FCPA Compliance and Ethics Blog

November 3, 2011

Olympus Redux: Lessons Learned for Investigating a Foreign Business Partner

There are times when facts which arise out of non-compliance matters can make excellent learning points for the compliance practitioner. The Olympus matter has become such a staple of teaching opportunities. It initially appeared that the primary lessons learned were (1) Do not pay one or two person agents and for an amount of work which is questionable; (2) Do not pay one or two person agents a commission which is unusually high amount of money and have them close up shop soon thereafter; and (3) Do not fire your whistle-blowing Chief Executive Officer (CEO) who desires to report such activity to the appropriate regulatory authority. However, yesterday an article in the Wall Street Journal (WSJ), entitled “Olympus Targets Had Scant History”, reporters Daisuke Wakabayashi and Juro Osawa presented facts which provide some additional lessons learned in the still unfolding Olympus matter.

To briefly recap, on October 14, 2011 the now-resigned Olympus Chairman, Tsuyoshi Kikukawa, dismissed the former head of the company, the Briton Michael C. Woodford, citing cultural differences in management styles. Mr. Woodford contended that he had been fired after raising questions about a series of acquisitions made by Olympus at, what he said, were inexplicably high prices or involved disproportionately pricey advisory fees paid to two persons who acted as agents of Olympus for the transactions in question.

Yesterday the WSJ reported that the three companies purchased by Olympus, whose purchases led to the unusually high commissions, had the following characteristics: “two of the acquired companies, medical-waste disposal company Altis Co. and food-container maker News Chef Inc., were founded in the early 1990s under different names, public company records show. The companies conducted no business for years.” The third company was founded “less than a year before Olympus bought a stake”. Olympus eventually acquired control of all three companies.  Within a year of acquiring control of these three companies, “Olympus wrote off three-fourths of its investments in the companies.” Professor Kotaro Inoue, an associate professor at Keio Business School, was quoted in the WSJ article as saying, “Those companies seem to have had no operating history when Olympus first invested in them. As an investment, paying this amount of money for nothing but business plans, is really unthinkable.”

So what are the lessons which can be learned from Olympus Redux for the compliance practitioner? If you are going to engage a foreign business partner, you need to determine if that company has been in business for an appropriate length of time and can deliver the products or services that they claim they can deliver. While the three companies acquired by Olympus were not agents, it appears that they had not been in business long enough to have a verifiable track records. If you are buying a company, you definitely should review and verify, to the extent possible, balance sheets, assets, sales records and other indicia of business transacted.

The same is true of a foreign business partner, in the compliance arena. If that foreign business partner is an agent, reseller, distributor or some other entity in the sales channel; they better have a verifiable track record. You should investigate and review some or all of the following:

  • Company formation documents;
  • License(s) or registration(s) to do business;
  • Physical location of business (tangible office or just a mail or drop box);
  • Number of employees;
  • Commercial and compliance business references;
  • Dollar amount of overall business;
  • Financial Statements; and
  • Any public filings which identify owners.

However, another issue to investigation is whether the foreign business partner has been in this business for reasonable period of time and can deliver the services that your company might need. So if a company in central Asia, which previously sold medical devices, now claims that they can assist your oilfield service business (or software business or just name the business) then that should raise a Red Flag. This information should be ascertainable through a review of some or all of the above but it may also require some interviews of the principles of the foreign business partner.

The Olympus matter promises to bring new and additional revelations in the future. The lessons learned can be utilized in many areas, including the compliance arena. At this point all I can add is “Watch this space” for we may well have an article entitled, “The Olympus Trifecta.”

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

March 7, 2011

Foreign Business Representatives: Some Red Flags to Review

Most Foreign Corrupt Practices Act (FCPA) Practitioners are aware that the greater the contacts with a foreign governmental official and the greater amount of money involved, the greater the FCPA risk for a company if a third party is involved. This is more particularly so if the foreign business representative involved does nothing more than simply make an introduction or uses his (or her) connections to get your company in front of “right people.”

This posting will discuss three Red Flags which a company should review regarding a foreign business partner. Many businesses look to the value obtained in the use of a foreign business representative. This simple economic analysis is not sufficient in the FCPA context. There should be a separate analysis on whether the foreign business representative has the substantive skills to perform the services requested. Finally, if the services performed by the foreign business representative are too far out of line with those performed by competitors, this can also present a Red Flag requiring additional scrutiny.

In his recent book entitled, “Foreign Corrupt Practices Act – A Practical Resource for Managers and Executives” noted FCPA specialist Aaron Murphy discussed this issue. Murphy had been in situations where the decision to retain a foreign business representative was based solely upon an economic analysis, with no substantive discussion within the company of whether the proposed foreign business representative had the requisite skills to provide substantive services. He observed that such a decision making process is a “dangerous mentality to adopt when doing business with foreign governments or state owned entities.”

Why

He goes on to discuss the situation where a foreign business representative is recommended by the entity with which your company is attempting to secure a contract. As a threshold issue, Murphy makes the inquiry as to whether such a “recommendation” is really a “requirement”. If your company is informed that the retention of such a foreign business representative would make things go more smoothly, this is clear evidence of a Red Flag on the proposed foreign business representative. Murphy recommends several inquiries which include the following:

  • With whom is the proposed foreign business representative related or affiliated?
  • What services does the foreign business representative bring to the table which our company cannot provide?
  • Was the need for the foreign business representative always contemplated as a part of the transaction?

Murphy focuses on the final question as particularly important. If the “recommendation” for the proposed foreign business representative appeared out of the blue and was not a part of any original bid requirement or tender package, a company should be particularly suspicious. Such a request has the indicia that the proposed foreign business partner is really just a sham and potential conduit for the transfer of money to a foreign governmental official.

What Happened?

A separate issue arises when the services of a foreign business representative is unexplained or vaguely understood. Usually a foreign business representative will perform some service(s) but just exactly what the service(s) are is unclear to your company. Murphy poses this situation as the “What Happened” scenario where a company may have a FCPA internal controls/books and records violation because it simply cannot explain what the service(s) foreign business representative provided. This situation can arise where a service was performed quickly, and apparently efficiently, by a foreign business representative but with little understanding by your company of just how such service(s) were delivered.

Too Good to be True?

Another Red Flag which should be evaluated is where the foreign business representative performs services which are far above that of any competitor or demonstrable success rate. James Min, Vice President, Int’l Trade Law & Corporate Compliance at DHL Americas – Legal Department, has developed a risk matrix model which evaluates the performance of companies in the freight forwarders/express delivery industry. In this matrix, Min analyzes risks by multiplying factors noted herein and thus scoring. The model shows that location should not be the sole criteria for risk. The factors in the Min Model are the performance of your company’s customers clearance brokers and how far that performance varies from the norm your company normally receives. In the below chart, +1.00 equals average clearance time. >1.0 equals faster than average and <1 means slower than average.

The Min Model

Country TI CPI Customs 

Clearance

Performance

Variance from 

Average Performance

Risk Score Risk Rank
A 55 .93 1.21 61.9 1
B 20 .76 0.89 13.5 3
C 54 .29 1.00 15.6 2
D 88 .12 0.7. 7.39 4

Min presented his model at the recent ACI FCPA Bootcamp. The key in this approach is how often the Customs Broker/Express Delivery Service varies above the average for customs clearance times. If the percentage of customs clearance performance is so great that your vendors variance is above 100% most of the time, this could be a Red Flag that bribery or corruption is involved. This should lead to further investigation, due diligence, or asking of questions of your vendor.

Most companies understand the need for and perform due diligence on foreign business partners. Many companies follow this up with a contract, with the foreign business partner, which requires FCPA compliance terms and conditions. However, there should be additional monitoring and review of the services provided to your company during the term of the agreement. The Red Flags listed in this article are not a complete list or dispositive, as each review will be determined by the facts involved in the transaction.

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

February 4, 2011

Agent Liability under the FCPA: Freight Forwarders and Express Delivery Services

Filed under: Agents,compliance programs,FCPA,Foeign Business Partner — tfoxlaw @ 6:39 am
Tags: , , , ,

I. The Problem

The Foreign Corrupt Practices Act (FCPA) world is littered with cases involving freight forwarders, brokers and agents in the shipping and express delivery arena. Both the Department of Justice (DOJ) and Securities and Exchange Commission (SEC) have aggressively pursued third party business relationships where bribery and corruption have been found. This is particularly true where companies are required to deliver goods into a foreign country through the assistance of a freight forwarder or express delivery service. There are several major risk points. These include:

• Location, location, location;
• Customs and other governmental agencies;
• Aviation and postal regulators;
• Business promotion expenditures for governmental officials;
• Agents and sub-agents; and
• Government accounts are a major part of express shipper customers so must analyze this as well.

Under the FCPA a company (or individual) can put itself at risk under three different knowledge standards:
• Knowing – The situation where a company or person authorizes an agent to make an improper payment or making a payment to an agent knowing some or all of the payment will go to a foreign governmental official.
• Knowledge of a high probability – Where the facts and circumstances surrounding a party, transaction or geographic location should put the reasonable person on notice to make further inquiries.
• Conscious indifference – As was the basis of the guilty verdict finding against Frederick Bourke.

The Panalpina enforcement action involved both the actions of the agent (Panalpina) and five of its energy customers. As noted by the FCPA Blog in “Making history today for the most companies to simultaneously settle FCPA-related violations”, this enforcement action levied fines and penalties of approximately $236.5 million. Additionally, all settling defendants agreed to Deferred Prosecution Agreements (DPA’s), with the exception of one which was given a Non-Prosecution Agreement (NPA).

The freight forwarded itself, Panalpina, paid over $80 million in fines and penalties. Panalpina admitted to three main illegal activities, these were: (1) customs clearance for its customers despite non-compliance or circumvention of customs formalities; (2) illegally obtaining a government contract for itself; and (3) obtaining unwarranted favorable tax treatment for its customers.

II. The Response

How can a company respond to protect itself or at least reduce its potential FCPA risk with regarding to a logistics company, freight forwarder or express delivery company? Obviously having a thorough risk assessment program and due diligence program are critical. After determining risk, move to perform due diligence based upon this risk. However, there are some general questions that you should ask, both internally and to your prospective vendor.
1. Relationship. What is your relationship with the third party? Is it purely arms-length? Is it sales agent making a solicitation? Is it a consortium, which may be a lower risk? Is it partnership of JV, if so what is your control? Is it subcontractor or supplier? All of these have different risk levels.
2. Business Formation. What is the character of the third party? Is it a US based company, is it subject to a robust national compliance law? Is it private/public? Who else do they represent? Length of time in business? Who are the principals and are they governmental officials?
3. Compensation. How do you compensate the third party? Is it bonus-based paid at the conclusion of a transaction? Will the representative have an expense account? If so how is it given to them, for instance will you pay on a lump sum v. verified expenditures? How will they be paid, local currency into a bank account, cash or check? What is the level of compensation? Are you over-compensating based upon the market; you are taking a chance that the third party could share it with others.
4. Location. What is the geographic location and is it one of the usual suspects on the TI Corruptions Index?
5. Industry. What is the industry or sector that you are engaged? This can be significant because certain industries/sectors such as infrastructure, medical industry, defense contractors are facing increased DOJ/SEC scrutiny.
6. Process. What is the process by which the business opportunity arose? What is the bidding process? Who invited you? Is it an open bid? Did you respond to an RFP? Did you compromise you own standards to bid? Is there a mandated partner assigned by the foreign government?

After you ask some of these questions, investigate your risks and evaluate them; you should incorporate these findings into a contract with appropriate FPCA compliance terms and conditions. This contract should announce to your to third party freight forwarder/express supplier of your expectations regarding their compliance program. Your contract should also allow for management of the compliance relationship. Your contract should require training and certification by verified provider or by your company. A new best practice has been to require a company funded Business Monitor whose job is to ensure compliance with your company’s compliance program.

III.  RISK MANAGEMENT: The Min Model
James Min, Vice President, Int’l Trade Affairs & Compliance at DHL Express (USA) Inc., developed a risk matrix for the freight forwarders/express delivery industry. In this Min analyzes risks by multiplying factors noted herein and thus scoring. This model shows that location should not be the sole criteria for risk. The factors in the Min Model are the performance of your company’s customers clearance brokers and how far that performance varies from the norm your company normally receives. In the below chart, +1.00 equals average clearance time. >1.0 equals faster than average and <1 means slower than average.

The Min Model

Country TI CPI Customs 

Clearance

Performance

Variance from 

Average Performance

Risk Score Risk Rank
A 55 .93 1.21 61.9 1
B 20 .76 0.89 13.5 3
C 54 .29 1.00 15.6 2
D 88 .12 0.7. 7.39 4

Min presented his model at the ACI FCPA Bootcamp, recently held in Houston, TX. He graciously allowed us to present this risk analysis model. The key in this approach is how often the Customs Broker/Express Delivery Service varies above the average for customs clearance times. If the percentage of customs clearance performance is so great that your vendors variance is above 100% most of the time, this could be a Red Flag that bribery or corruption is involved. This should lead to further investigation, due diligence, or asking of questions of your vendor.

Almost every business transaction engaged in by a freight forwarder, express delivery service or customs broker, outside the US involves a foreign governmental official. Every time your company sends raw materials into, or brings them out of, a country there is an interaction with a foreign governmental official in the form of a Customs Official. Every customs transaction involves a payment to a foreign government and every transaction involves some form of a foreign governmental regulatory process. While the individual payment per transaction can be small, the amount of total transactions can be quite high, if a large volume of goods are being imported into a foreign country.

Conversely interacting with international tax authorities can present problems similar to those with customs officials, but the stakes can often be much higher since tax transactions may be less in frequency but higher in financial risk. These types of risks include the valuation of raw materials for VAT purposes before such materials are incorporated into a final product, or the lack of segregation between goods to be sold on the foreign country’s domestic market as opposed to those which may be shipped through a free trade zone for sale outside that country’s domestic market.

If you utilize the services of a third party for any of the transactions listed above, that company’s actions will go a long way in determining your company’s FCPA liability.  You must have a thoughtful process and document that process.

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

January 26, 2011

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

 

 

 

November 15, 2010

What’s in a Name: Agents, Resellers and Distributors under the FCPA

Filed under: FCPA,Foeign Business Partner — tfoxlaw @ 1:57 pm
Tags: , , , ,

What is in a name? The terms agent, reseller and distributor are sometimes used interchangeably in the business world. However in the legal world they usually have distinct definitions. An agent can be generally defined as is a person who is authorized to act on behalf of another to create a legal relationship with a Third Party. An agent can also be a person who makes introductions and generally facilitates relationships between the seller of goods or services and end-using buyer. Such an agent usually receives some type of percentage of the final sale as his commission. An in-country national agent is often required in most Middle East and Far East countries. A reseller can be generally defined as a company or individual that sells goods to an end-using buyer. A reseller does not take title and thereby own the goods; the reseller is usually a conduit from the seller to the end-using buyer. A reseller usually receives a flat commission for his services, usually between 5-10% of the final purchase price. This format is often used in the software and hardware industries. A distributor can be generally defined as a company or individual which purchases a product from an original equipment manufacturer (OEM) and then independently sells that product to an end user. A distributor takes title, physical possession and owns the products. The distributor then sells the product again to an end-using purchaser. The distributor usually receives the product at some discount from the OEM and then is free to set his price at any amount above what he paid for the product. A distributor is often used by the US manufacturing industry to act as a sales force outside the US. 

The landscape of the Foreign Corrupt Practices Act (FCPA) is littered with cases involving both agents and resellers are they are the most clearly acting as representatives of the companies whose goods or services they sell for in foreign countries. However many US businesses believe that the legal differences between agents/resellers and distributors insulate them from FCPA liability should the conduct of the distributor violate the Act. They believe that as the distributor takes title and physical possession of the product, the legal risk of ownership has shifted to the distributor. If the goods are damaged or destroyed, the loss will be the distributor’s not the US business which manufactured the product. Under this same analysis, many US companies believe that the FCPA risk has also shifted from the US company to the foreign distributor. However such belief is sorely miss-placed. 

As almost everyone knows, the FCPA prohibits payments to foreign officials to obtain or retain business or secure an improper business advantage. But many US companies view distributors as different from other types of sales representatives such as company sales representatives, agents, resellers or even joint venture partners, for the purposes of FCPA liability. However the Department of Justice (DOJ) takes the position that a US company’s FCPA responsibilities extend to the conduct of a wide range of third parties, including the aforementioned company sales representatives, agents, resellers, joint venture partners but also distributors. No U.S. company can ignore signs that its distributors may be violating the FCPA. Company management cannot engage in conscious avoidance to the activities of a distributor that the company has put into a business position favorable to engaging in FCPA violations. Court interpretation of the FCPA has held that it is applicable where conduct violative of the Act is used to “to obtain or retain business or secure an improper business advantage” which can cover almost any kind of advantage, including indirect monetary advantage even as nebulous as reputational advantage. 

This scenario played out in China from 1997 to 2005 through AGA Medical Corporation. The Minnesota-based firm manufactured products used to treat congenital heart defects. To boost is China sales, AGA worked through its Chinese distributor. AGA sold products at a discounted rate to its Chinese distributor. This distributor then took some of the difference between his price from the equipment manufacturer AGA and the price he sold the equipment to Chinese hospitals to and paid corrupt payments to Chinese doctors to have them direct their government-owned hospitals to purchase AGA’s products. Its sales in China for the period were about $13.5 million. The Chinese distributor was found to have paid bribes in China of at least $460,000 to doctors in government-owned hospitals and patent-office officials. In 2008, AGA agreed to pay a $2 million criminal penalty and enter into a deferred prosecution agreement with the Department of Justice to settle Foreign Corrupt Practices Act violations. 

The same game was played by a Volvo subsidiary, Volvo Construction Equipment International (“VCEI”) when it used a Tunisian distributor to facilitate additional sales of its products to Iraq. VCEI reduced its prices to enable the distributor to make the illegal payments based on bogus after-sales service fees. Volvo’s 2008 settlement with the SEC included an agreement permanently enjoining it from future violations of Sections, ordering it to disgorge $7,299,208 in profits plus $1,303,441 in pre-judgment interest, and to pay a civil penalty of $4,000,000. In addition to this fine imposed by the SEC, Volvo also paid a $7,000,000 penalty pursuant to a deferred prosecution agreement with the DOJ. 

So what is in a name? Do we simply look to Shakespeare and his immortal words, “”What’s in a name? That which we call a rose; By any other name would smell as sweet.” Unfortunately I do not think the answer is quite so ethereal. It is more down to earth. If it walks like a duck and quacks like a duck, it probably is a duck. If you have a distributor, it must be subjected to the same FCPA scrutiny and management as an agent, reseller or joint venture partner. 

                                    *                      *                      * 

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 can be reached at tfox@tfoxlaw.com. 

© Thomas R. Fox, 2010

October 10, 2010

Schlumberger and The Management Of a Foreign Business Partner Under The FCPA

I. Schlumberger and Agent in Yemen

On Friday the Wall Street Journal, (WSJ) reported that the US Department of Justice (DOJ) was investigating allegations of possible bribery in Yemen by Schlumberger Ltd., in connect with Schlumberger’s 2002 agreement with the Yemen government to create a national exploration data-bank for the country’s oil industry. The allegations involve a foreign business representative, Zonic Invest Ltd., which became involved in the 2002 Data Bank Development Project between Schlumberger and Yemen’s national oil company, the Petroleum Exploration and Production Authority. Zonic’s General Director is the nephew of the then and current President of Yemen, Ali Abdullah Saleh. From the WSJ article, it was not clear the precise business relationship between Schlumberger and Zonic, for instance: whether Zonic was an agent of Schlumberger, a joint venture partner or simply a contractor.

In the WSJ article there were several reported allegations which stand out as classic Red Flags in Foreign Corrupt Practices Act (FCPA) compliance policies. Initially, Petroleum Exploration and Production Authority had urged Schlumberger to hire Zonic as a go-between at or near the time the contractual negotiations were nearing conclusion. Second the data-bank project went forward after Schlumberger “agreed to hire and pay Zonic a $500,000 signing bonus” then the contract between Schlumberger and the Petroleum Exploration and Production Authority was concluded. Indeed the General Director of Zonic was quoted as saying, “If it wasn’t for Zonic, there would have been no data-bank project.” Lastly, the WSJ article does not reference that any written contract was executed between Schlumberger and Zonic for this $500,000 payment.

The many Red Flags that may be raised in the WSJ report of the actions and statements that transpired before the contract for the data-bank project was concluded between Schlumberger and the Petroleum Exploration and Production Authority, there were several raised thereafter. After the contract for was concluded, WSJ reported that internal Schlumberger documents revealed that “Zonic wanted a roughly 20% cut of Schlumberger’s profits from the project.” While Schlumberger did not agree to pay such percentage of profits outright, it was noted that Schlumberger documents stated that the Yemen country manager had “suggested that those amounts could be compensated [to Zonic] through services.” These services were said to include providing personnel to the project, networking, furniture and computer hardware. Payments for such services were made, even though there was no contract between Schlumberger and Zonic, from 2002 to 2004. A contractual relationship between the parties was established in 2004 and lasted until at least 2007. The total amount paid by Schlumberger to Zonic was reported to be $1.38 million from 2003 to 2007. However, with regards to the services and products supplied by Zonic to Schlumberger, the WSJ noted that some were “above market rate” and others were unnecessary; specifically noting that over $200,000 was paid for certain computer hardware, “although Schlumberger itself was among the leading providers of such hardware.” The Daily Finance Blog reported, in an October 8, 2010 posting, that Zonic did not provide some of the services for which it was paid.

In 2008, the parties had some type of falling out leading to a breach of contract lawsuit by Zonic against Schlumberger. The Schlumberger compliance function did not become aware of Zonic matter until 2008; thereafter the company performed an internal investigation. Interestingly, this internal Schlumberger investigation concluded that “no one had violated its [Schlumberger’s] anti-corruption policy. Apparently, based on this conclusion that no Schlumberger employee had violated the company’s anti-corruption policy, the internal investigation was closed, as noted by the WSJ , “without any significant disciplinary action” of Schlumberger employees.

While this scenario, as reported in the WSJ, has numerous facts which could be the subject of several different training sessions on the FCPA, this post will focus on the actions which occurred after the conclusion of the contract for the National Data-Bank Project and subsequent actions after the inking of a written contract between Schlumberger and Zonic.

II. Management of a Foreign Business Relationship

Most companies understand the obligations to perform due diligence on foreign business partners. However such a step is only one of several steps a company should take when managing such a relationship going forward.

A. DPA Guidance

1. Monsanto

In its Deferred Prosecution Agreement (DPA) with the Monsanto Company for their FCPA violations, the DOJ provided some guidance on the continuing obligation to monitor foreign business partners. In the DPA, the DOJ agreed, after the initial due diligence and appropriate review were completed on foreign business partners, for Monsanto to implement certain post contract procedures. These requirements to Monsanto can be used as guidelines as to what the DOJ will look for from other companies who have entered into relationships with foreign business partners; especially in the area of monitoring said partner.

A company should, on a periodic basis of not less than every three years, conduct rigorous compliance audits of its operations with the foreign business partners. This monitoring would include, but not be limited to, detailed audits of the unit’s books and records, with specific attention to payments and commissions to agents, consultants, contractors, and subcontractors with responsibilities that include interactions with foreign officials and contributions to joint ventures. The compliance audit should include interviews with employees, consultants, agents, contractors, subcontractors and joint venture partners. Lastly, a review of the FCPA compliance training provided to the foreign business partner should be included.

2. Universal

In August, 2010 the DOJ announced an enforcement action involving Universal Corporation. As reported by the FCPA Professor, Universal took specific remedial steps during the pendency of its FCPA investigation process which were incorporated into the company’s DPA as a best-practices going forward. As reported in its Non-Prosecution Agreement, one of the steps implemented by Universal involved the creation of a Compliance Committee comprised of the Chief Financial Officer; General Counsel; Head of Internal Audit; Treasurer; Controller and the Principle Sales Director, which meets on a monthly basis to review and evaluate Universal’s compliance programs and training. Universal also revised and enhanced its payment approval policy which now requires an ‘approving officer’ to review all supporting documentation for a payment and to understand the purpose of the payment prior to approval. The ‘approving officer’ must certify that he or she has reviewed the existing documentation and obtained an understanding of the legitimate business purpose of the payment. The policy also requires that employees investigate any questionable payments and determine that they are legal, legitimate, and appropriate prior to approving the payment. Lastly Universal, created the position of “Relationship Officer” who was specifically tasked with managing the foreign business partner relationship both pre and post contract signing.

B. Ongoing Oversight

In addition to the DOJ guidance provided in the Monsanto and Universal matters, it is recommended that there be substantial involvement not only by the business unit most closely involved with the foreign business partner, but also by Legal; Compliance and other departments which would assist in completing the functions as outlined by the both DPAs. The most significant reason for maintaining a post-contract relationship is to ensure the business units remain engaged in the process. This involvement can also include some of the following participation, the senior business Vice President for the region where the foreign business partner operates should annually call upon the partner, in-person, to review all of the prospective business proposals and concluded business transactions that the foreign business partner has engaged in. This annual VP review must not take the place of a legal or compliance review but should focus on the relationship from the business perspective.

Managing the risk of a relationship with a foreign business partner is one of the most critical aspects of a FCPA compliance program. The documented risk for the potential violation of the FCPA by a foreign business partner to a company is quite high. To engage a foreign business partner, in a manner that properly assesses and manages the risk to, and for, a company, requires a committee of time, money and substantial effort. However, with a compliance based risk management procedure in place, the risk can be properly managed and a foreign business relationship can be successful for all parties.

The facts reported to date in the matter of Schlumberger and its (now former) foreign business partner, Zonic, demonstrate how ongoing oversight of an agent after a contract is signed is a critical component of a robust, best-practices FCPA compliance program. Even a foreign business partner, which may have raised Red Flags, enters into a contractual relationship with a company, such a relationship can be managed going forward. A Foreign Business Relationship Oversight Committee and a Relationship Manager provide additional levels of review which can be utilized to demonstrate ongoing compliance. These concepts should be incorporated into any current FCPA compliance program to assist in fulfilling the overall goals of any company’s program.

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, 2010

September 30, 2010

Getting Your Arms Around FCPA Due Diligence

The task of where to begin a full compliance and ethics program can often times appear quite daunting. Most US companies fully understand the need to comply with the Foreign Corrupt Practices Act (FCPA). However most companies are not created out of new cloth but are ongoing enterprises with a fully up and running business in place. They need to bring resources to bear to comply with the FCPA while continuing to do business. This can be particularly true in the area of performing due diligence on foreign business partners or vendors in the supply chain. Many companies understand the need for a robust due diligence program to investigation third parties, but have struggled with how to create an inventory to define the basis of risk of each foreign business partner and thereby perform the requisite due diligence required under the FCPA. 

In a recent Compliance Week webcast entitled “Getting Unstuck, Tactics for Defining and Executing Systematic, Risk-Based Third Party Due Diligence for FCPA Compliance”, Diana Lutz, Managing Director and Chief Compliance Officer of the Steele Foundation discussed mechanisms to utilize to assist an enterprise setting parameters to perform due diligence on foreign business partners such as agents, resellers, distributors, joint venture partners and any other such entities which might represent a US based company internationally. Her presentation presented concrete steps to take to allow businesses to ‘get their arms and heads around’ what they need to do and how to go about doing it in this area. 

The initial step was to conduct a risk inventory. This could be accomplished via a programmatic approach or via a forensic approach. The programmatic approach uses an overall roadmap to lead the assessment. It stresses a consistent and systematic linear approach which tends to identify and exclude low levels of risk. The forensic approach focuses on assessment at the individual third party level. However this approach can not only be more costly but allows a processor to manipulate certain information which could result in false result. 

Lutz suggested that a risk-based approach afforded not only consistency but is also “predictable and cost effective.” Such an approach would allow the visibility a company would need focus its due diligence resources. After an initial identification of the categories of third parties by such means as business segment, company or geographic region; there should be a weight and assessment of the level of exposure. Thereafter one should define the risk thresholds and the due diligence which should be applied to each risk level. All of this information would then allow a full risk matrix to be created and from such matrix, resources could be marshaled to perform an appropriate level of due diligence on foreign business partners. 

Using these steps, a company can establish the foreign business partners it needs and desires to perform due diligence on in a rational and reasonable manner. The mechanisms which Lutz outlined in the Steele webinar are useful tools for the Compliance Professional or Corporate Legal Department employee to demonstrate to management the ‘how’ of the mechanism of accomplishing this task in an ongoing FCPA compliance program. 

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, 2010

July 14, 2010

TOP 3 FCPA CASES OF 2010 PART II-(DING DONG) AVON CALLING

This is the second installment of our three part series on the Top 3 Foreign Corrupt Practices Act (FCPA) matters of 2010 to date and their significance for the FCPA compliance professional. In Part I we focused on the Gun Sting matter. Now we turn our attention to the Avon bribery scandal in China. 

As early as October 2008, Avon reported, in a Statement of Voluntary Disclosure, that it was investigating an internally reported allegation by an undisclosed whistleblower that corrupt payments had been made in its China operations. These allegations claimed that certain travel, entertainment and other expenses may have been improperly incurred. Although the details of the Avon case have not been disclosed, direct selling was not allowed in China under a law passed in 1998. The National Law Review reported that Avon was able to secure permission in late 2005 to begin direct selling on a limited basis. Later the Chinese government issued direct-selling regulations and granted Avon a broader license in February 2006 to make such sales.

In its 2009 Annual Report, Avon noted that the internal investigation and compliance reviews, which started in China, had now expanded to its operations in at least 12 other countries and was focusing on reviewing “certain expenses and books and records processes, including, but not limited to, travel, entertainment, gifts, and payments to third-party agents and others, in connection with our business dealings, directly or indirectly, with foreign governments and their employees”. The FCPA Professor, citing the Wall Street Journal, reported that Avon suspended four employees, including the

President, Chief Financial Officer and top government affairs executive of Avon’s China unit as well as a senior executive in New York who was Avon’s head of Internal Audit.

 One of the significant pieces of information to come out of the Avon matter is the reported costs as reported in the 2009 Annual Report the following costs have been incurred and are anticipated to be incurred in 2010:

Investigate Cost, Revenue or Earnings Loss
Investigative Cost (2009) $35 Million
Investigative Cost (anticipated-2010) $95 Million
Drop in Q1 Earnings $74.8 Million
Loss in Revenue from China Operations $10 Million
Total $214.8 Million

Marketwatch also reported that after these additional investigations were made public Avon’s stock prices fell by 8%. Lastly, in addition to the above direct and anticipated costs and drop in stock value, the ratings agency Fitch has speculated about the possibility of a drop in Avon’s credit ratings. In a June 1 Press Release, Fitch noted that not only could the above listed investigative costs come out of Avon’s ordinary cash flow, thereby putting a strain on the company, but that Fitch would expect companies such as Avon to make every effort to comply during an agreed upon deferred prosecution period with the Department Of Justice (DOJ) given the severity of an indictment. 

An indictment for FCPA violation(s) would be viewed as ‘Event Risk’, a term used by Fitch to describe the risk of a typically unforeseen event to the analyst which, until the event is explicit and defined, is excluded from existing ratings. An indictment would be an externally triggered event that would generate a rating review based on materiality and impact. 

But what does all of this mean for the Chief Compliance Officer sitting in his office in the US? It should mean quite a bit. There are several lessons from which you can learn and immediately implement in your FCPA compliance program if you have not previously done so. 

But what does all of this mean for the Chief Compliance Officer sitting in his office in the US? It should mean quite a bit. There are several lessons from which you can learn and immediately implement in your FCPA compliance program if you have not previously done so. 

1.     Who is a “foreign governmental official”? China poses a major challenge for US companies trying to comply with the law. The DOJ has consistently interpreted the FCPA as extending to any employee working for a state-owned business. Further, in a communist country, the DOJ has taken this interpretation a step further by opining that all employees are state employees and therefore a foreign governmental official. This means that from top to bottom, all persons in China are covered by the proscriptions of the FCPA. This interpretation has never been tested in a US court but it puts the broad swaths of the Chinese economy directly under the FCPA. Couple this with the pressure felt by foreign companies to sponsor trips by Chinese regulators, who do not seem to be shy in asking for perquisites, and you have a situation which is ripe for a FCPA violation. 

2.     Travel, Gifts and Entertainment under the FCPA. The FCPA includes an affirmative defense for payments to officials related directly to “the promotion, demonstration, or explanation of products or services” that are “reasonable and bona fide” 15 U.S.C. §§ 78dd-1(c)(2)(A) and 78dd-2(c)(2)(A). That defense is loaded with uncertainty and very difficult for companies to safely use. It may well be that Avon provided trips to the US for the Chinese Regulators with regulatory oversight for Avon’s China operations, or gifts and entertainment which did not fall under the FCPA exemption. If so, the FCPA compliance professional should review the company policy on such matters.  

3.     Internal Enforcement of Company FCPA Compliance Policy. One of the employees suspended was the (former) head of Internal Audit. In addition to a strong FCPA compliance policy, a company should continually monitor its compliance program, through a strong internal audit program, to use  as a first line of defense to not only prevent FCPA violations before they occur but also detect FCPA compliance violations.  

A key ‘best practices’ FCPA compliance program component is to utilize internal audit to monitor for FCPA compliance issues on a regular basis to not only assess compliance but to also identify anything which warrants further investigation. Taken a step further, a continuous controls monitoring program can assist a company to identify unusual expenses, budgeted items, or any other event which is outside an established norm and Red Flag such expense, item or event for further investigation.

All of the facts of the Avon matter should be carefully studied by the Chief Compliance Officer of any company doing business in China. The case stands for the proposition that a company should not only have a robust FCPA compliance policy in place but that it must continually monitor the policy to ensure compliance.

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, 2010

April 29, 2010

Oversight Committee and Management of Foreign Business Partners

Filed under: compliance programs,FCPA,Foeign Business Partner — tfoxlaw @ 6:18 am

We have previously blogged on the various stages of the relationship that a US company would travel through with a Foreign Business Partner, from the pre-relationship due diligence to the post-contract execution management. (See Here, Here and Here) One of the key elements in all of these stages is a high level oversight of the process at all of these stages. This article will discuss the concept of a Foreign Business Partner Review and Oversight Committee.

This concept appears to have found favor with the Department of Justice (DOJ), through its use in a Deferred Prosecution Agreement (DPA) with the Monsanto Corporation. The DOJ provided some guidance on the continuing obligation to monitor Foreign Business Partners. In the Monsanto DPA, the DOJ agreed, after the initial due diligence and appropriate review were completed on Foreign Business Partners, for Monsanto to implement certain post contract execution procedures. These requirements, placed upon Monsanto, can be used as guidelines as to what the DOJ will look for from other US companies who have entered into relationships with Foreign Business Partners; especially in the area of ongoing monitoring of the Foreign Business Partner.

The Monsanto DPA

In January, 2005, the Monsanto Company entered into a DPA for violating the Foreign Corrupt Practices Act (FCPA) in connection with an illegal payment of $50,000 to a senior Indonesian Ministry of Environment official, and the false certification of the bribe as “consultant fees” in the company’s books and records. In Appendix B to the DPA, Monsanto agreed to, among other things, “the establishment and maintenance of a committee to supervise the review of (I) the retention of any agent, consultant, or other representative for purposes of business development or lobbying in a foreign jurisdiction”, or an Oversight Committee. It should be noted that Monsanto successfully completed the terms of its DPA and was discharged from further obligations under it in 2008.

The scope of this Oversight Committee is not fleshed out in the DPA. However, it is suggested that a company should incorporate both a pre-execution function and a post-execution management function in overseeing the full relationship with the Foreign Business Partner. While this oversight would most necessarily focus on FCPA compliance, there should also be a commercial component to this function.

Who Should be on the Oversight Committee?

The Monsanto DPA provides guidance on this point by stating “The majority of the committee shall be comprised of persons who are not subordinate to the most senior officer of the department or unit responsible for the relevant transaction;” this would indicate that senior management should be involved in the Oversight Committee. It would also indicate that more than one department should be represented on the Oversight Committee. This would include senior representatives from the Accounting (or Finance) Department, Compliance & Legal Departments and Business Unit Operations.

What Should the Oversight Committee Review?

The Oversight Committee should review all documents relating the full panoply of a Foreign Business Partner’s relationship with a US company. This would begin with a review of any initial requests to engage a new Foreign Business Partner. The information presented to the Oversight Committee would include the Business Unit’s request to engage the Foreign Business Partner, the costs and benefits. The next step would be to review the due diligence and all background investigative materials on the prospective Foreign Business Partner.
The Oversight Committee should receive copies of, and approve, all due diligence and background investigative materials before a contract is executed with a Foreign Business Partner. Particular attention should be paid to the form of the contract. If there are deviations from the company’s standard form of agreement, with regard to the FCPA compliance issues, there should be a full explanation by the Foreign Business Partner or Business Unit. The Oversight Committee should determine if the company is taking on any unwarranted FCPA compliance risk if non-standard FCPA compliance terms and conditions are used.
After the commercial relationship has begun the Oversight Committee should monitor this relationship on no less than an annual basis. This annual audit should include a review of remedial due diligence investigations on the Foreign Business Partner and evaluation of any new or supplement risk associated with any negative information discovered from a review of financial audit reports on the Foreign Business Partners. The Oversight Committee should review any reports of any material breach of contract including any breach of the requirements of the Company Code of Ethics and Compliance.
In addition to the above remedial review, the Oversight Committee should review all payments requested by the Foreign Business Partner to assure such payment is within the company guidelines and is warranted by the contractual relationship with the Foreign Business Partner. Lastly, the Oversight Committee should review any request to provide the Foreign Business Partner any type of non-monetary compensation and, as appropriate, approve such requests.
The oversight of Foreign Business Partners is one of the key tools that a company can use to prevent and detect any violation of its own Code of Ethics and Compliance and the FCPA. The proper structure of the Oversight Committee and its full engagement with all aspects of a company’s relationship with a Foreign Business Partner is one of the areas that the DOJ will look for in a successful FCPA compliance program.

Conclusion

An Oversight Committee is a key tool which can be utilized by a company to manage its relationships with its Foreign Business Partners. Its use has been commented upon favorably by the DOJ through its citation in the Monsanto DPA. An Oversight Committee does not replace any of the other key components of an effective FCPA compliance program but it does provide an additional level of protection, back-up and transparency for all dealingss with a Foreign Business Partner. It should be a employed by US companies as an additional protection against any type of FCPA compliance and ethics violation slipping through the cracks to become a much larger problem down the road.

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, 2010

March 9, 2010

Maintaining a Relationship with a Foreign Business Partner under the FCPA after the Contract is Signed – Monitor, Monitor, and then, Monitor

In previous blogs postings, we have shared our thoughts on other aspect of the Foreign Business Partner (foreign agents, reseller, distributors or any person/entity representing the company overseas) relationship including how to evaluate the Foreign Corrupt Practices Act (FCPA) compliance risk; how to perform due diligence on prospective Foreign Business Partners; how to internally evaluate the information obtained through such due diligence; and what compliance contract terms and conditions you should set for the Foreign Business Partners. In this posting, we will discuss the steps a US company must follow to implement a procedure to monitor the actions of a Foreign Business Partner going forward.

DPA Guidance

In its Deferred Prosecution Agreement (DPA) with the Monsanto Company for their FCPA violations, the Department of Justice (DOJ) provided some guidance on the continuing obligation to monitor Foreign Business Partners. In the Monsanto DPA, the DOJ agreed, after the initial due diligence and appropriate review were completed on Foreign Business Partners, for Monsanto to implement certain post contract procedures. These requirements to Monsanto can be used as guidelines as to what the DOJ will look for from other US companies who have entered into relationships with Foreign Business Partners; especially in the area of monitoring the foreign business partner.

A US company should, on a periodic basis of not less than every three years, conduct rigorous compliance audits of its operations with the foreign business partners. This monitoring would include, but not be limited to, detailed audits of the foreign business partner unit’s books and records, with specific attention to payments and commissions to agents, consultants, contractors, and subcontractors with responsibilities that include interactions with foreign officials and contributions to joint ventures. The compliance audit should include interviews with employees, consultants, agents, contractors, subcontractors and joint venture partners. Lastly, a review of the FCPA compliance training provided to the foreign business partner should be included.

Ongoing Oversight

In addition to the DOJ guidance provided in the Monsanto DPA, it is recommended that there be substantial involvement not only by the business unit most closely involved with the Foreign Business Partner, but also by Legal; Compliance and other departments which would assist in completing the functions as outlined by the Monsanto DPA. The most significant reason for maintaining a post-contract relationship is to ensure the business units remain engaged in the Foreign Business Partner process. This involvement can also include some of the following participation, the senior business Vice President for the region where the Foreign Business Partner operates should annually call upon the Foreign Business Partner, in-person, to review all of the prospective business proposals and concluded business transactions that the Foreign Business Partner has engaged in. This annual VP review must not take the place of a legal or compliance review but should focus on the relationship from the business perspective.

Managing the risk of a relationship with a foreign business partner is one of the most critical aspects of a FCPA compliance program. The documented risk for the potential violation of the FCPA by a foreign business partner to a US company is quite high. To engage a foreign business partner, in a manner that properly assesses and manages the risk to, and for, a US company, requires a committee of time, money and substantial effort. However, with a compliance based risk management procedure in place, the risk can be properly managed and a foreign business relationship can be successful for all parties.

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, 2010

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