From PLI’s Course HandbookThe Foreign Corrupt Practices Act 2009: Coping with HeightenedEnforcement Risks#18499

3

SELECTED TRENDS IN ENFORCEMENTOF ANTI-CORRUPTION LAWSTHROUGHOUT THE WORLD

Margaret M. AyresBethany K. HippDavis Polk & Wardwell

Disclaimers and Suggested References: The outline

that follows provides a general overview of retiree

medical benefit VEBAs, with specific focus on the

VEBAs recently proposed by the Big Three U.S.

automakers. The author is by no means an expert on

medical benefit plans or VEBAs. Nor can the author

claim special insight into any aspect of the Big Three

VEBAs. The information in this outline is gleaned

entirely from public sources. For two very practical

references on retiree medical and VEBAs see: (1) the

ABA-JCEB teleconference “Shifting Retiree Health

Benefits from Employers to VEBAs” (December 6,

2007—available in archived teleconf format or CD), in

which Nell Hennessey, Douglas Greenfield, Karen

Handorf and Vicki Hood do a terrific job describing the

background on union retiree medical and the Big Three

VEBAs and (2) Jones Day Commentary—Who Killed

Yard-Man (Apr. 2007), a Jones Day client newsletter

Selected Trends In Enforcementof Anti-corruption LawsThroughout the World

Margaret M. AyresBethany K. Hipp

Davis Polk & Wardwell

February 27, 2009

Selected Trends In Enforcement of Anti-corruption LawsThroughout the World

Note: Much of the information contained in this outline is based on newspaper articlesand has not been independently verified.

1. Increased International Cooperation - Examples include:

o Alstom is under investigation by French, Swiss and Brazilian authoritiesfor suspicious payments in Asia and South America. The variousauthorities have agreed on a division of labor to avoid duplication ofeffort.

Wall Street Journal Law Blog, August 22, 2008

o Portuguese authorities and the U.K. Serious Fraud Office ("SFO") areworking cooperatively in the investigation of British property firm Freeport.

The Mail on Sunday, February 1, 2009

o U.K. and Danish authorities are jointly investigating DanishMissionpharma for alleged bribery in connection with a UN effort toprovide pharmaceuticals to Congo.

Financial Times, October 6, 2008

o Siemens Settlement: The U.S. Securities and Exchange Commission("SEC") press release acknowledged assistance from Munich PublicProsecutor, U.K. Financial Services Authority ("FSA"), and Hong KongSecurities and Futures Commission. The U.S. Department of Justice("DoJ") press release acknowledged mutual legal assistance provisionsin OECD Convention.

DoJ Press Release 08-1105; SEC Press Release 2008-294

o Halliburton/KBR settlement: The SEC acknowledged the assistance of"foreign authorities in Europe, Asia, Africa and the Americas." DoJindicated that "[s]ignificant assistance was provided by ... authorities inFrance, Italy, Switzerland and the United Kingdom."

DoJ Press Release 09-112; SEC Litigation Release 20897

o Swiss authorities have agreed to help Germany with the prosecution ofKarlheinz Schreiber, who is facing fraud, bribery and tax evasion chargesin Germany and awaiting extradition from Canada.

AP Worldstream, March 31, 2008.

o A Finnish-Slovenian joint task force is reportedly investigating Patria, aFinnish government-controlled defense contractor, for allegedly usingbribes to obtain a €278 million military contract for armored vehicles inSlovenia.

Helsingin Sanomat, November 14, 2008

o Credit/Recognition by U.S. authorities for other countries' monetarypenalties and payments

1. Siemens (2008) (Germany)

2. Flowserve (2008) (Netherlands)

3. Akzo Nobel (2007) (Netherlands)

4. Statoil (2006) (Norway)

o The Sino-U.S. Joint Liaison Group on Law Enforcement Cooperationestablished between China and the United States has brought lawenforcement cooperation in combating corruption within the scope of itswork and has conducted regular exchanges on relevant issues. Inaddition, the Supreme People's Procuratorate has reportedly committed

to cooperate with Interpol and the Sino-U.S. Joint Liaison Group in legalenforcement, including through judicial assistance, international arrests,repatriation, extradition and the return of assets.

Chinadaily.com.cn, July 16, 2008; UN Office on Drugs and Crime:http://www.unodc.org/documents/corruption/Best%20Practices/china.pdf

o The OECD holds annual meetings of prosecutors, with formal agendasand presenters, as well as quarterly meetings of the OECD WorkingGroup on Bribery. Prosecutors from the Fraud Section of the DoJ attendboth, along with prosecutors (and in some cases foreign ministrypersonnel) from other countries. These formal and informal gatheringsallow Fraud Section prosecutors and prosecutors from around the worldto get to know each other, which greatly facilitates cross-border,government-to-government cooperation on international bribery cases.

Summary of remarks of William Jacobsen at Houston, TX ACI Conference,January 26, 2009

2. Examples of Investigations in Multiple Jurisdictions

o Countries currently investigating potential violations by Halliburton/KBRof anti-corruption laws include France, Nigeria, Switzerland and the U.K.

KBR Annual Report (Form 10-K) (February 26, 2008); Halliburton Annual Report(Form 10-K) (February 22, 2008)

o Countries currently investigating potential violations by Siemens of anti-corruption laws include Argentina, Austria, Bangladesh, China, Greece,Hungary, Israel, Italy, Malaysia, Nigeria, Norway, Poland, Russia,Switzerland

Siemens Annual Report (Form 20-F) (December 2, 2008)

o Magyar Telekom is under investigation by U.S., Hungarian andMacedonian authorities in connection with consulting contracts inMacedonia.

Magyar Telekom Annual Report (Form 20-F) (December 31, 2007)

3. Examples of Increased Enforcement by U.K. Authorities

o Aon Ltd, the London subsidiary of Chicago-based insurer AonCorporation, agreed in January 2009 to a £5.25 million settlement withthe U.K. FSA for failure to prevent bribery and corruption in connectionwith its reinsurance business in a number of high risk countries. FromJanuary 2005 to September 2007, Aon Ltd's Aviation and Energydivisions are said to have used and paid third parties in order to securebusiness from clients, including state owned entities in such countries asBahrain, Bulgaria, Burma and Indonesia, notwithstanding the significantrisk that some of the money might be used for bribes. The fine wasreduced from £7.5 million in recognition of cooperation, early settlementand guilty plea.

FSA, Final Notice, January 6, 2009; The Evening Standard (London) January 8,2009

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o Balfour Beatty was fined £2.25 million in October 2008 in a "CivilRecovery Order" plea deal with the SFO in connection with overseaspayment accounting issues. This is the U.K.'s first use of a U.S.-styleplea bargain to encourage businesses to self-report.

ft.com, January 14, 2008, October 7, 2008; Times Online, Oct. 6, 2008.

o The Overseas Anti-Corruption Unit of the City of London Police ("OACU"),established in 2006, secured the convictions of Ugandan presidentialadvisor Ananias Tumukunde and former managing director of securitycontractor Niels Tobiasen. Tumukunde was sentenced to a year inprison. Tobiasen was given a five-month suspended jail sentence. Bothpleaded guilty. Tumukunde reportedly received £80,000 in bribes fromTobiasen. Notably, these are the first convictions for bribery in U.K.history. The OACU works closely with the SFO, operates a 24-hourreporting line, which permits anonymous tips of suspicious activity, andreportedly has 26 cases under investigation.

The Independent, Apr. 6, 2008; The Guardian, September 23, 2008, September27 2008; The Weekly Observer (Kampala), May 1, 2008; The Black Star News,May 11, 2008; ft.com, August 23, 2008.

o The U.K. Law Commission published a report recommending new anti-corruption statutes to replace the current law, which it called both "out-dated and in some instances unfit for [the] purpose."

U.K. Law Commission Report on Reforming Bribery, November 2008http://www.lawcom.gov.uk/docs/lc313.pdf)

o The SFO is investigating British engineering firm Smiths in connectionwith a possible role in a Japanese "golf-for-influence" scandal involvingYamada, an intermediary reportedly involved in deals to provide theJapanese Ministry of Defense with chemical warfare detection equipment.Japan's former Vice-Minister of Defense admitted accepting gifts valuedat over V12 million from Yamada employees, including numerous golfoutings and trips.

ft.com, August 17, 2008

o KBR's UK subsidiary and London lawyer Jeffrey Tesler are underinvestigation by the SFO in connection with allegations of paying bribesto Nigerian government officials to secure contracts for a gas productionplant in Nigeria.

The Times, September 12, 2008; September 6, 2008; The Guardian, Feb. 6,2004.

4. Examples of Increased Investigations and Enforcement in Other Countries

o Canada: Canadian oil and gas producer Niko Resources Ltd is underformal investigation by the anti-corruption unit of the Royal CanadianMounted Police, established in 2008. The investigation centers aroundallegations that Niko bribed senior officials in Bangladesh in return forfavoritism with respect to a Niko joint venture project with theBangladeshi government. Niko had earlier been investigated byBangladesh's Anti-Corruption Commission, which brought chargesagainst two former prime ministers who were ultimately imprisoned forconduct related to the joint venture.

Calgary Herald (Alberta), January 16, 2009

o

Finland: Finnish authorities are investigating Patria, a Finnishgovernment-controlled defense contractor, for allegedly using bribes to

3

obtain a €278 million military contract for armored vehicles in Sloveniaand military contracts in Egypt. Among those who have been arrested inconnection with the probe are the former Patria CEO, who resigned inAugust 2008, and a Patria marketing director, both of whom weredetained in November 2008 for two weeks. Finnish authorities haveinformed Slovenian police about the probe and a Slovenia parliamentarycommission opened an investigation. A Finnish-Slovenian joint taskforce is also reportedly working on the matter. Patria has stated that it iscooperating with the investigation. The Slovenian defense ministerwarned that if the Finnish police prove the allegations, it will cancel thecontract.

Agence France Presse, May 15, 2008; UPI, August 21, 2008; Agence FrancePresse, September 2, 2008; Agence France Presse, September 19, 2008

o France: As of December 2008, French prosecutors had brought 19 anti-bribery cases since it adopted the OECD Convention on CombattingBribery of Foreign Public Officials in International Business Transactions.Ten of those cases were brought in 2008.

Wall Street Journal, December 16, 2008

o Germany: As of December 2008, German prosecutors had brought 43anti-bribery cases since it adopted the OECD Convention, 39 of whichwere brought in 2008.

Wall Street Journal, December 16, 2008

o India: Russia's Technoprom Exports and Power Machines is underinvestigation by India's Central Bureau of Investigation and Interpol overalleged bribes paid for a boiler supply contract with NTPC Limited,India's largest power generation company, which is 89.5% owned by theGovernment of India.

MINT, June 17, 2008; November 24, 2008, November 25, 2008; December 4,2008

o Ireland: Irish authorities are investigating three companies in connectionwith the Oil-for-Food scandal and one individual for paying bribes inAzerbaijan and Oman. As of December 2008, there have been noprosecutions for foreign bribery in Ireland.

OECD Working Group on Bribery Phase 2bis report

o

Italy: Several executives of Total's Italian subsidiary, Total Italia, werearrested by Italian police in connection with allegations of corruptionconcerning the Tempa Rossa oil concession in southern Italy. InFebruary 2009 an Italian judge ordered Total to suspend its oil and gasdevelopment in the region in question for one year while theinvestigation continues.

ft.com, December 17, 2008; February 16, 2009; Oil & Gas Journal, February 18,2009

o Japan: Pacific Consultants International ("PCI") was fined V70 million forbribing a Vietnamese government official in connection with a roadconstruction project in Ho Chi Minh City financed with low-interestJapanese development assistance loans. The Tokyo District Court gavesuspended prison sentences to three former senior PCI officials.

Japan Economic Newswire, January 29, 2009

o Japan: Tokyo-based Nishimatsu Corporation and its joint venture partnerItalian-Thai allegedly paid over V350 million in bribes to senior Thai

4

government officials to obtain a drainage tunnel construction contractwith the Bangkok Metropolitan Administration in 2003. The Tokyo PublicProsecutor has begun an investigation and has reportedly asked forcooperation from the Thai authorities.

The Nation (Bangkok) July 8, 2008, July 16, 2008; Thai Press Reports, January15, 2009; The Daily Yomiuri (Tokyo), January 16, 2009; Jiji Press Ticker Service,January 16, 2009; Japan Times, January 21, 2009

o Peru: In October 2008, a Peruvian prosecutor brought charges againstthe CEO of Norway's Discover Petroleum, lobbyists for Discover, four topstate oil executives and several others in connection with potential bribesto members of Peruvian president Alan Garcia's ruling party, APRA.

Chemical News & Intelligence, October 6, 2008; Reuters, October 7, 2008,October 9, 2008; washingtonpost.com, October 10, 2008; The Economist,October 18, 2008; Associated Press Worldstream, October 22, 2008, January16, 2009

5. More Investigations and Enforcement by U.S. Authorities

o Mark Mendelsohn, Deputy Chief, DoJ Fraud Section has said thatroughly 100 companies are the subject of open FCPA investigations.

Compliance Week, January 7, 2009

o There were 37 SEC and DoJ enforcement actions in 2008 and 38 in2007, compared to 15 in 2006.

o As the attached chart indicates, 11 companies were subject toenforcement actions in 2008; two in 2009, as of February 28:

1. AB Volvo (DoJ, SEC)

2. Aibel Group (DoJ)

3. AGA Medical Corp. (DoJ)

4. Con-Way Inc. (SEC)

5. Fiat (DoJ, SEC)

6. Flowserve Corp. (DoJ, SEC)

7. Siemens (DoJ, SEC)

8. Faro Technologies (DoJ, SEC)

9. Willbros Group (DoJ, SEC)

10. Westinghouse Air Brake Technologies Corporation (DoJ, SEC)

11. Nexus Technologies Inc. (DoJ Pending)

12. Halliburton/KBR (SEC, DoJ) (2009)

13. ITT Corp (SEC) (2009)

o As the attached chart indicates, twenty-six individuals were prosecutedby or settled with U.S. enforcement authorities in 2008 and two as ofFebruary 27, 2009:

1. Yaw Osei Amoako (ITXC Corporation)

2. Ramendra Basu (The World Bank)

3. Lloyd Biggers (Willbros)

5

4. Frederic Bourke (Azeri privatization)

5. Carlos Galvez (Willbros)

6. Gerald Green (Thai Film Festival)

7. Patricia Green (Thai Film Festival)

8. Misao Hioki (Bridgestone)

9. Gerald Jansen (Willbros)

10. William J. Jefferson (former member, U.S. House ofRepresentatives)

11. David Kay (American Rice)

12. Joseph Lukas (Nexus Technologies)

13. Douglas Murphy (American Rice)

14. An Nguyen (Nexus Technologies)

15. Kim Nguyen (Nexus Technologies)

16. Nam Nguyen (Nexus Technologies)

17. Paul G. Novak (Willbros)

18. Richard John Novak (diploma mill)

19. Steven J. Ott (ITXC Corporation)

20. Shu Quan-Sheng (AMAC International Inc)

21. Christian Sapsizian (Alcatel)

22. Martin Eric Self (Pacific Consolidated Industries)

23. Albert "Jack" Stanley (KBR)

24. Jason Edward Steph (Willbros)

25. James K. Tillery (Willbros)

26. Roger Michael Young (ITXC Corporation)

27. Mario Covino (Control Components Inc.) (2009)

28. Richard Morlok (Control Components Inc.) (2009)

6. Increase in Actions Brought Against Individuals

o Japan: Three executives of Pacific Consultants International ("PCI")were sentenced to suspended jail terms for their roles in bribingVietnamese government officials in connection with a road constructionproject in Ho Chi Minh City. (January 2009)

The Daily Yomiuri, June 4, 2008; Japan Economic Newswire, July 18, 2008; TheDaily Yomiuri, August 4, 2008; Japan Economic Newswire, August 4, 2008,August 25, 2008

o Portugal: Portuguese authorities formally charged British citizen CharlesSmith and Portuguese Manuel Pedro for their roles in paying bribesconnected with the Freeport scandal (see above) (February 2009)

o U.K: The Overseas Anti-Corruption Unit of the City of London Policesecured the convictions of Ugandan presidential advisor Ananias

6

Tumukunde and former managing director of security contractor CBRNTeam Niels Tobiasen.(see above).

o U.S: Authorities have brought 26 actions against individuals in 2008 andtwo in the first two months of 2009. (see above).

7. Collateral FCPA-related Civil Litigation. The FCPA does not contain a privateright of action. Nonetheless, FCPA-related claims have increasingly become, atleast in part, the basis of a variety of civil litigation. Examples include:

o Shareholder Class Actions. E.g., Glazer Capital Mgmt., LP v. Magistri,549 F.3d 736 (9th Cir. 2008); In re Nature's Sunshine Prods. Sec. Litig.,486 F.Supp.2d 1301 (D. Utah 2007); In re UTStarcom, Inc. Sec. Litig.,2008 U.S. Dist. LEXIS 60336 (N.D. Cal. 2008).

o Shareholders' Derivative Actions. E.g., City of Harper WoodsEmployees' Ret. Sys. ex rel. BAE Sys. PLC v. Olver, 577 F.Supp.2d 124(D.D.C. 2008); Hawaii Structural Ironworkers Pension Trust Fund ex rel.Alcoa, Inc. v. Belda, 2008 U.S. Dist. LEXIS 52888 (W.D. Pa. 2008).

o Foreign Governments as Plaintiffs. E.g., Complaint, Republic of Iraq v.ABB AG, No. 1:08-cv-05951 (S.D.N.Y. June 27, 2008); Complaint,Aluminum Bahrain B.S.C. v. Alcoa, Inc., No. 2:05-mc-02025 (W.D. Pa.Feb. 27, 2008).

o Commercial Litigation. E.g., Castellanos v. Pfizer, Inc., 2008 U.S. Dist.LEXIS 42586 (S.D. Fla. 2008); Hijazi Med. Supplies v. AGA Med. Corp.,2008 U.S. Dist. LEXIS 10481 (D. Minn. 2008).

8. Asset Recovery Actions

o On January 8, 2009, the U.S. DoJ filed a forfeiture action againstSingapore accounts worth nearly $3 million that are alleged to be theproceeds of a wide-ranging conspiracy to bribe public officials inBangladesh and their relatives. The forfeiture complaint relates primarilyto alleged bribes, paid in U.S. dollars, to Arafat "Koko" Rahman (son offormer Bangladeshi prime minister) in connection with public worksprojects awarded by the government of Bangladesh to Siemens AG andChina Harbor Engineering Company. The illicit funds cleared throughU.S. financial institutions before they were deposited in accounts inSingapore, thereby subjecting them to U.S. jurisdiction. U.S. anti-moneylaundering laws cover financial transactions that flow through the UnitedStates involving proceeds of offshore offenses, including bribery.

United States v. Zasz Trading and Consulting PTE Ltd, No. 1:09-cv-0021 (D.D.C.Jan.8, 2009), DoJ Litigation Release 09-020, January 9, 2009

o On January 28, 2009 the English Court of Appeals upheld a decision ofthe English High Court granting an order freezing the British assets ofGlenn Manterfield, a U.K. citizen and resident. The SEC sought theorder for purposes of satisfying disgorgement relief resulting from anSEC enforcement action (for securities fraud, not bribery). The Court of

Appeals permitted the freezing of assets related to potentialdisgorgement relief but not to the civil penalty imposed by the SEC.

1 The citations in this section are to the most recent, substantive court decisions dealing with theFCPA-related claims as of February 27, 2009.

7

February 17, 2009 "Fulbright Briefing - White Collar Crime and InternationalTrade", Fulbright & Jaworski L.L.P.

o On February 13, 2009, the Acting U. S. Attorney for the Southern Districtof New York obtained a post-indictment restraining order against ViktorKozeny barring him and anyone else acting on his behalf or in concertwith him from transferring, selling or otherwise disposing of or

diminishing the value of property belonging to him, including any and

allright, title, and interest in the proceeds from the sale of his Aspen,Colorado estate valued at approximately $23 million. Kozeny is fightingextradition from the Bahamas to the United States to face FCPA andrelated charges.

United States v. Kozeny, No. 05 Cr. 518 SAS (S.D.N.Y. Feb. 13, 2009)

9. Larger Fines - Examples include:

o Siemens' $800 million in penalties and disgorgement in connection withthe SEC and DoJ enforcement actions (2008) and Halliburton/KBR's$579 million in penalties and disgorgement (2009) are the two largestDoJ/SEC combined penalties in FCPA history. The third largest is BakerHughes (2007) for $44.1 million.

o The £5.2 million fine against Aon Ltd is reportedly the largest everimposed by the U.K. FSA for financial crimes. (2008)

fcpablog.blogspot.com, January 9, 2009

o Siemens also paid €496 million in fines to the Munich Public Prosecutor(2008) and €179 million to German tax authorities (2007) in connectionwith bribery charges.

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