EFFECTIVE ANTI-CORRUPTION COMPLIANCE FROM THE GROUND UP Association of Corporate Counsel Ontario Chapter May 17, 2016 Milos Barutciski Partner Bennett Jones LLP Christa Wessel Corporate Director and Senior Advisor, Change Alliance 1

Overview of Anti-Corruption Law PART I 2

International treaties (OECD, OAS, UN) and other initiatives (e.g., World Bank sanctions) have changed the international legal and business environment Conduct once widely tolerated is increasingly subject to investigation and prosecution in multiple jurisdictions All 34 OECD member countries have now adopted strict laws against corruption and several enforce actively Penalties are growing in severity for both corporations and individuals The Rules of the Game 3

4 Trends in International Enforcement Enforcement activity outside of U.S. increasing steadily Australia, Canada, Chile, Germany, the UK, France, Norway, Netherlands, Italy, Korea, Japan, Switzerland, South Korea, Sweden and others have convictions under international bribery laws In 2014, non-U.S. enforcement actions outnumbered U.S. enforcement actions for the first time Enforcement actions outside the U.S. doubled in 2014 over 2013 (2015 had lowest level of U.S. enforcement actions since 2007 but Q madeup for it) Increase in multi-country investigations and international cooperation of enforcement agencies Activities in China, Nigeria, India, Russia, Brazil and Indonesia have been a focus of global enforcement activity State-owned enterprises (SOEs) are increasingly the subject of enforcement action within their own jurisdictions (e.g. 26 SOEs in China, Petrobras in Brazil) Anti-corruption enforcement in China under Xi government

5 Trends in International Enforcement

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FIFA officials ( ) – US $40 million (and counting) Novartis AG (2016) – US $25 million Nordion Inc. (2016) – US $375,000 (no penalty in Canada due to voluntary disclosure) VimpelCom Limited (2016) – US $397.6 million Sweett Group Plc (2015) – UK £2.25 million ICBC Standard Bank Plc (2015) – UK – USD$32.2 million BHP Billiton (2015) US – $25 million SNC Lavalin (2015) – Canada (charges laid) Karigar (2014) Canada – 4 years GlaxoSmithKline (2014) China – US$480m Alstom SA (2014) – US $772 million Avon Products Ltd. (2014) – US $135 million Hewlett Packard (2014) – US $108 million Alcoa (2014) – US $209 million Weatherford International (2013) - $152.6 million Griffiths Energy (2013) – Canada CAD$ million Marubeni (2012) – US $54 million Tyco International (2012) – US $26 million Pfizer (2012) – US $15 million Niko Resources (2011) – Canada CAD$ 9.5 million Johnson & Johnson (2011) – US $78 million JGC Corp (2011) – US - $219 million Alcatel/Lucent (2010) – US $137 million) Daimler (2010) – US $185 million BAE (2010) – UK & US $450 million Agip (2010) – US $338 million ENI (2010) – US $365 million Innospec (2010) – UK & US $23.9 million KBR (2009) – US $579 million Siemens (2008) – US & Germany $1.6 billion Trends in International Enforcement (Cont.) 7 Examples of recent actions:

Essence of the bribery offence is payment of value to a person (official or private) to obtain a business advantage As consideration for an act or omission by the person in relation to their duties to their government or employer - or- To induce the person to use their position to influence an act or decision of their government or employer Payment – however large or small – in exchange for a business advantage can trigger liability Offer or promise to pay is sufficient – actual payment is not required. The Bribery Offence 8

The bribery offence can be committed by: Direct payments to the person whose influence is being purchased Indirect payments through a third party (e.g., an agent or representative) Willful blindness to the possibility that a third party may have made a payment for the benefit of the company The Bribery Offence (Cont.) 9

The conduct of third parties such as agents or representatives, joint venture partners, service providers and other business associates can lead to liability where payments are made that result in a benefit to a company Where there is reason to know or suspect that such payments will be made by a third party and no remedial action is taken (i.e., willful blindness), a company and its officials may be found liable Bottom line: You can be liable for the conduct of third parties with whom you do business The Bribery Offence and Third Parties 10

11 Exceptions & Defences Facilitation payments Some countries allow "facilitation payments" to foreign officials (e.g., US, Switzerland) Canada still has this exception – amendment to remove exception has not yet come into force Facilitation payments are token payments to low-level officials to secure the performance of a routine administrative act Payments/benefits: That are lawful under local law (i.e., the official’s country) Reasonable and bona fide expenses incurred in connection with (i) the promotion, demonstration or explanation of products, or (ii) the execution or performance of a contract

Conduct that undermines a supplier or customer employee's loyalty to their employer for the benefit of the payer Private bribery is unlawful in most countries (e.g., paying a kick-back to a customer's employee to purchase your product) Private bribery can destroy supplier and customer confidence and lead to significant civil liability and reputational harm, as well as criminal prosecution in many countries In Canada: Criminal Code s. 426 (secret commissions) Private Bribery 12

Implementing a Compliance Program PART II 13

“Law is to justice, as medicine is to health, as business is to … what?” Enhancing Corporate Governance, ethics-enhancing-corporate-governance/ ethics-enhancing-corporate-governance/ Purpose 14

Comprehensive data Analyze and act on it “Cultural” surveys vs Engagement surveys Know Your Organization 15

Senior management and board commitment Corruption risk assessment Written policy and procedures Compliance officer responsible for implementation Procedure for reporting potential misconduct Tailored training and education Monitoring and accountability Key Steps in Implementing an Anti-Corruption Compliance Program 16

Corporate commitment at the most senior levels is essential Oversight by board and executive management Absent commitment, policy is just paper and may do more harm than good Induces false sense of security Regulators will view actions contrary to policy as an aggravating factor Corporate Commitment 17

An effective corruption compliance policy must be: Tailored to the company’s risk profile Integrated with the company’s internal controls Adapted to the company’s business operations Take geographic & sector risk into account Consider customer and supplier profiles Retrospective – include review of existing third party relationships, business practices, contracts, etc. Corruption Risk Assessment 18

Clearly articulated policy Procedures for specific activities (e.g., third party due diligence, gifts & entertainment, etc.) Lines of authority and reporting protocols Written Policies & Procedures 19

A compliance officer must be: Independent Sufficiently senior Have adequate resources Report to CEO or other senior officer and Board/Audit Committee Compliance Officer 20

Companies should develop a protocol for corruption investigations Implement a procedure for investigating complaints made by employees to management or anonymously through a "hot line" Complaints involving potential criminal offences should generally be investigated by counsel to preserve privilege over the results of the investigation The company can determine at any point in the investigation whether to make a voluntary disclosure to law enforcement or regulatory authorities Procedure for Reporting of Potential Misconduct 21

Training must be: Targeted to audience Sufficiently detailed Refreshed Use resources appropriate to the employees’ functions and risk profile Face-to-face seminars for sales and regulatory personnel who interact with public officials Online training for back-office Training & Education 22

Keeping up to date with developments in law and best practices Monitor compliance Periodic compliance audits (internal audit or external resource) Regular reports to management and board Monitoring and Accountability 23

New metrics/KPIs Behaviour, especially of leadership Effectiveness of compliance program Impact of compliance program on behavior & attitudes Examples: Regular review and consideration of “leadership” “Cultural” surveys – benchmarking & measuring change Measurement 24

25 Milos Barutciski Christa Wesssel