Corruption News Roundup

Recent FCPA news stories you don't want to miss

Here at The Compliance Report we like to talk about what’s going on in the world and share our little bit of insight and wisdom with you. But sometimes other people do such a good job sharing their own opinions that there isn’t much more that we can add. I’ve come across a few great compliance-related articles lately, and while I don’t feel that I can add any additional value by writing my own blog post on the subject, I can point you in the right direction to make sure you don’t miss any of them.

It just so happened that most of the articles that caught my eye in the past week or two are corruption and FCPA based, so with that in mind, here’s a recent corruption-themed news recap to make sure you stay in the know!

The Costs and Risks of Corruption: Impacts beyond the bribe

Published on the incredibly popular JDSupra, this article by CREATE.org covers a favorite topic of ours: That the issues stemming from FCPA violations reach far beyond federal fines and penalties. Recounting stories of Petrobras’ and Wal-Mart’s additional financial woes and the harm to morale within organizations following corruption issues, the article highlights these common fall-outs that many people may not initially think of:

  • The costs of investigation and remediation
  • Being subjected to follow-up civil suits
  • Losing additional business due to debarment
  • Reputational harm, which can affect a company’s bottom line

Another jaw-dropping example of the extended consequences of corruption (not mentioned in this particular article) is the fate of Ralph Lauren‘s presence in Argentina. In 2009, Ralph Lauren discovered bribery practices at one of its subsidiaries that ultimately lead to the company dismissing involved parties, terminating business contracts, taken steps to strengthen their compliance program, undertaking a risk assessment for the entire global organization and, in the end, discontinuing all business in Argentina. That’s a lot of impact beyond fines and disgorgement.

Does Competition Cause Corruption?

Written by Alison Taylor, director of advisory services at BSR, this article shines an much-needed light on how underlying company cultures, a focus on beating the competition no matter what and unreasonable goals can often breed an unethical, even corrupt, culture.

“It’s not always a healthy sign when a company appears intensely commercial, aware of its competitors, and pressing for market dominance. In that environment, senior managers sometimes encourage employees to believe they’re in a war for survival and that any unethical business practices will stop at some vague future point when the battle is won.”

Alison cites three examples where companies excused their use of bribery because the “end justified the means” or they felt that the company would be at a competitive disadvantage if they didn’t practice bribery. Reasoning like that, or teams trying to hit outlandish sales goals, are a major cause of slippery slopes … instances where well-intentioned employees reason themselves into noncompliance and misconduct without even realizing it.

While company culture (especially from the top down) is a major driver in instances like this, understanding the root cause and influencing factors of acts of noncompliance can help compliance teams identify cultural gaps or other reasons that are contributing to misconduct. Knowing the cause is the best way to prevent future issues.

IAP Worldwide Services pays $7.1 million criminal fine to settle FCPA offenses

I could probably write everyday about FCPA investigations, charges, fines and reactions … but that would get very repetitive and honestly wouldn’t be very helpful (unless there’s a larger lesson to be taken from the story, like with the recent BHP Billiton case). So we’ll keep this one short and sweet – this was a fairly straight forward case of bribery of a foreign official.

IAP paid the relatively small fine of $7.1 million and the DOJ agreed to a non-persecution agreement. The company does have to evaluate and improve it’s compliance program, particular around policies, procedures and internal controls, as well as report on improvement progress to the DOJ and local U.S. Attorney’s Office.

All in all, there’s nothing spectacular about his particular case. It may be interesting to some, though, that IAP is a privately held company, so don’t think that will protect you in a corruption case.

If you’re interested in more takeaways from this particular case, Thad McBride, Partner of International Trade at Bass, Berry and Sims, took a closer look.

Canada Anti-Corruption Law May Affect FCPA Enforcement

Originally published on Law360, you can now read this in depth article about the recently enacted Canadian Extractive Sector Transparency Measures Act (ESTMA) on JDSupra.

The act was approved in December but only recently became enforceable and is intended to “enhance transparency in the resource extractive sector in order to deter and detect corruption.” Companies engaged in the commercial development of oil, gas or minerals and listed on the Canadian stock exchange or who conduct business in Canada (and meet certain thresholds) could be effected by this act and should pay special attention. The article does a good job of explaining the act, who it effects and what that means for organizations.

There’s also a section in the article that details how, where and why ESTMA syncs up with the US Foreign Corrupt Practices Act. And, perhaps most useful, it outlines three key takeaways.

Did I miss any?

Those are the recent articles that caught my eye, but it’s certainly not all the important compliance news! Is there an article that you feel is especially insight or relevant? Let me now in the comments.