FCPA Compliance and Ethics Blog

February 14, 2013

Happy Birthday FT and Welcome Hanson Wade

Yesterday celebrated an auspicious anniversary as it was the 125th anniversary of the British newspaper, the Financial Times (FT), its first issue having been delivered on February 13, 1888. In England, and across the world, the FT is a venerated institution, beginning with its unique color for a print newspaper and, as you might guess from its name, a focus on all things financial. While we in the United States have the Wall Street Journal (WSJ), having a daily newspaper delivered to my door which reports on business, and other noteworthy events from around the world, from a British perspective certainly provides a matchless viewpoint to take a look at events, people and issues. As readers of this blog will recognize I get quite a bit of my material from the FT so it also a very useful resource to me writing about the Foreign Corrupt Practices Act (FCPA); the UK Bribery Act and compliance issues across the globe.

Although, perhaps, not quite as old as the FT, the English company Hanson Wade is putting on a peerless compliance oriented event here in Houston from April 29 to May 2. It is the 3rd annual Oil and Gas Supply Chain Compliance Conference. Once again Hanson Wade will have the top FCPA and related compliance talent in Houston for two days of conferencing and one day of focused workshops. The sessions will feature such topics as the following: New ways to enhance your ability to identify and mitigate the risks posed by third parties by applying some of the creative approaches that GE Oil & Gas and Parker Drilling utilize to ensure compliance across a complex, global supply chain; Ensuring that your company remains compliant when operating in new, challenging locations by applying the latest regional intelligence and develop a practical guide with fresh insights from Fluor, Baker Hughes and Dresser-Rand; Achieving the cross-departmental collaboration that is needed to operate in total compliance;  Hear about the perspectives of compliance and supply chain professionals from Weatherford, Huntsman and Halliburton on how they manage conflicting priorities; Discover the strategies used by Flowserve and Apache to help them prioritize their focus and achieve a higher level of  compliance by quickly and effectively isolating and eliminating weak links in your supply chain; and Benchmarking  your activities against the latest and most innovative approaches used by ExxonMobil, BP, Fluor, KBR and Ensco in how they are delivering continual improvement in their own compliance programs.

Recently Jay Martin, Vice President (VP), Chief Compliance Officer (CCO) and the Senior Deputy General Counsel (GC) for Baker Hughes Incorporated spoke to Hanson Wade about some of the recent issues that have come up for him in his role and what he will be talking about at this year’s event.

Over the last year, what changes have you seen with regard to FCPA implementation and enforcement action by the government? There seems to have been an increased emphasis on the prosecution of individuals as opposed to a sole focus on corporations. There have also been a series of industry sweeps that have been part of the recent enforcement agenda.

How has this highlighted the need for an effective compliance program? The Morgan Stanley case and the recent guidance that was issued by the SEC and the DOJ on the FCPA made clear the importance of a company having a robust compliance program to manage FCPA risk. Recent enforcement actions have given considerable credit to companies that have had such programs and this is the first time we have seen the government actually giving more affirmative credit for good programs.

What one initiative have you implemented this year that allowed you to maximize your compliance program? We are continuously reviewing and upgrading our compliance program based upon new events such as new enforcement cases coming out and the issuance of the DOJ and SEC guidance document.

We are particularly proud of the advancements that we have made with the application of our FCPA compliance program to joint ventures. That has been our biggest initiative.

What are you going to be speaking on at the conference this year? I will be presenting on the different international regulations and how they impact your organization’s compliance program. It is imperative that companies continue to expand and upgrade their compliance programs because of the proliferation of anti-bribery legislation around the globe and the increased cooperation across borders of the enforcement authorities.

So today we celebrate one of the UK’s greatest institution’s the FT. I would only add to the celebration by saying, “Keep on truckin’”. While Hanson Wade is not as old as the FT, they put on, for my money, one of the top compliance events in Houston and use the top compliance talent in Houston, of which there is a considerable amount, to give you insight in to not only what you should do in terms of best practices but also what to expect going forward. I hope that you will mark the dates on your calendar to attend and that I will see you there.

For full details on the Hanson Wade 3rd Annual Oil & Gas Supply Chain Conference, click here. Readers of this blog are entitled to a discount on the registration charge. So use the code FOXLAW13 when registering.

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, 2013

May 31, 2012

Houston – The Epicenter of FCPA Conferences in June

Next month the 7th Annual Compliance Week Conference will be held in Washington DC. In my opinion, it is the very best all-around compliance conference in the country and I would urge you to attend if you can do so. However, in the month of June, the city of Houston is playing host to three of the best conferences focusing on the Foreign Corrupt Practices Act (FCPA) compliance that I have recently seen. If you are a compliance practitioner and want to hear about the most cutting edge best practices regarding FCPA compliance and meet some of the top compliance practitioners in the US, you should plan to attend one or all of these upcoming events. So for one month Houston will be the epicenter of FCPA conferences, rather than its prior moniker as the epicenter of FCPA enforcement actions.

University of Houston

The University of Houston, Law Center – Center for Consumer Law, is hosting the “First Annual Ethics and Compliance Symposium” on Thursday June 7. The event is billed as one “to provide practical advice about real-world challenges that face ethics and compliance officers.  From training, to monitoring and auditing, to specific emerging risks like export controls, the Symposium is meant to be an interactive and useful event for the practicing E&C professional.”

The panelists include practitioners from the sponsoring law firm of Baker and McKenzie, notably Paul McNulty (he of the ‘McNulty’s maxims’) and White Collar specialist Ryan McConnell. There are also several Chief Compliance Officers (CCO’s) from well-known local energy companies such as Doug Walter from Phillips 66, Jay Martin from Baker Hughes and Dan Chapman from Parker Drilling. Rounding out the presenters are those from forensic and consulting firms such as Michael Schwartz from KPMG, Ramsey Pace from FTI and Mike McConnell from Grant Thorton LLP.

Bottom Line: Anytime you can hear Paul McNulty talk about “What Enforcement Authorities Expect in a Company’s Compliance Program” drop what you are doing and go listen.

World Check

World Check continues its program of top FCPA speakers with an event in Houston on June 26. The panel includes two of the best compliance practitioners I know; my “This Week in FCPA” cohort Howard Sklar and Jonathan Marks, he of the Marks’ “13 Step FCPA Action Plan”. I have heard them both speak and they are good.

Howard will examine ‘Schedule C’, which is the Department of Justice’s (DOJ) minimum 13-point best practices list of elements which should be included in your compliance program. It is found in recent Deferred Prosecution Agreements (DPA) entered into by the DOJ. Howard provides a color-by-number guide to compliance in his usually cool, calm and collected manner.

Jonathan Marks, a Partner & Leader in the Fraud, Ethics & Anti-corruption Practice at Crowe Horwath LLP, will give an overview of how organizations can deter problems before they arise and how to work toward building or enhancing a culture of compliance that addresses both the FCPA and the UK Bribery Act. I have used Jonathan’s 13 Step FCPA Action Plan in my practice. It is an excellent guide by which you can evaluate or assess your current compliance program and it is flexible enough to act as a guidepost for compliance program implementation or enhancement.

Bottom Line: Are you kidding – would you miss the opportunity to see Howard Sklar rant in person? But seriously, I know both of these guys and they both know their stuff as well as anyone in the field. This is the Tuesday event that I will attend. And the price is right – as in the event is complimentary.

Hanson Wade – Oil and Gas Supply Chain Compliance

Hanson Wade has put together one of the absolute best aggregations of FCPA compliance talent that has ever come to Houston for a conference; over three days, June 26-28. I realize the first day overlaps with the World Check event but that’s the way the cookie crumbles. The first day of the conference is Workshop Day with two great workshops. One on Supplier Due Diligence presented by Paul Liebman and the second on Managing the Risk of Third Parties by Rich Battaglia.

I have previously written about Dan Chapman and his interview presaging the event. In addition to Dan and several other top CCOs from the Houston area, the conference will be the only Texas appearance of the FCPA Professor, Mike Koehler, who will moderate a panel on “Does the Current FCPA Enforcement Environment Adequately Recognize Good Faith Compliance?” In addition to Dan Chapman, the FCPA Professor and other CCOs who will speak, there are some of the very top compliance practitioners, from both in-house and private practice, who will speak about doing the business of compliance on a day-to-day basis. It all starts with Jeff Spalding, Assistant General Counsel of Halliburton who is the event’s Chairman. Also included are such compliance industry leaders as Julia Symon from KBR; Julian Ranzato from DHL; Sam Tate from BP; Steven Gyeszly from Weatherford; Arvind Sharma from Flowserve and Ronald Sponberg from Baker Hughes.

The topics will be among the most relevant and most informative that you could ever ask for. They include FCPA prosecutions and enforcement actions, risk assessments and risk intelligence, dealing with facilitation payments, FPCA compliance training, and FCPA risk assessment in merger and acquisition work and in dealing with joint ventures, auditing and compliance convergence. Simply put the scope of the Hanson Wade event is as broad and far-ranging as you might ask for nevertheless the focus is on the compliance practitioner and the business of doing compliance inside a corporation.

Bottom Line: This is one of the very best FCPA conferences that has ever been staged in Houston. It will offer some of the most cutting edge best practices on a wide variety of issues that bedevil compliance practitioners on a day-to-day basis. This list of speaker is the most ‘A-List’ that has ever been seen at such an event in Houston. You owe it to yourself to attend.

For information on the Hanson Wade Conference, click here. For readers of this blog, a discount is offered by Hanson Wade. You can receive the discount by entering the online discount code: FOXLAW. You can also use this discount code if you register directly with Hanson Wade.

For information on the World Check event, click here. The event is free so no discount is needed.

For information on the University of Houston event, click here. Sorry but I haven’t been authorized to offer any discounts.

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

May 10, 2012

Jesse Owens and Hanson Wade’s FCPA in the Supply Chain Conference

What is the greatest one hour in the history of track and field? I would put forward the 45 minutes on May 25, 1935, when Jesse Owens, at the Big 10 Track and Field Championship run in Ann Arbor, Michigan, broke the world records in three events: the 220-yard dash, the 200-hurdles and the long jump. He also tied the world record in the 100-yard dash. Not a bad afternoon’s work.

Next month, Hanson Wade is putting on a conference in Houston which may be worthy of such a record. It is the “Oil and Gas Supply Chain Compliance” conference and the list of speakers is simply stunning. It includes the following Chief Compliance Officers (CCO): Dan Chapman, Parker Drilling; Brian Moffet, ENSCO, Jay Martin, BakerHughes; Julie Symon, KBR, Jan Farley, Dresser-Rand; John Sardar, Noble Drilling and a host of other luminaries in the field of Foreign Corrupt Practices Act (FCPA) compliance, including, in his only Texas appearance, the FCPA Professor, Mike Koehler. Even if you live outside of Houston, the FCPA compliance talent at this event will rival any other event in the US and for such an event not held in Washington DC or New York City, it is simply outstanding.

Some of the panels and topics for discussion include: Performing Adequate Risk Weighted FCPA Due Diligence for Acquisitions and Joint Ventures; Special Due Diligence and Contracting Considerations in Managing FCPA Risk Associated with Major International Freight Forwarders; Fresh Insights Into Mitigating FCPA Compliance Risks Through Effective Auditing; Embedding a Compliance Culture into Your Organization: Proven Intelligence on the Impact of Good Training; and the ENI experience on How to Address Specific Concerns in Procurement. These are but some of the sessions and there are many other excellent panels, sessions and speakers which I have not mentioned.

Recently one of the star speakers, Dan Chapman, Chief Compliance Officer for Parker Drilling, visited with Sara Patella about some of the issues facing US companies when dealing with third parties. Recognizing that it may be difficult for companies to know precisely what their third party partners may be doing at a specific time, Chapman stated that “The goal of a good due diligence program isn’t necessarily to identify improper activities from a retroactive standpoint.  Instead, an effective due diligence program assesses the character and propensities for improper conduct of your agents and other representatives that may act on your company’s behalf before they are engaged and then again at periodic intervals.”

Chapman also spoke about the differences in risks between developing and developed countries. He noted that in a developing country, “the bureaucracy may be so stagnant and inefficient that in order to perform services for their clients, certain vendors may feel pressure to engage in improper conduct.” This is usually coupled with a lack of internal enforcement in the developing country for those government officials who accept bribes or are otherwise engaged in corruption. Conversely in a developed country, there are usually more resources to fight corruption and perhaps greater political will as well. Wherever you might be doing business Chapman advises that the current FCPA enforcement regime should “encourage companies to avoid getting into trouble in the first place.” For the full text of the Chapman interview, click here.

I hope that you can attend this most excellent FCPA conference next month. Very few FCPA conferences focus on the supply chain and the information that you will receive at this one should be first rate. Will your day be as good as the one hour Jesse Owens had in Ann Arbor those many years ago? Why don’t you attend the event and see for yourself. It should be well worth the price of admission.

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For complete information on the Hanson Wade Conference, “Oil and Gas Supply Chain Conference“, click here. For readers of this blog, a discount is offered by Hanson Wade. You can receive the discount by entering the online discount code: FOXLAW. You can also use this discount code if you register directly with Hanson Wade.

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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

April 27, 2011

Conducting Pre-Acquisition FCPA Due Diligence

Filed under: Due Diligence,FCPA,Mergers and Acquisition — tfoxlaw @ 7:49 am
Tags: , ,

There are several recent examples where companies, bought both businesses and there pre-existing violations of the Foreign Corrupt Practices Act (FCPA), in large part because the acquiring companies failed to perform sufficient FCPA due diligence it the overall pre-acquisition due diligence. These examples include the Alliance One matter resolved this past summer with a $4.2 million fine for pre-acquisition conduct and $10 million in profit disgorgement. There was also the $240 million fine levied against Saipem for conduct of an acquired subsidiary of ENI, Snamprogetti, where the conduct at issue occurred over 2 years prior to the acquisition. One of the strongest examples is that of eLandia International Inc., which acquired Latin Node Inc., in 2007. Thereafter, it discovered potential FCPA violations, which it self-reported to the DOJ. As reported in the FCPA Blog, in addition to a $2 million fine, eLandia also disclosed that its purchase price for Latin Node “was approximately $20.6 million in excess of the fair value of the net assets” mostly due to the cost of the FCPA investigation, the resulting fines and penalties to which it may be subject, the termination of Latin Node’s senior management and the resultant loss of business. eLandia eventually wrote off the entire investment by placing Latin Node into bankruptcy and shuttering the acquisition.

There are several steps that a company should take when performing pre-acquisition FCPA due diligence. Yesterday at the Hanson Wade FCPA conference in Houston, some of these steps were discussed. While these steps are not an exhaustive list, they do provide a company with some guidance on specific issues to investigate to protect themselves from buying not only a new company but a FCPA enforcement action. These steps include:

  1. Charity Begins at Home. Review high risk geographic areas where your company and the target do business. If there is overlap, seek out your own sales and operational people and ask them what compliance issues are prevalent in those geographic areas. If there are compliance issues that your company faces, then the target probably faces them as well.
  2. Get Sales Lists. Obtain from the target a detailed list of sales going back 3-5 years, broken out by country. If you can obtain a further breakdown by product or services get that as well. You do not need to investigate de minimis sales amounts but focus your FCPA due diligence inquiry on high sales volumes in high risk countries.
  3. Get List of Foreign Business Representatives. If the target uses a sales model of third parties, obtain a complete list, including JVs. It should be broken out by country and amount of commission paid. Review all underlying due diligence on these foreign business representatives, their contracts and how they were managed after the contract was executed. But your focus should be on large commissions in high risk countries.
  4. Talk. You will need to speak to the target company personnel who are responsible for its compliance program to garner a full understanding of how they view their compliance program.
  5. T&E Records. You will to review the travel and entertainment records of the target’s top sales personnel in high risk countries. You should retain a forensic auditing firm to assist you with this effort. Use the resources of your own company personnel to find out what is reasonable for travel and entertainment in the same high risk countries which your company does business.
  6. Disclosure. While always an issue fraught with numerous considerations, there may be others in the M&A context such as any statutory obligations to disclose violations of  any anti-bribery or anti-corruption laws in the jurisdiction(s) in question; what effect will disclosure have on the target’s value or the purchase price that your company is willing to offer.
  7. Compliance Convergence. While you are performing the FCPA due diligence, you should also review issues for anti-money laundering and export control issues.

While not discussed in the presentation, we also believe that after the due diligence is completed, and if the transaction moves forward, the acquiring company should attempt to protect itself through the most robust contract provisions that it can obtain, these would include indemnification against possible FCPA violations, including both payment of all investigative costs and any assessed penalties. An acquiring company should also include reps and warranties that the entire target company uses for participation in transactions as permitted under local law; there is an absence of government owners in company; and that the target company has made no corrupt payments to foreign officials. Lastly, there must be a rep that all the books and records presented to the acquiring company for review were complete and accurate.

The clear trend in FCPA enforcement is an increased and aggressive level of enforcement activity under the both the DOJ and Securities and Exchange Commission. Businesses must be particularly heedful in the engaging in the mergers and acquisitions process, whether acquiring other companies or being acquired. Due diligence in these situations is critical and must encompass the full range of FCPA compliance issues.

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 27, 2011

FCPA and Bribery Act Compliance in the Global Supply Chain

Ed. Note-recently Harriet O’Brien, Program Director for Compliance in the Global Supply Chain, spoke with Adrian Mebane, Director of the Ethics and Compliance Group for Weatherford International Ltd., on issues relating to compliance in the global supply chain. The views stated herein are those of Mr. Mebane and not his employer. With permission, we reprint the issue on this posting.

Why is it important to focus on compliance in the context of the global supply chain?

In the various countries in which we operate, we’re always on the lookout for particular supply chain issues, specifically as they relate to procurement activities. We may encounter individuals not abiding by our procurement policy; either the global procurement policy that’s in place or the procurement policies in respective countries. By that I mean that vendors and/or suppliers may not have been selected appropriately, in that the business neglected to follow competitive bidding practices such as failing to obtain three quotes/bids or failed to have a clear segregation of duties. These practices can lead to an individual selecting a vendor or supplier in which they may have some sort of ownership interest or by showing preferential treatment to a company in which that individual’s family or friends may work. These conflicts of interest can potentially lay a foundation for code of business conduct violations. I’d say that these are some of the prevalent compliance issues companies’ encounter from a supply chain context.

Whilst these types of incidents thankfully do not expose companies to the same level of risk as other forms of corruption like improper payments and gifts to government officials in order to obtain or retain business, they  certainly can create headaches to operations and impact its bottom line. When we I initiate investigations into these matters, we conduct interviews and assess the sufficiency of the relevant documentation to attempt to determine if the business may be paying above market for goods and services and if so, whether employees may have  inappropriate relationships with vendors. We can then recommend remedial measures to ensure that the business is getting competitive rates, the best services and that the process in doing so is an efficient one. These supply chain issues come to our attention in a variety of ways but predominately via ‘Listen Up’, our anonymous hotline. As a result, and when we’ve been able to fully investigate these allegations, the majority of these matters have resulted in some form of disciplinary action, ranging from letters of reprimand to termination. Procurement involving vendors and suppliers is something our business units and product lines are keenly sensitized and an area in which our compliance team is acutely aware.

What would you say is the biggest challenge or risk for oil and gas companies with regards to compliance?

I’d say the biggest challenge or risk for many, if not all oil and gas companies, will always be with respect to 3rd parties and intermediaries acting on a company’s behalf in dealings with covered persons. We all do business in the “high risk” countries with reputations for corruption and we’re all somewhat reliant on sales agents, consultants and brokers in many of these countries. Many of the DOJ and SEC FCPA settlements we hear about started because of some bad act or acts by an agent for that company. Obviously, if you’re going to engage a 3rd party, the company must perform comprehensive due diligence and do all it can to have that 3rd party abide by its compliance policies.

How will the UK bribery act change the compliance landscape?

It will change the compliance landscape certainly but to what extent, it’s hard to tell. Many articles and FCPA practitioners refer to the UK Bribery Act as the “FCPA on steroids”. The Act incorporates many of the same elements that the FCPA has, but the envelope’s been pushed in some respects. For instance, the Act prohibits facilitation payments, although typically illegal in the countries where they’re being made anyway, there is at least the room within the FCPA to allow these “grease payments”. Serious Fraud Office (“SFO”) prosecutors will likely enforce this standard in a realistic and practical fashion but many companies are concerned. Given the fact that Weatherford operates in over 100 countries, we’ve banned facilitation payments at our company but for situations where employees are faced with an imminent threat to bodily harm and felt that it was just cleaner to do so. Keep in mind also that the Act provides a defense for companies with robust compliance programs and those companies, humbly; like Weatherford’s should be well insulated if the SFO comes knocking on the door. At the end of the day, I think the UK Bribery Act will be effective, and some companies are definitely looking to beef up their compliance programs to ensure that they do not fall afoul of the new act.

Adrian D. Mebane is the Director of the Ethics and Compliance Group for Weatherford International Ltd., joining the company in May 2009. Adrian is responsible for leading, managing, developing and implementing the global ethics and compliance program for Weatherford, which has operations in over 100 countries and more than 50,000 employees. For 4 years, Adrian was a federal prosecutor at the Fraud Section of the Department of Justice’s Criminal Division, where he prosecuted FCPA and other sophisticated white collar matters.

Adrian Mebane will speak at the conference, Compliance in the Global Supply Chain, in Houston, TX, on April 26 and 27. Through Friday, registrants can receive up to $400 USD off standard prices as well as an extra 10% for booking through this blog. Code to quote: FCPA2

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

© Thomas R. Fox, 2011

 

 

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