1. Foreign Corrupt Practices Act (FCPA)

2. FCPA Overview -Purpose of the FCPA The Foreign Corrupt Practices Act of 1977, ("FCPA"), was enacted for the purpose of making it unlawful for certain classes of persons and entities to make payments to foreign government officials to assist in obtaining or retaining business. -Increased relevance of the FCPA in Africa due to rise in investment on the continent -The FCPA contains Anti-Bribery Provisions and Accounting Provisions

3. FCPA – Anti-bribery provisions Who is covered by the Anti-Bribery provisions? -The FCPA applies to three broad categories of persons: those with formal ties to the United States and those who take actions in furtherance of a violation while in the US. In particular: (i) issuers and their officers, directors, employees, agents and shareholders; (ii) domestic concerns and their officers, directors, employees, agents and shareholders; and (iii) actions within the territory of the US. - Application to Subsidiaries only if: “participated sufficiently” and “agency” relationship (save for subsidiaries of “issuers” and “domestic concern” which is automatically covered by the FCPA).

4. FCPA – Anti-bribery provisions Hypothetical: Company A, a Delawere company with its principal place of business in New York, it is a large energy company that operates globally, including in Uganda. Company A shares are listed on the US stock exchange. Company A enters into an agreement with a Kenyan company, KenCo, to jointly bid to the Ugandan Oil Ministry. KenCo is not an issuer. Executives of Company A and KenCo meet in New York to discuss how to win the bid and decide to hire a purported third-party consultant (Mr. Shah) and have him use part of his “commission” to bribe high-ranking officials within the Oil Ministry. Mr. Shah meets with executives at Company A and KenCo in New York to finalize the scheme. Eventually millions of dollars of bribes are funnelled from the US and Kenya through Mr. Shah to high-ranking officials at the Oil Ministry, and Company A and KenCo win the contract. A few years later a front page article alleges the contract was procured through bribery. DOJ and SEC begin investigations. Which entities fall within the FCPA jurisdiction?

5. FCPA – Anti-bribery provisions What the FCPA Prohibits? A violation of the FCPA consists of six "elements." That is, a person or organization is guilty of violating the law if the government can prove the existence of: (i)a payment, offer, authorization, or promise (ii)to pay money or anything of value (iii)to a foreign government official (including a party official or manager of a state-owned concern), or to any other person, knowing that the payment or promise will be passed on to a foreign official (iv)with a corrupt motive (v)for the purpose of (a) influencing any act or decision of that person, (b) inducing such person to do or omit any action in violation of his lawful duty, (c) securing an improper advantage, or (d) inducing such person to use his influence to affect an official act or decision (vi) in order to assist in obtaining or retaining business for or with, or directing any business to, any person

6. FCPA – Anti-bribery provisions Defenses -Facilitating Payments for routine Government action (AKA “grease payment” exception”) -does not allow foreign official to award new business or retain business. -also facilitating payments allowed by the FCPA maybe unlawful under local laws -Payments permitted by written law “Kenyan Public Officers Ethics Act: A public officer may accept a gift given to him in his official capacity but, unless the gift is a non- monetary gift that does not exceed the value prescribed by regulation, such a gift shall be deemed to be a gift to the public officer’s organisation. ” -Reasonable and Bona Fide expenditure For example: Promotional; execution of a contract (training)

7. FCPA: Anti-Bribery – Defenses Hypothetical (reasonable expenditure): Based on the previous example, 3 years later Company A and KenCo are negotiating the renewal of the license with the Oil Ministry of Uganda. During negotiations an official from the Oil Ministry travels to New York to conclude negotiations. During the trip Company A and KenCo pay for the officials business class ticket and 5* hotel accommodation. The official was also treated to large dinners at restaurants and went to watch the Opera. He was also given subsistence allowance of US$ 300 per day. Would this constitute reasonable expenditure? Hypothetical (Facility Payments): Paying a clerk to fast track issuance of the license (to discuss).

8. FCPA: Accounting Requirements Applies only to “issuers” but it extends to “issuers” foreign and domestic subsidiaries Two Requirements: -Keep accurate books and records; -Maintaining a system of internal accounting controls Effective strict liability of parent company.

9. Penalties for violation the FCPA Anti- bribery Provisions Companies Criminal penalties -Multi-million dollar fines, which can be increased based on profits earned or losses incurred by another party -Compliance monitors Civil Penalties (SEC can bring civil actions against individuals involved in “aiding and abetting” a violation) -Can include disgorgement of profits, also leading to multimillion dollar fines -Cease-and-desist orders and injunctions Individuals Criminal penalties (non-reimbursable) - Anti-bribery –up to $250,000, imprisonment, or both Accounting –up to $5 million, imprisonment, or both Civil fines of up to $100,000 and disgorgement Limitation Period for criminal and civil – 5 years (does not prevent equitable civil remedies past 5 year eg. disgorgement of profits)

10. FCPA Investigations in Kenya Good Year Tire & Rubber Company – 2015 Public company – “issuer” therefore it subsidiaries had accounting responsibilities under the FCPA Good year conducted voluntary investigation in 2011 into Treadsetters Kenyan and Angolan subsidiaries paid bribes to land tire sales Violation of “book and record” and “internal control” requirements under the FCPA (bribes recorded as promotions expenses) The SEC’s order finds that Goodyear’s subsidiary in Kenya bribed foreign officials Goodyear must pay disgorgement of $14,122,525 – which comprises the company’s illicit profits in Kenya and Angola – plus prejudgment interest of $2,105,540.

11. Racketeer Influenced and Corrupt Organizations Act (RICO)

12. RICO: Overview -RICO was enacted in 1970 as a response to Mafia. The idea behind RICO was to tie all of their crimes together in one case, which allowed the prosecution to be able to connect the incidents allowing for convictions of the bosses behind the crimes. As the mafia era began to pass, the statute started to evolve and reached into the business sector. -RICO makes it unlawful to acquire, operate, or receive income from an enterprise through a pattern of racketeering activity. Geared towards ongoing organised criminal activities, the underlying tenet of RICO is to prove and prohibit a pattern of crimes conducted through enterprise. -The four elements of RICO are: conduct; enterprise; pattern and racketeering activity.

13. RICO: Elements Conduct - The first element of RICO is conduct. This element is extremely straightforward and rarely litigated in court. It simply requires the defendants who participated in the enterprise to carry out the directions of the enterprise. Enterprise An ‘enterprise’ is defined under RICO to include “any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity”. (Discuss examples of “associated in fact”) Pattern There must be proof of a pattern of illegal offence (racketeering offences) which RICO defines as the commission of at least two identified criminal offences within a 10 year period (focus is on long term criminal activity) Racketeering Activity "racketeering activity" includes a broad assortment of state and federal crimes. These include:- kidnapping, gambling, arson, robbery, bribery, extortion, or a list of many other criminal statutes. The more common statutes include fraud, obstruction of law enforcement, forgery, and trafficking statutes.

14. RICO: Criminal Violations The act specifically prohibits: any person from: (i)Using income received from a pattern of racketeering activity or from a collection of an unlawful debt (eg. loan sharks) to acquire an interest in an enterprise affecting interstate commerce; or (ii)Acquiring or maintaining through a pattern of racketeering activity or through a collection of unlawful debt an interest in an enterprise affecting interstate commerce; or (iii)Conducting or participating in the conduct of the affairs of an enterprise affecting interstate commerce through a pattern of racketeering activity or through collection of unlawful debt; or (iv)Conspiring to participate in any of these activities (this is usually how the CEO’s mobsters are brought into RICO).

15. RICO: Civil Violation A private Plaintiff must plead: (i)that the defendant (ii)through the commission of 2 or more acts (iii)constituting a “pattern” (iv)of “racketeering activity” (v)directly or indirectly invests in, or participates in (vi)an “enterprise” (vii)the activities of which affect interstate trade (viii)and which directly affected the business or property of the Plaintiff. Limitation Period: 4 years

16. RICO: Extraterritorial Jurisdiction RICO does not specifically provide extraterritorial jurisdiction of the Act, but the US Supreme Court has held on a number of occasions that: “RICO may apply extraterritorially if conduct material to the completion of the racketeering occurs in the United States, or if significant effects of the racketeering are felt here.” Examples have included: wire fraud involving the US; if enterprise is US; or if local criminal legislations have been breached.

17. RICO: Penalties Criminal Remedies Fine of USD 250,000 and/or double the amount of the proceeds earned from the activity Imprisonment – 20 years (above any other convictions) Forfeiture of all assets of the offender in the organization (this can cripple the organization) Civil remedies Treble damages Attorney’s fees

18. RICO: FIFA Case – Criminal Violation -May 2015 – US Attorney General charged 14 defendants -Allegations: bribery amounting to over US$ 150 million -Defendants include FIFA officials, US and South American sports marketing executive -Extraterritorial Jurisdiction -Enterprise: “FIFA and its six continental confederations, together with affiliated regional federations, national member associations, and sports marketing companies, constitute an enterprise of legal entities associated in fact for federal racketeering law.” as pleaded -Racketeering activity: bribery, conspiracy to bribe, loss to FIFA -Penalties for indicted and convicted defendants -Arrest in Zurich Hotel (why did the DOJ wait for so long?)

19. RICO: Rio Tinto/Vale/Beny Steinmetz – Civil Violation -Facts concerned the vast Simandou iron ore deposits in Guinea -Enterprise: “The RICO enterprise was born… [when] a meeting between Vale and BSGR occurred in 2008… [and] Steinmetz, BSGR, and Vale formed an agreement to work together – in conjunction with the other defendants and co-conspirators – to steal Rio Tinto’s mining rights at Simandou” – as pleaded -Extraterritorial Jurisdiction -Racketeering Activity: bribery, conspiracy -Outcome: Limitation period runs from the time of injury to Rio Tinto.

20. Bribery and Corruption: A UK Perspective 20

21. Overview of Talk UK Bribery Act, 2010 SFO enforcement against Foreign corrupt practices Deferred Prosecution Agreements (DPAs) under UK Law Standard Bank DPA in relation to Tanzania 21

22. UK Bribery Act 2010 - Overview Enacted on 8 th April 2010 and came into force on 1 st July 2011. Consolidated the law on bribery and corruption in the United Kingdom (England and Wales, Scotland and Northern Ireland) and repealed several Acts, including:  Public Bodies and Corrupt Practices Act 1889  Prevention of Corruption Act 1906  Prevention of Corruption Act 1916  Various sections providing for bribery and corruption in sectoral statutes such as the Criminal Justice Act, Local Government legislation and Anti-terrorism legislation. Bribery Act also abolished Common Law offences of bribery and embracery (accepting a bribe). Applies to extra-territorial bribery and corruption (outside the UK) where the person has a close connection with the UK. Close connection is defined in S. 12 (4) as including citizenship, ordinary residency or incorporation in the UK. 22

23. UK Bribery Act – what is bribery? P offers, promises or gives a financial or other advantage to another person and intends for the advantage to: induce a person to perform improperly a relevant function or activity; or to reward a person for improper performance of such a function or activity. P knows or believes that the acceptance of the advantage would itself constitute the improper performance of a relevant function or activity. S. 1 and s. 2 covers: being bribed or soliciting a bribe. Hospitality (dinners, event tickets) and gifts would not be bribes, based on extent and applicable law. The bribe must be inducement for a function or activity: - of a public nature; connected with a business (anywhere); in the course of a persons employment; on behalf of a body of persons. Provided that the person performing the function is expected: To act in good faith; To perform impartially; or Is in a position of trust by virtue of performing it *Expectation test is that of a reasonable man in the UK. 23

24. UK Bribery Act: Bribery of foreign public officials S. 6 provides for bribery of a foreign public official. A foreign public official is someone who holds a legislative, administrative or judicial position in a foreign country; exercises a public function; or is an official or agent of a public international organisation. Bribery occurs when P, directly or indirectly through a third party, offers, promises or gives a financial or other advantage to a foreign public official (F) or to another person at F’s request or with F’s assent or acquiescence, and F is neither permitted nor required by the written law applicable to F to be influenced in F’s capacity as a foreign public official by the offer, promise or gift. P must intend to:  Influence F in F’s capacity as a foreign public official  Obtain or retain business  Obtain or retain an advantage in the conduct of business 24

25. UK Bribery Act – Bribery and commercial organisations Section 7 – A relevant commercial organisation is guilty of failure to prevent bribery if an associated person bribes. Associated Person: who performs services for and on behalf of the organiation (employee, agent or subsidiary). Provision of goods is not covered in this definition. Definition is wide, and could be anyone who acts for, or on behalf of the organisation. Including us lawyers. Secretary of State Guidelines on anti-bribery procedures by commercial organisations (these can be a defence). There are six (6) principles: Proportionality: action you take should be proportional to the risk you face and the size of your firm. Top level commitment: show that management has been active in ensuring that staff and agents understand that you do not tolerate bribery. Risk assessment: research the markets you operate in. Due diligence: Know who you are dealing with. Do checks on your partners. Communication: Communicate policies to staff and agents. Monitoring and review: periodically monitor your risk and effectiveness of your procedures. 25

26. UK Bribery Act – Prosecution and Penalties S. 10: Proceedings require the consent of the Director of Public Prosecutions; or the Director of the Serious Fraud Office; or the Director of Revenue and Customs Prosecutions. S. 11 - Penalties for an individual:  On summary conviction, to imprisonment for a term not exceeding 12 months or a fine not exceeding the statutory maximum  On conviction on indictment, to imprisonment for a term not exceeding 10 years or to a fine, or both. S. 11 and 14 – Penalties for bodies corporate  On summary conviction, to a fine not exceeding the statutory maximum  On conviction on indictment, to a fine  If the offence is proved to be committed with the consent or connivance of a senior official, the senior official will be personally proceeded against, if he has a close connection with the UK. Bribery in intelligence or armed forces services is excluded. 26

27. UK Bribery Act – Key cases relating to Africa July 2015 – Somalia, Soma Oil & Gas The SFO is investigating Soma Oil & Gas Holdings Ltd., Soma Oil & Gas Exploration Ltd., and Soma Management Ltd, following whistleblower information. United Nations Monitoring Group for Somalia had also been investigating Soma’s, "Capacity Building Agreement" with the oil ministry, to "support salaries for ministry staff and experts, and (... provide a) contribution towards office equipment and outfitting". Soma in 2013 secured an exclusive contract to conduct seismic surveys on 12 offshore oil and gas blocks, totalling 60,000 square kilometres. It claims to have invested close to USD 40 million in Somalia. Soma’s directors include former Conservative Party leader Lord Michael Howard. 27

28. UK Bribery Act – Key cases relating to Africa…cont June 2015 – Nigeria, Swift Technical Solutions Ltd Three (3) employees of Swift (all UK nationals) were acquitted at the Southwark Crown Court of corruption offences in relation to tax affairs of the Nigerian subsidiary. The payments, alleged to have totalled GBP 180,000, had been made to agents of the Rivers State Board of Internal Revenue and the Lagos State Board of Internal Revenue in 2008 and 2009 (before the enactment of the UK Bribery Act 2010) in order to avoid, reduce or delay paying taxes owed in Nigeria. Swift co-operated with the SFO, providing documents and making staff available for interview. The Company was not charged with any offence. 28

29. Introduction to Deferred Prosecution Agreements (DPAs) in the UK A DPA is a voluntary alternative to prosecution, in which a prosecutor agrees to grant amnesty or defer prosecution, in exchange for the defendant agreeing to fulfill certain conditions in the DPA. A DPA is in effect, a plea deal. DPAs are provided under S.45 and Schedule 17 of the UK Crimes and Courts Act 2013, and relates to offences under S. 7 of the UK Bribery Act – failure of a commercial organisation to prevent bribery (see slide 6). DPAs have been in existence under the US Foreign Corrupt Practices Act, but the first UK DPA was only recently concluded between the SFO and ICBC Standard Bank Plc on 30 th November 2015 in relation to bribery of officials in Tanzania. 29

30. Introduction to DPAs in the UK…cont The SFO has issued a DPA Code of Practice, which sets out considerations for entry into a DPA. An invitation to negotiate a DPA should come from the prosecutor, and is issued at the prosecutor’s discretion. A company does not have a right to request a DPA. An invitation to negotiate a DPA does not mean that a DPA will be concluded. A prosecutor is required to apply a 2 stage test when determining entry into a DPA: Evidential stage: that the evidential stage of the Full Code Test in the Code for Crown Prosecutors is satisfied or if this is not met, that there is a least some reasonable suspicion based on some admissible evidence that P has committed the offence and that continued investigation will provide further evidence; Public interest stage: the public interest would be properly served by the prosecutor not prosecuting, but instead entering into a DPA with P. 30

31. DPAs in the UK – Public Interest Stage Public interest factors in favour of prosecution  A history of similar conduct  The conduct alleged is part of the established business practices of P  The offence was committed when P had no or ineffective corporate compliance programmes  P has been previously subject to warnings, sanctions or criminal charges  Failure to notify wrongdoing within a reasonable time or misleading/inaccurate reporting  Significant level or harm caused directly or indirectly to the victims Public interest factors against prosecution  Cooperation by the organisation and proactive approach  Lack of a history of similar conduct  Existence of a proactive corporate compliance programme  The offending is not recent or P is a different entity from offendor (M&A)  Conviction is likely to have disproportionate consequences for P  A conviction is likely to have collateral effects on the public (employees, shareholders or institutional pension holders) 31

32. DPAs in the UK – procedure of DPA negotiations Formal letter of invitation by the prosecutor outlining the basis of any negotiations. Negotiations are confidential, and there are confidentiality undertakings in the letter of invitation. DPAs are voluntary. Either party can withdraw at any stage. P does not have to give reasons for withdrawal, but prosecutor has to provide a gist of why they are withdrawing. There should be a full and accurate record of negotiations, which should be transparent. Meetings should be minuted, and the minutes agreed and signed. There should be full and accurate disclosure of information requested by the prosecutor. All documentation obtained should be retained by the prosecutor in the event of future prosecution. The DPA once agreed should be placed before the Court, for the Court’s approval. 32

33. DPAs in the UK - Terms A non-exhaustive list of terms is provided in 5 (3) of Schedule 17 to the Crimes and Courts Act. These include: A financial order/penalty The payment of reasonable costs of the prosecutor Cooperation with an investigation related to the alleged offence (s) Prohibition of P in engaging in certain activities Financial reporting obligations P putting in place a compliance and monitoring programme Cooperation with sector wide investigations 33

34. DPAs in the UK – the SFO: Standard Bank DPA It was the first DPA in the UK. It was also the first time that a section 7 offence (corporation failure to prevent bribery) was used since the enactment of the Bribery Act in 2010. The case involved the Tanzania Government’s wish to raise funds by way of a sovereign note placement. The bribe: In March 2013, Stanbic Bank Tanzania (subsidiary) paid GBP 4 million/USD 6 million to Enterprise Growth Market Advisors (EGMA), allegedly to induce a representative of the Tanzania Government to favour Standard Bank and Stanbic’s proposal for the sovereign note transaction. The fee to EGMA represented 1% of the funds raised by Standard Bank for the Tanzania Government (USD 600 million). There is no evidence that EGMA provided any services in relation to the transaction. EGMA opened a bank account with Stanbic Tanzania, where the cash was deposited. It was withdrawn at a fast rate which alarmed staff at Stanbic (whistle blowers). The matter was referred to the head of Standard Bank Group. Within 3 weeks, Standard Bank reported the matter to the SFO and the Serious and Organised Crime Agency (self reporting). 34

35. DPAs in the UK – the SFO: Standard Bank DPA…cont SFO invited Standard Bank to negotiate a DPA. Standard Bank cooperated fully, and disclosed all information requested. The DPA was placed before Lord Justice Leveson on 30 th November 2015. Term of the DPA is three (3) years. The Terms: Payment of compensation of USD 6 million plus interest of USD 1,046,196.58 to the Tanzania Government, representing the bribe to EGMA. Disgorgement of profit on the transaction of USD 8.4 million, representing the full amount of transaction fees received by Standard Bank and Stanbic Tanzania. Payment of a financial penalty of USD 16.8 million. Payment of SFO’s cost in connection with the investigation at GBP 330,000 (USD 500,000). Review of Standard Bank anti-bribery procedures to be conducted by a major accounting firm, and Standard Bank to implement recommendations. 35

36. Last but not least – the BAT Bribery Scandal Relates to alleged bribery of government and public international organisation, and private firm officials in Kenya and Africa by British American Tobacco (BAT), a UK Company. Formal investigations by the SFO have not commenced. The EACC is investigating the BAT bribery of KRA officials in Kenya. According to Kenya media, in late December 2015, KRA invited the SFO to assist in investigations. Investigations arose after media reports by the BBC and The Independent newspaper, of claims to them by a former BAT employee, Paul Hopkins, that he had been paying bribes, as a “cost of doing business in Africa”.  Government officials in Kenya are alleged to include the Kenya Revenue Authority (KRA) and a former public officer.  Public international organisation officials are alleged to include those of World Health Organisation (WHO) and the UN Framework Convention on Tobacco Control (FCTC)  Private corporation officials are alleged to be those of a competitor in Kenya. 36

37. Questions? 37