FCPA Compliance and Ethics Blog

June 17, 2013

Justin Rose and Barry Vitou-Two Winning Brits

Ed. Note-Yesterday, Justin Rose won the US Open, making him the first Englishman to win the Open since Tony Jacklin in 1970. So a big tip of the golf cap to Mr. Rose. In the field of anti-bribery and anti-corruption, the English are somewhat ahead of their golfing wins at the US Open. Barry Vitou, who together with Richard Kovalevsky QC, helps to shine a light on the UK Bribery Act, posted a piece on his recent remarks at the St. Petersburg International Law Forum. I asked Barry if I could repost his remarks on my site, which he graciously allowed me to do so.


Last week Barry attended and presented on a (large) at the St. Petersburg International Law Forum about corruption.

The St. Petersburg International Legal Forum is now an established premier fixture on the legal map in Russia.

There were various slots on corruption.  Ever topical on Wednesday the Russian media (this link is worth clicking through to see the raid) was full of the story about the arrest of the Russian CEO of Societe General Russia on suspicion of bribery (USD$1.5 million to allegedly favourably  alter the terms of a loan in Moscow).

At the Forum Barry presented on International developments (a quick run down on the continuing trend for anti-bribery law creation and enforcement), the UK Bribery Act (coming soon…eventually) and the practical aspects of compliance in a Russian context.

What do I mean by in a Russian context?

Russia’s capitalist economy is barely twenty years old.  You can’t make an omelette without scrambling some eggs and it’s fair to say a large number of eggs have been scrambled in Russia.

But you can’t fail to be inspired, as your walk around the streets of Moscow and St. Petersburg, by the progress which has been made in those twenty years.

It’s not perfect.  There’s still a long way to go.  But whichever way you look at it strides have been taken.

Back to the ‘Russian context’:

For Russian business on the one hand UK Bribery Act and FCPA seem distant.

Yes, there is long arm jurisdiction under both.  But in reality, non-Russian law enforcement will (in most cases) find it hard to enforce.  Getting evidence will be tough (probably even tougher than usual) and Russia’s constitution forbids the extradition of a Russian national to another country.

There is little or no chance of Russians being extradited in orange jumpsuits to face the music in the US.

And yet.

On the other hand, there are three compelling reasons why, in practice, Russians care a lot about anti-bribery and why, whenever we present there we do so to packed houses.

First, Russians don’t like corruption.  Contrary to popular belief Russians do not like having to bribe traffic cops, kindergarden teachers to get their kids in, the planning department to get the permits to refurbish their apartment or anything else for that matter.

No-one would be happier than Joe Blogski or John Doeski if corruption in Russia was a thing of the past.  It isn’t yet (but then corruption is alive and well in the West too).

Second, many Russian businesses want to operate on an international stage. This ranges from setting up shop in London or New York to Russian businesses doing IPO’s on the NYSE, NASDAQ or London Stock Exchange and everything in between.

But perhaps the most compelling of each of the three reasons at the moment is not a general desire to stamp out corruption, the threat of law enforcement or the lofty aspiration of setting up outside Russia.

Instead it is the more prosaic reality that many Russian businesses count western companies as their customers.  Increasingly those Western customers are seeking to impose their own (developing and in some cases ill thought out) anti-corruption compliance on Russian businesses (mindful of the problems third parties in risky places – and Russia is a risky place – can cause).

So Russian businesses, the Russian government and Russian citizens are very interested in anti-corruption.

After explaining that in Russia it was broadly impossible to fire someone suspected of bribery (they would need to be convicted by a criminal court) and that the only two reasons to sack someone were, basically, 1. if they were drunk at work or 2. seriously late, Anton Smirnov of Lovells said a journey of 1000 steps starts with just one step.

The chairman of the panel, the very smart Alevtina Kamelkova Russian & CIS General Counsel of Alcatel Lucent said it would be really helpful if CEO’s of Russian groups demonstrated tone from the top and participated in anti-corruption panels like those running at the Forum.

That would be good too.

But in our view Russia should not beat itself up and likewise the West should not beat Russia up, over its present stage of development.

In world terms the Russian economy is a baby.

Non-Russian labor laws are hardly perfect – but we’ve come across plenty of others with similar flaws from the UK to Asia and beyond when dealing with international internal investigations.

We would like to see some CEO’s of Western businesses taking the time to demonstrate real tone from the top and talk about anti-corruption on similar panels.  Imagine the message that would be sent if the CEO of a Fortune 500 (not under FCPA investigation) took the time…

We agree that every journey starts with just one step. Russia has begun its journey.

September 3, 2012

Doomsayers Proven Wrong Yet Again-Gifts and Entertainment Under the Bribery Act

Ed. Note-the following article was posted by our colleagues thebriberyact.com guys, Barry Vitou and Richard Kovalevsky Q.C. We received permission to repost the article in its entirety. 


‘We are not interested in that sort of case. We are interested in hearing that a large company has mysteriously come second in bidding for a big contract. The sort of bribery we would be investigating would not be tickets to Wimbledon or bottles of champagne. We are not the “serious champagne office”.’

today’s Daily Mail quotes the Director of the Serious Fraud Office as saying.  It is helpful stuff.

We have said time and time again that the SFO is unlikely to be bringing a stand alone Bribery Act prosecution over corporate hospitality.  Scare stories published about Olympic corporate hospitality levels and pictures of empty seats led to reports that the Bribery Act was to blame.

Many of the empty seats were not in fact empty corporate boxes but instead seats belonging to Olympic officials who did not bother to turn up to early qualifiers. But why let the facts get in the way of a good story.

That said, we are aware of instances where corporates had Olympic corporate hospitality rejected because of the Bribery Act.

Hopefully the latest comments from the new SFO Director will kill off some of the scaremongering that has gone before among the media and some legal advisers.

In an excellent post our friend Howard Sklar recently exposed some legal advice given by one lawyer about the Bribery Act who advised:

“The limit should be zero dollars. That will keep you safe”


Howard, known for his tempered approach commented:

“Really?  Zero?

Let’s just talk about how advice likes this harms not just the giver, but the receiver too.  First, the giver.  The person who gives this advice will give it to one of two types of people: people who know what they’re talking about, or people who don’t.  I don’t know which comes out on the bottom.  If the lawyer is giving this advice to a knowledgeable person, that person will likely politely smile, nod, and then put the lawyer in the “idiot” box in his head, and not listen to another thing that lawyer says.  Which is a problem, because maybe in the future—even a stopped clock is right, twice a day—that lawyer will give some advice the client should listen to.  But getting out of the “idiot” box is a rare feat.

Or the recipient won’t know what they’re talking about.  In which case, like a wide-eyed doe, they’ll just accept what the lawyer says as a best practice.  Heaven forbid they go back to their own company and repeat that advice out loud.  (We’re back to the “Idiot” box).  Or even worse, that they’re in a position of authority, and could implement that advice.”

This is not rocket science.  Companies should put in place proper procedures to deal with corporate hospitality in line with SFO guidance.

Broadly this means companies should think about their corporate hospitality process, and pick a number above which approval is required.  If you want you can pick some more numbers above which a higher level of approval is required.

The key is to be able to justify why you picked approval thresholds and that the policy is actually followed.  Both should be well documented.

As Howard says: “By the way, that “zero dollars” idea doesn’t keep you safe.  The business will ignore it, sidestep it, and will do that for just about any advice you give from now on.”

April 19, 2012

London Calling: The Olympics and Corporate Hospitality under the UK Bribery Act

As The Clash sang, London Calling, and the London Olympics are now less than 100 days away. One of the areas which has generated the greatest amount of hyperbole is over corporate hospitality at the upcoming 2012 summer Games. There has been rampant speculation that under the UK Bribery Act, corporations may well be prosecuted for providing corporate hospitality events before or during the Games. Indeed some have speculated that even purchasing a ticket at the face price for a client or customer would draw the scrutiny of the UK Serious Fraud Office (SFO). As a lawyer, I certainly appreciate the ‘going down the slippery slope’ argument and I may have even engaged in that technique once or twice. However, neither the UK Bribery Act nor the US Foreign Corrupt Practices Act (FCPA) prohibits corporate hospitality. Further, I think the ‘slippery slope’ argument is one that fails to stand up to scrutiny.

However, recognizing that my interpretation of UK law is simply that and I am not licensed to practice law in the UK and hence cannot provide a legal opinion on the Bribery Act, I went to thebriberyact.com to see what thebriberyact.com guys (who are licensed to practice law in the UK) might have opined on this issue. They have a couple of interesting posts up on this specific issue. Recently they had the opportunity to put this question to the SFO and, in a blog entitled “The SFO’s view on corporate hospitality”, they have posted what they heard from the SFO, , which I quote in its entirety::

The SFO have told us that they will be looking at five factors when considering corporate hospitality in the context of the Bribery Act.

Where the SFO is considering whether any particular case of corporate expenditure appears to fall outside the bounds of reasonable and proportionate hospitality, it will be looking to see whether:

1.    the company has a clear issued policy regarding gifts and hospitality,

2.    the scale of the expenditure in question fell within the confines of such policy and if not, whether special permission for it had been sought at a high level within the organization,

3.    the expenditure was proportionate with regard to the recipient,

4.    there is evidence that such expenditure had been recorded by the Company,

5.    the recipient was entitled to receive the hospitality under the law of the recipient’s country.

The inference that the expenditure was intended as a bribe would be strengthened if it should transpire (a) that there had been any unjustifiable ‘add-ons’, for example with regard to travel or accommodation, or (b) that that the expenditure in question could be related in time to some actual or anticipated business with the recipient, particularly in a competitive context.

In another post, entitled “Jo Morgan CCO IMI PLC – Debunks Olympic corporate hospitality myths”, the guys questioned a compliance practitioner Jo Morgan, the Chief Compliance Officer (CCO) of IMI PLC, a global engineering group focused on the precise control and movement of fluids in critical applications.  The question posed to Jo and her answer are as follows:

Question: I’d like to entertain some clients at the Olympics in the summer. I’ve read lots in the press about lavish hospitality being outlawed by the Bribery Act. My concern is that some of the tickets for popular events run into thousands of pounds and so I’m concerned that the amount is too much. On the other hand, the Olympics is a once in a lifetime chance for us to entertain our best clients. Surely, I can’t be prevented from inviting clients along as a result of the Bribery Act? Help.

Answer: Here at IMI plc we have very clear guidelines on entertaining. We have monetary limits above which one needs Executive Director approval for the event. In reviewing such requests the Directors look at:

a) who the entertainment is being offered to (i.e. customer, supplier, public, private, what level in the organization the person receiving the entertainment is);
b) what circumstances exist at the time the offer of the entertainment, and at the time the entertainment will take place, (i.e. is there a live bid or other circumstance which would mean that the entertainment could improperly influence a decision or provide an improper advantage);
c) whether there are any other circumstances which might make the entertainment look inappropriate – essentially this is the “newspaper test” – how would we feel if the entertainment was reported in the newspaper? Would it look OK to the ordinary man? That will generally tell you how the law enforcers would view it too.

I do not believe that it was the intention behind the Bribery Act to prevent attendance at events such as the Olympics and therefore if you consider the points above and you are comfortable with answers then you should be OK.

So for those of you who need “English English” translated into “American English” (or Texan for that matter), I think what both thebriberyact.com guys and Jo are saying is that your company should have a written policy on corporate hospitality and procedures for following that policy. If you want to take a customer or client to the Olympics, follow your company’s written procedure so that if the amount you intend to spend is above the limit set forth in the policy, follow the procedures and fill out the required forms and obtain approval before you engage in the corporate hospitality. You need to make certain that the hospitality is proportional AND that it is allowed by both the laws of the home country of the recipient and his or her employer. Lastly, all corporate hospitality must be correctly recorded in your company’s books and records. But at the end of the day, I think Jo Morgan’s final test may be the most appropriate, what we might call the “Wall Street Journal” test. How would your company feel (and you too for that matter) if the corporate hospitality you engaged in at the Olympics was reported on the front page of the Wall Street Journal?

Sometimes common sense is a good rule of thumb. And document, document document.

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

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