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February 23, 2016

Houston, Texas

UTILITIES & ENERGY COMPLIANCE &

ETHICS CONFERENCE OF THE SOCIETY

OF CORPORATE COMPLIANCE & ETHICS

Conflicting Compliance: When Foreign Laws

Are at Odds with Anti-Corruption Compliance

under the FCPA and UK Bribery Act

Winston Chan, Partner, Gibson, Dunn & Crutcher LLP

Natasha Ellis, Manager, PwC Advisory Services LLC

Thomas Firestone, Partner, Baker & McKenzie LLP

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Topics for Discussion

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� The FCPA and UK Bribery Act

� Global Enforcement Trends

� Detail on China, Russia, Brazil, Indonesia

� Spotlight on Extractive Industries

� When Compliance Conflicts with Local Laws

� The Complaint

� The Investigation

� Taking Action

� Reporting

The FCPA & UK Bribery Act

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The FCPA: An Overview� Anti-Bribery Provision

� Illegal to corruptly offer or provide money or anything of value to officials of foreign governments with intent to obtain or retain

business.

� Applies to “issuers” – any business entity registered under 15 U.S.C.§781 or required to file reports under 17 U.S.C.§780(d).

� Books and Records Provision

� Requires issuers to make and keep accurate books, records, and accounts, which, in “reasonable detail,” accurately and fairly reflect

the issuer’s transactions and disposition of assets.

� There is no materiality threshold and, for civil enforcement by the SEC, no knowledge requirement for an issuer.

� Enforcement actions typically involve either misreporting large bribe payments or widespread inaccurate recording of smaller

payments made as part of a systemic pattern.

� Internal Controls Provision

� Requires that issuers devise and maintain reasonable internal accounting controls aimed at preventing and detecting FCPA

violations.

� Internal controls must provide “reasonable assurance” transactions are properly recorded.

� SEC civil violations do not require knowledge for an issuer.

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The FCPA: An Overview

� Anti-Bribery Provisions Violations:

� Corporations – criminal penalties include a $2 million fine or twice the pecuniary gain or loss, disgorgement of

profits, and possible suspension and debarment by the U.S. government; civil penalties include disgorgement

of profits and a fine of up to $500,000.

� Individuals – criminal penalties include up to 5 years’ imprisonment, and a $250,000 fine or twice the

pecuniary gain or loss; civil penalties include a fine of up to $100,000.

� Accounting Provisions Violations:

� Civil penalties and criminal penalties for

“knowingly circumventing” the accounting rules.

� Corporations – criminal penalties of up to $25

million.

� Individuals – criminal penalties of up to 20 years’

imprisonment and $5 million fine.

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Top 10 FCPA Settlements: Two 2014 settlements among the largest

No. Company Total Resolution DOJ Component SEC Component Date

1 Siemens AG* $800,000,000 $450,000,000 $350,000,000 12/15/2008

2 Alstom S.A. $772,290,000 $772,290,000 -- 12/22/2014

3 KBR/Halliburton $579,000,000 $402,000,000 $177,000,000 2/11/2009

4 BAE Systems** $400,000,000 $400,000,000 -- 2/4/2010

5 Total S.A. $398,200,000 $245,200,000 $153,000,000 5/29/2013

6 Alcoa $384,000,000 $223,000,000 $161,000,000 1/9/2014

7 Snamprogetti/ENI $365,000,000 $240,000,000 $125,000,000 7/7/2010

8 Technip S.A. $338,000,000 $240,000,000 $98,000,000 6/28/2010

9 JGC Corp. $218,800,000 $218,800,000 -- 4/6/2011

10 Daimler AG $185,000,000 $93,600,000 $91,400,000 4/1/2010

* Siemens’s U.S. FCPA resolutions were coordinated with a €395 million ($569 million) anti-corruption settlement with the Munich Public

Prosecutor.

** BAE pleaded guilty to non-FCPA conspiracy charges of making false statements and filing false export licenses, but the alleged false

statements concerned the existence of the company’s FCPA compliance program, and the publicly reported conduct concerned alleged

corrupt payments to foreign officials.

The FCPA: An Overview

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The FCPA: Recent Developments

� Enforcement Actions in 2015:

� SEC enforcement has stayed more constant, while DOJ enforcement has focused more on individual

defendants.

� No parallel enforcement actions against companies by both DOJ and SEC in 2015.

� DOJ Enforcement Strategy Shifting:

� 10 new prosecutors in DOJ FCPA Unit as of November 2015.

� Refocusing efforts to:

� Encourage corporate cooperation through declinations.

� Pursue individual wrongdoers.

� Pursue high-value corporate enforcement actions.

“A shift in enforcement that targets the worst offenders and

punishes individuals may be a better way to encourage

corporate compliance and make sure only wrongdoers are

punished.”

—Wall Street Journal (Nov. 11, 2015)

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UK Bribery Act: An Overview

� Four Separate Offenses:

1. Offering, promising, or giving a bribe to a person (including private parties).

2. Agreeing to receive or accepting a bribe.

3. Offering, promising, or giving a bribe to a foreign government official with the intent to influence the

performance of his or her functions as a public official in order to obtain or retain business or a business

advantage.

4. Failing as a commercial organization to prevent bribery by associated persons.

� Impact of the UKBA:

� Expands the definition of criminal conduct, including a new strict liability offense.

� Expands the range of organizations and individuals subject to U.K. corruption law.

� Increases maximum penalties for violations.

� Criminalizes private commercial bribery.

� Does not require that the bribery of a government official had an improper purpose or corrupt intent.

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UK Bribery Act: Recent Developments

� First Deferred Prosecution Agreement

� The Serious Fraud Office entered into its first deferred prosecution agreement with ICBC Standard Bank Plc.

� Global payment of $36.9 million.

� $ 4.2 million to settle related civil charges by SEC.

� May signal rise in the enforcement of UKBA.

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UK Bribery Act: FCPA v. UKBAProvision FCPA Bribery Act

Who is Covered by the Rules Issuers, domestic concerns and any other persons

who take any act in furtherance of a corrupt

payment while within the territory of the U.S.

U.K. companies, citizens, and residents; non-U.K. nationals and

entities where any act takes place in U.K.; “failure to prevent

bribery” offense applies to any entity that undertakes business in

the U.K., regardless of whether the bribery has a connection to the

U.K.

Active vs. Passive Offenses Only the act of paying or offering a bribe is

prohibited

Active (making/offering a bribe) and passive offenses (accepting a

bribe ) are prohibited.

Recipient of Bribe Only bribes paid or offered to a “foreign official” Bribes paid to any person to induce them to act “improperly”

Corporate Strict Liability For failure to maintain adequate systems of internal

controls

For failure to prevent bribery, subject to defense of having

“adequate procedures” in place

Facilitating Payments Exception for payment to foreign official to expedite

or secure the performance of a routine non-

discretionary government action

No facilitating payments exception

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UK Bribery Act: FCPA v. UKBA

Both the FCPA and UK Bribery Act reach individuals who do not directly engage in corrupt activities,

but who permit them.

� In addition to persons who bribe or accept bribes, the Bribery Act explicitly provides that senior

officers, including directors, company secretaries, and managers, who “consented or connived” in

any of the offenses set forth in the Act may be held personally liable for that offense.

� In the U.S., the SEC has pursued expansive theories of director and officer liability:

� Civil liability as a “control person” (Nature’s Sunshine, 2009).

� Civil liability for “aiding and abetting,” by failing to implement internal controls (Syncor, 2007).

Many commentators describe the U.K.

Bribery Act as the “FCPA on steroids.”

—Wall Street Journal

(Dec. 28, 2010)

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Global Enforcement Trends

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Global Enforcement Trends� Governments around the world are dedicating more

resources to investigating and prosecuting acts of corruption

and bribery.

� In recent years, many countries have adopted new anti-

corruption legislation, including Brazil, China, and Russia.

� Extensive formal and informal cooperation among countries

is becoming more common, particularly between the U.S.

and EU countries (see Siemens AG case).

� OECD Anti-Bribery Convention and UN Convention Against

Corruption are helping drive the issue.

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As countries increasingly share information, companies must be aware of the risks of concurrent investigations in the U.S. and local markets.

� Louis Berger International, Inc.

� FIFA

� Standard Bank Plc

� China’s “Skynet”: Seeking extradition of potentially hundreds of

suspected corrupt officials who fled the country.

World Bank debarment

DOJ DPA and plea agreements

Indian police arrest former VP

DOJ indictment & Swiss investigation. Swiss arrest of suspects.

Swiss investigation of Sepp Blatter

Swiss DOJ approves 5 U.S. extradition

requests

DPA with U.K. SFO. SEC Settlement

Sources: "2014 FIFA Announcement (Joseph Blatter) 6" by Marcello Casal Jr. / ABr -

Agência Brasil (Secretaria de Imprensa e Divulgação). Licensed under CC BY 3.0 br via

Commons.

Global Enforcement Trends: Cross-Border Cooperation and Multinational Enforcement

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China: Anti-Corruption Laws

Chinese law punishes both the giving and taking of bribes. Chinese criminal law has provisions criminalizing three types of bribery:

1. Official Bribery: Criminalizes bribery of “state functionaries,” “government organs,” or their close relative or associates – new in 2015. Harsh penalties applicable, including the death penalty. RMB 10,000+ triggers criminal liability for bribery.

2. Commercial Bribery: Criminalizes bribery of “staff of a company or enterprise” and imposes record-keeping obligations. Employers are liable for the acts of their employees. No exception for small facilitating payments.

3. Foreign Bribery: In 2011, China amended its criminal law to criminalize bribery of “any foreign public official or official of an international public organization.”

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China: 2015 Legislative Developments

Nationwide

� Latest Amendment to Criminal Law Anti-Corruption Provisions

� For the first time, criminalizes bribery of officials’ close relatives or associates.

� Replaces specific monetary thresholds for official embezzlement sentencing ranges with more flexible tiers of offenses involving “relatively large,” “huge,” and “especially huge” amounts.

� Adds monetary fines for all graft- and bribery-related offenses.

� Requires higher level of cooperation for leniency.

Healthcare Industry

� New Rules Governing Donations to Healthcare Entities (Trial Implementation)

� Apply to PRC healthcare-related donees and domestic and foreign donors.

� Require donees to publicly disclose information regarding donations received.

� Prohibit donations involving commercial activities, unfair competition, or commercial bribery, or relating to the donee’s procurement of goods and services.

� Do not specifically address whether pharmaceutical or medical device companies’ sponsorships of hospital events are permissible.

Sources: Ninth Criminal Law Amendment of the People’s Republic of China (中华人民共和国刑法修正案(九))

(promulgated Aug. 29, 2015, effective Nov. 1, 2015); Measures for the Administration of the Receipt of Public Welfare

Donations by Health and Family Planning Organizations (Trial Implementation) (卫生计生单位接受公益事业捐赠管理办法(试行)) (Aug. 26. 2015), http://www.nhfpc.gov.cn/caiwusi/s3573/201510/761f2a9e36f74c1e9f00849f8de61f49.shtml.

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China: New Leadership Brings Changes in Laws and Enforcement

The anti-graft campaign launched by President Xi Jinping in November 2012 has lead to an explosion

of enforcement activity.

� Recent changes to anti-bribery laws and policies include:

� A 5-year anti-corruption plan was launched in December 2013 that:

� orders officials to submit reports annually on their anti-graft reform progress,

� expands pilot projects that require newly nominated officials to disclose their private assets,

� urges anti-graft training for Community Party members and officials, with a focus on law and corruption cases to warn

them of the consequences, and

� states that “commercial bribery will be handled sternly and probed, and punishments for giving bribes will be harsher.”

� Cross-country “shock and awe” anti-graft inspection tours of several government ministries, state-owned

enterprises, banks, and universities.

Communist Party Calls for Commercial Bribery Crackdown

“A crackdown on commercial bribery by multinationals is deeply significant to safeguarding the order of the

market economy and protecting an environment of fair competition.” — People’s Daily (7/17/2013)Source: 5-Year Plan Unveiled to Fight

Corruption, China.org (Dec. 26, 2013).

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China: 2015 Enforcement Trends

� Whistleblowing on the rise.

� Four out of five anti-corruption investigations originated from whistleblower tips.

� Chinese authorities have established official channels, including telephone hotlines, web pages, online platforms, and

mobile apps, for the public to report corruption.

� A website designed to receive whistleblower reports regarding the Central Government has received 4,924

whistleblower tips in the year since its December 2014 launch.

� Social media remains a popular avenue for whistleblowers to expose corruption.

� Continuing scrutiny of state-owned enterprises.

� Energy sector:

� Former top executives from Sinopec Group and China Resources under investigation for graft and corruption.

� Former executives of PetroChina and Sinopec face prosecution on corruption charges.

� Anti-corruption push shifts to Shanghai.

� 20 corporate, institutional, and investment enterprises in Shanghai under CCDI inspection, including major

state-owned enterprises Shenergy Co. and Shanghai Electric Group Co.

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29,011

By the Numbers (as of November 30, 2015):

Number of officials found guilty of corruption and bribery in China.

32,128 Number of matters investigated involving “work-related crimes” (embezzlement, bribery, misappropriation,

abuse of power, dereliction of duty, and malpractice) by the CCDI and its local counterparts.

43,231 Number of officials penalized for breaking Party rules, including corruption.

High-Ranking Officials Caught in the Anti-Corruption Crackdown

• Former member of the CCP Politburo Standing Committee

and former Minister of Public Security, Zhou Yongkang,

sentenced to life imprisonment.

• Former President Hu’s Top Aide, Ling Jihua, arrested pending

prosecution.

Sources: 2015年11月全国查处违反中央八项规定精神问题4833起，中央纪委监察部网站（2015年12月17日）,

http://www.ccdi.gov.cn/xwtt/201512/t20151216_71252.html; 十八大后三年来落马省部军级官员一览(名单), China Economic Net (Nov.19, 2015),

http://www.ce.cn/xwzx/gnsz/gdxw/201511/19/t20151119_7061270.shtml; China’s Corruption Crackdown is So Vast, Quartz (Nov. 12, 2015),

http://qz.com/547695/chinas-corruption-crackdown-is-so-vast-top-officials-from-every-single-province-have-been-nabbed/.

• Allies of Zhou Yongkang, including Jiang Jiemin and Wang Yongchun, former

top executives of CNPC and PetroChina, and former top officials from

Sichuan province, sentenced to lengthy prison terms.

• At least one top official has been ensnared in each of China’s 31

provincial-level divisions.

• 132 officials at provincial or higher levels have been under the corruption

investigation.

• 61 from central government bureaus and the military.• 60 from provincial-level governments.• 11 from central SOEs.

China: Domestic Enforcement

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China: Extraterritorial Efforts

� Apprehension of Overseas Fugitives

� China launched “Operation Fox Hunt” in 2014, followed by the “Sky Net” campaign in 2015, aimed at tracking down corruption suspects at large overseas and recover their ill-gotten assets.

� As of November 2015, 627 suspects in 63 overseas countries or regions have been apprehended.

� Anti-Money Laundering (“AML”) Efforts

� Chinese authorities are cracking down on underground banking and money-laundering to prevent corrupt officials from transferring their criminal assets overseas.

� Withdrawals at overseas ATMs are capped to stem capital outflows.

� U.S.-China Cooperation

� The U.S. and China have agreed to increased cooperation on cybersecurity, corrupt and criminal asset discovery, and law enforcement.

� The U.S. repatriated its first Chinese corruption fugitive named under Sky Net campaign in 2015.

� The U.S. Treasury Department’s Financial Crimes Enforcement Network and its counterpart in China, the China Anti-Money Laundering Monitoring and Analysis Center, signed a MOU to expand AML cooperation.

China is broadening the territorial reach of its anti-graft campaign to apprehend corruption

suspects and recover criminal assets overseas.

Sources: China and US to Co-operate on Corrupt Asset Seizures, Deportations, FT (Sept. 27, 2015), http://www.ft.com/intl/cms/s/0/0f6d756a-64e4-11e5-97e9-

7f0bf5e7177b.html#axzz3uYsYUpXu; China, U.S. Sign Agreement to Expand AML Cooperation, FCPA Blog (Dec. 14, 2015),

http://www.fcpablog.com/blog/2015/12/14/china-us-sign-agreement-to-expand-aml-cooperation.html; Police Step Up Underground Banks Battle, China Daily

(Oct. 16, 2015), http://www.chinadailyasia.com/nation/2015-10/16/content_15330495.html; China Cracks $64 Billion `Underground Bank' Moving Money

Abroad, Bloomberg (Dec. 16, 2015), http://www.bloomberg.com/news/articles/2015-11-20/china-cracks-64-billion-underground-bank-moving-money-

abroad; 627 Fugitives Captured in "Fox Hunt" Campaign, Xinhua News (Nov. 4, 2015), http://news.xinhuanet.com/english/2015-11/04/c_134783961.htm.

China’s Capital Outflows

• China is the leading source of illicit

outflows among developing countries, with nearly U.S. $1.4 trillion of illegal

funds transferred from China between

2003 and 2013.

• A record U.S. $194 billion of capital

outflows in September 2015.

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Russia: Anti-Corruption LawsIn 2011, Russia revamped its anti-corruption laws by adding a tiered system of fines and prison time, and criminalizing the bribery of foreign officials.

� Added the crime of aiding and abetting bribery.

� Foreign official is defined as “any person, whether elected or appointed, that holds any position at the legislative, executive, administrative or judicial body of a foreign state, and any person performing a public function for a foreign state, including any public agency or enterprise.”

� The fine for individuals accepting a bribe can be a prison term up to 15 years and a fine of up to 70 times the bribe amount or a fine of up to 100 times the bribe amount.

� The fine for individuals paying a bribe can be a prison term up to 12 years and a fine of up to 70 times the bribe amount or a fine of up to 90 times the bribe amount.

� Declined to add criminal penalties for legal entities; rather, increased the level of administrative fines (up to 100 times the bribe amount).

Active and passive commercial bribery is also criminalized under Russian law.

� Commercial bribery is defined as an illegal transfer of money, securities or any other assets to persons having managerial functions in commercial organizations for the purpose of influencing their actions or inactions in performing their managerial duties.

� Criminal penalties for individuals include fines between 10 and 90 times the amount of the bribe and imprisonment of up to 12 years.

Sources: Russian Code of Administrative Offenses Article 19.28; Russian Criminal Code Articles 204, 290, 291.

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Russia: Changing Legal LandscapeKey legislative changes (years 2012-2016):

� Companies operating in Russia are required to take affirmative compliance measures to prevent

corruption in their business.

� Public officials are required to declare and surrender any received gifts of unknown value or exceeding

RUB 3,000 (approx. $46) in value to specifically designated divisions of their government organizations.

� De-offshorization law was passed and entered into force on January 1, 2015.

� Since September 1, 2015, the Data Localization Law amended the Personal Data Law by establishing the

requirement that personal data of Russian citizens must be processed via servers located within the

Russian Federation:

� Implication on location of servers where whistleblower messages are processed.

� Implication related to imaging of local data in the course of an internal investigation.

� As of January 1, 2016, restrictions were implemented on the public procurement of foreign software.

Foreign software will not be listed in a unified register based on which government customers can purchase

software, but will require a prior exception based on a statement by the government customer of why the

restrictions cannot be observed.

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Russia: Enforcement TrendsAs of January 1, 2013, companies operating in Russia are required to take affirmative compliance measures to prevent corruption in their business.

� Such measures may include, among other activities, designating a department or officer responsible for preventing corruption and other related offenses, cooperating with Russian law enforcement agencies on anti-corruption matters, adopting a code of business ethics, preventing conflicts of interest, and preventing the creation of false, unofficial, or altered business records.

� The Russian Ministry of Labor and Social Protection issued guidance with recommendations in order to ensure a unified approach for preventing and combatting corruption in organizations.

� In August 2014, Transparency International Russia published the report “Transparency of Corporate Reporting and Anti-Corruption Policy in Russian Private Enterprise: Compliance as a Competitive Advantage.” The study investigated the websites and legal documents of 50 Russian companies and holdings, which had been on Forbes’ 2013 “Largest Businesses in Russia” list. The report’s conclusions include the following:

� Neither the Russian government nor private companies are interested in adopting rule-based business practices.

� Russian enforcement agencies may draw attention to fire safety regulations or tax compliance, but remain unwilling to impose stiffer penalties that would force companies to establish anti-corruption compliance programs.

� In most cases, Russian companies themselves do not have a code of ethics or a policy of zero tolerance towards corruption, nor are they keen to publish required declarations.

Sources: Federal Law No. 273-FZ “On Corruption Counteraction,” Art. 13.3;

www.rosmintrud.ru/docs/mintrud/employment/26; https://blog.transparency.org/2014/09/19/anti-corruption-

compliance-in-russia-a-way-forward/.

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Russia’s CPI ranking

remains low,

decreasing from 127 in 2013 to 136

in 2014.

Sources: Transparency International, Corruption Perceptions Index (2014); Transparency International, Global Corruption

Barometer (2013); The World Bank, Doing Business 2016: Measuring Regulatory Quality and Efficiency; Corruption in Russia as

a Business, Institute of Modern Russia (Jan. 29, 2013); Poll on expectations of Russians from 2016, Levada-Center (Dec. 28,

2015).

51 Russia’s ranking (out of 189 economies, 1 being the easiest) in the

World Bank 2016 Doing Business Report, which measures the relative

ease of doing business in a country using several compliance-related

metrics, such as obtaining a permit and dealing with red tape.

53%

25%

Percentage of Russians polled who expect high-profile corruption

scandals and minister resignations in 2016.

Percentage of Russia’s GDP possibly consumed by corruption, as

maintained by independent experts.

According to a Transparency

International survey, 79% of the

Russians polled think corruption in the

public sector is a serious problem, 13%

think it is a problem, 7% think it is a

slight problem, and only 1% think

corruption in the public sector is not

really a problem.

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120

130

140

150

2011 2012 2013 2014

CPI Rank (2011-2014)

79%

13%

7%

1%

Russia: Corruption Landscape

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Brazil: Anti-Corruption Laws

� President Rousseff signed Brazil’s Clean Company Law (No. 12,846/2013) in August 2013. The law:

� Imposes civil sanctions on legal entities that bribe domestic or foreign public officials and holds companies to

strict liability (unlike the FCPA, which requires proof of corrupt intent).

� Imposes harsh sanctions on violators—up to 20% of yearly gross billings and never less than the benefit

gained.

� Gives credit to companies that self-report violations or have strong compliance programs.

� The law became effective as of Jan. 29, 2014.

� However, federal authorities have yet to publish

regulations detailing how it will be enforced.

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Brazil: 2015 Legislative Developments

� Brazil’s 2015 Clean Company Act:

� Implemented on March 18, 2015, under Decree 8.420/2015.

� Gives Brazil’s Comptroller-General’s Office (“CGU”) jurisdiction over allegations of corruption involving foreign

and Brazilian officials.

� September 2015: CGU released new, non-binding guidelines for compliance programs, with five

“pillars” for corporate integrity programs:

1. Commitment and support from senior management;

2. Adequate authority and autonomy for the compliance function;

3. Creation of company-specific, risk-based integrity program;

4. Structuring of corporate compliance rules and instruments; and

5. Ongoing monitoring and testing of the compliance function.

Sources: ABA Section of International Law, International Anti-Corruption Committee Newsletter (April-May 2015); CGU,

Programa de Integridade - Diretrizes para Empresas Privadas (September 2015) (translated by Merrill Brink); Photo by

Blalonde.

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Brazil: “Operation Car Wash” Is Ongoing

� Has dominated front page news in Brazil since the start

of the investigation in March 2014.

� Massive corruption scandal alleging the over-charging of

oil contracts and paying kickbacks to politicians.

� To date, there have been over 100 arrests and more than 60 convictions. The upper echelons of

politics have also been implicated, including the leader of the government coalition in the Senate

and the speaker of the lower house of Congress.

� Several construction companies have signed leniency agreements with Brazilian authorities,

agreeing to cooperate in exchange for a reduction of penalties:

� Camargo Correa agreed in August 2015 to pay a R$104 million (approximately $27.7 million) fine;

� Andrade Gutierrez agreed in November 2015 to pay a R$1 billion fine for conduct involving both Petrobras

and the 2014 FIFA World Cup.

� More than construction companies have been impacted: in October 2015, advertising agencies FCB

Brasil and Borghi/Lowe signed a leniency agreement to pay R$50 million for paying a congressman

to steer government contracts to the agencies.

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Indonesia: Anti-Corruption Laws

� Principal Regulations

� Law No. 11 of 1980 on the Criminal Act of Bribery (Anti-Bribery Law).

� Law No. 31 of 1999 on the Eradication of the Criminal Act of Corruption as lastly amended by Law No. 20 of

2001 (Anti-Corruption Law).

� Law No. 28 of 1999 on Corruption-Free State Governance.

� Law No. 8 of 2010 on Combating Money Laundering Crime.

� Key Points

� No extraterritorial jurisdiction as long as the consequences of the offense do not cause loss to the Indonesian

economy.

� Punishes bribery of domestic officials, receipt of bribe by domestic officials, and any acts that cause loss to the

Indonesian economy.

� Fines of between IDR 50 million and IDR 1 billion; imprisonment up to a maximum of 20 years; under certain

extreme circumstances, life imprisonment or death penalty can be imposed.

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� Principal Enforcement Body

� Law No. 30 of 2002 on the Corruption Eradication Commission (the “KPK”).

� Role of the KPK

1. Coordinate with the agencies having the authority to eradicate corruption;

2. supervise the agencies having the authority to eradicate corruption;

3. conduct investigations, interrogations and prosecutions with respect to corruption;

4. take steps to prevent corruption; and

5. monitor the management of government.

� Recent Developments

� Proposed amendments in 2015 faced criticism that they would weaken the KPK.

� On October 13, 2015, Luhut Binsar Panjaitan, the Politics, Law and Security Coordinating Minister, indicated

that the planned revision of the KPK would be postponed.

Indonesia: Anti-Corruption Regulatory Body

Source: Indonesia: Planned New Law on Corruption Commission Postponed,

LAW.gov (October 20, 2015).29

Indonesia: Recent Enforcement Action

� Allianz SE: Allianz’s Indonesian subsidiary allegedly made improper payments to employees of state-

owned enterprises from 2001-2008 to obtain or retain almost 300 insurance contracts for large

government projects. The company paid more than $12 million to settle the charges.

� Innospec: The Indonesian authorities convicted and sentenced two individuals to prison for

accepting and paying bribes related to Innospec’s attempt to sell a gasoline additive to a state-owned

oil and gas company. This enforcement action was part of a global investigation that also resulted in

civil and criminal charges under the FCPA and UK Bribery Act.

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Spotlight on Extractive Industries:

More Stringent Reporting Requirements

� United States: In December 2015, the SEC voted to propose rules that would require resource

extraction issuers to disclose payments made to the U.S. federal government or foreign governments

for the commercial development of oil, natural gas or minerals. Under the proposed rules, this would

apply to issuers who are required to file annual reports with the Commission under the Securities

Exchange Act.

� United Kingdom: In December 2014, the U.K. signed into law a new regulation requiring large and

publicly listed oil, gas, mining and logging companies registered in the U.K. to annually disclose the

payments they make to governments around the world.

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Source: TRACE Global Enforcement Report 2014.

Total Enforcement Actions Concerning Bribery of Domestic

and Foreign Officials by Industry 1977-2014 (excluding

United States)

U.S. Enforcement Actions Concerning Bribery of

Domestic and Foreign Officials by Industry

1977-2014

Spotlight on Extractive Industries:

Leading the Pack in Global Enforcement Actions

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When Compliance Conflicts with Local Laws

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A Hypothetical Scenario

� You are the General Counsel of BigCo, a multinational corporation that specializes in selling

equipment for industrial uses to state-owned enterprises around the world. BigCo is listed on the

New York Stock Exchange and is currently under a DPA with DOJ as a result of a bribery case in Asia

that it settled two years ago.

� BigCo has an office in Corruptistan, an oil-rich country on the Eurasian land mass.

� Although Corruptistan is a signatory to the UN Convention Against Corruption and the OECD Anti-

Bribery Convention, it consistently receives poor evaluations from both the OECD Working Group on

Bribery and Transparency International, both of which have stated publicly that government contracts

are permeated with bribery and that law enforcement does more to further corruption than it does

to stop it. According to international human rights organizations, law enforcement officials in

Corruptistan routinely violate human rights and frequently torture suspects in order to force them to

confess.

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Hypothetical Scenario: The Complaint

� Yesterday, BigCo’s Regional Counsel for EMEA called to tell you that she had received a whistleblower

complaint from an employee in your office in Corruptistan. The employee claimed that the Country

Manager in Corruptistan had paid bribes to local government officials to help BigCo win several multi-

million dollar contracts over the last several years.

� Corruptistan law provides that “any citizen having evidence that a crime has been committed against

the state of Corruptistan must provide such evidence to the appropriate law enforcement authority.”

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Hypothetical Scenario: The Investigation

� You immediately hire an outside law firm, ABC, to conduct a full investigation. ABC does not have an

office in Corruptistan, but it does have a relationship with a local law firm, several of whose lawyers

also work simultaneously in the General Prosecutor’s Office, an arrangement which is not prohibited

under local law.

� Remember, Corruptistan law provides that “any citizen having evidence that a crime has been

committed against the state of Corruptistan must provide such evidence to the appropriate law

enforcement authority.”

� Also, under the law of Corruptistan, “investigations which may result in criminal prosecution may only

be carried out by duly authorized law enforcement officials in the Republic of Corruptistan, unless

otherwise provided for by the laws of Corruptistan or international treaty obligations of Corruptistan.”

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� Corruptistan law prohibits the processing of personal data “without the express consent of the data

subject.”

� The Country Manager signed a standard BigCo employment contract which provides that “the

employee agrees not to conduct personal business during work hours or on BigCo premises.”

Nevertheless, he refuses to surrender his work computer for imaging by ABC on the grounds that he

frequently uses it for personal correspondence. He says that if the ABC lawyers insist on taking it

from him, he will report them to his friends in the Ministry of Internal Affairs and have them arrested.

Hypothetical Scenario: The Investigation

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� The whistleblower has stated that the Country Manager paid the bribes with the assistance of Pierre,

the former Sales Manager for Eurasia. Pierre is now working in BigCo’s office in France. He agrees to

turn over his laptop for imaging, but only if ABC agrees to inform the labor union to which he belongs

and only if the labor union agrees that the review of his emails is legal under French law.

� The local Paris office of ABC has informed you that under French law, all employers who process

personal data of their employees must record such processing in a public register.

Hypothetical Scenario: The Investigation

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Hypothetical Scenario: Taking Action

� After ABC reviewed his emails, which turned out be extremely incriminating, Pierre admitted to the

ABC lawyers that he and the Corruptistan Country Manager paid numerous bribes over several years

to win “approximately ten public contracts” for BigCo. He has agreed to resign his position with the

company and continue to cooperate with the investigation if he is given two years’ severance pay and

if the company agrees to provide him with a good recommendation for any job he subsequently

applies for.

� Corruptistan law provides that no employee may be fired for criminal misconduct unless the

employee (a) admits to the misconduct and signs a confession setting out all the relevant facts of the

misconduct or (b) is convicted of the misconduct in a court of law.

� The Country Manager has agreed to sign a confession, but only if he is given three years’ severance

pay and only if ABC agrees not to report his misconduct to Corruptistan law enforcement.

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Hypothetical Scenario: Reporting

� Corruptistan law also provides that disclosure of sensitive information which may affect the interests

of the government of Corruptistan to a foreign government, without the consent of the government

of Corruptistan, may be criminally prosecuted.

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Winston Y. Chan

Winston Y. Chan is a partner in Gibson, Dunn & Crutcher’s San Francisco office. He is an experienced trial and appellate attorney, and is a member of the firm’s White Collar

Defense and Investigations Practice Group. He regularly represents entities and individuals in Foreign Corrupt Practices Act matters, including government enforcement

actions, internal investigations, compliance reviews and transactional due diligence, both domestically and abroad. In 2014, Mr. Chan was named in Law360 as one of just

five nationwide “Rising Stars” in the government enforcement defense and investigations field. Benchmark Litigation has recognized Mr. Chan as a 2015 California Litigation

Star for being “recommended consistently as a reputable and effective litigator by clients and peers.”

From 2003 to 2011, Mr. Chan served as an Assistant United States Attorney in the Eastern District of New York, where he investigated and prosecuted a wide range of matters

as part of that office’s Business and Securities Fraud Section, including Foreign Corrupt Practices Act violations, hedge fund improprieties, insider trading, accounting fraud,

market manipulation, False Claims Act matters, and fraudulent offerings of securities. Mr. Chan served in a number of supervisory roles, and received a variety of awards and

commendations.

Mr. Chan earned his undergraduate degree, magna cum laude, from Yale University, and his Juris Doctor from Yale Law School, where he was on the Yale Law Journal.

Following law school, Mr. Chan served as a law clerk for the Honorable Leonard B. Sand of the United States District Court for the Southern District of New York, and then for

the Honorable Chester J. Straub of the United States Court of Appeals for the Second Circuit.

Gibson, Dunn & Crutcher

555 Mission Street

San Francisco, California 94105-0921

+1 415.393.8362

wchan@gibsondunn.com

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Natasha Ellis is an experienced manager in the San Francisco, California office of PwC Forensic Services practice with over 10 years of experience providing fraud and contract

compliance consulting services to clients.

Ms. Ellis specializes in channel compliance assessments and investigations, anti-bribery and anti-corruption compliance, and corporate investigations. Ms. Ellis has extensive

experience assisting global companies design and implement robust business/channel partner compliance and investigation programs. She has managed and coordinated

numerous channel partner reviews and investigations, as well as internal remediation efforts throughout the world which have resulted in financial recoveries and mitigated

regulatory risks.

Ms. Ellis’ experience includes engagements in the United States, Asia Pacific, Eastern Europe, Western Europe, Latin America, and Middle East and focuses on applying

accounting, financial, and general business expertise in forensic accounting and investigative work such as allegations of FCPA violations, channel partner reviews, backdating

of stock options, and assessment of the assets. Ms. Ellis also has some experience in the areas of performance improvement, merger integration, and project management

across various industries including technology, government, and healthcare. She is a current member of the ACFE and AGMA (Alliance for Grey Market and Counterfeit

Abatement).

Natasha Ellis

PricewaterhouseCoopers Advisory Services LLC

Three Embarcadero Center

San Francisco, CA 94111

+1 (415) 498-5160

natasha.ellis@pwc.com

Natasha Ellis

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15

Thomas Firestone

Thomas Firestone is a partner in the Washington office. Since joining in 2012, he has worked in the Moscow and London offices and remains a member of London’s

Compliance and Risk Management Group. He previously worked at the US Department of Justice, first as an Assistant US Attorney in the Eastern District of New York handling

transnational organized crime, and then as Resident Legal Adviser and, intermittently, Acting Chief of the Law Enforcement Section at the US Embassy in Moscow. In the latter

capacity, he twice won the US State Department Superior Honor Award for his work on US-Russian law enforcement cooperation and promotion of the rule of law. He also won

a special award from the Russian Federal Anti-Monopoly Service for promoting US-Russian cooperation in combatting transnational criminal cartels.

Thomas Firestone

Baker & McKenzie LLP

Partner

Washington, DC

Email: Thomas Firestone

T + 1 202 835 6126

F + 1 202 416 7126

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