„FCPA, UK Bribery Act interpreted from a EU non-US/UK perspective“

NYSBA – Prague Regional Meeting 2012 – Friday, 9th of March

Otto Waechter, Philip Rosenauer

NYSBA – Prague Regional Meeting 2012 – Friday, 9th of March

I. Introduction

II. Numbers

III. “Corruption”

IV. Multinational/ European Treaties

V. Understanding – European

VI. Examples

VII. Outlook

Table of contents

Otto Waechter, Philip Rosenauer

FCPA, UK Bribery Act - why bother as Mainland European residing on the Continent?

– Corruption a concern

– Treaties (judicial assistance, implementation, etc.)

– Local Law / Money Laundering

– Sanctions / Extradition / Debarment

– “Ne bis in idem”

– Data Transfer / Bank Secrecy

– Taxes

– Costs (e.g. Compliance, Interviews)

– Attorneys admitted in NY or other States (Conduct, privilege), etc, etc, etc..

I. Introduction

3

http://www.benno-kuppler.de/benno_kuppler_texte_zu_politik_&_gesellschaft.htm- cartoon on bribery

I. Introduction

http://cpi.transparency.org/cpi2011/interactive- Transparency International, Corruption Perception Index 2011

I. Introduction/Numbers

http://bpi.transparency.org/interactive- Transparency International, Bribe Payers Index 2011

I. Introduction/Numbers

“Corruption”

bribery

fraud money laundering

grease pay.

embezzlementtheft

II. “Corruption”

illegal funding

smuggling

http://stock-channel.net– money rain

TELCO AG (seat in Vienna; ADR listed in NY, important business in Glasgow)

Secretary of Transportation enacted a regulation in favor of TELCO; Immediately after his resignation his assistant received a salary for 2 years of € 250.000,- from TELCO via a lobbyist.

Independently, Secretary was invited by TELCO to the Super Bowl, the Salzburger Festspiele and a private Cocktail Party by the CEO of TELCO.

II. “Corruption”

• OECD• “Convention on Combating Bribery of Foreign Public

Officials in International Business Transactions”• Members: e.g. Czech Republic, Hungary, Austria, UK

and US (mutual assistance, extradition!)

• United Nation• “Convention against Corruption” (UK ratified)• Working Group reports

IV. Multinational Treaties

• FATF- Financial Action Task Force- established by a G-7 summit- develops and promotes policies to combat money

laundering and terrorist financing

• MONEYVAL (Council of Europe)- evaluates measures of anti-money laundering- tasks – same as GRECO- cooperates with IMF, World Bank, FATF

IV. Multinational Treaties

IV. European Treaties

• Council of Europe: not an institution of the EU

aim: democratic and legal area throughout the whole

continent, ensuring respect for its fundamental

values: human rights, democracy and rule o. law

• Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime (amended 2003)

Member States: 48

Mutual Assistance and tracking down and seize proceeds

11

IV. European Treaties

• Civil and Criminal Law Convention on Corruption

• Member States (47):

• Austria, Bulgaria, Estonia, Finland, Greece, Latvia, Malta, Poland, Rumania, Sweden, Slovakia, Slovenia, Czech Republic, Hungary, Cyprus

• not: UK, Russia

• Mutual assistance, corporation and compliance

• common international definition for rules in connection with civil and criminal corruption

• claims, damages, protection of employees, preservation of assets, etc.

12

GRECO

• monitors the observance of the guiding principles of the treaty• monitors the implementation of international legal instruments• conduct evaluations of member states• prepares reports• national authorities are obliged to pursue criminal offences

IV. European Treaties

Art 325 AEUV

1. The Union and the Member States shall counter fraud and any other illegal activities affecting the financial interests of the Union through measures to be taken which shall act as a deterrent and be such as to afford effective protection in the Member States, and in all the Union’s institutions, bodies, offices and agencies.

2. Member Statesshall take the same measuresto counter fraud affecting the financial interests of the Union as they take to counter fraud affecting their own financial interests.

3. Member States shall coordinate their action aimed at protecting the financial interests of the Union against fraud. To this end they shall organize, together with the Commission, close and regular cooperation between the competent authorities.

IV. European Union

OLAF• Council Regulation – on-the-spot checks & investigations

carried out by Commission to protect financial interests• Commission decision establishing the European Anti-

Fraud Office (OLAF)

Target: EU expenditure, revenue, staff

�procedural rights: internal & external investigations, coordination of cases, criminal assistance

� recommendations:question in dispute is the legal consequence – binding for local authorities?

IV. European Union

OLAF’s mandate to investigate:

• all EU expenditures (structural funds, agricultural policy &rural development, direct expenditure and external aid),

• a substantial part of EU revenue (customs duties, agriculturalduties and sugar levies),

• EU staff (officials, temporary agents, local agents and contractagents)

…affecting the EU’s financial interests.

IV. European Union

OLAF in 2010: (€ 67,9 mio; € 351,2 mio. open)

European Anti-Fraud Office, Annual Report 2011

IV. European Union

V. Europe - Understanding

Council of Europe (Europarat) – “Corruption”(Civil and Criminal Law Convention on Corruption)

Examples:

Means: bribe, concealed party donationspurpose: distorting the proper performance of any duty or

behavior requiredculpability: deliberately acting (willfulness not required)offender: e.g.employee, executives, GmbH, AG, ltd., plc.recipient: official or a third person

e.g.public official (meaning under national law), wife, kid (relatives)

how: e.g. instigation (Anstiftung); agent

V. Europe - Understanding

Implementation & Enforcement (e.g. Austria)

• criminal code: prosecutor, criminal complaint by parties involved (bribery in private sector)

• civil law: civil complaint by parties involved

V. Europe - Understanding

Council of Europe (Europarat) – “Corruption”(Civil and Criminal Law Convention on Corruption

Sanctions:

Civil Law: compensation for damages either by the state or the Offender

Criminal Law: effective, proportionate and dissuasive sanctions and measures, including fines; and when committed by natural persons, fines, imprisonment and extradition

[Administrative: Debarment(P. Procurement Directive)]

V. Europe - Understanding

Council of Europe (Europarat) – “Corruption”(Civil and Criminal Law Convention on Corruption

• activity: $$ (Mio) to secure government contract ($ 1 bio.)• means: even goods of minor value – pen• purpose: neglecting/violating procurement procedures• offender: officer, director, employee, agent, stockholder;

national, resident, corp. or partnership in the USA; corp. or partnership organized under foreign law

•recipient: foreign public official, foreign political partye.g.officer or employee of a foreign government, or agency thereof, person acting on behalf of such instrumentality

VI. Examples

Case TELCO(fictitious case)

• activity: paying • means: € 250.000,--• purpose: to an Austrian Secretary of Infrastructure to sign

an Act (his duty) • how: via lobbyist• who: issuer of ADRs (TELCO)• culpability: knowing – influencing signing of an Act• recipient: Assistant of the Congressman

� Defense: payment is lawful in Austria?! (Secretary outside of Employment Act for Public Services)

VI. Examples

Case TELCO(fictitious case)

activity: Cocktail party/ Festspiele/ research papermeans: food & beverages / opera / $$purpose: show off, image; getting him to review draft of

an Act prepared by TELCO and to be signedhow: via CEO / lobbyistwho: executive of subsidiary (TELCO)culpability: intentionrecipient: Secretary of Infrastructure

� Defense: payment is lawful in Austria (?)adequate procedures (e.g. risk assessment, DD-policies, top-level commitments) (?)

VI. Examples

VI. Differences

• FCPA only active bribery

• FCPA limited to foreign officials (Cross border element)

• No criminal liability for corruption in private sector

• Settlements: US/UK Deferred Prosecution Agreement

• Enforcement

• Sanctions

• Defenses

25

• Securities Exchange Commission (SEC) • Department of Justice (DOJ)

UK• Director of the Serious Fraud Office (SFO)

EU (Austria)• public prosecutor (department on corruption), or• “private corruption”: if aggrieved party demands prosecution

� mutual assistance and extradition (treaties e.g. OECD)

VI. Enforcement

FCPA

FCPAcivil penalties up to $ 10.000,- and further penalties up to $ 2,- Mio (individuals: $ 100.000,-) orimprisonment of 5 years max.

UKfines up to statutory maximum (unlimited)imprisonment of 1to 10 years

EUROPECountry specific Austria imprisonment 1- 10 years

VI. Sanctions

VI. Defense

FCPA• lawful under foreign public official’s national law, • reasonable and bona fide expenditure, or

e.g. payment for flight and accommodation to joinproduct presentation

• securing or expediting routine governmental actione.g. visa, facilitation payments

UK

• “adequate procedures” (Sec7)

• Foreign public official: activity permitted or required under national law (Sec6)

28

EUROPE/ AUSTRIA•“Receiving a benefit”

not applicable to federal ministers, mayors, governors, members of supervisory boards of outsourced companies (no employment regulation)

•“Benefits”: no, in case feasible and appropriate service in return

•customary gifts of minor value, or received ex post,or no connection with official act

VI. Defense

Criticism from GRECO

• national congressmen are only liable to prosecution ifthey are actively/passively bribed for behavior in connection with voting in Congress

• provisions on the transparency of financing politicalparties are without any sanctions� regulation of disclosure to avoid corruption

• enacting of “Lobbying and Interest Groups Transparency Act” demanded (Ministerial Draft Bill)

• Bribing within the private sector – prosecution only by private party

• mandatory closing of proceedings if public official “makes good” (active repentance – “Tätige Reue”)

VI. Criticism

• need of standardization of provisions on “Corruption”within EU (corruption)

• improve cooperation between authorities and between authorities and private sector (information transfer)

• implementation of and compliance with Treaties• implementation of Compliance-Mechanism in business

entities• intensify Due Diligence Audits for takeovers

VII. Outlook

„FCPA, UK Bribery Act interpreted from a EU non-US/UK perspective“

Thank you for your attention!

Dr. Otto Waechter