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  • The Corruption Files Introduction

    The Corruption Files Introduction
    Jun 28 2022
    This is Tom Fox. I'd like to welcome you to an exciting new podcast series that I'm premiering on the Compliance Podcast Network, The Corruption Files, together with my co-host Thomas Fox and Michael DeBernardis, an artist partner at Hughes Hubbard & Reed LLP. We're going to be taking a look at some of the top corruption enforcement actions in the United States and beyond.  In our first five episodes, we're going to focus on some key industries inside the United States, which had important FCPA actions. We're going to focus on the background of each of the enforcement actions.  What did it mean from the prosecutorial perspective, from both the Department of Justice and the Securities and Exchange Commission? And then what did it mean at the time of the enforcement action? What does it mean today and what does it continue to mean for the compliance professional in the future?  I know you'll enjoy this great new series, The Corruption Files. Texas Tax rate at 80% of 8.25%
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    1 Min.
  • Energy Violations and the Panalpina Settlements with Tom Fox and Michael DeBernardis

    Energy Violations and the Panalpina Settlements with Tom Fox and Michael DeBernardis
    Jul 12 2022
    Thomas Fox and Michael DeBernardis discuss energy cases considered FCPA violations, highlighting Panalpina Settlement Day, the uncovered bribery methods, and its implications on the future of compliance, the written policies, and the solutions to commerce and transactions in higher-risk jurisdictions.  ▶️ Energy Violations and the Panalpina Settlements with Thomas Fox and Michael DeBernardis Key points discussed in the episode: ✔️ Tom Fox introduces the cases involving Shell, Transocean, Tidewater, Pride International, and Noble. ✔️ Michael DeBernardis describes the company’s methods as a hub-and-spoke arrangement and lays out the Department of Justice’s investigative process. The case has planted the seeds of the pilot program and corporate enforcement policy. The DOJ has become more deliberate in announcing settlements ✔️ Due diligence requires visibility across all aspects of the business. Thomas Fox shares a snippet of advice from a shipping company executive: “If you have a vendor with a 100% success rate, you have a problem.” Any business model based on bribery and corruption never ends well. ✔️ Panalpina’s methods were an open secret across other energy companies, designing ways to circumvent Nigerian customs. Monitoring during this time was less rigorous. ✔️ Due diligence is an ongoing process of improvement. High-risk jurisdictions for particular transactions are now thrown at the forefront. ✔️ Companies outside of the oil and gas industry have started to reconsider their strategies in high-risk areas. The solution is not to stop doing business completely but to work with companies that do compliance. ---------------------------------------------------------------------------- Do you have a podcast (or do you want to)? Join the only network dedicated to compliance, risk management, and business ethics, the Compliance Podcast Network. For more information, contact Tom Fox at tfox@tfoxlaw.com. Texas Tax rate at 80% of 8.25%
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    25 Min.
  • Uncovering the Hidden Schemes in Pharma with Tom Fox and Michael DeBernardis

    Uncovering the Hidden Schemes in Pharma with Tom Fox and Michael DeBernardis
    Jul 19 2022
    Tom Fox and Michael DeBernardis shed light on the bribery schemes highlighted in the cases of Eli Lilly, Fresenius, and Teva and present the prosecutorial investigation, the questionable donations and expenses, preventative measures for companies to implement, and practicing due diligence to minimize risk. ▶️ Uncovering the Hidden Schemes in Pharma with Thomas Fox and Michael DeBernardis Key points discussed in the episode: ✔️ Thomas Fox introduces the cases involving Eli Lilly, Fresenius, and Teva. ✔️ Michael DeBernardis breaks down the DOJ and SEC’s investigative process in uncovering Eli Lilly’s bribery schemes – by looking into other companies from similar industries and asking the pressing questions. ✔️ Thomas Fox describes the bribes made: money going to hospitals and to the doctors and nurses directly, sending individuals to five-star resorts for fake conferences and speeches, and paying for articles that were never published. Any prior SCC reinforcement action is already a red flag. ✔️ The Eli Lilly case has made companies warier of working with government officials as a Polish state-owned health organization was involved. Also, the intent of the fraudulent talks and events was fairly obvious from a prosecutorial perspective. ✔️ Michael DeBernardis and Thomas Fox share advice on how companies should approach charitable donations: Know where your money is going, do background checks on the receiving organization and publicize all donations. ✔️ Eli Lilly’s exceeding discount for a certain distributor was pushed to the spotlight. Overriding internal controls requires documenting for a business reason. Most due diligence problems can be solved by looking closer at business justifications. ---------------------------------------------------------------------------- Do you have a podcast (or do you want to)? Join the only network dedicated to compliance, risk management, and business ethics, the Compliance Podcast Network. For more information, contact Tom Fox at tfox@tfoxlaw.com. Texas Tax rate at 80% of 8.25%
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    23 Min.
  • How Corruption Happens in Tech

    How Corruption Happens in Tech
    Jul 26 2022
    Thomas Fox and Michael DeBernardis discuss the inner workings of bribery in the tech industry, specifically cases involving HP, Microsoft, and Panasonic, the DOJ and SEC driving home the benefits of voluntary disclosure and their response to future cases, and how companies can practice due diligence even within internal controls. ▶️ Bribery in Tech with Thomas Fox and Michael DeBernardis  Key points discussed in the episode: ✔️ Thomas Fox gives a brief background on the cases involving HP, Microsoft, and Panasonic. ✔️ Michael DeBernardis lays out the DOJ and SEC’s investigative process, with a focus on the benefits of voluntary disclosure. Data analytics has also been tossed in the forefront as Microsoft pioneered the transparency of looking into their distributor models and has now been added to compliance guidelines. ✔️ Petty cash has been proven to be an aspect worth examining as HP’s bribery case revolved around the lack of controls. HP’s schemes in Germany and Mexico also emphasized why training your team – whether contractual or full-time – should be trained to handle high-risk situations. ✔️ Internal and compliance controls must be interconnected. Otherwise, wrongdoers will find loopholes and take advantage of them. Making sales to a foreign government also means putting a target on your back. ✔️ Thomas Fox goes into detail about Panasonic’s case regarding corrupt agents, Microsoft’s move towards transaction monitoring, and HP’s suspicious commission discounts coinciding with the Parker Drilling case. ✔️ The DOJ has now provided clear guidance for compliance. Companies are now encouraged to fully disclose their transactions to benefit them in terms of credibility and reduced total penalties. ✔️ Greatly improving their responses, the DOJ has understood the value of cooperation and voluntary disclosure and widened its body of FCPA cases, making it easier for lawyers to counsel companies in preventing future issues from happening. ---------------------------------------------------------------------------- Do you have a podcast (or do you want to)? Join the only network dedicated to compliance, risk management, and business ethics, the Compliance Podcast Network. For more information, contact Tom Fox at tfox@tfoxlaw.com. Texas Tax rate at 80% of 8.25%
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    26 Min.
  • The Bribery Trilogy in Telecom

    The Bribery Trilogy in Telecom
    Aug 2 2022
    Tom Fox and Michael DeBernardis go in-depth about the bribery scandals of three big names in telecom, MTS, VimpelCom, and Telia; Ericsson’s shady deals in multiple countries, how knowing high-risk countries and the beneficiaries of companies can save you from trouble, and the importance of visibility for compliance professionals. ▶️ The Bribery Trilogy in Telecom with Tom Fox and Michael DeBernardis Key points discussed in the episode: ✔️ Tom Fox gives a brief background on the VimpelCom case. He points out how the company, including MTS and Telia, were all tied up with the schemes of Gulnara Karimova, the daughter of a former president in Uzbekistan. ✔️ The DOJ and the SEC are confident in tackling companies taking advantage of “shell companies” and getting involved with corrupt government officials. There was malicious intent on the companies’ sides regardless of the rank of the person involved. ✔️ Tom Fox describes the Telia case. Michael DeBernardis points out that the difference between the outcomes of Telia, MTS, and VimpelCom’s cases was the penalties. Cooperation from Telia and Vimpelcom garnered significant reductions. ✔️ Tom Fox lays out the MTS case. Even when violations were found in Kolorit’s purchase, MTS higher-ups presented excuses that the compliance team failed to argue. The control environment for transparency has since improved post-prosecution. ✔️ Michael DeBernardis emphasizes the risk behind unidentified beneficial owners. VimpelCom, Telia, and MTS had full knowledge of their schemes. But the story is a lot more muddied and complex to the ears of the board and compliance professionals. ✔️ Tom Fox retells the Ericsson case, illustrating it as not just a corrupt third-party, paid-for entertainment, or donations. The imagination only limits the depths where companies explore in weaving the most intricate schemes. Michael DeBernardis attributes this to enterprise-wide failure. ✔️ Knowing the high-risk countries can save your company from trouble. Once you start paying bribes, you’re stuck. The receiving party already has claws on you and will threaten to report to US authorities if you attempt to exit. Michael DeBernardis adds that despite these cases being beyond US soil, companies won’t be able to challenge them. ---------------------------------------------------------------------------- Do you have a podcast (or do you want to)? Join the only network dedicated to compliance, risk management, and business ethics, the Compliance Podcast Network. For more information, contact Tom Fox at tfox@tfoxlaw.com. Texas Tax rate at 80% of 8.25%
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    28 Min.
  • Hiring in the Financial Space

    Hiring in the Financial Space
    Aug 9 2022
    Welcome to another episode of The Corruption Files!  Thomas Fox and Michael DeBernardis discuss questionable hiring practices from JP Morgan, Credit Suisse, and Bank of New York (BNY) Mellon in employing relatives of high-profile clients to gain favor. They also discuss how companies can find a middle ground in hiring families, why Hiring can be a high-risk area, preventative questions to avoid a violation and the significance of internal control and documentation. ▶️ Hiring in the Financial Space with Thomas Fox and Michael DeBernardis Key points discussed in the episode: ✔️ Thomas Fox gives a brief background on the BNY Mellon case. ✔️ Michael DeBernardis mentions how Hiring based on connections has existed for a long time and doesn’t directly violate any laws. It’s all up to a company’s intent. For BNY Mellon, it was to maintain close connections with major clients. He recommends compliance professionals look into their company’s hiring process. ✔️ Hiring unqualified people means you’re hiring them for other reasons. JP Morgan took in ineligible candidates for leverage with high-profile clients and free advertising in their respective home countries. Documentation stopped JP Morgan in its tracks. ✔️ JP Morgan structured hiring program managed to override compliance controls, revealing regulation flaws. Being discovered next to BNY Mellon’s case, it was not the last instance of son-and-daughter corruption. ✔️ Thomas Fox retells the Credit Suisse case. Retracing the company’s spreadsheets revealed their inner workings. ✔️ The risk of hiring relatives can be minimized when there is a middle ground. Thomas Fox shares questions to ask to prevent violations. He also adds strengthening internal control can put a company on the good side of regulators. ---------------------------------------------------------------------------- Do you have a podcast (or do you want to)? Join the only network dedicated to compliance, risk management, and business ethics, the Compliance Podcast Network. For more information, contact Tom Fox at tfox@tfoxlaw.com. Texas Tax rate at 80% of 8.25%
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    24 Min.
  • The Instrumentality Ruling of United States v. Esquenazi

    The Instrumentality Ruling of United States v. Esquenazi
    Aug 16 2022
    Welcome to another episode of The Corruption Files! Tom Fox and Michael DeBernardis explore their biggest takeaways from the appeal of the conviction of former Terra Telecommunications Corp. executive Joel Esquenazi. He and other involved parties were proven to pay bribes to Haitian government officials in a grand scheme. The case remains an example of a significant conclusion from a defense involving the FCPA. ▶️ The Instrumentality Ruling of United States v. Esquenazi with Tom Fox and Michael DeBernardis Key points discussed in the episode: ✔️ The Esquenazi decision is vital in providing clear guidance for businesses to design robust compliance programs to address corruption, avoid making grease payments to foreign government officials, and remove the temptation to cull business favors and advantages for their company. ✔️ Companies doing business abroad should never forget the learnings from the Esquenazi decision in 2014. Following the conclusion of the Court of Appeals was identifying ownership and financial control to decipher the "instrumentalities" of foreign governments and to correctly identify that there were no red flags for FCPA compliance. ✔️ The 11th Circuit Court of Appeals' opinion clarifies how a two-part test is crucial in determining the "instrumentality" of an employee, officer, agency, or department as an entity of foreign governments. The elements of "control" and "function" served as the two prongs that the US Court of Appeals for the Eleventh Circuit made in its decision for Esquenazi and the others involved in the case. ✔️ A key indicia of a governmental entity is it doesn't have to make a profit. Think about the United States Postal Service — today; it still stands as a government service. Everyone uses it — and we don't want it to go away even if it doesn't make a profit. Indeed, non-earning can be the biggest indicator if you assess what constitutes any employee, officer, agency, or department as an "instrumentality" of foreign governments where clients are conducting business. ✔️ United States v. Esquenazi is a well-settled FCPA case that didn't go to the U.S. Supreme Court. The Esquenazi decision is a significant case law that came out of a defense trial with the defendant paying heavily and sentenced to prison for 15 years — a landmark decision that remains relevant today. ✔️ Key lessons learned from United States v. Esquenazi: 1. Ownership/Financial Control - There is no percentage amount listed, but the inclusion of financial control would indicate that anything over 50% would be a significant factor. 2. Actual control is key in all three court decisions. In Lindsey and Esquenazi, it is characterized as the government’s right to appoint key officers and directors. In Carson, it is called government control. But this means that if the government exercises actual control, it may trump the 50% guidance stated above. 3. Privileges and Obligations are also mentioned in all three. Does the entity have the right to control its functions? 4. Financing – Is the entity a for-profit entity financed through its revenues, or does it depend on financing by its government? 5. Perception is Reality - André Agassi’s immortal words appear again. If it is widely perceived as providing an official function, it is an instrumentality under the FCPA. ---------------------------------------------------------------------------- Do you have a podcast (or do you want to)? Join the only network dedicated to compliance, risk management, and business ethics, the Compliance Podcast Network. For more information, contact Tom Fox at tfox@tfoxlaw.com. Texas Tax rate at 80% of 8.25%
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    27 Min.
  • The Sophisticated Conduct of Och-Ziff's African Bribery

    The Sophisticated Conduct of Och-Ziff's African Bribery
    Aug 23 2022
    In 2016, the DOJ and SEC served enforcement action against Och-Ziff Capital Management Group for inappropriate business practices in Africa. It seemed like only yesterday when this successful hedge fund was incriminated in a complex scheme of bribing government officials to maintain and get new business. The settlement was $412 million (and even more for restitution for the victims), making it one of the biggest payments for violating the Foreign Corrupt Practices Act (FCPA). ▶️ The Sophisticated Conduct of Och-Ziff's African Bribery with Tom Fox and Michael DeBernardis Key points discussed in the episode: ✔️ A crisis can breed opportunities for corruption. Even as its red flags became increasingly apparent, the option remained for the Och-Ziff to stop its bribery and illegal action before and even after its activities were discovered. ✔️ Compliance professionals need to have their eyes extra peeled, not simply to vet due-diligence partners but to look deeply into the ongoing business relationships with joint-venture partners. Och-Ziff Subsidiary was involved in corruption issues tied to its mining projects in the Democratic Republic of Congo. What was blatantly amiss was the review and audit necessary to view the joint venture from the compliance perspective. ✔️ Find a joint-venture partner that approaches compliance the same way you do. In handling joint ventures, there is a need for ongoing due diligence — and ongoing management of the relationship beyond due diligence. In the lifecycle of a third-party agent, work starts when the contract is signed, and the joint venture is formed. ✔️ There are various means for auditing available that don’t include turning the place upside down. Here are some good ways to keep an eye on an entity like a joint venture: -Do spot checks on certain transactions -Do sampling from a distance -Make the audit by interviewing the employees to ensure they understand and follow the compliance requirements. ✔️ Remember, it becomes more complicated when you are not in control. Regarding building contractual protections and having strict control, ensure that you find a joint-venture partner that approaches compliance the same way you do. ✔️ Companies have always had audit rights but haven't exercised those rights. It's almost a requirement when making high-risk transactions to not only build in the audit rights but also exercise them. Ask the right questions and gauge whether the third party has been honest in the due diligence process. Many companies get scared off by the idea of the disruption and invasion involved, but that’s what takes away the potential problems and the unnecessary bouts with the SEC and the Department of Justice (which is responsible for enforcing the FCPA). ---------------------------------------------------------------------------- Do you have a podcast (or do you want to)? Join the only network dedicated to compliance, risk management, and business ethics, the Compliance Podcast Network. For more information, contact Tom Fox at tfox@tfoxlaw.com. Texas Tax rate at 80% of 8.25%
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    31 Min.