compliance challenges in latin...jul 2009 helmerich& payne $1.4 million argentina& venezuela...
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Office of Global Compliance – Ethics & Compliance Group
Utilities & Energy Compliance & Ethics Conference February 2012, Houston Texas
Compliance Challenges in Latin AmericaCompliance Challenges in Latin America
Marco Antonio Padilla MerigoRegional Compliance Counsel Latin America
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Regional Overview: The Countries
LATAM OIL & GAS COUNTRIES
• Argentina• Brazil• Bolivia • Chile• Colombia • Ecuador• Mexico• Peru• Trinidad & Tobago• Venezuela
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Region Overview: The Players
NATIONAL OIL COMPANIES• Argentina (Enarsa)• Bolivia (YPFB)• Brazil (Petrobras)• Chile (ENAP)• Ecuador (Petroecuador)• Mexico (Pemex)• Peru (Petroperu)• Trinidad & Tobago (National Gas Co.• Trinidad & Tobago (Petrotin)• Venezuela (PDVSA)
STATE OWNED ENTITIES • Petrominerales (Bolivia)• HOCOL (Colombia)• Emerald (Colombia)• Mansarovar (Colombia)• Savia (Peru)
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Region Overview: Corruption Index
TI’s CPI 2011 • Chile 7.2 – 22
• Brazil 3.8 – 73
• Colombia 3.4 – 80
• Peru 3.4 – 80
• T&T 3.2 – 91
• Argentina 3.0 – 100
• Mexico 3.0 – 100
• Bolivia 2.8 – 118
• Ecuador 2.7 – 120
• Venezuela 1.9 ‐ 172
TI’s BPI by Country
• Brazil 7.7 ‐ 14
• Argentina 7.3– 23
• Mexico 7.0 – 26
TI’s BPI by Sector
• Oil&Gas 6.2 – 16
• Utilities 6.1 – 17
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Region Overview: Enforcement
Enforcement of anti-corruption laws is on the rise around the world
3 58
20
13 14
26
27 7
18 20
26
48
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1215
3833
40
74
0
10
20
30
40
50
60
70
80
2004 2005 2006 2007 2008 2009 2010
SEC Actions
DOJ Actions
Total
There has been a significant increase in U.S. enforcement actions against both entities and individuals in recent years
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Region Overview: Enforcement
Date Company Penalties Location of Conduct
Apr 2009 Latin Node $2 million Honduras and another country
Jul 2009 Nature’s Sunshine $600,000 Brazil
Jul 2009 Helmerich & Payne $1.4 million Argentina & Venezuela
Sep 2010 ABB $58.3 million Mexico, other countries
Dec 2010 Alcatel –Lucent $137 million Costa Rica, Honduras, Nicaragua, Ecuador, other countries
Dec 2010 Pride $56.2 million Venezuela, Mexico, other countries
Dec 2010 Panalpina $81.8 million Brazil, other countries
Feb 2011 Tyson Foods $5.2 million Mexico
Sep 2011 Bridgestone $28 million Mexico and other countries
Dec 2011 Aon $16.2 million Costa Rica and other countries
10 CORPORATE SETTLEMENTS INVOLVING CONDUCT IN LATAM SINCE 2009
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Regional Overview: Enforcement
• Nature’s Sunshine (Brazil) – civil action against CEO and former CFO.
• ABB (Mexico) – criminal charges against former GM and agent.
• PECC (Panama) – criminal charges against two former presidents.
• Terra Communications (Haiti) – former president and executive VP indicted.
• Pride (Mexico, Venezuela) – civil complaint filed against former VP and former VZ country manager.
• Lindsey Manufacturing (Mexico) – President and CFO indicted, Convictions overturned in Dec 2011.
• Latin Node (Honduras) – former CEO sentenced and guilty pleas by former CFO, former VP, and former Chief Commercial Officer.
• Siemens (Argentina) – criminal charges filed against eight executives and agents and civil charges filed against seven former executives.
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Challenges: Resistance to ChangeChallenges: Resistance to Change
• “This is a common practice in the industry”
• “But.. Our competitors are doing it!”
• “Being compliant in LATAM is a business disadvantage”
Change in the perspective of being compliant
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Challenges: The Clients
National Oil Companies and State Owned Entities
• Tender Requirements • Tender Process• Direct Awards• Contract Extension• Work Orders• Social Responsibility Projects • Technology Transfer Clauses• Certifications• Operational Interaction
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Challenges: Business Partners, M&A
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Business Partners• Co-Bidding• Consortium• Joint Ventures• Consultants• Agents• Suitcase companies
M&A• Ownership • Contracts Acquired• Permits, Certifications
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Challenges: Business Partners, M&A
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YOUR LOCAL PARTNER
Construcciones y Servicios Tecnicos del Sureste won 100k USD in Pemex Contracts
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Challenges: Project Funding
Argentina, Bolivia, Ecuador, Colombia, Mexico, Peru and Venezuela are considered high risk countries for Money‐Laundering. (AML‐monitor)
Argentina, Bolivia, Ecuador, Colombia, Mexico, Peru and Venezuela are considered high risk countries for Money‐Laundering. (AML‐monitor)
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Challenge: Suppliers
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Suppliers: • Owned by Government Officials Family or Friends• Suggested by Government Officials
Challenge: Industry Regulators
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ENVIRONMENTAL, SOCIAL SECURITY, HEALTH, SAFETY, OPERATION PERMITS, HAZARDOUS MATERIALS, EXPLOSIVES, TRANSPORTATION, LICENSE PLATES, RADIOACTIVE SOURCES, WASTE MANAGEMENT, PUBLIC REGISTRY, TAXES, CUSTOMS, VISAS, WORK PERMITS, RELOCATIONS, CONSTRUCTION PERMITS, ESCORTS, CERTIFICATIONS, ….
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Challenges: Interaction with regulators
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The infamous “Gestores”
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Challenges: Charitable Contributions
Request for Charitable Contributions is a very common practice… Request for Charitable Contributions is a very common practice…
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Mitigating Risks: Compliance Program
• Tone from the Top• Effective Communication• Train, Train and Train• Focused Training• On the ground counseling• Interaction at all levels • Reporting Hotline• Compliance as part of the
team
Build Compliance DNA
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Mitigating Risks: Due Diligence
• Business Partners
• Acquisitions
• Intermediaries
• Project Financing
• Suppliers
• Monitor & Review
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Mitigating Risks: Simple and Clear Policy
Zero Tolerance Policy for Corruption
Prohibition on Facilitation Payments
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Establish your own limits in your program
Mitigating Risks: Governmental Interaction
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YesYes NoNo
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• Limits for gifts (type of gifts/amount/frequency)• Limits for entertainment (amount/frequency)
Mitigating Risks: Governmental Interaction Mitigating Risks: Governmental Interaction
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NoNoYesYes
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• Clear rules on travel related to technical visits or inspections
Mitigating Risks: Governmental Interaction Mitigating Risks: Governmental Interaction
Mitigating Risks: Contributions Control
• Monitored Process
• Well Documented
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• Do not donate to clients
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Marco Antonio Padilla MerigoRegional Compliance Counsel Latin America│ 2000 St. James Place│Houston │ TX │ 77056
Direct: +1. (713) 836‐4137 │ Mobile: +1.281.467.0931 [email protected]