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Anti-Corruption Enforcement and Compliance in the US, UK and China: Trends from 2014 and Forecast for 2015

January 30, 2015


Chelsie Chmela Events Manager [email protected] 847.293.8806

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SPEAKING TODAY

John P. Cunningham Partner, Washington, DC

Vivian Wu Special Counsel, Beijing

Geoff Martin Associate, London, UK/Washington, DC

Baker & McKenzie LLP is a member firm of Baker & McKenzie International, a Swiss Verein with member law firms around the world. In accordance with the common terminology used in professional service organizations, reference to a "partner" means a person who is a partner, or equivalent, in such a law firm. Similarly, reference to an "office" means an office of any such law firm. © 2015 Baker & McKenzie LLP

Anti-Corruption Enforcement and Compliance in the US, UK and China: Trends from 2014 and Forecast for 2015 January 30, 2015 John P. Cunningham: Washington, DC Vivian Wu: Beijing, China Geoff Martin: London, UK; Washington, DC

© 2015 Baker & McKenzie LLP 6

Global Enforcement and Compliance Trends - Overview ‒ Burgeoning global enforcement of anti-corruption laws US, UK, China, Brazil, Russia, Canada

‒ Increased multi-country enforcement actions ‒ Proactive cross-border investigative cooperation (sharing) ‒ Keying in on individual prosecutions ‒ Heavy involvement by agents or intermediaries (75%) [Source =

OECD Foreign Bribery Report, Dec. 2014] ‒ Majority of global matters in four sectors (67%): extractive,

construction, transportation, and information ‒ Greater compliance awareness among companies and employees

(e.g., whistleblower risk, monitoring)


2014 Transparency Int’l CPI Index* From 1 (least corrupt) to 174 (most corrupt), the countries of particular interest in this specific presentation rank as follows:

‒ USA: Rank 17, Score 74 (Score of 100 = least corrupt; 1 = most) ‒ UK: Rank 14, Score 78 ‒ China: Rank 100, Score 36

Other Countries of Note in the TI 2014 CPI Index (i.e., top and bottom rankings) ‒ Denmark (Rank 1, Score 92) ‒ New Zealand (Rank 2, Score 91) ‒ Note: Singapore (Rank 7, Score 84) is only ASEAN country in top 10 ‒ North Korea (Rank 174, Score 8) ‒ Somalia (Rank 174, Score 8)

*The TI Corruption Perceptions Index (CPI) measures how one country compares to others

included in the Index based on the perceived level of public-sector corruption in each country

United States


Top 20 FCPA Settlements (US millions)

Siemens AG $800 Alstom S.A. $772 KBR/Halliburton $579 BAE $400 Total S.A. $398 Alcoa $384 ENI S.p.A. $365 Technip S.A. $338 JGC Corporation $219 Daimler AG $185 Weatherford $152 Alcatel-Lucent $137 Avon $135 Hewlett-Packard $108 Deutsche / Magyar Telekom $95 Marubeni Corporation $88 Panalpina $82 Johnson & Johnson $70 Pfizer / Wyeth $60 ABB $58

2008

2009

2010

2013

2011

2012

2014


US - Enforcement and Compliance Trends in 2014 and Outlook for 2015: Overview ‒ US ranked 17 out of 174 on TI’s 2014 Corruption Perceptions Index ‒ FCPA still by far most actively enforced anti-corruption law in the world ‒ Cost of settling FCPA enforcement actions continues to rise –

accompanied by big global headlines ‒ Emergence of more active cross-border cooperation between US

authorities and other countries involving FCPA matters ‒ FCPA enforcement against non-US companies continues ‒ Self-reporting, cooperation, and remediation increasingly important

factors in reducing anti-corruption settlement penalties ‒ Prosecution of individuals involved in FCPA misconduct on the rise ‒ Continued emphasis on benefits of an effective compliance program

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US - Key Trends 2014 ‒ Increased role in global enforcement and cooperation Sharing information Joint prosecutions More countries: UK, Brazil, China, Russia, Canada

‒ Expanded charges Combining anti-corruption with export violations,

money laundering, mail and wire fraud, other charges


US - Key Trends 2014 ‒ Greater corporate awareness Self-reporting and cooperation Front page media reports Whistleblowers

‒ Higher expectations for compliance programs Third party due diligence M&A, JVs due diligence Investigation protocols and rapid response


US – Key Trends 2014 ‒ Aggressive expansion of FCPA jurisdiction to non-

domestic concerns and non-issuers Exerting extra-territorial jurisdiction Enforcement based on abetting and conspiracy theories

‒ Higher expectations for compliance programs to be comprehensive and premised on company-specific risk profile

‒ Immense penalties and collateral consequences (legal fees, compliance program costs, shareholder derivative actions, debarment, negative publicity)


US - Key Trends 2014 “The prosecution of individuals – including corporate executives – for white-collar crimes is at the very top of the Criminal Division’s priority list under Assistant Attorney General Caldwell.”

--Marshall Miller, US Principal Deputy Assistant Attorney General for the Criminal Division, September 17, 2014


US – Key Trends 2014: Increased Focus on Asia ‒ Of the five 2014 settlements in the top 20: Alstom and Marubeni both relate to corrupt payments in

Indonesia -- schemes to procure officials’ assistance in securing power projects for Alstom and its subsidiaries; and to secure a contract to provide power-related services in Indonesia (Marubeni)

Avon involved allegations of corrupt conduct in China, including improper gifts, entertainment, and hospitality provided to public officials


US – Key Trends 2014: Increased Focus on Asia (cont’d) ‒ Other 2013 and 2014 FCPA resolutions with

allegations of corrupt payments to officials in SEA / Asian countries include: Bio-Rad Products (Vietnam & Thailand) Smith & Wesson Holding Corporation (Indonesia) Bruker Corporation (China) Diebold Inc (China)


US – Looking Ahead in 2015 ‒ Hiring practices abroad US government investigating major financial firms

including Morgan Stanley and Citigroup, Inc. ‒ Travel issues Recent FCPA matters demonstrate continued interest

and significantly increased fines in connection with travel-related improprieties

‒ Third parties 70-80% of FCPA cases involve third parties committing

violations on or behalf of main corporate entity


US – Looking Ahead in 2015 ‒ M&A DOJ opinion release: DOJ will not penalize a company

subject to the FCPA for acquiring a foreign target with corruption issues, provided certain conditions were met

‒ Commercial bribery Diebold (2013) – SEC folding commercial bribery into its

FCPA enforcement realm


US – Looking Ahead in 2015 ‒ Sep. 2014 – $30 million USD award to a foreign

whistleblower in a fraud case (largest ever) ‒ November, 2014: SEC released annual Dodd Frank

whistleblower report covering FY’14: 3,620 tips, 20% increase over two years 9 whistleblower awards (5 in all previous years

combined)


US – Looking Ahead in 2015 ‒ Increased prosecution against individuals DOJ: Corporate cooperation credit will depend on

disclosure of evidence of individual culpability, more aggressive tactics will be used to investigate individuals

Creation of 3 new and dedicated FBI units to focus on FCPA matters

United Kingdom


UK - Enforcement and Compliance Trends in 2014 and Outlook for 2015: Overview ‒ Tooling-up for corporate prosecutions ‒ Building a head of steam - more cases brought ‒ Significant firsts on the horizon? ‒ A pipeline of cases for 2015 ‒ The future of the Serious Fraud Office


UK – Gearing Up for Corporate Prosecutions ‒ Introduction of Deferred Prosecution Agreements ‒ New Sentencing Guidelines ‒ Proposals for a broader ranging Corporate Offence of

a Failure to Prevent Fraud/Economic Crimes ‒ UK Anti-Corruption Plan


UK - Building a Head of Steam in 2014 ‒ Enforcement of pre-Bribery Act legislation Smith and Ouzman (December) Innospec (August) Alstom - Charged (July) Bruce Hall (July)

‒ Bribery Act enforcement Bio Fuel fraud & bribery convictions (December)


UK - Significant Firsts on the Horizon? ‒ First Deferred Prosecution Agreement ‒ First corporate conviction under Bribery Act s.7 ‒ First Bribery Act conviction for foreign bribery


UK - Pipeline of Cases for 2015 (selected) ‒ Rolls Royce ‒ GlaxoSmithKline ‒ Alstrom ‒ Barclays


UK - Future of the Serious Fraud Office ‒ Continued challenges Tchenguiz and Dahdaleh cases HM Crown Prosecution Service Inspectorate report

(November 2014) ‒ Home Office considers disbanding SFO and rolling into

the National Crime Agency


China - Enforcement and Compliance Trends in 2014 and Outlook for 2015: Overview

‒ Greater scrutiny from Chinese authorities ‒ Surge in prosecutions and higher penalties ‒ Strengthened administrative enforcement ‒ New legislation focusing on bribery


China - PRC Anti-Bribery Law PRC law prohibits and penalizes both the giving and receiving of “bribes” in exchange for “improper benefits”.

Legislation Context Authority

Criminal Law

• Criminal Law Judiciary Interpretation • Regulates both official bribery and commercial

bribery

Public Security Bureau Procuratorate; People’s courts;

Anti-Unfair Competition Law (AUCL)

• Regulations Concerning the Prohibition of Commercial Bribery Acts

• Regulates commercial bribery

State Administration for Industry and Commerce and its local counterparts

CPC Rules

• Communist Party of China (CPC) polices and rules

Commission for Discipline and Inspection of the Central Committee of CPC (CCDI)


China - General Enforcement Trends ‒ Increasing scrutiny of SOEs ‒ Industry sweeps Energy Telecommunications Media Automobile Banking

‒ Dawn raids frequently used by regulators Criminal prosecution Administrative enforcement


China - Highlights in Anti-Corruption Campaign ‒ Enforcement against Chinese government officials

‒ Prosecution against foreign invested enterprises GSK – a record fine of US$489 million

“Tigers” 30 transferred to criminal charges

68 “Flies” penalized for breaking disciplinary rules

71,748 “Fox Hunt” illegal assets recovered from abroad

US$ 500

million


China - Legislation Development ‒ New rule on enterprise information publication ‒ Draft 9th Amendment to Criminal Law New crime of offering bribes to close relatives of

government officials Impose fines to corruption/bribery related crimes Replacement of amount-based standards for sentencing

bribe-taking crimes with more general criteria ‒ Intensified international cooperation 2014 APEC Beijing Declaration on Fighting Corruption


China – Looking Ahead in 2015 ‒ Continuation of the country’s anti-corruption compaign Establish and Improve Punishment and Prevention of

Corruption System Work Plan (2013-2017) ‒ Strengthen prosecution of bribery crimes A new anti-corruption agency within the Supreme

People’s Procuratorate is to be established in 2015 ‒ Industry sweeps Industries concerning people’s livelihood will continue to

be enforcement targets


Baker & McKenzie - Additional Resources Follow ongoing developments in global anti-corruption enforcement and compliance via: http://globalcompliancenews.com/

Baker & McKenzie’s acclaimed “Inside the FCPA” Newsletter

http://www.bakermckenzie.com/insidethefcpa/

http://globalcompliancenews.com/

http://www.bakermckenzie.com/insidethefcpa/

Thank you! Any questions?


Contact Information for Presenters

John P. Cunningham, Partner, Washington, DC Email: [email protected] Phone: + 1 202 835 6148

Vivian Wu, Special Counsel, Beijing Email: [email protected] Phone: + 86 10 6535 3860

Geoff Martin, Associate, London, UK/Washington, DC Email: [email protected] Phone: + 1 202 835 1677


Wednesday, February 4, 2015

Corruption and Corporate Risk: How to Integrate Anti-Corruption Practices into Existing Business

Operations

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