compliance a new vision
DESCRIPTION
A review of current FCPA compliance requirements.TRANSCRIPT
Compliance-A New Vision
Thomas R. Fox-General Counsel, Drilling Controls, Inc.IQPC Contract Risk Management ConferenceHouston TX May 29, 2008
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Legal Disclaimer
The views stated herein are solely those of the author and are not those of Drilling Controls, Inc. or Aibel Group Ltd.
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Aibel and Deferred Prosecution Agreement
Aibel entered into a DPA with the US DOJ on February 6, 2007, agreeing to:
Comply with all commitments made to US government.
Comply with all additional requirements.
Implement and monitor compliance program and internal control procedures.
Compliance Counsel-Ray Bonoun
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FCPA-Why Enforcement?
FCPA enacted into law in 1977
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Enforcement Explosion-What is Response?
Compliance
Compliance
Compliance
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Compliance-Steps in Response
What did you do to stay out of trouble?Code of ConductHotlineTrainingDue Diligence
What did you do when you found out?InvestigateInternal v. External
What remedial action did you take?Disciplinary ActionVoluntary Disclosure
Paul McNulty-Baker McKenzie General Counsel Seminar-April 1, 2008
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Costs and Risks
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Costs
Financial Costs
Direct Financial Costs-standard commission of 10% but often higher.
Repeated Demands-once paid, precedent set.
No recourse-no control over outcome or how money is used.
Substandard business partners, sub-contracts or suppliers.
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RISKS
In addition to the costs there are other Risks for companies who do not operate ethically.
Risk of Blackmail
Risk of Violence
Political Risk
Risk of Public Perception
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A New Vision- Positive Effects of Compliance
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Protect and Strengthen Sales, Brand Image and Reputation
Companies should do more than just “give money”.
50% considered punishing a company based upon its “social actions”.
30% avoided doing business with a company for its “social actions”.
(Environics International Survey)
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Protect the Company
M&A-Misrepresentations in merger agreement can lead to a securities fraud claim. Titan Corporation
Wrongful Termination-failure to engage in illegal act. Sabin Pilots
Franchisor Liability-more than vicarious liability
Successor Liability-US entity acquiring foreign entity
Non-Controlling Investor in Foreign Entity-FCPA does not distinguish between controlling and non-controlling affiliation.
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Strengthen Employee Loyalty and Commitment
Only 6% of employees were inclined to stay when they believed their leaders to be unethical. (Walker
Information Survey)
Employees who believe they work in an ethical environment are 6X more likely to be loyal. (Hudson
Institute Survey)
Employees are generally more positive about their work and have greater loyalty if they work for a company with good values and ethical practices. (Diener and Seligman, “Beyond Money” Psychological Science in the Public Interest, Vol. 5, No. 1, 2004))
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Avoid New and Additional Regulation
Enron/World Com/SOX
SOX and other regulatory changes as evidence of a “frame shift” in which “all history is put through a new lens” (Wall Street Journal, January 15, 2003)
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Weather the Storm with Integrity Capital
Companies with a demonstrated commitment to ethical behavior can limit vulnerability to
shareholder and outside activist pressure due to heightened credibility.
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Reduced Costs
Cost Reduction through Enhanced Communications:
Proactive and effective engagement with shareholders.
Reporting identifies the effectiveness of programs.
Reporting identifies priorities to insure the greatest impact of available resources.
Reporting to use as a benchmark for overall organizational effectiveness.
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Improved Attractiveness to Investors
Shareholders, particularly institutional investors welcome increased disclosures.
A growing number include non-financial metrics in their analysis on the quality of investments, such as corporate governance.
75% of stakeholders believe that overall Board and Corporate Governance factors as important as financial performance for large institutional investors. (McKinsy/World Bank Large Institutional Investor Survey)
Large institutional investors will to pay higher prices for stocks of companies considered to be accountable. (McKinsy/World Bank
Large Institutional Investor Survey)
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Marketplace Advantages
Accountability makes market entry and retention easier.
Know your customer.
Due diligence your suppliers, agents and business partners.
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Supplier Due Diligence
Background research and inqueries required under the Aibel Directive for certain Supplier Due Diligence:
1. Certificate of Incorporation/Articles of Incorporation.
2. Company Brochures or Other Promotional Materials.
3. Annual Report.4. Resumes of Senior Personnel.5. Media Search Results-Google6. Media Search Results-Lexis/Nexis
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Supplier Due Diligence-cont’d
7.Boycott Data Base Search Results.
8. Special Designated Person (SDN) Data Base Search Results.
9. Inquiry to Government Agencies and Other Sources.
10. Certification Regarding Absence of Legal Prohibitions.
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Supplier Due Diligence-cont’d
11.Report of In Person Interview.
12. Report of Business Reference Interview.
13. Report of Financial Reference Interview.
14. Comparative Fee Inquiry
15. Annual Update
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Questions