September 10th, 2013

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By Greg Wolski and Virginia Adams

Greg Wolski

Virginia Adams

In a prior post, we discussed the importance of pre-acquisition due diligence and post-acquisition integration as an integral part of an effective compliance program. Our point of reference was the November 2012 joint U.S. Department of Justice and Securities and Exchange Commission Resource Guide to the U.S. Foreign Corrupt Practices Act.

Over the years, when performing anti-corruption due diligence on deals, we have uncovered and raised a number of issues that have become deal breakers for would-be investors and buyers.

Other risks have not stopped deals, but they have raised the buyers’ awareness of the potential red flags requiring their attention immediately post close. Throughout these deals, we have seen certain themes emerge, including the following 10 ten red flags to be mindful of when making an investment or acquisition abroad:

1. History of corruption in country or industry
2. Inadequate third-party selection or control
3. Ties to government officials
4. Use of shell companies
5. Cash payments
6. Invoicing discrepancies
7. Excessive gifts, travel, entertainment and contributions
8. Payments or promises to pay government officials
9. Extensive use of agents
10. No anti-bribery certification

The mere location of a company’s operations or business dealings, for example, can have an impact on the potential corruption risk there. For example, “BRIC” countries – Brazil, Russia, India, and China – are large emerging markets that historically have an increased level of perceived corruption.

 Read more.

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August 21st, 2013

By Greg Wolski and Virginia Adams

Greg Wolski

Our prior post addressed a trend emerging in Foreign Corrupt Practices Act settlement agreements with the U.S. Department of Justice during 2012, wherein the government laid out certain requirements for violators related to establishing effective anti-corruption compliance programs focused on conducting anti-corruption due diligence on potential acquisitions.

When the Criminal Division of the DOJ and the Enforcement Division of the Securities and Exchange Commission issued the Resource Guide to the U.S. Foreign Corrupt Practices Act (the Guide) in November 2012, the importance of considering anti-bribery and anti-corruption (ABAC) risks in merger and acquisition transactions was reinforced.

As was expected, the Guide did not provide any specific new guidance on performing pre-acquisition ABAC due diligence, but did underscore the expectation that such procedures should be conducted on deals, potentially affecting the decision not to prosecute a successor company for a pre-acquisition violation. Based on our observations since the Guide’s issuance, there appears to be a higher level of awareness on the importance of conducting ABAC diligence, particularly at a time when companies are nearing a turning point in deal making.

The most recent EY US Capital Confidence Barometer indicates that investment destinations continue to evolve as companies weigh risk tolerances with growth potential. The top country investment destinations by U.S. and global respondents to the survey are predominately in emerging markets, including China, India, Brazil and Mexico.

The survey indicates that, while companies remain optimistic about deals in emerging markets, almost 70% of U.S. respondents have changed their approach to investing in such markets. (See individual country and sector surveys here.)

In fact, 41% of the respondents say they remain optimistic about emerging markets, but will “apply further rigor” prior to making investments there. The ongoing investment in emerging markets reinforces the fact that companies should be mindful of the need to conduct ABAC pre-acquisition diligence and post-close compliance efforts to stay ahead of potential bribery and corruption problems farther down the road.

Future posts will discuss other elements of effective compliance as highlighted in the Guide, as well as red flags to be mindful of when performing anti-corruption due diligence.

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November 1st, 2012

Jacoby: Hi. This is Mary Jacoby. I’m the editor in chief of Main Justice and we’re conducting a podcast today on the issue of litigation holds.

Adam Cohen is a leader of the information management and E-Discovery readiness practice within Ernst and Young LLP’s Forensic Technology and Discovery Services group. Adam is also a former litigation partner at a major international law firm and the author of the major legal treatise on E-Discovery, “Electronic Discovery Law and Practice.”

Adam, thanks for being with us today. Litigation holds — what do you want to tell us about that first? And then we’ll go through seven steps you say every company needs to take into account.

Adam Cohen

Cohen:  Well, let’s be clear what we mean by a litigation hold. We’re talking about what needs to be done to implement compliance with a duty to preserve, which arises any time you reasonably anticipate or have pending a litigation, investigation or any other kind of legal process. And a litigation hold really refers to something much broader than a legal hold notice that we’re talking about and really refers to this entire process that we’re going to describe.

Jacoby: All right, the first step: systems overview.

Cohen: It’s impossible to do any of this correctly — any of electronic discovery, certainly any preservation — without having thorough knowledge of the sources of electronic information that you’re trying to preserve or collect or handle at any point in the process. What we typically recommend is that clients, certainly multinational companies with complex information systems, document the information about those systems and those sources of information that are relevant to electronic discovery. Surprisingly, or not surprisingly, most organizations do not have such documentation in any centralized way. Documentation about systems tends to be spread out with different IT administrators and therefore it’s difficult for legal personnel who are charged with implementing a preservation duty to identify the sources that they need to address in accomplishing preservation.

Jacoby:  Okay, so the second step is the employee policy.  Read more.

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October 10th, 2012

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By Adam Cohen

In my last blog entry, I discussed the critical need for business organizations to establish documented policies governing social media use by employees. Today I’d like to focus on one of the most important issue that such policies should address and identify some different approaches that companies take.

Adam Cohen

There is an old saying that “on the Internet, no one knows you are a dog.” This expresses the fact that anonymity in the eyes of other users is relatively easy to achieve, by omitting any self-identifying information or by affirmatively providing misleading information. When employees post social media content, whether through prior authorization by management or not, perception as to whether that content represents the views of the company is obviously something the company will want to control to the furthest possible extent.

The threshold gate-keeping issue in terms of compliance is whether the policy permits employees to post content without prior authorization from management. The policy should clarify that any restrictions on employee use of social media only apply to uses that may implicate the company, even though in practice identifying the range of such situations can be challenging. Businesses with substantial resources are likely to have dedicated resources, perhaps within their marketing or PR functions, tasked with implementing corporate social media strategy. Where this is the case, the members of the corporate social media group should be the first arbiters of what content is acceptable, of course subject to compliance and legal review.  Read more.

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October 1st, 2012

Click here to subscribe to an e-mail digest of The Forensic Brief blog.

By Adam Cohen

One of the hottest topics in electronic discovery is social media. This new source of potential evidence has already been the subject of several cases and is pointing out the necessity for corporate defendants to both investigate plaintiffs’ postings as well as control risk by establishing policies that control employee behavior on social media.

In some ways, social media is a godsend to defendants. Most of the cases where social media has featured prominently involve plaintiffs’ claims being blown out of the water by self-contradictory statements or pictures posted on Facebook or other social media outlets. These cases demonstrate that many lawyers are still not savvy enough to look into their clients’ social media activity before making claims belied by that activity, to say nothing of considering preservation requirements including social media.  Read more.

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