 7-09aagbreuer-remarks-fcpa.pdf
1

8. A ggressive E nforcement Tactics
2009: 2 Year S ting Operation
• Undercover Informant
• 22 Individuals Charged in US District Court in DC
The DOJ's press release on the day of the arrest:
• A pproximately 1 50 FBI agents
• 1 4 search warrants in the United States [9]
• 7 search warrants in the United Kingdom. [1 0]
[9] http:/www.mainj
/ 201 04/ fcpa-sting-case-why-gabon/ see al
ustice.com/ 0/ 05/ ; so http:/www.fbi.gov/
/ page2/an1 0/
j fcpa_ 01 261 0.html
[1 0] http:/www.j
/ ustice.gov/ pr/ 0/anuary/ 0-crm-048.html
opa/ 201 J 1

9. DOJ and SE C Techniques
Aggressive law enforcement techniques:
• Search Warrants
• Undercover Officers
• Confidential Informants
• Wiretaps
• Strategies typically reserved for investigations of violent gangs
and drug trafficking organizations (i.e. undercover sting
operations)

10. Whistleblower's Bounty
Financial Reform Bill
• Whistleblowers can recover between 1 0 and 30 percent of any
settlement that exceeds $1 million
• Based on significance of information and level of cooperation
• Cannot receive if convicted of a criminal violation
• Similar to False Claims Act

11. Who is a Foreign Official?
Broadly Defined
• Examples:
– A Candidate for a Foreign Political Office
– A Officer/
n Employee of a Public International Organization (e.g.
The World Bank or the United Nations)
– Officials of Government Owned Banks or Hospitals

12. What is an Instrumentality?
Foreign Official includes " Instrumentalities"
• Examples:
– General Manager of a corporation owned in-part by a
government owned entity (FCPA Op. Proc. Rev. 08-01 )
– US v. S namproget i Net and s B .V. – Instrumentality
t herl
49% government owned
– "Rescued" foreign banks

13. the " Knowing" Requirement
" Knowing"
• Actual Knowledge / Firm Belief
• High Probability
• Willful Blindness is not a defense

14. FC PA E xceptions
Facilitating or Expediting Payments
• Permits or Licenses
• Utilities
• Cargo Handling Services

15. FC PA A ffirmative Defense: Written L aws
• Payment under WRITTEN foreign law
• Examples:
– Court administrator expenses (FCPA Op. Proc. Rel.
07-03)
– The Nigerian fine and a "recommended" contractor
(FCPA Op. Proc. Rel. 98-01 )

16. FC PA A ffirmative Defense:
Reasonable Bona Fide E xpenditures
• Payment of reasonable and bona fide expense related to promotion,
demonstration or contract performance
• Examples:
– Travel expenses to United States (FCPA Op. Proc. Rel. 07-01 )
– Product samples for testing (FCPA Op. Proc. Rel. 09-01 )
– Journalist stipends (FCPA Op. Proc. Rel. 08-03)
– Trips to tourist destinations (US v. Met f & Ed d y, Inc.; S E C v.
cal
Lucent Technol ogies, Inc.)

17. A ccounting Provisions: C ommon Violations
• Failure to record transactions
• Falsifying any aspect of a transaction
• Misrepresenting purpose or circumstances
• Examples:
– Recording airline tickets for a foreign official's relative as
a "commission payment." (Unit S t es v. Liebo)
ed at
– Classifying payments to foreign officials as an "incidental
fee." (Unit S t es v. O 'H ara)
ed at

18. Penalties
Anti-bribery Provisions:
• Criminal penalties
– Companies: Up to $2 million per violation
– Individuals: Up to $1 00,000 per violation and/ up to 5
or
years imprisonment
• Civil penalties
– Corporations and Individuals
• Inj unctive Relief
• Up to $1 0,000 per violation

19. Penalties
Accounting Provisions:
• Criminal Fines for Knowing/ Willful Violations
– Companies: $25 million per violation
– Individuals: $5 million per violation and/ up to 20 years
or
imprisonment
S EC Enforcement Action:
• Possible additional fine not to exceed the greater of the following
– Gross amount of pecuniary gain to the Defendant
– A specific dollar limitation ranging from $5,000.00 to $1 00,000.00 for
a person and $50,000.00 to $500,000.00 for an entity

20. G lobal Industries are at the Greatest Risk
Multinational corporations seeking entry into foreign
markets
• Certain industries:
– Pharmaceutical
– Telecommunications
– Energy
– Industrial/ Technology
– Health Care
– Financial Services

21. E lements of E ffective FC PA C ompliance
FCPA issues arise typically in the following ways:
• Direct bribers to government officials
• Indirect bribers to government official via agents or third-party representatives
• Entertainment and hospitality expenses
• Payment of per diems for visiting officers
• J venture arrangements
oint
• Mergers and acquisitions
• Charitable contributions

22. E lements of E ffective FC PA C ompliance
Goals:
• Educating employees
• Communicating that the company is serious about enforcement
• Help employees determine when expert involvement is
necessary
• Monitor adherence to policies

23. E lements of E ffective FC PA C ompliance
• Risk identification
• Control identification
• Resource identification
• Scope and obj ectives identification
• Compliance procedures
• Accounting procedures
• Testing procedures
• Reporting procedures

24. E lements of E ffective FC PA C ompliance
• Annual assessments
• Implement an anti-corruption program
– Training
– Communication
– Transaction testing
– Disciplinary mechanisms

25. E lements of E ffective FC PA C ompliance
Training and Communications Programs:
• Effective recruitment, background, and screening of employees
• A nti-corruption training, with additional compliance resources and
training to certain employees involved in high-risk transactions
or areas
• Ethics and business conduct policies and procedures
• Policy for tracking payments accurately

26. E lements of E ffective FC PA C ompliance
Transaction Testing:
• Identify high risk
– Locations
– Business partners
– A ctivities
• Monitoring, Detection, and Auditing Process

27. E lements of E ffective FC PA C ompliance
Disciplinary Mechanisms:
• System for reporting suspected violations
• Procedures for reporting and responding to problems of
possible violations
• Notification of appropriate compliance personnel and members
of management
• Transaction holds
• Document preservation
• Mechanisms for anonymous reporting

28. E lements of E ffective FC PA C ompliance
Other Compliance Mechanisms:
• Develop third party acceptance and retention policies
– Compliance contract clauses
– Maintain contracts in central location
– Implement agent management and due diligence policies

29. Due Diligence Related to Third-Party A gents and
Distributors
• Weed out people or firms likely to make bribes
• Document hiring decisions
• Country desk at the State Department
• Background check
• Local databases and/ police records
or
• Written hiring procedures

30. Due Diligence Related to Third-Party Distributors
• Written Questionnaire
• Contractual Provisions
– Tightly worded
– No payment until written agreement in place with FCPA
provisions
– Written acknowledgment of FCPA

31. Due Diligence Related to Third-Party Distributors
Example Contract Provisions:
• Independent Contractor
• A ware of the FCPA and will not commit any actions that would cause an FCPA
violation
• Not an employer, officer, or representative of the foreign government, nor a candidate
for office
• No assignment of rights without consent
• Issuer can review corporate books
• Purchases made pursuant to an itemized list of expenses and in writing

32. Due Diligence Related to Third-Party Distributors
Example Contract Provisions:
• No anonymous payment
• Require consent before paying certain expenses, including gifts
• Require keeping accurate books
• A greement is void ab init if US Company believes that there
io
is any violation of either the US or the foreign company’s anti-
bribery laws
• Require notification of relevant changes

33. General Red Flags
Examples of general red flags include:
• "Improper payment" audit in the past five years
• Country history
• A ccounts of payoffs, bribes, kickbacks
• Industry history

34. Red Flags for Third-Party A gents and Distributors:
Transaction Specific
• Refusal to provide FCPA compliance statement
• Relative/business ties to government official
• Bad reputation
• Listing on databases for known corruption risks
• Request for non-disclosure of identity

35. Red Flags for Third-Party A gents and Distributors:
Transaction Specific
• Recommended by foreign government
• Lack of facility and/ staff
or
• Previous violations of local law
• Use of anonymous subcontractors
• Large/frequent political contributions
• Involvement of third-parties who do not add value to the
transaction

36. Red Flags for Third-Party A gents and Distributors:
Transaction Specific
• Foreign partner owned by key official or relative
• Undisclosed silent partner
• Relationship does not comply with local laws or regulations
• Assignment of rights or obligations
• Unexplained breakup with another company

37. C ontrol-Based Red Flags for Third-Party A gents and
Distributors
• J venture partner insists on two sets of books
oint
• Refuses auditing
• Inadequate/
Incomplete documentation of expenses

38. Red Flags for Payment Requests by Intermediaries
• Excessive commissions
• Payment through convoluted means
• Over-invoicing
• Anonymous payments
• Unusual bonuses, success fees, or extraordinary payments

39. Necessity of E ffective C ompliance Program
• Recent legislation
• Tarnished Reputation
• Expense of internal investigations and defense
• Expense of penalties imposed

40. The Foreign C orrupt
Practices A ct
Michael L. Volkov

41. FC PA Due Diligence: Identifies persons or companies of risk prior
to establishing a relationship
Follow the funds:
-Agents
-Distributors
-J venture partners
oint
-Resellers
-Suppliers
-Clients
-Partners

42. FC PA Due Diligence: Questions to ask
•Credible Identification
- Photo
- Date of Birth
- Passport or National ID Number
-A ddresses
•A you currently holding an elected or appointed government
re
office (local, state, or national)?
•Do you have a family member/
business partner who was
elected or appointed government office (local, state, or
national)?

43. Systematic Due Diligence
New Relationship
High Risk entities: Foreign Officials:
Already linked to corruption persons/ companies linked to
investigation foreign governments
Positive Match No Match Escalate Positive Match No Match Escalate

44. Systematic Due Diligence

45. Ongoing Monitoring
A your organization to risk based on the following:
lert
• Current 3rd party has now been linked to a corruption investigation or other
illicit behavior
• Current 3rd party now linked to a foreign government
• Known “foreign official” relationship now has been linked to illicit
behavior
• Produce reports of when said parties have been screened and
how the relationship was dispositioned

46. O ngoing D ue D iligence: the risk of any relationship can
change in an instant
Reputable Database of foreign officials,
and persons linked to corruption
Match Report
Monitoring Tool
based on the
following:
•Name
Your database of current •Dates of Birth
relationships
Vendors/ gents
A Employees
•Pas s port/
National ID Number
•Country
Customers Suppliers

47. A n Ounce of Prevention….
Systematic Due Diligence should be applied to all divisions of a company that provide or
receive products or services outside of the United States
• Initial Due Diligence:
- Screen all 3rd parties, regardless of locations, in a similar fashion
- Gather critical details on contacts to ease the deconflicting process
- Set up procedures to deal with names that fall in “gray”
• Ongoing Due Diligence:
- Gather and centralize information on 3rd parties
- Process names in a “batch” screening environment
- Implement monitoring application to alert to changes in risk

48. The Foreign C orrupt
Practices A ct
Q& A
Michael L. V olkov
M ichael Volkov
D ickinson Wright PL L C
mvolkov@dickinsonwright.com
(202) 659-6927
Ryan M organ
World C om pliance
rmorgan@worldcompliance.com
(305) 579-2298 x262