Acquisition May Create Headaches for Merck in Foreign Corruption Probe | BNET
Merck (MRK) disclosed in its quarterly 10-Q filing that it is the subject of an investigation by the Department of Justice and the SEC for possible violations of the Foreign Corrupt Practices Act (which prohibits paying bribes to do business in foreign countries). The investigation comes with a bit of unspoken history — and some potential risk created by Merck’s recent acquisition of Schering-Plough.
Merck says “this inquiry is part of a broader review of pharmaceutical industry practice.” That’s true: at least 10 other companies are suspected of doing the same thing, and an 11th — SciClone (SCLN.O) popped up Tuesday.
However, the fuller context is that the letters are more serious than a “review.” A DOJ assistant attorney general warned an assemblage of pharma industry lawyers last year that DOJ “will be intensely focused on rooting out foreign bribery in your industry.” A similar criminal investigation has already led to the imprisonment of one executive at Johnson & Johnson (JNJ) in the U.K., and J&J admitted in its most recent 10-Q that it had violated anti-corruption laws and that investigations are under way in several nations, including the United States.
via Acquisition May Create Headaches for Merck in Foreign Corruption Probe | BNET.
Compliance comes calling | The Economic Times
Take an Indian conglomerate preparing to acquire a Belgian company. The last thing it needs to worry about is US criminal laws, right? Wrong — and indeed, buying the Belgian concern without thoroughly analysing its compliance profile could mean buying tens of millions of dollars in criminal liability.
The compliance challenges posed by the vigorous pursuit by the US of alleged Foreign Corrupt Practices Act (FCPA) transgressors have been compounded as other countries, most prominently Germany and the UK, have adopted and begun active enforcement of anti-foreign corruption laws of their own.
On January 19, for example, the US unveiled 22 indictments of individuals, including UK citizen Pankesh Patel, as a result of an undercover operation with FBI agents posing as sales agents offering to corruptly facilitate foreign contracts. Patel and 20 other defendants were handcuffed in front of their peers right on the floor of a Las Vegas trade show.
In his allegedly corrupt pursuit of defence contracts in Africa, Patel had meetings within the US, and sent paperwork in furtherance of the underlying scheme to the US. His indictment is an application of FCPA provisions catching foreign persons that take steps within the US to further overseas corruption.
For Indian companies that are issuers of US securities , no such actions within the US would even be required.
For our hypothetical Belgian marketing company, though not directly subject to the FCPA, it might have FCPA liability if it had corruptly carried out business operations for US companies, or sent dollar-denominated wire transfers for corrupt purposes.
Another trend worth noting for non-US companies is the expectation of active supervision on the part of senior corporate executives.
US enforcers have held executives at headquarters responsible for misconduct occurring in the field, on the basis that the executives failed to supervise far-flung personnel or failed to design internal controls to prevent misconduct.
Other countries are also raising the bar to prevent bribery. In part, this is due to diplomatic pressure from the US but also the efforts of the OECD and the UN, both of whom have sponsored conventions that are now in place mandating that their signatories take certain actions in the fight against corruption. India is party to the UN convention.
The Siemens case in which it paid a record settlement of $800 million in fines and disgorgement of profits was mirrored by a fine of equal magnitude paid to the German regulator.
Murky world of corruption in China | BBC News
Bribery and other forms of corruption are problems often encountered by foreign businesses operating in China.
This can result in companies providing clients with expensive trips abroad, lavish meals and red envelopes stuffed with money.
But not all businesses get drawn into this murky world; some say they abide by the same high standards they observe elsewhere.
And one foreign business advisor said firms that supply good products and services will always do well – even if they refuse to be corrupt.
The use of bribery in the business world in China has come into sharp focus because of the trial involving four executives working for the Anglo-Australian mining firm Rio Tinto.
The four were sentenced in Shanghai to between seven and 14 years in prison for taking bribes and stealing commercial secrets.
But how much of a problem is bribery for foreign firms operating in China?
One British businessman, who did not want to be named, said it was a big problem, particularly in China’s smaller cities.
He told the BBC of one occasion when he was trying to set up a joint venture company with a Chinese partner in Shandong province.
Negotiations had been going on for weeks, without any success, he said. Then, at one meeting, he was asked to step outside for a chat with an official.
“He said all the problems could be overcome – so I asked him how. He said it could be done if I gave him 1m yuan ($146,000: £98,000),” said the businessman.
US Likely to Broaden Anti-Bribery and Corruption Efforts | Business Ethics
Look for the U.S. government to further intensify its efforts to combat transnational bribery and corruption, broadening them to include more government agencies in addition to the Justice Department, a top government prosecutor said.
“It’s my view that the U.S. government – and not just the Justice Department, but the U.S. government more broadly – is going to focus on international corruption in a more comprehensive and even more rigorous way than it has in the past,” said Mark Mendelsohn, the Justice Department’s lead criminal prosecutor for violations of the Foreign Corrupt Practices Act (FCPA).
Speaking to an audience of corporate compliance officers at the Dow Jones Global Ethics Summit in New York City, Mendelsohn said the increased activity would reflect President Obama’s “well-known and strongly-held views about the corrosive effect of corruption on the role of development and the rule of law.”
FCPA prosecutions have exploded in the past five years, with the Department of Justice bringing a total of twenty-six enforcement actions in 2009 compared to only two in 2006. Earlier this month, British defense contractor BAE agreed to pay fines totaling almost $450 million to settle charges that it had made illegal payments to officials in various countries to obtain contracts. In late 2008, industrial giant Siemens agreed to pay more than $1.6 billion in fines and penalties to settle charges brought under the FCPA.
via US Likely to Broaden Anti-Bribery and Corruption Efforts | Business Ethics.
Proposed UK Bribery Bill: It’s Implications and Contrasts to the FCPA | Thomas Fox – JDSupra
In March 2009, the United Kingdom introduced into Parliament a Bribery Bill drafted to consolidate and bring into the 21st Century the various UK anti-corruption and bribery laws. As stated by Her Royal Highness Queen Elizabeth II, in her speech of November 18, 2009, the purpose of the Bribery Bill is to “Provide a modern and comprehensive scheme of bribery offences to equip prosecutors and courts to deal effectively with bribery at home and abroad.” As of February 9, 2010, the Bribery Bill had its third and final reading in the House of Lords, where no changes were proposed, and the bill has now been presented to the House of Commons for the first reading.
With wide cross-party support it is anticipated that the Bribery Bill will pass the House of Commons and become law by May, 2010. The Bribery Bill amends and repeals existing anti-bribery offences under the Public Bodies Corrupt Practices Act 1889, the Prevention of Corruption Act 1906 and the Prevention of Corruption Act 1916 and abolishes the UK common law offenses of bribery and embracery (bribery of jurors). This proposed legislation represents a long awaited simplification of the law on corruption and makes the UK compliant with its international obligations under the OECD. It will have a major impact on the way businesses connected to the UK manage their international business.
via Proposed UK Bribery Bill: It’s Implications and Contrasts to the FCPA | Thomas Fox – JDSupra.
Take Five: Corporate Corruption, A Worldwide View – Boardmember.com
What do you get when you combine the acronyms FCPA, SEC, UK and US? Answer: trouble for public companies in both countries. Lawmakers are cracking down on corporate corruption and as Asheesh Goel, partner, Ropes & Gray, explains, the legal landscape is changing rapidly and prosecutors around the world are ready to make an example out of your company.
[continued] Take Five: Corporate Corruption, A Worldwide View – Boardmember.com.
Facilitation Payments: A business integrity officer’s perspective – Ethical Corporation
More than thirty years after the inception of the United States Foreign Corrupt Practices Act of 1977 FCPA, twelve years after the signing of the Organization of Economic Cooperation and Development’s OECD Convention on Combating Bribery of 1997, and half a decade since the adoption of the United Nations Convention Against Corruption of 2004, one of the still grey areas in the anti-corruption debate is the topic of whether “facilitation payments” should be made.
Simply put, a facilitation payment is what is more colloquially referred to as a “grease” payment.
Some jurisdictions allow them, others forbid them and yet others don’t allow them but provide exceptions because of their intrinsically extortionate nature.
Indeed, the United Kingdom, still in the midst of debating the final form of its new anti-corruption law expected to be adopted in mid 2010, is yet to have settled the issue. On International Anti-Corruption Day, December 9, 2009, the OECD announced an expansion of the efforts of its 30 member countries and additional eight signatory nations with regard to its anti-corruption efforts.
via Facilitation Payments: A business integrity officer’s perspective – Ethical Corporation.
With FCPA and OECD, Risk management a must today | Emirates Business
We are seeing more headlines in the Gulf about fraud cases and the recent high-profile prosecutions in the UAE emphasise the current approach of a zero-tolerance policy towards corruption.
The passing of anti-bribery laws and regulations and renewed efforts by governments to clarify and codify specific regulations in more recent legislations and decrees further highlight national efforts to combat corruption at all levels.
For example, provisions in the UAE Penal Code make acceptance of a bribe by a public official a criminal offence, punishable by imprisonment and fines and the provider of a bribe or the person who facilitates a bribe can also face criminal liability. Several countries in the Gulf, including the UAE, have signed up to the UN Convention against Corruption and companies in Dubai regulated by the DIFC and DFSA too have a handful of regulations and compliance procedures to watch out for.
American and European companies doing business in the region are always concerned with FCPA and OECD Anti-Bribery provisions and the number of investigations carried out by the US Securities and Exchange Commission for alleged violations of FCPA provisions globally has increased from nine in 2003 to more than 90 in 2008.
It is interesting to note that more local companies in the Gulf are beginning to recognise the act's impact and relevance in relation to business transactions, which is making thing easier for everyone.
What is also often misunderstood is that the FCPA applies only to American companies, when in fact the provisions apply to any entity with physical assets or securities registered in the United States.
[continued] Risk management a must today.
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