April 24, 2012

1. Global Anti-Corruption Laws: Increasing Enforcement, Enhancing Your Protection April 24, 2012

2. Eric A. Savage, Esq. Shareholder in New York City of Littler Mendelson, P.C., largest management-side labor and employment in the US. Over 30 years of litigation and employment law experience, and core member of firm’s International and Whistleblower/Compliance Practice Groups. Member American and International Bar Associations, Vice Chair of Middle East Law Committee, ABA International Section. esavage@littler.com– 212.583.2695

3. Agenda • Why is this Topic Hot? • FCPA’s Anti-Bribery Basics • UK Bribery Act Basics • Dodd-Frank &Its New Regulations • Compliance Implications & Best Practices • Questions From the Audience • The Numbers Tell the Story • Greater Enforcement by the DOL • Key Risk Areas • Practical Compliance Solutions • Training Solutions that Tangibly Reduce Risk and Deliver a ROI.

4. Why Is This Topic Hot? Global Anti-Corruption Laws: Increasing Enforcement, Enhancing Your Protection

5. The DOJ and SEC Are Actively Enforcing the FCPA • In 2011, the U.S. government recovered penalties of over $500 million under the FCPA. • 23 DOJ enforcement actions and 25 SEC enforcement actions brought in 2011. • Including 12 FCPA-related indictments and eight SEC complaints against individuals. • Longest FCPA sentence in history was imposed against an executive in 2011: 15 years in prison, and forfeiture of over $3 million.

6. $365m in 2010 $400m in 2010 $800m in 2008 $219m in 2011 $185m in 2010 $338m in 2010 $137M in 2010 $82m in 2010 $579m in 2009 Top 10 Corporate Recoveries $95m in 2011

7. Stepped up Anti-corruption Efforts by UK Serious Fraud Office (SFO) • SFO is the lead agency tasked with enforcing the UKBA • Enforcement Priorities: • Targeting non-UK companies which disadvantage UK interests through the payment of bribes overseas. • Prosecuting senior Individuals • Targeting Proceeds of Crime

8. UK Serious Fraud OfficeLatest Civil Recovery Orders • January 2012 – Mabey Engineering (Holdings) Limited agreed to pay £131,201 in recognition of share dividends derived from contracts won through unlawful conduct of a subsidiary. • First recovery by SFO of dividends paid to an “innocent” investor. • July 2011 - Macmillan Publishers Limited paid £11.2 m in recognition of sums it received which were generated through unlawful conduct related to its Education Division in East and West Africa.  • April 2011 - DePuy International Ltd, part of J & J, paid £4.8 m • Improper payments to Greek medical professionals. • Global resolution: DoJ: $21.4 m fine. SEC: $24.258 m disgorgement. • February 2011 - MW Kellogg, engineering contractor wholly owned by KBR, paid £7 m • Improper payments to Nigerian officials to secure over $6 bn contracts to build LNG facilities on Bonny Island.

9. UK Bribery Act Enforcement • No corporate prosecutions • One prosecution of an individual: • Mr. Patel, an administrative clerk at a Magistrates Court, was convicted of one count under section 2 of the Bribery Act and one count of misconduct in public office. • In return for a payment of 500 GBP, Mr. Patel offered to make sure that a traffic penalty would not make its way onto the court database. • Sentenced to 3 years imprisonment for the Bribery Act count and 6 years imprisonment for the misconduct in public office count. • A humble and uncontroversial beginning for the Bribery Act, but … • UK Serious Fraud Office says it has identified “suspicions of bribery” occurring after the UK Bribery Act came into force on 1 July.

10. FCPA’s Anti Bribery Basics Global Anti-Corruption Laws: Increasing Enforcement, Enhancing Your Protection

11. FCPA: Anti-Bribery Provisions The FCPA’s anti-bribery provisions prohibit: • Covered person . . . • Offering, paying, or promising to pay anything of value . . . • Directly or indirectly . . . • To a government official . . . • Corruptly . . . • In order to obtain or retain business Who Payment Directly or Indirectly, While Knowing Recipient Corrupt Intent Business Purpose Test

12. FCPA: Whose Actions Are Covered? • The FCPA covers conduct by all of the following: • A company based in the U.S. or publicly traded on the U.S. exchange • Its officers, directors and employees • Third parties acting on the Company’s behalf (for ex., outside consultants, investigators, and advisors) • U.S. citizens and residents • Foreign nationals or businesses who take any action in furtherance of a corrupt payment while in the U.S.

13. FCPA’s Corrupt Intent Requirement • FCPA puts focus on intent: • Intent to get a “quid pro quo” (this for that) • Intent to secure an improper advantage • Intent to induce official to misuse his/her position • Intent can be inferred from the circumstances.

14. Prohibited Payments Under the FCPA • FCPA prohibits offering, paying, promising to pay, or authorizing giving money or “anything of value.” • “Anything of value” includes: • Cash • Goods (a laptop, a cell phone, a bottle of wine) • Services (transportation, lodging) • Non-cash benefits (contribution to favored charity) • Includes an “offer” or “promise” of a payment, even if the payment is never actually made.

15. FCPA Bars Prohibited Payments Made to… • A “foreign” (non-U.S.) official, including: • Regulators and other government / public employees (for example, prosecutors, police, customs officials, judges) • A private person acting temporarily in an official capacity • Employees of government-owned or -controlled companies • Political parties, party officials, and candidates for political office • Employees of public international organizations (e.g., UN, OECD)

16. FCPA Prohibits Direct or Indirect Payments • Key risk: Dealing with third parties (consultants, outside counsel in challenging markets, etc.) • “While knowing that the payment or promise to pay will be passed on to a foreign official” • Knowledge could be imputed to company if a third party made an improper payment and company had avoided making reasonable inquiries • “Aware of a high probability” (SEC)

17. FCPA’s Business Purpose Test Payment made for purpose of… • “Obtaining or retaining business” • Could include a payment intended to help “improv[e] the business opportunities of the payor”

18. FCPA Exceptions • Facilitation payments for routine government actions. • Payments permitted by law of the foreign official’s country. • Payment of foreign official’s “reasonable and bona fide expenditures” (not made to obtain or retain business.)

19. FCPA Potential Anti-Bribery Penalties • Against an Organization: • Up to $2M in criminal fines • Up to $10,000 in civil fines • Disgorgement of improper profits

20. FCPA Potential Anti-Bribery Penalties (con’t) • Against an Individual: • Up to $10,000 in civil fines • Up to $250,000 in criminal fines • Up to 5 years imprisonment • The U.S. government often pursues penalties against companies and involved individuals • The U.S. government considers who was involved in the conduct, its pervasiveness and the credibility of the company’s remedial efforts in deciding how to resolve FCPA cases • The U.S. government often requires extensive follow-up reporting by companies as a condition of settlement

21. Case Study: Donations A foreign official with whom your organization is working asks your organization to make a sizeable donation to a charity in his home country; to make things “easier” for your organization, he says to pay him and he’ll handle forwarding the money to the charity.

22. Case study (con’t) Factors to consider when making donations: • Ensure no disguised personal benefits for officials • Any donation to a government entity should be made directly to the entity and not to any government official personally • Donation must be transparent within the government entity • Memoranda of understanding or other written agreements are a good idea • Be alert to signs of possible diversion

23. UK Bribery Act Basics Global Anti-Corruption Laws: Increasing Enforcement, Enhancing Your Protection

24. UK Bribery Act’s Broad Reach • Effective July 1, 2011 • Broad jurisdictional reach: • UK citizens and individuals based in the UK • UK commercial entities • Non-UK commercial entities that “carry on a business or part of a business in the UK” • Non-UK commercial entities and individuals when an act or omission forming part of the bribery takes place in the UK

25. UK Bribery Act’s Key Provisions • The UK Bribery Act prohibits three primary forms of bribery: • Bribing another person (public and private sector) • Being bribed (public and private sector), and • Bribing Foreign Public Officials. • The Act also makes Failing to Prevent Bribery a separate corporate offense.

26. Failure to Prevent Bribery • A company that carries on a business or part of a business in the UK commits an offence if an “associated person” pays a bribe intending to secure business or a business advantage for the company • irrespective of whether the bribe was paid in UK or elsewhere (s 12(5)) • irrespective of the nationality of the perpetrator (s 7(3)(b)) • no need for perpetrator to have been convicted - just that he would be guilty of s 1 or s 6 offence • no need for board room knowledge or involvement • It is a defense to prove that the company had “adequate procedures” to prevent bribes being paid on its behalf 26

27. Adequate Procedures: Six Principles • Top level commitment to the prevention of briberyEstablishing a culture in which bribery is never acceptable is the responsibility of boards of directors and/or owners • Proportionate proceduresProcedures should be proportionate to the bribery risks that the entity faces as well as to the nature, scale and complexity of its activities. Must be clear, practical, accessible and effectively implemented and enforced. • Risk assessment Regular and comprehensive risk analyses should be performed that monitor any alterations in an entity’s corruption risk profile over time. Should be “informed”, “documented” and conducted “periodically.”

28. Adequate Procedures: Six Principles • Due DiligenceMitigate identified bribery risks by carrying out “proportionate and “risk based” due diligence on those who are to act for or on the entity’s behalf. • CommunicationPolicies and procedures should be embedded throughout the organization through, among other things, regular training of employees and non-employees acting for or on an entity’s behalf. • Monitoring and review Regular monitoring and auditing of the anti-corruption program to continually improve effectiveness.

29. Implementation of the Six Principles Culture Top Level Commitment Policies & Procedures Monitoring & Review Risk Assessment Communication Knowledge Action Due Diligence

30. UK Bribery Act More Comprehensive Than the FCPA? • Not limited to bribes to foreign officials – covers business to business bribery • Covers receipt of bribes • No facilitating payments exception • Creates a corporate offence of failure to prevent bribery

31. Dodd-Frank & Its New Regulations: Gasoline on the Fire? Global Anti-Corruption Laws: Increasing Enforcement, Enhancing Your Protection

32. Whistleblower Basics • Under Dodd Frank, the SEC must pay cash awards to: • “Whistleblowers” who • “Voluntarily” provide • “Original information” that • “Leads to successful enforcement” • Of the US securities laws • Resulting in monetary sanctions of more than $1 million • Awards must = 10% to 30% of recovery in SEC enforcement action and “related actions” (e.g., DOJ prosecution). • Statute prohibits adverse employment action taken “because of” whistleblowing activity.

33. No Internal Reporting Requirement • SEC declined to require internal reporting • Adopted three “incentives” instead: • Mandatory consideration of whistleblower’s involvement with an internal reporting program in determining the amount of the award • 120-day “look-back” period • Potential credit to whistleblower for company’s self-report • Open question whether incentives will be effective.

34. Protections Against Retaliation • Dodd Frank prohibits adverse action taken “because of” whistleblowing activity • Determination will be made on case-by-case basis • Employee can file claim directly in federal court • Rules also provide SEC with power to enforce • Statute of limitations: 6 -10 years after violation

35. Protections Against Retaliation • To be protected, whistleblower must: • Possess a “reasonable belief…” • Both subjectively genuine and objectively reasonable • That the information relates to a possible securities law violation… • That has occurred, is ongoing, or is about to occur… • Anti-retaliation protections apply whether or not the whistleblower is eligible for an award.

36. Dodd-Frank’s Connections to Bribery Dodd-Frank is likely to increase not only reporting of traditional “securities” violations (such as alleged fraud in SEC filings) ,but also FCPA reporting.

37. Compliance Implications & Best Practices Global Anti-Corruption Laws: Increasing Enforcement, Enhancing Your Protection

38. Policies • Your organization’s Code of Conduct should clearly prohibit the use of bribery to obtain business or business advantage. • Must re-examine your Code and related policies in light of the FCPA and UKBA’s stricter standards! PRINCIPLES PRACTICES VALUES CODE OFCONDUCT

39. Procedures • Detailed procedures, standards, and guidance that makes sense given the nature and extent of your organization’s operations. • Key: Create clear reporting channels so that your employees know how to seek guidance and report potential issues internally to your organization. • Having an effective compliance program is a factor the government considers when deciding whether to charge a company in the first place!

40. Anti-Bribery & Corruption Training Survey • According to a 2011 KPMG Anti-Bribery &Corruption Survey, majority of respondents were making anti-bribery and corruption training mandatory for all employees: • 2010 UK: 65% • 2010 US: 49% • 2008 US: 25%

41. Training Can Limit FCPA Liability Under Federal Sentencing Guidelines, sentences and fines for FCPA violations can be reduced by as much as 95% if organization has an effective compliance and ethics program, including training. (For more details, see: http://elt-inc.com/our-solutions/ethics/understanding-the-laws-that-mandate-ethics-code-of-conduct-training.)

42. Training Can Help Provide Complete Defense to UKBA Claim • Organizations that have in place “adequate procedures” to prevent bribery enjoy a complete affirmative defense. (UKBA sec. 7(1) and (2)) • “Adequate procedures” not defined, but UKBA Guidelines specify communication (including training) as one of the key principles to establish this defense.

43. Training Best Practices • Design training to provide the appropriate education to employees based on job responsibilities, geographic location, and line of business. • Include not just employees “wheeling and dealing” around the globe, but all employees engaged in global business (those who could either engage in or observe corruption.) • Communicate organization’s anti-corruption commitment, and provide clear guidance on where to go to ask questions or report issues. • Ensure third parties are trained!

44. Be Committed to Detecting, Investigating, & Remedying • Implement systems to deter and/or detect corruption. • Most importantly, make sure your organization has procedures in place to address questions AND investigate issues detected or reported. • Key area where HR’s investigations expertise can be utilized!

45. A Special Note About Dodd-Frank Before a Whistleblower Report is Made: • Maintain effective compliance program, and train on it • Coordinate across departments • Document personnel decisions After a Whistleblower Report Comes In: • Conduct targeted investigation and consider whether to self-report • Consider the whistleblower • Consider other disclosures • Consider remedial measures

46. Questions & Answers

47. THANK YOU Eric A. Savage, Esq.esavage@littler.com212.583.2695, www.littler.com