Presentation Transcript

1. INVESTIGATING CORRUPTION IN CHINA – RECENT DEVELOPMENTS AND PRACTICAL EXPERIENCES Keith Williamson, Managing Director, Alvarez & Marsal Andrew Dale, Partner, Orrick, Herrington & Sutcliffe 6 May 2014
2. Agenda Introduction Overview of anti-corruption legal framework in China Recent investigations and actions by US and Chinese authorities Common corruption risks in China Practical challenges and solutions in conducting and remediating investigations in China Summary Biographies Contact Information
3. introduction
4. OVERVIEW OF ANTI-CORRUPTION LEGAL FRAMEWORK IN CHINA
5. CHINESE ANTI-BRIBERY LAW OVERVIEW Comprehensive legislation under PRC law regarding anti-corruption, for example: Criminal Law PRC Anti-Unfair Competition Law SAIC Anti-Commercial Bribery Regulations PRC Invitation and Submission of Bids Law Advertisement Law of the People’s Republic Law Government Procurement Law of the PRC Laws of State Public Servants Circular on Prohibiting State Administrative Agencies and Their Personnel from Presenting or Accepting Gifts in Performing Official Duties in China Communist Party of China Regulations on Disciplinary Penalties Related Rules issued by Industrial Administrative Departments
6. commercial bribery Banned like UK’s Bribery Act Commercial bribes are activities of giving or accepting money, in-kind goods or property with the purpose of providing or obtaining transaction opportunities or other economic benefits, which take place during commercial business and which are in breach of the fair competition principle Any unrecorded commission, discount or payment will be treated as commercial bribery
7. RECENT INVESTIGATIONS AND ACTIONS BY US AND CHINESE AUTHORITIES
8. RECENT INVESTIGATIONS AND ACTIONS BY US AND CHINESE AUTHORITIES China and US-led investigations China-led investigations Rolls Royce – 2012/2013 GlaxoSmithKline – 2013 Dumex (owned by Danone) – 2013 US-led investigations Avon – 2008-2014 JP Morgan – 2013
9. COMMON CORRUPTION RISKS IN CHINA
10. COMMON CORRUPTION RISKS IN CHINA Common corruption risks in China Use of sales agents and government service providers Government relations Tax authorities, environmental agencies, customs, immigration, licensing agencies Off-book bank accounts and records Non-cash bribes Gifts (e.g. iPads, handbags, powdered milk) Appointment of relatives Hidden interests in related companies Joint ventures with state-owned enterprises Use of travel agencies – prevalent in many industries (not just pharma)
11. PRACTICAL CHALLENGES AND SOLUTIONS IN CONDUTING AND REMEDIATING INVESTIGATIONS IN CHINA
12. PRACTICAL CHALLENGES AND SOLUTIONS IN CONDUCTING AND REMEDIATING INVESTIGATIONS IN CHINA Conducting investigations Planning and scoping investigations “Client confidentiality” v. common law privilege Data challenges Privacy and state secrecy Practical reality Off-shore entities, multiple sets of books Language and cultural acceptability Fabrication of documents and collusion with third parties
13. PRACTICAL CHALLENGES AND SOLUTIONS IN CONDUCTING AND REMEDIATING INVESTIGATIONS IN CHINA Fabrication of documents and collusion with third parties to disguise false and illegitimate transactions are commonplace in Chinese corruption cases Company Board minutes Incorporation documents Official company seal or chop
14. PRACTICAL CHALLENGES AND SOLUTIONS IN CONDUCTING AND REMEDIATING INVESTIGATIONS IN CHINA Remediating investigations Lack of oversight from international headquarters/operations Locals know best Practicality of compliance recommendations to local environment Relatively low status and qualifications of finance/accounting staff Rules v. principles – sometimes lack of local understanding where there is no rule Hierarchical management structure “Pleasing the boss trumps compliance” Silo mentality Internal politics Tone from the top Compliance as a value proposition
15. SUMMARY
16. SUMMARY Three key takeaways Anti-corruption enforcement in China is now both global and local Pro-active preparation and proper scoping of investigations is vital Close “parental supervision” of Chinese operations is critical to ongoing compliance
17. questions?
18. BIOGRAPHIES
19. Keith Williamson Managing Director Hong Kong Keith Williamson is a Managing Director and Head of Alvarez & Marsal’s Global Forensic and Dispute Services team in Hong Kong and China. He brings more than 18 years of forensic and investigative accounting experience, specialising in investigations of fraud, corruption (US FCPA/UK Bribery Act) and regulatory issues, asset tracing and recovery, and litigation support and expert witness services for disputes.  Mr. Williamson has predominantly been involved in large scale global investigations, asset tracing exercises and litigation support exercises on behalf of U.S., European and Asian owned corporations facing fraud, corruption, regulatory, asset recovery and dispute issues across a broad spectrum of industries, including oil and gas, minerals and mining, healthcare/pharmaceuticals, manufacturing, leisure, financial institutions, education, media and technology. Mr. Williamson has given evidence and been cross-examined in legal proceedings relating to forensic accounting matters. Most recently at A&M, Mr. Williamson has been investigating allegations of US FCPA violations in China and the Asia-Pacific region, performing forensic accounting reviews of alleged fraudulent activity in Hong Kong and China, and acting as the UK high court appointed receiver of Russian assets that are the subject of a judgment debt in favour of a Kazakh bank. Examples of Mr. Williamson’s notable assignments in Asia include: US Foreign Corrupt Practices Act investigation of a global corporate’s activities across Asia, including China and Singapore. Advising and assisting a non-governmental organisation with investigations of the alleged misappropriation of grant funds in Asia and Africa. Forensic financial due diligence on a proposed Chinese acquisition by a US private equity firm. Management of a large team of accountants and lawyers administering and investigating the assets comprising the multi-US$ billion estate of a Hong Kong businessman involved in property development. Investigation of allegations of payroll and expense irregularities at a US SEC-listed manufacturer of household consumer products’ Chinese joint-venture. Prior to joining A&M in 2011, Mr. Williamson spent six years with AlixPartners in London, where he most recently served as Managing Director conducting investigations and compliance reviews and providing dispute services across Europe, Africa and the Middle East.  Mr. Williamson also spent 10 years with Deloitte’s Forensic & Dispute Services team, including three years working in Asia from their Hong Kong office. Mr. Williamson earned a bachelor’s degree in Law from the University of Birmingham.  He is a member of the Institute of Chartered Accountants in England and Wales and the Hong Kong Institute of Certified Public Accountants.
20. Andrew J. Dale Partner White Collar & Corporate Investigations Hong Kong Contact +852 2218 9178 adale@orrick.com Andrew J. Dale, a partner in Orrick’s Hong Kong office, is a member of the firm’s White Collar & Corporate Investigations practice group. He has been recognized in both Chambers Asia Pacific and Chambers Global for his regional anti-corruption work and international investigations. While focusing his practice on corporate investigations, he has considerable experience in and also is a recognized lawyer for complex commercial litigation and arbitration matters. Some of his more notable engagements include the following cases. Advising a Hong Kong listed company subject to an SFC investigation. Represented a U.S. listed company relating to various accounting issues in its Asian operations. Assisted a U.S. listed company on an FCPA investigation relating to its Chinese subsidiaries. Represented a U.S. listed company regarding FCPA and other issues raised by a whistleblower. Advised a global client on an internal investigation involving the misappropriation of funds and confidential information. Represented a Japanese client in an asset tracing exercise in Asia, Europe and the United States. Education Diploma in Legal Practice, College of Law of England and Wales, York, 1997 LL.B., University of Leicester, 1996 Admitted in Hong Kong England and Wales Honors “Ranked Lawyer” for China Dispute Resolution: Anti-Corruption, Chambers Asia and Chambers Global, 2014 “Dispute Star” for Hong Kong, Benchmark Asia Pacific 2013 Orrick Community Responsibility Award 2008 Memberships Fellow of the Hong Kong Institute of Directors High Technology Crime Investigation Association (Asia Pacific Chapter) The Law Society of Hong Kong’s Anti-Money Laundering Committee
21. CONTACT INFORMATION
22. Alvarez & Marsal Asia Alvarez & Marsal Global Forensic and Dispute Services Limited 11/F, MassMutual Tower 38 Gloucester Road, Wanchai, Hong Kong Tel: +852 3102 2600 Fax: +852 2598 0060 www.alvarezandmarsal.com Principal points of contact in A&M’s Global Forensic & Dispute Services practice in Asia: Keith Williamson James Lei Managing Director, Hong Kong Director, Shanghai +852 3102 2606 +86 18818003010 kwilliamson@alvarezandmarsal.comjlei@alvarezandmarsal.com Aruni Weerakesera Davin Teo Senior Director, Hong Kong Director, Hong Kong +852 3102 2613 +852 3102 2614 aweerakesera@alvarezandmarsal.comdteo@alvarezandmarsal.com Shanghai Office Beijing Office Hong Kong Office Alvarez & Marsal Consulting (Shanghai) Limited, Beijing Branch Unit 1118-21, 11F, China World Office 1, No.1 Jianguomenwai Ave., Chaoyang District, Beijing 100004, ChinaTel: +86 10 5737 9080Fax: +86 10 6563 7835 Alvarez & Marsal Consulting (Shanghai) Limited Unit 3682-3683, Level 36, Tower 2, International Finance Centre, No.8 Century Avenue, Pudong District, Shanghai 200120, China Tel: +86 21 6062 6293 Fax: +86 21 6062 6399 21
23. Orrick’s Key Contacts Principal points of contact in Orrick’s Global White Collar & Corporate Investigations practice: Andrew J. Dale Partner Hong Kong +852 2218 9178adale@orrick.com Pamela R. Davis Partner San Francisco +1 415 773 5561pdavis@orrick.com Guy Singer Partner New York & Washington D.C. +1 212 506 3510/+ 1 202 339 8525gsinger@orrick.com KEY OFFICE LOCATIONS HONG KONG 43/F, Gloucester Tower, The Landmark 15 Queen’s Road Central, Hong Kong Tel: +852 2218 9100 Fax:+852 2218 9200 NEW YORK 51 West 52nd Street, New York NY 10019-6142, United States Tel: +1 212 506 5000 Fax:+1 212 506 5151 SAN FRANCISCO The Orrick Building, 405 Howard StreetSan Francisco, CA 94105-2669United States Tel: + 1 415 773 5700 Fax:+ 1 415 773 5759 WASHINGTON D.C. Columbia Center, 1152 15th Street, N.W.Washington, D.C., 20005-1706United States Tel: + 1 202 339 8400 Fax:+ 1 202 339 8500
24. About Alvarez & Marsal Specialising in Forensic and Dispute services, as well as business advisory and consulting services, A&M delivers operational, consulting and industry expertise to management and investors seeking to overcome challenges, accelerate performance and maximize value. OVERVIEW Founded in 1983 by co-CEOs Tony Alvarez II and Bryan Marsal 2,400+ professionals 300+ Managing Directors 43 offices; 19 countries; 4 continents INDUSTRY EXPERTISE Automotive and Suppliers Consumer Packaged Goods Energy Financial Services Healthcare and Life Sciences High Tech Infrastructure Insurance Manufacturing Media and Entertainment Public Sector Private Equity Real Estate Retail Transportation and Airlines GLOBAL CAPABILITIES Turnaround and Restructuring Turnaround advisory Crisis and interim management Claims management Creditor advisory Transaction Advisory Financial due diligence Commercial due diligence Operational due diligence Tax due diligence Divestiture services Forensics and Dispute Services Forensic accounting and investigations, Disputes - Testifying and consulting experts Forensic Technology Tax Advisory Global Asset Risk Services Performance Improvement Revenue enhancement Process improvement Merger integration Strategy Risk management Interim management