1. © Copyright 2016 by K&L Gates LLP. All rights reserved. Jamila Jean, Thomson Reuters Jasmine S. McGhee, K&L Gates, LLP Monica Thurman, Halliburton Foreign Corrupt Practices Act and International Anti-Corruption Law: Recent Developments and Best Practices September 2016

2. klgates.com PRESENTERS 2 Jasmine McGhee, Government Enforcement and Litigation, K&L Gates Monica Thurman, Assistant General Counsel and Director- Compliance & HR Management, Halliburton Jamila Jean, VP & Assistant General Counsel, Enterprise Compliance, Thomson Reuters

3. FCPA Background

4. What is the FCPA?  15 U.S. C. §§ 78dd-1, et seq.  Broadly speaking, it is a U.S. law that prohibits companies that conduct business in foreign jurisdictions from making payments to government representatives.  The FCPA has two primary provisions: o The Accounting Provision o The Anti-bribery Provision klgates.com 4

5. The Accounting Provision  Requires that companies whose securities are listed in the U.S.:  make and keep books and records that accurately and fairly reflect the transactions of the corporation and  devise and maintain an adequate system of internal accounting controls. klgates.com 5

6. The Anti-Bribery Provision Prohibits: 1.a payment, offer, authorization, or promise to pay money or anything of value 2.to a 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 3.with a corrupt motive 4.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 5.in order to assist in obtaining or retaining business for or with, or directing any business to, any person. klgates.com 6

7. The Meaning of a Government Official  The term “government official” is very broad. Be aware that a person may be a government official despite purporting to act in a private capacity, e.g., as a consultant.  A “government official” includes, at a minimum, any member, officer or employee, of any rank or level, of: A national, provincial, or local government, including, but not limited to, its departments and agencies; Any business or company that is controlled, directly or indirectly, by the government (such as employees of state-owned or -controlled banks) (Note: Control can be exercised by operation of law or contract, or by direct or indirect ownership of a significant portion of an entity, which may, in some cases, be less than 50%); An institution that is primarily funded by the government, such as a university, school, or hospital; klgates.com 7

8. The Meaning of a Government Official  A “government official” includes (con’t): A financial institution receiving government intervention loans or support; A public international organization (e.g., the World Bank or the United Nations); A political party, any party official, or any candidate for political office; Any person acting in an official capacity or on behalf of any national or international government or public organization (e.g., an official advisor to a government); A royal family. A close relative (e.g., spouse, sibling, or child) of any of the above individuals klgates.com 8

9. Who is a Covered Person? Issuers of registered securities in the U.S. (includes non- U.S. companies who trade ADRs on U.S. stock exchanges) All “domestic concerns,” meaning U.S. citizens, residents, companies, and foreign branches of U.S. companies o Officers, directors, employees, and agents of the above Foreign companies or persons who commit acts in furtherance of corrupt payments while in the U.S. or who cause others to do so klgates.com 9

10. History of FCPA Enforcement  Enforced by the DOJ and SEC (for “issuers”)  Although enacted in 1977 in response to the Watergate scandal, the government has expanded enforcement of the FCPA over the past ten years.  Increased punishments for offenders.  Evidence sharing between countries.  Parallel investigations. klgates.com 10

11. FCPA Recent Trends

12. FCPA Enforcement Actions against Corporations Resolved corporate case total (12) already equals total for 2015. 11 actions taken by SEC, 4 by DOJ (3 parallel proceedings). Note: no parallel enforcement actions between DOJ and SEC in 2015. klgates.com12 Image provided by Shearman & Sterling LLP

13. Total Corporate Penalties  Total corporate penalties for 2016 already up significantly from 2015 ($920.8 million vs. $143.1 million).  Largest penalty: resolution with VimpelCom for $795 million ($397.5 million to Dutch prosecutor’s office). klgates.com13 Image provided by Shearman & Sterling LLP

14. FCPA Enforcement Actions against Individuals 8 actions against individuals in first half of 2016 vs 11 actions in all of 2015. Equal share of actions between DOJ and SEC (4 each). klgates.com14 Image provided by Shearman & Sterling LLP

15. High-Profile Corruption Matters  DOJ charges against officials at FIFA related to racketeering, wire fraud, and money-laundering (not the FCPA per se).  While FIFA is not a “public international organization,” companies doing business with FIFA or other major international bodies should consider their potential exposure.  DOJ and SEC investigations related to the Petrobras “Car Wash” scandal in Brazil (discussed further below).  DOJ and SEC investigating documents released as part of “Panama Papers” revelations (discussed further below). klgates.com 15

16. 2016 Enforcement Overview  Q1 and Q2, 2016 statistics indicate that 2016 will be a significant year for FCPA enforcement.  By one estimate, there are currently 87 companies currently subject to an ongoing and unresolved FCPA-related investigation as of June 30, 2016. klgates.com 16

17. 2016 Enforcement Overview  First half of 2016:  Fifteen enforcement actions initiated by SEC.  Five enforcement actions initiated by DOJ.  Twelve corporate enforcement actions resolved by SEC and DOJ  A total of $920.8 million to authorities.  For comparison:  All of 2015: twenty actions initiated, eleven corporate resolutions with total payments to the DOJ and SEC of $133 million  All of 2014: twenty-six actions initiated, ten corporate resolutions with payments of $1.56 billion. klgates.com 17

18. 2016 Enforcement Overview 2016 Number of Corporate Resolutions by Country (location of bribery):  China x 7  Russia x 2  Panama x 1  Venezuela x 1  “South America” x 1 klgates.com 18

19. 2016 Enforcement Overview  SAP enforcement action (Feb. 1, 2016)  US $3.9M Books & Records  No controls around deep discounts given to third party agents to sell licenses.  Discounts were falsely recorded as legitimate discounts in SAP’s Mexico subsidiary (consolidated into SAP’s books & records)  No heightened scrutiny of deep discounts.  Agents skimmed cash off of full price license sales; created slush fund to pay bribes  Key executive jailed for 22 months. klgates.com 19

20. 2016 Enforcement Overview  Vimpelcom LTD. (February 18, 2016)  US $795M to US & Dutch regulators; $397.6M to SEC and DOJ (6th largest US fine in FCPA history)  Bribery, books & records & internal controls failures  Payments falsely recorded as consulting, reseller and equity transactions  Uzbek subsidiary paid bribes and recorded as charitable contributions  Unexplained payments made to shell companies  Red Flag financial transactions not properly vetted  Qualcomm (March 1, 2016)  US $7.5M to SEC  Hiring relatives of key clients; regulator considered the practice as bribery klgates.com 20

21. The Panama Papers  On April 3, 2016, The International Consortium of Investigative Journalists (ICIJ) published more than 10 million records (2.6 terabytes) from the Mossack Fonseca law firm. The documents demonstrated the use of anonymous shell companies by world leaders, politicians and others to shield billions of dollars from public view.  Soon afterwards, the Chief of the SEC’s FCPA Unit, Kara Novaco Brockmeyer, confirmed that the agency will be reviewing the documents for potential violations.  The DOJ has also confirmed that it will be reviewing the leaked documents.  In addition to potentially initiating new investigations, the released information may also provide missing evidence in ongoing investigations or ones which have gone cold. klgates.com 21

22. Limits on FCPA Jurisdiction  According to the FCPA Guide published by the DOJ and the SEC staff, individuals or companies can be found guilty of conspiracy to violate the FCPA “even if they are not, or could not be, independently charged with a substantive FCPA violation.”  In August 2015, in U.S. v. Hoskins, Judge Janet Bond Arterton (D. Conn.) rejected the DOJ’s theories (as reflected in the FCPA Guide) on the government’s authority to charge an individual with conspiracy to violate the FCPA, finding that for the DOJ would have to show that the defendant met one of the three jurisdictional bases of the FCPA (issuer, domestic concern, territorial).  On March 16, 2016, the court affirmed its earlier ruling.  The DOJ has filed a notice of appeal seeking to overturn the court’s decision.  The ruling could significantly impact on the government’s enforcement decisions, and could limit the scope of potential defendants.  On May 2, 2016 the U.S. Supreme Court decided Ocasio v. United States, ruling for the government that one can be guilty of conspiracy to commit extortion under the Hobbes Act for attempting to acquire property from individuals within the conspiracy.  This suggests the Court may be willing to take a similarly expansive view on the scope of conspiracy liability in other corruption cases, including conspiracy to violate the FCPA. klgates.com 22

23. Actions Against Individuals and Yates Memo  The Department of Justice has come under sharp criticism for failing to prosecute high-level individuals for serious financial crimes.  On September 9, 2015 DAG Sally Quillian Yates issued a memo to DOJ staff called “Individual Accountability for Corporate Wrongdoing.” On November 16, 2015, the U.S. Attorneys’ Manual (USAM) was revised based on the Yates memo issued by Deputy Attorney General Yates  Focus by U.S. DOJ on individual prosecutions for director conduct, especially in financial reporting and issuer disclosure investigations.  Expectation of enhanced oversight by SEC and corporate boards.  Corporate boards expected to create strong ethics and compliance culture.  Reasons for issue:  Insufficient sharing of information within DOJ  Companies and their counsel have been able to obtain cooperation credit without being aggressive in internal investigations, and without being required to identify evidence of misconduct by individual employees. 23

24. 1.“All or Nothing” Cooperation Credit 2.Focus on Individuals 3.Communication Between Criminal and Civil 4.No Individual Releases Absent Extraordinary Circumstances 5.Clear Plan to Resolve Individual Cases 6.Civil Also Should Focus on Individuals 24 Six Policy Points in the Yates Memorandum

25. Actions Against Individuals  Opinions differ on the Yates Memo:  New policy requiring federal investigators to produce charges against individuals during corporate prosecutions?  Merely emphasizes long-standing expectations that investigators must pursue both individuals and corporations, and that cooperation requires naming culpable individuals?  The Yates Memo comes at a time when the DOJ and SEC have run into difficulties in the past year pursuing FCPA charges against individuals.  United States v. Sigelman – government ultimately entered into a plea agreement involving no jail time, after the government’s key witness admitted to making false statements on the stand.  United States v. Firtash – an Austrian judge refused to order the extradition of Dmitry Firtash, a Ukrainian billionaire and ally of the country’s ousted president, Viktor F. Yanukovych, siding with the defense, who claimed the American request was politically motivated. klgates.com 25

26. New Significant Hires at DOJ  Effective June 1, 2016, Daniel Kahn became Chief of the FCPA Unit at DOJ Fraud Section.  Previously acting chief of FCPA Unit.  Has been with Fraud Section since 2010 and prosecuted 10 corporate FCPA actions and prosecuted the Joel Esquenazi and Carlos Rodriguez case where former executives of Terra Telecommunications Corp. were convicted of bribing officials at Haiti’s state-owned telecom company. Obtained 15 year sentence for Esquenazi, the longest FCPA sentence ever imposed.  Effective November 3, 2015, The DOJ Fraud Section hired Hui Chen as a “full-time compliance expert.”  Previously Head of Anti-Bribery and Corruption, Standard Chartered Bank.  The move suggests that the DOJ will develop and apply benchmarks for evaluating corporate compliance, and will provide expertise to prosecutors and monitors during on-going program assessments. klgates.com 26

27. New Self-Reporting Program  On April 5, 2016, the DOJ announced a one-year pilot program to encourage companies to self-report FCPA offenses and cooperate with DOJ.  Early reporting an cooperation can earn up to a 50 percent reduction off the bottom end of the U.S. Sentencing Guidelines fine range.  Dual Objectives:  “transparency” to FCPA investigations  “accountability” to subjects of FCPA investigations  New program intended to draw “a clear distinction between credit that you can be eligible for voluntary self-disclosure as opposed to companies that may decide to wait to see if they get caught, and then cooperate.”  Three primary requirements: (1) self-disclosure (2) cooperation (3) remediation klgates.com 27

28. Pilot Program: First Three Months  DOJ issued three declination letters  Nortek, Inc.  Internal audit discovered foreign employees had made payments and given gifts to Chinese government officials  Akamai Technologies  Foreign subsidiary had made payments to induce Chinese government-owned entities to buy excess services than required  Johnson Controls  Chinese subsidiary used sham vendors to pay bribes to employees if Chinese government-owned shipyards, shipyard owners, and others, to obtain and retain business.  Aligned with the pilot program requirements, DOJ noted the companies’ “prompt voluntary self-disclosure,” “fulsome cooperation,” and “full remediation.” klgates.com 28

29. International Cooperation  U.S. law enforcement officials have signaled that cooperation with their international counterparts will be a significant priority moving forward.  Assistant Attorney General Leslie Caldwell (3/4/16):  “To address crime on a global scale, we are forging deep coalitions with our international enforcement and regulatory partners.”  Caldwell specifically cited cooperation with the Netherlands in the VimpelCom resolution from February of this year.  Chief of the DOJ Fraud Section Andrew Weissmann (4/5/16):  Cited coordination with foreign counterparts as one of three steps in the department’s enhanced FCPA enforcement strategy.  “The Department is strengthening its coordination with foreign counterparts in the effort to hold corrupt individuals and companies accountable. Law enforcement around the globe has increasingly been working collaboratively to combat bribery schemes that cross national borders.” klgates.com 29

30. International Cooperation  Reflects a trend toward cooperation between governments in the investigation and prosecution of alleged violations under the FCPA.  Other countries are independently expanding their enforcement capabilities and respective laws/regulations.  Potential consequences of international cooperation:  Companies may be more likely to make voluntary disclosures, given the increased likelihood that foreign governments will investigate and discover improper conduct.  Increased likelihood of follow-on prosecutions in other countries after an FCPA disclosure is made in the U.S. klgates.com 30

31. The UK Bribery Act

32.  The UK Bribery Act, enacted in 2010, was introduced to update and enhance UK law on foreign bribery to address the requirements of the 1997 OECD anti-bribery Convention.  While similar in several respects, the Bribery Act varies in at least four significant ways: 1.Private sector bribery – Covers bribes offered or given to any person, not only to government officials. Liability attaches to payments intended to bring about the improper performance of a function or activity. 2.Intent – Does not require a corrupt intent; the payer must merely intend to influence the recipient in order to obtain a business advantage. 3.Recipient liability – Liability attaches to receivers of bribes, not merely payers. 4.Facilitation payments – No exemption for facilitation payments, though official guidance suggests prosecutorial discretion will be exercised in this area. klgates.com 32

33. The UK Bribery Act  The Bribery Act also creates a strict liability corporate offence for failure to prevent bribery, unless they are able to establish that a company has “adequate procedures.”  In contrast, under the FCPA, a company can be held vicariously liable for acts of its employees and agents.  The UK offence extends to acts of “associated persons,” meaning anyone who performs services for or on behalf of the commercial organization.  This provision is located in section 7 of the Bribery Act. klgates.com 33

34. The UK Bribery Act  In December 2015, the British Serious Fraud Office secured its first conviction of a company at trial for overseas bribery.  Smith and Ouzman Ltd, was convicted in December of 2014, and this past January the defendant was ordered to pay a penalty of £2.2 million.  Because the conduct at issue predated the enactment of the Bribery Act, the company was convicted under the old UK bribery laws.  Also in December, 2015, the first-ever DPA was approved against Standard Bank plc in relation to the alleged bribery of Tanzanian Government members.  This may set a precedent for further use of this tool already popular with American prosecutors.  On February 19, 2016, Sweett Group plc became the first company to be convicted under section 7 of the Bribery Act (failure to prevent bribery).  The company was sentenced and fined £2.25 million for bribing an official in the United Arab Emirates. klgates.com 34

35. Other International Enforcement

36. Global Anti-Bribery Enforcement  Non-U.S. anti-bribery enforcement actions have more than doubled in the past few years.  Companies cannot afford to view compliance from a U.S. (or U.K.) law-only perspective.  Almost twice as many countries are investigating bribery of their own officials compared to bribery of foreign officials.  Environmental and energy industries remain the focus of enforcement activity throughout the world (followed by engineering, manufacturing, and aerospace and defense industries).  Anti-bribery enforcement actions are highest in China, Iraq, Nigeria, India, Russia, Brazil and Indonesia. klgates.com 36

37. China Anti-Bribery Enforcement  The Chinese government (the Central Discipline Inspection Commission) has significantly strengthened its anti-corruption laws and enforcement, including clarification of what constitutes a bribe, harsher penalties, and prosecution of executives.  Part of 5-year plan announced in 2013  China has:  started to use an app-based whistleblower program  implemented a series of extradition programs focused on capturing corruption suspects overseas and recovering assets  emphasized a public crackdown on corruption  From bribe takers side: over the last few years, there were multiple rounds of inspections of at least 69 state-owned entities by the Central Discipline Inspection Commission of the Communist Party.  In July 2016, Chinese Gen Guo Boxiong was sentenced to life for corruption (using his influence to seek promotions for others and of accepting bribes). klgates.com 37

38. China Anti-Bribery Enforcement  Bribe givers: Section 393 of the Criminal Law makes it an offense for an organization (including private companies, non-profits, and other entities) to give bribes to government workers.  In July 2014,China fined GSK $490 million following a bribery conviction. The former head of China operations was given 3 years of suspended sentence and deported.  Other GSK executives who are China nationals were sentenced to between two and four years in prison.  Began a new wave of prosecution toward individual and corporate bribe givers. For example:  In February 2016, the president of Hefei Tianxing Pharmaceutical Services Co Ltd. was arrested for organizational bribery.  In April 2016, a subsidiary of China Traditional Chinese Medicine Co. Limited was charged with organizational bribery. 38

39. Brazil Anti-Bribery Enforcement  “Operation Car Wash”  On December 17, 2015, Brazilian prosecutors charged 12 individuals with various offenses related to allegations that SBM Offshore NV (Netherlands) paid at least $46 million in bribes to former Petroleo Brasiliero SA (Petrobras) executives.  As of April, investigators have charged 179 people with criminal offences and secured 93 convictions. Estimated losses to the state from the corruption: R$29-42 billion.  In May of this year, former President Dilma Rousseff resigned less than a year and a half into her second term. To date President Rousseff has not been charged with a crime, but she has been implicated due to her role as chairman of Petrobras between 2003 and 2010. klgates.com 39

40. Brazil Anti-Bribery Enforcement  Brazil’s Anti-Corruption Moment  The investigation and prosecution of corruption is seen as a historic moment for Brazil, which traditionally has tolerated corruption and allowed politicians to act with relative impunity.  However, In May acting President Michel Temer dissolved Brazil’s principle anti-corruption agency, the Comptroller General, and replaced it with a new Transparency Ministry. He has also halted certain plea negotiations with construction companies caught in the scandal. In response, some have doubted his commitment to reforming Brazil’s culture of corruption.  To some extent, this scandal obscures important reforms enacted by the Brazilian congress, including reforms regarding (1) procurement, (2) public access to information, and (3) encouraging regulatory compliance by business. klgates.com 40

41. FCPA Best Practices

42. 7 Elements of an Effective Compliance Program: The Federal Sentences Guidelines  Establish standards and procedures to prevent and detect criminal conduct.  Exercise sufficient oversight of the compliance and ethics program.  Conduct due diligence to ensure that authority is not delegated to unethical individuals.  Communicate and train employees on the compliance and ethics program.  Monitor the effectiveness of the program through regular auditing and evaluation.  Enforce the program consistently through appropriate incentives and disciplinary measures.  Respond appropriately to criminal conduct, and take steps to prevent further such incidents. klgates.com 42

43. BEST PRACTICES: The Basics  Understand the regulatory enforcement environment  Analyze and minimize legal exposure under local laws  Transparency International (TI) – annual rankings  Be familiar with recent trends  Prioritize the key risks to the company’s business and reputation  Risk Assessment  Culture of Compliance  Written Policies and Procedures  Employee Training  Handling Violations klgates.com43

44. BEST PRACTICES: Culture of Compliance  “Tone at the Top” - management support is important.  Document clear rules to be distributed.  Compliance is an ongoing process.  Rules should be updated as the business and/or environment changes and grows.  All corporate codes, policies, and forms must be translated into the appropriate languages.  Compliance Officers klgates.com 44

45. BEST PRACTICES: What to Address Within Written Policies and Procedures:  Conflicts of interest  Internal controls  Expense reporting  Cash and petty cash  Accurate books and records  Antitrust or competitive behavior  Data privacy consents  Export controls  Business partners (agents, consultants, distributors, resellers, joint venturers, etc.)  Gifts, hospitality, entertainment  Facilitation payments  Political or charitable donations klgates.com45

46. BEST PRACTICES: Training  Train employees and certify completion of training.  Training should be tailored to the business.  Live training of directors, officers, and managers who have significant foreign government relationships.  Online training for low-risk business units/mid-level employees.  Monitor and test compliance.  Audit to evaluate the effectiveness of the program. klgates.com 46

47. BEST PRACTICES: Agent/Business Partner Relationships  Annual FCPA risk assessment, training, and due-diligence review;  Procedures to identify unusual payments;  Consistent Agent and Distributor Contracts;  Anti-corruption clauses;  Right to inspect books and audit payments;  Required annual written attestation of compliance;  Document provision and certify completion of FCPA training. klgates.com 47

48. BEST PRACTICES: Remediate Violations  Remediate violations and punish offenders.  Define a reasonable scope of investigation.  Obtain expert advice when responding to compliance issues.  Timely handling of credible reports of violations.  Securing documents and/or electronic records;  Notification of the Audit Committee chair;  Notification of counsel.  Terminate the misconduct.  Revise the code of conduct, review policies and procedures, and modify internal controls. klgates.com 48

49. Appendix: 2015 Year In Review

50. SEC Enforcement Overview  The large majority of the SEC’s enforcement actions in 2015 (10/11) were against corporations (“corporate actions”).  These were primarily “low-value” actions, targeting smaller corporations with correspondingly smaller penalties. klgates.com 50

51. SEC Enforcement Overview  The SEC continued a recent trend of bringing corporate actions via administrative proceedings:  Actions brought via administrative proceedings against: Hatoum, Goodyear, FLIR, BHP Billiton, Mead Johnson Nutrition, Garcia, BNYM, Hyperdynamics, Standard Bank, and Bristol-Myers.  The outliers were PBSJ (Deferred Prosecution Agreement) and Hitachi (Consent Decree). klgates.com 51

52. DOJ Enforcement Overview  Of the DOJ’s 10 enforcement actions in 2015, 2 were against corporate defendants: IAP Worldwide Services, Inc. and Louis Berger International  The remaining eight were brought against individuals.  The Department also declined to bring several actions, including a declination against PetroTiger Ltd.  The DOJ attributed the drop in enforcement actions to fewer self-disclosures and to its focus on pursuing more complicated "higher-impact" bribery cases. klgates.com 52

53. DOJ Enforcement Overview  Recent hires suggest FCPA enforcement will be a department priority in the future.  On November 17, 2015, the DOJ announced that it had hired 10 new prosecutors to its FCPA unit, increasing the unit’s size by 50%.  On March 30, 2015 the FBI announced it had established three “dedicated international corruption squads” to investigate violations of the FCPA. klgates.com 53

54. Foreign Corrupt Practices Act and International Anti-Corruption Law: Recent Developments and Best Practices