The House Judiciary Committee will hold hearings Tuesday
on the Foreign Corrupt Practices Act. At this point the Witness List as set
forth on the Committee's website is as follows:
At this point no preview of the witnesses' testimony has
been released. However, other than Greg Andres, the testimony will probably not
be a defense of the FCPA or even the need to expand it to meet the anti-bribery
and anti-corruption enhancements found in the UK Bribery Act. Indeed it reads
like a list of representatives from the US Chamber of Commerce, which has been
engaged in a campaign to amend the FCPA.
However in the past 12 months or so many of the
complaints which have practitioners have made regarding the FCPA have been
addressed by the Department of Justice (DOJ) or by recent court rulings. In a
blog entitled, "House
Judiciary FCPA Hearing: An Opportunity for Greater Information" I
have reviewed the federal district court rulings in the CCI and Lindsey
Manufacturing cases, which both discussed the factors which should go into an
analysis of what is a foreign governmental instrumentality under the FCPA. So
at this point, I thought it might be propitious to review some of the
information which has come out from the DOJ on what it considers the current best
practices for a FCPA compliance program.
Alliance One/Universal Corp.-actions during
the pendency of an investigation
Last July, the DOJ released joint Deferred Prosecution
Agreement (DPAs) for two companies in the tobacco industry: Alliance One and
Universal Corp. These DPAs started a year-long process by which the DOJ has
informed the compliance community about specific steps companies can take to
enhance their FCPA compliance program or benchmark their current compliance
programs against DOJ suggested best practices. These two DPAs in
question provided to companies in the midst of FCPA enforcement actions
specific steps that should be implemented during the pendency of an
investigation to present to the DOJ, which could reduce the overall penalties
at the end of the day. Initially it should be noted that full cooperation with
the DOJ at all times during the investigation is absolutely mandatory.
Thereafter from the Alliance One matter, the focus was on accounting procedures
and control of cash payments. From the Universal case, a key driver appears to
be the due diligence on each pending international transaction, and subsequent
full due diligence on each international business partner. Next is the
management of any international business partner after due diligence is
completed and a contract executed. Lastly is the focus on the Chief Compliance
Officer position, emphasizing this new position throughout the organization and
training, training and more training on FCPA compliance.
Panalpina Settlements-Best Practices
In the DOJ settlement with the freight forwarder
Panalpina and all related settlements announced on the same day last November,
the DOJ attached as Attachment C (Attachment B to the Noble Non-Prosecution) a
list of 13 best practices which included the collective Corporate
Compliance Programs provided the FCPA compliance practitioner with the most
current components that the Department of Justice believes should be included
in a FCPA compliance program. Hence, this information is a valuable tool by
which companies can assess if they need to adopt new or to modify existing
their internal controls, policies, and procedures in order to ensure that it
maintains: (a) a system of internal accounting controls designed to ensure that
a Company makes and keeps fair and accurate books, records, and accounts; and
(b) a rigorous anti-corruption compliance code, standards, and procedures
designed to detect and deter violations of the FCP A and other applicable
anti-corruption laws. The Preamble notes that these suggestions are the
"minimum" which should be a part of a Company's existing internal controls,
policies, and procedures:
1. Code of Conduct.
2. Tone at the Top.
3. Anti-Corruption Policies and Procedures.
4. Use of Risk Assessment.
5. Annual Review.
6. Sr. Management Oversight and Reporting.
7. Internal Controls.
9. Ongoing Advice and Guidance.
11. Use of Agents and Other Business Partners.
12. Contractual Compliance Terms and Conditions.
13. Ongoing Assessment.
The DOJ goes on to fill in each of these categories so
that it a valuable list to create, enhance or benchmark your FCPA compliance
Alcatel-Lucent, Maxwell Technologies and
Tyson Foods-Risk Assessments
The three enforcement actions, all announced in early
2011, involving the companies Alcatel-Lucent, Maxwell Technologies and Tyson
Foods, had common areas that the DOJ indicated were FCPA compliance risk areas
which should be evaluated for a minimum best practices FCPA compliance program.
In both Alcatel-Lucent and Maxwell Technologies, the Deferred Prosecution
Agreements (DPAs) listed the seven following areas of risk to be assessed.
Geography-where does your Company do business.
Interaction with types and levels of Governments.
Industrial Sector of Operations.
Involvement with Joint Ventures.
Licenses and Permits in Operations.
of Government Oversight.
and Importance of Goods and Personnel Going Through Customs and Immigration.
In the Tyson Foods DPA, this list was reduced to the
following (1) Geography, (2) Interaction with Governments, and (3) Industrial
Sector of Operations. As with all DPAs released since the Panalpina
settlements, each DPA has included an Attachment C, compliance program best
practices. However these three DPAs give the compliance practitioner the
guidance that the DOJ considers a risk assessment to be the starting pointing
for any compliance program. In addition to this information on the starting
point, there are specific risks which should be assessed listed by the DOJ.
Johnson and Johnson-self disclosure and
enhanced compliance obligations
FCPA practitioners have repeatedly asked the DOJ for
specific guidance as to what will be the tangible results of self-disclosure.
In the Johnson & Johnson DPA this question is clearly answered. Listed
under the section "Relevant Considerations" one of the reasons the DOJ entered
into the DPA is the following:
J&J voluntarily and timely disclosed the majority of the misconduct
described in the [Criminal] Information and Statement of Facts;
So the self-disclosure was one of the reasons that the
DOJ entered into the DPA, however, and perhaps more importantly, the
self-disclosure brought to Johnson & Johnson a monetary benefit with a
tangible reduction in its overall fine and penalty. The DPA reported a
reduction by 5 points of the company's overall Culpability Score with the
(g)(1) The organization, prior to an imminent threat of
disclosure or government investigation, within a reasonably prompt time after
becoming aware of the offense, reported the offense, fully cooperated, and
clearly demonstrated recognition and affirmative acceptance of responsibility
for its criminal conduct; -5
It is not possible to determine from the DPA how much of
the reduction was attributable to the self-disclosure and how much was
attributed to the conduct thereafter. However, this precise language makes
clear that the DOJ places a real value on such self-disclosures and companies
should take this as a clear sign that, at the end of the day, it will be better
for them to self-disclose.
The following nine points will not be unfamiliar to the
FCPA compliance practitioner. These points are recognized to be in most 'good
to best' compliance programs. However, the Johnson & Johnson DPA goes much
further by adding an Attachment D, entitled "Enhanced Compliance Obligations"
which is designed to be in addition to, and to build upon, the commitments made
by Johnson & Johnson in Attachment C. These enhanced obligations include
Hospitality and Travel
Relationships with Third Parties
This Attachment D "Enhanced Compliance Obligations" is an
excellent road map for the FCPA practitioner in which to establish, enhance, or
simply review a company's FCPA compliance program. As with the Attachment C,
the DOJ expands upon each of these categories. The Johnson & Johnson DPA
demonstrates that a company's commitment to ongoing FCPA remediation and program
enhancement will help it reduce its overall FCPA liability in a case with facts
as bad as those presented in this matter.
These DPAs demonstrate that
the DOJ is committed to releasing information on what it believes will
constitute a best practices compliance program. It will be interesting
to see if any of the witnesses before the House Judiciary Committee will
acknowledge the DOJ's efforts in this area or the recent federal court rulings
on what may constitute an foreign governmental instrumentality under the FCPA
in their testimony.
Join Me for Following Upcoming Webinars
Tuesday, June 21 at 1 EDT, I am co-presenting on a
webinar with Mary Shaddock Jones, former Assistant General Counsel and Director
of Compliance at Global Industries, Ltd., on "Supply Chain Relationship
Management Under the FCPA and Bribery Act". The event is co-hosted by
Ethisphere and World Check. For information and registration details
Wednesday, June 22 at 1 PM EDT, I am a co-panelist with
Henry Mixon, Managing Director of Mixon Consulting, in a webinar hosted by
Corporate Compliance Insights, entitled, "Internal Controls Under the FCPA
& UK Bribery Act". For information and registration details click here.
Visit the FCPA Compliance
and Ethics Blog, hosted by
Thomas Fox, for more commentary on FCPA compliance, indemnities and other forms
of risk management for a worldwide energy practice, tax issues faced by
multi-national US companies, insurance coverage issues and protection of trade
This publication contains general information
only and is based on the experiences and research of the author. The author is
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© Thomas R. Fox, 2011
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