FCPAméricas Blog
SNC-Lavalin Got You Down? What to do when a business partner is accused of corruption
5.30.2013
For those monitoring foreign bribery cases, 2013 is starting to get busy. In the United States, the last couple of months have included the unsealing of FCPA actions against BizJet executives and Wall Street traders. Just yesterday, authorities announced the fourth most expensive FCPA settlement to date. In Canada, the country’s largest engineering company, SNC-Lavalin, recently received the longest World Bank debarment in history, ten years, for payments related to a Bangladeshi bridge project. Canadian officials have charged its executives for their involvement.
What should a company do when it learns that a joint venture partner, supplier, or other third party has been charged with, or simply accused of, corruption?
From the perspective of enforcement, ongoing monitoring of business partners and third party relationships is a basic expectation. This might mean updating due diligence periodically, exercising audit rights, conducting periodic training, or requesting annual certifications by the entity. Monitoring should be risk based and applied consistently. When a red flag calls into question the third party’s integrity, it is standard for a company to act accordingly.
Compliance teams are responding to reports of partners’ corrupt acts in various ways. Many are pursuing a “kick the tires” approach. This might include any of the following:
– Reviewing agreements in place with the partner to make sure appropriate compliance language is included. If language is not there, they will determine how and when it can be incorporated, perhaps when the agreement is up next for renewal.
– Speaking with the business personnel who manage the relationship to understand the foreign corruption risks associated with the relationship. Does the partner interact with foreign officials on the company’s behalf? Does it use third parties to do so?
– Speaking with business personnel to get a sense of whether other red flags are present in the relationship. Has the partner been complying with the provisions of its agreement with the company? How is it being compensated for its work? Are services and costs well defined in the agreement?
– Requesting information about the partner’s anti-corruption compliance program, especially when there are foreign bribery risks at play.
Accusations of corrupt acts by a business partner do not automatically mean that a company must cease all business activities with that entity. This is especially the case when the reports of corruption have to do with a completely different country or business unit. Moreover, the fact that the entity might now be subject to an enforcement action probably means that it will start embracing robust compliance practices. For example, SNC-Lavalin just announced that it is following Siemens’ compliance lead by offering an amnesty program to encourage whistleblowers to come forward with more information about unethical practices at the company. Such enhanced compliance measures have the effect of making a company’s business relationship with that entity more secure.
At the same time, knowledge of wrongdoing by a partner should cause a company to take some proactive actions to ensure that similar risks do not extend to its own operations. As always, all such compliance steps should be properly tracked and recorded.
The FCPAméricas blog is not intended to provide legal advice to its readers. The blog entries and posts include only the thoughts, ideas, and impressions of its authors and contributors, and should be considered general information only about the Americas, anti-corruption laws including the U.S. Foreign Corrupt Practices Act, issues related to anti-corruption compliance, and any other matters addressed. Nothing in this publication should be interpreted to constitute legal advice or services of any kind. Furthermore, information found on this blog should not be used as the basis for decisions or actions that may affect your business; instead, companies and businesspeople should seek legal counsel from qualified lawyers regarding anti-corruption laws or any other legal issue. The Editor and the contributors to this blog shall not be responsible for any losses incurred by a reader or a company as a result of information provided in this publication. For more information, please contact Info@MattesonEllisLaw.com.
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@2013 Matteson Ellis Law, PLLC
Post authored by Matteson Ellis, FCPAméricas Founder & Editor
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