FCPA Compliance and Ethics Blog

October 9, 2012

South America is Not a Country-Interview of Matt Ellis

Today we continue our interview series with last year’s New Comer of the Year-Matt Ellis, author of the FCPAméricas Blog.


1. Where did you grow up and what were your interests as a youngster?

I grew up in Dallas, TX. I was lucky to graduate from the best private school in the city, where I was on significant financial aid. I loved it and excelled. My senior year I was elected student body President, and tried hard to do more than just plan good parties. Texas made a lasting impression on me. The heavy influences of Mexico gave me a taste early on for Latin American culture. The state’s entrepreneurial spirit eventually empowered me to launch my own law practice.

 2. Where did you go to college and what experiences there led to your current profession?

I went far away to Dartmouth where, in a small town in New Hampshire, I was exposed to the world. My first-year roommate was a Sikh from India who had never stepped foot in the United States. I took courses in Latin American politics, studied Spanish in Barcelona and Art History in Italy, taught English in Switzerland, and interned in the East Wing of the White House, where I observed Bill Clinton, up close, interacting with foreign dignitaries. College made me want to see the world.

After graduating, I moved to Argentina where I planned to stay for three months. I wound up staying for three years. My goal was to learn Spanish fluently, at a professional level, and I had to immerse myself. I moved in with a group of young Argentine guys who didn’t speak English. I got a job at General Motors Argentina. Ninety percent of my work was in Spanish and 100% of my socializing. I had no choice but to become fluent — if not, I wouldn’t have a pay check or a social life. Then the President of GM Argentina persuaded me to study Portuguese as well. He knew that Brazil would be the next big thing. This was before the term “BRIC” existed. He was right. Today, Brazil is the source of a good amount of my work.

 3. After beginning your career in a large, multi-national law firm you went to the World Bank. Can you tell us why you moved over, what you did and how has it informed your compliance and ethics practice going forward?

Very few attorneys from the United States have the chance to work on anti-corruption matters at The World Bank’s Integrity Vice Presidency (INT). After law school at Georgetown, I was working at a major law firm with a leading FCPA practice. We were advising INT on the development of the World Bank’s Sanctions program, grappling with questions like: How does the Bank ensure that the funds it loans to the developing world actually make it to building the roads and bridges, purchasing the medicine, etc., and are not diverted into the pockets of corrupt government officials?  INT was staffed with a smart group of people from every corner of the world, and I hit it off with the team. When I received an offer to work as an investigator and litigation specialist, I seized it. I spent two years at the Bank, conducting internal investigations throughout Central Asia and Eastern Europe.

I took three vital lessons from my time at the World Bank. Each has informed my FCPA compliance work since then. First, contrary to the view that corruption is “cultural” or “accepted” by certain people, I learned that ethical business is an important concept wherever you are in the world. On the front lines, no matter the country or culture, rarely are citizens accepting when public officials use government positions for personal gain. Toleration should never be mistaken for endorsement. Second, the rapidly developing anti-corruption norms with which we work are having a profound effect on the ground throughout the globe. The more that corrupt actors are brought to justice, the more that individuals see universal business standards at work, and the more they are empowered themselves to push back. Third, an appreciation for cultural nuance is essential to compliance. When introducing World Bank procurement standards to a small, regional consulting firm in India, or vetting a sales agent in Brazil, practitioners have to account for context, language, and background to do the job effectively.

 4. Many people think that South America is a country. You seem to have different thoughts on the subject. What are some of the unique or specific challenges when working on compliance related issues in South America? Are they different if you represent an indigenous company rather than a US company with a South American affiliate?

Compliance in Latin America must respond to the local landscape to work. Corruption risks in the mountainous jungles of Colombia are different from those in the concrete jungles of Sao Paulo. While companies can usually count on the police in Chile, in Mexico the police are often the problem. To design an internal reporting program in Argentina that works, practitioners must understand the inherent skepticism that people there have for anonymous tips.

Cultural nuance is even more important when working on compliance for Latin America-based companies. Imagine a local company that has been built over the years where corruption is around every corner, and has now gone global. Education on compliance takes time and steady commitment. Buy-in is achieved person-by-person, unit-by-unit. With time, companies begin to see the value in adhering to international standards. Only when business leaders appreciate the stakes are they willing to engage in the wholesale reform and commitment of resources necessary for compliance to work. The learning curve is steep. But the trends of globalization are going in only one direction.

5. Why did you start your Blogsite, what did you hope to achieve from it and what will be your focus going forward?

I want FCPAméricas to serve as a bridge between two worlds. One world involves United States law that is currently driving anti-corruption compliance by creating powerful incentives. The other world is where the bribery usually occurs, a world of drastically different cultures, norms, languages, and histories. The blog’s aim is to try to connect the two.

My experiences interacting, living, working and attending school with people from around the world drive the blog’s direction. I relate my job as an FCPA lawyer to the jobs many of my graduate schoolmates now have in the foreign service, working in embassies all over the world, where they liaise with foreign officials and help U.S. companies working abroad navigate the waters. I perform a similar service. I help companies manage risks when doing business in far-off countries. I help them understand the rules of the global economy. Why is this important? In an age of globalization, the world of business opportunity has suddenly grown a lot bigger. At the same time, companies cannot do business like they used to. In the past, cross-border business could be done with a handshake, and the hand often had a $20 bill in it. Nowadays, multi-million dollar investments are made with the click of a button. But bribes can put people in jail. As a result, the challenge of global business no longer is about paying off the right person to get the job done. It is about ensuring that your company thrives while following applicable international rules. This means structuring compliance programs to be effective. This requires local know-how. I help companies bridge the gap.

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, 2012

November 28, 2011

The Fight against Shell Corporations in the US

One of the critical areas in due diligence for foreign business partners is determining who are the true owners of an entity. Unfortunately this is not always possible to determine as many countries do not require the names, addresses and other identifying information of shell company owners or limited liability partners. Many people think of the Cayman Islands or other traditional tax havens when such issues arise.

However, a surprising number of allegedly low risk countries also have this problem. New Zealand is generally recognized as one of the lowest risk countries in the annual Transparency International Corruption Perceptions Index, nevertheless this rating may not be all it seems. In an article by Michael Field on the Stuff.co.nz website, entitled “NZ firms linked to money laundering”, Field reported that one individual was listed as a Director of over 300 New Zealand formed companies. Another person, listed as the Director of the New Zealand Company alleged to have been involved with the shipment of arms to North Korea, was “convicted of 75 breaches of the Companies Act for giving false addresses on registration forms”.

New Zealand is not be the only country with a low corruption perception which may not be completely accurate. In a Reuters article, entitled “Special Report: A little house of secrets on the Great Plains”, authors Kelly Carr and Brian Grow reported on one house in Cheyenne, Wyoming which the authors claim “serves as a little Cayman Island on the Great Plains” as it is home to the registration of over 2,000 entities. The article claims that Wyoming allows “the real owners of corporations to hide behind “nominee” officers and directors with no direct role in the business, often executives of the mass incorporator.” Carr and Grow also quote Jason Sharman, a professor at Griffith University in Nathan, Australia, who states that “Somalia has slightly higher standards [for business incorporation] than Wyoming and Nevada.”

One of the anomalies in the ongoing HP investigation, for alleged bribery and corruption violations in its German subsidiary, was the German authorities’ investigation of activities in and through the state of Wyoming. The article by Carr and Grow may help explain why the German authorities needed to investigate matters relating to Wyoming where the allegations were that bribes were paid by a HP German subsidiary for a sale into Russia.

However, perhaps there is legislation on the way to close this loophole in the US. In another Reuters article, entitled “House bill targets anonymous shell corporations”, Patrick Temple-West reports on US legislations, introduced in the House of Representatives, which would require stricter discloser laws. The author notes that “This is at least the third time lawmakers have considered proposals to crack down on shell company incorporation.” The legislation has bipartisan support, the bill was introduced by a Democrat in the House and jointly introduced by a Democrat and Republican in the Senate. It is reported to have “wide support by law enforcement” and support from the US Departments of Treasury and Justice.

So you ask who would be opposed to bringing the US standards for business incorporation up to that of at least Somalia. Temple-West reports that “Some state government group[s] remain opposed. In the past, resistance has also come from business groups and lawyers.” I am also somewhat chagrined to report that an organization that I belong to, the American Bar Association, has opposed prior legislation to provide greater discloser for shell companies. However, it is now reported to be “reviewing the latest bills.”

How does all of this relate due diligence as the US problem would not seem to impact a company covered by the Foreign Corrupt Practices Act (FCPA)? First of all, a company should know with whom they are doing business, and  more pointedly a US company which is subject to the UK Bribery Act needs to recognize that any agent, distributor or other type of representative here in the US, is a foreign entity under the Bribery Act and needs full due diligence. While the jurisdictional scope of the Bribery Act has yet to be fully fleshed out, such a US company needs to consider its due diligence here in the US and may need to strengthen its investigations and background checks on such parties to comply with the Bribery Act.

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

October 4, 2011

Is the FCPA working? Three dispatches from Latin America

Ed. Note-today we have a guest post from Matt Ellis, Principle and Founder of the law firm of Matteson Ellis Law, PLLC. He blogs at the  FCPAméricas Blog, a blog that explores corruption issues throughout Latin America and speaks to the companies and business-people in the region seeking to comply with international anti-corruption norms. 

In his August 12, 2011 article entitled “Recent Disclosures Raise Many FCPA Questions,” the FCPA Professor Mike Koehler asks whether increased FCPA enforcement has done anything to deter future violations. This question is timely, especially given that the FCPA is under fire by major organizations (such as the U.S. Chamber of Commerce) for the burdens it places on U.S. businesses.

The Professor’s query also raises a broader question—how can levels of corruption even be measured? In an attempt to measure corruption, Transparency International gathers expert assessments and opinion surveys for its Corruption Perceptions Index. The World Bank’s Worldwide Governance Indicators project measures corruption in a similar manner by combining the views of numerous enterprise, citizen, and expert survey respondents in industrial and developing countries. Ultimately, these methods rely on subjective criteria and are limited by the inherent difficulties of applying consistent measures across countries. Assessing levels of corruption is not easy to do.

As a practitioner who has lived, worked, and conducted corruption investigations throughout Latin America for several years, I have developed my own perspective on the question. Following are three examples of how I believe the FCPA is making an impact in the region.

Compliance Programs at Work (Mexico). While conducting an internal investigation in a coastal town in Mexico for a major U.S.-based energy company, I observed an interesting phenomenon. Many oil and oil services companies were conducting their Gulf of Mexico operations from this particular town. Yet it appeared that local officials in the town had largely stopped demanding bribes. Why? The foreign energy companies operating there were some of the first to be hit by a wave of FCPA enforcement. As a result, they had developed and implemented advanced compliance programs to prevent their employees from paying bribes. I was there to assist with one of these programs—FCPA attorneys regularly conduct internal investigations to identify and assess the facts when an allegation of a corrupt payment arises. I learned from the foreign workers that, because of their strict internal prohibition against entertaining bribe requests from local officials, the officials had simply stopped asking. At routine traffic stops, the local police did not even bother to demand money because, if they did, the employee would ask to be taken to the police station where he or she would request a receipt for the payment. Workers were aware of the rules regarding foreign bribery because they had been subjected to FCPA training repeatedly. They also knew the consequences of paying a bribe because they had seen colleagues lose their jobs after doing so. The companies’ compliance programs were working together to send a message to local officials, which resulted in diminished requests for bribes.

Foreign Proceedings Inspired by U.S. Proceedings (Honduras).  In 2009, four executives from the Miami-based telecommunications company Latin Node Inc. pleaded guilty to FCPA violations in the U.S. District Court for the Southern District of Florida. The executives paid more than $500,000 in bribes to Honduran telecommunications officials to retain a valuable telecommunications contract. These U.S. prosecutions appear to have inspired the pursuit of justice in Honduras. According to the Honduran newspaper, La Prensa, investigators in Honduras have built their own “strong” case against the Hondurans involved in the scheme, encouraged by the U.S. proceedings. They have even requested that U.S. officials provide them with evidentiary assistance pursuant to the Article XIV mutual assistance provisions of the Inter-American Convention Against Corruption. Though Honduran courts have yet to begin official proceedings, action appears imminent. Perhaps as U.S. officials increase enforcement pressure, government officials in other parts of the region will be empowered to take action as well.

The FCPA as a Shield (Argentina). To a friend in Argentina—a U.S. citizen working as President of a major multinational corporation there—the FCPA serves as a shield. On several occasions, high-level Argentine officials have propositioned him for improper payments. When this happens, he stands behind the FCPA. He explains that making the payment would be illegal, would expose his company to significant liability, and would subject him to possible jail time. Given the history of high-level corruption cases in the country, my friend’s encounters are probably not unique. For example, the Siemens AG settlement dealt with multi-million dollar payments to high-level Argentine officials.  The payments were made to win a state contract for the development of national identity cards valued at around $1 billion. In the “maletinazo” case, Argentine airport customs officials found $790,000 in the suitcase of a Venezuelan businessman with ties to the Venezuelan government purportedly headed to assist President Cristina Fernández’s presidential campaign. I remember when the IBM case broke because I was living in Argentina at the time. In that case, U.S. officials brought an FCPA action against IBM when its subsidiary paid $4.5 million through an agent to Banco de la Nación Argentina officials. The payment was made to obtain a $250 million systems integration contract. As Tom Fox noted in his article “How to do Business in a Pure Pay to Play Country,” one of the FCPA’s three policy goals as set out in the preamble to the original 1977 legislation was to place U.S. companies in a better position to resist demands to pay bribes in countries where such activity is common. The Argentina example supports the assertion that this policy goal is being achieved, as the FCPA continues to provide executives with the shield they need to resist corruption.

While it is certainly true that progress in the battle against corruption is difficult to measure, perspectives like these are helpful in understanding the impact of enforcement efforts, even those that are difficult to quantify.


Matt Ellis is a new and welcome addition to the world of FCPA compliance and blogging. His focus is on the Americas and as you might guess from the title of his blog, he has extensive experience in South America. Subscribe to his blog at  http://mattesonellislaw.com/fcpamericas/ and check his website out at http://mattesonellislaw.com/.


They’re back for episode 18 of This Week in FCPA. Howard Sklar and I discuss the 1st year anniversary of Corruption Currents, the Wolfberg Report, the DOJ concession in CCI, KPMG and Dow Jones/ACAMS AML reports, News Corp (of course) and more. Check us out at http://thisweekinfcpa.wordpress.com/2011/10/03/episode-18/


It’s not too late to register for the upcoming World Check FCPA event in NYC on Thursday morning at the Sheraton Hotel and Towers. Come eat some breakfast and hear the wit of myself and the wisdom of Mike Volkov and Jim Feltman on the FCPA and Private Equity: the Gathering Storm. It’s all free. Register at https://ethisphere.site-ym.com/events/attendees.asp?id=179863

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