Focus on Third Party Due Diligence in Mexico ACI s 2 nd Mexico Summit on Anti-Corruption March 24-25, 2015 Charlie Meacham Partner Gardere Wynne Sewell LLP Raul Escalante Corporate Compliance Counsel Grupo Modelo
FCPA RESOURCE GUIDE 1. Understand the qualifications and associations of its third party partners, including its business reputation and relationship, if any, with foreign officials. The degree of scrutiny should increase as red flags surface. 2. Companies should have an understanding of the business rationale for including the third party in the transaction. 3. Companies should undertake some form of on-going monitoring of third party relationships.
How to Undertake Due Diligence on Agents, Representatives or Business Partners 3 phases for due diligence: Due diligence before engagement Ongoing evaluation during course of relationship Annual written certifications
How to Undertake Due Diligence on Agents, Representatives or Business Partners Consider the reputation for corruption of the country where third party resides Review information from governmental organizations (e.g., Embassy or State Department) Review information from NGO s such as Transparency International
How to Undertake Due Diligence on Agents, Representatives or Business Partners Determine the competence of the agent, representative or business partner Qualifications of candidate (expertise, certifications, resources) Identification of agent s expected activities or services
How to Undertake Due Diligence on Agents, Representatives or Business Partners Determine the integrity of the agent, representative or business partner Conduct interview with candidate/internal point of contact Obtain and interview business/financial references Review U.S. and Non-U.S. restricted parties lists Social media/internet searches Identification of known conflicts of interest
How to Undertake Due Diligence on Agents, Representatives or Business Partners Identify any relationships between the agent, representative or business partner and government officials Entity information/documentation Ownership ties Directors/officers/key employees Past and present relationships with government agencies
How to Undertake Due Diligence on Agents, Representatives or Business Partners Determine the business justification and reasonableness of compensation and payments Terms (commission, term, territory) Business justification (current opportunities in territory, how candidate was identified)
How to Undertake Due Diligence on Agents, Representatives or Business Partners Ensure that answers provided by the agent, representative or business partner to due diligence questions are accurate and complete Verify information received from consultant with interviews of business references and background search
How to Undertake Due Diligence on Agents, Representatives or Business Partners Ensure compliance with local law Has agent, representative or business partner been barred by local governmental agencies?
How to Undertake Due Diligence on Agents, Representatives or Business Partners Integrate Anti-Corruption representations and covenants into the agent, representative or business partner s agreement
How to Undertake Due Diligence on Agents, Representatives or Business Partners Provide for continuing oversight of the activities of the representative or business partner a sponsor should be assigned and will be responsible for ensuring continuing oversight
How to Undertake Due Diligence on Agents, Representatives or Business Partners Ensure maintenance of accurate and updated books and records
How to Undertake Due Diligence on Agents, Representatives or Business Partners Use consistent standards and common sense
Third Party due Diligence Checklist 1. Gather the full Company Name, Industry, Physical Office and Mailing Address(es), Website Address 2. Owners Details: Name; Title; Date of Birth Passport/National ID/Driver s License Number Address/Taxpayer ID Number (Registro Federal de Contribuyentes) 3. Executives Details (provide information for all officers or senior executives): Name; Title; Date of Birth Passport/National ID/Driver s License Number Address/Taxpayer ID Number (Registro Federal de Contribuyentes)
Third Party due Diligence Checklist 4. Is the foreign agent related to any officer or employee of a government agency responsible for purchasing the company s product or regulating any of the company s activities, products or services? 5. Are the foreign agent s principals, shareholders, directors, managers, officers, or employees related to any officer or employee of a government agency responsible for purchasing the company s product(s) or services or regulating any of the company s activities, products or services? 6. Is the foreign agent owned or controlled by a foreign government agency, stateowned enterprise or other instrumentality?
Third Party due Diligence Checklist 7. Is the agent a current or former foreign government official (including a legislative, judicial, executive, administrative, or judicial position in any municipality, province, state or national government)? 8. Is the agent a current or former board member, executive, or employee of a business in which a government owns an equity interest or stake in the company? 9. Is the foreign agent a current or former political party official, political candidate for office, or an official of a public international organization (e.g., United Nations, IMF, World Bank, Asian Development Bank, European Union)?
Third Party due Diligence Checklist 10. Are any of the foreign agent s principals, shareholders, directors, officers, managers, employees or related parties currently or formerly an official, employee, agent or representative of a foreign government, state-owned enterprise or other instrumentality or political party official, political candidate for office or an official of a public international organization? 11. Has the agent ever been, within the last ten years, involved in, accused of, or adjudicated for violating any anti-bribery law, including but not limited to the Foreign Corrupt Practices Act, or UKBA?
Third Party due Diligence Checklist 12. Has the agent s principals, shareholders, directors, officers or employees ever been involved in, accused of, or adjudicated for violating any anti-bribery law, including but not limited to the Foreign Corrupt Practices Act, the 2010 United Kingdom Anti- Bribery Act, the 2012 Mexican Anti-Corruption Law or any anti-bribery law? 13. Has the agent ever been, within the last ten years, arrested for a crime, accused of a crime, or convicted of a crime? 14. Has the agent s principals, shareholders, directors, officers, managers or employees ever been arrested for a crime, accused of a crime or convicted of a crime?
Third Party due Diligence Checklist 15. Has the agent provided at least three business references which indicate that the agent is in good standing in the business community? 16. What specific services will the agent provide to the company (please be detailed in the nature of the services to be provided, including any correlation between the services provided and the amount of compensation paid to the agent)? 17. What are the specific arrangements for compensation of the agent? Will an intermediate be used to pay the agent?
Third Party due Diligence Checklist 18. Will the agent provide an official invoice (factura) to the company? 19. How was it determined that the terms of compensation are reasonable in the country in which the services are to be provided and are commensurate with the difficulty, duration, and intensity of the services to be provided? 20. Are the terms of compensation contingent on a specific outcome, or incentivebased?
Third Party due Diligence Checklist 21. What specific arrangements will be made for the company s payment to the agent? Will the agent be paid in the country which he/she provides the services? Will the payment be made in local currency? 22. Will the agent be paid directly, if so, by what means (e.g., cash, check, wire transfer, bank deposit)? 23. Will the agent retain, or have the authority to retain, any subcontractors ( subagents ) or gestores to assist in the services provided to the company?
Third Party due Diligence Checklist 24. Will the agent and the company enter into a written contract? Will the contract be signed before a notary public? 25. Does the written contract include warranties and representations that the agent will comply with U.S. laws, including the Foreign Corrupt Practices Act, as well as the 2010 UK Anti-Bribery Act, the 2012 Mexican Anti-Corruption Law or any applicable anti-corruptions laws, or any other relevant law which may apply to the specific services provided by the agent to the company?
Third Party due Diligence Checklist 26. Does the written contract authorize the company to inspect and audit the agent s financial records? 27. Does the written contract authorize the company to terminate the contract with the agent if the agent is suspected of conduct which may violate U.S. law, including the Foreign Corrupt Practices Act, the 2010 UK Anti-Bribery Act, the 2012 Mexican Anti-Corruption Law and any other anti-corruption laws, or any other applicable law which may apply?
Third Party due Diligence Checklist 28. How did the company learn of the agent and decide to consider retaining the agent to assist the company? 29. Describe the circumstances surrounding the identification, negotiation and proposal to hire the agent?
Third Party due Diligence Checklist 30. Has the agent provided the following supporting documentation: (a) company business license; (b) document showing company establishment or incorporation; (c) current company financial statements; (d) agent resume or company description; (e) bank reference letter; and (f) copy(ies) of any written code of conduct or ethics or anti-corruption policy.
Red Flags Reputación El Proveedor es conocido por incurrir en conductas no éticas. El Proveedor ha sido despedido por otras empresas por conducta indebida. El Proveedor ha sido sujeto a demandas de carácter civil o penal. El Proveedor ha sido investigado o condenado por o actualmente es objeto de una investigación relacionada con soborno, lavado de dinero o fraude. El país donde el Proveedor prestará servicios para tu empresa obtuvo una calificación de 40 o menos en el Índice de Percepciones de Corrupción de Transparencia Internacional (http://www.transparency.org/research/cpi/overview).
Red Flags Relaciones con el Gobierno El Proveedor de Punto de Contacto (o alguno de sus consejeros, propietarios, funcionarios o empleados) es un Funcionario Público. El Proveedor de Punto de Contacto (o alguno de sus consejeros, propietarios, funcionarios o empleados) tiene relaciones familiares o de negocios con un Funcionario Público. El Proveedor de Punto de Contacto realiza aportaciones políticas considerables o frecuentes. El Proveedor de Punto de Contacto fue recomendado por un Funcionario Público.
Red Flags Capacidades El Proveedor de Punto de Contacto no llevará a cabo actividades sustanciales para tu empresa. El Proveedor de Punto de Contacto no cuenta con el personal o instalaciones necesarias para desempeñar las tareas que se requieren. El Proveedor de Punto de Contacto no cuenta con la experiencia en la industria/técnica relevante o no ha estado en el mercado por mucho tiempo. El Proveedor de Punto de Contacto tiene poca estabilidad financiera o un historial crediticio débil. El Proveedor de Punto de Contacto es una empresa fantasma o tiene una estructura corporativa inusual.
Red Flags Remuneración El Proveedor de Punto de Contacto solicita una comisión u otro pago significativamente superior a la tarifa de mercado o solicita un pago por adelantado sustancial. El Proveedor de Punto de Contacto pide que el pago se efectúe en efectivo o en cheques al portador. El Proveedor de Punto de Contacto pide que los pagos se efectúen a través de un tercero o en una cuenta bancaria de otro país. El Proveedor de Punto de Contacto solicita otros arreglos económicos inusuales. El Proveedor de Punto de Contacto pide que una factura refleje una cantidad mayor que el precio real de los artículos suministrados. El Proveedor de Punto de Contacto se niega a documentar debidamente los gastos.
Red Flags Circunstancias Cuestionables El Proveedor de Punto de Contacto pide anonimato o que la relación se guarde como secreto. El Proveedor de Punto de Contacto no coopera con la investigación de auditoría previa de AB InBev o se niega a aceptar una disposición contractual que prohíba el soborno o participar en el lavado de dinero o en fraude. El Proveedor de Punto de Contacto hace declaraciones sospechosas, tales como que necesita dinero para obtener el negocio o hacer las gestiones necesarias. El Proveedor de Punto de Contacto sugiere que se pueden eludir los procesos normales de los negocios o de licitación. El Proveedor de Punto de Contacto se rehúsa a certificar que cumplirá con la Política Anti-Corrupción de AB InBev o que no tomará acción alguna para fomentar un pago indebido. El Proveedor de Punto de Contacto presenta facturas falsas u otros documentos falsos o engañosos.
Frequently Asked Questions 1. Why is conducting anticorruption due diligence on vendors so important? 2. Is there an obligation under U.S. law to conduct due diligence for anticorruption on vendors? 3. Should all vendors should be treated the same for anticorruption purposes? 4. How can you identify high risk vendors? 5. Have you identified a special category of vendors in Mexico that represent a high risk for anticorruption purposes? 6. What are some key issues to negotiate with all vendors?
Frequently Asked Questions 7. What additional issues need to be negotiated with high risk vendors? 8. What are the key elements of an anticorruption due diligence process? 9. What are the key elements of an anticorruption representation (clause)? 10. What do you need to ask if you find a red flag during due diligence? 11. How to obtain the cooperation of your vendors? What to do in case a vendor refuses to cooperate during due diligence? Is there an argument under Mexican law that could help you obtain the vendor s cooperation?
Frequently Asked Questions 12. Could a non-u.s. vendor be subject to U.S. liability in case it commits a corrupt act while rendering services to a U.S. entity? 13. Recommendations on how to deal with your top management in case a key vendor doesn t pass the anticorruption test. 14. What to do if you discover anticorruption issues prior to the vendor rendering its services? 15. What to do if you discover anticorruption issues after a vendor renders its services? Can you terminate contract without liability under Mexican law? Is there are duty to contact Mexican Criminal Authorities?
Frequently Asked Questions 12. Could a non-u.s. vendor be subject to U.S. liability in case it commits a corrupt act while rendering services to a U.S. entity? 13. Recommendations on how to deal with your top management in case a key vendor doesn t pass the anticorruption test. 14. What to do if you discover anticorruption issues prior to the vendor rendering its services? 15. What to do if you discover anticorruption issues after a vendor renders its services? Can you terminate contract without liability under Mexican law? Is there are duty to contact Mexican Criminal Authorities?
HYPOTHETICAL CASE
CONTACT INFORMATION GARDERE WYNNE SEWELL LLP Charles E. Meacham 1000 Louisiana, Suite 3400 Houston, TX 77002-5007 Phone: 713.276.5633 Fax: 713.276.6633 cmeacham@gardere.com GRUPO MODELO +52 55 22660000 raul.escalante@gmodelo.com.mx