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Tecma bolsters its Foreign Corrupt Practices Act compliance program

Tecma bolsters its Foreign Corrupt Practices Act compliance program

The Tecma Group’s Mark Earley explains how having a strong Foreign Corrupt Practices Act in place enables companies to conduct transactional business in an honest and straightforward manner.

Tecma Group of Companies:

Hello, and welcome to another installation of Tecma Talk Podcasts. These, as regular listeners know, are discussions with individuals that are internal and external to the Tecma Group of Companies. They are on subjects that have to do with manufacturing in Mexico, and things that are related to that topic. Today, we are with one of our internal experts. His name is Mark Earley. I will let him introduce himself, in a moment, but first I will give a bit of background on what we are going to speak about. We are going to talk about the Foreign Corrupt Practices Act. This discussion contains useful information for any company that is doing business that transcends international boundaries. Mark, please introduce yourself, and speak to the importance of this topic, if you could.

Mark Earley:

Thank you. I appreciate the opportunity that has been provided me to speak on this very important topic. I am the vice president of accounting within the Tecma Group. I have also been assigned the duties of the roll out of the of the Foreign Corrupt Practices Act, or the FPCA, for Tecma. This includes for, not only our own employees, but also agents and representatives of Tecma that potentially have the ability to corrupt foreign officials.

Tecma Group of Companies:

It is interesting that you mentioned a few moments ago that the Foreign Corrupt Practices Act is almost thirty years old, so it has been around a while. Can you tell us exactly what the FPCA is?

Mark Earley:

Sure. This is a US law that was enacted in 1977 to prohibit bribery of foreign officials. There are really two main provisions of the Foreign Corrupt Practices Act. The first is considered the “anti-bribery” portion of the Act, while the other one consists of the accounting provisions. The best way to look at the “anti-bribery” section of the FCPA is to consider that it points out what constitute violations. It prohibits bribery of any foreign official, and in the accounting provisions we are looking at the internal controls that a company employs to ensure that bribes are not paid out to foreign officials. Basically, the provisions included in the accounting section of the Foreign Corrupt Practices Act make it difficult for bribery to take place.

Tecma Group of Companies:

Why should companies and individuals care about the Foreign Corrupt Practices Act?

Mark Earley:

It is interesting that the Act has been around for thirty-eight years. If you look at most companies, and how they would go ahead and protect themselves to ensure that employees or agents that represent their organizations were not involved in bribery was mostly through the “code of conduct” that a company would have. That is something that an employee would review and sign upon starting with an employer. Some companies would go through this, or a similar exercise, every year. In the last ten years, we have seen an increase in the enforcement of the provisions of the Foreign Corrupt Practices Act by the Department of Justice (DOJ) and the Securities Exchange Commission (SEC). When we look at the year 2013, for instance, the average fine that was levied for FCPA violations was US $80 million, per occurrence. What we’ve seen, then, is a drastic increase in enforcement levels. We see that both the DOJ and the SEC have hired quite a number of individuals whose sole function is the prosecution of violations of the Foreign Corrupt Practices Act.

Tecma Group of Companies:

Ignoring the FCPA can be costly?

Mark Earley:

Yes. One thing that I would like to mention is that both criminal and civil penalties can be associated with violations. This can impact not only the companies, but the individuals involved.

Tecma Group of Companies:

This is even more reason to pay attention to the statute?

Mark Earley:

Absolutely.

Tecma Group of Companies:

There are basic elements to the Foreign Corrupt Practices Act. If you could please provide an overview of what those are, I think that it would be helpful to the listeners to have a sense of
them.

Mark Earley:

In our internal training, we provide internal training not only to our employees, but also to those of our clients. We also offer Foreign Corrupt Practices Act training to representatives, as well as key third parties. For instance, this would include attorneys, or anyone acting on our behalf in a foreign country. When we offer training to them, at a minimum, they must send a signed representation affirming that they are complying with the FCPA, and that they understand the provisions of the Foreign Corrupt Practices Act.

I think that the easiest way to understand the FCPA is to examine the five elements that constitute a violation. The first item that is pertinent is that there has to be something of value given.

The second important consideration is that the item of value is corruptly given, or offered. Thirdly, that item of value is given directly or indirectly. Fourthly, it is proffered to a prohibited foreign recipient, and the fifth consideration is that the item given has been offered in return for an improper purpose or for an advantage.

When we look at the Foreign Corrupt Practices Act, all five of these elements must be present in order for a violation to occur. It is important that companies that look at the FCPA and train their employees in it make sure that they truly understand the significance of these five elements. In our particular training, we go into specific detail as to what each of one of them consists of. Let me give you an example: If you look at the first element, something of value can be defined as a gift, entertainment, meals, travel expenses, hosting of site visits. It can be discounts given on products and/or services. It can include employment, either directly or indirectly. It can also include setting up or providing consulting engagements and job offers. Again, this is what is considered value. It does not necessarily have to be or include cash. These inclusions have been developed over time by the US government in the course of reviewing what are violations or foreign corruption. These are the vehicles that have been identified as the ways in which value has been corruptly provided to foreign officials.

Tecma Group of Companies:

Because of what you just said, in terms, of the higher incidences of violations and the resources that have recently been dedicated to enforcing the Foreign Corrupt Practices Act, what should companies do to make themselves immune to problems of this sort?

Mark Earley:

That’s a very good question. What companies need to do is to put a “credible and defensible” program into place to protect themselves against possible violations of the FPCA. The fact that an employee signs a code of conduct is not what is deemed to be credible and defensible. This would not suffice in a court of law as a company’s defense against a violation of the Foreign Corrupt Practices Act. What all companies should do is to, definitely, go out develop an FCPA program as the Tecma Group has. Internal to Tecma what that means is that every employee that gets hired needs to go through the program. This is a training that encompasses the elements of the FCPA, as well as its importance. A communications line has to be set up by which potential violations can be reported to the appropriate company officials. This will enable any employee, or agent, that sees a potential violation of the Foreign Corrupt Practices Act to communicate what problems, or potential problems, exist to organizational authorities. Doing this empowers a company to identify possible or potential FCPA violations and to take action as needed. New employees get “certified” on the training, not only when they first enter into employment, but also on a yearly basis. Doing things in this manner provides a constant and continuous reminder to the employees of the importance of this matter. We provide notifications and updates on the subject internally through emails to our key employees and representatives that explain to them on a regular basis what the importance of the Foreign Corrupt Practice Act is. We explain that their compliance is critical, not only for critical reasons for the company but also to make them aware that both civil and
criminal penalties can apply personally to them.

Tecma Group of Companies:

There is one last question, however, I don’t know if it is a question or just thinking out loud. It seems that one of the secondary effects of being proactive and putting together a FCPA program, as well as having training on a yearly basis might actually be a factor that would make companies less likely to attract people that would violate the statute? If there is such a stress on such a program, then those who may be prone violate the FCPA might be more inclined to seek employment elsewhere? This would be a positive outcome.

Mark Earley:

You’re correct. A defense from an individual that would bribe a public official might be a claim that he or she did not know about the Foreign Corruption Protection Act, or that whatever was done was in violation of the FCPA. That is a defensible position for the individual. If that defense is used by an employee, then the company is liable for most criminal and civil penalties. If an employee or an agent of a company goes through Foreign Corrupt Practices Act training, and notifications and updates are consistent, he or she does not have ignorance of the law as a valid defense. If a company has a viable program in place that is both credible and defensible, then the employee is civilly and criminally responsible for his or her actions. By virtue of having trained and informed employees, the company has protection in such cases.
Tecma Group of Companies:

Mark, we just scratched the surface of this topic. You have obviously put a lot of work into putting a program for Tecma. If people that would like to tap into your expertise and email you or give you call with questions on this topic, would you be willing to share your knowledge on this issue? If yes, how can people contact you.

Mark Earley:

Definitely. They can contact me through the website, and also they can call the Tecma Group’s main telephone number and ask for me.

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