Overview of the Foreign Corrupt Practices Act and Related Corporate Procedures (A312, A312A and A301)

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Overview of the Foreign Corrupt Practices Act and
Related Corporate Procedures (A312, A312A and
A301)
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Northrop Grumman has had a long-standing
commitment to the letter and spirit of the U.S.
Foreign Corrupt Practices Act (FCPA). All
employees must be well-informed regarding the
FCPA and various international anti-bribery laws
that have been enacted since the FCPA was
introduced in the U.S. Completion of this module
should enable you to identify issues that require
the attention of the Law Department.
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Risk of Prosecution or Investigation
Reducing bribery and increasing transparency has
become an important topic in the international
community and has moved to the top of the global
and political agenda. The number of
investigations and prosecutions is increasing and
the likelihood of being brought before a foreign
court for violations of international
anti-bribery laws has increased
dramatically. Ronald D. Sugar, Chairman and CEO
of Northrop Grumman has stated that FCPA
compliance is a top priority for the company and
that the consequences of non-compliance would
represent a huge and unacceptable risk.
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What is the FCPA?

• U.S. law passed in 1977 to prohibit bribery of
  foreign officials
• Two main components
• (1) Anti-bribery Provisions prohibits bribes
  (or offers to bribe) made to foreign officials,
  political parties, candidates for public office
  whether made directly or through a third party
• (2) Accounting Provisions requires accurate
  books and records and adequate accounting and
  financial controls
• Violations can result in both criminal and civil
  penalties including imprisonment, fines, loss of
  export licenses and suspension from competing on
  government contracts

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Who does the FCPA apply to?

• Any U.S. person or company, as well as any
  officer, director, employee or agent of the
  company and any stockholder acting on behalf of
  the company
• All foreign persons who commit an act in
  furtherance of a foreign bribe while in the U.S.
• Employees of foreign subsidiaries of U.S.
  companies can be liable for acts committed while
  in the United States
• Also, foreign subsidiaries can cause liability
  for U.S. parent for acts outside of the U.S.

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Corporate Procedure A312, Foreign Corrupt
Practices Act

• Provides a general description of the FCPA,
  defines responsibilities and guidelines for
  identifying potential compliance issues
• All employees are responsible for compliance and
  must notify the Law Department of any potential
  or actual violation
• In addition to criminal and civil penalties under
  the FCPA, violations of A312 can lead to
  termination of employment

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Corporate Procedure A312A, Business Expenditures
for Foreign Officials

• All business courtesies (gifts, travel or
  hospitalities) provided to a foreign official
  must adhere to the guidelines and requirements in
  A312A. Requests for such courtesies must be
  submitted to the International Legal Group of the
  Law Department for pre-approval using Form C-591
  (Request for International Legal Group Approval
  of Business Expenditures for Foreign
  Official(s)).
• The Law Department will review the proposed
  courtesy for compliance with the FCPA and the
  relevant local law.

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Corporate Procedure A301, Consultants,
Representatives, and Lobbyists
Companies like Northrop Grumman can be held
liable under the FCPA and similar international
anti-bribery laws for the acts of third parties,
including commercial intermediaries and other
agent representatives and joint venture partners.
To mitigate this risk, any company element
intending to utilize the services of a third
party must conduct a thorough due diligence to
identify any red flags that may indicate a
potential violation of the FCPA.
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Corporate Procedure A301 continued

• Examples of red flags
• Requests for unusually large or up-front
  commissions
• Refusal to sign FCPA certification
• Requests for payment in a third country
• Refusal to disclose owners, partners or
  principals
• Use of shell companies, holding companies or
  blind trusts

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Corporate Procedure A301 - continued

• Corporate Procedure A301 provides the
  requirements for engaging third parties to
  represent the company or provide advice or
  lobbying services.
• No commissioned sales representative or
  consultant may be tasked or retained without the
  review and approval of the Law Department!
• The Law Department reviews the ownership,
  financial viability, government relations, and
  reputation of the proposed agent or consultant,
  as well as local law requirements, if any.

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Where to Get More Information

• Employees with specific questions about this
  module or Corporate Procedure A312, A312A or A301
  should contact the Law Department. For more
  information on the topics discussed in this
  module please contact
• James Gormley (1-410-765-3124)
• David Morris (1-410-765-0097)
• Jannette Hasan (1-410-765-6654)
• Employees who wish to discuss a matter
  confidentially should contact either the Law
  Department or the Ethics OpenLine at
  1-800-247-4952.

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Test Yourself

• Click the link below to take the required on-line
  training and test
• 2006 FCPA Training