Managing International Risks + Corporate Investigations

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z Managing International Risks + Corporate Investigations presented by Luis M. Alcalde Corporate Corruption + Fraud Seminar January 16, 2014

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Global business attorney Luis Alcalde presented "Managing International Risks + Corporate Investigations" on Thursday, January 16, at the Schneider Downs' Corporate Corruption + Fraud Seminar. Luis discussed international corporate investigations involving the Foreign Corrupt Practices Act (FCPA), corporate ethics and other regulatory matters.

Transcript of Managing International Risks + Corporate Investigations

  • 1. zManaging International Risks + Corporate Investigations presented by Luis M. Alcalde Corporate Corruption + Fraud Seminar January 16, 2014

2. zRisks in International Business +Market Risks (unexpected market changes, raw material prices, supply problems, new competitors)+Regulatory Risks (changes in regulatory scheme)+Socio-Political Risks (political/social instability/changes to government programs)+ Economic/FinancialRisk (nonpayment by third parties, changes in monetary exchange rates)+ OperatingRisks (inability to maintain high standards of efficiency and production, infrastructure problems, labor issues)Management Risks (inability to comply with international ethical and compliance norms; poor fit with local culture) 3. zInternational + Internal Corporate Investigation INTERNATIONAL + Company A isJurisdictionINTERNALSubject to U.S.+ Affiliated, Subsidiary orJoint Venture Partner of Company A is in a foreign jurisdiction+ Thiscan include the wide range of reasons to self-investigate and gather information upon learning of possible wrongdoingFor this presentation: + Violationsof FCPA+ Violationsof other U.S. laws and regulatory matters+ Public Companies 4. zBasics To Lessen Management Risks Tone from the top re importance of ethics & internal controlsInternal Risk Management Processes & ProtocolsAction when Wrongdoing is DetectedSupervision, Dialogue, Enforcement & Testing of Processes & Controls 5. zRisk Management + CorporateEthics Policy that addresses requirement of legal competition, anti-bribery, gifts and entertainment, proper business expenditures and records+ Company Anti-Bribery/AnticorruptionPolicy and specific policies tailored to local risks with foreign affiliates and partners + Localengagement with SOEs; Regulators; High Risk Partners+ Protocol/Policy Re + Policy toHiring Agents, Consultants, Vendorsensure all contracts address company ethics and anticorruption policies 6. zRisk Management (audit standards 15 U.S.C. 78 j-1) +Proceduresdesigned to provide reasonable assurances of detecting illegal acts that would have a direct and material effect on the determination of financial statement amounts+Proceduresdesigned to identify related party transactions that are material to the financial statements or otherwise require disclosures therein 7. zRisk Management (supervision) +Regularand consistent supervision & dialogue with foreign partners and employees+ trustbut verify+Createtrust and dialogue+Enforcementand Testing+ Periodic review ofprocess + Risk assessment audits Take Action upon learning of risk or wrongdoing 8. zTriggers to Internal Corporate Investigations INTERNALEXTERNAL+ Anonymoustip to hotline or corporate officers+ EmployeeWhistleblower tip to SEC, DOJ or Other Regulatorreports wrongdoing+ Company internalcontrols detect possible wrongdoing or risks auditor or consultant identifies possible risk areas and transactionsSEC/ Regulator subpoena/ request interviews/starts administrative or civil action+ IndependentDOJ Criminal Investigation/Grand Jury/ Search warrants/Agent interviews 9. zWhy Investigate? Government is Investigating or likely to investigateNo Governmental Investigation+ Company needs+ Internalto gather information to argue: + Thereis no wrongdoing+ Thewrongdoing does not warrant prosecution of company+ Convincegovernment that it need not investigate or do a less intrusive investigation+ Seek bestcompanysettlement possible forinvestigations are key component of effective compliance program+ Outsideauditors are required to report illegal acts to Company Board/ management and evaluate the companys response+ Directors/seniormanagement have legal and fiduciary duties to investigate and ensure internal controls are working 10. zPrinciples of Federal Prosecution of Corporations U.S. Attorneys Manual + Seriousness of + ExtentOffense, Harm to Public, Prior History of WrongdoingOf Corporate Wrongdoing And Complicity of Top Management+ Timely and Voluntary DisclosureGovernment+ Existenceand Cooperation by Corporation with& Effectiveness Pre-Existing Compliance Program+ RemedialSteps to Implement Compliance Program, Punish Wrongdoers, Pay Restitution+ CollateralHarm to Shareholders, Pension Holders, Employees, and Others not Proven Personally Culpable+ Adequacy of + Thethe Prosecution of Individuals Responsibleadequacy of Civil or Regulatory Remedies 11. zCorporate Criminal LiabilityAgent acting within scope of authorityAgent motivated at least in part to benefit corporationAgents knowledge imputed to corporation 12. zConsequences of Corporate Criminal Liability Direct Sanctions Fines, Reimbursement, Disgorgeme nt, Legal FeesLoss of State Corporate CharterShareholder LawsuitsLoss of Government Contracts, & AccreditationImpact on Corporate Stock and Securities 13. zConducting the Investigation 1.Identifying Client4.+ Board + AuditCommittee + Management5.2.Defining Scope of Investigation6.3.Investigation Team7.+ U.S. Counsel + ForeignCounsel + Auditors/Forensic Team (IT)Evidence/Document Preservation + Gathering Interviewing Domestic and Foreign Witnesses Privileges Attorney/Work Product Preparing a Report + Oralor written? + Who gets reports? + Reports to client + Reports to auditors 14. zImportance of Remedial Measures Principles of Federal Prosecution: Remedial steps to implement compliance program, punish wrongdoers, pay restitution Audit Standards Require Auditors to Consider : Board and management response to potential illegal acts and remedial measures put in place. 15. zDisclosure of Investigation Certain Government InvolvementSelf DisclosurePossible Leniency 16. zNon-disclosure--Risk/Benefits Analysis If detected without self disclosure then more intrusive government involvement and possible greater sanctionsNo Disclosure, implement remedial measures without government involvement , and hope for no further consequences 17. zSEC Disclosure Obligations Material pending legal proceedingFacts that may materially affect the businessDirector or executive officer involved in legal proceedingsFacts that materially affect finances of companyFacts that materially affect previously filed financial reports 18. z 19. zThank You! Luis M. Alcalde, Of Counsel Kegler Brown Hill + Ritter [email protected] keglerbrown.com/alcalde 614-462-5480