Foreign Corrupt Practices Act: Unexpected Liabilities For D&O Insurers
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Transcript of Foreign Corrupt Practices Act: Unexpected Liabilities For D&O Insurers
2010 PLUS International Conference
Foreign Corrupt Practices Act:Unexpected Liabilities
For D&O Insurers
2010 PLUS International Conference
The Round-Up…
MODERATOR:• Joseph P. Monteleone, Esq., Partner, Tressler, LLP
PANELISTS:• Robert Axelrod, JD, Director, Deloitte Financial Advisor
Services, LLP• Charles “Trey” W. Branham, III, Esq., Founder, Goldfard
Branham LLP• Kevin LaCroix, JD, RPLU, Partner, Oakbridge Insurance
Services, L.L.C. • Lisa A. Prager, Esq., Partner, Wilson Sonsini Goodrich & Rosati
2010 PLUS International Conference
What’s on Tap…
• Overview
• Plaintiff’s Perspective
• Compliance and Risk Management Issues
• Defendant’s Perspective
• D&O Insurance Implications
• Conclusion and Forecast
• Q&A
2010 PLUS International Conference
Overview
• Foreign Corrupt Practices Act Defined
• Anti-Bribery Component
• Accounting Controls
• Who Can Bring an Active Pursuant
• Relief Granted and How Measured Bribe-to-Fine Ratios
2010 PLUS International Conference
Plaintiff’s Perspective
• Impact on Securities Fraud Class Actions
• Impact on Shareholder Derivative Litigation
• Other Impacts on Civil Litigation
2010 PLUS International Conference
Plaintiff’s Perspective
“The failure of a board of directors to ensure that its company had an adequate corporate compliance
information and reporting system in place can “render a director liable for losses caused by non-compliance with
applicable legal standards.”
“The failure of a board of directors to ensure that its company had an adequate corporate compliance
information and reporting system in place can “render a director liable for losses caused by non-compliance with
applicable legal standards.”
In Re Caremark Int’l Derivative Litigation, 698 A.2d 959, 970 (Del. 1996)
2010 PLUS International Conference
Plaintiff’s Perspective
FCPA requires every issuer to “make and keep books, records, and accounts which in
reasonable detail accurately and fairly reflect the transactions and dispositions of assets”
15 U.S.C. §§78m(b)(4)-(5).
2010 PLUS International Conference
Plaintiff’s Perspective
Three Types of Record Keeping Offenses
1. Records that fail to record improper transactions at all (e.g. bribes and kickbacks)
2. Records that are falsified to disguise aspects of improper transactions otherwise recorded correctly
3. Records that correctly set forth the amounts paid, but that fail to record aspects which would reveal their illegality Complying with the Foreign Corrupt
Practices Act, Cruwer, Donald, 1999
2010 PLUS International Conference
Plaintiff’s Perspective
Types of Transactions Implicated
1. Payments to mid- or high-level foreign government officials
2. “Facilitating payments” to low-level foreign governments
3. Commercial bribes or kickbacks
4. Political Contributions
5. Charitable Contributions
6. Smuggling Activities
7. Income Tax Violations
8. Customs Violations
9. Extraordinary GiftsForeign Corrupt Practices Handbook, Tarun, Robert W., p.20
2010 PLUS International Conference
Plaintiff’s Perspective
Damage Theory
1. Investigation Costs
2. Lost Earnings
3. Lost Revenue
4. Civil Fines
2010 PLUS International Conference
Plaintiff’s Perspective
White v. Avon Products, Inc.Initial Damage Model
1. Investigation Costs - $130,000,000
2. Lost Earnings - $74,800,000
3. Lost Revenue - $10,000,000
4. Civil Fines - ????
Total Damages to Date: $214,000,000 +
2010 PLUS International Conference
Compliance and Risk Management Issues
• Department of Justice Enforcement• Securities & Exchange Commission Role• Recent Activity
Small Cases Big Cases
• Does It Pay to Self Disclose• Foreign Equivalents
2010 PLUS International Conference
Defendant’s Perspective
• Coordination
• Differing Impacts
• Impact on Loss Causation, Liability and Damages
2010 PLUS International Conference
D&O Insurance Implications
• Coverage Implications
• Conduct Exclusions
• FCPA-Specific Policy Provisions
• Insurability and Public Policy Concerns
• Claim Definition
• Policy Enhancements
2010 PLUS International Conference
Conclusion and Forecast
• Likelihood of Enhanced FCPA Activity
• New Legislative Developments
2010 PLUS International Conference
Questions&
Answers
2010 PLUS International Conference
Many Thanks To…
• Joseph P. Monteleone
• Robert Axelrod
• Charles “Trey” W. Branham
• Kevin LaCroix
• Lisa A. Prager