2010 plus international conference foreign corrupt practices act: unexpected liabilities for d&o...

2010 PLUS International Conference

Foreign Corrupt Practices Act:Unexpected Liabilities

For D&O Insurers


The Round-Up…

MODERATOR:• Joseph P. Monteleone, Esq., Partner, Tressler, LLP

PANELISTS:• Robert Axelrod, JD, Director, Deloitte Financial Advisor

Services, LLP• Charles “Trey” W. Branham, III, Esq., Founder, Goldfard

Branham LLP• Kevin LaCroix, JD, RPLU, Partner, Oakbridge Insurance

Services, L.L.C. • Lisa A. Prager, Esq., Partner, Wilson Sonsini Goodrich & Rosati


What’s on Tap…

• Overview

• Plaintiff’s Perspective

• Compliance and Risk Management Issues

• Defendant’s Perspective

• D&O Insurance Implications

• Conclusion and Forecast

• Q&A


Overview

• Foreign Corrupt Practices Act Defined

• Anti-Bribery Component

• Accounting Controls

• Who Can Bring an Active Pursuant

• Relief Granted and How Measured Bribe-to-Fine Ratios


Plaintiff’s Perspective

• Impact on Securities Fraud Class Actions

• Impact on Shareholder Derivative Litigation

• Other Impacts on Civil Litigation



“The failure of a board of directors to ensure that its company had an adequate corporate compliance

information and reporting system in place can “render a director liable for losses caused by non-compliance with

applicable legal standards.”

“The failure of a board of directors to ensure that its company had an adequate corporate compliance

information and reporting system in place can “render a director liable for losses caused by non-compliance with

applicable legal standards.”

In Re Caremark Int’l Derivative Litigation, 698 A.2d 959, 970 (Del. 1996)



FCPA requires every issuer to “make and keep books, records, and accounts which in

reasonable detail accurately and fairly reflect the transactions and dispositions of assets”

15 U.S.C. §§78m(b)(4)-(5).



Three Types of Record Keeping Offenses

1. Records that fail to record improper transactions at all (e.g. bribes and kickbacks)

2. Records that are falsified to disguise aspects of improper transactions otherwise recorded correctly

3. Records that correctly set forth the amounts paid, but that fail to record aspects which would reveal their illegality Complying with the Foreign Corrupt

Practices Act, Cruwer, Donald, 1999



Types of Transactions Implicated

1. Payments to mid- or high-level foreign government officials

2. “Facilitating payments” to low-level foreign governments

3. Commercial bribes or kickbacks

4. Political Contributions

5. Charitable Contributions

6. Smuggling Activities

7. Income Tax Violations

8. Customs Violations

9. Extraordinary GiftsForeign Corrupt Practices Handbook, Tarun, Robert W., p.20



Damage Theory

1. Investigation Costs

2. Lost Earnings

3. Lost Revenue

4. Civil Fines



White v. Avon Products, Inc.Initial Damage Model

1. Investigation Costs - $130,000,000

2. Lost Earnings - $74,800,000

3. Lost Revenue - $10,000,000

4. Civil Fines - ????

Total Damages to Date: $214,000,000 +


Compliance and Risk Management Issues

• Department of Justice Enforcement• Securities & Exchange Commission Role• Recent Activity

Small Cases Big Cases

• Does It Pay to Self Disclose• Foreign Equivalents


Defendant’s Perspective

• Coordination

• Differing Impacts

• Impact on Loss Causation, Liability and Damages


D&O Insurance Implications

• Coverage Implications

• Conduct Exclusions

• FCPA-Specific Policy Provisions

• Insurability and Public Policy Concerns

• Claim Definition

• Policy Enhancements


Conclusion and Forecast

• Likelihood of Enhanced FCPA Activity

• New Legislative Developments


Questions&

Answers


Many Thanks To…

• Joseph P. Monteleone

• Robert Axelrod

• Charles “Trey” W. Branham

• Kevin LaCroix

• Lisa A. Prager

2010 plus international conference foreign corrupt practices act: unexpected liabilities for d&o...

Documents

international conference

civil litigation slide

forecast qa slide

lost earnings

lost revenue

lowlevel foreign governments

civil fines

types of record