Due Diligence Regarding Third Parties –
a Key Concern
For most EB-5 issuers, the most important part of the ethics
and compliance program will be conducting due diligence before
engaging contractors. Before engaging any foreign contractor, the
company should follow pre-established due diligence procedures.
These procedures should include a questionnaire completed by
the employee proposing the contract, designed to assure that the
contract is for legal, bona fide services and to identify “red flags”
for corrupt intent, including the following warning signs:
and disciplinary measures. But the company
should at a minimum ensure that it does not create
financial incentives for success “at any cost,” which
can encourage circumvention of the compliance
program. Nor should the company penalize an
officer or employee whose adherence to the program
results in a lost opportunity that was only available
through payment of a bribe.
7. Risk Assessment. The compliance program should
require, at least once a year, a top-level reassessment
of the organization’s risk of FCPA violations. Has
the nature or location of the company’s activities
created new risks or increased existing risks? Has
the company switched from acting directly to
using independent contractors, or vice versa? If
the company is not proactive in addressing such
changing risks, its compliance program will not be
viewed as effective.
8. Confidential Reporting and Internal Investigation.
For most EB-5 issuers that have only one or two
layers of management, a confidential reporting
system may not be practical. Larger organizations
may need to have a third-party “hotline” or
internal ombudsman to satisfy this element of the
program. But even the smallest EB-5 issuer should
ensure that an employee or contractor can raise
concerns about improper payments without fear of
retribution or reprisal, and if such a report occurs
the company should ensure that it investigates the
issue fully and documents its response.
9. Continuous Improv V