Due Diligence on Foreign Agents, Distributors, Consultant, Freight Forwarders...
Compliance A New Vision
1. Compliance-A New Vision
Thomas R. Fox-General Counsel, Drilling Controls, Inc.
IQPC Contract Risk Management Conference
Houston TX
May 29, 2008
2. Legal Disclaimer
The views stated herein
are solely those of the
author and are not those
of Drilling Controls, Inc.
or Aibel Group Ltd.
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3. Aibel and Deferred Prosecution Agreement
Aibel entered into a DPA with the US DOJ on
February 6, 2007, agreeing to:
Comply with all commitments made to US government.
Comply with all additional requirements.
Implement and monitor compliance program and
internal control procedures.
Compliance Counsel-Ray Bonoun
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4. FCPA-Why Enforcement?
FCPA enacted into law in 1977
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6. Compliance-Steps in Response
What did you do to stay out of trouble?
Code of Conduct
Hotline
Training
Due Diligence
What did you do when you found out?
Investigate
Internal v. External
What remedial action did you take?
Disciplinary Action
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Voluntary Disclosure
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Paul McNulty-Baker McKenzie General Counsel Seminar-April 1, 2008
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8. Costs
Financial Costs
Direct Financial Costs-standard commission of
10% but often higher.
Repeated Demands-once paid, precedent set.
No recourse-no control over outcome or how
money is used.
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Substandard business partners, sub-contracts or
suppliers.
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9. RISKS
In addition to the costs there are other Risks for
companies who do not operate ethically.
Risk of Blackmail
Risk of Violence
Political Risk
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Risk of Public Perception
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10. A New Vision- Positive Effects of Compliance
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11. Protect and Strengthen Sales, Brand
Image and Reputation
Companies should do more than just “give money”.
50% considered punishing a company based upon
its “social actions”.
30% avoided doing business with a company for its
“social actions”.
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(Environics International Survey)
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12. Protect the Company
M&A-Misrepresentations in merger agreement can lead to a
securities fraud claim. Titan Corporation
Wrongful Termination-failure to engage in illegal act. Sabin
Pilots
Franchisor Liability-more
than vicarious liability
Successor Liability-US entity
acquiring foreign entity
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Non-Controlling Investor in
Foreign Entity-FCPA does not
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distinguish between controlling
and non-controlling affiliation.
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13. Strengthen Employee Loyalty and Commitment
Only 6% of employees were inclined to stay when
they believed their leaders to be unethical.
(Walker Information Survey)
Employees who believe they work in an ethical
environment are 6X more likely to be loyal.
(Hudson Institute Survey)
Employees are generally more positive about their
work and have greater loyalty if they work for a
company with good values and ethical practices.
(Diener and Seligman, “Beyond Money” Psychological Science in the Public Interest, Vol. 5, No. 1, 2004))
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14. Avoid New and Additional Regulation
Enron/World Com/SOX
SOX and other regulatory changes as evidence of a
“frame shift” in which “all history is put through
a new lens” (Wall Street Journal, January 15, 2003)
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15. Weather the Storm with Integrity Capital
Companies with a demonstrated commitment to
ethical behavior can limit vulnerability to
shareholder and outside activist pressure due to
heightened credibility.
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16. Reduced Costs
Cost Reduction through Enhanced Communications:
Proactive and effective engagement with
shareholders.
Reporting identifies the effectiveness of
programs.
Reporting identifies priorities to insure the
greatest impact of available resources.
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Reporting to use as a benchmark for overall
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organizational effectiveness.
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17. Improved Attractiveness to Investors
Shareholders, particularly institutional investors
welcome increased disclosures.
A growing number include non-financial metrics in their
analysis on the quality of investments, such as corporate
governance.
75% of stakeholders believe that overall Board and Corporate
Governance factors as important as financial performance
for large institutional investors. (McKinsy/World Bank Large Institutional Investor Survey)
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Large institutional investors will to pay higher prices for
stocks of companies considered to be accountable. (McKinsy/World Bank
Large Institutional Investor Survey)
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18. Marketplace Advantages
Accountability makes market entry and
retention easier.
Know your customer.
Due diligence your suppliers, agents and business
partners.
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19. Supplier Due Diligence
Background research and inqueries required under
the Aibel Directive for certain Supplier Due
Diligence:
Certificate of Incorporation/Articles of
Incorporation.
Company Brochures or Other Promotional
Materials.
Annual Report.
Resumes of Senior Personnel.
Media Search Results-Google
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Media Search Results-Lexis/Nexis
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20. Supplier Due Diligence-cont’d
7.Boycott Data Base Search Results.
8. Special Designated Person (SDN) Data Base
Search Results.
9. Inquiry to Government Agencies and Other
Sources.
10. Certification Regarding Absence of Legal
Prohibitions.
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21. Supplier Due Diligence-cont’d
11.Report of In Person Interview.
12. Report of Business Reference Interview.
13. Report of Financial Reference Interview.
14. Comparative Fee Inquiry
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15. Annual Update
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