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INVESTIGATING CORRUPTION IN CHINA – RECENT DEVELOPMENTS AND PRACTICAL EXPERIENCES. Keith Williamson, Managing Director, Alvarez & Marsal Andrew Dale, Partner, Orrick, Herrington & Sutcliffe 6 May 2014. Agenda. Introduction Overview of anti-corruption legal framework in China - PowerPoint PPT Presentation
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INVESTIGATING CORRUPTION IN CHINA –RECENT DEVELOPMENTS AND PRACTICAL EXPERIENCES
Keith Williamson, Managing Director, Alvarez & MarsalAndrew Dale, Partner, Orrick, Herrington & Sutcliffe
6 May 2014
© Copyright 2014 Alvarez & Marsal Holdings, LLC. All rights reserved. ALVAREZ & MARSAL®, ® and A&M® are trademarks of Alvarez & Marsal Holdings, LLC.
AGENDAI. IntroductionII. Overview of anti-corruption legal framework in ChinaIII. Recent investigations and actions by US and Chinese
authoritiesIV. Common corruption risks in ChinaV. Practical challenges and solutions in conducting and
remediating investigations in ChinaVI. SummaryVII. BiographiesVIII. Contact Information
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INTRODUCTION
OVERVIEW OF ANTI-CORRUPTION LEGAL FRAMEWORK IN CHINA
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CHINESE ANTI-BRIBERY LAW OVERVIEW
Comprehensive legislation under PRC law regarding anti-corruption, for example:
– Criminal Law– PRC Anti-Unfair Competition Law– SAIC Anti-Commercial Bribery Regulations– PRC Invitation and Submission of Bids Law – Advertisement Law of the People’s Republic Law– Government Procurement Law of the PRC– Laws of State Public Servants– Circular on Prohibiting State Administrative Agencies and Their Personnel from
Presenting or Accepting Gifts in Performing Official Duties in China– Communist Party of China Regulations on Disciplinary Penalties – Related Rules issued by Industrial Administrative Departments
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COMMERCIAL BRIBERY
Banned like UK’s Bribery Act
Commercial bribes are activities of giving or accepting money, in-kind goods or property with the purpose of providing or obtaining transaction opportunities or other economic benefits, which take place during commercial business and which are in breach of the fair competition principle
Any unrecorded commission, discount or payment will be treated as commercial bribery
RECENT INVESTIGATIONS AND ACTIONS BY US AND CHINESE AUTHORITIES
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RECENT INVESTIGATIONS AND ACTIONS BY US AND CHINESE AUTHORITIES
China and US-led investigations
China-led investigationsRolls Royce – 2012/2013GlaxoSmithKline – 2013Dumex (owned by Danone) – 2013
US-led investigationsAvon – 2008-2014JP Morgan – 2013
COMMON CORRUPTION RISKS IN CHINA
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COMMON CORRUPTION RISKS IN CHINA
Common corruption risks in China
Use of sales agents and government service providers
Government relationsTax authorities, environmental agencies, customs, immigration, licensing agencies
Off-book bank accounts and records
Non-cash bribesGifts (e.g. iPads, handbags, powdered milk)Appointment of relativesHidden interests in related companies
Joint ventures with state-owned enterprises
Use of travel agencies – prevalent in many industries (not just pharma)
PRACTICAL CHALLENGES AND SOLUTIONS IN CONDUTING AND REMEDIATING INVESTIGATIONS IN CHINA
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PRACTICAL CHALLENGES AND SOLUTIONS IN CONDUCTING AND REMEDIATING INVESTIGATIONS IN CHINA
Conducting investigations
Planning and scoping investigations
“Client confidentiality” v. common law privilege
Data challengesPrivacy and state secrecyPractical realityOff-shore entities, multiple sets of books
Language and cultural acceptability
Fabrication of documents and collusion with third parties
PRACTICAL CHALLENGES AND SOLUTIONS IN CONDUCTING AND REMEDIATING INVESTIGATIONS IN CHINA
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Fabrication of documents and collusion with third parties to disguise false and illegitimate transactions are commonplace in Chinese corruption cases
• Fapiao/invoice• Supplier
confirmation• Purchase order• Delivery note
• Business license• Tax filing• Annual report to Administration for
Industry and Commerce
• Delivery note• Sales agreement• Purchase order
• Bank statement• Bank slip• Bank confirmation• Bank chop• Non-existing bank branch
Bank Customer
SupplierGovernment Official
Company• Board minutes• Incorporation
documents • Official company seal
or chop
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PRACTICAL CHALLENGES AND SOLUTIONS IN CONDUCTING AND REMEDIATING INVESTIGATIONS IN CHINA
Remediating investigations
Lack of oversight from international headquarters/operationsLocals know best
Practicality of compliance recommendations to local environment
Relatively low status and qualifications of finance/accounting staff
Rules v. principles – sometimes lack of local understanding where there is no rule
Hierarchical management structure“Pleasing the boss trumps compliance”Silo mentalityInternal politics
Tone from the top
Compliance as a value proposition
SUMMARY
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SUMMARY
Three key takeaways
Anti-corruption enforcement in China is now both global and local
Pro-active preparation and proper scoping of investigations is vital
Close “parental supervision” of Chinese operations is critical to ongoing compliance
QUESTIONS?
BIOGRAPHIES
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Keith Williamson
Managing DirectorHong Kong
Keith Williamson is a Managing Director and Head of Alvarez & Marsal’s Global Forensic and Dispute Services team in Hong Kong and China. He brings more than 18 years of forensic and investigative accounting experience, specialising in investigations of fraud, corruption (US FCPA/UK Bribery Act) and regulatory issues, asset tracing and recovery, and litigation support and expert witness services for disputes.
Mr. Williamson has predominantly been involved in large scale global investigations, asset tracing exercises and litigation support exercises on behalf of U.S., European and Asian owned corporations facing fraud, corruption, regulatory, asset recovery and dispute issues across a broad spectrum of industries, including oil and gas, minerals and mining, healthcare/pharmaceuticals, manufacturing, leisure, financial institutions, education, media and technology. Mr. Williamson has given evidence and been cross-examined in legal proceedings relating to forensic accounting matters.
Most recently at A&M, Mr. Williamson has been investigating allegations of US FCPA violations in China and the Asia-Pacific region, performing forensic accounting reviews of alleged fraudulent activity in Hong Kong and China, and acting as the UK high court appointed receiver of Russian assets that are the subject of a judgment debt in favour of a Kazakh bank.
Examples of Mr. Williamson’s notable assignments in Asia include:– US Foreign Corrupt Practices Act investigation of a global corporate’s activities across Asia, including China and Singapore.– Advising and assisting a non-governmental organisation with investigations of the alleged misappropriation of grant funds in Asia and Africa.– Forensic financial due diligence on a proposed Chinese acquisition by a US private equity firm.– Management of a large team of accountants and lawyers administering and investigating the assets comprising the multi-US$ billion estate of
a Hong Kong businessman involved in property development.– Investigation of allegations of payroll and expense irregularities at a US SEC-listed manufacturer of household consumer products’ Chinese
joint-venture.
Prior to joining A&M in 2011, Mr. Williamson spent six years with AlixPartners in London, where he most recently served as Managing Director conducting investigations and compliance reviews and providing dispute services across Europe, Africa and the Middle East. Mr. Williamson also spent 10 years with Deloitte’s Forensic & Dispute Services team, including three years working in Asia from their Hong Kong office.
Mr. Williamson earned a bachelor’s degree in Law from the University of Birmingham. He is a member of the Institute of Chartered Accountants in England and Wales and the Hong Kong Institute of Certified Public Accountants.
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Andrew J. Dale, a partner in Orrick’s Hong Kong office, is a member of the firm’s White Collar & Corporate Investigations practice group. He has been recognized in both Chambers Asia Pacific and Chambers Global for his regional anti-corruption work and international investigations.
While focusing his practice on corporate investigations, he has considerable experience in and also is a recognized lawyer for complex commercial litigation and arbitration matters.
Some of his more notable engagements include the following cases.
• Advising a Hong Kong listed company subject to an SFC investigation.
• Represented a U.S. listed company relating to various accounting issues in its Asian operations.
• Assisted a U.S. listed company on an FCPA investigation relating to its Chinese subsidiaries.
• Represented a U.S. listed company regarding FCPA and other issues raised by a whistleblower.
• Advised a global client on an internal investigation involving the misappropriation of funds and confidential information.
• Represented a Japanese client in an asset tracing exercise in Asia, Europe and the United States.
Andrew J. Dale
Education• Diploma in Legal Practice,
College of Law of England and Wales, York, 1997
• LL.B., University of Leicester, 1996
Admitted in• Hong Kong• England and Wales
Honors• “Ranked Lawyer” for China
Dispute Resolution: Anti-Corruption, Chambers Asia and Chambers Global, 2014
• “Dispute Star” for Hong Kong, Benchmark Asia Pacific 2013
• Orrick Community Responsibility Award 2008
Memberships• Fellow of the Hong Kong Institute
of Directors• High Technology Crime
Investigation Association (Asia Pacific Chapter)
• The Law Society of Hong Kong’s Anti-Money Laundering Committee
Partner
White Collar & Corporate Investigations
Hong Kong
Contact
+852 2218 9178 [email protected]
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CONTACT INFORMATION
ALVAREZ & MARSAL ASIA
Alvarez & Marsal Global Forensicand Dispute Services Limited11/F, MassMutual Tower38 Gloucester Road, Wanchai,Hong KongTel: +852 3102 2600Fax: +852 2598 0060www.alvarezandmarsal.com
Principal points of contact in A&M’s Global Forensic & Dispute Services practice in Asia:
Keith Williamson James LeiManaging Director, Hong Kong Director, Shanghai+852 3102 2606 +86 [email protected] [email protected]
Aruni Weerakesera Davin TeoSenior Director, Hong Kong Director, Hong Kong+852 3102 2613 +852 3102 [email protected] [email protected]
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Hong Kong Office Shanghai OfficeAlvarez & Marsal Consulting (Shanghai) LimitedUnit 3682-3683, Level 36, Tower 2, International Finance Centre, No.8 Century Avenue, Pudong District, Shanghai 200120, ChinaTel: +86 21 6062 6293Fax: +86 21 6062 6399
Beijing OfficeAlvarez & Marsal Consulting (Shanghai) Limited, Beijing BranchUnit 1118-21, 11F, China World Office 1, No.1 Jianguomenwai Ave., Chaoyang District,Beijing 100004, ChinaTel: +86 10 5737 9080Fax: +86 10 6563 7835
Orrick’s Key Contacts
KEY OFFICE LOCATIONS
HONG KONG43/F, Gloucester Tower, The Landmark15 Queen’s Road Central, Hong KongTel: +852 2218 9100Fax:+852 2218 9200
NEW YORK51 West 52nd Street, New YorkNY 10019-6142, United States Tel: +1 212 506 5000Fax:+1 212 506 5151
Andrew J. DalePartnerHong Kong+852 2218 [email protected]
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Principal points of contact in Orrick’s Global White Collar & Corporate Investigations practice:
Pamela R. DavisPartnerSan Francisco+1 415 773 [email protected]
Guy SingerPartnerNew York & Washington D.C.+1 212 506 3510/+ 1 202 339 [email protected]
SAN FRANCISCOThe Orrick Building, 405 Howard StreetSan Francisco, CA 94105-2669United States Tel: + 1 415 773 5700Fax:+ 1 415 773 5759
WASHINGTON D.C.Columbia Center, 1152 15th Street, N.W.Washington, D.C., 20005-1706United States Tel: + 1 202 339 8400Fax:+ 1 202 339 8500
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