FCPA Boot Camp

© 2010 Fluor. All Rights Reserved.

FCPA Compliance Best Practices

ACI’s 7th Annual FCPA Bootcamp

Jacki Trevino

Jay Martin

Jay is the Vice President, Chief Compliance Officer and the Senior Deputy General Counsel for Baker Hughes Incorporated (“BHI”). Prior to joining BHI, Mr. Martin was a Shareholder at Winstead Sechrest & Minick P.C., a Partner at Phelps Dunbar and Andrews & Kurth, and the Assistant General Counsel of Mobil Oil Corporation’s Worldwide Exploration and Production Division in Fairfax, Virginia. Mr. Martin has also served as General Counsel of Mobil Natural Gas, Inc. in Houston, Texas. Mr. Martin holds JD, MPA and BBA degrees from Southern Methodist University in Dallas, Texas.

While in private practice, Mr. Martin was engaged in a wide variety of domestic and international energy transactions, and regulatory matters for natural gas exploration and producing companies, oil field service companies, marketers, pipelines and refiners. Mr. Martin’s practice involved such diverse matters as participating in generic federal and state restructuring proceedings in the natural gas and electric industries, drafting virtually every type of domestic and international oil and gas agreement, working on mergers and acquisitions, asset acquisitions and divestitures, handling a significant number of energy lending transactions including but not limited to mezzanine and conventional production based financings and work-out situations, and advising clients on a wide variety of natural gas marketing and processing matters. Mr. Martin also regularly handled problems for clients arising under the Foreign Corrupt Practices Act, the U.S. Economic Sanctions Laws and Arab Boycott Regulation. In addition, Mr. Martin developed broad experience in crisis management, designed corporate compliance programs for clients, and conducted many types of internal investigations for clients.

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About Jay G. Martin

Jacki is currently the Senior Manager, Corporate Compliance at Fluor Corporation. Prior to joining Fluor, she was the Chief Compliance Officer at Global Compliance, where she was responsible for the development, administration and management of Global Compliance’s internal ethics and compliance program. In addition, Jacki was actively involved in consulting with Global Compliance’s clients to assist them in building effective compliance programs.

Jacki also spent seven years as the Assistant Director, Global Ethics & Compliance at Dresser, Inc. Jacki was integral in the creation of Dresser’s ethics and compliance program including the design and implementation of a new Code of Conduct and an ethics and compliance training program. She also developed and implemented global ethics and compliance policies and procedures, established a program to manage third parties, and managed internal investigations of reported business misconduct.

Jacki was one of the first in the industry to obtain the certification of Certified Ethics and Compliance Professional (CCEP). She has long been an active leader in the ethics and compliance community and an active member with the Ethics and Compliance Officer Association (ECOA), the Society for Corporate Compliance and Ethics (SCCE), the Practicing Law Institute (PLI) and The Conference Board. Additionally, Jacki is a frequent speaker on ethics and compliance industry speaking agendas and webinars. Her areas of expertise within global ethics and compliance include program design, development, implementation and management.

About Jacki D. Trevino

FCPA Guidance

“To avoid being held liable, U.S. companies are encouraged to exercise

due diligence and to take all necessary precautions to ensure that they

have formed a business relationship with reputable and qualified partners

and representatives.” “The Lay Persons Guide to the FCPA”

published by the United States Department of Justice

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“In appropriate circumstances, [the] DOJ and SEC may decline to pursue

charges against a company based on the company’s effective compliance

program, or may otherwise seek to reward a company for its program,

even when that program did not prevent the particular underlying FCPA

violation that gave rise to the investigation.”

A Resource Guide to the U.S. Foreign Corrupt Practices Act

published by the United States Department of Justice

and the Securities and Exchange Commission

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Investigations and Prosecutions

Investigators focus on:

Are you acting in good faith?

Do you have a healthy, robust compliance program?

What is the likelihood of the offense reoccurring?

Did your compliance program uncover this issue?

Was there an appropriate response?

Was the issue widespread?

Was there prompt remedial action?

Was there a prompt and forthcoming voluntary disclosure?

How did you respond?

If this issue identified weaknesses in your compliance program, have they been

corrected?

Is your compliance program a paper or a “check the box” program only?

Elements of an Effective Anti-Corruption Compliance Program

Risk Assessment Commitment

Policies, Procedures,

Internal Controls Communication and

Training

Compliance

Infrastructure

Disciplinary Guidelines

Third Party

Accountability Monitoring and Auditing Review and Testing

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M&A Activity

Anticorruption: Elements of an Effective Compliance Program

Risk Assessment

Geographical and country risk

Interaction with governmental officials

Industry sectors of operation

Extent of third party usage

Importance of licenses and permits

Degree of governmental oversight and inspection

Volume and importance of goods and people clearing customs and

immigration


Strong, explicit and visible support

Appropriate measures to encourage and support a robust and effective

ethics and compliance program

Adequate funding

Adequate resources

Adequate support

Commitment


Dedicated that includes designated responsibility to one or more senior

corporate executives for:

Implementation and oversight of policies, standards and procedures

“Compliance Officer” must have direct reporting obligations to independent

body such as:

Internal Audit

Board of Directors

Board of Director committee

Must have adequate level of autonomy from management, sufficient

resources and authority

Compliance

Infrastructure


Must be explicit, clearly articulated and visible

FCPA and other global anticorruption laws

Policies and procedures must include directives that “reduce the prospect of violations of

anticorruption laws and the company’s own compliance code.”

Cover policies toward “gifts, hospitality, entertainment, and expenses; customer travel,

political contributions; charitable donations and sponsorships; facilitation payments; and

solicitation and extortion.”

Applicable to all officers, directors, employees and third parties acting on behalf of the

organization

Internal controls to avoid and address potential violations of books, records and

accounting provisions

“Reasonably designed to ensure the maintenance of fair and accurate books, records and

accounts and ensure they cannot be used for the purpose of bribery or concealing such

bribery.”

Policies, Procedures,

Internal Controls


Must carry serious consequences for violations of anti-corruption laws,

compliance code, policies and procedures by

Directors, officers, employees, third parties

Reasonable steps to remedy harm and prevent further misconduct

Disciplinary Guidelines


Effective communication and periodic training on policies and procedures

to

Directors, officers, employees, third parties

Know and understand

Annual certification to certify compliance and training requirements

Communication and

Training


“Institute appropriate due diligence and compliance requirements

pertaining to the retention and oversight”

Inform third parties of the company’s commitment to abiding by laws and

ethics and compliance standards

Obtain “reciprocal commitment” reflecting understanding and acceptance

Agreements and contracts (including renewals) have proper anti-corruption

language and that the company may have the right to:

Audit

Terminate

Third Party

Accountability


Ongoing to ensure effectiveness

Directed to company’s key risk areas

Measure for effectiveness

Regular audits of books and records (including third parties)

Monitoring and Auditing


Designed to evaluate and improve effectiveness

At least once a year to assess relevant developments in international and

industry standards

Update and adapt policies, procedures, internal controls and compliance

program to ensure continued effectiveness

Review and Testing


Pre-closing activities should focus on:

Assessment of financial controls

Business locations

Use of third parties

Prior internal investigations

Compliance culture

Existence of policies, training and audit practices

Hotline reporting systems and action taken

Overall compliance structure

Post-closing activities should focus on:

Embedding compliance culture within newly acquired company

Training on key risk areas in a timely manner

Providing clear, concise and understandable polices and procedures

Setting the expectations early

Providing employees with an avenue to report violations and ask questions

M&A Activity

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Anti-Corruption Risk Areas for Engineering

and Construction Companies

♦ Third parties

♦ Geographic

♦ Interface with Government Officials

♦ Pre-Qualifications, RFP’s, MSA’s,

Export and Developmental Bank

Funding

♦ Contract Provisions

Code of Conduct

Compliance Programs

Training Requirements

Procurement Protocols

Audit & Termination Rights

Damages for Violations

SUPPLIERS IN

EMERGING

MARKETS TEMPORARY

EMPLOYEES

SUBCONTRACTORS

INT’L

INTERMEDIARIES

DOMESTIC

AGENCIES

OFFSHORE

SERVICE

PROVIDERS

DATA

VENDORS

FOREIGN

DISTRIBUTORS

DEALERS /

RESELLERS

LOBBYISTS

AUDITORS

INT’L JOINT

VENTURES

PARTNERSHIPS

SUPPLIERS’

SUPPLIERS

CONTRACTORS

VENDORS DISTRIBUTORS

CONSULTANTS

JOINT

VENTURES

SUPPLIERS

AGENTS

FLUOR

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“This is an issue we're absolutely passionate about.

Corruption has a corrosive impact on market

opportunities and the general business climate. It

deters investment, curbs economic growth and

sustainable development, distorts prices and

undermines legal and judicial systems. Regrettably,

this situation is endemic in many areas of the world. It

is our responsibility and obligation to our stakeholders

and the global community to do what we can to

mitigate this challenge."

Remarks by Alan Boeckmann

ECOA 2007 Annual Business Ethics &

Compliance Conference

Los Angeles – September 26, 2007

Alan Boeckmann – Former Fluor Chairman

and CEO

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Fluor Compliance Policies, Guidelines &

Practices

♦ Code of Conduct

– Centerpiece to program

– Values and risk-based

– Learning aids

♦ HR Policies

– HR-720 Anti-Bribery & Corruption

– HR-705 Reporting, Investigations & Corrective Action

– Export Compliance Manual

♦ Guidelines

– Third-Party Expectations (Fluor’s Business Conduct and Ethics Expectations for Suppliers and Contractors)

– Sales & Marketing Toolbox: Legal/Contracts section regarding Agents

– Procurement Practices

♦ Project-specific practices

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Training Requirements

Code of Conduct Training

Periodic requirement of all salaried employees Must complete within 3 weeks of hire

Web-based program

Covers the key elements included in the Code of Conduct

Ethics Certification

Annual requirement of all salaried employees & all FGG employees

On-line certification; manual forms available

Employee acknowledges their acceptance to adhere to the Company’s Code of Conduct and Government Supplement if applicable

Provides an opportunity to disclose ethical concerns

Provides an opportunity to disclose potential conflicts of interest

Employment Law for Supervisors and Managers (new)

One-time requirement of all U.S. based supervisors/managers

How to handle C&E allegations and Employment Law

On-line course (approximately 60 minutes)

Live training (approximately 2 hours)

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Training and Communication

Risk Based Training & Communications

Targeted to employees in key business functions

Specific to areas of risk including:

Anti-corruption

Financial Integrity

Export Controls

Health, Safety and Environmental

Human Resource Topics

Face to face training

Articles

Merry Compliance and Happy Ethics

Fluor co-chairs anti-corruption workshop in New Delhi

Stop Corruption: Avoiding the Slippery Slope to Bribery

Fluor ranked top performer by TI in assessment of anti-corruption measures

Seaton and Boeckmann receive prestigious Mallan award

Financial Integrity: Expense Report Red Flags

What Would You Do? What is appropriate and what is forbidden? Test your Compliance & Ethics savvy with this hypothetical case.

Fluor’s Commitment to Combating Trafficking in Persons (TIPs)

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Results of Ethical Behavior – Bottom Line

♦ Win bids – outshine competitors ♦ Attract and retain top talent ♦ Access to capital ♦ Sustainability / Corporate Responsibility ♦ Avoid costs of damages, settlements, fines, fees… ♦ Awards

Winner of the 2007 Great Dallas Business Ethics Award

Top 100 list for World’s Most Ethical Companies in 2007, 2008, 2009, 2010, 2011 and 2012 (Ethisphere Magazine)

Earned distinction of “Ethics Inside Certified” in 2007 (Ethisphere Magazine)

Government Contractor Ethics 2008 Rankings (Ethisphere Magazine):

Number 3 for “Best Ethics Program Overall”

Number 2 of the 100 Largest Contractor Ethics Programs

Top 10 contractors for “Best Code of Business Conduct and Ethics”

Top 10 “Best Ethics Training and Communications Program”

Fluor CEO named one of the Top 10 Most Influential Leaders in Business Ethics in 2007 (Ethisphere Magazine)

Fluor named one of the 100 Best Corporate Citizens by the Corporate Responsibility Officers Association in 2009

Top 50 list for Most Admired Companies in 2004-2012 (Fortune Magazine)

Number 1 in Engineering & Construction category 2012

VP Corporate Compliance, named to “2009 & 2010 Attorneys Who Matter” list (Ethisphere)

Ranked 2009 "Best Overall Governance, Compliance and Ethics Program - small to mid-cap” (Corporate Secretary Magazine)

VP Corporate Compliance, named 2009 “Corporate Secretary of the Year – small to mid-cap” (Corporate Secretary Magazine)

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Other Training

♦ Live

– Anti-Corruption

– Export Compliance

♦ Web-Based

– Anti-Corruption

– Export Compliance

– Anti-Boycott

– Insider Trading

– Supervisory

♦ Under Development

– Conflicts of Interest

– Sales Program

– Procurement Program

– FGG

– many others

Due Diligence

Suppliers of Goods

Suppliers of Services

Agents

Project Specific Business Partners

On-Going Business Ventures (e.g. ICA Fluor)

Third Party Compliance Questionnaire

Enhanced Global Database Checks & Adverse Media Screen

Verification of Company Information Including Officers & Directors

Financial Review

Litigation Review

Criminal Records Check

Internal & External Interviews

Site Inspections

Basic OCR

Screen

Further DD

dependent on

risk profile *

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Investigation Protocols

The Investigation Protocols are general protocols that help ensure

consistency and high-quality, thorough investigations across Fluor. The

protocols focus on 5 key areas:

1. Opening & Categorizing the Case

2. Planning the Investigation

3. Executing the Investigation Plan

4. Determining Appropriate Follow-Up

5. Closing the Case

Investigating Departments Include:

♦ Corporate Security

♦ HSE

♦ HR

♦ Industrial Relations

♦ Internal Audit

♦ Law

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Joint Ventures – Red Flags

♦ Red Flags include: ■ Involves “high risk” jurisdiction known for corruption

■ Lacks experience with product, field or industry or qualified

staff

■ Objects to anticorruption contract provisions or

certifications

■ Reference checks reveal potential JV Partner’s flawed

background or reputation

■ JV Partner’s reliance on public officials to secure contracts

■ Unusual contract terms or payment arrangements

requested by JV Partner

■ Excessive, false or inadequately described payments

requests in JV books & records

■ Unusual or overly generous subcontracting arrangements

■ JV Partner offers preferential access to government

officials / government deals

♦ Mitigation and Solutions

include: • Ensure Senior Manager board role /

seat at table of JV Partner

• Enhanced due diligence of JV

Partner to detect undisclosed

violations

• Adequate monitoring regarding the

activities carried out within the JV

• Enhanced contract provisions

• Training

“Associated person” could include a joint venture partner (posing additional risk of liability for failure to prevent bribery)

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Agents, Advisors and Business Consultants

– Red Flags

♦ Red Flags include: ■ Agent is located or doing business in a

country with high levels of corruption

■ Objections to representations regarding

compliance with anti-corruption laws

■ Lacks experience with product, field or

industry or qualified staff

■ Disproportionate commission/fees/cash

payments onshore vs. offshore

■ Fees linked to a percentage of the project

cost or value

■ Request for money to be paid into a

personal or offshore bank account

■ Services detailed to be provided are

vague

■ Agent is a relative or close associate of a

present or former official

♦ Mitigation and Solutions include: • Justification for use of Agent

• Fees negotiated according to market

rates only

• "Ability to terminate” for identified breach

by Agent

• Enhanced due diligence screen

• Enhanced contract provisions

• Training

Agents can pose significant legal, regulatory and reputational risks. Anti-corruption laws impose implicit duty to vet its third parties.

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Suppliers – Red Flags

♦ Red Flags include: • Previously convicted of, or is alleged to have

been involved in illegal conduct

• Rising expenses for goods and services

• Increasing purchases from one vendor

• No division of duties between new vendor

approval and authorization for purchasing

• Contracts written to limit competition

• Same vendor wins contracts by small

margins

• Contract always goes to the bid received last

• Splitting one purchase into multiples to avoid

the approval process

• Paying above-market prices for goods or

services

♦ Mitigation and Solutions include: • Embed compliance principles and

signatory requirements within Internal

Procurement process

• Develop meaningful measurements to

analyze trends on vendor wins and

vendor concentration

• Instill mandatory RFP process (e.g. 3

estimates per contract)

• Audit rights

Suppliers which provide services should be scrutinized as business partners. Risk that such companies supply chain is from high risk countries.

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M&A – Red Flags

♦ Red Flags include: ■ Involves “high risk” jurisdiction known for

corruption

■ Objects to anticorruption contract

provisions or certifications

■ The target is heavily reliant on licenses, or

consents issued by the local government

■ Substantial volumes of the target’s

business is conducted through agents.

■ Deficient record and book-keeping

practices at target

■ Historic corruption inquiries relating to the

Target or Target's Senior Management

♦ Mitigation & Solutions include: • Extended due diligence to determine

undisclosed violations

• Risk profile for target based on volume of

sales & agents

• Negotiate protections for closing exposure

• Implement procedures to protect against

transfer of tainted assets/personnel

• Acquisition Representations & Warranties

Risk of becoming implicated in corruption charges based on inherited liabilities. Need to seek protection against the acquisition of tainted assets

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Conclusion

FCPA Boot Camp

Business

Transcript of FCPA Boot Camp