Korea’s Anti-Corruption and Civil Rights Commission ( ACRC) recently published its annual report setting forth its major accomplishments for 2015.  Though the ACRC was established in 2008, it has recently become very proactive in its measures to fight corruption in Korea.  (more…)

 The Impact of Korea’s New Anti –Corrution Laws On Internal Investigations

Korean companies are now faced with issues that they have not had to deal with before- namely anti-corruption domestic laws ( the  Kim Young-Ran Act or the “Act”) that provides criminal penalties for bribery, vicarious liability extending criminal penalties not only to the employee but the  employer as well and expanding bribes to also include the exchange of monetary interest without a duty relation component.  This puts Korean companies in a difficult position domestically as not only do Korean companies have to worry about prosecution under the new Act, but they also should worry about how this relates to the FCPA and UK Anti-Bribery Act.  (more…)

South Korea and Corruption- A Renewed Focus On Corporate Compliance

Currently, Park Guen Hye’s administration is caught up in a potential bribery scandal involving alleged pay outs to several of President Park’s top aides as well as other politicians connected with the ruling party.  (more…)

Do You Comply With The FCPA?---  South Korea has recently updated its anti-corruption laws in an effort to become compliant with the OECD Anti-Bribery Convention passed last year.  The new updates close loopholes that allowed public officials to accept expensive gifts without threat of criminal prosecution.  (more…)

When it comes to compliance- just do it!

Recently, I read that the Securities and Exchange Commission sanctioned numerous firms for violating auditor independence rules when they prepared the financial statements of brokerage firms that were their audit clients.    Specifically, the agency found that during audits, the firms relied on data from financial statements and notes that the audit firms themselves had prepared for the clients.     Obviously they couldn’t do it because they were in effect auditing their own work.   In another example,  I recenlty read that a former paralegal of a well known pharmaceutical company, claims she was fired in retaliation for revealing a huge scheme involving kickbacks to doctors in violation of US Law.   So  why then, in these examples, years after the implementation of SOX  and the FCPA  ( which forbids these actions)  did such a number of firms violate SOX and probably their own internal rules? If the former paralegal 's allegations are true, why didnt the pharmaceutical company have a FCPA process in place to pick up the kickbacks?   The answer is simple: the companies in question failed to implement a  proper compliance program that adequately addresses their major processes and procedures .

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Recently the news is filled with M&A activity.  Companies are acquiring or merging with other companies on a global scale.  What some companies fail to do, however, is to consider the FCPA implications of a M&A transaction.

The FCPA?

Yes, the Foreign Corrupt Practices Act (FCPA) plays a major role when considering the acquisition of another company, especially a foreign owned company.  Specifically, due diligence needs to cover FCPA concerns. There are several reasons for this:

1. If a company’s foreign subsidiary or affiliate includes inaccurate entries on its books and records in violation of the FCPA and that is reported up within the parent for purposes of consolidated financials, the parent may have violated the FCPA.
2. Successor in interest- a successor company in an M&A transaction will also in most cases inherit the liability of the target’s FCPA violations, if any.
3. Agency implications- under the agency concept, the parent will be liable for the actions of its subsidiary or JV partners as they are considered agents of the parent.

What may seem to be a reasonable acquisition may turn to be a nightmare of government fines and investigations if the acquiring party fails to adequately investigate a target company’s potential FCPA violations.   Anti-bribery laws, especially the US FCPA and the UK Anti-Bribery Act  are now very important and must be considered in the context of a merger or acquisition. Not only are U.S. companies liable for the acts of non US affiliates when it comes to the FCPA, but if they  a successor in interest to a non US company that has committed FCPA violations, they may very well inherit liability for FCPA violations.  And sanctions levied by the DOJ for FCPA violations may be very invasive.

So, make certain your due diligence covers the FCPA.  Make certain your due diligence covers the target’s 3^rd party vendor relationships and agreements, especially if they operate in high risk jurisdictions.  Look at the target’s FCPA rules if any?  Has an assessment been done on the effectiveness of the FCPA policies? What accounting controls are in place?  What FCPA training, if any, was performed at the target company?  Do they even know what the FCPA is?

Remember, when considering  M&A transactions, especially involving a foreign owned company or a company that does business in high risk jurisdictions, FCPA due diligence is a must!

Therefore, when structuring your Legal Risk Management processes for M&A transactions, I highly recommend due diligence processes that also consider potential FCPA issues.  FCPA due diligence these days is a given!