CHAPTER 14 COMPLIANCE PROGRAMS AND ETHICS ISSUES

• Jurisdiction: United States

Mining Agreements: Contracting for Goods & Services
(Sep 2015)
CHAPTER 14
COMPLIANCE PROGRAMS AND ETHICS ISSUES
Diego Venegas
Director Ethics and Compliance
Goldcorp Inc.
Vancouver

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DIEGO VENEGAS is the founder and Director of Goldcorp's Ethics and Compliance function and a Board Member and Treasurer of Transparency International Canada. Goldcorp is the largest gold mining company in the world by market cap and has operations and development projects throughout the Americas. For the vast majority of his career, Mr. Venegas has been focused in strengthening organizational control environments, first focusing in financial reporting and process-level controls and then placing significant emphasis in entity, governance and cultural-level controls. He notes that: "Process-level controls are very important, they help define the rules to conduct business on a day-today basis. However, people don't have any personal connection with these controls, and in almost all cases, these can be by-passed through collusion. That's when I realized I needed to place a lot more attention in the organization's entity, governance and cultural-level controls. These cultural-level controls have a much closer and personal connection with our employees; and therefore, by-passing these would be as cheating against one-self. The better job we do in synchronizing our ethics principles and values as an organization with the personal values and beliefs of our employees, the stronger our control environment will be." Since the creation of the Ethics and Compliance function at Goldcorp, significant progress has been achieved in fields such as anti-bribery and anti-corruption compliance, third party risk management, and ethical leadership and awareness. Over the past 12 years Mr. Venegas has traveled extensively and worked in various and very different cultures and jurisdictions such as Canada, United States, Mexico, Guatemala, Honduras, Brazil, Venezuela, Chile, Argentina, and Peru. This international exposure has allowed Mr. Venegas to leverage off cultural differences as a key design component of each of the programs designed and implemented by his office. Mr. Venegas's internal audit and fraud examination background has allowed for the implementation of a full cycle of compliance including preventive but also detective efforts in support to the organization's commitment to acting with integrity. Over the past two years, Mr. Venegas has been focused on strengthening Goldcorp's Anti-Bribery and Anti-Corruption compliance program through the execution of multiple initiatives including, but not limited to, the definition and roll-out of a stand-alone anti-bribery and anti-corruption policy, the execution of risk and compliance maturity assessments, the design and delivery of live and on-line training, the design and execution of anti-corruption detective audits and strengthening the Company's approach to third party risk mitigation.

Discussion Topics

• What's wrong with Bribery?

• Comparative between UK, US and Canadian laws around foreign corruption of public officials

• Facilitation payments

• Books and Records

• Elements of a good compliance program

• Practical implementation recommendations related to mining

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What's wrong with Bribery?

"Corruption is a considerable obstacle to economic and social development around the world. It has negative impacts on sustainable development and particularly affects poor communities.

For companies, corruption impedes business growth, escalates costs and poses serious legal and reputational risks. It also raises transaction costs, undermines fair competition, impedes long-term foreign and domestic investment, and distorts development priorities. Investors too understand that corruption can negatively impact value and pose financial, operational and reputational risks to their investments"¹

Specifically:

• Illegal in virtually every country in the world

• Perpetuates poverty - inequitable distribution of wealth

• Creates further demand for bribes (sets a precedent with no escape)

• Negative impact to employees and shareholders' trust. Graphics below show the market cap losses after the announcement of bribery scandals:

• Hurts bottom line either in the short or long term

• Negative impact in social license to operate

• Imprisonment of executives and employees

• Distraction of management's attention

• Negative impact on future business ventures (e.g. M&A, JV's, etc.). Checking and flagging instances of corruption is becoming the norm.

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Comparative overview between UK Bribery Act, US FCPA and Canada's CFPOA

• In general, and without making specific distinctions yet, most anti-bribery and anti-corruption regulation cover the following:

o Criminalize giving or offering to give a bribe (anything of value) to influence a government official (broad definition) to act (or not to act) in a certain way

o Requires to have controls to prevent and detect bribery

o Requires that books and records reflect the real nature of the transactions that generated those records

• A government official is virtually anyone who receives a salary from a federal, provincial or municipal government - including employees of state-owned enterprises and those working for international organizations such as the UN, World Bank, etc.

• Most enforcement action relates to FCPA -TOP 10 FCPA settlements = US$4 billion

• International pressure from a variety of organizations and civil society are pushing countries to enhance regulation against corruption of public officials:

o OECD

o UN Global Compact

o Extractive Industry Transparency Initiative (EITI)

o Publish What you Pay

• The UK Bribery Act of 2011 is an evidence of tougher regulations around Anti-Bribery and Anti-Corruption. The table included in Appendix 1² below presents a comparison between FCPA, CFPOA and UK Bribery Act.

• The Top 3 most notable differences between the 3 regulations are:

o UK incorporates the concept of commercial bribery (e.g. not just related to government officials)

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o FCPA does not require an actual bribe to happen to enforce books and records provisions

o FCPA maintains Facilitation Payments as a defence mechanism

• In Canada, two recent changes are a clear demonstration of this: Changes made to CFPOA and ESTMA

o CFPOA Amendments ³

PRIOR TO JUNE 19, 2013.	POST JUNE 19, 2013
The CFPOA originally only targeted business activities that were "for profit" (potentially creating a loophole for not-for-profit work, or business transactions that did not turn a profit).	The current version of the CFPOA has removed the "for profit" requirement Now, business is defined simply as "any business, profession, trade, calling, manufacture or undertaking of any kind carried on in Canada or elsewhere."8
The CFPOA previously had a maximum penalty of imprisonment for a term of 5 years.	The recent amendments to the CFPOA increased the maximum individual penalty to 14 years.9
No previous provision	The current version of the CFPOA implements record keeping requirements, creating an indictable offence for anyone who:
(a) establishes or maintains accounts which do not appear in any of the books and records that he/she/it is required to keep in accordance with applicable accounting and auditing standards;
(b) makes transactions that are not recorded in those books and records;
(e) records non-existent expenditures;
(d) enters liabilities with incorrect identification;
(e) knowingly uses false documents; or
(f) intentionally destroys accounting books and records (earlier than permitted by law).10
The "real and substantial" connection test for asserting jurisdiction.	Jurisdiction has been expanded to include the "nationality jurisdiction" approach Now, individuals can be charged where there is a real and substantial connection or on the basis that acts committed by Canadian citizens, permanent residents or Canadian companies will be deemed to have been committed in Canada.11
No previous provision	An amendment to the CFPOA confirms that officers of the Royal Canadian Mounted Police (or a person designated as a peace officer under the Royal Canadian Mounted Police Act) have the exclusive jurisdiction to lay criminal charges under the CFPOA.12

o ESTMA (short for Extractive Sector Transparency Measures Act)

• Came into force June 1, 2015

• Requires disclosure of government payments made by mining and oil & gas entities engaged in the commercial development of oil, gas and mineral. Payees include all levels of government in Canada or abroad, corporations or other bodies established to perform government powers and their respective employees and public office holders. The prescribed categories include taxes, royalties, fees and production entitlements, among others

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• Both FCPA and CFPOA = broad jurisdictional provisions. Particularly under FCPA, it is very easy to establish a connection back to the US even if the entity or individual are not US Citizens, residents or listed in a US based market.

• The UK Bribery Act does not make a distinction between commercial bribery and public officials' bribery, while the other 2 regulations (CFPOA and FCPA) focus specifically on corruption of public officials.

As a matter of fact, in 2014 the SFO's commenced its first prosecution⁴ related to commercial bribery despite the public comments indicating that there wouldn't be enforcement of the commercial component of the "equation"

• Focus on commercial bribery may become a new enforcement/compliance point of pressure for signatories of global anti-corruption pacts. This trend aligns well with the updated (2013) COSO (Committee of Sponsoring Organizations of the Tradeway Commission) internal controls framework which places significantly more weight in fraud detection that the preceding framework. Therefore, if...