Day 1: Prepare for Brazil’s New Anti-Bribery Law with Resources from TRACE!

Offer: Brazil Country Bulletin & New Anti-Bribery Law Overview

This offer must be accepted by midnight tonight.

Day 1-TRACE Holiday Promo-Country BulletinTRACE is pleased to offer the compliance community a FREE Brazil Country Bulletin and New Anti-Bribery Law Overview prepared by our partner firm in Brazil, Vitor Costa Advogados. Country bulletins, one of the most valued features of our Member-Only Resource Center, are designed to address the questions companies should consider before working with commercial intermediaries in a particular country. Our virtual reference library contains local law resources for over 130 countries and is frequently updated by our trusted TRACE Partner Law Firms. Country Bulletins provide a comprehensive overview of local laws and anti-bribery compliance guidelines and clearly address the nuances of local laws.

As part of our 10 Days of Giving, we are pleased to offer you the country bulletin for Brazil. This comprehensive guide will help prepare you to comply with the Clean Company Law, which goes into effect January 29, 2014. Additionally, we will provide you with a memoranda from Vitor Costa Advogados explaining the details of the new law including: subjected persons, prohibited acts, sanctions, enforcement authorities and leniency agreements.

This offer may not be redeemed by service providers.

To accept this offer, please write to prior to midnight tonight.

We’re Baaaack…Compliance Monitors 2.0 Reply

Like it or not, compliance monitors are back, and this time they’re here to stay.  At least that seems to be one message to take from last week’s deferred prosecution agreement between French company Total S.A and the Department of Justice.  Total admitted to bribing Iranian officials and violating the Foreign Corrupt Practices Act (FCPA), agreeing to pay a $398 million fine and enter into a 3-year compliance monitor program.

inspectorFor a period of time, it appeared as if there were a trend away from using compliance monitors in FCPA settlements, but today corporate monitorships remain fairly common, as evidenced both by last week’s Total settlement as well as DOJ settlements last year with Smith & Nephew, Biomet and Eli Lilly, to name just a few.  So here’s a quick refresher for those who need to brush up on corporate compliance monitors:

What is a compliance monitor?

A compliance monitor is a government-appointed third party hired by the company under the terms of a negotiated settlement with the government to oversee the company’s efforts to fix its compliance program.  They are not required by law, but compliance monitors are frequently imposed as a condition of settlement with the DOJ and are, at the very least, contemplated under the comments section of the Federal Sentencing Guidelines as experts that may be employed by the courts to “assess the efficacy of a compliance and ethics program.” (Guidelines Manual §8D1.4).

What a compliance monitor actually does will usually depend on the specific terms of the company’s settlement agreement.  Often they are part-investigator, tasked with figuring out what went wrong in the company, and part-senior executive, tasked with restructuring the company’s compliance program to fix any outstanding issues.  Quite often the settlement agreement will stipulate that the compliance monitor has full access to the company’s records and provide a yearly report to the government detailing what progress has been made in such areas as third-party due diligence, risk management and employee training.

Why are compliance monitors so controversial?

Besides being intrusive, companies often complain that compliance monitors are overly expensive.   The list of those who have served as compliance monitors in the past includes a former German Finance Minister (Siemens), a former FBI director (Daimler), and a former Attorney General (Zimmer Holdings), none of whom came cheap.  In the case of Zimmer Holdings, former Attorney General John Ashcroft estimated that his 18-month contract with the company was worth between $28 million and $52 million, a sum that seemed especially egregious given that Ashcroft had been appointed by then-New Jersey prosecutor Chris Christie in what many viewed as a politically-motivated maneuver by Christie to help out his former boss. More…

Assessing FCPA Risks: Step One, Identify Your Third Parties Reply

It’s well known that third parties are a major source of liability under the Foreign Corrupt Practices Act for large multinational corporations.  But as companies look to minimize their compliance risks, one difficultly they face is simply identifying who their third parties are.  Unlike with subsidiaries and affiliates, third party relationships are often less well-defined and records of who those parties are may not be regularly maintained.   Add to that the fact that a typical large company may interact with tens of thousands of third parties at any given time, and that many of those parties may change on a weekly basis.

So who is a third party for the purpose of assessing liability under the FCPA?  The answer is that any outside representative used by a company to conduct business abroad poses an FCPA risk.  That means companies are looking at all of their upstream representatives, including sales agents, outside accountants, service providers, and resellers, and assessing their anti-bribery controls.  The below table is just a sampling of the extensive network of third parties that have created liability problems for companies in the past:

Third Party



Distributors Biomet, Inc. Distributors paid bribes on Biomet’s behalf to doctors in China and Brazil.
Sub-contractors IBM Argentina Subcontractor made payments to Argentinian bank owned by Argentine government on behalf of IBM.
Resellers Veraz Networks Singapore reseller paid bribes to state-controlled Vietnamese company on behalf of company.
Sales Agents InVision Technologies Inc. Sales agents paid exorbitant commissions with knowledge that money would be used to pay officials in China and the Philippines.
Charitable organizations Eli Lilly Small charitable foundation used as intermediary for payments to Polish health official.
Suppliers Siemens Investigation included improper payments to supplier related to oil and gas business in Central Asia.
Customs agents/brokers Diageo Plc Kickbacks to a third-party customs broker used to pay $86,339 in bribes to a Korean customs service official.
Legal service providers (e.g. notaries) Alcatel Notary entered into several sham agreements on behalf of Alcatel to obtain telecommunications contracts in Costa Rica. More…

3 Steps Towards Building a Better Compliance Culture Reply

A corporation’s compliance culture: that intangible force that permeates a company’s entire way of doing business.  Like an invisible hand of ethical expectations, it guides employees to do the right thing in difficult situations.  But how well are companies cultivating their compliance culture?

In a recent 2012 survey conducted by Ernst & Young, a stunning 15% of respondents said that they were prepared to make cash bribes to win or retain business.  That means that 15% of respondents were willing to break the law – putting themselves and their companies at risk of criminal penalties – in order to win a business opportunity.  The survey was comprised of 1,700 interviews of chief financial officers and heads of legal, compliance and internal audit in 43 different countries.  The survey is a cold reminder that for a sizable minority of companies the message remains plain: win at any cost.

A healthy compliance culture, on the other hand, not only helps a company stay out of trouble, but it also builds a company’s reputation as trustworthy and can often lead to gaining new business opportunities.  How, then, to change the message?  Below are three steps that compliance officers are taking in the uphill battle towards building a better compliance culture at their companies:

1)  Change The Incentive Structure – Studies have found that people act dishonestly less out of a desire for personal gain and more out of anxiety for what will happen to them if they don’t cheat.  In a recent article in Scientific America Mind entitled “Why We Cheat”, it was revealed that “many instances of dishonesty in the real world result when people find themselves in a situation in which they face losing money, reputation or their career.”  That goes double in a bad economy.  “There is little question that the current economic situation has exerted negative pressure on employees,” writes Ernst & Young in their report.  “One of the most troubling findings of the survey is the widespread acceptance of unethical business practices.”

Companies need to be aware of these pressures and create incentive structures and reward systems that counteract the impulses to act unethically.  This entails giving employees a sense of security that they will be rewarded, not punished, by doing the right thing.

Walmart associates from around globe gather during the 2011 Walmart Shareholders' Meeting. (photo by Wesley Hitt, Hitt Photography)

Walmart associates from around the globe gather during the 2011 Walmart Shareholders’ Meeting. (photo by Wesley Hitt, Hitt Photography)

That’s what Walmart’s trying to do right now.  Last year, Walmart made front-page headlines when it was alleged that their employees had been paying bribes in various countries around the world.  Since then, the company has spent millions of dollars to reform its compliance program, and, more importantly, change its compliance culture.  Part of that shift has been changing its executive compensation plan so that pay is not only based on financial measures, like sales, operating income, and return on investment, but also based on whether they’ve successfully overhauled their compliance operations.  By changing the incentive structure, such as Walmart is trying to do, companies send a message to their employees that compliance is more than just some hollow promise.

2)  Nip Bad Behavior in the Bud – Strict enforcement against infractions – even minor ones – can help prevent bigger problems down the road.  It’s what Dan Ariely, a behavioral economist at Duke University, describes as the “what the hell effect” – an attitude that develops after a person has already broken a rule once, leading them to cheat more frequently.  “Just as an untreated minor infection may progress to a more serious condition, minor acts of dishonesty that pass without consequences may be followed by more egregious misconduct,” writes Scientific MindMore…