First Annual Mexico Summit on Anti-Corruption
More than 100 members of the Mexican legal and business communities gathered in Mexico City on March 25 and 26, 2014 to attend the American Conference Institute’s First Annual Mexico Summit on Anti-Corruption. The two-day summit featured 18 different panels of in-house counsel and compliance officers from Mexico’s energy, manufacturing and security sectors. Mexican government officials and legislators also attended and presented at the summit. Highlights included: 1) comparing the evolving regulatory landscape in Mexico to established Foreign Corrupt Practices Act (FCPA) and United Kingdom (UK) Bribery Act standards; 2) discussing anti-corruption initiatives in Mexico City; 3) best practices for ensuring compliance in high-risk transactions in light of the Latin American cultural landscape; and 4) addressing corruption issues in conjunction with the limitations of Mexican labor law.
Comparison Between FCPA and Proposed Mexican Anti-Corruption Laws
After discussing highly publicized cases brought in the United States alleging bribery in Mexico against companies such as Bridgestone, BizJet, and of course, Wal-Mart Stores, panelists stressed that companies doing business in Mexico should not rely only on the mandates of the FCPA and the UK Bribery Act to define the contours of their anti-corruption efforts.
Indeed, various provisions of Mexico’s “Federal Anti-Corruption Law for Public Contracts of 2012” (the Mexican Anti-Corruption Law), are even more stringent than those of the FCPA and UK Bribery Act. Like the FCPA and the UK Bribery Act, the Mexican Anti-Corruption Law prohibits bribery for the purpose of obtaining unfair benefits or advantages in connection with federal public contracts or commercial transactions in Mexico and abroad. In concluding that the FCPA, and to a certain extent the UK Bribery Act, seem relatively routine next to the Mexican Anti-Corruption Law, however, panelists focused on the scope of prohibited conduct under each of the laws and the potential sanctions faced by violators.
Unlike the FCPA, the Mexican Anti-Corruption Law prohibits both the payment and the acceptance of bribes as crimes. The Mexican Anti-Corruption Law also prohibits “facilitation” or “grease” payments of any kind, whether or not the benefit obtained as a result of a payment is one to which a company might have been legally entitled. The FCPA, by contrast, contemplates legal facilitation payments in certain circumstances. Unlike the UK Bribery Act, the Mexican Anti-Corruption Law does not contain an “adequate procedures” defense. Finally, unlike the FCPA and UK Bribery Act, the Mexican Anti-Corruption Law has a prospective punitive component that prohibits violators from participating in future government procurement programs.
Not surprisingly, panelists recommended that companies tailor their compliance programs to the most restrictive applicable regime. Although panelists noted that the Mexican Anti-Corruption Law has drawn little attention since it went into effect, the differences noted above caused panelists to postulate that the Mexican Anti-Corruption Law might just supplant the FCPA and the UK Bribery Act as the most restrictive regime applicable to companies operating in Mexico.
Initiatives Dedicated to the Reduction of Corruption in the Government of Mexico City
The summit’s keynote speaker, Mexico City Controller General Hiram Almeida Estrada, spoke at length about Mexico City Mayor Miguel Ángel Mancera Espinosa’s commitment to transparency, and introduced the mayor’s “Plan for the Prevention and the Fight Against Corruption.” Noting that corruption might result from factors such as the availability of high amounts of public service funds, the unchecked discretion of public officials, a lack of internal controls, historically low public sector salaries, and ambition, Mr. Almeida Estrada outlined the five tenets of the mayor’s program. These include: 1) the professionalization of public servants through formal evaluation and training; 2) strengthening internal controls; 3) administrative simplification; 4) engaging residents in the “better exercise of government;” and 5) technological innovation to prevent and fight corruption.
Necessity to Consider Cultural Issues
Not lost on participants was the fact that corruption is generally seen as rampant throughout Latin America. Even more apparent was the fact that Mexico is generally perceived as more corrupt than the majority of countries in the region.
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Panelists posited that Mexico constituted a “high-risk” geographic area in part because of the extent to which the Mexican government traditionally has participated in business ventures, particularly in the technology, energy and natural resources sectors, the Mexican government’s complicated permitting schemes, the heavy reliance on relationships with third-party intermediaries, and the inability of administrative bureaucracies to effectively manage the large-scale infrastructure projects that account for 40 percent of Mexico’s federal budget. Panelists noted that transparency was virtually impossible at both large agencies such as Petróleos Mexicanos (Pemex), the state-owned oil company whose invoices are known to pass through seventeen different steps before payment, as well as at the 90 percent of “small” or “medium-sized” Mexican companies with insufficient internal controls to monitor all potential sources of corruption.
Panelists also spoke at length about the culture of conducting business in Mexico. They characterized “negocios a la Mexicana,” or “business the Mexican way,” as resting on a foundation of personal relationships fostered by “courtesy” invitations to join in meals, travel and other entertainment. Indeed, they explained that it was not only common, but rather expected, that deals would be made over meals.
Accordingly, substantial summit attention was devoted to “balanc[ing] legal needs [to avoid corruption] with Mexican customs of courtesy.” Recommendations included: 1) hiring a local compliance officer familiar with Mexican customs to help navigate local terrain; 2) creating a Gift and Travel Policy that integrates legal review, prior compliance approval, and accounting controls; and 3) placing restrictions on the use of cash. Panelists stressed the importance of translating all compliance policies into Spanish, and conducting periodic in-person trainings, also in Spanish. By so doing, panelists felt that companies could benefit from the efficiency of implementing a compliance policy with global application, and at the same time effectively address risks specific to Mexico, and/or any other locality, for that matter.
Addressing Corruption Despite Barriers Inherent in Mexican Labor Law
Towards the end of the summit, participants heard “How to Address an Employee’s Corrupt Conduct: Discipline or Termination of an Employment Contract in Compliance with Mexican Law.” During that panel, speakers acknowledged the fact that Mexican Federal Labor Law often posed a challenge for companies attempting to root out corruption from their ranks. Noting that Mexican Federal Labor Law enumerates specific (and limited) “cause” for termination of an employee, panelists explained that companies are often unable to meet the high burden the law imposes to “conclusively” prove any cause. Panelists recommended instituting a compliance investigation and issuing a formal report any time an allegation of corruption was raised, and noted that emphasis on an internal policy of non-retaliation would be crucial to collecting evidence required to support cause before the Mexican Labor Board.
Even where Mexican Labor Law will not support termination for cause, panelists advised companies to consider imposing disciplinary sanctions, so long as the sanctions were already outlined in internal policies, or terminating employees “without cause.” Although termination without cause entitles employees to certain benefits under Mexican law (including severance equivalent to three months and 20 days of aggregate salary, a seniority premium and outstanding fringe benefits), panelists suggested that such costs might, in some cases, be preferable to the appearance that corruption was consistent with continued employment.
What to Expect Next
While panelists at one point referred to Mexico as “the great avoider” when it came to addressing issues of corruption, they stressed that Mexico was in the midst of a “major overhaul” of its anti-corruption regimes. Although less than 5 percent of reported cases of corruption in Mexico have traditionally ended with consequences for those involved, such days are likely numbered as panelists fully expect Mexico to develop a new culture of “pointing out smokers in the non-smoking section.” Panelists cited the BizJet case as an example, noting that the Mexican government had assisted in the Department of Justice’s FCPA investigation. Although the efficacy of the Mexican reforms remains to be seen, panelists were nonetheless sure that Mexico’s increased commitment to anti-corruption would, at the very least, translate to increased international cooperation in anti-bribery enforcement.