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Ethics and Anti-Corruption Policies
The directors, officers, and employees of any business licensed inside the United States of and its wholly-owned and majority-owned affiliates (collectively referred to as the “company”) must have active policies and controls directed at committed to compliance with the anti-corruption laws of all countries and territories in which we operate or market products. Each company must have a culture of compliance is embedded in our management systems, beginning with an Ethics Policy.
The Ethics Policy requires all directors, officers, and employees to comply with all applicable laws and to record all transactions accurately in our books and records. The Gifts and Entertainment Policy, Political Activities Policy, and International Operations Policy address related topics.
The purpose of this Anti-Corruption Ethics Policy is to familiarize each employee with the U.S. Foreign Corrupt Practices Act (“FCPA”), and the principal global anti-corruption conventions that apply to all United States performing businesses. Every Director, officer and employee is expected to comply with applicable policies, guidelines, and procedures described in the following pages, and to consult with his or her supervisor and the lawyers whenever there is a question about the legality of an action to be taken by or on behalf of the company.
The FCPA is not the only transnational anti-corruption statute. Since 1996, more than 100 countries have signed one or more of a series of multilateral conventions under the auspices of the Organization for Economic Co-operation and Development (OECD), the Organization of American States (OAS), the Council of Europe (COE) and, more recently, the United Nations, and the African Union. Those conventions require signatory countries to criminalize a wide range of offenses, including bribery, diversion of property by public officials, trading in influence, illicit enrichment, money laundering, and concealment of property. They also seek to establish accounting standards for private companies, to provide for recovery of stolen assets, and to eliminate the tax deductibility of bribes. They also establish and require mutual legal assistance, including extradition, among signatory countries in the investigation and prosecution of corruption offenses, which has led to numerous case referrals and has greatly facilitated the prosecution of corruption cases in many jurisdictions. Implementation and adherence to the conventions by countries are encouraged through monitoring by intergovernmental task forces established for this purpose.
As a result, in addition to pre-existing domestic bribery laws, dozens of countries throughout the world now have laws similar to the FCPA criminalizing transnational official bribery. Those transnational standards are equalizing the terms of competition among competitors from countries with historically different legal standards and business traditions.
The policy of every company must be is to comply with all governmental laws, rules, and regulations applicable to its business. The company’s Ethics policy does not stop there. Even where the law is permissive, the company must always choose the course of highest integrity. Local customs, traditions, and mores differ from place to place, and this must be recognized. But honesty is not subject to criticism in any culture. Shades of dishonesty simply invite demoralizing and reprehensible judgments. A well-founded reputation for scrupulous dealing is itself a priceless corporate asset. A core value of the Ethics Policy is that the company cares how results are obtained, not just that they are obtained. Directors, officers, and employees should deal fairly with each other and with the Company’s suppliers, customers, competitors, and other third parties. The company expects compliance with its standard of integrity throughout the organization and will not tolerate Directors. Officers, and employees who achieve results at the cost of violation of law or who deal unscrupulously. The company’s directors and officers support, and expect the company’s employees to support any employee who passes up an opportunity or business advantage that would sacrifice the ethical standards set out in this policy.
It must be and is a core value of the company that all transactions will be accurately reflected in its books and records. This, of course, means that falsification of books and records and the creation or maintenance of any off-the-record bank accounts are strictly prohibited. Employees are expected to record all transactions accurately in the company’s books and records, and to be honest and forthcoming with the company’s internal and independent auditors. The company expects candor from employees at all levels and adherence to its policies and internal controls. One harm which results when employees conceal information from higher management or the auditors is that other employees think they are being given a signal that the company’s policies and internal controls can be ignored when they are inconvenient. That can result in corruption and demoralization of an organization. The company’s system of management will not work without honesty, including honest bookkeeping, honest budget proposals, and honest economic evaluation of projects.
It is the company’s core value to make full, fair, accurate, timely, and understandable disclosure in reports and documents that the company files with the United States government agencies and officials who so inquire and to do so in other public communications. All employees are responsible for reporting material information known to them to higher management so that the information will be available to senior executives responsible for making disclosure decisions.
Gifts and Entertainment Policy
It is the policy of the company to base commercial decisions on commercial criteria. That policy serves the company’s business interests and fosters constructive relationships with organizations and individuals doing business, or seeking to do business, with the company. In many cultures, those constructive relationships may include incidental business gifts and entertainment. Directors, officers, and employees providing or receiving third-party gifts and entertainment in their corporate capacities are expected to exercise good judgment in each case, taking into account pertinent circumstances, including the character of the gift or entertainment; its purpose; its appearance; the positions of the persons providing and receiving the gift or entertainment; the business context; reciprocity; and applicable laws and social norms. All expenditures for gifts and entertainment provided by the company must be accurately recorded in the books and records of the company.
Political Activities Policy
It is the policy of the company to refrain from making contributions to political candidates and political parties, except as permitted by applicable laws and authorized by the Board of Directors. It is the company’s policy to communicate information and views on issues of public concern that have an important impact on the company. The company considers that registering and voting, contributing financially to the party or candidate of one’s choice, keeping informed on political matters, serving in civic bodies, and campaigning and office holding at local, state, and national levels are important rights and responsibilities of the citizens of a democracy. Directors, officers, and employees engaging in political activities are expected to do so as private citizens and not as representatives of the company. Personal, lawful, political contributions and decisions not to make contributions will not influence compensation, job security, or opportunities for advancement.
International Operations Policy
It is the policy of the company to comply with all governmental laws, rules, and regulations applicable to its operations outside the United States and to conduct those operations to the highest ethical standards. Laws that apply to operations outside the United States include those of the countries where the operations occur, and may also include certain United States laws which govern international operations of United States companies and United States persons, broadly defined. Accordingly, directors, officers, and employees of the company who are involved with the company’s operations outside the United States should consult with legal counsel for advice on applicable United States laws, especially laws regarding boycotts, trade sanctions, export controls, and foreign corrupt practices, and are expected to comply with those laws.
The policies set out in this Ethics Policy are the core values of the company adopted and promulgated in order to communicate fundamental expectations and standards regarding integrity and compliance with applicable laws, including the FCPA and the anti-corruption laws of other countries. In addition, the company must adopt and promulgate various formal internal guidelines and procedures relating to its policies. Everything the Directors do must build a corporate culture which is perpetuated by a management stress of legal compliance on a continuous basis and that believes that a well-founded reputation for scrupulous business dealing is a priceless company asset.
The company encourages employees and others to report violations through various channels without fear of retaliation. The company’s policies, guidelines, and procedures are enforced by disciplinary mechanisms including, when fitting, discipline of executives and managers who fail to detect violations. Violations of law and indifference to legal requirements are not tolerated at any level.
The FCPA and the laws of other countries prohibit inappropriate payments to obtain business advantage. Although on the surface the FCPA’s requirements and prohibitions seem straightforward, in practice FCPA issues are often subtle.
- Anti-Bribery Prohibitions
The FCPA is a U.S. criminal statute that prohibits improper payments to, or other improper transactions with, non-U.S. officials to influence the performance of their official duties. In general, the anti-bribery provisions of the FCPA prohibit giving, paying, promising, offering, or authorizing the payment of anything of value, directly or indirectly through a third party, to any “foreign official” – a term that is very broadly defined – to obtain or keep business or to secure some other improper advantage.
- Accounting and Recordkeeping Requirements
In addition to prohibiting bribery, the FCPA requires U.S. companies and their majority-owned affiliates to maintain adequate internal controls and to keep accurate and complete records of the transactions in which they engage. The FCPA also requires those companies to make good-faith efforts to cause the ventures in which they own minority interests to keep such records and proper internal controls.
The FCPA applies to U.S. persons or business entities anywhere in the world, to “issuers” of securities regulated by the U.S. Securities and Exchange Commission, and to any person who performs a prohibited act in the U.S. U.S. nationals and residents remain subject to the FCPA regardless of where they are employed or with whom they are working. Such employees associated with non-U.S. companies – either through temporary assignment, by serving on the boards of directors of such non-U.S. companies, or otherwise – remain individually subject to the FCPA even if the non-U.S. companies are not. In such circumstances, there is a risk that the individual employee, or the U.S. parent company, may be held accountable for actions taken by the non-U.S. company.
- Penalties and Enforcement
The FCPA has both criminal and civil aspects, and is aggressively enforced by the U.S. Department of Justice and the Securities and Exchange Commission. Representatives of those agencies advise that they investigate allegations that come to their attention through a variety of sources. A company can suffer serious consequences even if it is not convicted and the statutory penalties are not brought into play – mere indictment under the FCPA may trigger significant sanctions. Also, FCPA prosecutions often include charges of other criminal violations, such as mail and wire fraud and conspiracy, and may lead to civil claims against the company. FCPA violations, moreover, can trigger investigations by non-U.S. governments, with the risk of both penalties under local laws and loss of good will.
The FCPA provides for harsh criminal and civil penalties. Statutory criminal penalties for individuals vary according to the offense, but may include fines up to $1,000,000 per violation or imprisonment up to 10 years, or both. Individual officers, directors, and employees of companies may be prosecuted even if the company for which they work is not. Fines assessed against individuals may not be reimbursed by the company. Companies may be fined up to $2,500,000 per violation. Under alternative sentencing provisions, those penalties can be increased significantly.
The FCPA also allows a civil action by the U.S. government for a penalty of up to $10,000 against a company, or against any officer, director, employee, or agent of a company who violates the anti-bribery provisions of the FCPA.
- Elements of an FCPA Bribery Violation
The FCPA prohibits every U.S. company and its employees and representatives from giving, paying, promising, offering, or authorizing the payment of anything of value to any foreign official, or to any other person while knowing it would be offered, promised, or given to a foreign official, to persuade that official to help the company, or any other person, obtain or retain business, or obtain an improper advantage.
The FCPA bars such payments even if:
- The benefit is for someone other than the person making the payment;
- The business sought is not with the government;
- The payment does not actually result in business being awarded or an advantage being obtained; or
- The foreign official initially suggests the payment.
- Payments to Non-U.S. or Foreign Officials
As mentioned, the term “foreign official” under the FCPA is broadly defined. It means any officer or employee of a non-U.S. government or of any department, agency, or instrumentality thereof, or of a designated public international organization, or any person acting in an official capacity for or on behalf of any such government or department, agency, or instrumentality, or for or on behalf of any such public international organization. Public international organizations, for purposes of the FCPA, are designated from time to time by Executive Order of the President of the United States. The current list includes the United Nations, the World Bank, the International Monetary Fund, the International Red Cross, the World Trade Organization, and many other organizations. Foreign or non-U.S. officials include employees and representatives of non-U.S. government departments or agencies, whether in the executive, legislative, or judicial branch of a government, and whether at the national, state, or local level. Non-U.S. officials also include officers and employees of companies under non-U.S. government ownership or control, such as national oil companies. The basic FCPA prohibitions also apply to any non-U.S. political party or official thereof and any candidate for non-U.S. political office. While technically those persons and entities are not within the FCPA definition of foreign official, references to “non-U.S. official” in this Summary will include non-U.S. political parties, their officials, and candidates for non-U.S. political office, in the interest of brevity and convenience. In some instances, non-U.S. officials are not treated as government officials by their own governments, and they expect to be treated like any other private business person. For purposes of the FCPA, however, it is legally irrelevant whether a person is considered a government official by the government at issue. The U.S. law definition controls.
- Payments to Government Entities
The FCPA prohibits improper payments to individual non-U.S. officials. Good-faith payments to a government entity, such as payments to the host country’s federal treasury required by contract or law, are not prohibited, so long as they are made with due care to the government entity and not to any individual official.
- Anything of Value
The law prohibits offering, promising, or giving anything of value to a non-U.S. official to get or keep business or secure an improper advantage. Thus, the prohibition is not limited to cash payments. Anything of value may include:
- Business activities; or
- Covering or reimbursing expenses of officials.
In addition, less obvious items provided to non-U.S. officials can violate the FCPA. For example, in-kind contributions, investment opportunities, subcontracts, stock options, positions in joint ventures, favorable contracts for relatives, scholarships for children, and similar items provided to non-U.S. officials are all things of value that can violate the FCPA.
- Payments to Non-U.S. Officials
The FCPA does not expressly prohibit doing business with individual non-U.S. officials or their private business interests, and such business may be legally acceptable so long as the business is arms-length, transparent, and based on fair market value. However, this is an area that presents risk under the FCPA, and great care should be taken before entering into business with a non-U.S. official or a company in which a non-U.S. official has an interest. For example, granting a contract on highly favorable terms to a company in which a non-U.S. official holds significant financial or other beneficial interest could be viewed as a payment prohibited by the FCPA. Therefore it is always wise to analyze any prospective business relationship with a government official carefully in advance to determine that it is in compliance with the FCPA and local law and that this can be demonstrated. Doing business with an official or a related person or company includes the full range of business activities, such as entering into a contract or joint venture, hiring as an employee, consultant or representative, awarding a contract or subcontract for goods or services, making in-kind contributions, granting investment opportunities, or simply paying a fee for services. In each instance, something of value is being provided.
- Payment to Non- US Government Entities
The FCPA permits doing business with non-U.S. governments, departments, agencies, and government-owned or government-controlled companies. Indeed, the company’s business requires entering into contracts with host governments and having frequent direct dealings with government entities and officials acting in their official capacities. Those dealings may be in the form of sales to government-owned companies, joint ventures with government-owned or government-controlled companies, and other relationships.
- Travel and Lodging
The FCPA does not prohibit aggressive, creative marketing activities. In fact, the FCPA expressly allows a company to pay the reasonable and legitimate expenses of a non-U.S. official, such as transportation, lodging, and meals, so long as the purpose of the trip is for:
- The promotion, demonstration, or explanation of products or services; or
- The execution or performance of a contract with the host government.
This defense under the FCPA is very specific. A general “business purpose” for a trip or an event may not be sufficient to justify payment of expenses on behalf of a government official for purposes of the FCPA.
- Gifts, Meals, and Entertainment
Under certain circumstances, customary gifts made to non-U.S. officials and reasonable expenses for meals and entertainment for non-U.S. officials are permitted under the FCPA. For example, customary gifts at holidays, logo gifts, and routine business meals and entertainment often are permissible. Good judgment must be exercised in each case, taking into account pertinent circumstances, including the character of the gift, meal or entertainment; its purpose; its appearance; the positions of the persons involved; the business context; reciprocity; and applicable laws and social norms.
- Non- US Political Party and Candidate Contributions
Contributions, whether cash or in-kind, to political parties, party officials, and candidates are prohibited by the FCPA to the same extent as payments to government officials. Please refer to the Political Activities Policy for further guidance on the company’s policy with regard to political contributions.
- Facilitating Payments
In some circumstances, a payment to a non-U.S. official may qualify under a narrow FCPA exception for payments made to secure routine governmental actions. Such facilitating payments include, for example, payments made to expedite or facilitate:
- Obtaining routine, nondiscretionary business permits;
- Processing nondiscretionary governmental papers such as visas;
- Obtaining police protection or mail service;
- Obtaining inspections associated with contract performance or the shipment of goods;
- Obtaining telephone, power, or water service;
- Loading and unloading cargo; or
- Similar activities that are ordinarily and commonly performed by an official.
In summary, an employee may make a facilitating payment if it is properly authorized under the company’s Ethics Policy and meets all of the following conditions:
- Does not violate U.S. law, as interpreted and administered;
- Is made to expedite or secure routine government action to which the company is legally entitled;
- Is lawful under applicable foreign law, as locally interpreted and administered;
- Is customary in the country where the payment is made;
- Is small; and
- Is properly booked.
Compliance with the FCPA must be undertaken on a case-by-case basis and often raises difficult issues.