Ten Questions Every Director Should Ask About FCPA Compliance.docx

Ten Questions Every Director Should Ask About FCPA ComplianceOn August 8, 2010, the chairman of China North East Petroleums audit committee, Robert Bruce, tendered his noisy resignation from the companys board of directors. Mr.?Bruce resigned because the boards chairman, Edward Rule, had days earlier declined Mr.?Bruces request that the company investigate potential violations of the Foreign Corrupt Practices Act (FCPA). In denying Mr.?Bruces request, Mr.?Rule reasoned that, among other things, such an investigation could last as long as a full year and cost the Company as much as several millions of dollars and could even lead to the delisting of the company from the stock exchanges. Mr.?Rule ended his letter by noting that the course of action you recommend that the Board pursue seems at odds with the prudent discharge of duties to the shareholders.[1]?Chairman Rules refusal to investigate possible FCPA violations, whether or not warranted under the circumstances, squarely raises the issue of an independent directors role in FCPA compliance.?There is no doubt that a board has a role to play—in fact, a duty under law and critical government policies to discharge—with respect to FCPA compliance. The Federal Sentencing Guidelines, for example, state that a board must be knowledgeable about the content and operation of the companys compliance program and must exercise reasonable oversight with respect to the implementation and effectiveness of the compliance and ethics program.[2]?Likewise, the Department of Justices prosecution guidelines consider whether the board exercises independent review of the compliance program and whether the board is provided with information sufficient to enable the exercise of independent judgment.[3]?Directors have similar oversight Caremark duties arising under case law,?[4]?and various other sources, such as stock exchange rules, Sarbanes-Oxley, and audit committee charters.[5]To be sure, although not in the context of the FCPA, the SE