FCPA Compliance and Ethics Blog

January 26, 2011

FCPA and Bribery Act Counseling:Dr. No Versus Problem Solving Approaches

Filed under: FCPA — tfoxlaw @ 5:22 pm
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Ed. Note-today we are pleased to host a guest post by our colleague Michael Volkov.

Mark Twain observed correctly about lawyers: “Lawyers are like other people–fools on the average; but it is easier for an ass to succeed in that trade than any other.”

When it comes to advising clients in the area of the FCPA and Bribery Act, counseling attorneys are critical players. We play an important role in the end in making sure a company complies with the law.Like in many other areas of life and work, the challenge is not just to be a nay-sayer, not just to parade out a bunch of horribles, kill a transaction or a deal, and then rest assured that I have served my client. Rather, the challenge is to look at a situation, factor in the business needs and impact, and develop creative solutions to the problem.

All too often, I hear complaints about compliance officers, general counsels, and outside counsels, who are the so-called “deal-killers” or “doomsayers.” The challenge within any organization is not to stop the work but to consult and advise on ways to meet the requirements of the law and figure out a way to make it work.

It is easy to be “Dr. No.” It is harder to say “That is a problem. How can we solve it? What can we do to make it work?” Such an approach is critical to establishing credibility with your client company, and making sure you are viewed as a part of the team.
Building your position as a problem solver ensures the most critical aspect of the lawyer-client relationship – Trust. Once you are viewed as a problem solver you establish yourself as a credible partner in the business and develop a rapport so that salespeople and other staff who are on the frontlines and in the trenches will come to you when they see a potential problem.

A successful general counsel is one who plays a critical role in the development and implementation of business strategy. Some general counsels like to sit back and wait for the problems to come to them. In contrast, some sit at the right hand of the CEO and advise on business just as much as legal issues – that is the challenge for our profession.

I know I am not supposed to criticize my profession – or say that we really are “fools on average” but as I see and hear more about compliance issues in the FCPA and Bribery Act industry, I would urge my brethren to take a deep breath, carefully assess the issue and make sure the first words out of your mouth are not “No, we cannot do that.” Rather, the challenge is to listen to the problem, and then say – “Let’s see if we can figure out a way to make it work, so that we are comfortable and we can further our business.”

Michael Volkov practices with Mayer Brown in Washington DC. He can be reached via email at MVolkov@mayerbrown.com and via phone at (202) 263-3288

Doing Business in Russia under the FCPA or Bribery Act

As reported by Andres Kramer in Tuesday’s New York Times, in an article entitled, “Russia, Facing Big Budget Gap, Warms to Foreign Investors”, the Russian government is actively seeking foreign capital and foreign investors. The article mentioned that several state-owned enterprises are up for investment. It is reported that the state owned bank VTB; the state-owned oil company Rosneft and the state-owned national hydro-electric RusHydro, among others are seeking foreign investment.

While these offerings may produce significant business opportunities, Kramer notes that doing business in Russia still presents significant risks. He reports that the British political risk consulting firm Maplecroft “ranked Russia 186th out of 196 countries for political risk to business”. The Transparency International Corruption Perceptions Index for 2010, released in November 2010, gives Russia a score of 2.1 or number 154 out of 178 countries rated.

The Consultative Guidance on an adequate procedures program on the Bribery Act lists geographic risk as one of the key risks to be assessed for compliance purposes. This means that any US company contemplating such an investment, or UK company which will soon be subject to the Bribery Act, will need to carefully tread in any investment. Yesterday at the ACI FCPA Boot Camp in Houston, Michael Volkov, noted FCPA attorney from the firm of Mayer Brown, spoke on a panel with Ryan Morgan, of World Compliance, on the topic of due diligence on third parties. Many of Volkov’s remarks are applicable for US or UK companies which may wish to invest in Russian companies. Volkov believes the key all compliance based issues is to document the evidence. If you ask questions and get answers, document the process. If you ask questions and do not receive answers, document that process too. But the key is to Document, Document, and Document.

Volkov believes that the entire process of screening and evaluation of a new third party relationship should be done at the highest level possible within a corporation. This means in the General Counsel’s office; the Chief Compliance Officer or other equally high office trained to not only perform due diligence but also evaluate the risk. This centralized review should also include a centralized review of contracts to ensure consistent standards. He emphasized that the in-country business unit should not be allowed to handle this task. He noted that after the relationship is established you can set up a different standard for monitoring the relationship going forward. The key in this post-contract execution area is that if you detect a problem, then how does your company deal with the problem? Once again he emphasized Document, Document, and Document.

Volkov gave his thoughts on some of the basic pieces of information to cover when a company might begin the due diligence process. This would include:

  1. Existence of relationships with foreign governmental officials.
  2. Prior history of bribery or other crimes.
  3. What is the nature of services provided?
  4. What is the compensation and what will be the payment method?
  5. Have a written contract in place with appropriate terms and condition’s including:
    1. Reps and Warranties on compliance;
    2. Right to inspect and audit books and records; and
    3. Right to terminate if you believe that a violation has occurred.

As noted by the Kramer in his Times piece, there may be great opportunity for investment. However the risks for such investment, both political and those in the areas of anti-corruption and anti-bribery, as prohibited by the Foreign Corrupt Practices Act (FCPA) and the UK Bribery Act may also be great. Some companies may find that their risk appetite is not large enough for such an opportunity. We can only end with the words of Ronald Reagan, in a different type of transaction he conducted with the then Soviet Union, “Trust, but verify.”

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2011




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