Fcpa And Anti Corruption Task Force Mo Fo

Morrison & Foerster’s
FCPA and Anti-Corruption
Task Force
January 2011

© 2011 Morrison & Foerster LLP | All Rights Reserved | mofo.com

Table of Contents
Tab
1 FCPA Backgrounder

2 FCPA Practice: Compliance

3 FCPA Practice: Asia Investigations

4 FCPA Practice: Overview

5 2010: Another Record Breaking Year for FCPA
Enforcement, Confirming “New Era,” Morrison &
Foerster Client Alert, January 12, 2011
6 Alcatel-Lucent Settles “Unprecedented” $137 Million
FCPA Case, Morrison & Foerster Client Alert, January 3,
2011
7 FCPA: DOJ May Be Listening, But It Is Not Changing Its
Approach, Morrison & Foerster Client Alert, December 2,
2010
8 DOJ Official Proclaims “New Era” of FCPA Enforcement,
Morrison & Foerster Client Alert, November 19, 2010
9 SEC Issues Proposed Doff-Frank Whistleblower Rules,
Morrison & Foerster Client Alert, November 4, 2010

10 Professional Summaries
Paul T. Friedman
Randall J. Fons
Daniel P. Levison
Carl H. Loewenson, Jr.
Kevin Roberts
Robert Salerno
Sherry Xiaowei Yin

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FCPA Backgrounder
What You Need to Know About the Foreign Corrupt Practices Act (“FCPA”)

WHAT IS THE FCPA?
• The FCPA prohibits paying – or promising to pay – anything of value to a foreign government official where the
purpose is to obtain or retain business.

• The FCPA also requires publicly traded companies to keep accurate books and records and implement
appropriate internal controls.

WHY IS THE FCPA IMPORTANT TO YOU?
• FCPA applies to all U.S. nationals (companies or individuals) and any foreign company listed on a U.S.
exchange or that submits reports to the SEC as result of capital raising activities (including trading American
Depository Receipts).

• Companies can be held responsible for FCPA violations by agents and joint venture partners.

• Increasing number and size of FCPA cases: In 2002, there were zero criminal prosecutions. In 2004, there
were only 3. By 2009, there were 34, with 150 open U.S. Department of Justice (“DOJ”) investigations.

• Growing trend to aggressively enforce FCPA both by DOJ and U.S. Securities and Exchange Commission
(“SEC”), with an increasing number of tag-along civil litigations.

o Enforcement priority with increasing dedicated resources.

o Steep financial penalties (e.g., Siemens was fined $800 million in U.S.; Daimler was fined $185 million).

o Four letter word: J-A-I-L (executives have been sentenced to jail time).

o Essentially strict liability for parent company for FCPA books and records violations of its wholly-owned
subsidiaries.

o Relevant to all industries: not just oil, pharmaceutical, or high tech.

o Relevant to many geographies: China and many other countries are deemed “high risk.”

o Collateral consequences, including debarment from government contracts and reputational harm.

• Growing global patchwork of anti-corruption laws and multi-national cooperation (i.e., OECD Convention, UK
Bribery Act 2010).

© 2010 Morrison & Foerster LLP | mofo.com

FCPA BACKGROUNDER

HOW CAN MORRISON & FOERSTER HELP?
• Our domestic and international offices advise on and investigate FCPA matters.

• We have a deep bench, and work seamlessly across our offices. Our Securities Litigation, Enforcement,
and White Collar (“SLEW”) practice group includes more than 150 attorneys in our 16 offices worldwide, with
over 20 former federal and state criminal prosecutors, former SEC enforcement attorneys, as well as in-
house accounting experts.

• Been there, done that: We have performed a large number of FCPA investigations -- large and small — in
China, Japan, Korea, Thailand, Indonesia, other Asian countries, and Latin America.

• We have vast experience in scores of FCPA matters for major companies and individuals, across a
wide range of FCPA matters:

o Diligence: conducted due diligence reviews for potential M&A transactions (both buy and sell side),
prospective agents, consultants and joint venture partners, and in other contexts, in Asia-Pacific, Europe,
Middle East, South America, and North America.

o Counseling: advised on FCPA compliance policies and procedures, including real-time counseling to
legal and compliance departments when problematic facts emerge.

o Compliance Programs/Training: designed, reviewed, and provided anti-corruption compliance training
(in numerous languages including English, Mandarin and Spanish).

o Investigations: conducted scores of cross-border internal investigations on behalf of companies and
Boards of Directors; represented companies and individuals in investigations by DOJ and SEC.

o Remediation: when anti-corruption problems are detected, we help companies fix those problems.

• We are well-equipped to protect companies and individuals in parallel criminal, SEC and civil proceedings,
as well as with related government contracts issues.

• Largest investigation practice among international firms in Asia, including over 30 litigators in Japan and over
20 Chinese-trained lawyers in Beijing, Shanghai, and Hong Kong offices.

• Strong presence in the UK.

• Follow the money: we have an in-house Forensic Accounting Services Group.

• Our Privacy & Data Security Group assists in cross-border investigations.

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FCPA BACKGROUNDER

EXPERTISE BASED ON HANDLING SCORES OF FCPA MATTERS
• Represented many global companies in internal investigations, government investigations, self-reporting
procedures.
• Where necessary, we can field a team in several countries simultaneously.
• A few representative examples:
o Represented a U.S.-based multinational Fortune 50 company in internal investigation of alleged
violations of the FCPA in Asia-Pacific countries. Following the conclusion of our investigation and self-
reporting, neither the SEC nor the DOJ took any action against our client.
o Represented a U.S.-based multinational public corporation in an internal investigation of whistleblower
allegations of violations of the FCPA in China and elsewhere in Asia, with interviews in several countries.
o Assisting a public company acquisition target with FCPA diligence requests from potential buyers.
o Representing senior executives of multinational corporations in investigations by DOJ and SEC into
allegations of illegal payments to government officials in Nigeria, Angola, Kazakhstan, Venezuela, and
Thailand.
o Investigating FCPA allegations at a telecom company and software company in Venezuela.
o Investigating FCPA allegations at a NASDAQ-listed Chinese services company.
o Represented an officer of a large oil services firm in a joint DOJ and SEC investigation relating to
payments to government officials in Indonesia and Brazil.
o Conducting an FCPA internal investigation in Latin America for a Fortune 500 company.

UK BRIBERY ACT 2010
• In April 2011, companies doing business in the UK will be subject to this new law globally.
• It is broader than the FCPA in important respects.
• We are advising companies on exposure and compliance with this new law.

For more information about Morrison & Foerster’s FCPA and Anti-Corruption practice, please contact:

PAUL T. FRIEDMAN CARL H. LOEWENSON, JR.
SAN FRANCISCO NEW YORK
(415) 268-7444 (212) 468-8128
PFRIEDMAN@MOFO.COM CLOEWENSON@MOFO.COM

RANDALL J. FONS ROBERT A. SALERNO
DENVER WASHINGTON, DC
(303) 592-2257 (202) 887-6930
RFONS@MOFO.COM RSALERNO@MOFO.COM

DANIEL P. LEVISON SHERRY XIAOWEI YIN KEVIN ROBERTS
TOKYO BEIJING LONDON
81 3 3214 6522 6 10 5909 3566 020 7920 4160
DLEVISON@MOFO.COM SYIN@MOFO.COM KROBERTS@MOFO.COM

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Because of its generality, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based
on particular situations.

Representative Morrison & Foerster has extensive experience in a wide range of FCPA
compliance matters. Our FCPA Task Force has a strong track record of
FCPA Compliance working with global companies to manage their risk and exposure to
Programs and anti-corruption issues.

Training We have developed, implemented, and reviewed anti-corruption programs for
global companies in many industries, including professional services, defense
FCPA TASK FORCE CONTACTS: and aerospace, media and entertainment, and transportation, among others.
We have conducted scores of FCPA training programs in English, Japanese,
PAUL T. FRIEDMAN and Mandarin to companies operating in China, Japan, and elsewhere in Asia
SAN FRANCISCO to all levels of employees, officers, and directors.
(415) 268-7444 In addition, we work closely with clients in developing FCPA-related
PFRIEDMAN@MOFO.COM
agreements for joint ventures, agents, consultants, key vendors, and other
business relationships, as well as anti-corruption training modules for
CARL H. LOEWENSON, JR.
employees, agents, consultants, and third-party intermediaries. We have also
NEW YORK
(212) 468-8128 conducted scores of reviews of prospective agents, consultants, and joint
CLOEWENSON@MOFO.COM venture partners in Europe, the Middle East, South America, North America,
and the Asia-Pacific region.
RANDALL J. FONS
In the M&A context, we have assisted with anti-corruption due diligence into
DENVER
foreign acquisition targets with substantial operations in the Asia-Pacific, Latin
(303) 592-2257
America, among other regions. Based on results of due diligence, we have
RFONS@MOFO.COM
developed FCPA compliance programs for merged entities, including drafting of
ROBERT A. SALERNO anti-corruption policies and training materials and assisting clients with
WASHINGTON, DC in-person training prior to closing.
(202) 887-6930 We leverage our global network of resources and experts in the United States,
RSALERNO@MOFO.COM
Europe, and the Asia-Pacific to ensure effective geographic coverage for our
clients. Our Securities Litigation, Enforcement, and White-Collar Defense
DANIEL P. LEVISON
Practice Group is comprised of more than 150 attorneys in our 16 offices
TOKYO
81 3 3214 6522 worldwide and includes over a dozen former federal and state criminal
DLEVISON@MOFO.COM prosecutors, former Securities and Exchange Commission (SEC) enforcement
attorneys, and in-house accounting experts with decades of public accounting
experience.

Representative Matters
The following are illustrative examples of our vast expertise relating to FCPA
compliance programs.

Following Asia-Pacific-wide internal investigation, worked with a Fortune 50
global company to re-engineer anti-corruption compliance program.


FCPA PRACTICE: COMPLIANCE

Representative Conducted dozens of FCPA training sessions in English and in Mandarin to companies
FCPA operating in China, including recently to a publicly traded real estate company, and to a
Compliance subsidiary of a public U.S. company.
Programs and Following the representation of a U.S. company accused of FCPA violations related to sales
Training of aerospace supplies in Asia, we conducted an internal investigation which included an
audit of the client's FCPA Compliance Program and internal controls. Also assisted the
client with developing an enhanced FCPA Compliance Program and employee training
materials.
Assisted a publicly-traded U.S. company with FCPA due diligence into foreign acquisition
target with substantial operations in China, Latin America, and South Asia. Based on results
of due diligence, developed FCPA compliance program for merged entity, including drafting
of anti-corruption policy and training materials, and assisted client with in-person training of
China employees prior to closing.
Represented a large multinational services company in reviewing and developing
enhancements as needed for its FCPA Compliance Program, including developing
FCPA-related agreements for joint venture and other business relationships, employees,
agents, consultants, and third-party intermediaries.
Represented a global professional services firm to review its FCPA Compliance Program,
recommend enhancements, and develop training materials.
Following our response to allegations of FCPA violations on behalf of a large multinational
defense contractor, we conducted a review of the existing FCPA Compliance Policies and
developed enhancements and internal controls. Also performed extensive reviews of more
than 50 prospective agents, consultants, and joint venture partners in Europe, the Middle
East, South America, North America, and the Asia-Pacific region and provided training for
upper management and legal department.
Developing and implementing FCPA Compliance Program for a multinational company
providing cross-border services. Includes FCPA-related agreements for joint venture and
other business relationships and training modules for employees, agents, consultants, and
third-party intermediaries. Training provided to upper management and legal staff.
Represent a large multinational company in reviewing and developing enhancements as
needed for its FCPA Compliance Program.
Represent a large multinational company in reviewing and developing enhancements as
needed for its FCPA Compliance Program, including developing FCPA-related agreements
for joint venture and other business relationships, employees, agents, consultants and
third-party intermediaries. Training to upper management will likely be provided during Fall
2010.
Represent a large multinational media company in reviewing and developing enhancements
as needed for its FCPA Compliance Program, including developing FCPA-related
agreements for joint venture and other business relationships, employees, agents,
consultants, and third-party intermediaries.

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FCPA PRACTICE: COMPLIANCE

Representative Reviewed existing FCPA/anti-corruption policy, provided comments; commented on draft
FCPA training materials, and delivered half-day training to management and staff of operating
Compliance subsidiary of a NYSE-listed transportation company. Training was conducted at two client
Programs and locations in China.
Training Provided training and materials on FCPA compliance to local staff of a NASDAQ-listed
communications company in Shanghai. Local managers and staff attended the training.
Provided FCPA compliance training and materials to the Board of Directors and senior
management of a NASDAQ-listed mobile application service provider in Shanghai.
Provided FCPA compliance materials to a leading value-added distributor of medical
imaging and other diagnostic equipment in China.
Provided FCPA compliance materials to a diversified U.S. multinational company.
Provided FCPA and anti-corruption advice to a leading developer and manufacturer of
pharmaceutical products.
Conducted FCPA compliance training for a diversified multinational Fortune 500 company, a
leading consumer survey and consulting firm, and a well-known international financial
services firm.

References
While most of our clients prefer confidentiality pertaining to our services in this area, we will be
able to provide references upon request.

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FCPA Practice: Asia Investigations
Representative Morrison & Foerster has over 25 years of experience on the ground in Asia.
We have over 200 attorneys and other professionals in our Asia offices,
FCPA including 45 Japan-licensed attorneys, 17 Hong Kong-licensed solicitors, 17
Investigations England- and Wales-qualified attorneys, and 22 attorneys with PRC bar
qualifications. Dozens of our litigators in Asia specialize in the skills and
and Other Internal techniques necessary to effectively conduct internal investigations.
Reviews — Our firm has significant experience conducting a wide range of investigations in
China and China, from purely domestic investigations to those with a more global reach.
Our China team is also supported by over a dozen former federal and state
Asia-Pacific criminal prosecutors, former Securities and Exchange Commission (SEC)
HONG KONG enforcement attorneys, and in-house accounting experts with decades of public
33/F EDINBURGH TOWER accounting experience.
THE LANDMARK
15 QUEEN'S ROAD CENTRAL Morrison & Foerster’s Hong Kong, Beijing, and Shanghai offices frequently
HONG KONG represent companies, individuals, audit committees and management, and
PHONE: (852) 2585-0888
FAX: (852) 2585-0800 advise independent directors and special committees of boards of directors.
The firm has been recognized as one of the five best corporate governance
legal practices in Asia (Corporate Governance Asia Recognition Awards).
SHANGHAI
SUITE 3501, BUND CENTER We work with our clients to design and implement codes of ethics and
NO. 222, YAN AN ROAD
employee guidelines, insider trading prevention programs and policies,
EAST SHANGHAI 200002
PEOPLE’S REPUBLIC OF CHINA whistleblower protections, disclosure policies, and audit committee policies
PHONE: (86 21) 2322-5200 required by the Sarbanes Oxley Act of 2002. Our U.S. securities experts in
FAX: (86 21) 2322-5300
China advise on issues related to the SEC, drawing on relevant expertise in our
U.S. offices as needed.
BEIJING
22ND FLOOR, CHINA CENTRAL The firm also has developed and presented seminars for clients and developed
PLACE TOWER 3 compliance policies and controls on important related topics, including
77 JIANGUO ROAD conducting internal investigations – including on FCPA, antitrust, revenue and
CHAOYANG DISTRICT
BEIJING 100025 accounting issues, IP, import licensing topics; designing effective compliance
PEOPLE'S REPUBLIC OF CHINA programs -- including on antitrust and anti-corruption topics; and coping with
PHONE: (86 10) 5909-3399 parallel proceedings.
FAX: (86 10) 5909-3355
The following are illustrative examples of our wide-ranging experience we have
TOKYO
in China relating to FCPA as well as other investigations. Many of our matters
SHIN-MARUNOUCHI BUILDING
29TH FLOOR cannot be described due to client confidentiality requirements.
5-1, MARUNOUCHI 1-CHOME
CHIYODA-KU, TOKYO
100-6529, JAPAN
PHONE: 81 3 3214 6522
FAX: 81 3 3214 6512


FCPA PRACTICE: ASIA INVESTIGATIONS

Representative China – FCPA
FCPA Represent a major U.S. medical device developer in an internal investigation involving FCPA
Investigations and anti-bribery issues in China.
and Other Represent the audit committee of a NASDAQ-listed company in connection with an internal
Internal investigation involving numerous local staff interviews regarding FCPA and accounting
Reviews — issues relating to a major public tender process.
China and Represented Fortune 500 company in SEC investigation and internal investigation of: (a)
Asia-Pacific accounting for revenue on complex contract with a Chinese state-owned enterprise; and (b)
related FCPA issues.
Conducted an internal investigation concerning FCPA issues on behalf of an audit
committee of a semiconductor manufacturer with U.S. and China operations. We also
represented the company in a related SEC informal investigation, which ended quickly and
with no action taken against our client.
Represented the former head of the China operations of an entertainment sales and
distribution company in an FCPA internal investigation.
Represented a U.S. company accused of FCPA violations related to sales of aerospace
supplies in Asia. The allegations included bribes paid to government officials to obtain large
contracts with the foreign government. Our internal investigation included witness interviews
and forensic review of books and records in Chinese and English. We also assisted the
client with developing an enhanced FCPA Compliance Program and employee training.
Represented a major China-based, NASDAQ-listed company in a company-wide internal
investigation regarding possible accounting irregularities, in conjunction with outside
auditors. Following the investigation, which involved employee interviews and document
review, also successfully defended the company against multiple delisting actions by
NASDAQ, handled all aspects of related communications with public investors, represented
the company in an SEC investigation and U.S. class action lawsuit, and negotiated favorable
settlements for both.
Represented a U.S.-based multinational public corporation in an internal investigation of
whistleblower allegations of violations of the FCPA in China and elsewhere in Asia, with
interviews in several countries. Following the conclusion of our investigation and
self-reporting, the SEC and DOJ took no action against our client.
Represented the independent committee of a NASDAQ-listed company in the investigation
of potential breaches of Sarbanes-Oxley and FCPA requirements in connection with
payments to PRC officials.
Represented the independent directors of a NASDAQ-listed company based in China in
conducting an investigation into alleged bribery activities and falsification of records involving
multiple points of sale throughout China.

2


Representative Represented the Special Committee of a NASDAQ-listed Bermuda corporation with its
FCPA principal place of business in China in an internal investigation of possible FCPA violations
Investigations related to use of consultants.
and Other Conducted internal investigation into alleged bribery activities in the PRC media industry by
Internal third-party consultants engaged by a NASDAQ-listed company.
Reviews — Conducted numerous FCPA training sessions in English and in Mandarin to companies
China and operating in China, including recently to a publicly traded real estate company, and to a
Asia-Pacific subsidiary of a public U.S. company.
China – Other

Represent a major international property developer with extensive operations in China in an
internal investigation in connection with alleged misdeeds by its China country manager.
Represent executives of industrial products company in international cartel and corrupt-
payments investigation spanning Japan, China, Malaysia, America, and Europe.
Represent a NASDAQ-listed technology company and its audit committee in connection with
an internal investigation into accounting irregularities and related SEC and Sarbanes-Oxley
issues.
Represent a U.S.-based multinational public corporation in an investigation of its business
practices in Europe, Asia, Australia, and North America in connection with a U.S. grand jury
subpoena and related government investigations in Europe, New Zealand, and Asia.
Represent a U.S.-based multinational public corporation in an internal investigation of
alleged price-fixing practices in its Asian operations triggered by the receipt of a grand jury
subpoena.
Represented the audit committee of a NASDAQ-listed company in connection with China
sales irregularities and related accounting and SEC and Sarbanes-Oxley-related issues. The
work also involved coordination of deposition-type interviews with a China country manager
who was ultimately terminated, and other staff in-country.
Represented a U.S. public company with operations in Asia in an internal investigation
regarding the company’s employee stock option program, involving the review of documents
and interviewing of employees in English, Chinese, and Japanese.
Represented a U.S.-based public company in an internal investigation of a whistleblower
complaint regarding self-dealing and product safety issues in its China-based sourcing
operations.
The following are illustrative examples of our work advising board committees and conducting
internal reviews and investigations in other areas of Asia.

Other Asia-Pacific Investigations

Represented multiple employees of a large Japanese manufacturer in U.S. Department of
Justice investigations of alleged cartel and FCPA activity.

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Representative Represented a U.S. software company in an internal investigation of its Japanese subsidiary
FCPA relating to accounting policies and procedures. We interviewed sixteen witnesses in Japan
Investigations and nineteen witnesses in the United States.
and Other Represented a U.S. software company in an internal investigation of its Japanese subsidiary
Internal after a whistleblower complaint about revenue manipulation.
Reviews — Represented a large Japanese multinational foreign company sanctioned by the U.S. State
China and Department for alleged violations related to sales of controlled products and services to
Asia-Pacific restricted countries. Our internal investigation and compliance reviews involved lawyers in
our Tokyo, Singapore, and Washington, DC offices, and successfully concluded with the
State Department agreeing to lift the sanctions.
Represented a Japanese chemical company in an antitrust investigation triggered by a
grand jury subpoena. The investigation included the company’s U.S. and European
subsidiaries, and was conducted by attorneys from the firm’s Tokyo, New York, San
Francisco, and London offices.
Represented a major consumer electronics company, headquartered in Japan, in an internal
investigation in connection with alleged price fixing allegations in the CRT industry.
Represented a major conglomerate, headquartered in Japan, in an internal investigation in
connection with alleged price fixing allegations in the LCD industry.
Represented a Japanese software company in an internal investigation in connection with
possible theft of trade secrets.
Represented a U.S.-based multinational corporation in an internal investigation regarding
the import licensing practices of its Japanese subsidiary.
Represented a U.S. public company and its Asia subsidiary in an investigation of alleged
improper labeling of the grade and quality of plastics used in computer monitors and other
electronics equipment.
Represented independent directors in an investigation into alleged kickbacks paid in
connection with the formation of a joint venture and acquisition of assets in the
telecommunications industry.
Represented a global company in an investigation by the Japanese government involving
potential claims concerning a government contract.
Counsel healthcare products company on FCPA compliance relating to its operations in
Japan.
Represented an officer of a large oil services firm in a joint DOJ and SEC investigation
relating to payments to government officials in Indonesia and Brazil.
Represented senior executive of global oil and gas services company in an FCPA
investigation of activities in Africa, Asia, and Europe.
Investigating FCPA allegations in Taiwan, Malaysia, the Philippines, and Thailand for a
Fortune 100 company.

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Representative For more information about Morrison & Foerster’s FCPA practice, please contact:
FCPA
Investigations PAUL T. FRIEDMAN CARL H. LOEWENSON, JR. RANDALL J. FONS
SAN FRANCISCO NEW YORK DENVER
and Other (415) 268-7444 (212) 468-8128 (303) 592-2257
Internal PFRIEDMAN@MOFO.COM CLOEWENSON@MOFO.COM RFONS@MOFO.COM

Reviews —
China and
ROBERT A. SALERNO DANIEL P. LEVISON
Asia-Pacific WASHINGTON, DC TOKYO
(202) 887-6930 81 3 3214 6522
RSALERNO@MOFO.COM DLEVISON@MOFO.COM

5

Representations Our Securities Litigation, Enforcement, and White-Collar Defense Practice
Group is comprised of more than 150 attorneys in our 16 offices worldwide.
Involving FCPA The Group includes over a dozen former federal and state criminal prosecutors,
former Securities and Exchange Commission (SEC) enforcement attorneys,
FCPA TASK FORCE CONTACTS:
and in-house accounting experts with decades of public accounting experience.

PAUL T. FRIEDMAN Our domestic and international offices often advise on and investigate alleged
SAN FRANCISCO FCPA violations. These matters have spanned the three primary provisions of
(415) 268-7444 the FCPA: anti-bribery, books and records, and internal controls.
PFRIEDMAN@MOFO.COM
Representative Matters
CARL H. LOEWENSON, JR.
Represented a U.S.-based multinational public corporation in an internal
NEW YORK
investigation of whistleblower allegations of violations of the FCPA in China
(212) 468-8128
and elsewhere in Asia, with interviews in several countries. Following the
CLOEWENSON@MOFO.COM
conclusion of our investigation and self reporting, the SEC and DOJ took no
RANDALL J. FONS action against our client.
DENVER Represent senior executives of multinational corporations in investigations
(303) 592-2257 by the Department of Justice (DOJ) and the SEC into allegations of illegal
RFONS@MOFO.COM payments to government officials in Nigeria, Angola, Kazakhstan, and
Thailand.
ROBERT A. SALERNO
Conducted an internal investigation of possible FCPA violations involving
WASHINGTON, DC
(202) 887-6930 telecom company in Venezuela.
RSALERNO@MOFO.COM Investigating FCPA allegations in Taiwan, Malaysia, the Philippines, and
Thailand for a Fortune 100 company.
DANIEL P. LEVISON
Represented an officer of a large oil services firm in a joint SEC/Justice
TOKYO
Department investigation relating to payments to government officials in
81 3 3214 6522
Indonesia and Brazil.
DLEVISON@MOFO.COM
Represent a major U.S. medical device developer in an internal
investigation involving FCPA and anti-bribery issues in China.
Conducted FCPA due diligence reviews for a defense contractor on more
than 50 prospective agents, consultants, and joint venture partners in
Europe, the Middle East, South America, North America, and the
Asia/Pacific region.


FCPA PRACTICE: OVERVIEW

Representations Conducted numerous FCPA training sessions in English and in Mandarin to companies
Involving FCPA operating in China, including recently to a publicly traded real estate company, and to a
subsidiary of a public U.S. company.
Represented employee of a large international public company under investigation for
violation of the FCPA in connection with activities in Argentina . After testimony, the SEC
took no action against the employee.
Represented the former president of a Fortune 500 oil services conglomerate in an FCPA
investigation of improper payments in connection with government contracts in Nigeria.
Represented oil services industry executives in connection with DOJ and SEC investigations
of alleged FCPA violations in Venezuela and Nigeria.
Represented the former in-house counsel of a Fortune 500 oil services conglomerate in an
FCPA investigation in connection with activities in Africa and Europe.
Represent board member of European company in FCPA investigation of activities in global
telecom industry.
Represented Fortune 500 company in an SEC investigation and internal investigation of: (a)
accounting for revenue on complex contract with a Chinese state-owned enterprise; and (b)
related FCPA issues.
Represent multiple employees of large Japanese manufacturing company in investigations
relating to FCPA and cartel activities.
Counsel software company on policies and procedures for FCPA compliance in connection
with activities around the world.
Counsel healthcare products company on FCPA compliance relating to its operations in
Japan.
Represented senior executive of global oil and gas services company in an FCPA
investigation of activities in Africa, Asia, and Europe.
Conducted an internal investigation concerning FCPA issues on behalf of an audit
committee of a semiconductor manufacturer with U.S. and China operations. We also
represented the company in a related SEC informal investigation, which ended quickly and
with no action taken against our client.
Represented the former head of the China operations of an entertainment sales and
distribution company in an FCPA internal investigation.
Represented a U.S. company accused of FCPA violations related to sales of aerospace
supplies in Asia. The allegations included bribes paid to government officials to obtain large
contracts with the foreign government. Our internal investigation included witness interviews
and forensic review of books and records in Chinese and English. We also assisted the
client with developing an enhanced FCPA Compliance Program and employee training.
Represented a major China-based, NASDAQ-listed company in a company-wide internal
investigation regarding possible accounting irregularities, in conjunction with outside
auditors. Following the investigation, which involved employee interviews and document
review, also successfully defended the company against multiple delisting actions by

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FCPA PRACTICE: OVERVIEW

Representations NASDAQ, handled all aspects of related communications with public investors, represented
Involving FCPA the company in an SEC investigation and U.S. class action lawsuit, and negotiated favorable
settlements for both.
Represented the independent committee of a NASDAQ-listed company in the investigation
of potential breaches of Sarbanes-Oxley and FCPA requirements in connection with
payments to PRC officials.
Represented the independent directors of a NASDAQ-listed company based in China in
conducting an investigation into alleged bribery activities and falsification of records involving
multiple points of sale throughout China.
Represented the Special Committee of a NASDAQ-listed Bermuda corporation with its
principal place of business in China in an internal investigation of possible FCPA violations
related to use of consultants.
Conducted internal investigation into alleged bribery activities in the PRC media industry by
third-party consultants engaged by a NASDAQ-listed company.

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Client Alert.
January 12, 2011

2010: Another Record-Breaking Year for FCPA
Enforcement, Confirming "New Era"
By Paul T. Friedman, Ruti Smithline, and Angela E. Kleine

Since 2007, regulators and commentators alike have touted each passing year as a record-breaking year for FCPA
enforcement. 2010 was no exception. Last year saw an explosion in the number of cases brought by the Department of
Justice (DOJ) and the Securities and Exchange Commission (SEC). The last 12 months also brought the imposition of
record-breaking corporate fines and prison terms for individual defendants.

In November of last year, Assistant Attorney General Lanny Breuer, Criminal Division, DOJ, announced that “[W]e are in a
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new area of FCPA enforcement.” A look back at 2010 confirms Mr. Breuer’s statement—in the history of FCPA
enforcement, there has never been a year quite like 2010.

THE NUMBERS
The number of FCPA enforcement actions increased by 85% from 2009 to 2010. Last year, the DOJ brought 48 criminal
cases. The SEC filed 26 new actions. To put these numbers in context, in 2007—commonly anointed the first record-
breaking year of FCPA enforcement—the DOJ brought 18 cases and the SEC filed 20 cases. Although these numbers
have been steadily increasing from year to year, 2010 overshadowed any prior year in sheer numbers of enforcement
actions.

The monetary penalties assessed against corporations in 2010 were also astounding in their magnitude. In total,
companies paid a record $1.8 billion in financial penalties to the DOJ and SEC in 2010. Even in 2008, when Siemens
paid $800 million (which remains the largest single fine ever paid), the DOJ and SEC collected $890 million in total for that
2
year. Of the top 10 biggest FCPA settlements of all time, eight of them were reached in 2010. These include:

COMPANY SETTLEMENT AMOUNT
(in millions)

BAE Systems $400
ENI/Snamprogetti $365
Technip $338
Daimler $185
Alcatel-Lucent $137

1
Pleases see our Client Alert from November 19, 2010, http://www.mofo.com/files/Uploads/Images/101118-FCPA-Enforcement.pdf. A transcript of the
speech is available at http://www.justice.gov/criminal/pr/speeches/2010/crm-speech-101116.html.
2
See “Recent Cases, Foreign Companies Dominate New Top Ten,” FCPA Blog (Jan. 5, 2010), http://www.fcpablog.com/blog/2011/1/5/recent-cases-
foreign-companies-dominate-new-top-ten.html.

1 © 2011 Morrison & Foerster LLP | mofo.com | Attorney Advertising

Client Alert.
3
And 2010 also brought the longest FCPA prison sentence ever handed down: seven years and three months. There
were a few relatively short sentences, such as the six months that Gerald and Patricia Green received for allegedly paying
bribes to Thai government officials in order to win film festival contracts. But, overall, 2010 saw prosecutors aggressively
going after individuals, and individuals receiving hefty prison sentences. For example, two of the defendants involved in
4
the Haiti Telecom investigation received sentences of 48 months and 57 months.

A YEAR OF FIRSTS
2010 was also remarkable as a year of firsts in terms of creative and aggressive enforcement, both by U.S. regulators and
the international anti-corruption community. To list just a few examples, 2010 was the first year that:

x The SEC charged a company that is not a U.S. issuer with FCPA violations. 5

x The DOJ successfully used money-laundering conspiracy charges to reach the conduct of foreign government
officials accepting bribes. 6

x U.S. and UK law enforcement cooperated in a massive corruption undercover sting operation. 7

x U.S. Congress enacted a new law providing a bounty program for FCPA whistleblowers. 8

x The UK passed the UK Bribery Act 2010 criminalizing a company’s failure to prevent bribery and commercial bribery
between private parties. 9

CONCLUSION
2010 was unquestionably a watershed year for FCPA enforcement. Regulators ushered in a “new era” of enforcement
through aggressive and expansive prosecutions. Regulators are promising the “era” to continue in 2011, and beyond. If
so, 2011 may produce yet another record-breaking year.

Contact
Morrison & Foerster’s FCPA and Anti-Corruption Task Force:

Paul T. Friedman Carl H. Loewenson, Jr. Randall J. Fons Robert A. Salerno
San Francisco New York Denver Washington, D.C.
(415) 268-7444 (212) 468-8128 (303) 592-2257 (202) 887-6930
pfriedman@mofo.com cloewenson@mofo.com rfons@mofo.com rsalerno@mofo.com

Daniel P. Levison Sherry Yin Kevin Roberts
Tokyo Beijing London
+ 81 3 3214 6717 + 86 10 5909 3566 + 020 7920 4160
dlevison@mofo.com syin@mofo.com kroberts@mofo.com

3
DOJ Press Release No. 10-422 (Apr. 19, 2010), http://www.justice.gov/opa/pr/2010/April/10-crm-442.html.
4
DOJ Press Release No. 10-639 (June 2, 2010), http://www.justice.gov/opa/pr/2010/June/10-crm-639.html; DOJ Press Release No. 10-883 (July 30,
2010), http://www.justice.gov/opa/pr/2010/July/10-crm-883.html.
5
Complaint, SEC v. Panalapina, Inc. (S.D. Tex. Nov. 4, 2010), http://www.sec.gov/litigation/complaints/2010/comp21727.pdf.
6
DOJ Press Release No. 10-639 (June 2, 2010), http://www.justice.gov/opa/pr/2010/June/10-crm-639.html.
7
DOJ Press Release No. 10-048 (Jan. 19, 2010), http://www.justice.gov/opa/pr/2010/January/10-crm-048.html.
8
Please see our Client Alert from November 4, 2010, http://www.mofo.com//files//Uploads/Images/101104-Dodd-Frank-Whistleblower.pdf.
9
Please see our Client Alert from September 30, 2010, http://www.mofo.com/files/Uploads/Images/100930-UK-Bribery-Act-2010.pdf.


Client Alert.
About Morrison & Foerster:

We are Morrison & Foerster—a global firm of exceptional credentials in many areas. Our clients include some of the
largest financial institutions, investment banks, Fortune 100, technology and life science companies. We’ve been
included on The American Lawyer’s A-List for seven straight years, and Fortune named us one of the “100 Best
Companies to Work For.” Our lawyers are committed to achieving innovative and business-minded results for our clients,
while preserving the differences that make us stronger. This is MoFo. Visit us at www.mofo.com.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should
not be acted upon without specific legal advice based on particular situations.


Client Alert.
January 3, 2011

Alcatel-Lucent Settles “Unprecedented”
$137 Million FCPA Case
By Paul T. Friedman, Angela E. Kleine and Ruti Smithline

After a six-year international investigation, the DOJ and SEC announced that Alcatel-Lucent S.A. will pay one of the
1
largest settlements in Foreign Corrupt Practices Act history. The Paris-based telecommunications company and three
of its subsidiaries will pay $92 million to resolve criminal charges with the DOJ and $45 million in disgorgement to the SEC
for using consultants to bribe government officials in Costa Rica, Honduras, Malaysia, and Taiwan. The $137 million
2
settlement is the seventh largest FCPA settlement ever reported.

FOCUS ON MEANINGFUL INTERNAL CONTROLS
DOJ charged Alcatel-Lucent with violating the internal controls and books and records provisions of the FCPA, and three
subsidiaries with conspiring to violate those provisions and the FCPA’s anti-bribery provisions. The SEC brought civil
charges against Alcatel-Lucent for bribery, books and records, and internal control violations.

The SEC alleged that, from 2001 through 2006, Alcatel and its subsidiaries “failed to detect or investigate numerous red
3
flags.” The complaint does not implicate any Alcatel officer or director. Rather, the SEC concluded that the bribery
scheme was the product of a “lax corporate control environment.”

The government acknowledged that, at the time the bribes were made, Alcatel already had a “company-wide FCPA
training program” and “risk assessment committee” in place. However, employees allegedly routinely disregarded or
circumvented those programs, and the risk assessment committee was more focused on “customer lawsuits” than on
preventing bribery.

“UNPRECEDENTED” AGREEMENT TO FOREGO THIRD-PARTY AGENTS
The DOJ’s announcement focused on Alcatel’s “business model”—pursuing business opportunities in foreign countries
using third-party agents and consultants. DOJ said “this business model was shown to be prone to corruption.”

1
Department of Justice Release No. 10-1481 (Dec. 27, 2010), available at
http://www.justice.gov/opa/pr/2010/December/10-crm-1481.html; SEC Litigation Release No. 21795 (Dec. 27, 2010), available at
http://www.sec.gov/litigation/litreleases/2010/lr21795.htm.
2
See “In New Top Ten, Eight Are Foreign,” FCPA Blog (Nov. 5, 2010), available at
http://www.fcpablog.com/blog/2010/11/5/in-new-top-ten-eight-are-foreign.html.

3
Complaint, SEC v. Alcatel-Lucent, S.A. (S.D. Fla. Dec. 27, 2010), ¶¶ 3, 19, available at
http://www.sec.gov/litigation/complaints/2010/comp21795.pdf.


Client Alert.
4
The SEC’s complaint highlights two extreme examples. A perfume distributor was hired as a “consultant” in Honduras.
He had no telecom experience, but was the brother of a government official. Also, the Alcatel employees responsible for
reviewing Costa Rican consultants’ reports could not read or speak Spanish.

In its three-year deferred prosecution agreement, Alcatel agreed to stop using third-party sales and marketing agents in
conducting its worldwide business. DOJ reported that the “unprecedented pledge” was made on the company’s “own
initiative and at a substantial financial cost.”

Alcatel-Lucent added in a separate statement that it was the “first in its industry” to terminate its international agents and
5
consultants, which it said were the “primary” source of the improper payments. The company added that it is “a radically
different company today” than at the time the improper payments were made, with “different management, including a
new CEO, a new executive committee and a different Board of Directors, . . . a zero-tolerance policy regarding bribery and
corruption and . . . a system in place with strong processes and Internet-based and live training designed to prevent these
types of situations in all aspects of our business.” The company added that it has “implemented policies and procedures
to prevent the violations from happening again.”

Notwithstanding Alcatel-Lucent’s existing anti-corruption program, the company agreed to implement rigorous compliance
enhancements. As part of the settlement, the company also agreed to retain an “independent compliance monitor for
three years to oversee the implementation of the enhanced FCPA compliance program and to submit yearly reports to
6
[DOJ].”

THE LONG AND WINDING ROAD TO SETTLEMENT
The settlements were a long time coming. In 2004, Alcatel learned that Costa Rican authorities were investigating its vice
7
president and long-time employee Christian Sapsizian for bribery in that country. Soon after, Alcatel fired Sapsizian and
Edgar Valverde Acosta, Alcatel’s senior Costa Rican officer.

Alcatel disclosed these payments to the U.S. government in 2004. But according to the DOJ, Alcatel’s cooperation with
8
the U.S. government’s investigation was “limited and inadequate.” Cooperation did not improve, according to the DOJ,
until after Alcatel merged with U.S.-based Lucent Technologies in November 2006.

4
SEC Complaint, note 3 above, at ¶¶ 32, 40.

5
Alcatel-Lucent Press Release, Alcatel-Lucent Welcomes the Settlements with U.S. Authorities Regarding Previously Reported
Violations of Foreign Corrupt Practices Act (Dec. 27, 2010), available at
http://www.alcatel-lucent.com/wps/portal/!ut/p/kcxml/04_Sj9SPykssy0xPLMnMz0vM0Y_QjzKLd4x3tXDUL8h2VAQAURh_Yw!!?LMSG_
CABINET=Docs_and_Resource_Ctr&LMSG_CONTENT_FILE=News_Releases_2010/News_Article_002305.xml.

6
DOJ Release No. 08-848 (Sept. 23, 2008), available at http://www.justice.gov/opa/pr/2008/September/08-crm-848.html.

7
Alcatel-Lucent Condensed Consolidated Financial Statements (June 30, 2010), at 43-46.

8
DOJ Release No. 10-1481, note 1, above.


Client Alert.
In December 2006, Sapsizian was indicted for causing Alcatel to wire $14 million in “commission” payments to a
9
consultant, who then transferred $2.5 million to a government official in Costa Rica. He pled guilty in June 2007 and
10
was convicted in September 2008. Sapsizian was sentenced to 30 months in prison, three years of supervised release,
11
and forfeiture of $261,500. Acosta was likewise indicted for conspiring to arrange the bribes back in 2007, but he
12
remains a fugitive.

Lucent, meanwhile, had its own FCPA issues prior to its merger with Alcatel and settled FCPA charges with DOJ and
SEC in December 2007. The government alleged that Lucent improperly paid travel expenses for Chinese government
13
officials from 2000 to 2003. Lucent paid a $1 million criminal fine and $1.5 million in civil penalties.

Then, in its February 2010 10-K, Alcatel announced that in December 2009 it had reached agreements in principle to
resolve the DOJ and SEC’s investigations of the company. The SEC and DOJ announced the final settlements, subject to
court approval, on December 27, 2010.

Alcatel’s settlement with the U.S. government came after the company already agreed to pay $10 million to settle a
corruption case brought by the government of Costa Rica. And, Alcatel’s corruption saga may not yet be over. The
Honduras government said it will reopen investigations into alleged bribes in that country in light of the U.S. government
14
settlements. Alcatel disclosed in its financial statements that French and Costa Rican authorities are also investigating
15
the company’s activities.

DOJ PUNISHES THE COMPANY’S “LIMITED” COOPERATION
The DOJ’s announcement stated that Alcatel’s unusually high penalty reflected, in part, the company’s “limited and
inadequate cooperation” before Alcatel’s 2006 merger with Lucent. This despite the fact that the company self-reported
improper payments in 2004. DOJ did acknowledge that after the merger, the company’s cooperation “substantially
improved,” and said the charging documents reflect that cooperation.

9
DOJ Release No. 06-850 (Dec. 19, 2006), available at http://www.justice.gov/opa/pr/2006/December/06_crm_850.html.

10
DOJ Release No. 07-411 (June 7, 2007), available at http://www.justice.gov/opa/pr/2007/June/07_crm_411.html; DOJ Release No.
08-848 (Sept. 23, 2008), available at http://www.justice.gov/opa/pr/2008/September/08-crm-848.html.

11
DOJ Release No. 08-848 (Sept. 23, 2008), available at http://www.justice.gov/opa/pr/2008/September/08-crm-848.html.

12
Notice to Transfer to Fugitive Status, U.S. v. Edgar Valverda Acosta, Case 1:06-cr-20797-PAS (S.D. Fla. June 14, 2007), available at
https://secure.traceinternational.org/compendium/file.asp?id=576.

13
DOJ Release No. 07-1028 (Dec. 21, 2007), available at http://www.justice.gov/opa/pr/2007/December/07_crm_1028.html; SEC
Release No. 20414 (Dec. 21, 2007), available at http://www.sec.gov/litigation/litreleases/2007/lr20414.htm.

14
Associated Press, Honduras Reopens Alcatel Bribe Case on SEC Ruling (Dec. 29, 2010), available at
http://www.businessweek.com/ap/financialnews/D9KDN1F00.htm.

15
Alcatel-Lucent Condensed Consolidated Financial Statements, note 7 above.


Client Alert.
CONCLUSION
This significant settlement underscores the importance of establishing and maintaining robust internal controls and
compliance programs. It is not enough to put a compliance program in place. Policies and procedures must be followed,
monitored, and updated regularly. Importantly, that includes keeping tabs on the consultants and other agents that the
company and its subsidiaries employ in foreign countries. This case highlights the potential perils of reliance on
consultants and other agents in foreign countries, given DOJ’s statement that Alcatel’s “business model was shown to be
prone to corruption.”

Contact:

Paul T. Friedman Carl H. Loewenson Randall J. Fons Robert A. Salerno
(415) 268-7444 (212) 468-8128 (303) 592-2257 (202) 887-6930

+ 81 3 3214 6717 + 86 10 5909 3566 + 020 7920 4160





Client Alert.
December 2, 2010

FCPA: DOJ May Be Listening, But It Is Not
Changing Its Approach

As we wrote in our November 19, 2010 FCPA Client Alert, Assistant Attorney General Lanny Breuer, Criminal Division,
Department of Justice, recently acknowledged that “some practitioners and others would like to see, in the FCPA area, an
1
amnesty program similar to the one that exists in the realm of antitrust.” In a hotel ballroom filled with FCPA defense
attorneys and in-house counsel, Mr. Breuer stated that “we listen to considered suggestions of this kind.” But on
November 30, 2010, in front of the Senate Judiciary Committee’s Subcommittee on Crime and Drugs, Acting Deputy
Assistant Attorney General Greg Andres rejected the possibility of an amnesty program for FCPA cases.

Although seemingly inconsistent with Mr. Breuer’s suggestion that DOJ was willing to consider an amnesty program, Mr.
Andres’s remarks at the Senate Hearing reinforced Mr. Breuer’s basic theme: the DOJ’s aggressive enforcement of the
FCPA is here to stay irrespective of extensive criticism.

For months, critics of the recent approach to FCPA enforcement have urged regulators to adopt a leniency program
modeled after one effectively used by DOJ’s Antitrust Division. Under the Antitrust Division’s Corporate Leniency
Program, the first member of a price-fixing cartel that self-reports the violation—and agrees to cooperate fully with the
government—can receive a free pass. The government’s rationale for granting amnesty is that, without a member of the
cartel coming forward, it may be difficult or impossible for the government to discover and prosecute the illegal conduct.

Similarly in the FCPA context, advocates of a leniency program argue that, in the absence of self-disclosure, the
2
government is not as likely to discover the FCPA violation. International bribery investigations are lengthy and
expensive, and the government has limited resources. The government often relies on companies to conduct their own
internal investigations and report their findings. Critics of the government’s aggressive FCPA enforcement argue that
companies should get amnesty, or the very least leniency, for self-reporting violations that regulators are otherwise
unlikely to find.

Advocates of an FCPA amnesty program also point to the detrimental effects an FCPA conviction can have on a
3
company, including debarment from federal programs. By rewarding self-disclosure and cooperation, companies could
be spared potentially devastating outcomes while still remediating and addressing the improper conduct. And, giving the
company amnesty would not prevent the government from pursuing the individuals who perpetuated the illegal conduct.

1
Please see our Client Alert from November 19, 2010, available at http://www.mofo.com/files/Uploads/Images/101118-FCPA-Enforcement.pdf. A
transcript of the speech is available at http://www.justice.gov/criminal/pr/speeches/2010/crm-speech-101116.html.
2
See transcript from October 27, 2010 Legal Reform Summit, sponsored by U.S. Chamber of Commerce.
3
See Testimony of Michael Volkov before the Subcommittee on Crime and Drugs, Committee on the Judiciary, United States Senate, November 30,
2010, available at http://judiciary.senate.gov/hearings/hearing.cfm?id=4869.


Client Alert.
Moreover, as one critic pointed out, an amnesty program would be a significant improvement to FCPA enforcement that
regulators could implement quickly and without protracted legislative action. “[The Justice Department] could do it
4
tomorrow” by making a new policy.

Despite the advocacy for an amnesty program, Mr. Andres made clear that DOJ is not interested in making changes to its
current enforcement practices. Mr. Andres stated that DOJ does not believe “that immunity is appropriate, just as [it]
5
do[esn’t] believe that a bank robber could get immunity for disclosing that he robbed a bank.” According to Mr. Andres,
the fact that a company self-discloses a violation does not merit the company “getting a pass for those crimes.”

Mr. Andres also pointed out that companies already receive favorable treatment for self-reporting violations. According to
Mr. Andres, DOJ has traditionally encouraged companies to self-report, promising credit for cooperation, and DOJ officials
consistently assert that “a company that comes forward on its own will see a more favorable resolution than one that
6
doesn’t.” As a result, Mr. Andres said that, given the credit self-reporting companies already receive from DOJ, he was
“not sure there’s a need for a formal amnesty program.”

However, just how much “credit” a company receives by self-reporting under the current enforcement regime is subject to
vigorous debate. There is a widespread belief among practitioners that a company may not benefit at all by having
reported the violation and, in some instances, it is in fact worse off. An amnesty program would at least give companies a
concrete and transparent incentive to self-disclose a violation, governed by clear “rules of the road.”

CONCLUSION
DOJ’s rejection of the amnesty program highlights two significant trends in FCPA enforcement:

One, it leaves companies in the same uncertain and uncomfortable position of deciding whether self-reporting is
beneficial. The decision about whether to self-report is a difficult one, and the analysis needs to take into consideration
more than just DOJ’s statements about cooperation credit currently available. The decision is necessarily informed by the
specific facts and circumstances, and should be made only after consideration of all relevant facts, in consultation with
expert counsel.

Two, the government will continue its heightened prosecution of FCPA cases regardless of mounting criticism. While the
government may be “willing to listen” to constructive criticism and suggestions, thus far it has not been convinced that any
change to its increasingly aggressive enforcement policies is warranted.

Contact

(415) 268-7444 (212) 468-8128 (303) 592-2257 (202) 887-6930

4
See id.
5
See Testimony of Deputy Assistant Attorney General Greg Andres before the Subcommittee on Crime and Drugs, Committee on the Judiciary, United
States Senate, November 30, 2010, available at http://judiciary.senate.gov/hearings/hearing.cfm?id=4869.
6
See transcript from Lanny Breuer’s November 2010 speech, available at http://www.justice.gov/criminal/pr/
speeches/2010/crm-speech-101116.html.


Client Alert.
Contacts continued:

+ 81 3 3214 6717 + 86 10 5909 3566 + 020 7920 4160





Client Alert.
November 19, 2010

DOJ Official Proclaims “New Era” of FCPA
Enforcement

Assistant Attorney General Lanny Breuer, Criminal Division, Department of Justice, announced a “new era of FCPA
1
enforcement” this week. He emphasized that DOJ’s aggressive enforcement of the FCPA is “here to stay.”

The Foreign Corrupt Practices Act (“FCPA”) is a federal law enacted in 1977 to prohibit making payments to foreign
2
officials for the purpose of obtaining or retaining business. It applies broadly to U.S. companies and individuals,
companies that have issued securities registered in the U.S., employees and agents of U.S. businesses, and foreign
nationals and businesses that cause prohibited acts in the U.S.

Speaking at the American Conference Institute’s National Conference on the Foreign Corrupt Practices Act, Mr. Breuer
described “historic” growth in FCPA actions during 2010. He concluded with concrete advice to companies operating in
the new climate of “vigorous” enforcement.

AGGRESSIVE ENFORCEMENT
FCPA enforcement has “become more aggressive,” and Mr. Breuer stated that companies “are right to be more
concerned.” He detailed the Department of Justice’s FCPA increased enforcement efforts during 2010, including:

• “Historic Cases”: In the past year, DOJ has imposed well over $1 billion in criminal penalties—more than in any
prior 12-month period. Last year and this year combined, the government has charged over 50 individuals and
collected nearly $2 billion in FCPA-related cases. In comparison, in 2004 it charged just 2 individuals and collected
$11 million. The Department is now focused on prosecuting individuals, as well as levying substantial criminal fines
against companies.

• “Significant Changes in the Fraud Section”: The Department’s Fraud Section grew significantly this year. Its new
FCPA Unit alone consists of over a dozen prosecutors dedicated solely to FCPA cases. The FCPA Unit is also
working with the Asset Forfeiture and Money Laundering Section, which targets, in part, proceeds of foreign official
corruption being laundered through the United States.

• Increasing International Cooperation: The Department is expanding its reach by forming partnerships with foreign
agencies. Cooperation with the U.K.’s Serious Fraud Office, for example, led to guilty pleas and a $400 million-plus
criminal fine against a U.K. company. The speech also highlighted the United States’ participation in the Organization
for Economic Cooperation and Development (“OECD”), an international economic organization of 30 member
countries.

1
A transcript of the speech is available at http://www.justice.gov/criminal/pr/speeches/2010/crm-speech-101116.html.
2
Foreign Corrupt Practices Act of 1977, Pub. L. No. 95-213, 91 Stat. 1494 (codified as amended at 15 U.S.C. §§ 78m, 78dd-1, 78dd-2, 78dd-3, 78ff).
For a summary of the FCPA’s provisions, please see our Client Alert from September 20, 2010, available at
http://www.mofo.com/files/Uploads/Images/100920-FCPA.pdf.


Client Alert.
TAKING ON FCPA CRITICS
Mr. Breuer acknowledged that the government’s increasingly aggressive FCPA enforcement has drawn criticism. He
agreed that there has been some “thoughtful” commentary, but emphasized that some “much less thoughtful
commentary” is “exactly upside down.”

• Rejecting “Bad for Business” Criticisms: Mr. Breuer forcefully rejected the argument that FCPA enforcement is
“bad for business.” He reiterated the Department’s position that the FCPA is vital to ensuring market integrity and an
even playing field.

• “Competitive Disadvantages”: Mr. Breuer described the criticism that FCPA enforcement puts American business
at a competitive disadvantage as “unfounded.” More than half of the Department’s FCPA resolutions in the last five
years have involved foreign companies. In any case, the United States, he said, leads by example. As a result, the
U.K. and other OECD members are stepping up anti-bribery enforcement around the world.

• Open to Suggestions: Mr. Breuer acknowledged that at least some criticisms are “worth debating.” The Department
takes “serious commentary” into account. He specifically recognized calls for an amnesty program similar to that
under antitrust law. He did not entirely reject it, but said only, “I can at least tell you that we listened to [and]
considered suggestions of this kind.”

SUGGESTIONS TO COMPANIES
Mr. Breuer made clear that companies should not “wait in worry for [DOJ] to come knocking.” Rather, companies need to
be proactive and take affirmative steps that “would put [ ] organizations in a better position for the day we do come
knocking, or that could prevent us from coming at all.” He offered two specific suggestions to companies given the
climate of vigorous FCPA enforcement.

1) “Take a hard look at your organization’s FCPA compliances practices.”

Reviewing and strengthening compliance programs is more important than ever in the Department’s “new era” of FCPA
enforcement.

• Guidance from the OECD: Mr. Breuer referred companies to the OECD’s recently published Good Practice
Guidance on Internal Controls, Ethics, and Compliance. 3 The OECD’s recommendations for evaluating compliance
programs include:

o Risk-Assessment: Assess the company’s individual risks, such as industry and geography, to tailor internal
controls, ethics, and compliance programs.

o A Strong Anti-Corruption Policy Based on the Risk Assessment: Implement a clear and visible anti-
corruption policy applicable to all employees and entities the company controls. High-risk areas, such as gifts
and hospitality expenses, should be the subject of specific compliance programs. Senior management should
establish a strong “tone at the top,” and individuals at all levels of the company should be responsible for
monitoring and ensuring compliance.

o Oversight: Consider whether a senior corporate officer should be charged with overseeing anti-bribery
compliance. That individual (or group) should have sufficient resources, autonomy from management, and
the authority to report directly to the board’s audit committee.

3
The guidance is available on the OECD website at http://www.oecd.org/dataoecd/5/51/44884389.pdf.


Client Alert.
o Guidance: Make guidance and advice, including responses to urgent questions about situations in foreign
jurisdictions, available to employees and business partners.

o Reporting: Allow all employees and business partners to report potential violations confidentially and protect
them from discipline.

o Re-Assessment: Regularly review and re-assess anti-bribery policies and programs.

• High-risk industries: Mr. Breuer discussed the fact that the government is increasingly taking an “industry-wide
approach” to FCPA investigation. Corporations can even receive “credit” by providing the government with
information about their competitors and clients. Industries that have been the subject of a high number of Department
of Justice and Securities and Exchange Commission enforcement actions include energy, infrastructure,
pharmaceuticals and medical devices, life sciences, 4 telecommunications, and defense.

2) Self-Reporting

Mr. Breuer assured companies, “there is no doubt that a company that comes forward on its own will see a more
favorable resolution than one that doesn’t.” He cited a recent example in which “cooperation” meant that company
counsel conducted an investigation in 46 jurisdictions, hired an outside auditor, and held over 60 meetings and calls with
the DOJ and SEC. The company ultimately received a deferred prosecution agreement.

Mr. Breuer’s message encouraging self-reporting is not itself reflective of a “new era” of enforcement. The Department,
as reflected in Mr. Breuer’s speech, has traditionally encouraged companies to self-report violations. But, the decision
whether to self-report is, as Mr. Breuer acknowledged, “a difficult one.” The analysis needs to take into consideration
more than the cooperation credits available. The decision is necessarily informed by the specific facts and circumstances,
and should be made only after consideration of all relevant factors, in consultation with expert counsel.

CONCLUSION
Mr. Breuer’s speech underscores the increasing momentum of FCPA enforcement activities, and the high priority DOJ is
giving to FCPA enforcement. His suggestion that companies take a hard look at their FCPA compliance policies and
controls is a good one, and we have been speaking to our clients about the importance of doing so.

Contact

(415) 268-7444 (212) 468-8128 (303) 592-2257 (202) 887-6930

+ 81 3 3214 6717 + 86 10 5909 3566 + 020 7920 4160

4
For more information, please see our Client Alert from January 19, 2010, “Government FCPA Enforcement ‘Intensely Focused’ on Life Sciences
Companies,” available at http://www.mofo.com/government-fcpa-enforcement-intensely-focused-on-life-sciences-companies-12-01-2009/.


Client Alert.




Client Alert.
November 4, 2010

SEC Issues Proposed Dodd-Frank Whistleblower Rules
By Paul Friedman, Boris Yankilovich and Justin Hoogs

Yesterday, the Securities and Exchange Commission released a 181-page set of Proposed Rules for the implementation
of the new, robust whistleblower provisions enacted as part of the Dodd-Frank Wall Street Reform and Consumer
1
Protection Act (“Dodd-Frank”). The provisions encourage whistleblowers to report violations of the securities laws to the
SEC by offering bounties for information leading to successful enforcement actions.

The fact that the SEC acted unanimously and quickly in crafting this comprehensive proposal — well in advance of the
April 2011 deadline to issue final regulations — suggests that it perceives the new whistleblower provisions as an
important part of its enforcement toolkit. Recent blockbuster whistleblower payouts, including last month’s $96 million
2
bounty awarded to a pharmaceutical company’s former employee under the False Claims Act, have reinforced concerns
about the new whistleblower bounty provisions and their potential impact on the business community. The issuance of
these Proposed Rules comes days after the SEC’s announcement that it has set aside a fund of $452 million for
3
anticipated whistleblower claims.

SYNOPSIS OF KEY PROVISIONS
While the comment period, which runs through December 17, 2010, may lead to changes in the final implementation of
the Rules, we have prepared a preview and synopsis of some of the key provisions in the Proposed Rules to help our
clients prepare for the changes ahead:

• Who Is A “Whistleblower”?

o The Proposed Rules do not significantly limit Dodd-Frank’s broad definition of “whistleblower,” which
includes any individual, or two or more individuals acting jointly, who provide(s) to the SEC “original”
information relating to a violation of the securities laws.

o While officers, directors, employees, shareholders, business competitors, agents, consultants,
distributors, vendors, contractors, service providers, or customers can generally serve as whistleblowers,
the Proposed Rules clarify that certain employees or directors, such as those with established
professional obligations that play “a critical role in achieving compliance with the federal securities laws,”
would not qualify as whistleblowers.

1
The Proposed Rules (Release No. 34-63237; File No. S7-33-10) are available at http://www.sec.gov/rules/proposed/2010/34-63237.pdf. For a
summary of Dodd-Frank’s whistleblower provisions, please see our Client Alert from July 21, 2010, available at
http://www.mofo.com/files/Uploads/Images/100721SLEW.pdf.
2
See http://www.reuters.com/article/idUSTRE69S4LZ20101029;
http://online.wsj.com/article/SB10001424052702303443904575578713255698500.html?mod=googlenews_wsj.
3
http://www.sec.gov/news/studies/2010/whistleblower_report_to_congress.pdf


Client Alert.
o The Proposed Rules explain that the whistleblower’s information need only relate to a “potential violation”
of the securities laws, and that Dodd-Frank’s anti-retaliation protections do not depend on an ultimate
determination about whether the reported potential violation constituted an actual violation of the
securities laws.

• Who Is Not A Whistleblower?

o Dodd-Frank prohibits certain individuals from receiving bounties as whistleblowers, such as persons
convicted of crimes related to the violation, persons who learned of the disclosed information by
performing audits of financial statements as required by the securities laws, and persons who knowingly
provide false, fictitious, or fraudulent information.

o The Proposed Rules further delineate who may receive bounties as whistleblowers by specifically
excluding:

persons who provide information after the company has received any formal or informal request,
inquiry, or demand from the SEC (unless the company fails to provide the documents or
information to the requesting authority in a timely manner);

persons who provide information obtained through communications protected by the attorney-
client privilege, or information obtained in connection with the legal representation of a client;

persons who provide information obtained in connection with an independent public accountant’s
performance of an engagement required under the securities laws;

persons with legal, compliance, audit, supervisory, or governance responsibilities to whom
information about potential misconduct was communicated with the reasonable expectation that
they would take appropriate steps to respond to the alleged violation (unless the company does
4
not disclose the information to the SEC in a timely manner or proceeds in bad faith);

persons who provide information obtained from or through a company’s legal, compliance, audit,
supervisory, or governance functions (unless the company does not disclose the information to
the SEC in a timely manner or proceeds in bad faith);

persons who obtained the provided information in a manner that violates federal or state criminal
law; and

persons who provide information that was obtained from those who would otherwise be excluded
under any of the above limitations.

4
After Dodd-Frank’s enactment, many lawyers and compliance officers expressed concern that the prospect of large awards would reduce the
effectiveness of existing compliance, legal, audit, and similar processes for investigating and responding to potential misconduct. By excluding
compliance-focused employees from serving as whistleblowers, the Proposed Rules may dampen Dodd-Frank’s impact on companies’ internal
compliance processes, audits, and investigations. By commenting that the SEC will consider higher percentage awards for those whistleblowers who
first report violations through internal compliance programs, the Commission further encourages potential whistleblowers to turn first to companies’ own
compliance vehicles before reporting to the government.


Client Alert.
• Whistleblower Anonymity.

o Under the Proposed Rules, a whistleblower would be permitted to provide information anonymously, but
only if he or she is represented by an attorney who is identified to the SEC at the time of the initial
submission and who certifies that he or she has verified the whistleblower’s identity. The whistleblower,
however, would have to disclose his or her identity before the SEC could pay out any award.

o The SEC will not reveal the whistleblower’s identity, or disclose other information reasonably expected to
reveal his or her identity, except under limited circumstances — for example, when such disclosure is
required to a defendant or respondent in a SEC-initiated federal court or administrative action.

o The SEC may share information with other domestic and foreign regulatory and law enforcement
agencies, but domestic agencies are required to maintain the information as confidential, and foreign
agencies must provide the SEC with appropriate assurances of confidentiality.

• No Impediments Against Whistleblower Communications With the SEC.

o The Proposed Rules prohibit any person from taking any action to impede a whistleblower from
communicating directly with SEC staff about a potential violation. This prohibition includes attempting or
threatening to enforce a confidentiality agreement against the whistleblower, unless the confidentiality
agreement deals with information covered under exceptions for the attorney-client privilege or legal
representation.

o Aiming to ensure unobstructed communication between the Commission and the whistleblower, the
Proposed Rules authorize SEC staff to communicate directly with the whistleblower, without first seeking
the consent of company counsel. This rule would apply even to communications with high ranking
directors and officers, to whom company counsel’s representation ordinarily would attach to preclude
direct contact by outside counsel.

• Gains From One’s Own Misconduct?

o The Proposed Rules do not categorically prohibit wrongdoers from being rewarded as whistleblowers. To
prevent wrongdoers from financially benefiting from their own misconduct, however, the Proposed Rules
restrict how much of a sanction the SEC may consider as the basis for the whistleblower’s bounty.
Specifically, the Proposed Rules prohibit the SEC from counting any monetary sanctions imposed against
the whistleblower or against an entity for liability based substantially on conduct directed, planned or
initiated by the whistleblower.

o As a result of these limits on conduct that can be considered in establishing the qualifying sanction
amount, culpable individuals have an incentive to blow the whistle on others who engage in the
misconduct alongside the whistleblower, although the whistleblower likely will do so only if he or she
believes that the conduct attributable exclusively to others will sustain a hefty monetary sanction. The
SEC is soliciting comments on whether to expressly limit the category of whistleblowers to only those
individuals who provide information about another person’s potential violations.


Client Alert.
• No Amnesty for Culpable Whistleblowers.

o In addition to precluding recovery from a whistleblower’s own misconduct, the Proposed Rules would
clarify that whistleblowers who participated in the alleged wrongful conduct are not immune from
prosecution or enforcement actions. Yet, under existing policy, the SEC retains discretion to determine
whether, by how much, and in what manner to credit the whistleblower’s cooperation.

STEPS COMPANIES SHOULD CONSIDER TO MINIMIZE THE IMPACT OF THE NEW WHISTLEBLOWER LAW AND
REGULATIONS
Experience with other statutes, such as the False Claims Act, shows that whistleblowers are often employees who first
raised concerns internally and felt that their concerns were not adequately addressed by their corporate employer.

To minimize the risks presented by the Dodd-Frank whistleblower provisions, companies should consider doing more to
ensure that their compliance systems are robust and state-of-the-art, and to demonstrate prompt, sincere attention to
employee concerns. Companies should review their compliance and ethics programs to ensure that these programs
allow them to identify, investigate, and handle potential misconduct quickly and effectively. Companies also should
reinforce to their managers the importance of taking concerns seriously and respectfully. Our clients should consider the
following specific steps, among others:

• Re-emphasize Culture of Compliance: Company management should regularly communicate the importance
of compliance, and ensure that employees receive periodic training on compliance issues. Companies might
consider incentivizing internal reporting and ethical decision-making.

• Hotline: Companies should examine Hotline procedures to ensure that employee concerns are adequately
addressed in a timely and effective manner that consistently conveys that concerns are being taken seriously.

• Renewed Management Training, Especially Senior Management: Companies should emphasize education
and training of management on recognition of whistleblower complaints, procedures to respond to complaints,
and non-retaliation policies.

• Regular Compliance Audits and Risk Assessments: Companies should examine Hotline reports and other
sources in developing and updating their compliance programs. Regular compliance audits and risk assessments
should be conducted to detect potential risks and offenses.

Contact

(415) 268-7444 (212) 468-8128 (303) 592-2257 (202) 887-6930

Daniel P. Levison Sherry Yin Kevin Roberts Daniel P. Westman
Tokyo Beijing London Northern Virginia
+ 81 3 3214 6717 + 86 10 5909 3566 + 020 7920 4160 (703) 760-7795
dlevison@mofo.com syin@mofo.com kroberts@mofo.com dwestman@mofo.com


Client Alert.




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