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Posts Tagged ‘Bribery’

Anti-Corruption & Fraud – Weekly Industry News

December 4th, 2013
in Anti-Corruption / FCPA, Legal Conferences, Litigation, Regulatory Compliance and Trade |

Comment: Australia must strike a higher note on anti-corruption, by Fleur Johns and David Hertzberg, Posted on SBS

Australia’s anti-corruption legislative framework is meek compared to the US and the UK, with concerning implications for our global business dealings and diplomatic relations. Renewed claims before the Victorian Supreme Court that Leighton Holdings engaged in corrupt practices, allegedly paying a $42 million kickback to Iraqi officials, have once again called into question the scope and effectiveness of Australia’s anti-corruption laws. [Read More...]


Wide-ranging corruption scandal hits Polish ministries, Posted on TheNews.pl

A former deputy minister of the interior in Poland is among a group of officials to have been arrested on bribery charges in the “biggest scandal in the history of Polish kickbacks”. His arrest concerns contracts for the purchase of IT equipment for the ministry of the interior, as well as for the country’s Police Headquarters (KGP). A top official at Poland’s statistical office (GUS) has also been arrested. “This is the biggest scandal in the history of Polish kickbacks,” spokesman for Poland’s anti-corruption unit (CBA) Jacek Dobrzynski told the Gazeta Wyborcza daily. [Read More...]


Eastern Partnership: is fighting corruption in eastern europe compromised? By Nienke Palstra, Posted on TransparencyInternational.eu

The European Union summit planned for 28-29 November in Vilnius, Lithuania was supposed to see four eastern European countries embrace a reform process that leads to greater integration with western economies and progress in the fight against corruption. [Read More...]


Major UN conference underscores universal stake in ending corruption, Posted on UN News Center

30 November 2013 – The rule of law, governance, profits and livelihoods all suffer from corruption’s corrosive effects, a senior United Nations official said at the conclusion of the world’s largest biennial anti-corruption gathering, which this year took place in Panama City. “We all have a stake in ending corruption,” a declared John Sandage, Director of the Division for Treaty Affairs of the UN Office on Drugs and Crime (UNODC), underscoring that the resolutions passed during the Fifth Session of the Conference of the States Parties to the United Nations Convention against Corruption would help lay the groundwork for strengthening partnerships to prevent and combat the scourge. [Read More...]


NZ tops Global Anti-Corruption Perceptions Index, Posted on Voxy

The Transparency International Secretariat in Berlin today released its annual Global Corruption Perceptions Index. The Index, which ranks the public sector of 177 countries across the world, has consistently shown New Zealand as a country with a strong reputation for clean government. In 2013, New Zealand ties with Denmark for first place due to strong access to information systems and rules governing the behaviour of those in public positions. [Read More...]


Corruption list puts Spain six points lower on scandals, Posted on BBC News

A key global survey of international perceptions of official corruption has put Spain down six points to 40th place after a series of recent scandals. Only Syria, in the middle of a civil war, lost more points in the survey, carried out by the Berlin-based Transparency International. The list of 177 countries put Denmark and New Zealand top with 91 out of 100. The UK is ranked in 14th place, up from 17 last year, with a score of 76 points out of 100. [Read More...]


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Anti-Corruption & Fraud – Weekly Industry News

November 27th, 2013
in Anti-Corruption / FCPA, Legal Conferences, Litigation, Regulatory Compliance and Trade |

Officials, others held in Poland over corruption, Posted on Boston.com

WARSAW, Poland (AP) — Eighteen people including current and former state officials were detained in Poland on Tuesday on suspicion of large-scale corruption, investigators said. The detentions are a blow to the government of Prime Minister Donald Tusk, which is seeking to improve its image halfway through its second term. A government reshuffle is expected Wednesday. [Read More...]

Romania, Moldova strengthen anti-corruption efforts, By Paul Ciocoiu, Posted on Southeast European Times

Moldova and Romania are strengthening co-operation against corruption to help the former Soviet republic in its EU accession process. Romania’s National Anticorruption Department and Moldova’s National Anticorruption Centre (CNA) ran a joint anti-corruption operation last month, arresting more than 50 customs officials and border police officers on both sides. Authorities and experts say the operation was the largest joint anti-corruption action so far between the two countries and that professionals on both sides have intensified co-operation, exchanging information and experience. [Read More...]


Qld govt sacks anti-corruption committee, By Stephanie Smail, Posted on ABC News

In the final hours of the parliamentary year, the Queensland Government sacked the entire committee that oversees the state’s corruption watchdog. It follows a bitter dispute between the Government and the committee after the committee questioned the independence of the Crime and Misconduct Commission boss, who has publicly backed Queensland’s tough new anti-bikie laws. [Listen to the audio file]


OECD Draws on Siemens Corruption Experience With Force Head, By Alex Webb, Posted on Bloomberg Business Week

Siemens AG (SIE)’s Klaus Moosmayer has been appointed by the Organization for Economic Co-operation and Development’s business advisory committee as its anti-corruption taskforce head, drawing on the German company’s experience fighting graft. Moosmayer, Siemens’s chief counsel for compliance issues since 2010, will co-ordinate the Business and Industry Advisory Committee’s efforts to tackle corruption, the Munich-based company said in a statement. He was first given a role tackling sleaze at Europe’s largest engineering company in 2007, the same year a new chief executive officer was hired to clean up after a bribery scandal. [Read More...]


‘Mega corruption network’, Posted on PressEurop

three-year investigation conducted by the Central Anti-corruption Bureau (CBA) and international police forces has revealed a gigantic network of corruption, including slush funds used by several international IT firms to bribe ministry officials responsible for awarding IT tenders, reports Rzeczpospolita. [Read More...]



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Anti-Corruption & Fraud – Weekly Industry News

November 19th, 2013
in Anti-Corruption / FCPA, Legal Conferences, Litigation, Regulatory Compliance and Trade |

UK Bribery Act, By Daniel Hunter, Posted on FreshBusinessThinking.com

Only 17% of UK accountants believe the UK Bribery Act 2010 has given confidence to small and medium-sized businesses (SMBs) that they will not have to compete with or encounter corrupt business practices, a research report from ACCA (the Association of Chartered Certified Accountants) reveals today (Tuesday). Combating bribery in the SME sector: the UK findings polled ACCA’s UK membership to revisit original research conducted in 2007. [Read More...]


UK bribery: construction in the cross-hairs, By Eoin O’Shea, Charles Hewetson, Rosanne Kay and George Brown, Posted on Lexology

The UK’s Serious Fraud Office has made clear that its anti-bribery investigations are focussed on two industries in particular: construction and energy. Construction firms especially are under-prepared for the risks which this new approach will bring, and need to take action quickly. Making a Clean Sweep In a recent speech, David Green, Director of the SFO, said that the agency would adopt a “sweep” approach and focus on specific industries. The sweep approach involves seeking out intelligence, including by covert means, to identify businesses which might be breaking the law. [Read More...]


Govt cracks down on union corruption, Posted on Sky News

Unions that mismanage members’ money could face fines of more than $1 million under new federal legislation to crack down on bad behaviour. The coalition government had foreshadowed the move, saying union officials should face the same penalties as company directors. Government house leader Christopher Pyne introduced the legislation on Thursday in parliament and linked the move to allegations of misuse of Health Services Union member’s funds against former Labor MP Craig Thomson and party boss Michael Williamson.[Read More...]


Plea to foreign anti-corruption agencies: Do your homework on Ukraine, By Halyna Senyk, Posted on Kyiv Post

The release of the Organized Crime Observatory interim report on corruption and organized crime in Ukraine earlier this month makes one wonder whether at least some foreign experts help or hurt fighting corruption. The Organized Crime Observatory is a Swiss-based nongovernmental organization commissioned by the European Commission to do a thorough research on corruption and organized crime in Ukraine in order to inform the European Union on the readiness of Ukraine to sign the association agreement. Those who knew about the world-class experts engaged in this report, such as Louise Shelley, Judith Deane or Pedro Gomez Pereira, were dying in anticipation to see it. [Read More...]


World Bank President Jim Yong Kim Makes Pitch To CEOs For Africa Investment: WSJ CEO Council, By Nat Rudarakanchana, Posted on International Business Times

World Bank President Jim Yong Kim touted African economies and investments on Tuesday, inviting dozens of U.S. CEOs to explore African investment opportunities with him at an annual summit of business executives. “If you look back, over the last five or six years, even Africa had over 5 percent growth rates,” said Kim at the Wall Street Journal’s CEO Council in Washington, D.C., on Tuesday, highlighting bright spots among emerging economies. He pointed to the West African nation of Burkina Faso as one interesting spot, with “great” leadership and a growing private sector. [Read More...]


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C5’s forum Managing Third Party Relationship Risks

August 31st, 2012
in Anti-Corruption / FCPA, Legal Conferences, Regulatory Compliance and Trade |

When: Tuesday, October 23 to Wednesday, October 24, 2012

Where: Hotel Lutetia, Paris, France

Attend C5’s forum Managing Third Party Relationship Risks, and join over 30 leading in-house counsel, ethics and compliance executives, and internal auditors from some of the largest multinational companies who will take you through the essential do’s and don’ts for detecting and minimising all risks associated with engaging third parties. Hear new insights on maintaining strict controls through the duration of the contract by taking into account different potential risks according to the third party’s location, function and industry.

  • You will get a cross-industry perspective on the best practices your company should use to spot potential risks including Corruption and Bribery, Economic Sanctions, Export Controls, Anti-Trust as well as general financial, commercial and reputational risks at the beginning of the relationship.
  • You will learn how global organisations are revisiting their third parties’ risks profiles, mid-relationship, and doing more focused due diligence and monitoring exercises on areas of potential exposure.
  • You will gain practical pointers on how to test and detect whether your third party programmes have properly captured all possible risks and how to maintain adequate checks throughout the life of the relationship.

Have your questions answered and gain practical guidance from leading compliance executives who have seen it all, including:

  • Timur Khasanov-Batirov, Chief Compliance Officer, DTEK (Ukraine)
  • Deniz Kuban, Head of Legal, Genel Energy (Turkey)
  • Jean-Daniel Lainé, Senior Vice-President, Ethics & Compliance, Altsom (France)
  • Amanda Wiltshire, Group Third Party Partner, Director, De La Rue plc (UK)
  • Richard Battaglia, Former Senior Counsel, BP (USA)
  • Jean Claude Najar, General Counsel France & Senior Counsel EMEA, GE (France)
  • Johanne Peyre, Head of Antitrust Europe, Michelin (France)
  • Gary Parkin, Chief Financial Crime & Regional Sanctions Officer, Europe, Chartis Insurance
  • Simon Jenvey, Global Life Compliance Officer, Group Compliance, Zurich Insurance Company
  • Kees van Ophem, General Counsel & VP – Corporate Management, Leica Microsystems GmbH
  • Sam Tate, Managing Counsel, Legal and Regulatory, BP plc
  • John Lowe, General Counsel and Communications Director, Qioptiq
  • Christophe Celerier, Associate General Counsel, Trust & Compliance Officer, IBM Europe
  • Daniel Sandmann, Head of Compliance Policy, Communications & Regulatory Affairs, Group Compliance, Allianz SE (Germany)
  • Poju Adedeji, Legal and Compliance Officer, Baker Hughes (France)
  • Caroline Visser, VP Global Head of FICS Fraud Investigations and Compliance Services, Philips Internal Audit (The Netherlands)

Plus! To enhance your learning experience, do not forget to sign up for our Pre Conference Interactive Workshops, Monday 22nd October 2012:


Responding to Red Flags Mid-Relationship: How to Conduct an Effective Investigation and Extricate your Company from Potential Exposure


Top Techniques for Performing Thorough Due Diligence Checks in Preparation for Completing a Merger & Acquisition (M&A) or Forming a Joint Venture

For more details please download the BROCHURE

How To Risk-Base Supply Chain Vendors Under The FCPA

November 17th, 2010
in Anti-Corruption / FCPA, Expert Guest Blog Entries, Regulatory Compliance and Trade |

What are the methods to assess the risks of your Supply Chain vendors? Other than perhaps financial due diligence, such as through Dun & Bradstreet or quality control through your QHSE group, the Supply Chain probably does not command your Compliance Department attention as do other types of third party business partners such as agents, distributors and joint venture partners. This may be coming to an end as most Compliance Professionals recognize that third parties which supply goods or services to a company should be scrutinized similarly to other third party business partners. In the recently released Deferred Prosecution Agreement with Panalpina and six other oil-field service companies, the Department of Justice specifically noted that regarding business partners, such as Supply Chain vendors, a company should, ”it should institute appropriate due diligence” so as to help ensure compliance with the FCPA.

However to initiate “appropriate due diligence” a company must first rate the compliance risk of any third party, such as a Supply Chain vendor. The risk rating will inform the level of due diligence required. There are several methods that could be used to assess risk in the area of supply chain and vendors. The approach suggested by the UK’s Financial Services Authority (FSA) in its settlement of the enforcement action against the insurance giant AON would refer “to an internationally accepted corruption perceptions index” such as is available through Transparency International or other recognized authority. The approach suggested by the Department of Justice, in Release Opinion 08-02 would provide categories of “High Risk, Medium Risk and Low Risk”. Finally, writing in the FCPA Blog, Scott Moritz of Daylight Forensic & Advisory LLC has suggested an approach that incorporates a variety of risk-assessment tools, including, “the strategic use of information technology, tracking and sorting the critical elements”.

This commentary proposes an approach which would incorporate all three of the above cited analogous compliance areas into one risk-based assessment program for supply chain vendors. Based upon the assessed risk, an appropriate level of due diligence would then be required. The categories suggested are as follows:

1. High Risk Suppliers;

2. Low Risk Suppliers;

3. Nominal Risk Suppliers; and

4. Suppliers of General Goods and Products

A.        High-Risk Suppliers

A High-Risk Supplier is defined as a supplier which presents a higher level of compliance risk because of the presence of one or more of the following factors:

1. It is based in or supplies goods/services from a high risk country;

2. It has a reputation in the business community for questionable business practices or ethics; or

3. It has been convicted of, or is alleged to have been involved in, illegal conduct and has failed to undertake effective remedial actions.

B.        Low-Risk Suppliers

A Low-Risk Supplier is defined as an individual or private entity located in a Low-Risk Country which:

1. Supplies goods or services in a Low-Risk Country;

2. Is based in a low risk country where the goods or services are delivered, it has no involvement with any foreign government, government entity, or Government Official; or

3. Is subject to the US FCPA and/or Sarbanes-Oxley compliance

C.        Minimal-Risk Suppliers

A Minimal-Risk Supplier is an individual or entity which provides goods or services that are non-specific to a particular job or assignment and the value of each transaction is USD $10,000 or less. These types of vendors include office and industrial suppliers, equipment leasing companies and such entities which supply such routinely used services.

D.        Suppliers of General Goods and Products

A Supplier of General Goods and Products is an individual or entity which provides goods or services that are widely available to the general public and do not fall under the definition of Minimal-Risk Supplier. These types of vendors include transportation, food services and educational services providers.

This proposed rating is but one method to allow a company to assess its risks involving its Supply Chain vendors. As has been noted in both the Consultative Guidance to the United Kingdom Bribery Act and in the Panalpina settlements, both documents list the risk rating as a key component of a best practices anti-corruption and anti-bribery compliance program. A company need not engage in full due diligence for all Supply Chain vendors. However it must implement and follow a system to rate each vendor for that vendor’s FCPA compliance risk and evaluate and manage that relationship accordingly

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2010

The Six Principles of a Best Practices Anti-Corruption Program Under the UK Bribery Act Guidance Part I

September 23rd, 2010
in Anti-Corruption / FCPA, Expert Guest Blog Entries, Regulatory Compliance and Trade |

By: Thomas R. Fox

Last week the United Kingdom’s Ministry of Justice released its “Consultation on guidance about commercial organisations preventing bribery (section 9 of the Bribery Act 2010)”. The stated purpose of this document is to provide guidance, as required under section 9 of the Act, to “support businesses in determining the sorts of bribery prevention measures they can put in place.” Businesses covered by the UK Bribery Act can be convicted of a criminal offence if they fail to prevent bribery on their behalf. However, the Act provides that if the organization can show that it has adequate bribery prevention procedures in place, such “adequate procedures” are a defense to a prosecution.

The Consultation lists “Six Principles for Bribery Prevention” which the Ministry of Justice believes are good international practices for such adequate procedures and is designed to assist businesses in determining what bribery prevention procedures they can put in place. In this posting, we will provide a review of Principles 1 and 2. In subsequent postings we will review the remaining four Principles.

Initially it should be noted that the Six Principles are designed to be result oriented and to allow a flexible approach to ethics and compliance. US practitioners will observe this is in contrast to the US approach, which is much more rules based. The UK approach is to allow each company to tailor its policies and procedures so that they are proportionate to the nature, scale and complexity of its activities. Clearly there is a huge variety of circumstances; small and medium sized organizations will, for example, face different challenges compared to large multi-national enterprises. As a result, the detail of how each company addresses these principles will vary, but the outcome should always be robust with effective anti-bribery systems and controls.

PRINCIPLE 1: Risk Assessment

The commercial organisation regularly and comprehensively assesses the nature and extent of the risks relating to bribery to which it is exposed.

The foundation of understanding the corruption risks which a business can face is the keystone of any compliance and ethics program. Bribery and corruption risks evolve over time therefore a company’s approach to risk assessment must also grow. While the type of risk assessment procedures can vary greatly from industry-to-industry and company-to-company depending on such factors as the size of a company, its customers, markets and suppliers, there are certain risk factors, noted below, which a company should consider for a risk assessment procedure.

A. Expertise-as an initial assessment, a company must determine whether it has the in-house expertise to conduct an appropriate risk assessment or whether external professional consultants should be employed to do so.

B. Underlying data-each company must choose the most reliable data to form the basis of the risk assessment. Types of data could include annual audit reports, internal investigation reports, focus groups and staff/client/customer complaints; and by analyzing publicly available information on corruption issues in particular sectors or overseas markets and jurisdictions.

C. Key bribery risks

1.        Internal Risk – this could include deficiencies in

  • employee knowledge of a company’s business profile and understanding of associated bribery and corruption risks;
  • employee training or skills sets; and
  • the company’s compensation structure or lack of clarity in the policy on gifts, entertaining and travel expenses.

2.        Country risk – this type of risk could include: (a) perceived high levels of corruption as highlighted by corruption league tables published by reputable Non-Governmental Organizations such as Transparency International; (b) factors such as absence of anti-bribery legislation and implementation and a perceived lack of capacity of the government, media, local business community and civil society to effectively promote transparent procurement and investment policies; and (c) a culture which does not punish those who seeks bribes or make other extortion attempts.

3.         Transaction Risk – this could entail items such as transactions involving charitable or political contributions, the obtaining of licenses and permits, public procurement, high value or projects with many contractors or involvement of intermediaries or agents.

4.         Partnership risks – this risk could include those involving foreign business partners located in higher-risk jurisdictions, associations with prominent public office holders, insufficient knowledge or transparency of third party processes and controls.

After the appropriate Risk Assessment, as guided by Principle 1, a company should look to Principles 2 to 6 on how the risk assessment will inform the development, implementation and maintenance of effective anti-bribery policies and procedures. The UK Government is clear that a static Risk Assessment is insufficient, therefore as a business evolves, or external circumstances change, a company will need to ensure that it is devoting sufficient resources to the assessment and mitigation of bribery and corruption risks as they emerge. For example, a small or medium sized company which enters a new market in a part of the world in which it has not done business before and therefore uses intermediaries and agents, may not be able to rely on anti-bribery policies designed for domestic purposes.


PRINCIPLE 2: Top level commitment

The top level management of a commercial organisation (be it a board of directors, the owners or any other equivalent body or person) are committed to preventing bribery. They establish a culture within the organisation in which bribery is never acceptable. They take steps to ensure that the organisation’s policy to operate without bribery is clearly communicated to all levels of management, the workforce and any relevant external actors.

This is the classic “Tone at the Top” requirement. Top leadership must commit, in word and deed, to a zero tolerance towards bribery and corruption, or to paraphrase the Dallas Cowboys former coach Jimmy Johnson “You can talk the talk, but you gotta walk the walk”. Those persons at the top of any business are in the best position to foster a culture of integrity where bribery is unacceptable within the organization. Effective leadership in bribery prevention will take a variety of forms depending on the circumstances in which an organization does business, but, by way of example, the kinds of leadership procedures that may be effective include:

1.          Releasing a statement of commitment to counter corruption in all parts of the company. Such a statement should include commitments to carry out business fairly, honestly and openly.

2.          Adopting a zero tolerance policy towards bribery and corruption and publicly announcing the consequences of engaging in such prohibited behavior for employees and management.

3.          Extending this proscription to all business partners through anti-bribery and corruption terms and conditions in each contract with said business partners.

4.          Lastly, and very interestingly, this Principle would require companies to avoid doing business with others who do not commit to doing business without bribery. This requirement would mandate that a top-level statement may be made public and communicated to subsidiaries and business partners.

In addition to these factors listed above, there must be a clear commitment against bribery in a company’s management structure and, as such, this commitment must be embedded into a company a culture of compliance. This should include such things as the personal involvement of top-level managers in developing a code of conduct or ensuring anti-bribery and anti-corruption policies are published and communicated to employees, subsidiaries and business partners.  Maintenance of a clear top-level commitment to anti-bribery policies may be assisted by the appointment of a senior manager to oversee the development of an anti-bribery program and to ensure its effective implementation throughout a business.

The UK Government has provided a very useful tool for any company which desires to measure its current compliance and ethics program. While this Consultation only deals with the UK Bribery Act’s requirements, it could also be a valuable and welcome tool for companies subject to the US Foreign Corrupt Practices Act (FCPA) in measuring their FCPA compliance policy. The information presented in the Consultation may well form  the best practices in the arena of anti-bribery and anti-corruption compliance programs. US companies can and should use this Consultation as a guidepost for not only their US FCPA-centric compliance programs but to enhance the program for any UK subsidiary that will be governed by the UK Bribery Act.


Part 2 is available here

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com

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TOP 3 FCPA HITS OF 2010, Part I. Guest blog entry by Thomas Fox

July 14th, 2010
in Anti-Corruption / FCPA, Expert Guest Blog Entries, Regulatory Compliance and Trade |



As we enter the second half of 2010 it is time to review what we believe to be three of the more significant Foreign Corrupt Practices Act (FCPA) matters which came to significant public attention in the first half of this year. In Part I, we will review the Gun Sting case; in Part II we will review the (Ding Dong) Avon Calling matter revolving around its China operations; and in Part III, we will discuss the case of the HP German subsidiary alleged paying bribes to obtain a contract in Russia. In each case we will set out the significant facts as they have been reported to-date and discuss some of the lessons learned for the Chief Compliance Officer which he may put to use in the day-to-day running of a FCPA compliance program.

  1. The Facts

On January 18, 2010, on the floor of the largest annual national gun industry trade show in Las Vegas, 21 people from military and law-enforcement supply companies were arrested, with an additional defendant being later arrested in Miami. The breadth and scope was unprecedented. Assistant Attorney General for the Criminal Division of the US Department of Justice (DOJ), Lanny Breuer, who led the arrest team, described the undercover operation as a “two-and-a-half-year operation”. The arrests represented the largest single investigation and prosecution against individuals in the history of the DOJ’s enforcement of the FCPA.

Individuals from the UK, US, Israel and even Peru were caught up in this sting operation. This enforcement action also had the cooperation of several international anti-corruption agencies in the execution of search warrants. It has been reported that over 150 federal enforcement agents were involved in this case during the pendency of the investigation and the arrests. The scope of personnel and the amount of money involved in this case make clear that the US government will expend considerable manpower and financial resources to enforce the FCPA.

As explained in the indictments, one FBI special agent posed “as a representative of the Minister of Defense of a country in Africa (Country A), later identified as Gabon” and another FBI special agent posed “as a procurement officer for Country A’s Ministry of Defense who purportedly reported directly to the Minister of Defense”. Undercover criminal enforcement techniques such as wire taps, video tapes of the defendants and a cooperating defendant were all used in the lengthy enforcement action. In a later indictment, and seemingly unrelated to the “Africa” part of this undercover sting operation, allegations were included that corrupt payments were made to the Republic of Georgia to induce its government to purchase arms.

  1. Take-Aways for the CCO

But what does all of this mean for the Chief Compliance Officer (CCO) sitting in his office in the US? It should mean quite a bit. There are several lessons from which you can learn and immediately implement in your FCPA compliance program if you have not previously done so.

  • High Risk Country. The undercover FBI agent was represented to be a sales agent who the defendants believed represented the Minister of Defense for Gabon. Any agent or transaction involving an agent in West Africa should receive heightened scrutiny as it is a high risk country. Any transaction involving an agent, a 20% commission or anything that remotely seems unusual should require Compliance Department involvement at some level. Procedures should be put in place to routinely Red Flag any such transactions for further review
  • Sales Agent Due Diligence. As the Sales Agent was an FBI agent posing as a corrupt foreign governmental official, it would appear that little-to-none due diligence was performed on the proposed agent. Such an approach (clearly) invites FCPA liability. All sales agents should receive the highest level of investigation, internal evaluation, contractual obligation and post-contract signing by management going forward. If your choices are close the deal without performing adequate due diligence OR walking away from the deal because of adequate due diligence, it is far better to complete the due diligence process than to close the business transaction without adequate risk analysis through the due diligence process. As noted with Number 1 above ( Take-Aways for the CCO), any transaction in West Africa should have heightened scrutiny and any agent from this area of the world should be subjected to the current ‘best practices’ of sales agent due diligence, review
  • Commission Amount. In this case, an agent, who for doing very little or nothing, was to receive a commission of 20% which is clearly above the standard and should have raised a Red Flag. Further, it was made clear that at least part of the commission would be paid as a bribe. Any commission should be reviewed by not only the Legal or Compliance Departments in a company but also by internal audit to assure that it is not out of line with other commissions paid. If required external forensic auditors should be brought into to review the proposed transaction.

The Gun Sting case and its aftermath may well be with us for sometime. All we can say, with any certainty, is that more will be revealed.

-Thomas Fox, Principal at tomfoxlaw.com and Advanced Compliance Solutions

Proceed to part II of Top 3 FCPA Hits Of 2010

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