On the Ground at the ACC Annual Meeting: How General Counsel Can Mitigate Crime and Corruption

Topics: ACC, Client Relations, Corporate Legal, Criminal Enforcement, Efficiency, Financial Crime, Financial Fraud & Anti-Money Laundering, General Counsel, Internal Investigations, Money Laundering


PHOENIX — Trade secret theft. Bribery. Corruption. Money laundering. Sounds like a lot to keep on your plate, but for today’s general counsel it’s part of the job description.

GCs know they are the first line of defense against the risk of bad actors and that role was top-of-mind for attendees at the Association of Corporate Counsel (ACC) Annual Meeting held in late-October.

Indeed, GCs are taking special note of increased enforcement actions and stinging monetary penalties being handed down by U.S. regulatory agencies to both corporations and those individuals involved. They need look no further than French banking giant Societe Generale’s settlement with U.S. authorities of about $134 billion dollars for violations of U.S. sanctions against Cuba and other countries as well as money laundering charges. And then there is the notorious “car wash” case involving Petróleo Brasileiro SA, involving a Brazilian oil company that settled charges of bribing politicians and seeking to conceal payment. The company paid $853.2 million to settle with the U.S. government.

Managing Bribery Risks

At the ACC meeting, panelists from the oil and gas industry spoke on their unique challenges involved in bribery and corruption cases. Brent Benoit, Chief Compliance Officer at National Oilwell Varco, explains that the laws governing such incidents can span national, state, or local jurisdictions. In the energy sector, organizations doing business overseas may find themselves governed by other nations’ laws.

Since the passage of the U.S. main foreign bribery law — the Foreign Corrupt Practices Act (FCPA) — in 1977, the global marketplace has become entwined in an increasing number of laws and regulations that aim to prevent bribery. A key challenge is that these laws often are not uniform across countries. What may be clearly criminal in one country, may be murky in another. For example, the United Kingdom’s Bribery Act of 2010 prohibits corruption and bribes to foreign officials and private parties. The FCPA applies only to public officials.

In the old days, bribery was a cash-intensive activity, where a suitcase was slid to another person under the table. Now bribery can take many forms, including gifts and hospitality, luxury travel expenses, or even political or charitable donations.

General counsel also needs to be aware of other applicable laws, including those governing money laundering, misappropriation, embezzlement, theft, false reporting, and evasion (tax, sanctions, and registration).

In the old days, bribery was a cash-intensive activity, where a suitcase was slid to another person under the table. Now bribery can take many forms, including gifts and hospitality, luxury travel expenses, or even political or charitable donations.

Amber Shushan, Senior Legal Counsel at PetroChina International-America, emphasizes that general counsel need to understand what constitutes a “bribe,” noting that it can often be complex depending on the jurisdiction. “You might hear traders say, ‘We do this in Japan all the time,’ but that won’t fly in the U.S.,” Shushan says. “It means you have to harmonize your compliance program to fit these challenges.”

Panelists agreed that general counsel in the energy sector face unique risks in these areas:

  • Mergers & Acquisitions due to i) inadequate pre-transaction due diligence to identify potential legal and other risks; ii) documentation lacking representations about corruption and carve-outs; and iii) inadequate post-transaction due diligence, integration, and remediation.
  • Trading Relationships due to not knowing your counterparty and not knowing your counterparty’s relationships.
  • Opaque or Questionable Supply Relationships due to materials, equipment, land or natural resources, commodities, and services.

Benoit advises general counsel to think about corporate anti-bribery policies and corruption ahead of time by crafting a proactive strategy, in case regulators come knocking. “Think about what we want to be saying when we are across the table from the DOJ [U.S. Department of Justice],” Benoit says. “Did we have a training program in place? Did we follow through on investigations? Did we say something before it got too far?”

In-house lawyers sometimes need to push back on business practices that do not make sense or look out of the ordinary, either giving away too much or are too large, he adds. That way you get ahead of a situation before it evolves into a regulatory violation or worse.

Best Practices and Minimum Protections

Another set of ACC panels focused on mitigating risks in dealing with bad actors. Both panels provided commonsense principles to deal with risks related to sanctions, anti-bribery, and anti-money laundering (AML) laws as well as the individuals who may potentially be involved.

First, GCs should start with running effective due diligence in both on-boarding of new employees, contractors, and agents. This applies equally in mergers and acquisitions of new companies. When you acquire the company, you often acquire their culture as well. If the culture of the company leans towards loose or questionable practices, you will have to take this into consideration and find a way to mitigate.

Second, your policies and manuals are pivotal. These documents must set clear expectations and be updated regularly. Most importantly, they must be jurisdiction-specific.

Third, you will want to conduct training for all personnel you oversee, including agents. That training should be both general and specific to the project. Like the oil and gas industry example above, you can have situations that are unique to your sector based on the nature of the business.

John Wood, General Counsel of the U.S. Chamber of Commerce, also suggests that once you are aware of a potential violation, make sure all documents are preserved, so no one can destroy anything ahead of time.

Final Takeaway: Effective Compliance is Not One Size Fits All

Panelists from the oil and gas panel offered universally sound advice as it relates to compliance: Effective compliance programs are more than just one-size fits all policy and training. Your policy needs to be adaptable and ready for changes in regulations, which can come frequently, particularly around sanctions. Your policy also needs to be able to adapt to new projects, locales, and personnel.

Most importantly, you should conduct risk assessments, amend compliance accordingly and react promptly to any data that highlights compliance gaps or the need for review.