Reflections on TRACE’s Global Enforcement Report 2013: The Butterfly Effect 1

TRACE GER 2013 ScrnshtWhile the U.S. remains the leader in formal foreign bribery actions, defined as cross-border enforcement actions by government agencies that have resulted in formal charges or official declinations, other countries are certainly taking steps to close that gap.  The number of formal foreign bribery actions by countries other than the US increased by 71% in 2013 as compared to 2012, according to TRACE’s Global Enforcement Report (GER) 2013.  The GER 2013 provides an updated summary of international anti-bribery enforcement trends based on the cases and investigations tracked in the TRACE Compendium, TRACE’s online database of transnational corruption cases.  Enforcement actions are included only if the alleged bribe has a cross-border component and involves an allegation of a bribe made to a government official or to an employee of a state-owned entity.  The GER 2013 offers both graphic and textual analyses of all known enforcement actions—including investigations, prosecutions, settlements and cases settled with no finding of bribery—since the enactment of the FCPA in 1977 through 2013.

One trend contributing to the increase in non-U.S. enforcement is the proliferation of parallel prosecutions.  A company can no longer expect settlements with the SEC and DOJ to end its liability for violations.  GlaxoSmithKline, which has been subject to ongoing 2010 bribery investigations by the DOJ and SEC, unexpectedly found itself facing bribery charges and employee detentions by China’s Ministry of Public Security.  The high-profile Chinese probe of GlaxoSmithKline then triggered a preliminary review by the U.K.’s Serious Fraud Office. More…

TRACE Poll: March’s Biggest Compliance Story Reply

Vote for what you think is this month’s top compliance story.

U.S. government freezes stolen assets of former Nigerian dictator Sani Abacha- A civil forfeiture complaint was unsealed this month indicating that the U.S. Department of Justice (“DOJ”) is seeking recovery of more than USD$550 million in connection with the largest kleptocracy forfeiture action brought in the Department’s history.  This is not the first time that the DOJ has gone after a former kleptocrat, however; in 2011, the government brought an action against the assets of President Teodoro Nguema Obiang Mbasogo of Equatorial Guinea.  The son of Equatorial Guinea’s president has also been put under formal investigation recently in France for money laundering.

Japanese Corporation pleads guilty to FCPA charges- Japanese trading company Marubeni agreed to pay a USD$88 million fine to the DOJ regarding charges that it worked in concert with a Connecticut company, among others, to bribe high-ranking Indonesian officials in the state-owned electric company, Perusahaan Listrik Negara.  It is the company’s second foreign-bribery payout in two years.

US and EU implement economic sanctions related to events in Ukraine and Russia- As part of a broader economic sanctions policy against Russia, the US and EU have added a growing list of individuals to their denied parties watchlists over the past few weeks.  The lists include Gennady Nikolayevich Timchenko, who was until recently co-owner of the Gunvor Group, one of the largest international energy traders.

FCA fines Besso Limited for anti-bribery systems failings- The UK’s Financial Conduct Authority (FCA) fined Besso Limited £315,000 (~$520,000) for a failure to take reasonable care to establish and maintain effective systems and controls for countering the risks of bribery and corruption.  Besso is a FCA-regulated insurance broking firm wholly owned by Besso Insurance Group Limited.

China’s anti-bribery campaign aims high- Several news reports have hinted that Zhou Yongkang, a retired member of China’s Politburo Standing Committee, may be under investigation for bribery.  If true, Zhou would be the highest ranked person in the communist party to be targeted by President Xi Jinping’s recent campaign against corruption.

Didn’t see a story that you think should have been added?  Email us at info@TRACEinternational.com to let us know!

Guest Post: Five Questions that Can Keep Your Monitor From Running Away Reply

Today’s guest blog post is written by Ms. Kathleen Hamann.  Ms. Hamann, a partner at White & Case LLP in Washington, DC, was previously a Trial Attorney in the FCPA Unit at the Department of Justice, where she selected and oversaw a number of monitorships in a variety of industries and saw firsthand the problems with keeping monitors in check.

Kathleen Hamann, White & Case LLP

Kathleen Hamann, White & Case LLP

So the investigation is finally over, and settlement negotiations are nearing their end.  The whole company can breathe a sigh of relief that the constant interviews, document requests, and never-ending upheaval in your offices and stress on your employees is over, right?  Wrong.  The company has been hit with a monitorship.  The nightmare stories of the “runaway monitors” in the New Jersey medical device cases – some of whom cost more than $50 million – and Apple’s woes with its judicially-appointed monitor cast a pall, promising three more years of the same.

But there is some hope.  For monitors in transnational bribery in both the U.S. and the U.K. (at least pursuant to the new U.K. DPAs), the company gets to nominate three candidates from which the government will select the monitor.  Careful selection of those candidates can minimize the cost to the company, both in terms of the monitor’s fees and the business disruption that comes from a monitorship.  Here are the key questions to ask of those you invite to pitch to you:

Do you know transnational bribery and my company’s industry?

One of the key complaints Apple had about its antitrust monitor was that he had no experience in antitrust.  Your monitor candidates need to know the FCPA and the UKBA, of course, but it’s also helpful if they understand anti-bribery laws more broadly so they can check your systems across the board.  You don’t want to have to pay for their education.  If they lack the broader expertise, you may end up with repeat reviews to check for other compliance issues or to go back and evaluate key risk areas that the monitor missed the first time around.  Worse yet, failure to look for other compliance issues – as happened with a number of medical device companies – can lead to a second set of prosecutions under a different anti-bribery law.  Waiting for the monitor to learn all the rules will cost you.

Likewise, if your monitor candidate is not already familiar with the risks specific to your industry and how your industry operates, you’re looking at paying for a longer ramp-up time as they get to know where the issues might be and where they need to focus.  This not only increases your costs, but it might delay the start of the monitorship.  In addition, it may mean the first report to the government is all about how your company operates and how the industry works, which the government already knows from the investigation, rather than getting down to business – potentially delaying resolution of the monitorship.

What is your plan for the monitorship?

So many monitor candidates walk into the interview with the government – let alone the company – with no plan for conducting the monitorship.  The presentation is basically, “I used to be someone important, therefore I’ll be a great monitor.”  Having once held an important position does not necessarily correlate to being a good monitor who won’t waste your time or your money – in fact, history shows those types of candidates sometimes make the worst (and certainly the most expensive) monitors.  You aren’t looking for a big name.  You’re looking for someone who knows what they’re doing, and will do it efficiently.

The first stage of any monitorship is the proposal of a work plan, which is reviewed and approved by the government.  There’s only so much a monitor candidate can do before they know all the details of the problems the company already had, but some candidates don’t want to invest in putting a plan together at all until they are being paid for it.  They will come in to pitch to you empty-handed aside from their resume.  Don’t let them get away with it – there is virtually no way to ensure their plan is properly designed to minimize both fees and disruption to business operations if you don’t know what the plan is until they’ve been appointed.  At a minimum, the candidates should be able to outline (in writing) their philosophy, strategy, and approach.  The better they know the issues and the industry, the more detail they can provide.  Particularly if the monitor is offering an alternative fee arrangement like a soft cap, the plan needs to be accurate and appropriate, to limit the possibility that they will cite unforeseen complications as a reason to exceed the cap. More…

Governance Reform in the Philippines – Onward and Upward Reply

Today’s blog post is courtesy of Michelle Juan, the Regional Consultant of TRACE in the Asia Pacific. Previously she was General Counsel at the Araneta Group of Companies, and an attorney at Romulo Mabanta Buenaventura Sayoc & De los Angeles.  

© Government Press Office
© Government Press Office. Licensed by Creative Commons

This year, the Philippines celebrates the 28th anniversary of the 1986 People Power Revolution, a series of protests and mass actions aimed against electoral fraud, corruption, the suppression of civil liberties, and the widening gap between rich and poor during the 21 year regime of Ferdinand Marcos. The demonstrations took place on Epifanio de los Santos Avenue (EDSA) from 22-25 February 1986, and culminated in the exile of President Marcos and the restoration of democracy. Corazon C. Aquino, widow of slain opposition leader Benigo Aquino, Jr., was proclaimed the 11th President of the Philippines.

Despite EDSA and the return of democratic institutions, the road to reform has been difficult. In what was dubbed as EDSA II, President Joseph Estrada was removed from office in 2001 following a long drawn-out impeachment trial and allegations of large scale corruption in his administration (Transparency International’s 2004 Global Corruption Report estimated that Estrada embezzled US$70-80M during his abbreviated three year term). He was later convicted of plunder and sentenced to life imprisonment, but was pardoned by his successor, President Gloria Arroyo. Arroyo now herself faces corruption charges for alleged widespread misuse of government funds during her 9 year term. The former president, now a member of congress, has been under arrest since 2010.

In 2010, Benigno Aquino III, son of Corazon Aquino, was elected President. He ran on a reformist, anti-corruption platform, and his campaign battle cry was “Kung Walang Corrupt, Walang Mahirap” (“where there is no corruption, there is no poverty”).  Aquino has made good governance and anti-corruption the cornerstone of his administration’s agenda, and, in the last three years, has taken concrete steps to tackle corruption (particularly, judicial corruption) and ensure the independence and capacity of key oversight agencies.

Most notably, Chief Justice Renato Corona, a staunch ally of former President Arroyo, was impeached and removed from office in 2012 for failing to disclose over US$2M in foreign currency assets. Plunder charges have also been filed against 3 senators, 5 former congressmen, and 30 others allied with the Arroyo administration in the “pork barrel scam” –  a political scandal regarding alleged misuse of funds in the amount of PhP10 Billion (US$2.24M).

While anti-corruption efforts continue to face an uphill climb, it is largely conceded that the investment climate has improved, largely because the administration is perceived to take the need for institutional reform seriously. A 2013 World Bank report noted that the Philippines is now beginning to reap the benefits of political stability, a popular government, and governance reforms.

Indeed, as noted by the World Bank, one bright spot is the very active and vocal private sector, which takes the lead in promoting ethical practices and anti-corruption efforts. In particular, the business community has long understood that corruption not only exacerbates poverty, but also seriously undermines the Philippines’ long-term economic development prospects.

Recognizing these developments, TRACE International recently opened an office in Manila to meet the increasing demand for locally delivered anti-bribery compliance services. In addition, it partnered with the Makati Business Club (MBC) to help bring transparent business practices to the Philippine business community and promote a global anti-bribery and third party compliance standard, giving the private sector better tools to fight endemic corruption.

TRACE and MBC will be hosting an anti-corruption workshop on 30 April 2014, to cover a broad range of topics, including anti corruption enforcement actions in Asia, recent developments concerning the FCPA & UK Bribery Act, and compliance program best practices & risk assessments, among others.