CODE OF ETHICS IN ACCORDANCE WITH LEGISLATIVE DECREE No. 231 OF JUNE 8, 2001 DOCUMENT APPROVED BY SO.F.TER. S BOARD OF DIRECTORS ON JUNE 26 th, 2015 1
TABLE OF CONTENTS PAGE INTRODUCTION... 3 1. MINIMUM REQUIREMENTS FOR CODES OF ETHICS ESTABLISHED BY LEGISLATIVE DECREE No. 231/2001... 4 1.1 MINIMUM REQUIREMENTS FOR ADDRESSING INTENTIONAL CRIMES... 4 1.2 MINIMUM REQUIREMENTS FOR ADDRESSING NEGLIGENT OR RECKLESS CRIMES... 5 1.3 SANCTIONS FOR VIOLATING THE CODE OF ETHICS... 6 2. LEGISLATIVE DECREE No. 231/2001... 8 2.1 ADMINISTRATIVE RESPONSIBILITIES OF ORGANIZATIONS... 8 2.2 TYPES OF CRIMES ESTABLISHED BY LEGISLATIVE DECREE No 231/2001... 11 2.3 FURTHER REGULATORY MODIFICATIONS/INTRODUCTIONS... 12 2.4 SANCTIONS... 15 2.5 CRIMINAL ACTORS: SUBJECTS IN UPPER MANAGEMENT OR UNDER THE AEGIS OF THE SAME... 16 2.6 COMPANY INTEREST OR ADVANTAGE... 16 2.7 THE MODEL AS POTENTIAL EXEMPTION FROM ADMINISTRATIVE LIABILITY... 17 2.8 CONFINDUSTRIA GUIDELINES... 19 2.9 GENERAL PRINCIPLES AND GUIDELINE FOR CONDUCT... 21 3. DOCUMENT REVISIONS... 21 DOCUMENT APPROVED BY SO.F.TER. S BOARD OF DIRECTORS ON JUNE 26 th, 2015 2
«The Declaration adopted for the first time in Seoul during the 2008 Congress recognized and memorized, for the first time as an international document, the fundamental human right to a safe and healthy workplace. Buy-in must come from all persons within a company, and they must be mobilized to contribute to the development of a culture of workplace safety and health». The present document was created based on the Guidelines for building Organizational, Management, and Control Models as issued by Confindustria of Italy (last update: March 31, 2008). INTRODUCTION The Code of Ethics represents the Guidelines applied by the Company. The adoption of ethical principles aimed at preventing the crimes defined in Legislative Decree No. 231/2001, constitutes an essential element of the preventative control system. These principles are incorporated into this Code of Ethics. Stated generally, Codes of Ethics are official documents, promulgated by an entity and containing the gamut of rights, duties, and responsibilities shouldered by the same with regards to its stakeholders (employees, vendors, customers, public administration, shareholders, the financial markets, etc.). These Codes aim to encourage, promote, or forbid certain conduct, beyond (indeed, independently of) the minimums set by laws and regulations. They may include sanctions that fit the infraction committed. Codes of Ethics are documents that flow from the will and approval of top management within the organization. To better understand the following descriptions, we start with the Minimum Requirements for Codes of Ethics (or Codes of Conduct) regarding the intentional or negligent/reckless crimes established by Legislative Decree No. 231/2001. System 231 documents are available on the company intranet and website www.softergroup.com. Please note that any given printed copy might not be an updated version. Please therefore note the revision date on any copy consulted. DOCUMENT APPROVED BY SO.F.TER. S BOARD OF DIRECTORS ON JUNE 26 th, 2015 3
1. MINIMUM REQUIREMENTS FOR CODES OF ETHICS ESTABLISHED BY LEGISLATIVE DECREE No. 231/2001 1.1 MINIMUM REQUIREMENTS FOR ADDRESSING INTENTIONAL CRIMES 1.1.1 The organization has an unwavering commitment to abide by all applicable laws and regulations in any country in which it does business. Each employee of the Organization must likewise agree to abide by the laws and regulations of any country in which the Organization operates. That obligation extends to independent contractors, vendors, customers, and for anyone else working with Organization. The latter shall not initiate or proceed into any relationship with a subject who does not intend to abide by that principle. Employees must know the law, and behave accordingly. Should there be any doubts regarding the same, the Organization must be proactive in providing clarification for its personnel. The Organization must ensure a proper training/awareness program to handle issues related to the Code of Ethics on a continuing basis. 1.1.2 Each operation or transaction must be properly recorded, authorized, verifiable, legitimate, transparent, and in line with these principles. All Organizational transactions and operations must be properly recorded, and there must be a means to verify the decision-making process, including the authorization and performance of the transaction or operation itself. Each operation must have proper supporting documentation so that, at any moment, an audit to determine the characteristics and motivations for such operation may be carried out. Moreover, such documentation will allow the person authorizing, performing, recording, or verifying the operation to be properly identified. 1.1.3 Basic principles regarding relationships with Organizational stakeholders: public administration, civil servants, and in the case of entities holding public or other government contracts, private commercial stakeholders. Offering money or gifts to executives, functionaries, or other employees within the Public Administration (hereinafter, P.A. ) or to their relatives (whether Italian or of other nationality) is prohibited, unless the gift or benefits are of a de minimus nature. Unauthorized payments made directly to Italian entities or their employees, and unauthorized payments made via third parties acting on behalf of such entities (whether in Italy or abroad), shall be considered acts of corruption. It is likewise forbidden to offer or accept any valuable article, service, performance, or favor to obtain more favorable treatment in relationship with the P.A. In countries where it is custom to offer gifts to customers or other subjects, such custom may be observed provided the gifts are of an appropriate nature and of modest value, and provided such a gift is given in accordance with the law. Such a gift must never be construed as a solicitation of favor. DOCUMENT APPROVED BY SO.F.TER. S BOARD OF DIRECTORS ON JUNE 26 th, 2015 4
While any business negotiation, request, or relationship with the P.A. is underway, the employee in charge must not seek to improperly influence the decisions of their counterpart, including those of any functionary who negotiate or make decisions on behalf of the P. A. Where a public-procurement contest is under way, one must always operate in accordance with both applicable law and business ethics. Should the Organization avail itself of a consultant or third party to represent the Organization in dealings with the P.A., it must ensure that such consultant or third party abide by the same principles as the Organization s own employees do. Furthermore, in negotiations with the P.A. the Organization shall not be represented by any such third party when a conflict of interest may arise therefrom. Over the course of a specific business negotiation, request, or relationship with the P.A., none of the following actions may be undertaken, whether directly or indirectly: Examination or offers of employment and/or business opportunities that might pose a personal advantage for an employee of the Public Administration Offers or any type of provision of gratuities or gift Solicitations of, or receipt of, confidential information that might compromise the integrity or reputation of either side. There may be, moreover, legal prohibitions against the Organization hiring former P.A. employees or their relatives, where the latter had personally and actively participated in any commercial negotiation, or had advocated for the requests submitted by the Organization to the P.A. Any violation (whether actual or potential) committed by the Organization or by any third party shall be promptly submitted to the proper internal department. The Organization may give contributions to political parties, committees, public organizations, or political candidates, provided it does so in accordance with applicable law. 1.2 MINIMUM REQUIREMENTS FOR ADDRESSING NEGLIGENT OR RECKLESS CRIMES The company must make clear and known via a formal document the fundamental principles and criteria that underlie all decisions (of any type / at any level) related to workplace safety and health. These principles and criteria 1 may be identified as follows: a) Risk avoidance b) Assessment of risks that cannot be avoided c) Combatting risks at their source d) Fit the job to the worker; especially with regards to work placements and the choice of work equipment, as well as the methods of work and production, to alleviate the monotonous or repetitive work and to reduce the effects these types of tasks have on a worker s wellbeing e) Keep pace with technical evolution f) Replace dangerous items with things that are not dangerous, or less dangerous 1 The reference parameter for these principles is made up of general principles regarding workplace safety and health, as established by Article 6, paragraphs 1 and 2 of European Directive No. 89/391 (the Framework Directive ). DOCUMENT APPROVED BY SO.F.TER. S BOARD OF DIRECTORS ON JUNE 26 th, 2015 5
g) Plan accident-prevention, aiming for an overall, consistent program that incorporates technique, work organization, working conditions, social relationships, and the influence of workplace factors h) Give priority to measures of collective protection, over methods of individual protection i) Give workers appropriate instructions. These principles are used by the company to take the necessary measures to protect the health and safety of its workers, and include operations related to preventing professional, informational, and training risks, as well as to provide necessary structure and tools for its personnel. The entire company, from top management to manual laborers, must abide by these principles, in particular when decisions or choices must be made and, thereafter, when those decisions/choices must be implemented [see Article 6, paragraph 2(b) of Legislative Decree No. 231/2001]. 1.3 SANCTIONS FOR VIOLATING THE CODE OF ETHICS A brief description of sanctions for violating the Code of Ethics is now in order, since the implementation of an adequate sanction-matrix is fundamental to the model itself (both for violations of the Code and for its procedures). Violations damage the trust established by the Organization 2 and must therefore trigger disciplinary actions, regardless of any criminal charges brought upon the violator where such conduct constitutes a crime. With regards of type of sanctions available to be meted out, first of all, with regards to regular (full-time or part-time) employees, any sanction must abide by the procedures in Article 7 of the Worker s Code and/or by any other applicable regulations. Where violations of the Code of Ethics (and the procedures flowing from the same) might lead to technical/organizational problems, the employee may be trained for a position in another company area, as long as such a move does not constitute a demotion. With regards to an employee transfer (meaning the movement from one production unit to another), such a step is foreseeable as a disciplinary procedure provided it is expressly listed among the disciplinary measures established within any collective-bargaining agreement, and by the disciplinary codes adopted upon implementation of the same, at a company-wide level. Where such precursors do not exist, that step may only be authorized when the technical, organizational, or productive prerequisites established by Article 2103 of the Italian Civil Code apply. Because of their disciplinary effect, the Code of Ethics and related procedures whose violation comports sanctions must be inserted into company disciplinary policy (if any exists) or formally stated to be binding of all those to whom the model applies (e.g., via an internal memo or formal communication), as well as made available as required under Article 7, paragraph 1(l) No. 300/1970, via posting in an area accessible by all, and conspicuously highlighting the sanctions related to different violations. Should an independent contractor, vendor, or other contractor violate an ethical norm, contract termination may provide a succinct remedy. To that end, an express-termination clause making explicit reference to the Code of Ethics provisions may be inserted into supply or collaboration (agency, partnership, subcontracting, etc.) agreements. 2 See Articles 2104 and 2105 Civil Code: duties of diligence and loyalty of the worker towards his/her employer. DOCUMENT APPROVED BY SO.F.TER. S BOARD OF DIRECTORS ON JUNE 26 th, 2015 6
Examples of potential sanctions, diversified by role: 3 TYPE SANCTION CCNL REFERENCE [Italian Collective Bargaining Contract] WORKERS PRINCIPALS MANAGEMENT EXECUTIVES sanctions from verbal warning to suspension sanctions from written warning to suspension sanctions from suspension to termination for cause termination for cause OTHER TYPES OF CONTRACTS - INDEPENDENT CONTRACTORS - SUB CONTRACTORS anticipatory contract termination, and potentially a claim for damages Furthermore, to underscore what was previously stated, we note that the company s Legal Representative is required, in accordance with Legislative Decree No. 231/01 Rules regarding Administrative Responsibilities for Legal Persons, Companies, and for Associations with or without Legal Capacity and by Article 2392 of the Italian Civil Code Obligations towards the Company, both to adopt and ensure adherence to the same, as recently emphasized by the Court of Milan (Section VII, Civil Docket) in its opinion No. 1774 of February 13, 2008. To the immediately preceding information we also add the Supreme Court s opinion No. 38991/2010 wherein, on the facts of a company in which 11 workers died from causes related to asbestos-inhalation diseases, an entire Board of Directors was found to be liable. Following an acquittal at the trial level, in fact, both the Court of Appeals as well as the Supreme Court condemned fourteen persons: the entire Board of Directors, the C.E.O., the Plant Director, and all executives, based on a violations of workplacesafety provisions held to be egregious, repeated, and systemic at the Verbania plant, with regards to asbestos exposure from 1972 to 1996. In the words of the Supreme Court: «the delegation of functions to one or more directors (with specific oversight on workplace-safety issues) does not thereby absolve the other members of the Board of Directors, even in a complex, well-organized company, with regards to high-level organizational choices regarding the organization of processes that relate directly to the Employer s sphere of responsibility». The court en banc further noted that «the Supreme Court has had, through a number of opinions, the 3 For Top Management (Directors, Auditors, Chairmen of the Board of Directors, Statutory Auditors etc.) infractions will be evaluated on a caseby-case basis DOCUMENT APPROVED BY SO.F.TER. S BOARD OF DIRECTORS ON JUNE 26 th, 2015 7
opportunity to establish that within corporations, the duties regarding workplace safety and health imposed by the law on the Employer, weigh jointly and severally on the members of the Board of Directors». Furthermore, the Supreme Court noted the right of the following entities to claim both economic and non-economic damages: Unions and other labor organizations Associations who in various ways have always stood by workers in hazardous jobs. The Court, in fact, held: the Union may have been subject to an «economic harm due to the reduction of member-workers dues to an upset in the faith workers have in its ability to represent them». 2. LEGISLATIVE DECREE No. 231/2001 2.1 ADMINISTRATIVE RESPONSIBILITIES OF ORGANIZATIONS Legislative Decree No. 231 (June 8, 2001) regarding the Rules regarding Administrative Liability for Legal Persons, Companies, and for Associations with or without Legal Capacity enacted on July 4, 2001, which implemented the Law-Decree No. 300/2000, introduced into Italian law in conformity with European laws and regulations a new level of culpability labeled administrative (i.e., characterized by an specifically punitive nature), imposed on organizations, legal persons, and companies, arising out of either the commission or attempt to commit certain types of crimes to further the advantage or interest of the companies themselves. Such responsibilities line up with the criminal culpability for the physical person who materially committed the act that constitutes a crime. Until Legislative Decree No. 231/2001 was enacted, the principle of personhood with regards to criminal liability shielded companies from sanctions, except for claims for damages and for the civil liability for paying fines or amends inflicted on physical persons, but only in cases where the actual criminal culprit was never found (Articles 196 and 197 Italian Criminal Code). The introduction of this new, stand-alone type of liability, of a criminal nature, allows for a direct hit against organizational assets where such organizations have gained an advantage, or simply had an interest, with regards to the commission of certain crimes by physical persons / criminal culprits of the illicit act who impersonate the company or who at any rate act in the interests of the same. Furthermore, where the Organization is found guilty under Decree 231, the directors, besides being held criminally accountable for the crimes committed, also run the risk of civil liability for inadequate administrative oversight under Article 2392 of the Italian Civil Code, Responsibility towards the Company ( corporate malfeasance ). Before examining the above-mentioned regulation in greater detail, we will set forth an important preamble. Article 6, paragraph 6 of Legislative Decree No. 231/2001 notes the essential characteristic for DOCUMENT APPROVED BY SO.F.TER. S BOARD OF DIRECTORS ON JUNE 26 th, 2015 8
building an organizational, management, and control model. In particular, letters (a) and (b) of that provision expressly refer to a type of risk-management system. 4 The regulation lays out the two principal phases for such a system: a) Risk Assessment: that is, the analysis of the company environment to highlight where (in which activity area/sector) and by what means, adverse events (with regards to Legislative Decree No. 231/2001) have a chance of occurring 5. b) Designing a control system (the protocols for coordinating training, and implementing Organizational decisions), that is, the evaluation of the system existing within the Organization, and its improvement (if necessary) to build a capacity to effectively combat the risks identified, or rather, to reduce their probability to an acceptable level. Reducing a risk means intervening (jointly or separately) on two dispositive factors: (1) the probability that such an event should occur; and (2) the impact of the adverse event itself. To operate effectively, however, a system cannot be reduced to a single run. Rather, it must be a continuous process that must be repeated at reasonable intervals, and especially during times of significant company changes (the opening of new locations, increasing operations, acquisitions, restructurings, etc.). With regards to the risk of unlawful conduct related to workplace safety and health, such a system must necessarily keep pace with applicable law and in particular with Legislative Decree 81/08 (as subsequently modified and supplemented). That legal and regulatory framework, indeed, defines a system of mandatory principles and obligations, which must pervade the structure of any company system applying the same. Where properly integrated/fitted into the organizational model proposed by Legislative Decree No. 231/2001, it may prove suitable for reducing these to an acceptable level, with regards to the exonerating effects of the Decree itself, and the possibility of a conduct which integrates the details of the crimes of manslaughter or negligent serious/egregious injury resulting from a violation of workplace safety and health regulations 6. 4 With regards to the extension of delegated powers, and the risk of such crimes being committed, the models in a(1) must meet the following needs: a) Identify the activity in which crimes might be committed; b) Lay out specific protocols for training, and for the implementation of Organizational decisions with regards to the crimes to be prevented. 5 With regards to the risk of conduct including the crimes of manslaughter and serious or egregious negligent injury with violation of workplace safety and health regulations, the analysis must necessarily include the entire gamut of company areas/activites. 6 The notion of acceptability stated above involves risks of deviant conduct with regards to the organizational mode, as well as the underlying risks to workplace safety and health which, according to the principles of the legal and regulatory environment, must nevertheless be entirely eliminated with regards to the know-how acquired through technical progress and, where that is not possible, to be reduced to a minimum and subsequently managed. DOCUMENT APPROVED BY SO.F.TER. S BOARD OF DIRECTORS ON JUNE 26 th, 2015 9
RISK MANAGEMENT PROCESS EXAMPLE: It follows, therefore, that the model and the related measures must be structured so that the agent not only must intend for the crime to occur, but must implement his criminal deed only by acting fraudulently by the use of artifice and/or subterfuge 7 with regards to Organizational instructions. The measures, taken as a whole, which the criminal actor wishes to violate must be forced and would have to be undertaken with regards to specific activities considered risky by the Organization, in terms of the specific crimes connected to the same. For negligent or reckless crimes, on the other hand, the criminal actor must have intended the act, but not the consequences. The Company has an interest in the requirements of Legislative Decree No. 231/2001 because just like any other company it has risk exposure for the corporate crimes introduced by Legislative Decree No. 61/2002, and also because in its dealings with the Public Administration, it has risk-exposure for crimes in which the victim is the P.A. 7 Artifice: the manipulating or transfiguring external reality, induced by simulating facts or circumstances that in fact are non-existent. Subterfuge: fake operations created through words and discussions that allow a falsehood to be perceived as truth. DOCUMENT APPROVED BY SO.F.TER. S BOARD OF DIRECTORS ON JUNE 26 th, 2015 10
2.2 TYPES OF CRIMES ESTABLISHED BY LEGISLATIVE DECREE No. 231/2001 8 The types of crimes which, pursuant to Legislative Decree No. 231/2001 (as subsequently amended or supplemented), might give rise to administrative culpability within the company are only those expressly and absolutely enumerated by the Legislator. The list below includes the crimes predicated on administrative culpability for organizations falling under Legislative Decree No. 231/2001, as posted on the webpage Confindustria - Legislative Affairs Section - on October 26, 2011 (i.e., the most updated version available as of this writing). Specifically: 1. Undue influence for disbursements, fraud against the State or a public entity, or for the performance of public disbursements and cyber-fraud against the State or a public entity (Art. 24, Legislative Decree No. 231/2001) 2. Cybercrimes and unauthorized use of data (Art. 24-bis, Legislative Decree No. 231/2001) [article added from Law No. 48/2008] 3. Acts of organized crime (Art. 24-ter, Legislative Decree No. 231/2001) [article added from Law No. 94/2009 and modified by Law No. 69/2015] 4. Extortion, undue influence for giving or promising any other benefit, and corruption (Art. 25, Legislative Decree No. 231/2001) [article modified by Law No. 190/2012 9 ] 5. Counterfeiting currency, legal tender, tax stickers, or of any other recognized instrument or sign (Art. 25-bis, Legislative Decree No. 231/2001) [article added by Law-Decree No. 350/2001, converted with modifications from Law No. 409/2001; modified by Law No. 99/2009] 6. Crimes against industry and commerce (Art. 25-bis.1, Legislative Decree No. 231/2001) [article added from Law No. 99/2009] 7. Corporate crimes (Art. 25-ter, Legislative Decree No. 231/2001) [article added from Legislative Decree No. 61/2002, modified by Law No. 190/2012 and by L. 69/2015] 8. Crimes motivated by terrorism or subversion of the democratic order, as codified by the criminal code and special laws (Art. 25-quater, Legislative Decree No. 231/2001) [article added from Law No. 7/2003] 9. Female genital mutilation (Art. 583-bis Criminal Code) (Art. 25-quater.1, Legislative Decree No. 231/2001) [article added from Law No. 7/2006] 10. Defamation and other crimes (Art. 25-quinquies, Legislative Decree No. 231/2001) [article added from Law No. 228/2003] 11. Felonies relating to improper use of the market (Art. 25-sexies, Legislative Decree No. 231/2001) [article added from Law No. 62/2005] 12. Felonies of manslaughter and negligent or reckless serious or egregious injury, committed as a result of workplace safety, health, and accident-prevention regulatory violations (Art. 25-septies, Legislative Decree No. 231/2001) [article added from Law No. 123/2007] 13. Receipt, laundering, or use of money, assets, or benefits from illicit sources, as well as internal moneylaundering (Art. 25-octies, Legislative Decree No. 231/2001) [article added from Legislative Decree No. 231/2007; modified by Law No. 186/2014] 8 This list was created by Confidustria s Legislative Affairs Section; for a detailed list of crimes, please see the original legislation. 9 Article 1, paragraph 77 of Law No. 190/2012 introduces among the crimes predicated on Administrative Liability pursuant to Legislative Decree No. 231/01: - in Article 25 Legislative Decree No. 231/01 the felony of "Incitement to give or promise a benefit " (art. 319-quater Criminal Code) - in the new subpart s-bis of Article 25-ter of Legislative Decree No. 231/01, the felony of "Corruption among individual actors," with regards to the corrupting actor s active corruption alone (Article 2635, paragraph 3 Civil Code) DOCUMENT APPROVED BY SO.F.TER. S BOARD OF DIRECTORS ON JUNE 26 th, 2015 11
14. Crimes related to copyright infringement (Art. 25-novies, Legislative Decree No. 231/2001) [article added from Law No. 99/2009] 15. Witness tampering (whether to influence them to refuse to testify, or to perjure themselves) (Art. 25-decies, Legislative Decree No. 231/2001) [article added from Law No. 116/2009] 16. Environmental felonies (Art. 25-undecies, Legislative Decree No. 231/2001) [article added from Legislative Decree No. 121/2011, modified by Law No. 68/2015] 10 17. Use of out-of-status immigrant labor (Art. 25-duodecies, Legislative Decree No. 231/2001) [article added from Legislative Decree No. 109/2012] 18. Trans-national felonies (Law No. 146/2006) [Administrative culpability may be predicated on the previously listed crimes, if committed in a manner that crosses national boundaries]. 2.3 FURTHER REGULATORY MODIFICATIONS/INTRODUCTIONS We also note that the Council of the European Union, with the framework decisions noted hereafter, required that the Member States adopt - by January 27, 2015; June 22, 2005; January 20, 2006; and May 12, 2006, respectively - all measures necessary to regulate the following in a criminal venue: Conduct contrary to environmental protection (EU Council, January 27, 2003 Framework Decision No. 2003/80/GAI, related to protecting the environment via criminal sanctions) The issues of corruption in the private sector (EU Council, July 22, 2003 Framework Decision No. 2003/568/GAI, regarding corruption in the private sector) Sexual exploitation of children (EU Council, December 22, 2004 Framework Decision No. 2004/68/GAI, related to the fight against the sexual exploitation of children and child pornography) Lanzarote Treaty (signed October 23, 2012, the Italian Law which ratified this treaty to protect children from sexual abuse and exploitation). This treaty arose as a fundamental expression of the attention that the European Council has always given to policies aimed at protecting children, and manifests the efforts the Council expects its Member States to make to protect the rights of society s youngest and most vulnerable, and to combat the terrible crimes that victimize them. It constitutes the first international legal instrument used to require the States to prevent, and to criminalize, all forms of sexual abuse and exploitation. It is therefore a binding treaty for the countries that signed it. The Treaty became effective for those countries ratifying it, on July 1, 2010. For all other details, please see the text of the Treaty itself. Illegal drug trafficking (EU Council, October 25, 2004 Framework Decision No. 2004/757/GAI, regarding establishing standardized minimums within the elements of these crimes, and the applicable sanctions related to drug trafficking) These decisions further require that each Member State adopt necessary provisions so that the proper legal persons may be held responsible, according to the circumstances and conditions indicated therein, for the illegal acts to which the introduced criminal provisions apply. In terms of environmental crimes, the application of criminal law indicates a greater awareness of the impact of these crimes and consequently, the need for a greater deterrent. 10 Legislative Decree No. 121 of July 7, 2011. Implementation of EU Directive 2008/99/CE regarding environmental crimes, as well as EU Directive 2009/123/CE which modified directive 2005/35/CE relating to pollution caused by ships, and the introduction of sanctions for violating the same. (Italian Official Gazette No. 177 on 8/1/2011), effective as of August 16, 2011. DOCUMENT APPROVED BY SO.F.TER. S BOARD OF DIRECTORS ON JUNE 26 th, 2015 12
Environmental protection, in fact, was recognized as an eminent principle of the order, both by the Constitutional Court as by the Supreme Court (Opinion No. 210 from May 8, 1987 had already labeled the environment as a fundamental human right), with a clear anchor in Article 9, Section 2 of the Italian Constitution (landscape protection) as well as Article 32 of the Italian Constitution (protection of health as a fundamental human and collective right). Consider that EU Directive 2008/99/CE emanated by the European Parliament and by the Council on November 19, 2008 on sanctions for environmental crimes was published in the Official Gazette of the European Union (G.U. UE L 328/28; December 6, 2008). That Directive, which became effective on the twentieth day following its publication in the Official Gazette (12/26/2008), would have to have been implemented by Member States by December 26, 2010. 11 Directive 2008/99/CE reflects the general principle promulgated by the Court of Justice (Opinion in cause No. C-176/03 from September 13, 2005), according to which the European Community s authority to implement policies and actions for the good of the Union, pursuant to Articles 2 and 3 of the EC Treaty, also includes the power to request Member States to apply adequate criminal sanctions. Indeed, that opinion put an end to the controversy regarding its authority over environmental crimes, which had been sparked by the Court s abrogation of Framework Decision 2003/80/GAI regarding protecting the environment using criminal measures. Directive 2008/99/CE aimed to create a punitive-criminal system able to guarantee the effective and standardized application of Union environmental laws and regulations. In terms of application, it was destined to have a ripple effect across the criminal codes of the individual Member States, insofar it criminalized (at an EU level) conduct having one or more of the following effects: environmental harm traceable to natural and/or legal persons; conduct leading to serious health effects (death or serious injury); or any significant deterioration of the quality of the air, soil, flora or fauna. To that end, using a formula established at a Union level, the Directive required Member States to adopt effective, proportionate and deterrent sanctions against natural or legal persons, albeit without setting any mandatory sentencing minimums. The aim was to harmonize responses to unlawful acts, notwithstanding any other types of liability for environmental damages already built into EU or national laws and regulations, and subject to the right of each member state to enact stricter criminal provisions for the same. The Directive identified a list of conduct that at the least restrictive level would be considered unlawful, whether committed intentionally or through gross negligence (Article 3). The unlawful nature of the acts derives from the fact that they came to being in violation of EU law (or national law implementing the same) on environmental protection. (see Addenda A and B of the Directive itself). 11 On July 7, 2001, CDM approved the procedure for receiving Directive 2008/99 and 2009/123 regarding environmental protection as a modification of Legislative Decree No. 231/2001: administrative culpability for environmental crimes was thereby extended to Companies (Art. 25-undecies). The new decree will become effective once published in the Italian Official Gazette. (see previous footnote). DOCUMENT APPROVED BY SO.F.TER. S BOARD OF DIRECTORS ON JUNE 26 th, 2015 13
Among the main crimes enumerated by the European legislators were (as an example), those connected to acts of: (a) (b) (c) (d) (e) (f) (g) dumping, emission, or introduction of ionizing substances or radiations into the air, soil, or water; collection, transportation, breakdown or, in general, the unlawful handling of waste; running industrial plants in which dangerous activities occur; production, processing, use, deposit, or breaking down of nuclear materials and dangerous radioactive substances; production, import/export, marketing, or use of substances that destroy the ozone; habitat destruction within protected sites; and killing, destroying, possessing, or selling protected animal and plant species. Likewise, solicitation or incitement to commit any of the acts above was likewise criminalized. With regards to more recent introductions, as noted above, Private-Sector Corruption and Unlawful Immigration were also criminalized. For the former, Law No. 190 of 11/6/2012 (Popular name: Anti- Corruption Law), Provisions for the prevention and repression of corruption and illegality in public administration published in Italian Gazzetta Ufficiale No. 265 (11/13/2012), new precursor crimes from the group of those established and criminalized by Legislative Decree No. 231/2001. A few of the prescriptions enumerated in the UN treaty against corruption (10/31/2003, the Merida Treaty, ratified by Law No. 116/2009) were received and implemented, as well as the criminal treaty on corruption approved by the European Council on 1/27/1999 (the Strasbourg Treaty, ratified with Law No. 110/2012). The Company may also be answerable for undue incitement to give or promise benefits (Article 319- quater Criminal Code) and for the new subpart s-bis of Article 25-ter Legislative Decree 231/01, for the crime of private-sector corruption (Article 2635 of the Civil Code). Specifically, the crime of undue incitement to give or promise benefits under the new Article319-quarter of the Criminal Code, introduced within the channel of precursor crimes of Legislative Decree No. 231/2001 at Article 25 (next to corruption and extortion) sanctions except where the facts form the elements of a more serious felony conduct by the Public Official or Civil Servant who, in an abuse of his/her position or powers, incites someone to unduly give or promise, whether to the person himself or to a third party, money or other benefit, as well as the conduct of he/she who gives or promises money or other benefit (to the Public Official or Civil Servant). With regards to the incitement mentioned above, it is important to understand how the legal framework has changed compared to before the Anti-Corruption Law. With the felony of unlawful incitement, regulated as we mentioned by Article 341-quarter of the Criminal Code, for the first time we have a punishment of the private individual who has unduly incited the Public Official or Functionary via an illicit promise or donation. Punishment shifts to the private individual since from victim he/she becomes a necessary participant in the crime. Essentially, he/she is punished because of that discretion, since he/she might benefit from a direct advantage and might therefore decide to give or promise a benefit. With regards to the second felony, as published in Italian Gazzetta Ufficiale No. 172 (7/25/2012) and effective 8/9/2012, Legislative Decree No. 109 (7/16/2012) implemented Directive 2009/52/CE on the minimum sanctions and provisions with regards to Employers engaging foreign labor who are out of status in terms of immigration. Culpability thereby extends to the organizations when exploitation of DOCUMENT APPROVED BY SO.F.TER. S BOARD OF DIRECTORS ON JUNE 26 th, 2015 14
out-of-status labor exceeded certain predetermined limits (of number of works, age of the same, and working conditions) as set in Legislative Decree No. 286/98, known as the Immigration Omnibus Act. On that note, we highlight the Supreme Criminal Court opinion No. 18603/2013 which allows for a company to be seized upon verification of their use of unauthorized labor. On April 24, 2013, the high court affirmed the right to seize a company when it makes predominant use of an unauthorized, out-of-status workforce in its operations. Therefore, if there are any indicia that even some of the company s assets have been used to consummate that felony, pursuant to Legislative Decree No. 231/2001 ( Company s administrative culpability for its employees and contractors), the entire company may be subject to preventative seizure, based on the pertinence ratio between the company asset and the crime committed. NOTE: with regards to the precursor crime of illegal immigration, based on what was noted above, a company should take heed to prohibit the employment of persons without legal status in the country, as well as to conduct periodic verifications on any foreign workers immigration paperwork. 2.4 SANCTIONS Sanctions established by the law, to be borne by the company consequent to the commission or attempt to commit the specific crimes mentioned above consist of: ECONOMIC SANCTION of a minimum of 25,822.84 to a maximum of 1,549,370.69 (and seizure, as a bond for the same). The amount for the sanction is established via a proportionate system of quotas. Phase 1 Monetary value of quotas based on the Organization s financial status, Phase 2 The number of quotas is set based on indices that track the severity of the crime. Article 12 of the decree incudes cases where the economic sanction may be reduced PROHIBITIVE SANCTIONS between three months and two years, which in turn may consist of: a freeze on all company operations; suspension or revocation of permits, licenses, or concessions that aided in the commission of the unlawful act; prohibition against soliciting or entering public or government contracts; exclusion from favorable tax treatments, financing, or subsidies, and potentially a revocation of any previously received; prohibition to advertise goods or services; CONFISCATION OF THE PROFIT the company received thanks to the crime (seizure, as a preliminary matter); PUBLICATION OF THE VERDICT (which may be made available where a prohibitive sanction has been applied). Prohibitive sanctions apply only to those crimes for which it has explicitly been allowed, and where at least one of the following conditions applies: the company has made a substantial profit off of the crime, and it was carried out by top management or by subjects under the aegis of the same where, in the latter instance, the crime was made possible or determined by a severe lack of administrative oversight; DOCUMENT APPROVED BY SO.F.TER. S BOARD OF DIRECTORS ON JUNE 26 th, 2015 15
where unlawful conduct is repeated. Sanctions related to a freeze on operations, the prohibition to contract with the public sector, and the prohibition against advertising goods and services may be applied in the most serious of cases as a permanent measure. 2.5 CRIMINAL ACTORS: SUBJECTS IN UPPER MANAGEMENT OR UNDER THE AEGIS OF THE SAME Legislative Decree No. 231/2001 establishes that a company is responsible for acts committed in its own interests or for its own advantage: By persons who are representatives of the company, or who serve in a directorial or management function within the Organization or any one of its departments having financial/functional autonomy, as well as by any person who exercises even on de-facto basis management and control of the Organization itself, (these are the upper management persons in accordance with Article 5, paragraph 1, subpart (a) of Legislative Decree No. 231/2001 By persons subject to the direction or oversight of a member of upper management (that is, persons under the aegis of upper management [Article 5, paragraph 1, subpart (b) of Legislative Decree No. 231/2001]. The company is statutorily precluded from liability (Article 5, paragraph 2, Legislative Decree No. 231/2001) if the persons listed above acted exclusively in their own interests, or in the interests of a third party. 2.6 COMPANY INTEREST OR ADVANTAGE Culpability only arises where a subject tied in some manner to the Organization commits one of the crimes above, and only where such conduct was undertaken in the interest or for the advancement of the same. Therefore, the conduct need not lead to a specific advantage (economic or otherwise) for the Organization; even where such a concrete result does not come to light, the mere pursuit of an Organizational interest in committing the crime would suffice. In terms of defining interest and advantage, the governmental Report accompanying Legislative Decree No. 231/2001 defines the former as a subjective value, that is, referring to the will of the actor (natural person) committing the crime (who must have undertaken the act with the intent to further a specific interest of the Organization, whereas the latter is defined as having an objective quality referring to the actual results of the conduct (the reference is to cases in which the criminal actor, even without a specific intent to further an organizational interest, nevertheless obtains an advantage for the same.) The Report concludes that the inquiry into the existence of the first requisite (interest) requires a verification of what took place upstream and conversely the inquiry into the advantage garnered by the organization even where the natural person did not act according to a specific organizational interest always requires an inquire downstream reviewing simply the result of the criminal act. DOCUMENT APPROVED BY SO.F.TER. S BOARD OF DIRECTORS ON JUNE 26 th, 2015 16
Paragraph 2 of Article 5, Legislative Decree No. 231, supra, limits the type of liability, excluding those cases where the crime, even when it turns out to be advantageous for the Organization, was committed by a subject intent solely on pursuing his or a third-party s interest. The law should be read jointly with the provisions of Article 12, paragraph 1, subpart (A), which holds that economic sanctions may be reduced where «the criminal actor committed the act predominantly in his own, or a third-party s interest, and the Organization obtained no advantage or minimum advantage from the same». If, therefore, the subject acted both his own and an Organizational interests, sanctions may lie. Where the actor s interest predominates over that of the Organization, the sanction may be mitigated provided that the Organization obtained either no, or minimum, advantage from the commission of the illicit act. Finally, where it is found that the subject acted solely in his own interest (or that of a third party), the Organization shall not be liable, regardless of any advantage derived from the criminal act. 2.7 THE MODEL AS POTENTIAL EXEMPTION FROM ADMINISTRATIVE LIABILITY Article 6 of Legislative Decree No. 231/2001, in introducing the above-cited framework for liability, contemplates that a company may be exempted from liability even upon commission of one of the listed crimes if it can show: a) the governing body had adopted and effectively implemented prior to the crime being committed Organizational and Management Models suitable for preventing the type of crime committed b) the task of overseeing the functionality, efficacy, and adherence to the same, as well as for keeping the system updated, was entrusted to an internal body equipped with autonomous authority to conduct audits and create initiatives (an Oversight Entity) c) natural persons committed the crime by fraudulently evading the Organizational and Management Models d) the Entity noted in (b), supra, did not provide insufficient oversight, or fail to provide oversight altogether. Legislative Decree No. 231/2001 also defines the content for Organizational and Management Models, establishing that these must respond to the following needs (with regards to the extension of delegated powers, and the risk that a crime be committed): a) Identify the operations in which crimes might be committed b) Lay out specific protocols for training, and for implemented company decisions related to the crimes to be prevented c) Identify the means of managing financial resources suitable for preventing the commission of those crimes d) Establish reporting duties for the entity tasked with overseeing the functioning of the Management Model, and adherence to the same e) Introduce an appropriate disciplinary system to sanction failures to abide by the measures prescribed in the Organizational Model. The adoption of an Organizational and Management Model specifically calibrated for those crimes which expose the Company to actual liability and aimed at preventing - by establishing codes of conduct DOCUMENT APPROVED BY SO.F.TER. S BOARD OF DIRECTORS ON JUNE 26 th, 2015 17
- the commission of such unlawful acts, fulfils a preventative function and constitutes the first layer of a system aimed at risk management. The company will therefore not be subject to sanctions in all situations where it has adopted organizational measures aimed at avoiding the commission of such crimes that are: Appropriate; that is, aimed at ensuring the proper carrying out of operations in a legal manner, as well as to quickly uncover and eliminate risky situations; Effective; that is proportional to the need to ensure compliance with the law, and therefore subject to periodic updates with the aim of undertaking any modifications rendered necessary by material violations to the rules, or where the company or its operations have undergone changes. Consequently, there must be a disciplinary system able to sanction a failure to abide by organizational regulations. Adoption of such a tool is not required for the Company, but is simply an option one that allows for a potential exemption from liability and other benefits (reduced sanctions). To follow up on that last note, we add that even through the above-cited law makes the systems optional or rewards-based, Organizations compliance with the regulations in question (and therefore the adoption of a 231 Model ) is increasingly a de-facto obligation for companies. Some Regional regulations in Italy (e.g., in the Regions of Lombardy and Calabria) do in fact require 231 Model as a requisite for all organizations intending to carry out training services and which intend to seek contracts with the Region itself. Also bear in mind that in an opinion of the Court of Milan (Section VIII, Civil Docket; No. 1774, February 13, 2008), entered a verdict against a company which had incurred a civil judgment (under Article 2392 of the Civil Code) related to its negligent conduct (corporate malfeasance), for not having adopted an Organizational Model due to the C.E.O. s failure to act. Therefore the adoption of a suitable Model aimed at preventing the risk of such crimes within the Organization is a management decision which, albeit left to the discretion of the governing body, may allow the Organization to avoid administrative culpability and moreover, the application of prohibitive and economic sanctions. Legislative Decree No. 231/2001 also contemplates that the Models may be adopted based on codes of conduct drafted by industry associations, and communicated to the Ministry of Justice who, acting with other competent Ministries, may issue (within 30 days of receipt) advisory opinions on the capacity of the Model to prevent crime (Article 6, paragraph 3, Legislative Decree No. 231/2001). The present Model is based on indications provided by Confindustria in its document Guidelines for building organizational, management, and control models published March 31, 2008, and updated with the precursor-crimes on October 26, 2011. DOCUMENT APPROVED BY SO.F.TER. S BOARD OF DIRECTORS ON JUNE 26 th, 2015 18
2.8 CONFINDUSTRIA GUIDELINES To implement the provisions of Article 6, paragraph 3, of Legislative Decree No. 231/2001, Confindustria defined its own Guidelines for building organizational, management, and control models pursuant to Legislative Decree 231/2001, which provide its consortium of companies with methods for identifying areas of risk, and structuring organizational, management, and control models. The Guidelines encourage companies to use risk-evaluation and risk-management processes, and define the following phases to lay out the Model: identify areas of risk; lay out and/or implement a control system suitable to prevent the risk of crime via the adoption of specific protocols. The salient components of such as system as defined by Confindustria are: a) a Code of Ethics b) a sufficiently formal and clear organizational system, especially with regards to: how responsibility is allocated; chains of command; job descriptions; and with a specific provision for auditing principles, such as the juxtaposition of functions c) annual and/or electronic procedures aimed at regulating operations, punctuated by control checkpoints d) authority and signing power that align with defined organizational and management responsibilities, which allows for (upon request) a clear indication of the limits of expenses that may be approved e) management and control systems able to quickly alert management of the existence or insurgence of a general or specific critical situation f) communication with, and training for, personnel. The list of control systems must be informed by principles of: 1) The ability to verify, document, and demonstrate the alignment and consistency of every operational decision or choice 2) Application of the principles of separation of functions/tasks 3) Documentation of controls and audits 4) The laying out of an appropriate disciplinary system for violating the Code of Ethics and procedures established under the Model 5) Autonomy, independence, professionalism, and perpetuity of the Oversight Board 6) Identification of selection criteria for the Oversight Board, and establishment of specific lines of communication to/from the same 7) A possibility within more complex company groups for organizational solutions that center the functions set out in Legislative Decree No. 231/2001 within the parent group, provided that: Each subsidiary have its own Oversight Board pursuant to Article 6, paragraph 1, subpart (b) (except that this function may be given directly to the governing body of the subsidiary where the subsidiary s relatively small size warrants it) It is possible, for the subsidiary s Board to avail itself of resources at its counterpart in the parent company DOCUMENT APPROVED BY SO.F.TER. S BOARD OF DIRECTORS ON JUNE 26 th, 2015 19