FCPA Roundtable

Arcie I. Jordan | Partner Tel. 512.542.7032 3000 One American Center, 600 Congress Avenue | Austin, Texas 78701 An Ounc...

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Arcie I. Jordan | Partner Tel. 512.542.7032 3000 One American Center, 600 Congress Avenue | Austin, Texas 78701

An Ounce of Prevention Is Worth a Pound of Cure … Foreign Corrupt Practices Act (FCPA) Understanding the FCPA Q: Who is subject to the FCPA?

Q: What does the FCPA require?

A: US citizens & US-based businesses (i.e., those having a place of business or organized under the laws of any US state) – including their employees and third parties acting on their behalf, regardless of where the conduct occurs

A: “Issuers” must maintain accurate books & records, and maintain internal controls sufficient to detect and prevent violations

- “Issuers” (i.e., those trading on a US stock exchange) – including their employees and third parties acting on their behalf, regardless of where the conduct occurs -

Non-US persons & businesses if conduct occurs in the US or includes use of US mail or other means/instrumentalities of US interstate commerce to further US to further improper conduct (broadly applied) - - Non-US persons/businesses may be liable, even if do not have connection to US, if aiding, abetting, or conspiring to violate FCPA

Q: What does the FCPA prohibit? A: Offering or providing anything of value to a “foreign official” to obtain or retain business, direct business to any person, or obtain a business advantage Q: What does the FCPA permit? A: Facilitation payments to expedite routine governmental action -

Reasonable & bona fide promotional expenditures

-

Payments permitted by written law of foreign country

Q: What are the consequences of FCPA violations? A: Criminal penalties: Up to 5 yrs. imprisonment + Up to $250,000 per violation or 2xs benefit - Civil penalties: $10,000 USD per violation and/or restitution

As well as: -

Forfeiture and Disgorgement Pre-judgment interest Revocation of permits/licenses to do business in foreign country where violation occurs Damage to business and personal reputation Loss in stock value / business value On-going monitoring

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Arcie I. Jordan | Partner Tel. 512.542.7032 3000 One American Center, 600 Congress Avenue | Austin, Texas 78701

Preventing FCPA Violations Q: What measures should be adopted to avoid FCPA violations? A: Communicating organization-wide and setting tone at the top that compliance is a top priority

A: Designing and maintaining meaningful compliance programs, including …

- Providing meaningful training (and periodic retraining) so that officers, directors, managers, and boots on the ground (including appropriate third parties) are aware of issues and may appreciate consequences to themselves and the business

- Designating senior executive with sufficient authority, autonomy & independence to manage/implement program, including having access to board or appropriate board committees

- Providing ready access to expertise / guidance and encouraging pre-conduct consultations, including establishing process by which employees can report potential violations on a confidential basis without fear of retaliation

- Promptly initiating internal investigations and corrective action - Adopting consistent, appropriate disciplinary measures in the event of violations, and administering them promptly - Conducting meaningful periodic audits, periodic testing and risk assessments

A: Conducting meaningful due diligence in vetting third parties, JV partners, & merger/acquisition targets

- Reviewing, improving, & updating compliance program periodically (especially, adopting corrective modifications in the wake of incidents)

- Successor liability for acquired company’s preacquisition conduct, even if unknown to acquirer, is an area of great FCPA risk - Following up post-acquisition, as necessary, to confirm pre-acquisition findings and/or address any issues (red flags)

- Regularly reviewing and reporting by management to board on potential issues & action taken (e.g., responses to complaints reported)

Undertake voluntary disclosure after determining if appropriate after careful consideration of pros/cons & with advice of counsel Selected Differences between FCPA and Anti-bribery/Anti-corruption laws of other countries FCPA

UK Bribery Act

France

Germany

Canada

Facilitation Payments – Permitted

Not a recognized exception or defense

Exception or defense available, if “legally grounded”

Generally prohibited (but may not be a criminal offense, if benefit is “socially acceptable”

Exception being repealed

Reasonable & bona fide promotional expenditures – Permitted

Not a recognized exception or defense

Exception or defense available, if “legally permissible”

Assessed on a case-bycase basis

Permitted

Payments permissible under written law of foreign country – Permitted

Permitted if recipient is a foreign official

Exception or defense available, if “legally permissible”

No exception

Permitted

Existence of compliance program – Not a defense (but may be mitigating factor, if sufficiently robust & enforced)

A defense to offense of failing to prevent bribery, but not to other violations

Not a recognized exception or defense

A defense to offense of failing to prevent bribery

Not a recognized exception or defense

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