March 19, 2012 Volume 4, No. 2
This edition of Currents is from Eric L. Dobberteen, Esq., a member of the litigation and white collar crime practice teams. Please contact Eric Dobberteen to inquire about the subject matter of this issue.
Bribe?!? What Bribe?!? - Continued
Part two of this three part series shows that the Department of Justice (DOJ) has stepped up its enforcement of the 34-year old statute called the Foreign Corrupt Practices Act (FCPA). United States businesses that engage in international trade and wish to limit exposure to bribery prosecutions or fines under the FCPA should consider instituting a compliance program.
Read part three below to see the major components of an effective compliance program.
PART ONE: What is the FCPA?
PART TWO: Why Worry About the FCPA Now?
PART THREE: Can Trouble With the FCPA Be Avoided?
Can Trouble With the FCPA Be Avoided?
Many companies doing business overseas have instituted "compliance programs" designed to educate employees on the terms of the FCPA and to set in place policies and procedures designed to prevent problematic conduct before it starts. Having an effective FCPA compliance program can prevent or, at least, minimize FCPA risks. Moreover, the existence of a compliance program can help a company avoid prosecution or reduce the penalty imposed if some violation is found. The DOJ and SEC have identified the existence of an effective compliance program as a factor to be considered when deciding whether to bring charges against a company.
The major components of an effective compliance program are:
- Strong Corporate Policy against FCPA Violations. The company should develop a policy statement that clearly and forcefully states its commitment to do business abroad without making illegal or corrupt payments. The company needs to promote an organizational culture that encourages ethical conduct and a commitment to compliance with the law. The company can do this by obtaining a commitment from top-level management to follow the law, i.e., setting the “tone from the top.”
- Clear Written Procedures and Guidelines. The company should provide specific guidance and procedures for dealing with reasonably anticipated business scenarios. Among other things, the guidelines should cover such topics as: (i) dealings with foreign government officials of any level (e.g., making “expediting” payments), (ii) dealings with foreign third parties such as representatives, brokers or agents, (iii) contributions to politicians and foreign charities, (iv) conduct or events that should be considered as “red flags,” (v) maintenance of accurate books and records, and (vi) meals, entertainment, and gifts. The company’s anti-corruption policies and procedures should be transparent—i.e., available for review on the company’s website.
- Management Oversight for FCPA Compliance. The company should have at least one compliance officer who, inter alia, regularly reviews the company’s FCPA policies and procedures, keeps track of potentially affected employees, monitors company compliance with the FCPA, and supervises employee training. The compliance officer(s) should routinely report to the company’s senior management and directors and general counsel, if applicable .
- Training. Employees and representatives of the company should have an appropriate understanding of the FCPA do’s and don’ts. An FCPA compliance program should have widely-available educational materials, including (i) a summary of the FCPA and related foreign anti-corruption laws, (ii) frequently asked questions and answers about the FCPA, and (iii) Power Point presentations.
- Existence of a Helpline. An FCPA compliance program should have a mechanism available to put employees in contact with the compliance officer(s) and/or attorneys who can provide timely and accurate advice when questions arise.
- Due Diligence Protocols. The company’s procedures should require employees to conduct meaningful due diligence before entering into foreign business relationships. Among other things, background checks, questionnaires and checklists should be used to assess the bribery and corruption risks associated with third parties such as vendors, consultants, suppliers, expediters or facilitators, agents and joint venture partners.
- Annual Certifications of Compliance. Employees and foreign agents, representatives, consultants and other business partners who regularly operate in the foreign business sphere should be required to certify annually in writing that they have been advised of the company’s policies regarding illegal or improper foreign payments and that they will adhere to such policies.
- Anti-Bribery Contract Provisions. For any contractual relationships with a foreign representative or business partner, the company should insist on contractual provisions (i.e., anti-bribery clauses) that acknowledge the applicability of the FCPA and ensure that all parties will abide by the law.
- Accounting Records and Internal Control Procedures. The company should have in place financial and accounting procedures to ensure that its books and records accurately and fairly reflect all corporate transactions. Effective FCPA compliance thus requires the company to maintain a system of internal accounting controls to provide reasonable assurances that company transactions are on the “up and up.”
- Reporting of Violations (Hotline). Employees or third parties should be given an adequate opportunity and mechanism to report violations (without fear of retaliation) and be able to do so anonymously if they wish.
- Appropriate Disciplinary Standards. Company management must make certain that company policy contains appropriate disciplinary mechanisms and standards for employees and agents who violate the FCPA or company policy.
Given the federal government’s current aggressive FCPA enforcement posture and the significant criminal and civil penalties associated with FCPA violations, it is critical that U.S. companies engaged in foreign business have a viable FCPA compliance program in place. Such a program will take some time and effort (and expense) to create, but the consequences of failing to have such a program can be catastrophic.
The requisite elements of a company’s FCPA compliance program will vary depending on the existence of a variety of factors, including where the company does business, the particular industry involved, and the nature of its corporate and management structure. A company thus should consider conducting a risk assessment analysis to assist in determining the necessary scope and comprehensiveness of the company’s compliance program.
A “top-level” commitment would include a “zero tolerance” policy toward bribery in all circumstances and a clear explanation of the consequences that employees and business partners will suffer if they violate company policy.
For further information on complying with the Act, please contact Eric L. Dobberteen, Esq. at EDobberteen@clarktrev.com or at 213.629.5700. Website: www.ClarkTrev.com.
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