July 15, 2011 / 4:37 PM / in 7 years

UK anti-corruption drive has US companies sweating

* Big focus on beefing up internal compliance

* Britain expected to pursue several high-profile cases

* Even insurers see opportunities in anti-corruption area

* Defense contractors, pharmaceutical firms seem vulnerable

By Andrea Shalal-Esa

WASHINGTON, July 15 (Reuters) - U.S. companies, already sweating under heightened enforcement of anti-corruption laws at home, are nervously reviewing their policies on how they wine and dine business contacts abroad in the wake of tough new regulations imposed in Britain.

The new law, which took effect July 1, bans all so-called facilitating payments and does not expressly allow entertainment of government officials and others.

The jury is still out on how rigorously British authorities will choose to enforce the law. Companies in the defense, pharmaceuticals, energy and telecommunications sectors are seen as particularly vulnerable.

At the same time, U.S. companies are grappling with tighter rules at home too. New whistleblower rules approved by the U.S. Securities and Exchange Commission have also spurred companies to scrutinize their existing compliance programs, according to legal experts in the United States and Washington.

“We have definitely seen an uptick in our business in the anti-corruption and anti-bribery area,” said Ed Rubinoff, a Washington-based expert on export controls and foreign corruption with Akin Gump Strauss Hauer and Feld.

Just this week, U.S. lawmakers urged federal officials to investigate whether News Corp (NWSA.O) broke the U.S. law banning bribes to foreign officials. [ID:nL6E7I9069]

Akin Gump has added lawyers to handle the extra work, and now has 16 attorneys working on regulatory compliance in the United States, three in London and more in Abu Dhabi, Geneva and Beijing, Rubinoff told Reuters.

Lawyers at other big-name firms report similar trends, noting that the British law and the new SEC rules offering incentives to whistleblowers have galvanized some U.S. firms that had less-than-stellar compliance programs in the past.

Paul Huey-Burns, a partner with Bryan Cave, urged clients to review internal controls, rehearse how to respond to a possible whistleblower report, and establish an unequivocal “no retaliation” policy to avert problems.

Attorneys are reluctant to identify specific companies that are tightening their internal rules for fear of attracting unwanted attention from U.S. or international regulators, but say the issue has attracted a lot of attention by nearly all companies that do business overseas.

“There’s a lot going on,” said Sharie Brown, who chairs DLA Piper’s anti-bribery, anti-corruption and compliance group.

FEAR-MONGERING

Legal experts say U.S. companies are girding for the worst in Britain.

Senior British officials, however, are pushing back against what they call fear-mongering by compliance professionals and lawyers on this side of the Atlantic, and have told U.S. experts that they plan to focus on significant violations, not reasonable business entertainment for government officials.

    Chastened by years of criticism from U.S. officials, British authorities will likely be looking for some high-profile cases to demonstrate their commitment to increased enforcement, said Brown, a former U.S. federal prosecutor.

    Initial cases would likely piggyback on probes already in the U.S. Justice Department pipeline, and could involve firms in the defense, pharmaceutical, energy and telecommunications sectors, given their frequent use of third-party intermediaries and dealings with state-owned enterprises abroad, she said.

    The FBI last month told a meeting at SEC headquarters it was keeping a close eye on deals between global aerospace firms and state-owned airlines, possible violations involving the 2014 World Cup and 2016 Olympic Games in Brazil, and the reopening of South Sudan’s oil industry.

    OPTING OUT

    Insurers also see opportunities in the compliance arena. Marsh, a unit of Marsh and McLennan Companies Inc (MMC.N) and the world’s biggest insurance broker, this week launched a new insurance policy that covers companies and individuals for bribery-related investigations that can result in “significant legal, accounting, auditing, and consulting costs.”

    The UK law differs from the U.S. Foreign Corrupt Practices Act in several ways, casting a wider net for which foreign officials are covered, and imposing unlimited fines on companies that do business in Britain if they cannot prove they have adopted adequate measures to ban bribery. [ID:nL6E7HS2EZ]

    U.S. companies are urging British authorities to provide more detailed guidance on how they will interpret the new law, said Justin Williams, a partner with Akin Gump in London.

    Williams said the new law lets British authorities opt out of pursuing cases that could jeopardize the UK national interest, which means that despite the tough new law, Britain could still avert prosecutions in cases like the one involving BAE Systems Plc. (BAES.L)

    Britain’s Serious Fraud Office in 2006 halted an investigation into alleged bribes paid by BAE Systems in connection with a huge arms deal with Saudi Arabia amid fears that it would threaten UK national security. BAE later paid $400 million to settle related charges raised by the United States.

    “It’s by no means certain that a case like that would be brought under the new regime,” Williams said. “We’re going to have to see how the enforcement works.”

    BAE Systems carefully reviewed the new UK law, and concluded policies and procedures put in place after the Saudi arms deal would exceed the new requirements, Brian Roehrkaesse, a U.S.-based spokesman for the company, told Reuters. (Reporting by Andrea Shalal-Esa, editing by Matthew Lewis)

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