When a country’s largest construction firm admits to bribing government officials and is consequently fined in the billions, we must take a step back, analyze this case, and create solutions to prevent future catastrophes. If corruption can happen at a large organization such as Brazil’s Odebrecht, where else is something similar occurring? How can we work to prevent reoccurrence?
The news is a showstopper for Panama’s government, who had Odebrecht listed as a firm ready to participate in the bid on the Panama Canal bridge project. Now, the firm will have to compensate the country for any damages while also experiencing a contract block from the government until Odebrecht can demonstrate it is “effective and efficient” with investigators and paying fines, according to a government statement.
The lessons to be learnt are simple: training and tone at the top are just not enough – an effective Governance, Risk & Compliance (GRC) program is vital, one that focuses on governance from the board down, using leading-edge tools and techniques such as Compliance Insights, ‘Stand in the Space’ and Benford’s Law.”
Bribery – Then and Now
The recent Odebrecht case, in which Brazil’s biggest construction firm admitted to bribing officials to secure contracts, has some disturbing parallels to the 2010 case involving Daimler.
In 2010, German carmaker Daimler, the owner of Mercedes-Benz, admitted to paying tens of millions of dollars in bribes to government officials in at least 22 countries using secret bank accounts, fictitious invoices, phony price ‘surcharges’ and disbursements from a ‘cash desk’ at a factory in Stuttgart.
Fast forward to 2016, and by their own admission, Odebrecht established a fully-functioning ‘bribery department’ and by working with Braskem, a Brazilian petrochemical firm that is jointly owned by Odebrecht and Petrobras, systematically paid hundreds of millions of dollars to corrupt government officials in countries on three continents.
So, whilst you might think that little has changed for bribery and corruption in the last six years, what certainly has changed is the level of fines and sentences that regulators and courts now have at their disposal, both at the company and individual level.
In 2010, Daimler paid $185M to settle the case; by comparison, Odebrecht has been banned from bidding in contract auctions, the former Odebrecht CEO has been sentenced to 19 years in prison and the two companies will pay fines totaling at least $3.5B. In simple terms, the fine has increased almost 20-fold in the intervening six years, escalating it from millions to billions.
Ironically, the bribery at Daimler and Odebrecht have one further thing in common; in both cases, the bribery lasted for more than a decade and became ‘business as usual’, to the point that the perpetrators believed they were unassailable. Clearly, they were not.