Author: Frédéric Ruppert

About Frédéric Ruppert

Frédéric Ruppert, Avocat à la Cour, Attorney at Law, California State Bar, Frederic's practice is mostly focused on M&A and Private Equity and also extends to other corporate and business matters and Corporate Governance. Email ruppert@frlaw-avocats.com

The French system of law is changing through DPAs.

This week, White Collar Post features a guest post from Frédéric Ruppert(1) and Maria Lancri(2)

One year after the enactment of the Sapin II Law, that set up the French Anticorruption Agency “AFA” and authorized Deferred Prosecution Agreements “DPA” à la française, the first DPA was approved by the Paris Tribunal.

Although the investigation started years before the Sapin II Law enactment and the matter involved money–laundering of tax evasion proceeds rather than corruption, this French DPA is being watched with attention as a guidance for future settlements.

It was brought together by i) the French National Financial Prosecutor “NFP,” who contributed to the Sapin II law and the DPA, with a clear understanding that business requires a dedicated and efficient tool against white–collar crimes, and ii) the negotiations with the defendant’s lawyers, after the Sapin II Law enactment.

The DPA statement of facts state that HSBC group and particularly its Swiss affiliate HSBC Private Bank (Suisse) SA “PBRS,” sent its salespeople to France to prospect new French clients or offer new products to existing clients. Most, also French tax residents, did not declare their Swiss accounts, contrary to French legal requirements. PBRS thus assisted them in illegally concealing these assets from the French tax administration. A judicial investigation was then opened; PBRS was indicted for unlawful financial and banking solicitation and aggravated money–laundering of tax evasion proceeds.

As PBRS admitted to the facts and accepted their legal characterization, which was necessary because an investigation was opened, the NFP proposed a DPA that the Tribunal approved.

Because the Justice Ministry has not yet issued any guidelines, the HSBC/PBRS DPA is valuable in understanding how authorities determined the fine paid by PBRS. It describes i) PBRS’ activity in France, ii) the number of its employees, iii) the value of the undeclared assets managed for its French clients, iv) its profits, and v) its profits derived from assets managed for French clients. From this, the authorities calculated a €86,400,000 fine for disgorgement of profits.

The compliance program of HSBC group at the time, is described by the DPA as less developed than today. It also notes that its subsidiaries, including PBRS, were allowed to conduct their business quite independently. HSBC group has since overhauled its compliance program, increased its control over its subsidiaries, withdrawn from certain markets and implemented strict financial crime, regulatory and compliance standards. At PBRS’ level, most managers were replaced, a transparency policy was implemented, some services were no longer offered and numerous clients were dropped.

Until the Sapin II Law enactment, PBRS was uncooperative, as the law did not permit settlements in such criminal matters. However, afterwards, the NFP recognized PBRS’ cooperation with authorities.

Given the seriousness of the matter, the DPA imposed an additional €71,575,422 fine, bringing PBRS’s total to the maximum available at law.

PBRS also had to indemnify the victims per the Sapin II Law, including the French Government, which was awarded damages for its €142,024,578 tax loss.

Altogether, PBRS paid €300,000,000, which HSBC Holdings guaranteed.

The advantage of DPA procedures over regular procedures is that defendants are not prohibited from participating in public procurement processes.

Incidentally, this is the major difference with World Bank procedures. It debars companies engaged in corruption or collusion from participating in any World Bank financed public procurement market. This was the case for the French company Oberthur Technologies SA., debarred for 2.5 years. It was also debarred from procurements issued by other development banks as part of the cross–debarment procedure.

 

(1) Frédéric Ruppert, Avocat à la Cour, Attorney at Law, California State Bar, Frederic’s practice is mostly focused on M&A and Private Equity and also extends to other corporate and business matters and Corporate Governance. https://www.linkedin.com/in/frederic-ruppert-2218767/ Email:  ruppert@frlaw-avocats.com

(2) Maria Lancri, Avocat à la Cour, has had a career in both private practice and in-house. She is currently of Counsel at GGV, a Franco-German law firm and specializes in Compliance matters and Data Protection and also advises companies in France on how to set up their Compliance programs: http://gg-v.fr/equipes/maria-lancri/ Email: lancri@gg-v.net

Guest Post: Insights into the New French Anti-Bribery & Corruption Law

This week, White Collar Post features a guest post from Frédéric Ruppert(1) and Maria Lancri(2).

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In December 2016, France passed into law the so called “Sapin 2” law to combat non-ethical behavior and promote transparency. Its new anti-corruption legislation is intended to improve its commitment to business ethics, the prevention of fraud and prohibiting the bribery of foreign public official. This new French law sets forth anti-corruption measures with a view to the more efficient pursuit and prosecution of corruption cases, both foreign and domestic. The impetus came from the frequent critics, most notably from the Organization for Economic Cooperation and Development, that France had not been adequately enforcing its current anti-corruption  laws.

Large companies now have mandatory anticorruption programs, pursuant to the new law, Companies or groups of companies over 500 employees and EUR100 million of turnover and public administrations must implement a detailed anti-corruption compliance program.

Some features of the new law include obligation to implement an anti-corruption compliance program  and that the executive managers bear the actual responsibility of enforcing this obligation within their companies. This is in line with a current trend where the underlying rationale is that only when individuals understand that their personal liability is at stake, will they take care of the situation.

Anticorruption programs are quite common in various organizations now, in particular following the footsteps of US, UK and many Canadian companies. The enforcement of the parent companies’ local laws (most notably US based) against their French subsidiaries, has really helped the understanding and acceptance of such regulations. French subsidiaries of foreign companies have implemented these programs for years now.

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