Counsel to Counsel - September 2008 - (Page 23) accepted practice. Although it’s clearly an extraordinary case, counsel should note the sweeping response from authorities. “We’re seeing an enforcement attitude around the world that is new,” Sonde says. “Part of it is the government authorities abroad have decided to follow the U.S. lead.” The 30 member states of the Organisation for Economic Co-operation and Development adopted a convention on international corruption in 1997. It took several years for the agreement’s provisions to get up to speed, but by the middle of this decade, meaningful collaboration among enforcement authorities around the world resulted in a large jump in prosecutions. At the same time, the SEC and Justice Department were redoubling their own efforts and expanding the types of penalties they assess. In addition to fines, enforcers now require disgorgement of profits and interest, and went after individual executives with new vigor. “Individuals as well as companies face exposure, and in the case of penalties assessed against individuals, companies are prohibited from indemnifying in some circumstances,” explains Daniel E. Waltz, a partner in Patton Boggs’ international practice. One little-discussed tangent of that dynamic is that, more often now, one of the first calls general counsel make when FCPA violations crop up is to retain their own outside counsel. More corporate counsel have been subject to enforcement actions since the advent of Sarbanes-Oxley, says Sonde, than in previous times. Another result of Sarbanes-Oxley reporting requirements is that more companies are uncovering their own FCPA violations and self-reporting them to the government. But just because a company turns itself in doesn’t mean it can expect leniency. “That’s a big debate,” Waltz says. “Certainly when Justice or the SEC settles those “certainly when Justice or the Sec settles those cases, they talk about how they could have assessed greater penalties. but that’s cold comfort to companies that are paying $25 million in fines.” cases, they talk about how they could have assessed greater penalties. But that’s cold comfort to companies that are paying $25 million in fines.” as a token gesture, recognizing a cultural tradition without doing anything that could be construed as a bribe. In the end, effective compliance is a combination of training and support. It’s crucial to have a system that allows people on the ground to get prompt advice on the sensitive situations they encounter. You won’t make everyone experts, but you can apprise them of the warning signs that will lead them to seek counsel. “There should be rules in place for all common business scenarios,” Zucker concludes. “It may be OK to take someone to dinner. It is never OK to order a $1,000 bottle of wine.” Better Training The biggest mistake most companies make when it comes to FCPA compliance is not having a meaningful training program. “Many companies don’t take this seriously enough,” says Sonde. “They need to be more alert to trouble signs. It’s incumbent on inhouse counsel to be the early warning system.” Appropriate compliance training is not merely briefing staff on the fundamentals of the FCPA, but also the cultural nuances of the countries in which you do business. “In many countries, certain forms of bribery are culturally acceptable, if not perfectly legal, and a part of how business is done,” Zucker cautions. “When people try to be culturally sensitive, they could get themselves in trouble.” China is a frequently cited example. In Chinese culture it is customary to present gifts as a part of even the most routine business meetings. Moreover, there is often no clear distinction between government and commercial entities. The senior executive you take to dinner may turn out to be a party member, a very murky scenario for FCPA compliance. Every problem, however, has a solution. A nominal gift—say a leather-bound portfolio with the company logo—could be presented Patton Boggs LLP maintains a well-known government and regulatory advocacy practice and prides itself on strong political connections on both sides of the aisle. It is also a full-service corporate firm supporting international business transactions and conducting litigation. Article Participants: Theodore “Ted” Sonde Partner, Securities, Litigation and Dispute Resolution tsonde@pattonboggs.com Peer Review Rated Daniel E. Waltz Partner, International Practice dwaltz@pattonboggs.com Jennifer Zucker Partner, Litigation and Government Contracts Practice jzucker@pattonboggs.com www.martindale.com/c2c SEptEmbEr 2008 23 http://www.martindale.com/c2c
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