CORPORATE CRIME REPORTER
Gibson
Dunn’s Warin on FCPA, UK Bribery Act, Depressed Compliance Officers and
China
25 Corporate Crime Reporter 7, February 14, 2011
China and corruption.
They go hand in hand.
Doing business in China poses a triple threat.
The Chinese have been prosecuting foreign multinationals and their employees for giving bribes in China.
The U.S. Justice Department has been prosecuting U.S. based multinationals for giving bribes in China.
And the Chinese have been prosecuting their own public officials for taking bribes in China.
And some of the sentences have been – to put it mildly – harsh.
It ain’t a pretty picture.
But F. Joseph Warin has painted that picture in a recent law review article titled – FCPA Compliance in China and the Gifts and Hospitality Challenge (Virginia Law and Business Review, Spring 2010).
Warin is a partner at Gibson Dunn & Crutcher in Washington, D.C.
“China’s economy is now the third largest economy in the world – fast on its way to becoming the first,” Warin told Corporate Crime Reporter in an interview last week. “It’s GNP grew last year at 10.8 percent. So, it’s an absolute priority one for virtually all of our clients to be able to sell products and services in China. The real challenge is – how does one enter the Chinese markets?”
“How does one navigate pretty elaborate regulatory hurdles?”
“You often intersect with state owned enterprises – and how you do that can have Foreign Corrupt Practices Act implications.”
“Most U.S. based multinationals have substantial operations in China. Often their joint venture partner is a state owned enterprise. The U.S. regulators take the view that virtually all of the employees of the state owned enterprises are foreign officials for purposes of the FCPA.”
“You see in the United States the publicity relating to U.S. multinationals running afoul of the FCPA.”
“But the volume of cases in China is enormous – both against public officials and beginning against multinational corporations and their employees,” Warin said.
“There is vigorous enforcement in China. The statutes are complex and in some ways even more strict than the U.S. statutes.”
“For example, a Chinese government official can take no gratuity whatsoever in a business relationship. Under the U.S. law, the cap is $25. If a government official came to my law office, theoretically, he or she could have a tuna fish sandwich with me.”
“And that wouldn’t run afoul of a gratuity statute. In China, you can’t even have that.”
“It’s a strict liability world that is being enforced in China.”
“There are some public officials who fall from grace. And when they do, they are sanctioned, including the head of their FDA, who was executed.”
Warin and his colleagues at Gibson Dunn recently hosted a roundtable featuring UK Serious Fraud Office Director Richard Alderman.
Reports of the meeting raised eyebrows in legal circles in the United States.
“Both at conferences and in exchanges, we have had interactions with him,” Warin said.
“He happened to be in Washington during that time and said he would be available to answer questions as to how he perceived the ongoing implementation of the statute.”
“It was a roundtable discussion. We posed hypothetical questions – what about x, or what about y.”
“Our regulators are reluctant to do that. But it was a good healthy discussion about how practically one does business in emerging countries.”
Would it be a good thing if U.S. prosecutors met with defense law firms here – as Alderman is doing?
“Sure
it would,” Warin says. “It would be very helpful for roundtable
discussions. Justice and SEC officials do speak at a variety of programs. But
they are reluctant to engage in specific inquiries for fear that
people will say – I relied upon x government official for what I did.
But it would be healthy and provide guidance.”
“The vast majority of corporations are working very hard to comply with
the law and to get their employees to comply with the law. So, gaining a keener
understanding of the law and law enforcement would be helpful to them.”
“Most corporations have built up an elaborate compliance structure loaded with substantial personnel commitments and training.”
“Hearing first hand what regulators have to say about given matters, would be very helpful.”
Warin is not happy with the new Dodd-Frank whistleblower statute.
“It’s mistaken,” Warin says. “An appropriate approach ought to be an exhaustion approach – you have to exhaust within the corporation before you go to the government.”
“It’s a little bit like how I view family affairs. You address matters within a family before you get external participation.”
“That’s how I think this ought to be handled.”
“You can’t underestimate how much effort, time and attention corporations spend to try to do the right thing to educate their employees about where the boundaries are between right and wrong and to punish and take disciplinary action against people who step over that line.”
“I have a lot of exasperated and depressed chief compliance offices who feel that they are being marginalized because everything they are working on goes for naught when somebody gets a financial interest for going to the government first.”
Warin likes deferred and non prosecution agreements.
He tries to keep track of them all, but knows that a handful a year are not made public.
“You are missing one or two or so a year that go unreported,” he says.
“I put out a six month report on deferred and non prosecution agreements that captures mostly all of them. I am aware of one in 2010 that did not get captured. We
represented the corporation in that case.”
“But generally speaking, they do get captured.”
How does a defense lawyer get a prosecutor not to publicize a non prosecution agreement?
“It happens serendipitously,” Warin says. “Occasionally, the regulators decide not to issue a press release. That happens from time to time. But it’s the rarest of circumstances these days.”
“In the 1990s, not by agreement, but by happenstance, prosecutors took that approach. Today, it’s very infrequent that a prosecutor would take this approach.”
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