Top 12 of 2012: A look back at the biggest anti-bribery stories from last year 1

Guest blogger Severin Wirz, an attorney specializing in compliance with the Foreign Corrupt Practices Act, reflects back on the most noteworthy anti-bribery developments of 2012.

By Severin Wirz

Snowflake 2013With 2012 behind us, it seems a perfect opportunity to pause and reflect back on the anti-bribery developments of the last twelve months.  So here are TRACE’s “Top 12 of 2012” – all the biggest trends, breakthroughs and scandals of 2012, composed neatly in list form:

12.   Whistleblowers favored – The US government showed just how serious it is about encouraging whistleblowing when the IRS agreed to pay jailed banker Bradley Birkenfeld $104 million in September for information he provided against his former employer UBS.  The payout followed on the heels of the DOJ’s announcement in early August of the creation of an Office of Inspector General Whistleblower Ombudsperson and the SEC’s first whistleblower payout later that month.

11.   Barclays’ woes worsen – It’s been a difficult year for international banking giant Barclays plc.  Four months after settling a $160 million fine over interest rate manipulation, Barclays announced that it was also being investigated by both British and US authorities for potential acts of bribery in Qatar.

10.   UK adopts deferred prosecution agreements -  In October, Britain’s Ministry of Justice declared that it would begin using deferred prosecution agreements (DPAs).  Widely used in the United States, DPAs are expected to encourage more self-reporting and greater certainty for corporations in negotiating settlements with the UK Serious Fraud Office.

9.      Ongoing FCPA sweep of the medical industry – The SEC and DOJ brought no less than 10 separate FCPA-related actions in 2012 against companies in the healthcare sector, including suits against Pfizer, Wyeth, Biomet, Smith & Nephew and Orthofix.  Read more about these cases in the TRACE Compendium.

8.      Twilight of the facilitation payment exception –  Only 6 OECD countries continue to uphold the facilitation payments exception.  Among those is Australia, which this year proposed getting rid of the defense altogether.  TRACE’s 2012 Anti-Bribery Benchmarking Survey indicates that even when legal, companies are increasingly choosing to prohibit employees from making so-called “grease” payments abroad.

7.      Wal-Mart bribery scandal in Mexico – Reminding us of the power of journalism as an anti-corruption tool, the New York Times published a investigative exposé in April revealing that Wal-Mart sought to cover-up millions of dollars in bribes to agents and government officials in Mexico.  The article has since led to a growing probe of Wal-Mart’s activities in other countries as well as a formal investigation by Congress.

6.      DOJ’s FCPA unit suffers trial losses– Prosecutors at the DOJ suffered several surprising FCPA losses this year, including defendant John O’Shea’s acquittal in January, the dismissal of all charges against the African sting defendants in March and the end of the DOJ’s appeal in the Lindsay Manufacturing case in May.  And while the stinging setbacks won’t stop future FCPA prosecutions, it may well embolden more pushback from defense lawyers who now perceive cracks in the DOJ’s enforcement facade.

5.      SEC implements widening net of Dodd-Frank rules – The SEC issued several new rules this past year mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act, including disclosure requirements concerning the use of conflict minerals as well as payments made in the extractives industry to foreign governments.  Along with new federal regulations against human trafficking, companies are becoming ever more vigilant against compliance problems that may arise during the course of overseas dealings.

4.      New collective action tools alleviate costs of anti-bribery compliance –Speaking of compliance, for many the two biggest buzzwords of 2012 were “collective action.”  Online platforms such as TRACE’s TRAC tool now allow companies to conduct broader baseline due diligence at a lower cost.  It should come as little surprise, then, that the Basel Institute on Governance launched the International Center for Collective Action (ICCA) in October to serve as a resource hub for companies looking to improve their anti-corruption programs.

3.      Anti-Corruption efforts rev-up in “BRIC” countries – There’s been an undeniable increase in the attention paid to anti-bribery concerns within BRIC countries (Brazil, Russia, India and China) recently.  Over the past year, Brazil’s former presidential chief-of-staff was sentenced to over 10 years in prison in a vote-buying scandal there, Russia entered into the OECD anti-bribery convention, the grassroots anti-bribery movement in India continued to pick up steam, and China’s new leader Xi Jinping voiced renewed resolve to launch an offensive against corruption in his country as well.

2.      Morgan Stanley’s Declination– The DOJ and SEC declined to initiate an enforcement action against Morgan Stanley for violations committed by a “rogue employee.” Not only is the value of a robust compliance program and frequent training confirmed, a true breakthrough in the history of the FCPA, the seldom accepted “rogue employee” defense prevails.

1.      DOJ and SEC publish long-awaited FCPA Guidelines – The hype surrounding the much-anticipated FCPA Guidelines finally proved real when, in mid-November, the DOJ and SEC released their 120-page compilation of information about the FCPA.  And while the Guidelines are by no means game-changing, they have been roundly applauded for providing needed insight into such lingering questions as the definition of a foreign official, what makes for a good compliance program, and what constitutes a facilitation payment.

The perfect holiday read for the compliance professional Reply

 Book Cover10 Days of Giving

Day 5

Offer must be accepted today by midnight, 12/14.

Our ten days of giving continues today with a free copy of How to Pay a Bribe: Thinking Like a Criminal to Thwart Bribery Schemes, edited by TRACE President, Alexandra Wrage. In this eminently readable collection, anti-corruption experts guide the reader through the dark world of international bribery schemes, from Washington, D.C. to Europe and Africa and across Asia. Following the authors’ accounts of imaginative and varied schemes in which charitable contributions are tainted and fine art is used as a vehicle for passing bribes to greedy officials, this volume offers recommendations for the best practices companies can incorporate to avoid corruption as they interact with governments, intermediaries and each other in international markets.

The book is the first in a series scheduled to be published annually under the same title. TRACE invites in-house counsel and anti-bribery practitioners to not only enjoy this fascinating read full of practical insights on us, but to “join the conversation” by sharing their corruption (and compliance!) stories by writing to HowtoPayaBribe@traceinternational.org.

Receive your free copy before the holidays by writing to info@traceinternational.org today by midnight.

The holiday giving continues next week.

Happy International Anti-Corruption Day 2012! 1

Every year since 2003, when the UN General Assembly passed Resolution 58/4 designating December 9th as International Anti-Corruption Day, more countries have joined forces to raise awareness about corruption, and about the importance of international instruments such as the United Nations Convention against Corruption (“UNCAC”). As of this month, 164 nations have ratified the UNCAC, leaving only 30 to go before universal adoption.

In order to support the ratification, implementation and monitoring of the Convention, the UNCAC Coalition was formed in 2006. It is a global network of more than 350 civil society organizations, including international, regional and national groups, each of them focusing on issues that affect transparency and anti-corruption advocacy.

With the establishment of each new institution to enforce anti-corruption laws, important measures are being taken against corruption. Likewise, as companies headquartered or doing business in these countries become part of the anti-corruption business network, more progress is made. Compliance is becoming more effective, more focused, and more feasible for companies and their intermediaries.

This is a great and positive development – that countries, national institutions, state-owned enterprises, and private corporations and civil society organizations are embracing anti-corruption as a creed, and actively advocating in their communities. Of no less importance, however, is the involvement of ordinary people — of individuals who are tired of resources being sucked into the black hole of corruption, and who want to make their corner of the world a better place.

The grassroots groups formed by these individuals are a good measure of the depth and breadth of anti-corruption efforts around the world. In 2011, the upheavals in North Africa and the Middle East helped open people’s eyes about the evils of corruption. In 2012, India’s popular movement against corruption has been widely publicized. The proliferation of on-line reporting sites, beginning with India’s ipaidabribe.com, has given a voice to people all over the world who want to shed light on corruption in their countries. Anonymous reporting sites are up and running now in Pakistan, Kenya, Greece and Zimbabwe, and will soon be operating in Mongolia and the Philippines. Government agencies all over the world have set up sites, and so have businesses private businesses and universities. In some countries, special applications have been developed for cellphones so that bribe demands can be reported anywhere, any time.

With public awareness and electronic methods of increasing transparency, enforcement of national and international anti-corruption laws is also on the rise.

All of these developments point to real progress combating corruption on every continent. Today, we celebrate this progress, and vow to continue working toward clean and transparent business throughout the world.

An Overview of Turkey’s Corruption Problems – Part II Reply

Today’s post, the second in a tri-partite series about Turkey, was contributed by TRACE intern Asli Aksoylu, a Turkish attorney who recently received her LLM from Northwestern University School of Law.

Turkey - Parliament building

Ankara, Grand National Assembly Building

Turkey’s International Anti-Bribery Obligations

Turkey and International Conventions

Many countries are aligning their legislation with the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (“OECD Convention”), which sets common grounds to combat bribery at the international level; Turkey is one of these countries.

Turkey’s public sector is perceived to be the 54th most corrupt country out of 176 countries according to the Corruption Perceptions Index 2012 published by Transparency International. Even though the results of surveys seem pessimistic, Turkish authorities have taken the initiative to fight against corruption by ratifying international conventions and introducing legislative amendments in parallel with these. Most importantly, Turkey ratified OECD Convention on July 26, 2000 and the implementing legislation entered into force on January 11, 2003. Turkey was subject to Phase 2 review, which assesses whether the country implements the laws and rules of the OECD Convention and enforces them in practice. The working Group will prepare Turkey’s Phase 3 report in March 2014, to evaluate the sufficiency of Turkey’s legislative amendments as well as Turkey’s efforts enforcing the anti-bribery legislation.

Along with the OECD Convention, Turkey signed United Nations Convention against Corruption (“UN Convention”) on December 2003, which is the first global convention on corruption aiming at preventing corruption in both public and private sectors. Turkey ratified the UN Convention in November 2006.

Turkey became a member of Group of States Against Corruption (“GRECO”) upon ratifying Council of Europe’s Civil Law Convention on Corruption, which mainly provides remedies for people who suffer damage due to corruption. Turkey also ratified the Council of Europe’s Criminal Law Convention aiming to improve criminal law measures for national and international bribery offences as well as international cooperation in the prosecution of these offenses. Additionally, Turkey ratified the Council of Europe’s Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime in 2004, which aims to assist international cooperation in investigating crimes as well as seizing and confiscating the proceeds thereof.

For companies doing business in Turkey, TRACE offers due diligence reports on commercial intermediaries and model compliance policies.  TRACE members have access to the Resource Center, which contains summaries of applicable Turkish law, guidelines on gifts and hospitality, and research on corporate best practices.  For information, click here, or visit TRACEinternational.org.