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Effective Anti-Corruption Compliance in India

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					Effective Anti-Corruption Compliance in India
A Pepper Hamilton Webinar

We will be starting momentarily…

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Listen to the audio portion of today’s webinar by dialing:

North America: +1.866.322.1348 International: +1.706.679.5933 Audio Conference ID #: 36979856

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Technical Support Numbers
If you experience technical difficulties, hit *0 on your telephone keypad and an operator will assist you. Or you can dial: For Web Support: +1.877.812.4520 or +1.706.645.8758 For Audio Support: +1.800.374.2440 or +1.706.645.6500

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Feel free to submit text questions throughout the webinar

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Moderator
Valérie Demont Partner Pepper Hamilton LLP

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Speaker
Gregory A. Paw Partner Pepper Hamilton LLP

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Speaker
John G. Rahie Managing Partner Freeh Group International

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Anti-Corruption Enforcement Is At All-Time High
• Enforcement authorities around the world are increasing anti-corruption investigations and prosecutions • U.S. prosecutors have been particularly active:
– Siemens - $800 million (2008) – KBR-Halliburton - $579 million (2009) – More cases in past five years than in the prior history of the statute – Over 120 current open cases
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Enforcement Expands Outside U.S. • OECD Convention on Combating Bribery of Foreign Public Officials in International Business • 38 countries have adopted • Some countries aggressively enforcing • India has not yet ratified

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FCPA Enforcements of Companies Doing Business in India • Control Components (2009) • Westinghouse Air Brake Technologies (2008) • York International (2007) • Chandramowli Srinivasan – A.T. Kearney Ltd. – India (2007) • Dow Chemical Company (2007) • Textron (2007)
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Anti-Corruption Enforcements Against Companies from India • World Bank debarment of Satyam Computer Services, Wipro Technologies, and Megasoft Consultants (2007-09) • Chilean investigation of Tata Consultancy Services (2008) • UN Oil-for-Food program – 120 Indian companies cited in UN Report (2005)
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Indian Anti-Corruption Enforcement Efforts
• India Prevention Of Corruption Act
– Punishes “public servants” who accept or agree to accept “any gratification” as a reward for doing or forbearing to do any official act
• “Public servant” broadly defined, and includes employees of government-owned or governmentcontrolled entities • “Gratification” not restricted to pecuniary benefits

– Punishes abettors of the offense – No exception for facilitating payments

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Current Trends
• Cases like Satyam and Bofors, and concern of link between corruption and terrorism, have raised Indian efforts • 2009 letter from India’s Ambassador to the U.S. has generated a call to action • Indian government creating 71 courts to work with Central Bureau of Investigation • September 2009, Chief Justice of India condemned “pervasive culture of graft [that] provokes pessimism about the quality of governance.”
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A Challenging Environment
• India has a high perception of corruption
– # 85 - same tier as Panama, Albania, Serbia

• Some commentators say corruption has long cultural history
– Cultural history of gifts to persons in power – Complex and rigid bureaucracy
• Improved since 1991 reforms, but still cumbersome • “Speed” payments are common

– Costly political campaigns – Lack of transparency

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Perception Surveys in India
• Surveys of corruption in India show:
– Frequent bribe requests – Relatively low value
• 84% under $5,000 • Unlike China, where 36% were $5,000 or more

– Most frequent bribe requests come from police, but also often requested by customs, taxation, water and land record officials – Bribes most frequently relate to obtaining a service already due
• Unlike China, where bribes to obtain business are four times more likely than in India
» Source, Trace International 2009

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Perception Surveys in India
• Corruption perceptions vary among Indian states:

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Perception Surveys in India
• 75% said political parties are extremely or very corrupt • 83% said bribes to land authorities was a very serious or serious problem • More than half admitted to paying bribes to tax officials • Favorable perceptions of shopkeeper offering bribe for a license was more than twice the world average
» Source, Transparency International 2009 and Transparency International-India 2005

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Points for Indian Compliance
• Corruption compliance is needed for ALL multi-national companies entering Indian market
– Compliance program – Monitoring – Training

• Due Diligence
– Partners, business agents, joint ventures – Mergers and Acquisitions

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M&A Due Diligence
• What to Know:
– – – – Target business players and history How the business operates Customers/contracts Finances and books

• How to Learn It:
– U.S. Embassy – Experienced, creative investigators

• How to Protect It:
– Top-notch compliance program – Warranties and representations
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Protection through the Purchase Agreement
• Representations and Warranties:
– All transactions appropriate under local law – No portion of the deal proceeds will be used to fund payments to secure government approvals or gain some improper business advantages – No corrupt payments were made to government officials to obtain or retain company business – No government officials is a company owner, or holds any interest in the company – Company’s books and records are accurate and complete

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Compliance Best Practices KNOWLEDGE
• Know your risk environment
– Marketplace risks, such as:
• • • • Multiple books Taxes avoidance Remnants of Octroi Trucking system

• Know your agents and consultants
– Think broad
• Including lawyers, accountants and other professionals

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Compliance Best Practices KNOWLEDGE
• Know exposure to regulatory layers
– – – – – Police Customs Property offices Taxation Judiciary

• Know how your money is being spent
– Follow the money in accounting system – Awareness of tax avoidance schemes

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Compliance Best Practices CULTURE
• • • • Create culture of compliance Policies/monitoring/training Anonymous employee reporting Understand and respect your setting – Know your local environment
• Recognize the good corporate policy nevertheless can put employees in difficult social positions • Respect cultural issues when conducting interviews

– Translate into local languages
• Keep the language plain

– Stress more than a U.S.-centric law
• Not FCPA but anti-corruption

– Get out to the field – Enlist local leadership on compliance issues

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The Take Aways
• Every multi-national company transacting business in India should conduct a risk assessment and have a compliance plan • Every deal by a multi-national company for a business in India should include a risk assessment and due diligence

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Question and Answer Session

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Feel free to submit text questions throughout the webinar

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Thank You!

Valérie Demont Partner Phone: 212.808.2745 demontv@pepperlaw.com

Gregory A. Paw Partner Phone: 609.951.4145 pawg@pepperlaw.com

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Thank You!

John G. Rahie Managing Partner Phone: 302-824-7139 rahie@freehgroup.com

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