Foreign Corrupt Practices Act Enforcement P A U

Foreign Corrupt Practices Act Enforcement P A U L, W E I S S, R I F K I N D, W H A R T O N & G A R R I S O N LLP Avoiding Corruption in International Mining Projects: Risk Management and Compliance Strategies A Presentation For Mine. Africa's 9 th Annual Investing In African Mining Seminar Mark F. Mendelsohn March 8, 2011 1

Foreign Corrupt Practices Act Enforcement P A U L, W E I S S, R I F K I N D, W H A R T O N & G A R R I S O N Combating Corruption Is A Growing Priority • LLP We know that countries are more likely to prosper when governments are accountable to their people. So we are leading a global effort to combat corruption—which in many places is the single greatest barrier to prosperity, and which is a profound violation of human rights. That’s why we now require oil, gas and mining companies that raise capital in the United States to disclose all payments they make to foreign governments. And it’s why I urged the G-20 to put corruption on its agenda and make it harder for corrupt officials to steal from their people and stifle their development. — Remarks of President Barack Obama, September 22, 2010, Millennium Development Goals Summit, U. N. Headquarters, New York 2

Foreign Corrupt Practices Act Enforcement P A U L, W E I S S, R I F K I N D, W H A R T O N & G A R R I S O N • • • 3 First 20 Years: 1977 to 1997 – – History of the FCPA LLP Law created after Watergate scandal 17 companies and 33 individuals named in FCPA enforcement actions Little foreign bribery legislation or enforcement outside the United States UN and World Bank decline to address corruption Next 10 Years: 1998 to 2008 – – – OECD Convention implemented and tax deductibility of bribes eliminated – 50 companies and 70 individuals named in FCPA enforcement actions 1998 FCPA amendments expand its jurisdictional reach Increased financial improprieties lead to increased oversight of corporate conduct (e. g. Sarbanes Oxley) Current FCPA Enforcement – – Enforcement has surged – In 2009 and 2010 alone, 41 companies and 75 individuals named as defendants in FCPA enforcement actions Historic increases in monetary penalties in 2009 and 2010 Industry-wide sweeps Increase in multi-jurisdictional investigations and prosecutions with closer coordination between prosecutors

Foreign Corrupt Practices Act Enforcement P A U L, W E I S S, R I F K I N D, W H A R T O N & G A R R I S O N • An overview of the FCPA: Two Parts – Key FCPA Concepts – • Anti-Bribery Provisions – Prohibits corrupt offers or payments to foreign government officials to assist in obtaining or retaining business Accounting Provisions – Requires (1) accurate books and records; and (2) appropriate accounting and controls systems Long jurisdictional reach of the FCPA – Anti-Bribery Provisions apply to: • • • – – – • (1) US persons (individuals and companies) wherever they are; (2) anyone in the territory of the US; and (3) non-US companies with stock listed on US exchanges (includes those that issue certain American Depository Receipts) Issuers, US companies (including subs of foreign companies) and individuals are liable if they take improper actions using the US mails, wires or other means of interstate commerce (e. g. telephone calls, emails, wire transfers) Foreign companies are liable of they take improper action while within the territory of the US US government has asserted broad jurisdiction over foreign companies and individuals, including bringing charges for "conspiring to violate" or "aiding and abetting violations" of the FCPA Important concepts broadly defined – – – 4 LLP "Money or anything of value" – includes cash; gifts, hospitality and entertainment; travel; scholarship or admission to university; jobs; interest in a business; dividends "Foreign official" – covers officers or employees of a foreign government, including government-owned or controlled organizations (SOEs like national oil companies; state-run hospitals); officers or employees of a public international organization; police and military officials; customs and border officials; advisor to a government; political party or candidate for office "Obtain or retain business" – includes sale of goods; grant or renewal of a contract/concession; regulatory approval; reduction in taxes; avoiding customs duties Indirect payments also prohibited – corrupt payments through a third party, such as a sales representative, consultant, joitn venture partner, or lawyer are prohibited if authorized, directed or had knowledge "Knowledge" defined to include that a person believes conduct is highly probable or substantially certain to occur; imputed knowledge of facts purposely avoided ("conscious disregard")

Foreign Corrupt Practices Act Enforcement P A U L, W E I S S, R I F K I N D, W H A R T O N & G A R R I S O N • International Framework OECD Convention – Came into force in February 1999, focusing strictly on supply-side official corruption – Signed by 34 OECD member countries and 4 non-member countries – Requires national implementing legislation, including a foreign bribery offense; corporate liability; effective, proportionate and dissuasive sanctions – Gold standard peer review mechanism – In June 2010, the OECD released for the first time data on foreign bribery enforcement efforts by the 38 Parties to the Convention. – • 5 LLP • 148 individuals and 77 entities have been criminally sanctioned foreign bribery in 13 Parties between the time the Convention entered into force in 1999 and the end of 2009. Of these 13 Parties, 7 have sanctioned both companies and individuals. • At least 40 of the sanctioned individuals were sentenced to prison foreign bribery. • Combined fines of up to EUR 1. 24 billion have been imposed on companies foreign bribery. • Approximately 280 investigations are ongoing in 21 Parties to the Anti-Bribery Convention, with no activity in the other 17. OECD Good Practice Guidance establishes global anti-corruption compliance standards. UN Convention Against Corruption – First global, comprehensive anti-corruption treaty – 140 signatories as of March 1, 2011 – Addresses demand supply side corruption; international and domestic corruption; asset seizure, forfeiture and repatriation; technical assistance – Peer review mechanism under development

Foreign Corrupt Practices Act Enforcement P A U L, W E I S S, R I F K I N D, W H A R T O N & G A R R I S O N • Canada LLP Corruption of Foreign Public Officials Act (CFPOA) – Canada ratified the OECD Convention and adopted national implementing legislation effective February 1999. – CFPOA modeled very closely on the US FCPA – Key differences: • CFPOA has no accounting provisions or civil enforcement or sanctions • CFPOA has narrower jurisdiction, requiring "real and substantial link" to Canada • CFPOA has no nationality jurisdiction, resulting in OECD criticism for failure to implement the Convention in this respect • CFPOA does have a "facilitation payments" exception, like the FCPA – RCMP has established special units in Calgary and Ottawa to investigate overseas corruption – One corporation and, in July 2010, one individual charged under the CFPOA. – A major, listed Canadian oil and gas exploration and production company is reportedly under investigation – International peer pressure on Canada to improve its enforcement record is likely. 6

Foreign Corrupt Practices Act Enforcement P A U L, W E I S S, R I F K I N D, W H A R T O N & G A R R I S O N • United Kingdom & The Bribery Act LLP The United Kingdom: A new legislative and institutional framework is coming. – The UK Bribery Act of 2010 • Expected to come into force three months after guidance is finalized – probably by end of 2011. • Active and passive bribery offenses covering public official and private sector bribery. • New offense of foreign official bribery. • • – No facilitation payments exception; prosecutorial discretion – No safe harbor or provision for promotional and marketing expenses, although this is likely to be addressed in guidance. New strict liability corporate offense of failure to prevent foreign official bribery. – Affirmative defense of “adequate procedures; ” draft guidelines suggest that standards will be in line with USSG and OECD Good Practice Guidance – Affirmative defense is not available where senior management is involved in the crime. Jurisdictional reach: covers commercial organizations which "carry on a business, or any part of a business, in any part of the United Kingdom" – Prosecution of cases 7 • A new, unified economic crime agency may be formed, merging parts of the Financial Services Authority (FSA), the Serious Fraud Office (SFO), and the Office of Fair Trading. • • Unclear whether the new agency will have enhanced powers. In the meantime, the SFO is prosecuting & settling cases under the old laws.

Foreign Corrupt Practices Act Enforcement P A U L, W E I S S, R I F K I N D, W H A R T O N & G A R R I S O N Dodd-Frank Act: Disclosure of Payments by Resource Extraction Issuers • LLP Proposed rules under the Dodd-Frank Act require extraction issuers to include in their annual reports disclosure of payments by the issuer, a subsidiary or other controlled entity to a non-U. S. government or the U. S. federal government for the purpose of the commercial development of oil, natural gas or minerals. – Covered payments include production entitlements; corporate taxes on income, profits and production; royalties; bonuses; license and concession fees; etc. – Disclosure obligation has no exception for local law restrictions or contractual confidentiality obligations. – Rules prescribe specific format and content of disclosure. – Disclosure will be “furnished” rather than “filed, ” resulting in no liability for material misstatements or omissions – Final rules to be adopted by April 15, 2011, with first annual disclosures likely due in annual reports for FY ending on or after April 15, 2012. 8

Foreign Corrupt Practices Act (FCPA): Current Anti-corruption Enforcement Compliance Best Practices P A U L, W E I S S, R I F K I N D, W H A R T O N & G A R R I S O N Mining Sector Corruption Risks LLP 1. Mineral resources are often in markets suffering from weak rule of law and high levels of corruption: Congo, Sierra Leone, Afghanistan, Mongola, Papua New Guinea, etc. 2. Common use of finders, commissioned agents, local partners, and other third parties in the acquisition of mining rights and concessions 3. Importance of relationships with and support of local and tribal communities and leaders 4. Heavy dependence on local police and military for security and protection 5. Prevalence of joint venture and other teaming and coinvestment relationships 6. Mergers and acquisitions are a regular feature of the industry

Foreign Corrupt Practices Act (FCPA): Current Anti-corruption Enforcement Compliance Best Practices P A U L, W E I S S, R I F K I N D, W H A R T O N & G A R R I S O N Mining Sector Corruption Risks LLP 7. Use of cash and lack of sophisticated banking system in certain countries of operation 8. Need for approvals, permits, water, power and labor result in frequent interactions with government bureacracies 9. Must deal with tax, finance and mining authorities 10. Customs issues with the importation of equipment, tools and personnel and the export of minerals 11. Intersection of the mining sector and national security and state secrets issues

Corrupt Practices Act on the Executive Suite and Foreign Corrupt. Foreign Practices Act (FCPA): Focus Enforcement the General Counsel P A U L, W E I S S, R I F K I N D, W H A R T O N & G A R R I S O N Compliance as the Best Defense LLP There will always be rogue employees who decide to take matters into their own hands. They are a fact of life. But when the right tone is set at the top – in the executive suite and in the general counsel’s office – you significantly reduce the risk of criminal conduct. And your jobs become easier. We are not interested in prosecuting corporations or executives or lawyers who are working hard to do the right thing. We are not interested in making cases for their own sake. We bring cases only when the facts and the law convince us that we can prove guilt beyond a reasonable doubt. Indeed, just as we will not shy away from bringing any case when the circumstances warrant, we also aim to reward responsible corporations – corporations that maintain strong compliance programs and remedy and disclose wrongdoing when they discover it. Assistant Attorney General Lanny A. Breuer of the Criminal Division. Speaks at the Annual Meeting of the Washington Metropolitan Area Corporate Counsel Association Mc. Lean, VA ~ Wednesday, January 26, 2011

Foreign Corrupt Practices Act (FCPA): Current Anti-corruption Enforcement Compliance Best Practices P A U L, W E I S S, R I F K I N D, W H A R T O N & G A R R I S O N LLP 1. Written, corporate anti-corruption policy Anti-Corruption Compliance Standards 2. Strong, visible senior management commitment to anticorruption policy 3. Well-designed compliance standards and procedures, applicable to all directors, officers and employees, and extended to third-parties and business partners, which address: – Gifts – Charitable donations and sponsorships – Hospitality, entertainment and expenses – Facilitation payments – Customer travel – Solicitation and extortion – Political contributions

Foreign Corrupt Practices Act (FCPA): Current Anti-corruption Enforcement Compliance Best Practices (continued) P A U L, W E I S S, R I F K I N D, W H A R T O N & G A R R I S O N Anti-Corruption Compliance Standards LLP 4. Tailor compliance policy, standards and procedures based on assessment of risks facing your company 5. Review anti-corruption compliance policy, standards and procedures no less than annually and update 6. Assign responsibility for implementation and oversight of anti-corruption compliance system to a senior corporate executive, with sufficient resources, independence and authority, and with a direct report to independent monitoring bodies, e. g. the Board of Directors, an appropriate committee of the Board, and internal audit 7. Maintain a system of financial and accounting procedures and internal controls reasonably designed to ensure accurate recordkeeping and to prevent corporate assets, records and accounts from being used to carry out or conceal foreign bribery

Foreign Corrupt Practices Act (FCPA): Current Anti-corruption Enforcement Compliance Best Practices (continued) P A U L, W E I S S, R I F K I N D, W H A R T O N & G A R R I S O N Anti-Corruption Compliance Standards LLP 8. Effectively communicate anti-corruption compliance policy, standards and procedures, including: – Periodic training for directors, officers, employees, agents and business partners – Annual training and compliance certifications for directors, officers, employees, agents and business partners 9. Maintain compliance advice, hotline, and whistleblower mechanisms which: ‐ are readily available on an urgent basis and throughout global operations ‐ provide for confidential reporting by and protection for whistleblowers, both internal and external ‐ respond promptly to complaints and undertake appropriate action

Foreign Corrupt Practices Act (FCPA): Current Anti-corruption Enforcement Compliance Best Practices (continued) P A U L, W E I S S, R I F K I N D, W H A R T O N & G A R R I S O N LLP 10. Maintain remediation policies and procedures which: Anti-Corruption Compliance Standards ‐ discipline those who violate anti-corruption laws and policies ‐ address the harm resulting from violations ‐ take steps to prevent further, similar misconduct 11. Institute due diligence and compliance requirements pertaining to agents and business partners including: ‐ conduct risk-based due diligence ‐ exercise oversight of agents and business partners ‐ inform agents and business partners of your commitment to integrity and anti-corruption compliance policy and procedures ‐ obtain a reciprocal commitment from your agents and business partners

Foreign Corrupt Practices Act (FCPA): Current Anti-corruption Enforcement Compliance Best Practices (continued) P A U L, W E I S S, R I F K I N D, W H A R T O N & G A R R I S O N Anti-Corruption Compliance Standards LLP 12. Include the following contractual provisions in agreements with agents and business partners: ‐ anti-corruption representations and warranties ‐ audit rights ‐ termination rights upon violation of law or representations and warranties 13. Periodic review and testing of anti-corruption compliance policy and procedures ‐ corruption audits 14. Conduct anti-corruption diligence in connection with mergers, acquisitions and investments