ANTI-CORRUPTION HANDBOOK

The Use of This Handbook

This Handbook on Anti-Corruption aims to help employees of NagaCorp Ltd., and all its subsidiaries achieve a better understanding of corruption, how to avoid it, and what to do when confronted with it. It can be used by employees at all levels within the organization, and also when conducting any corporate training on anti-corruption.

• Section I provides an overview of what constitutes corruption.
• Section II describes who may be liable for corruption.
• Section III details why and how corruption should be avoided.
• Section IV sets forth reporting guidance when confronted with corruption.

The Purpose of Anti-Corruption Training

1. Corruption is a global occurrence which can present significant risk to any business, particularly those operating in an international environment. Acknowledging this fact is crucial. It may take place in developed, developing and under-developed countries. It may take place at any phase of a business, and may be committed by any employee, management official, member of the Board of Directors, or the company itself.

2. Some corruption offenses are committed knowingly and deliberately for personal or corporate gain. Some offenses are committed reluctantly in the belief that it is necessary to undertake these practices in order to remain competitive, or in order to retaliate against the corrupt practices of others. Some offenses are committed in the erroneous belief that these practices are normal business acts and do not constitute criminal offenses. Thus, having the right and proper training for employees of NagaCorp is crucial.

3. Many employees fail to recognize corrupt situations or, if they do recognize them, fail to appreciate the risks of becoming involved in corruption.

4. It is important to stress that whatever the apparent commercial or other justification for activities involving corruption are, it is never acceptable. Corrupt acts constitute criminal offenses for which a number of persons may be liable including the individual employee who committed the act, his employer, and company directors.

5. The consequences of an employee, manager or executive of NagaCorp being involved in corruption, whether directly or indirectly, are potentially extremely serious. An employee may face imprisonment. NagaCorp may face damage to its reputation, financial loss and/or debarment. In the current business environment, there is much more pressure for corruption to be detected and prosecuted. Consequently, unlike in past years, there is now a far greater likelihood that wrongdoing will be punished. Many governments have pledged to take steps to combat corruption and have increased the associated levels of punishment that may be passed down.

6. The damage caused by corruption in terms of loss and injury is more widely understood, with the resultant realization that all efforts must be made to eliminate corruption.

7. It is essential, therefore, that employees of NagaCorp acquire a better understanding of how corruption occurs, the employee and corporate risks of criminal and civil liability of involvement in corruption, the damage caused by corruption and what to do when confronted with corruption.

I.What is Corruption?

Corruption in the workplace involves the abuse of power for personal gain. Corruption is fraudulent or dishonest acts, typically including bribery. Acts of corruption include bribery, extortion, fraud, collusion and money-laundering and other related acts. Corruption may be voluntary or coerced. Definitions of each are included below.

A. Bribery

Bribery is a Criminal Offense

• In general terms, bribery is committed when a person (A) offers or gives some benefit to another person (B) as an inducement for that person or another person (C) to act dishonestly in relation to his principal, or employer’s, business. In such a case, all those persons involved (A, B and C), as well as other persons who were complicit in the offense, may be guilty of bribery.

• Nature of a bribe. A bribe may be a cash payment, or it may be a non-cash advantage (such as the promise of a future contract, or a holiday, a treat of some sort, benefits to family or friends, gifts and donations).

• The dishonest activity. The dishonest activity includes any dishonest act or omission which would not be done but for the payment of the bribe. It would be an act or omission done by someone in relation to his principal, or employer’s, business. For example, a government officer acting on behalf of a government department may, if offered a bribe, dishonestly award a contract.

• Institutional bribery refers to a situation where a bribe may be paid or received with the full approval of the organization, which is the employer of the individual paying or receiving the bribe. This may occur, for example, when a contracting company authorizes its commercial director to pay a bribe to win a tender.

• Personal bribery refers to a situation where a bribe may be paid or received by a representative of an organization without the approval of that organization. This may occur, for example, when a government officer receives a bribe to award a contract, but the organization of the employee offering the bribe did not approve the offering of the bribe.

• Supply-side bribery refers to those persons or companies who are responsible for offering or paying bribes.

• Demand-side bribery refers to those persons or companies who are responsible for demanding or receiving bribes.

• A “facilitation payment” is the term often used in relation to relatively minor payments made to officials so as to obtain or expedite services to which the payer is entitled (for example, the obtaining of import or work permits, or installation of telephone lines). The amounts which are paid are often quite small, yet the consequences of not paying can be serious. (For example, a delay in issuing an import permit could delay a project, which could increase the contractor’s costs and cause the contractor to have to pay liquidated damages to the project owner for delay.) A distinction is sometimes made between bribes and facilitation payments. A bribe is regarded as being a payment made to someone to act in a way in which he should not (for example, by awarding a contract to the bribing party, or releasing a party from a legal obligation) whereas a facilitation payment is regarded as being a payment made to a person to do something which he should already be doing (for example, issuing a visa or customs clearance) or for undertaking this task more quickly. However, most countries criminalize the payment and receipt of both bribes and facilitation payments. It is also worth noting that the term “facilitation payment” can be wide ranging and the nature of which is not necessarily illegal in some countries. Examples include obtaining a fast track pass for airport entry as well as prioritized shipment of goods through courier services.

• Examples of bribery:

  • A project owner may bribe a government official in order to obtain planning permission for a project.

  • A bidder may bribe the project owner’s designer to design a project in a manner which improperly favors that bidder over other bidders.

  • A bidder may pay a bribe to the project owner’s representative to win the contract.

  • A contractor may pay a bribe to the project owner’s representative to have defective or nonexistent work approved.

  • The project owner may pay a bribe to the project engineer in return for the engineer refraining from issuing a payment certificate or an extension of time to a contractor.

  • If the parties are in dispute in relation to the construction of the project, one party may bribe a witness, expert, arbitrator or judge in order to give false evidence, or to give a favorable opinion or verdict.

• The bribe mechanism. The payment of a bribe may be made directly by the payer to the ultimate recipient who is to carry out the dishonest act. However, it is common for a bribe to be paid through intermediaries. This is done so as to make it more difficult to detect that a bribe has been paid. The following are some common methods of concealing a bribe by the use of intermediaries. These examples are only provided to educate employees on the types of criminal behavior to be aware of, and for notification to the appropriate NagaCorp officials if and when encountered.

  • Agents. The most common form of intermediary is the agent. A contractor who wishes to hide the payment of a bribe may appoint an agent who has contacts with a representative of the project owner or with the government of the country concerned. The contractor will enter into an agency agreement with the agent which purports to be an agreement for legitimate services. However, the scope of those services will often be false or exaggerated and the size of the payment due under the agreement will be significantly in excess of the value of the legitimate services specified in the agreement. The payment may sometimes be expressed as a percentage of the contract price. The agent will normally receive the payment when the contractor is awarded the contract. The agent will then pass the whole or part of the payment to the representative of the project owner or government who has dishonestly ensured that the contractor would win the contract.

  • Joint ventures. An international joint venture, comprising joint venture partners from several countries, may arrange for an agency agreement (which conceals a bribe arrangement) to be entered into by the joint venture partner who is resident in the country which is least likely to discover or punish the bribery.

  • Subsidiaries or other group companies. Where a contractor is part of a multinational group, arrangements may be made by the group for a corrupt agency agreement to be entered into, or for a corrupt payment to be made, by a subsidiary or other group company which is located in a country where the bribe is less likely to be detected or punished. The subsidiary or other group company will then be repaid by the contractor through inter-company charges for false services or services of inflated value.

  • Sub-contractors. A contractor may channel a bribe through a corrupt sub-contract arrangement. For example, a sub-contract may falsely state that certain services are to be provided to the contractor in return for a certain payment. In reality, the sub-contractor will not provide these services or will provide services of a much lower value than the price agreed. The balance of the payment will then be passed on by the sub-contractor to the relevant party as a bribe.

    In each of the above cases, the bribe may have been deliberately paid with full knowledge of all relevant parties. Alternatively, a bribe may be paid in situations where a related party is unaware of the bribe. For example:

    • A contractor may be unaware that an agent intends to use part of his agency fee to pay a bribe;

    • A joint venture partner may be unaware that a fellow joint venture partner has paid a bribe in order for the joint venture to win the contract;

    • A contractor may be unaware that a sub-contractor paid a bribe to a representative of the project owner to ensure that the contractor won the tender.

    In such situations, a contractor may be genuinely unaware that these practices are occurring. However, in many cases, the contractor may have been willfully blind to the circumstances. In other words, the contractor may have suspected that there was a likelihood of corruption but refrained from making inquiries or taking preventive action. Such willful blindness could be treated as culpable in many jurisdictions.

B. Extortion

Extortion is a Criminal Offense

• Extortion is a form of blackmail where one party makes threats against another party of adverse consequences unless demands, usually for payment, are met by the other party. Such blackmail may constitute, for example, refusal to provide customs clearance for equipment or materials, or refusal to make payments or issue certificates that are due. Sometimes such threats may involve threats of physical harm.

• If the party who is the victim of the extortion provides the payment or other benefit, it will normally become liable for the offense of bribery. However, the party making the extorted payment may have a defense to bribery if the threat was of imminent death or personal injury.

C. Fraud

Fraud is a Criminal Offense

• It is sometimes referred to as “deception”.

• Fraud usually involves one person (or group of persons) deceiving another person in order to gain some financial or other advantage.

• In the context of gaming, fraud offenses may include but are not limited to the following:

• Employees dishonestly cheating the casino or customers and pocketing of casino chips

• The deliberate or non-deliberate attempt of taking/stowing away casino chips

• Shortchanging the casino or customers

• Manipulation of EGM software for the purpose of fraud/no-consent

• Parties may be liable for the offense of fraud where they deliberately undertake the fraudulent action with full knowledge of the circumstances. Alternatively, it is possible for a party to be liable for fraud if it was reckless as to the circumstances. For example, a dealer may be liable for fraud if he overpays a customer and having known of his/her mistake, fails to take reasonable steps to address/fix the problem.

D. Collusion

Collusion is a Criminal Offense

• It occurs where two or more parties co-operate to defraud or deceive another party. This is a type of fraud and is often described as a “cartel”, “anti-trust” or “anti-competitive” offense.

• An example of collusion is:

• Where dealer(s) and pit boss(s) collude in order to misappropriate casino chips. This is akin to stealing.

E. Money-laundering

• Money-laundering is a Criminal Offense

• It occurs where a party moves cash or assets obtained by criminal activity from one location to another. Money-laundering is often used to conceal the criminal source of funds.

  A detailed version of this is available “NagaWorld AML Manual – Combating Money Laundering and the Financing of Terrorism and Proliferation – Version 2.0, 15 June 2014” for further reference.

• Relationship between Bribery and Fraud

• Bribery normally involves a degree of fraud. A bribe paid by an employee to another will normally be concealed by some fraudulent act with the aim that the fraudulent act does not emerge in the open.

• Fraud (such as collusion to remain silent after an act of fraud has been committed) does not necessarily involve bribery. However, many acts of fraud may need an act of bribery in order to complete the fraud. For example, a dealer misappropriated casino chips (which is fraud) and might then bribe the pit boss into remaining silent (which is bribery).

• Financial waste, such as an employee using work time to perform significant personal activities and providing a payment of some type to their supervisor or colleague to conceal the personal activities, is attributable to fraudulent practices and bribery.

F. Voluntary or Coerced corruption

• In some cases, the corrupt practice may be a voluntary act undertaken by the relevant party with the deliberate intention of gaining a competitive advantage or obtaining additional unjustified compensation.

• However, in other cases, the practice may be undertaken so as to “level the playing field.” For example, a dealer may feel compelled to offer a bribe to his boss, or a junior employee offers money/favors to a senior employee, with the view that the offer is normal practice.

• In some circumstances, a bribe may be extorted from the dealer by his boss. For example, the pit boss may threaten the dealer that he has committed an offense and may be reported when, as a point of fact, the dealer has not done anything wrong. The dealer under duress may then succumb and offer a bribe to his boss in order to maintain his job without further interference from his extorter.

• Some offenses are committed in the mistaken belief that practices, such as bribing, tipping, offering are normal acts and do not constitute criminal offenses.

G. Other Related Offenses

• Corruption offenses may also constitute breaches of tax and accounting laws and stock market regulations. For example, a bribe wrongly shown in the accounts as an agency commission for legitimate services would constitute a false accounting entry which would be in breach of accounting laws and stock market regulations and may also constitute other types of criminal offenses. Deduction of a bribe in calculating tax may also constitute a breach of tax law. Prosecutors may find it easier to prosecute under accounting or tax laws than bribery laws as the standard of proof may be lower, and proof may be obtained by the mere fact of the erroneous entry.

• Thus, a wide range of people may be caught in both the initial offense (such as bribery or submission of fraudulent claims), and in subsequent offenses, which may involve accounting and legal staff.

II. Who May Be Liable for Corruption Offenses?

Both NagaCorp and its employees can be liable for a criminal offense. The exact extent of criminal liability will depend on the law of a particular country. NagaCorp operations are predominantly in Cambodia with its stock exchange listing in Hong Kong. NagaCorp also maintains offices in Malaysia, Vietnam, Thailand, Russia and Macau.

A. Individual Liability

• An individual may incur liability for corruption as follows:

• Those directly involved: Any individual who is directly involved in committing a corruption offense may be liable for the offense.

• Those indirectly involved: An individual may be liable for a corruption offense where he is indirectly involved in committing the offense. For example, an individual may be liable where he has used another person to act on his behalf.

• Those in authority: A person in authority, such as a chief executive, director financial manager or commercial manager, may be liable for a corruption offense even where he was not directly involved in committing the offense, if he either expressly authorized the offense or that type of offense, or knew of the offense and either consented to it or turned a blind eye to it. Such liability may arise where, for example a chief executive suspects that the company’s employee may be paying bribes on a project but takes no action to prevent them doing so.

• Aiding and abetting: An individual may also be liable for the offense of aiding and abetting where he has somehow facilitated the committing of the offense.

• An individual may incur criminal liability even where:

• He was not aware that the activity constituted a crime.

• He did not or would not make any personal gain from the activity.

• He did not pay or receive the bribe personally, and instead the bribe was paid or received through or by another person, such as an agent, subsidiary company, joint venture partner, friend, spouse or other third party.

• He did not commit a fraud personally, and instead the fraud was committed by or through another person.

• He was following the instructions of a superior in the organization.

• He believed that his actions were in the interests of his employer.

• There were threats of adverse consequences made to him in order to make him commit the offense (unless he feared imminent physical harm).

• The bribe or fraudulent activity did not involve money, but instead involved the provision of a non-cash advantage, for example, a future contract, a holiday, jewelry or other gift.

• The person who had been offered or who had received the bribe did not act in the way intended when the bribe was agreed.

• The bribe was offered, but was never actually paid.

• The amount of the bribe was less than the financial damage which could result from failure to pay the bribe.

• The conduct constituting the offense was widely practiced and considered to be normal business practice.

• The conduct constituting the offense was believed to be necessary for a party to remain competitive.

• The offense did not succeed (as the person could be liable for an attempt to commit the offense).

B. Corporate liability

In many jurisdictions, companies can be liable for criminal offenses. This liability may arise in a number of ways including:

• Through the acts of its employees. NagaCorp may incur criminal liability through the corrupt act of its employee (whatever his/her position) if the employee was acting within the course of their employment. Thus, if a junior employee responsible for preparing work records submits a false work record to another company in support of a claim, then NagaCorp (as well as the junior employee) could be liable for fraud. Or, if a company director decides to pay a bribe in connection with the company’s business, then the company (as well as the director) could be liable for bribery.

• Through the acts of its agents, NagaCorp may incur criminal liability through the corrupt act of its agent who has been appointed to act on its behalf and where the corrupt act is committed in the course of that appointment.

• Through the acts of NagaCorp’s related companies or business partners. NagaCorp could be liable for a corrupt act committed by a subsidiary or associated company, joint venture or consortium partner, sub-contractor or supplier, where that corrupt act could benefit NagaCorp’s business. Such liability could arise where NagaCorp authorized, approved, condoned or turned a blind eye to the corruption.

• “Turning a blind eye” (or willful blindness) occurs when a party in authority (such as an officer or manager) suspects corruption in relation to a business transaction in which NagaCorp is involved, but deliberately refrains from making further inquiries and taking preventive steps. In such situations, even if the officer or manager has not been expressly told that a business partner is paying a bribe which may benefit NagaCorp, a court may infer that NagaCorp must have known that a bribe would probably be paid. This inference may arise where the circumstances would be likely to put the officer or manager on notice. Such circumstances would include, for example, where an agency commission is significantly disproportionate to the legitimate scope of services which the agent is to undertake, or where the agent has no capability for undertaking those services, or where the agency commission is to be paid, without good reason, in foreign currency into an off-shore bank account. The existence of a formal agency agreement will not prevent an inference of corruption. The courts would look at the circumstances surrounding the agreement and at its true effect, not merely at its form. It is, therefore, extremely important for company officers and managers to make proper inquiries, should they suspect corruption in relation to the company’s affairs, and to take steps to prevent or stop the corruption. Otherwise their inaction may make the company liable (in addition to causing them to incur personal liability).

C. Range of Persons (both Employees and NagaCorp) Who May Be Liable

A wide range of persons could be liable for a corruption offense. For example, a bribe is agreed to be paid by a contractor to a government employee and, in order to conceal the bribe, it is paid by the contractor through a subcontractor who in turn appoints an individual agent to pay the bribe. In such circumstances, the following may incur liability where they are aware of or are willfully blind to the corrupt circumstances:

• Those directors and managers of the contractor and sub-contractor who authorize payment of the bribe, or who authorize the general policy of payment of bribes, whether tacitly or expressly;

• Those directors and managers of the contractor and sub-contractor who are involved in the decision to conceal the bribe by payment through the sub-contractor and agent;

• The director or manager of the sub-contractor who directly negotiates the payment of the bribe with the agent;

• Those directors and managers of the contractor and sub-contractor who suspect that there may be corruption but do not make proper enquiries and take preventive steps;

• The accounting employee of the sub-contractor who implements payment of the bribe to the agent and charges the contractor with the cost of the bribe;

• The accounting employee of the contractor who implements reimbursement of the cost of the bribe to the sub-contractor;

• The lawyer who drafts the agency or other agreement which was used as a cover for the bribe mechanism;

• The agent who acts as intermediary for payment of the bribe;

• The government employee who receives the bribe;

• The contractor and sub-contractor (when they are companies), their liability being incurred through the knowledge and actions of their directors and managers.

D. OverseasBribery

As a result of the OECD Convention on Combating Bribery which came into force in 1999, all countries which have ratified the Convention have made it a crime for their companies or individuals to bribe a foreign public official abroad.

III. Why Should Corruption Be Avoided?

Corruption should be avoided because of:

• The risk of criminal prosecution;

• The risk of financial loss;

• The moral argument.

The order of priority of the above will depend on the personal values of an individual.

A. Risk of criminal prosecution

Until relatively recently, there has been little risk of prosecution for corruption in relation to the certain business sectors (such as infrastructure, construction and engineering). However, due to a number of factors, individuals and companies are facing an increasing risk of prosecution. These factors are as follows:

• Increased awareness. There is growing awareness of the scale of corruption and of both the social and commercial damage that this is causing.

• Increased pressure. There is increased pressure to take steps to eliminate this corruption. Civil society, aid organizations, multi-lateral development banks, governments and the business industry itself are all responsible for this increased pressure.

• Better laws and an increased risk of prosecution. Such pressure has resulted in the passing and ratification of a number of anti-corruption conventions (in particular the United Nations Convention against Corruption and the OECD Convention on Combating Bribery). Countries which have ratified such conventions are required to enact the necessary laws to criminalize domestic and overseas bribery of public officials and also to ensure that those laws are enforced.

• Increased risk of detection. Far greater attention is now being paid to methods of detecting corruption in in the business sector, particularly in the gaming industry. There is also increased protection for and encouragement of whistle-blowing. Thus, there is now a far greater risk that corruption will be uncovered.

• Increased willingness to prosecute and punish white-collar crime. There is increasing pressure to ensure that white-collar crime (which includes corruption offenses) is punished as severely as blue-collar crime. This means that there is a growing likelihood that where an individual is convicted of corruption, more severe penalties may be imposed than previously.

• Serious penalties. The penalties for corruption offenses can be severe. In most jurisdictions, such penalties for individuals may include several years’ imprisonment and heavy fines. For companies, the criminal penalty will normally be a substantial fine.

• Company directors and employees. Corruption now presents a real risk of harsh punishment for both senior and junior employees.

B. Risk of financial loss

As it becomes more acknowledged that corruption must be prevented and penalized, governments, funders, project owners, competitors, and employers will become less tolerant of corruption. There is, therefore, an increasing tendency for these parties to adopt stronger measures against corruption. Such measures may include:

• Debarment of companies because of corruption involvement. Multi-lateral development banks have adopted formal debarment policies whereby a company which has been found to have been involved in corruption will be debarred permanently or for a number of years from participating in any of their projects. Whilst aid organizations and other lenders may not yet have official debarment policies, it is becoming increasingly unlikely that they would allow companies which have been convicted of corruption or debarred by multi-lateral development banks, to participate in projects which they are funding. Some public sector project owners are now required by law to debar convicted companies from participating in their projects. For example, the European Union Procurement Directives require compulsory exclusion of a company from all EU public sector contracts if the company, or any of its senior managers, have been convicted of a corruption offense.

• Exclusion of companies from projects because of unsuitability. Funders and project owners are increasingly carrying out better due diligence in order to determine the risk of corruption in including certain companies in projects, even if they have had no conviction for corruption. Thus, for example, companies which have not adopted adequate anti-corruption measures may be considered unsuitable to tender.

• Termination of corrupt contracts. A contract which has been obtained through corruption is often either void, or can be terminated, and this can have significant financial consequences. For example, if a party pays a bribe to win a contract, or submits fraudulent data with its tender, and if the project owner discovers the corruption, it is possible that the project owner will terminate the contract (if it has already been awarded to the corrupt party).

• Reputational damage for companies. The increasing attention given to corruption issues and the growing desire for ethical investment means that companies which are associated with corruption (even where there has been no conviction) may suffer in terms of share value and may also find that they are increasingly considered to be undesirable business partners. It may also mean that the company may find it more difficult to win work, raise financing, and employ good staff.

• Reputational damage for individuals. Involvement by an individual in corruption may irreparably damage an individual’s reputation. Companies are paying increasing attention to their own reputation and consequently to corporate social responsibility and are therefore increasingly unlikely to employ an individual who has been involved in corruption.

• Dismissal of individuals from employment. The growing trend of anti-corruption requirements by governments, funders and project owners has the effect that employers must now be seen to be imposing stricter disciplinary measures against employees who have been involved in corruption. It is becoming more common for an officer or employee of a company to be dismissed from employment because of involvement in corruption. A company may prefer to lose an employee rather than damage its business.

• Disciplinary action against individual members by professional associations. Professional associations are becoming more conscious of their duty to deter corruption by their members, and may impose fines on, or suspend or disqualify from practice, members who have engaged in corruption.

• Litigation against individuals and companies for losses caused by corruption. Significant financial loss can be caused to a company which is the victim of corruption. For example:

• A tenderer which loses a tender because of bribery by a competitor may lose both the cost of submitting its tender and the potential profits from the contract;

• A contractor against whom a project owner submits a fraudulent claim (which is then approved by a corrupt certifier) may lose its own claim and have to pay the project owner’s fraudulent claim.

It is becoming increasingly likely for such companies to take legal proceedings to recover their losses. Such proceedings may be taken against both the corrupt company and the individuals involved in the corruption. These proceedings can be costly in terms of lawyers’ and consultants’ fees, lost management time and emotional stress.

C. The Moral Argument

Corruption in the public sector usually involves bribery or fraud being perpetrated against a government body. It is, therefore, the taxpayer that ultimately pays for this corruption. This can occur in a number of ways:

• Needless, uneconomic or over-designed projects. The most blatant type of corruption occurs where a project is commissioned which is not necessary or which is unviable or overdesigned, and whose sole purpose is to act as a vehicle for corruptly channeling government funds into the private accounts of corrupt government officers and their associates. In such cases, the initial corruption in conceiving or over-designing the project may rest with the responsible government official and the consultant designer. However, where a contractor takes on such a project while aware or suspicious that the project is corrupt from inception, it too may become implicated in the corruption.

• Bribes included in the contract price. The cost of bribes paid by contractors to corrupt government officials is usually recouped by including the amount of the bribe in the contract price which is paid by public funds.

• Contract prices fraudulently inflated. Where a contract is corruptly awarded, it is often the case that the contract price is significantly inflated, not just to cover the cost of the bribe, but also to maximize profit for the contractor. Where the contractor is assured of success in winning the contract, it will have considerable freedom to demand a high contract price.

• Fraudulent claims approved and paid. Contractors may submit fraudulent claims which are either unmerited or inflated. Bribery of the certifier, or other person responsible for approving the claims, will ensure that the claims are approved. Bribery of the relevant government official will ensure that he does not challenge the approvals and that the claims are paid.

• Contracts awarded and claims approved in the hope of future or indirect gain. In developed countries, the corrupt awarding of contracts and corrupt approval of fraudulent claims may take a more insidious form. Large bribes may not necessarily change hands directly. Favors may consist of a discreet assurance of future employment once a government official leaves office. Such favors may be promised in exchange for preferential award of planning permissions or contracts, or for ensuring that inflated contract prices or claims are left unchallenged.

• Defective or dangerous work product provided. Contractors may use bribery to persuade a certifier to approve defective work product or materials. This can result in projects being provided which are seriously defective and which deteriorate very quickly requiring repair or replacement far earlier than should be the case. Alternatively or in addition, defective work may result in dangerous work places which may cause injury or death. It is the taxpayer who will have to fund any repair or replacement of the defective products and compensate those harmed by them.

In simple terms, corruption in the public sector is stealing from the taxpayer. Money is stolen which could be spent on hospitals, schools, roads, and other vitally important infrastructure. This loss will be felt most severely in poorer countries. It will nevertheless also be felt in developed countries where large sums may be lost through more subtle forms of corruption.

Corruption in the private sector takes the same form as corruption in the public sector but the cost of corruption is not directly borne by public funds. It nevertheless can have widespread and serious consequences. Corruption may have an immediate adverse effect on the cost and quality of the private sector works. It may result in an increase in the financing, capital, operating and maintenance costs of projects. This in turn may result in increased property or utility prices, or increased charges that are required for use of certain facilities such as toll roads or bridges. It may also result in dangerously defective works. All these factors will affect the ordinary population. In the longer term, the effects may include less investment (due to the growing concern to ensure ethical investment) and withdrawal of ethical contractors from the market. This will leave the market even further open to corruption which will then inevitably infect other sectors. It is unlikely that there will be significant corruption in the private sector without such corruption spreading to the public sector.

D. How Individuals May Avoid Liability for Corruption

In order to avoid liability for corruption, an individual should take all possible steps to ensure that he is not involved, whether directly or indirectly, in any corrupt activity. This would include the following:

• They must not be involved in offering, paying, requesting or receiving bribes.

• They must not be involved in any fraudulent or dishonest activity.

• They must not authorize, expressly or impliedly, any corrupt activity.

• They must not participate in any activity which could facilitate corruption. Such activity may include authorizing payment of bribes, drafting illegal agreements, drafting fraudulent claims, falsifying evidence, and giving false evidence in legal proceedings.

• They must not assist in the concealment of any corrupt activity. This does not necessarily mean that a party must report corrupt activity (although in some countries failure to report may be an offense itself). It means that he must not take any positive steps to conceal the corruption.

• They must not commit corrupt activity because they have been requested to do so by their company or by any senior manager.

• Where they are in a position of authority, they must not turn a blind eye to corrupt activity. If he suspects that corruption has occurred, is occurring, or is likely to occur, he must make proper enquiries to establish what has happened or may happen, and take steps to prevent or stop it. However, in all circumstances, the employee should not take any step which is likely to endanger his safety, or that of another person.

IV. Anti-Corruption Reporting Guidance

NagaCorp employees should avoid involvement in any corrupt situation at all times. If an employee observes, becomes aware of or has been confronted with a situation believed to involve corruption and/or corrupt acts, the employee must report that information to the NagaCorp Compliance Officer immediately. The Compliance Officer will be responsible for reporting this information to the CEO and/or Compliance Committee to evaluate and for further action.

If any employee has unintentionally become involved in a corrupt or potentially corrupt situation, they should withdraw from the situation as soon as they become aware that it is a corrupt or potentially corrupt situation, and immediately report the circumstances as described above. No employee will be subject to retaliation as a result of a good faith effort to report activities believed to be corruption or potential corruption.

Company Official Secret: Any unauthorized use or leakage of information may incur legal civil liability and/or criminal liability (wherever applicable), and the Company shall pursue to the full extent allowable by laws in the relevant jurisdictions.

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