Category Archives: Gift Hospitality & Travel

Local Laws – Global Dilemmas Reply

commercial intermediaries, Compliance Strategies, Gift Hospitality & Travel, TRACE, TRACE Partner Firms, What Works? • Tags: , , ,

Multinational companies face local law dilemmas every day. Is the local ministry official in Gabon able to accept tickets to an Africa Cup game? Can Indonesian officials receive Lebaran hampers filled with food and other goodies? Can you use a third party to market your products to a government agency in India? And, if the use of a third party is allowed, is there a cap on the commission rate they are permitted to receive?

Companies, especially those new to anti-bribery compliance, or just beginning to expand internationally, are not always aware of the local law pitfalls that await them when operating overseas. A grasp of both local regulations and custom not only ensures compliance with the letter of the law and reduces the risk of prosecution, but also gives employees ammunition when faced with inappropriate demands. A refusal to engage in an activity because of illegality may not solve the problem for the employee, but it is a good first line of defense. As is knowing that they are in the right when an official questions compliance with a regulation in an attempt to extort a payment, or a third party insists on a certain level of compensation because it is “customary.”

Finding useful in-country resources and identifying fully-vetted, reliable local counsel with experience in this field can be challenging, especially for companies new to a territory.  The Global Anti-bribery In-house Network (GAIN) conference on April 23rd and 24th in Washington, DC, will bring together in-house compliance professionals and representatives from TRACE partner law firms worldwide. The program will focus on new anti-corruption initiatives, local compliance challenges, and practical advice and solutions when operating in high-risk countries. GAIN is open to both TRACE member and non-member companies. For additional information, go to https://secure.traceinternational.org/Trace/Events/GAIN.html.

Aon Corporation Settles with SEC and DOJ Reply

enforcement, FCPA, Gift Hospitality & Travel, Investigations, TRACE Compendium, US Government • Tags: , , , , ,

Aon Corporation, a publicly-traded insurance brokerage firm headquartered in Chicago, has entered into a non-prosecution agreement with the Department of Justice and agreed to pay a $1.76 million penalty to resolve violations of the Foreign Corrupt Practices Act (FCPA).  Aon also reached a settlement with the SEC and agreed to pay approximately $14.5 million in disgorgement and prejudgment interest.   Aon’s United Kingdom subsidiary, Aon Limited, administered certain training and education funds in connection with its reinsurance businesses. The SEC complaint alleges that Aon made over $3.6 million in improper payments to various parties between 1983 and 2007 as a means of obtaining or retaining insurance business in several countries. Funds were used to reimburse officials for non-training related activity, including travel with spouses to overseas tourist destinations, or for uses that could not be determined from Aon’s books and records and which did not include any recorded business purpose.  The Compendium summary and government documents may be accessed here.

TRACE Launches Enhanced Anti-Bribery Compliance Website Reply

commercial intermediaries, Compliance Strategies, Due diligence, FCPA, Gift Hospitality & Travel, TRACE, TRACE Compendium • Tags: ,

Interactive Site Now Delivers Unparalleled Local Resources for Companies Worldwide

TRACE International member companies and people interested in global bribery trends and risk mitigation strategies have a comprehensive, enhanced data and information tool available to them with today’s launch of the new TRACE website.

Available at www.traceinternational.org, the redesigned site offers an array of valuable and practical resources for companies doing business worldwide.  Through the new interactive portal “MY TRACE,” members are now able to create company profiles, participate in the TRACEconnect online discussion room, use the TRACE Resource Center, register for TRACE events, and access their company’s due diligence reports.

“In the 10 years since TRACE was founded, our more than 2000 multinational and SME members have become an active and engaged community that continually benchmarks ‘best practices,’ shares tips and model language and occasionally commiserates over specific challenges in the most difficult countries in which they operate,” said Alexandra Wrage, Founder and President of TRACE. “This new website is designed to facilitate this high level of engagement as TRACE enters its second decade of supporting our member companies with practical and cost-effective tools and ensuring that they remain on the leading edge of anti-bribery compliance.”

The updated Resource Center now provides members with access to the specific laws and regulations governing bribery in 108 countries around the globe.  They can find everything from model language for compliance policies and agent contracts to foreign law summaries and the results of TRACE’s extensive benchmarking projects.

“International anti-bribery compliance involves much more than the much-discussed US FCPA and the UK Bribery Act,” added Ms. Wrage. “Multinational companies must comply with local rules and regulations in every country in which they operate, from restrictions on how in-country agents are compensated to local disclosure requirements when providing hospitality to government customers.  Because of TRACE’s network of partner law firms in over 100 countries, TRACE members have access to unparalleled local law resources.”

TRACE members applaud the changes. “The gifts and hospitality information on the Resource Center enables our global team of commercial lawyers to give advice, within minutes, on the 80 countries where we do business,” said Rebecca Goldman, VP, Commercial Law, Rockwell Automation. “Delivering prompt and definitive advice ensures our internal clients keep coming to us for answers.”

Sections of the re-designed site available to non-TRACE members — including the general public — include the TRACE Compendium, which tracks anti-bribery enforcement worldwide, and BRIBEline, an anonymous, multi-lingual tool that tracks demand-side bribery.

About TRACE

TRACE is a non-profit membership association that pools resources to provide practical and cost-effective anti-bribery compliance solutions for multinational companies and their commercial intermediaries (sales agents and representatives, consultants, distributors, suppliers, etc.). TRACE provides several core services and products, including: due diligence reports on commercial intermediaries; model compliance policies; an online Resource Center with foreign local law summaries, including guidelines on gifts and hospitality; in-person and online anti-bribery training; and research on corporate best practices.

For additional information about TRACE and the TRACE Compendium, visit www.TRACEinternational.org.

TRACE Compendium Updates Reply

enforcement, FCPA, Gift Hospitality & Travel, Opinion Release Procedure, US Government • Tags: , , , ,

Judge Declares Mistrial in FCPA Sting Case

On July 7, 2011, after seven days of jury deliberations following the six-week trial of the first four “FCPA Sting” defendants – Pankesh Patel, Andrew Bigelow, John Benson Weir and Lee Allen Tolleson – U.S. District Judge Richard Leon declared a mistrial.  The jurors could not reach a unanimous verdict.  The government plans to re-try the four defendants.

This is the first part of a multi-trial case stemming from the arrest of 22 executives in the military and law enforcement products industries in January 2010.  The FBI sting operation represents the first large-scale use of traditional, aggressive law enforcement techniques in an FCPA investigation.

The Compendium summary regarding this matter may be accessed here: https://secure.traceinternational.org/compendium/view.asp?id=172


DOJ Issues First Opinion Procedure Release of 2011

On June 30, 2011, the Department of Justice issued Opinion Procedure Release 11-01, which discusses a U.S. adoption service provider’s provision of hospitality to two visiting foreign government officials.

The Compendium summary regarding this release may be accessed here: https://www.traceinternational.org/compendium/viewOPR.asp?id=61

IBM Reaches $10 Million Settlement with SEC over FCPA Violations in South Korea and China Reply

China, enforcement, FCPA, Gift Hospitality & Travel, US Government • Tags: , , , , , ,

On March 18, 2011, the SEC charged International Business Machines Corporation (“IBM”) with violating the FCPA’s books and records and internal control provisions by providing improper cash payments, gifts, and travel and entertainment to government officials in South Korea and China.  Without admitting or denying the SEC’s allegations, IBM consented to the entry of a final judgment permanently enjoining the company from violating the FCPA’s books and records and internal control provisions. IBM agreed to pay disgorgement of $5,300,000, $2,700,000 in prejudgment interest, and a $2,000,000 civil penalty.

In 2004, South Korean authorities brought a bribery and bid rigging enforcement action against IBM’s subsidiary and joint venture in South Korea, as well as several employees of the Korean entities.  This case prompted investigations by the US DOJ and SEC.  The DOJ appears to have closed its investigation without taking any enforcement action.

The Compendium summary regarding this matter may be accessed here:  https://secure.traceinternational.org/compendium/view.asp?id=201

Veraz Networks Settles With SEC for $300,000 Reply

China, enforcement, FCPA, Gift Hospitality & Travel, US Government, Vietnam • Tags: , , , , , , ,

On June 29, 2010, without admitting or denying the SEC’s allegations, Veraz Networks, Inc. consented to the entry of a final judgment permanently enjoining the company from future violations of the FCPA’s books and records and internal controls provisions.  Veraz was ordered to pay a $300,000 civil penalty.  The SEC alleged that Veraz made or offered improper payments to government officials in China and Vietnam following the company’s initial public offering in April 2007.  The improper payments included gifts and entertainment promised to employees of state-controlled telecommunications companies and, in most cases, were offered through third party intermediaries. 

The Compendium summary of this matter may be accessed here:  https://secure.traceinternational.org/compendium/view.asp?id=233

Digi International Announces FCPA Investigation Reply

Gift Hospitality & Travel, voluntary disclosure • Tags: ,

Digi International, Inc. announced on May 10th that it voluntarily disclosed potential violations of the FCPA to the DOJ and SEC. According to the company’s 10-Q, the investigation is focused on violations of Digi’s gifts, travel and entertainment policy by employees in the Asia Pacific region. The Company’s Chief Financial Officer, Subramanian Krishna, resigned as a result of the inquiry. For a summary of the investigation please visit the  TRACE Compendium.

Recognized Gift-Giving Holidays Reply

Cambodia, Gift Hospitality & Travel, Indonesia, Kazakhstan, Russia, TRACE, Uzbekistan

International Women’s Day in Kazakhstan… Lebaran in Indonesia… Are gifts expected? Appropriate? If your third party marketing representative in the country alerts you that government customers expect a “token” of appreciation on these days, how do you determine if it truly is a local custom? And even if it is a local custom, does it violate the local law on providing something of value to a government official? Carolyn Lindsey reached out to TRACE’s 100 partner firms with this question. The result is the addition of a list of recognized gift-giving holidays from around the world posted on the TRACE Resource Center.

Christmas is certainly the main gift-giving holiday in North America, Western Europe and Latin America; while gifts are most commonly exchanged in Middle Eastern countries during Eid Al Fitr, following Ramadan. In Cambodia, gifts are expected during the Khmer New Year in April and Pnchum Ben, the Ancestor Festival, held in September or October.

The requirement that gifts may only be given to government customers on or around a recognized gift-giving holiday is part of many corporate anti-bribery compliance programs. This tool will help those responsible for approving requests to independently verify when such requests are appropriate. As for International Women’s Day, at least your female customers and business associates in Russia, Kazakhstan and Uzbekistan may all expect to receive a small gift.

TRACE Compendium Update: Another Major Gifts & Hospitality Case Reply

China, FCPA, Gift Hospitality & Travel, TRACE Compendium

In what resembles a sequel to the oft-quoted Lucent FCPA enforcement matter of 2007, on December 31, 2009 the DOJ and SEC announced settlements with UTStarcom, Inc., another U.S. telecommunications company, for violating the FCPA in connection with improper travel provided to employees of Chinese government-controlled telecommunications companies (as well as other improper gifts and benefits provided to Chinese, Thai and Mongolian telecommunications officials). Through its Chinese subsidiary, UTStarcom spent nearly $7 million on approximately 225 overseas leisure trips for Chinese officials between 2002 and 2007 in order to obtain and retain municipal and provincial telecommunications contracts, with China constituting the company’s largest sales market during the period. While purportedly for customer “training,” the trips – to such tourist destinations as Hawaii, Las Vegas and New York City – were primarily or exclusively for leisure and sightseeing purposes.

UTStarcom was also alleged to have (i) improperly paid for over $4 million in expenses for Chinese officials to attend executive training programs at U.S. universities between 2002 and 2004; (ii) provided fictitious U.S. employment salaries, benefits and permanent U.S. residency sponsorships to at least three Chinese and Thai officials between 2001 and 2005; (iii) paid over $23,000 in improper gifts and entertainment expenses for a government customer in Thailand in 2004; (iv) made $1.5 million in questionable payments to a consultant in Mongolia in 2005; and (v) made $200,000 in questionable payments to a consultant in China in 2007.

UTStarcom voluntarily disclosed the conduct to the U.S. authorities. In settling the matter, UTStarcom entered into a non-prosecution agreement with the DOJ and agreed to pay a $1.5 million fine. In the related SEC action, the company agreed, without admitting or denying the allegations, to the entry of a permanent injunction and a $1.5 million civil penalty. Notably, the SEC settlement also obligates UTStarcom to submit annual FCPA compliance reports and certifications for a four year period.

For more information on this and other international anti-bribery enforcement actions – in the gifts and hospitality genre and beyond – please visit the TRACE Compendium.

News From the Swedish Supreme Court Reply

enforcement, Gift Hospitality & Travel, Sweden • Tags: , ,

Caroline Falconer of Setterwalls, TRACE’s partner firm in Sweden, provides this report on a new development in Swedish anti-bribery case law:

“The Swedish Supreme Court announced on 18 November 2009 judgment in a case which has attracted much media attention in Sweden. The court decided that gifts given between two friends should not be considered as bribes, even if there is a business connection between the two.

The case concerned a wine importer who was facing charges for bribery and who had given a wine cooler to his defense counsel – a famous attorney in Sweden. The attorney had accepted the wine cooler while being the client’s defense counsel. The attorney was acquitted by the District Court of Stockholm but was found guilty in the Court of Appeal. Both the Court of Appeal and the Supreme Court found that it was possible for the client to bribe his own defense counsel as the bribe may lead to the attorney giving the client in question a preferential position in relation to other clients.

However, the Swedish Supreme Court is now acquitting both the attorney and the client, who were charged with bribe-taking and bribery, and established that the friendship existed between the attorney’s and the client’s families and that quite expensive gifts had been exchanged between the two parties previously. Therefore, the wine cooler was not considered as a bribe with the purpose to affect the attorney’s performance as a defense counsel.”