Guidance for creating and implementing a corporate FCPA compliance program.

1. IMPLEMENTING AN EFFECTIVE
FCPA COMPLIANCE PROGRAM

2. Introduction
•F o r e i g n C o r r u p t P r a c t i c e s A c t ( F C PA ) e n a c t e d i n 1 9 7 7 – U . S .
law that imposes civil & criminal penalties on corporations &
individuals that bribe foreign government officials
• R e c e n t l y, p e n a l t i e s f o r c o r p o r a t i o n s h a v e b e e n i n e x c e s s o f
$800M, while individuals have been sentenced to prison &
ordered to pay fines
• F C PA c o m p l i a n c e p r o g r a m s s h o u l d i m p l e m e n t e d a n d i n c l u d e
e d u c a t i o n , p r e v e n t i o n / d e t e c t i o n & r e s o l u t i o n o f a n y F C PA
issues

3. Recent Examples of FCPA
Enforcement
 In the past few years, FCPA enforcement has increased dramatically, as have the
penalties extracted from FCPA violators:
 Siemens AG - $1.6 Billion
 Siemens AG & three of its subsidiaries falsified corporate books and records and knowingly failed to implement and
circumvent existing internal controls
 BAE Systems - $400 Million
 Pled guilty to conspiring to defraud the U.S., violated the AECA and ITAR; one of the largest criminal fines in the history of the
DOJ’s ongoing effort to combat overseas corruption
 Charles Paul Edward Jumet – 87 month prison sentence
 Paid bribes to former Panamanian government officials to secure maritime contracts
 Daimler AG - $185 Million
 Charged with one count of conspiracy to violate the anti-bribery provisions of the FCPA; paid bribes to foreign
government officials through the use of corporate ledger accounts known internally as TPAs
 Made hundreds of millions of dollars worth of improper bribes to secure contracts with government customers for
the purchase of Daimler vehicles

4. Understanding the FCPA
T h e P r i m a r y o b j e c t i v e o f t h e F C PA i s t o d e t e r
corporations and individuals from bribing foreign
officials through:
1. Anti-Bribery Provisions
2. Books and Records provisions
3. Enforcement & Penalties

5. Anti-Bribery Provisions
 To Whom do the Provisions Apply?
 What are the Elements of an Anti-Bribery Violation?
 Any Exceptions or Affirmative Defenses to the Anti-
Bribery Provisions?

6. To Whom do the Provisions Apply?
1. Issuers
 Any entity that has securities registered with the SEC or is required to file
reports with the SEC (U.S. and foreign companies that trade on any of the
U.S. stock exchanges)
 Officer, director, employee, or agent of such issuer acting on issuers behalf
2. Domestic Concerns
 Individual who is a citizen national or resident of the U.S. or any organization
which has its principal place of business in the U.S.
3. “Persons other than Issuers or Domestic
Concerns”
 Individual or organization that while in the U.S. territory committed an act of
prohibited payment

7. What are the Elements of an Anti-Bribery
Violation?
U.S. Department of Justice must prove all of the
following to establish an anti-bribery violation:
1. Use of an instrumentality of interstate commerce
2. Made an offer, payment or promise to pay money or anything of value
3. An offer, promise, or payment to a foreign official, political party, party
official or candidate for foreign political office was made
4. Mad the prohibited payment “corruptly”
5. Mad the prohibited payment in order to assist in obtaining or retaining
business for or with anyone

8. Any Exceptions or Affirmative Defenses to the
Anti-Bribery Provisions?
 1 Exception:
 “Facilitating Payments” – often small in amount made to
“expedite/secure the performance of routine governmental
action by a foreign official”
 i.e. issuance of permits/licensing, visa processing, police
protection, mail delivery, scheduling of inspections, phone service
& cargo handling
 2 Exceptions
1. If an offer/payment is permissible under a written local
laws/regulations
2. The offer or payment is a reasonable bona fide expenditure

9. Books and Records Provisions
 Applies to issuers with 50.1% + interest in foreign
subsidiary
 Unlikely that prohibited payment will be
recorded/reported
 REQUIRES:
 Issuers keep books/records that fairly reflect transactions and
dispositions of assets
 System of internal accounting that provides reasonable
assurances that the transactions are properly authorized

10. Enforcement & Penalties
1. Who is Responsible for FCPA Enforcement?
 Department of Justice – criminal enforcement & civil
enforcement against concerns, foreign entities & individuals
 SEC – responsible for civil enforcement against issuers
2. What are the Penalties for an FCPA Violation?
 Criminal Penalties – fines & penalties
 Civil Penalties – fines depending upon the egregiousness of
the conduct

11. Components of an Effective
FCPA Compliance Program
1 . E D U C AT E M A N A G E M E N T A N D E M P L O Y E E S
2. PREVENT AND DETECT POTENTIAL ISSUES
3 . R E S O LV E A N Y F C PA I S S U E S

12. Education of Management & Employees
1. What are the FCPA risks of your company?
 Determine your company’s FCPA risk profile
2. What are your FCPA Policies?
 Create FCPA policies that are practical for your employees,
that are easy to read and located somewhere accessible by
all
 “Tone from the top”
3. Does your Company offer FCPA Training?
 Mandatory and regularly periodic FCPA training that
incorporates real-life examples

13. Prevention & Detection of Potential FCPA
Issues
1. Due Diligence
 Obtain as much background information as possible on
potential new agents; be cautious if any red flags pop up
 Important that FCPA compliance-related provisions are
incorporated into the contract with the agent
2. Audit
 Independent external auditor that performs periodic audits of
company’s financial and accounting controls
3. Board Reporting
 Company FCPA compliance officers should prepare annual
reports to the Board of Directors on the status/effectiveness
of their FCPA compliance program

14. Compliance Pitfalls
Foreign Affiliates Facilitation Payments
 U.S. companies may be  Not violations of FCPA
liable for the FCPA
violations of its foreign  Doesn’t provide specific max.
agents/subsidiaries allowable dollar amounts or list
type of officials and activities
 Acquisitions may introduce eligible
problems with foreign
company’s unfamiliarity with  Risky to leave foreign affiliates
FCPA regulations to setting their own facilitation
policies
 U.S. firms should enforce
their position on FCPA
compliance

15. Conclusion
 An effective FCPA compliance program involves
officers, directors, managers, and employees who
are committed to compliance
 A compliance program helps manage, detect, and
discipline FCPA violators
 A failure to develop & implement an effective FCPA
program can result in SIGNIFICANT criminal & civil
penalties – as we have recently seen!

16. About CHESTER PLLC
J.F. (Jim) Chester, JD/LL.M, Managing Attorney
www.chester-law.com
info@chester-law.com
877-34-WORLD (TOLL FREE)
214-988-9248
Advise entrepreneurs, start-ups, privately held companies with trademarks, copyrights, trade secret
protection, licensing & enforcement and assist companies in commercial transactions in the U.S. and
abroad