1

The Foreign Corrupt Practices Act

(FCPA) ________________________

John Parkerson, General Attorney

Law Department

2

Foreign Corrupt Practices Act ___________________________

Antibribery ProvisionsAntibribery Provisions

• Prohibits offers or giving anything of value to foreign government officials to obtain or retain business or secure an improper advantage

Recordkeeping ProvisionsRecordkeeping Provisions

• Requires that company records be kept in reasonable detail to accurately reflect transactions

3

Antibribery Provisions ____________________________

Delta, its officers, directors, employees, and others working for Delta, no matter where located, are prohibited from:

• making an offer, payment, promise or authorization of payment of money or anything of value

• to a foreign official, political party or candidate or to a third person while knowing part of the money or thing of value will be transmitted to a foreign official

•to influence the foreign official in order to obtain or retain business or to secure any improper advantage

4

Who is covered? ___________________________

• Delta

• Delta Officers & Directors

• Delta Employees

• Delta Agents (including GSAs and consultants)

For acts in furtherance of a corrupt payment occurring anywhere in the world

5

What Acts are Prohibited? ___________________________

• Offers, payments or authorization of payments of: – Money or

– Anything of value including:

• free flights or upgrades, gifts, unusual discounts, etc.

• Any act in furtherance of improper payments, including:– telephone calls, faxes, e-mail messages, etc. to arrange for

payments to be made

Note: Payments need not be received to be in violation of the FCPA.

6

Further Prohibited Acts_____________________________

Third Parties (Agents)

Delta is responsible for corrupt offers, payments, or authorization of payments made by third parties

• such as a GSA, consultant or alliance partner

• if Delta or its employee knew or should have known

• that the third party intended to make an improper payment.

7

What Officials are Covered? ___________________________

• Foreign Government Officials

– Officers/employees of foreign governments

– Employees of government-controlled companies, such as national airlines or public airports

– Employees of public international organizations, such as the International Civil Aviation Organization

– Any person acting in an official capacity for or on behalf of any such a government or agency

• Foreign Political Parties

• Candidates for Foreign Political Office

8

What Constitutes an Improper Motive?___________________________

• Offer, promise or payment for the purpose of:

- Influencing any act in the foreign official’s “official capacity”

- Inducing the official to act in violation of a duty, or to “look the other way”

- Inducing the official to use his or her influence to affect an act or decision of the foreign government

• To obtain or retain business or gain an improper advantage.

9

Examples of Improper Motive _____________________________

– To gain an award of business from the foreign government or private sector

– To reduce tax assessments in the foreign country

– To obtain a favorable lease agreement

– To obtain anything of competitive value that would not have been available otherwise

10

FCPA Recordkeeping Provisions _____________________________

The recordkeeping provisions serve to deter businesses that wish to “hide” improper payments and prevent corporate

assets from being used for corrupt purposes.

11

Recordkeeping Provisions__________________________

Delta and its subsidiaries must:

• Maintain financial records and accounts in reasonable detail to accurately represent transactions and the status of its assets and liabilities

• Develop and maintain a reasonable system of internal accounting controls

• Refrain from making false or misleading entries or off-the-book transactions

12

Exception to the FCPA Facilitating payments for routine governmental action

_____________________________

• Permits or licenses that Delta is entitled to receive under local laws

• Processing certain governmental papers such as visas and work orders

• Mail pick-up and delivery

• Providing phone service, power and water supply

• Loading or unloading cargo

• Protecting perishable products

from deterioration

13

Affirmative Defenses __________________________________

• Payment is lawful under the written laws of the country

• Payment is a reasonable and bona fide expenditure, such as travel and lodging expenses, directly related to

– Promotion, demonstration or explanation of products or services

– Execution or performance of a contract with a foreign government or agency

14

Penalties_____________________________

Criminal Penalties (per violation)

• Company: up to $ 2 million in fines

• Officer, director, employee, or agent of Company:

– up to $100,000 fine or twice the benefit sought and

– up to 5 years in prison

Civil Penalties (per violation)

• Company OR officer, director, employee, or agent: $10,000

Individuals’ fines CANNOT be paid by the Company

15

Anti-Bribery Legislation in Other Countries_____________________________

• OECD members include the majority of industrialized countries of the world, including the U.S.

• The OECD Convention requires member countries to pass laws criminalizing bribery of foreign officials

• To date, most member countries have enacted anti-bribery laws similar to the FCPA

OECD CONVENTION

(Organization for Economic Cooperation and Development)

16

Elements of Delta’s FCPA Compliance Program

_____________________________• Due Diligence

• Contract Provisions

• Monitoring -- Red Flags

• Periodic Certification

• Bookkeeping Rules

• Established Lines for Reporting Violations

• Training

17

Compliance Program – Due Diligence

_______________________________________

• When hiring consultants or other agents:

– Identify qualifications sought for the position

– Identify candidates for the position

– Collect information regarding the candidates

– Review information collected to evaluate and compare candidates

– Review local law

– Prepare written report documenting due diligence

– Request approval of appointment

18

Compliance Program - Contract Provisions _____________________________

• FCPA compliance provisions are mandatory for certain agreements related to Delta’s international business

• Delta’s legal department must approve all agreements with

– GSAs

– Airline affiliates

– Consultants with international functions

19

Compliance Program - Red Flags___________________________

When doing business in a foreign country, certain circumstances should alert you that there is an

increased risk of an FCPA violation.

20

Red Flags – Examples ______________________________

• Rumors regarding unethical conduct by an employee, GSA, consultant or government official

• In a transaction, any unusual payment patterns or financial arrangements, including

– Requests for payment in a third country

– Requests for payment in cash

• Consultant refuses to disclose associates or subcontractors who share the commissions or fees

• Political contributions are requested

21

Red Flags (Cont’d) _____________________________

• Doing business in a country with history of corruption

• Requests for unusually large commissions or other payments, or payments that appear excessive for the service rendered

• Agent or representative who is related to, or has close personal relationship with a government official

• Agent or representative is recommended by a government official

If you discover a red flag, contact the Law Department immediately for further review.

22

Compliance Program - Bookkeeping Rules _____________________________

• No circumvention of controls for:

– Internal accounting, expenditures, or purchasing

– Sale, barter, transfer or disposition of assets.

• No intentional failure to make a correct entry in the accounting system for any disbursement.

• No orders, barter agreements, or purchase payments without purchase requisition, contract or other written authorization.

23

Bookkeeping Rules (Cont’d) _____________________________

• No spending cash or issuing a check or draft without approved documentation supporting the reason for the refund or disbursement, including for petty cash funds.

• Report any request to participate in an illegal payment or “off-the-book” disbursement to the Law Department.

24

Additional Elements of Delta’s Compliance Program

___________________________• Open lines of communication

– Employees encouraged to ask questions

– Employees encouraged to report “red flags” including requests for corrupt payments

– Availability of Ethics and Compliance HelpLine

• Training

– Periodic refresher courses

– Training for new employees

25

Where to Get Help _____________________________

To get answers to questions or reportsuspected violations or red flags, contact:

– Law Department (Sally Hogsette, General Attorney: 404-715-2467)

– Delta Ethics & Compliance HelpLine: Outside U.S. - call collect: 770-409-5006

All reports of suspicious activity, red flags and possible violations are confidential.