INVESTIGATING CORRUPTION IN CHINA –
RECENT DEVELOPMENTS AND PRACTICAL EXPERIENCES
Keith Williamson, Managing Director, Alvarez & Marsal
Andrew Dale, Partner, Orrick, Herrington & Sutcliffe
6 May 2014
AGENDA
I. Introduction
II. Overview of anti-corruption legal framework in China
III. Recent investigations and actions by US and Chinese
authorities
IV. Common corruption risks in China
V. Practical challenges and solutions in conducting and
remediating investigations in China
VI. Summary
VII. Biographies
VIII. Contact Information
© Copyright 2014 Alvarez & Marsal Holdings, LLC. All rights reserved. ALVAREZ & MARSAL®,
® and A&M® are trademarks of Alvarez & Marsal Holdings, LLC.
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INTRODUCTION
OVERVIEW OF ANTICORRUPTION LEGAL
FRAMEWORK IN CHINA
CHINESE ANTI-BRIBERY LAW OVERVIEW
Comprehensive legislation under PRC law regarding anti-corruption, for example:
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Criminal Law
PRC Anti-Unfair Competition Law
SAIC Anti-Commercial Bribery Regulations
PRC Invitation and Submission of Bids Law
Advertisement Law of the People’s Republic Law
Government Procurement Law of the PRC
Laws of State Public Servants
Circular on Prohibiting State Administrative Agencies and Their Personnel from
Presenting or Accepting Gifts in Performing Official Duties in China
– Communist Party of China Regulations on Disciplinary Penalties
– Related Rules issued by Industrial Administrative Departments
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COMMERCIAL BRIBERY
Banned like UK’s Bribery Act
Commercial bribes are activities of giving or accepting money, in-kind goods or property
with the purpose of providing or obtaining transaction opportunities or other economic
benefits, which take place during commercial business and which are in breach of the fair
competition principle
Any unrecorded commission, discount or payment will be treated as commercial bribery
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RECENT INVESTIGATIONS
AND ACTIONS BY US AND
CHINESE AUTHORITIES
RECENT INVESTIGATIONS AND ACTIONS BY US AND CHINESE AUTHORITIES
China and US-led investigations
China-led investigations
Rolls Royce – 2012/2013
GlaxoSmithKline – 2013
Dumex (owned by Danone) – 2013
US-led investigations
Avon – 2008-2014
JP Morgan – 2013
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COMMON CORRUPTION RISKS
IN CHINA
COMMON CORRUPTION RISKS IN CHINA
Common corruption risks in China
Use of sales agents and government service providers
Government relations
Tax authorities, environmental agencies, customs, immigration, licensing agencies
Off-book bank accounts and records
Non-cash bribes
Gifts (e.g. iPads, handbags, powdered milk)
Appointment of relatives
Hidden interests in related companies
Joint ventures with state-owned enterprises
Use of travel agencies – prevalent in many industries (not just pharma)
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PRACTICAL CHALLENGES
AND SOLUTIONS IN
CONDUTING AND
REMEDIATING
INVESTIGATIONS IN CHINA
PRACTICAL CHALLENGES AND SOLUTIONS IN CONDUCTING AND
REMEDIATING INVESTIGATIONS IN CHINA
Conducting investigations
Planning and scoping investigations
“Client confidentiality” v. common law privilege
Data challenges
Privacy and state secrecy
Practical reality
Off-shore entities, multiple sets of books
Language and cultural acceptability
Fabrication of documents and collusion with third parties
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PRACTICAL CHALLENGES AND SOLUTIONS IN CONDUCTING AND
REMEDIATING INVESTIGATIONS IN CHINA
Fabrication of documents and collusion with third parties to disguise false and illegitimate
transactions are commonplace in Chinese corruption cases
• Bank statement
• Bank slip
• Bank confirmation
• Bank chop
• Non-existing bank
branch
Company
• Board minutes
• Incorporation
documents
• Official company seal
or chop
• Business license
• Tax filing
• Annual report to
Administration for Industry
and Commerce
• Delivery note
• Sales agreement
• Purchase order
Bank
Customer
Government
Official
Supplier
• Fapiao/invoice
• Supplier confirmation
• Purchase order
• Delivery note
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PRACTICAL CHALLENGES AND SOLUTIONS IN CONDUCTING AND
REMEDIATING INVESTIGATIONS IN CHINA
Remediating investigations
Lack of oversight from international headquarters/operations
Locals know best
Practicality of compliance recommendations to local environment
Relatively low status and qualifications of finance/accounting staff
Rules v. principles – sometimes lack of local understanding where there is no rule
Hierarchical management structure
“Pleasing the boss trumps compliance”
Silo mentality
Internal politics
Tone from the top
Compliance as a value proposition
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SUMMARY
SUMMARY
Three key takeaways
Anti-corruption enforcement in China is now both global and local
Pro-active preparation and proper scoping of investigations is vital
Close “parental supervision” of Chinese operations is critical to ongoing compliance
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QUESTIONS?
BIOGRAPHIES
Keith Williamson
Managing Director
Hong Kong
Keith Williamson is a Managing Director and Head of Alvarez & Marsal’s Global Forensic and Dispute Services team in Hong Kong and China.
He brings more than 18 years of forensic and investigative accounting experience, specialising in investigations of fraud, corruption (US
FCPA/UK Bribery Act) and regulatory issues, asset tracing and recovery, and litigation support and expert witness services for disputes.
Mr. Williamson has predominantly been involved in large scale global investigations, asset tracing exercises and litigation support exercises on
behalf of U.S., European and Asian owned corporations facing fraud, corruption, regulatory, asset recovery and dispute issues across a broad
spectrum of industries, including oil and gas, minerals and mining, healthcare/pharmaceuticals, manufacturing, leisure, financial institutions,
education, media and technology. Mr. Williamson has given evidence and been cross-examined in legal proceedings relating to forensic
accounting matters.
Most recently at A&M, Mr. Williamson has been investigating allegations of US FCPA violations in China and the Asia-Pacific region, performing
forensic accounting reviews of alleged fraudulent activity in Hong Kong and China, and acting as the UK high court appointed receiver of
Russian assets that are the subject of a judgment debt in favour of a Kazakh bank.
Examples of Mr. Williamson’s notable assignments in Asia include:
– US Foreign Corrupt Practices Act investigation of a global corporate’s activities across Asia, including China and Singapore.
– Advising and assisting a non-governmental organisation with investigations of the alleged misappropriation of grant funds in Asia and
Africa.
– Forensic financial due diligence on a proposed Chinese acquisition by a US private equity firm.
– Management of a large team of accountants and lawyers administering and investigating the assets comprising the multi-US$ billion estate
of a Hong Kong businessman involved in property development.
– Investigation of allegations of payroll and expense irregularities at a US SEC-listed manufacturer of household consumer products’ Chinese
joint-venture.
Prior to joining A&M in 2011, Mr. Williamson spent six years with AlixPartners in London, where he most recently served as Managing Director
conducting investigations and compliance reviews and providing dispute services across Europe, Africa and the Middle East. Mr. Williamson
also spent 10 years with Deloitte’s Forensic & Dispute Services team, including three years working in Asia from their Hong Kong office.
Mr. Williamson earned a bachelor’s degree in Law from the University of Birmingham. He is a member of the Institute of Chartered
Accountants in England and Wales and the Hong Kong Institute of Certified Public Accountants.
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Andrew J. Dale
Andrew J. Dale, a partner in Orrick’s Hong Kong office, is a member of the
firm’s White Collar & Corporate Investigations practice group. He has been
recognized in both Chambers Asia Pacific and Chambers Global for his
regional anti-corruption work and international investigations.
Partner
White Collar &
Corporate
Investigations
Hong Kong
Education
• Diploma in Legal Practice,
College of Law of England and
Wales, York, 1997
• LL.B., University of Leicester,
1996
Admitted in
• Hong Kong
• England and Wales
Honors
• “Ranked Lawyer” for China
Dispute Resolution: AntiCorruption, Chambers Asia and
Chambers Global, 2014
• “Dispute Star” for Hong Kong,
Benchmark Asia Pacific 2013
• Orrick Community Responsibility
Award 2008
Memberships
• Fellow of the Hong Kong Institute
of Directors
• High Technology Crime
Investigation Association (Asia
Pacific Chapter)
• The Law Society of Hong Kong’s
Anti-Money Laundering
Committee
While focusing his practice on corporate investigations, he has considerable
experience in and also is a recognized lawyer for complex commercial
litigation and arbitration matters.
Contact
+852 2218 9178
Some of his more notable engagements include the following cases.
adale@orrick.com
• Advising a Hong Kong listed company subject to an SFC investigation.
• Represented a U.S. listed company relating to various accounting issues
in its Asian operations.
• Assisted a U.S. listed company on an FCPA investigation relating to its
Chinese subsidiaries.
• Represented a U.S. listed company regarding FCPA and other issues
raised by a whistleblower.
• Advised a global client on an internal investigation involving the
misappropriation of funds and confidential information.
• Represented a Japanese client in an asset tracing exercise in Asia,
Europe and the United States.
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CONTACT INFORMATION
ALVAREZ & MARSAL ASIA
Hong Kong Office
Beijing Office
Shanghai Office
Alvarez & Marsal Global Forensic
and Dispute Services Limited
11/F, MassMutual Tower
38 Gloucester Road, Wanchai,
Hong Kong
Tel: +852 3102 2600
Fax: +852 2598 0060
www.alvarezandmarsal.com
Alvarez & Marsal Consulting
(Shanghai) Limited, Beijing
Branch
Unit 1118-21, 11F, China World
Office 1, No.1 Jianguomenwai
Ave., Chaoyang District,
Beijing 100004, China
Tel: +86 10 5737 9080
Fax: +86 10 6563 7835
Alvarez & Marsal Consulting
(Shanghai) Limited
Unit 3682-3683, Level 36, Tower 2,
International Finance Centre, No.8
Century Avenue, Pudong District,
Shanghai 200120, China
Tel: +86 21 6062 6293
Fax: +86 21 6062 6399
Principal points of contact in A&M’s Global Forensic & Dispute Services practice in Asia:
Keith Williamson
Managing Director, Hong Kong
+852 3102 2606
kwilliamson@alvarezandmarsal.com
James Lei
Director, Shanghai
+86 18818003010
jlei@alvarezandmarsal.com
Aruni Weerakesera
Senior Director, Hong Kong
+852 3102 2613
aweerakesera@alvarezandmarsal.com
Davin Teo
Director, Hong Kong
+852 3102 2614
dteo@alvarezandmarsal.com
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Orrick’s Key Contacts
Principal points of contact in Orrick’s Global White Collar & Corporate Investigations practice:
Andrew J. Dale
Partner
Hong Kong
+852 2218 9178
adale@orrick.com
Pamela R. Davis
Partner
San Francisco
+1 415 773 5561
pdavis@orrick.com
Guy Singer
Partner
New York & Washington D.C.
+1 212 506 3510/+ 1 202 339 8525
gsinger@orrick.com
KEY OFFICE LOCATIONS
HONG KONG
43/F, Gloucester Tower, The Landmark
15 Queen’s Road Central, Hong Kong
Tel: +852 2218 9100
Fax:+852 2218 9200
NEW YORK
51 West 52nd Street, New York
NY 10019-6142, United States
Tel: +1 212 506 5000
Fax:+1 212 506 5151
SAN FRANCISCO
The Orrick Building, 405 Howard Street
San Francisco, CA 94105-2669
United States
Tel: + 1 415 773 5700
Fax:+ 1 415 773 5759
WASHINGTON D.C.
Columbia Center, 1152 15th Street, N.W.
Washington, D.C., 20005-1706
United States
Tel: + 1 202 339 8400
Fax:+ 1 202 339 8500
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ABOUT ALVAREZ & MARSAL
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