Fraud Reporting
Procedures
Approved by the Directory of Celulosa Arauco y Constitución S.A.
2008
Index
Application and Scope
Fraud Reporting
Page 2 of 11
Objective
Definition
Protection of Fraud Reporters Channels for Reporting Fraud
Reception of the Fraud Claim
Registering the Fraud Claim
Handling the Fraud Claim
Confidentiality
Investigation Report
Fraud Claim Resolution
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Application
and Scope
Objective
The objective of this document is to define the procedure for fraud
reporting, the investigation and its solutions. The aim is to guarantee
the anonymity of the reporter of the claim, avoid information leakage,
avoid the involvement of innocents and to guarantee appropriate legal
action.
Celulosa Arauco y Constitucion S.A. and its affiliates (Arauco) have
adopted this program in order to receive, accept, investigate and act
in case of any direct or anonymous reports of fraud. These may be
made by workers, clients, suppliers, shareholders or third parties, and
involve all matters related to the compliance with Business Principles,
Ethical Conduct Regulations, Conflicts of Interest or, all aspects
related to the non-compliance with regulations, internal control,
alteration of Financial Statements and “Situations or acts that require
the attention of the Management and/or the Board of Directors”,
providing distorted tips or information to either the market, investors,
proprietors, clients or creditors, with respect to the reality of the
company and to guarantee the anonymity of the informant, avoid
information leakage and avoid involving innocents and to guarantee
legal action.
All submitted claims shall be independently analyzed, be kept
confidential and shall not result in any reprisal.
Definition
By virtue of this code, fraud shall be defined as a complete range of
irregularities and illegal acts which are characterized by intent to deceive. These acts of fraud can be perpetrated to benefit or damage the
Company and can be carried out by external persons or employees of
the Company.
Fraud can de defined as the intentional use of a deceit, a trick or some
dishonest means which seeks to induce an error from a particular
person, to cause property damage.
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Application
and Scope
Definition (continued)
The following are examples of acts of fraud for the benefit of the
Company:
- The sale or assignment of fictitious or falsified assets.
- Inappropriate payments, such as illegal political
contributions, bribes, payments to government officials,
payments to intermediaries of government officials, or to
clients or suppliers.
- Irregular or premeditated entry or valuation of transactions,
assets, liabilities or benefits.
- Irregular or premeditated transfer prices (for e.g. valuation
of goods interchanged between related companies).
- Irregular or premeditated transactions between related
parties, in which one of the parties receives a benefit, which
would not have been obtained without favorable treatment.
- Intentional errors in the registry or publication of relevant
information with the intention of improving the financial
status of the Company to third parties.
- Prohibited business activities, such as those which violate
the law, regulations or contracts.
- Tax fraud.
The following are examples of acts of fraud for the direct or indirect
benefit of the employee, of an external third party or one belonging to
another organization:
- Receiving bribes or payoffs.
- Deviation of a potentially lucrative transaction to an employee or to an external third party, which would have generated benefits for the Company under normal circumstances.
- Embezzlement, described as the fraudulent appropriation of
money or properties, and the subsequent falsification of the
financial statements to conceal the act, making its detection
difficult.
- Intentional concealment or falsification of facts or data.
- Claims made for goods or services not in fact provided to
the Company.
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Reporting
Fraud
Protection of the
Fraud Reporters
This Procedure offers protection against any discriminatory measure,
resulting from the claim, adopted by Arauco against the employee
who made the claim in good faith and within the parameters of this
procedure.
In order to facilitate the obligation the employees have to report
facts, conducts or circumstances that may constitute, in their best
judgment, a breach of this Code, the following channel shall be used
for reporting a claim.
In line with Arauco policies and principles, no reprisals or intention
of reprisal may be taken, under any circumstance, against any person
who reports acts of fraud to Arauco, in good faith and within the
parameters of this Procedure.
Channels for
Reporting Fraud
i. Regular mail: The informant can make the claim by means of a
confidential letter, addressed to the Secretary of the Board or any of
its members. The claim shall not be considered if the letter does not
include a valid telephone number or electronic mail address. The fraud
report, especially in the cases of Argentina and Brazil affiliates, must be
addressed to the Secretary of its own Board or any of its members.
From now on, and exclusively for Argentina and Brazil, any reference
to the Board, any of its members and other related parties will be the
concern of their own Board. ii. Web page: www.arauco.cl, access the section named “About Arauco
- Ethics “, the aforementioned does not apply here; for Argentina, Web
page: www.altoparana.com.ar, access the section named “Alto Paraná
– Ethics”, and for Brazil, Web page: www.araucodobrasil.com.br, access
the section “Placas do Paraná – Ethics”.
Whichever the case, you will find a form to enter the claim. If the
claim is to be anonymous, consider that the report will not be
reviewed unless a valid telephone number or electronic mail is
provided.”
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Reporting
Fraud
Reception of the Fraud Claim
The Secretary of the Board, or any board member who has been specifically assigned to the task, and/or the President of the Board, shall
be authorized to receive and to conduct the opening proceedings of
the investigation. The claims shall be made known to the President of
the Board in the subsequent Board meeting. In this way, and to initiate
the investigative process, shall act under the authority and mandate of
the Board of Celulosa Arauco y Constitucion S.A.
The person who has been designated for the duty must investigate,
solve and write a report on the investigation and present it to the
Board.
In the case of affiliates in Argentina and Brazil, even though the claims
will be received and dealt with by the respective Board, the Arauco
Head Office Board must always be kept informed.
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Reporting
Fraud
Registering the Claim
The Secretary of the Board must keep a log of all claims received,
regardless whether they have been investigated or not.
This information must contain, among others, the following:
(i) The date and nature of the claim and the persons involved;
(ii)Present state of the investigation;
The Secretary of the Board must provide an update of this report,
emphasizing the status of the ongoing investigations.
All claims and information shall receive legal treatment and/or
consideration, according to the context, through specific consulting.
If the Board accepts the claim, it may pass on the case to an
appropriate person to carry out the fraud investigation.
The Secretary of the Board, or any member of the Board assigned to
investigate the claim, must assess whether it merits investigation and
shall inform of the recommendation in the following Board meeting
where the final decision on whether to proceed or not, will be made.
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Reporting
Fraud
Handling the Claim
During the investigation all measures must be taken by the fraud investigator to gather as much information to enable the investigation to
take course and authorization is granted to interact with the source
of the claim in order to obtain more details and in this way, give an
appropriate and timely course to the investigation.
If on the contrary, it is not possible to obtain sufficient information
to initiate the investigation, the claim shall be filed and added to the
claims registry.
In case of the investigation being carried out, the following steps shall
be taken:
I. A meeting with the claimant shall be requested and held,
outside the office. Here, details of the operation and the
alleged persons involved shall be disclosed. The person
designated in charge of the investigation, shall inform of
the measures taken to safeguard the information and the
guarantees of anonymity, as set down in this procedure.
II. The operation or operations shall then be assessed and
quantified by analyzing the information provided.
III. The necessary steps to obtain proof shall be defined in
order to verify the claim.
IV. The true facts of the information shall be proven.
V. The scope of the impact and the responsible persons of the
fraud shall be established.
Once all the information has been gathered and the investigation has
concluded, the person designated in charge of the investigation must
prepare the correspond report.
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Reporting
Fraud
Confidentiality
All investigations shall be carried out in absolute confidentiality.
Only certain information may be disclosed in order to carry out
any appropriate actions. This confidentiality must be maintained
throughout the complete investigation process. The results are also to
be considered confidential, and can only be known by the Board.
In the case that the claim involves or implicates, either directly or
indirectly, the person designated by the President of the Board, as
being the responsible party of the investigation of the claim, he/she
must step aside in a timely manner, and inform the President of the
Board in writing. The Board shall proceed to name another person in
charge to carry out the investigation.
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Reporting
Fraud
Investigation Report
The Secretary of the Board must review and analyze the claims that
have been submitted, leaving evidence of these actions in paperwork.
In addition, once the investigation has concluded, a report with the
compiled facts must be submitted, in reasonable detail and with clear
regard of the facts. The Investigation Reports, among other facts, must
describe the following:
(i) the submitted claim.
(ii)the procedures used for the investigation.
(iii)documented results of the investigation and,
(iv)the recommended corrective measures.
The Board must take the pertinent measures or if deemed necessary,
request further investigation of the facts.
The Secretary of the Board or the person designated to carry out
the investigation may hire, with prior approval of the President of the
Board, external auditors, consultants or other external experts to help
with the investigation and analyze the results.
All the investigations must be carried confidentially, in such a way that
only the necessary information be disclosed to facilitate the review of
the investigated documents or what it required by law.
Additionally, the investigator may, if considered reasonable and necessary, request the support of internal auditors, Managers, other executives or collaborators of Arauco to investigate and solve the claim.
Confidentiality must always be maintained.
All costs incurred during the investigation of the claim shall be charged
to the budget of the Board.
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Reporting
Fraud
Resolution of the Claim
The Board must review the submitted Investigation report and apply the
corresponding disciplinary sanctions and instruct Management to adopt
any corrective measure in response to a particular claim. The Board
may, at its discretion, consult with any Arauco executive or any third
party who may have expert knowledge which may contribute to the
investigation.
If the submitted claim and the final investigation report determines
or concludes that the report has legal implications, the Head of Legal
Affairs or Arauco’s attorney must offer legal advice and take all the
necessary actions to safeguard the interests of the Company and
report the case, in the shortest possible period, to the courts of
justice.
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