LEVICK | April 11th, 2016

Q&A: Anti-Corruption

Senior Vice President Ian McCaleb, of LEVICK™’s Business Intelligence practice, has helped multinationals address corruption allegations that threaten to undermine their brand and jeopardize plans for growth. In this “What™’s Next?” Q&A, Ian discusses the steps that smart companies should be taking to inoculate themselves against real or perceived violations of anti-corruption laws and regulation

1. Ian, you point out that more and more countries are adopting stringent anti-corruption codes. How can multinationals keep abreast of the most important trends?

The United States Department of Justice set a high standard for the rest of the world to follow at the end of the last decade, when it decided that its primary tool of international financial fraud enforcement was to become the Foreign Corrupt Practices Act (otherwise known as the FCPA). The FCPA had been on the books since 1977, and was already a fearsome enforcement threat. But the financial crisis that started at the end of the Bush administration, and caught fire at the beginning of the Obama administration, prompted the DoJ to consider how the over-arching concept of the “rule of law” could be brought to bear on the international corporate and financial communities in a way that would discourage corruption, manipulation, and other forms of malfeasance, while bulking up the US Treasury through massive disgorgements achieved primarily through hard-fought settlements. Other U.S. regulatory and law enforcement bodies soon followed suit, and within a short time, anti-corruption prosecutors the world over, noting spectacular successes in the U.S., expanded and tightened their own bribery statutes.

All of these international agencies cooperate fully with each other, and the multilateral banks have become significant cooperative players as well. Multinationals have to keep abreast of an international legal and regulatory landscape that is evolving faster than they can adapt. Securing outside help is essential. Align yourself with multiple law firms that specialize in defending corruption cases. Bring in due diligence investigators to catch problems before law enforcement agents do. And secure the assistance of specialized communications professionals who can explain your company™’s status and position to the world at large – because government prosecutors are incredibly adept at formulating their narrative, and setting it loose first.

2. In your experience, what issues tend to trip up well-meaning companies seeking to adhere to anti-corruption measures?

That™’s the key question, isn’t it? The possibilities can be endless. Most often, when a corruption investigation pops up in front of a totally unsuspecting organization, it™’s a complete surprise. Most multinationals have no warning or idea whatsoever that they have violated any laws, particularly, for example, US statutes that might have nothing at all to do with the locale in which the alleged transgression took place. The worldwide construction of anti-corruption laws, regulations and statutes has to be envisioned as an incredibly complicated spider web of sorts. One small ripple in a remote corner of the web could alert the spider, which is lying in wait on the farthest side of the web. In little time, the spider will arrive at the place where the ripple occurred.

A multinational must not only be conscious and respectful of the laws of the country or locale in which it is attempting to conduct or build new business, it must understand how the laws of its own country govern its overseas conduct, and it must be ever mindful that it is subject to the laws and regulations of any country in which it holds an exchange or bourse listing. So, just by way of example – consider that you might NOT be listed on a US-based exchange, and you are accused of some kind of bribery in a developing country. Even though the alleged bribery had no nexus to the United States, and no US-connected persons were involved, you are still liable to be prosecuted inside the US, under the full weight of US anti-corruption and securities statutes.

3. So what should smart companies be doing to ensure that executives and employees are thoroughly versed in anti-corruption compliance issues?

Know what is happening at all levels of your organization and the supply chain. And it™’s not just what you know but what you should be assumed to know. Regulatory authority is very broad.

You can’t be assured that everyone, no matter their rank, is staying true to your required annual compliance training modules. Annual compliance training is well-meaning to be sure, but it isn’t going to discourage a foreign agent who you have hired on-the-fly to help close a deal in sub-Saharan Africa or South Asia, and it isn’t going to account for your own internal due diligence processes, which might have cleared your activities in one country, but not accounted for how the laws of your own country might block the transaction you’re trying to close. The fact is, you have no choice but to stay current on worldwide laws, your internal compliance protocols and measures must far exceed all international standards, and you must thoroughly check the backgrounds and social and professional networks of all employees, even contractors, the supply chain, and temporary partners, who are helping you secure new deals. Cautions and messages of lawfulness and integrity should be trickling down with regularity from your C-Suite, but all employees must be empowered to assure level and fair dealings at all strata. And you find something is amiss – do yourself the greatest favor possible. Mount your own internal investigations, and self-report to the most relevant authorities.

4. When a corruption allegation occurs, what should a multinational do?

You should already have law firms that specialize in matters of anti-corruption on your speed dial. Get them on the phone as soon as the first hint or inquiry comes your way from a law enforcement or regulatory agency. Immediately mount your own internal investigations to determine the extent of your problem, who is responsible, and to whom bribes or considerations may have been granted. Seek outside investigative help if you have to. Reinvestigate your own people. Cooperate as thoroughly as possible with investigating authorities. And most importantly, consider the worth of your brand, and the integrity of your name.

At the ABA White Collar seminar in San Diego this March, trial attorneys and government prosecutors alike lamented that too few companies think of their long-term public perception in the midst of an anti-corruption probe. Secure knowledgeable, specialized outside communications counsel, and insist that the communications team work as closely as possible with your legal team. Too few companies maintain legal and communications teams that even know each other, never mind know how to work together. Cooperation, agreement, and solid strategizing are immensely important in the midst of a crisis like a bribery probe. Tell your side of the story, stress cooperation, pledge to improve, and show the world how you value honesty, integrity and community growth and enrichment, and you will emerge a better organization from what promises to be a long and troublesome process

5. What™’s next in enforcement?

The Multilateral Development Banks (MDBs), having recognized the power and profitability of the DoJ, SEC, and SFO, have begun regulating in the most powerful way possible…