Managing Compliance Risk in
International Transactions
Michael X. Marinelli
Washington, D.C.
marinellimx@gtlaw.com  202.530.8503
GREENBERG TRAURIG, LLP  ATTORNEYS AT LAW  WWW.GTLAW.COM
©2010. All rights reserved.
Heightened Compliance Risk in Current
Market
 Foreign Corrupt Practices Act (FCPA)
□
Aggressive national prosecution strategy
 Export controls and trade sanctions
□
Legislation dramatically increased penalties
 Practical steps to manage compliance and
control risk
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Transparency International
Corruption Perceptions Index
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FCPA Prohibitions
 Paying bribes to foreign officials to obtain
business or other “improper advantage”
 Paying money to a third party knowing that the
third party will use it to pay bribes to foreign
officials
 Offering, authorizing or agreeing to pay bribes
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Proving Knowledge
 Knowledge
□
Positive information that a bribe will be paid
□
Awareness of a high probability that a bribe will be paid
□
Willful blindness
□
Knowledge is most often established by showing the
company ignored “Red Flags”
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Red Flags
 Unusual payment patterns or financial arrangements
□
Payments to third countries
□
Payments to parties not involved in the deal
 Agents or representatives that do nothing
□
Late-arriving agents
□
Backdated agreements
 A history of corruption in the country
 Unusually high commissions
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Red Flags
 Business partner lacks qualifications or resources
 Agent is recommended or selected by the government
customer
 Refusal by the foreign business partner to provide an FCPA
certification
 Lack of transparency in expenses and accounting records
□
Representative’s records
□
Company’s records
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FCPA Basics:
Exceptions and Defenses
 Payments that are lawful under the “written laws
and regulations” of the official’s country
 Bona fide and reasonable expenses
 Payments to facilitate routine government actions
– “grease payments”
 “Everyone does it” (customary payments) is not a
defense
 There is no de minimis exception to the FCPA
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Recent Penalty Cases
 Siemens: $1.6 billion
□
$450 million in U.S. criminal fines
□
$350 million in profits disgorged to the U.S. government
 Halliburton/KBR: $402 million
 Baker Hughes: $44 million
 ABB Vetco: $26 million
 Willbros: $22 million
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Faro Technologies
 Paid bribes of $430,000 secure contracts worth
$4.54 million
 Internal investigation cost $3.6 million during the
first nine months
 Net Income for the same nine months was $4.5
million
 Ultimately paid $1 million criminal fine
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Practical Lessons
From the Cases
1. Most violations are obvious when they are
happening; don’t ignore red flags.
2. Demands for bribes are common and do not
provide a defense.
3. Be prepared to give up the deal.
4. Make sure employees understand the rules.
5. Conduct and document due diligence on business
partners before you sign the deal.
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Practical Lessons
From the Cases
6. Having a compliance program is not enough.
7. Audit compliance on a regular basis.
8. It is the purpose, not the size, of the payment
that matters.
9. The collateral damage can be worse than the
formal penalty.
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Export Controls and
Sanctions Regimes
 Export Controls
□
Product Based Controls
 Classification is the key
 Controls apply to goods, software and technology
 Controls capture items that we would consider low-tech
□
End-Use Controls
 Depend on what the customer will do with the product
 Apply to virtually all U.S. products
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Export Controls and
Sanctions Regimes
 Trade Sanctions
□
Restricted Countries
 Cuba
 Iran
 North Korea
 Sudan
 Syria
□
Restricted Party Lists
 Specially Designated Nationals (Treasury)
 Denied Persons (Commerce)
 Entity List (Commerce)
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Recent Export Cases
 ITT: $100 million
 Balli: $17 million
 Sirchie: $2.5 million
 EMD Biosciences: $904,500
 Wilden Pump: $700,000
 Cryostar: $500,000
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Protecting the Company:
Effective Compliance
 Management involvement and support
 Clearly communicated standards and procedures
□
General policy statements are not enough
□
Procedures tailored to fit the company’s business
□
Train employees and managers
 On substance
 On process
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Protecting the Company:
Effective Compliance
 Diligence in Engaging Agents and Distributors
□
Establish objective criteria to be met
□
Document the selection process
□
Document due diligence regarding agent
□
Include compliance language in agreements
 Procedures for assessing business information
from the compliance perspective
□
Who is the customer?
□
Is it a government entity? Military entity?
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Protecting the Company:
Effective Compliance
 Audit and review operations
□
Sales and marketing operations
□
Expense reports
□
Finance operations
 Procedures for reporting and investigating possible
wrong-doing
□
Internal reporting mechanism
□
Clear chain of command for response
□
Include legal and finance teams
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