October Poll – What was this month’s most important anti-bribery development? Reply

Time for another TRACE Blog poll to find out what was this month’s biggest story.  Cast your vote below:

  1. FCPA Settlements Continue – This month, Diebold Incorporated agreed to pay more than $48 million to settle SEC and DOJ allegations that Diebold bribed foreign government officials in China, Indonesia and Russia.  Stryker Corporation agreed to pay over $13.2 million to settle SEC charges that Stryker’s subsidiaries allegedly made illicit payments to doctors and government employees in Argentina, Greece, Mexico, Poland and Romania.
  2. Court Finds Dodd-Frank Protections Do Not Protect Whistleblowers Outside US – In the case Liu v. Siemens AG, a U.S. District Court ruled that the anti-retaliation provision of the 2010 Dodd-Frank financial reform law, which shields whistleblowers from discipline for reporting alleged violations by their employers, did not apply to conduct outside the United States.  The plaintiffs had claimed that they were fired after disclosing that Siemens AG, a German company, was funneling kickbacks to Chinese and North Korean hospital officials.
  3. OECD criticizes Russia’s implementation of Anti-Bribery Convention – Despite certain progress, the OECD remains concerned with Russia’s compliance with key provisions of the OECD Anti-Bribery Convention, the organization announced this month.  Having just completed a second report on Russia’s implementation of the convention, the OECD’s Working Group on Bribery concluded, among other things, that Russian law enforcement and related agencies needed to implement a more proactive approach to detecting, investigating and prosecuting foreign bribery offenses.
  4. UK launches new National Crime Agency – The United Kingdom announced a new crime-fighting agency, the National Crime Agency (NCA), with “national and international reach and the mandate and powers to work in partnership with other law enforcement organizations.”  The NCA will work in coordination with the Serious Fraud Office and other national agencies to combat and prosecute bribery and corruption.
  5. U.S. Congressman Sentenced to 3 Years For Extortion – Former Congressman Rick Renzi (R.-AZ) was sentenced to 36 months in prison for convictions on public corruption, money laundering and other charges.  Among other allegations, Renzi was accused of committing extortion while trying to swap U.S. government land for a farm that belonged to a business partner who owed him money.

EU Draft Legislation: Increased Reporting Requirements for European Institutions Reply

In the wake of the recent financial and debt crisis, the European Union continues to seek new regulations to mitigate fluctuations in the financial system.  Most recently, European authorities met to discuss draft legislation that would substantially increase the degree to which European companies must disclose their profits as well as change capital reserve requirements for banks.  These legislative efforts follow closely on the heels of other draft EU legislation that requires companies in various industries to make public the payments they make to foreign governments.  Below, we outline both of these new proposed regulations.

european-central-bankDisclosure Requirements for Banks

On February 27, 2013, the European Parliament and EU Council reached an agreement to implement much of the G-20 Basel III rules, which were developed in 2010 to safeguard the global banking system from another financial crisis.  The newest agreement focuses primarily on restricting bonuses in the financial sector, instituting capital and liquidity requirements, and imposing new governance and transparency rules for banks.

If passed, EU banks would soon be required to disclose to the EU Commission the following information for the previous year:

  • the number of their employees,
  • how much profit they made ,
  • how much they paid in taxes,
  • how many subsidies they’ve received, and
  • their net banking income.

The EU Commission has said that it intends to use the relevant data in order to make determinations regarding competitiveness, credit availability and investment levels of European financial institutions. More…

In the Age of Whistleblowers, How to Coax More Internal Reporting Reply

It’s been over a year now since the Dodd-Frank whistleblower provisions went into effect, and they seem to be proving themselves hugely effective.  In 2012 alone, the Securities & Exchange Commission (SEC) received over 3,000 whistleblower tips, including 115 that were FCPA-related.  In August, the SEC made its first payout of nearly $50,000 to a tipster who reported fraud by his employer.

Many companies are responding by redoubling their efforts to encourage internal reporting.  But nurturing a strong internal disclosure program is something of an art, requiring a certain level of sensitivity to balance both the interests of the company and the interests of the individual.  While some disclosures are frivolous and malicious, others, that may be substantial, can become lost or forgotten in piles of paperwork.  We’ve listed here some tips to help those developing in-house disclosure programs maximize the number of employees reporting problems internally before they seek outside help:

  1. Announce the program widely.  Are employees properly informed about how and when they can report issues?  It’s amazing how many may not even know that an internal disclosure program exists.  More…

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.