by Karen Boman Rigzone Staff Wednesday, December 26, 2012
Canadian oil and gas companies face exposure to bribery and corruption as they increase investment in emerging markets that include Brazil, India, Russia and China (BRIC) at a time when they face more stringent enforcement of anti-bribery regulations at home and worldwide.
Canadian oil, gas and extractive companies are facing increased pressure to ensure their operations at home in Canada and abroad from two sources, Toby Duthie, partner and head of global consulting firm Forensic Risk Alliance (FRA) UK, told Rigzone in a recent interview.
One source is the Organization for Economic Cooperation and Development (OECD), which has been critical of Canadian companies for their efforts to stamp out bribery and corruption within their operations. In fact, the OECD gave Canada a "fail" grade in the OECD Phase three report published in March 2011.
The other source is the Royal Canadian Mounted Police – the equivalent of the Department of Justice (DOJ) or the Federal Bureau of investigation in the United States – which is beginning to pursue bribery and corruption cases more aggressively than they have in the past since the OECD Phase three report was released.
The increase in investigations in Canada is being carried out under the Corruption of Foreign Public Officials Act (CFPOA), which became law in 1999. CFPOA was created by Canada in response to the OECD Convention which Canada and other OECD member states signed in 1997 to fight bribery of foreign public officials. Enforcement of the law increased in 2007, after Canada signed the United Nations Convention Against Corruption. The Royal Canadian Mounted Police also formed two special teams to focus on cases ofCanadian companies making illicit payments abroad, The Globe and Mail reported last month.
In 2011, Canadian oil and gas firm Niko Resources pled guilty to bribery charges under Canada's Corruption of Foreign Public Officials Act (CFPOA). The company was fined $9.5 million for bribing a Bangladeshi government official. The investigation into Niko marked the first major prosecution under the CFPOA by the Royal Canadian Mounted Police, The Global and Mail reported.
At the same time, Canadian oil and gas companies also must contend with the U.S.'s Foreign Corrupt Practices Act or the UK's recently enacted Bribery Act. The Swiss and German governments are also stepping up their enforcement of anti-bribery and anti-corruption laws. These efforts are being encouraged by the U.S. DOJ, said Duthie.
The Dodd-Frank Act passed earlier this year in the United States, which requires oil and gas and extractive industry companies to disclose all payments made to governments, also is part of the international initiative to increase transparency in financial dealings as a means of fighting corruption.
The increased investment by Canadian companies into BRIC countries and emerging markets in Southeast Asia and Sub-Sahara Africa, which are home to significant natural resources, also is driving Canadian companies to strengthen their compliance to mitigate the risk of business interruption and reputational damage arising from corruption events, said FRA COO Maggie Deacon in an Oct. 31 presentation in Vancouver, Canada, on anti-corruption for the mining sector.
New technology and oil prices are making projects economically viable in countries that have not traditionally been provinces for oil and gas operations. No oil industry existed in regions such as East Africa a decade ago, but the region's deepwater assets is drawing industry here, Duthie noted. But these opportunities in emerging markets, including BRIC countries, also open up companies to risk.
Fighting corruption in operations overseas can be cumbersome. And in some cases, such as with custom clearance agencies, companies are not bribing customs officials for profit but just as part of the everyday routine of doing business, Duthie said. But companies must address these issues in order to avoid exposure.
Canadian extractive companies that operate in BRIC countries are vulnerable to enforcement due to the higher corruption perception index in the markets in which they operate; exposure to inadvertent infringements of the law through joint venture partners, customs clearance through which bribery and corruption are rife, and use of agents in business dealings, according to the findings of a series of roundtable discussions in Canada on effective risk assessment due diligence and audits for mining companies operating in foreign jurisdictions.
The real cost of a bribery investigation is higher than actual penalties levied, including a drop in stock price and liability associated with class action suits, distraction from core business, loss of investor financing, resource costs and professional fees associated with responding to allegations, and negative publicity that results in a decrease in the company's brand value, according to the findings of recent roundtable discussions.
Additionally, agreements such as bilateral investment Treaties can become null and void as a result of bribery to secure contracts, leaving exposed companies with little recourse in the event that a concession is wrongfully taken away.
Oil majors and service companies, who often carry out projects through joint ventures, are increasingly worried they will be exposed to risk of prosecution due to vendors or joint venture parties, Duthie commented. FRA is seeing challenges for energy-related companies operating in Brazil and other BRIC countries, such as offshore drillers getting their drilling rigs through customers without paying bribes.
Russia offers a very challenging environment in terms of bribery and corruption not only in the public but the private sector, Duthie noted. But there is also a growing sense that if you want to pursue opportunities with multi-national companies, then a company needs to have an anti-bribery and anti-corruption program in place. Corruption also has been an issue in China, but protests by the middle class against corruption within the government have occurred in recent times.
However, Canadian companies are taking a more pro-active approach to addressing bribery issues, including an increased focus on managing third-party relationships through audits, Deacon said. Anti-bribery audits are used as part of a top-down and bottom-up approach in a balanced compliance program. Key business risk areas for corruption include the tendering process for project, vendors, mergers and acquisitions and joint ventures, taxes/customs, regulatory, financial controls and government support.
"From our hands-on experience we can reveal that companies who carry out an anti-bribery audit proactively, rather than in response to an inquiry from a regulatory authority, will win out because they can minimize their exposure to business costs and punitive fines," said Deacon in a statement.
When conducting an anti-bribery audit, companies should look at accounting areas, such as control over funds, payment procurement, accounting records, sales and marketing, cost accounting, receivables management, technology controls, and tendering and contracts, Deacon said.
"We have seen a clear trend that Canadian companies are waking up to the reality of their vulnerability when operating in emerging markets and that extractive sector companies are being proactive in the sense that they are taking action to minimize their exposure to risk now, rather than taking a 'wait and see' approach'," Deacon commented.
According to the OECD's March 2011 Phase three report on Canada's implementation and enforcement of the 1997 Convention – in which the OECD concluded that Canada's legislative and institutional framework remains problematic for enforcing anti-bribery laws -- Canadian mining companies had invested over $60 million in developing countries, including approximately $41 billion in Latin America and Mexico and nearly $15 billion in Africa. In 2008, 1,293 companies, or 75 percent of the world's exploration and mining companies, were headquartered in Canada.
However, Transparency International, in its September 2012 progress report, Exporting Corruption? Country Enforcement of the OECD Anti-Bribery Convention, that Canada has moved up to the moderate enforcement category, a positive change from the organization's 2011 progress report where no countries moved to a higher category. But the organization reported that the overall level of enforcement remains inadequate, with only seven countries having attained Active Enforcement status. This number has not changed since 2009.
"Governments need to integrate anti-corruption actions into all aspects of decision making," according to Transparency International's website. "They must prioritize better rules on lobbying and political financial, make public spending and contracting more transparent, and make public bodies more accountable."
The group noted that corruption destroys lives and communities and undermines companies and institutions. "It generates popular anger that threatens to further destabilize societies and exacerbate violent conflicts," Transparency International noted.
In the United States, measures that require more transparency in money paid to foreign governments for projects have not been well received by some in the oil and gas industry. The American Petroleum Institute filed suit against the U.S. Securities and Exchange Commission over the Dodd-Frank Act, Dow Jones Newswires reported in October. API argued that the measure would hurt the competitiveness of the oil and gas industry overseas.
In Duthie's views, however, legislation such as the Dodd-Frank Act in the United States that are driving transparency as a means of fighting corruption will be the new world order. While Duthie sympathizes with oil and gas companies' argument that too much transparency can hurt their business, the industry would be better off collaborating and lobbying for clarity, noting that it will become harder for those companies and countries who are resisting Dodd-Frank and the Extractive industries Transparency Initiative.
A Polícia Federal (PF) de 
Estadão 18/01/2012
NEW ORLEANS - Former New Orleans Mayor Ray Nagin was indicted Friday on charges that he used his office for personal gain, accepting payoffs, free trips and gratuities from contractors while the city was struggling to recover from the devastation of Hurricane Katrina. 
Ex-controladores Luis Felippe e Luis Octávio estão entre os indiciados.
