The Rolls-Royce Case Lands the UK’s Serious Fraud Office in the Anti-Corruption Big Leagues

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Photo Credit: Robert (via Flickr)

In January 2017, Rolls-Royce, one of the world’s largest luxury-car and aircraft engine manufacturers, agreed to pay $800 million in a global settlement with the United Kingdom’s Serious Fraud Office (SFO), the U.S. Department of Justice (DOJ), and Brazilian prosecutors. Rolls-Royce acknowledged that in the course of three decades it hired intermediaries who paid bribes in return for lucrative contracts in at least seven countries, including Indonesia, China, India, Russia, and Nigeria. The key role in this investigation belongs to the SFO. Rolls-Royce is the largest ever case carried out by the British anti-corruption agency. Over five years, 70 investigators examined more than 30 million documents related to the case and conducted about 200 interviews with Rolls-Royce employees. To a great extent, this case was a survival test for the SFO, which was under systematic abolition threats since 2011. The deferred prosecution agreement (DPA) with Rolls-Royce in the amount of £497.2 million placed the British agency among anti-corruption’s big-league players.  Read More...

The Odebrecht Case Marks a Historic Step Forward in Global FCPA Enforcement

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Photo Credit: Wikipedia via https://en.wikipedia.org/wiki/File:Flags_south_america.png

What makes the Odebrecht case so special? In December 2016, Brazil’s biggest construction company Odebrecht and its petrochemical subsidiary Braskem agreed to pay at least $3.5 billion to Brazilian, US, and Swiss authorities in a multi-country Foreign Corrupt Practices Act (FCPA) settlement. Aside from this record-breaking settlement, the Odebrecht case demonstrates an unprecedented level of international cooperation in investigations and prosecutions of transnational bribery. The case marks a historic step forward for many Latin American countries not previously known for their aggressive prosecution of FCPA violators. The coordinated enforcement action by Brazilian, US and Swiss authorities generated a snowball effect across Latin America, prompting Argentina, Colombia, the Dominican Republic, Ecuador, Guatemala, Mexico, Panama, and Peru to open investigations into Odebrecht.

One can hardly overestimate the importance of this case for global FCPA enforcement. Andy Spalding, a renowned anti-corruption expert and Professor at the University of Richmond, calls Odebrecht “a new chapter in the global fight against corruption.” According to Spalding, “anti-bribery enforcement at the highest levels is no longer solely the province of the developed world.” Global settlement agreements and huge penalties imposed by law enforcement agencies in developing countries are becoming a real nightmare for international and local companies involved in bribery.  Read More...

Lessons for Corporate Compliance from Improvisation

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Photo Credit: Heather (via Flickr)

Recently I listened to a webinar focused on a somewhat unexpected topic: what can improvisation teach us about ethical behavior? The webinar was hosted by NYSE Governance Services, the leading governance, compliance and education solutions provider for companies and their boards, and Second City Works, the B2B side of The Second City, the world’s leading comedy theatre and school of improvisation. The speakers were Kelly Leonard, longtime creative executive for The Second City, and Heather Caruso, adjunct professor of behavioral science at the University of Chicago’s Booth School of Business.

I am a big fan of Mike Birbiglia, a comedian whose new movie, Don’t Think Twice, explores the life of a New York-based improv group. I am also always intrigued by how behavioral insights can be applied in compliance. In this webinar, Leonard and Caruso recognize that many people feel trapped by their patterns of behavior, both in personal and professional life.  Read More...

Improving Corporate Governance in Ukraine’s State-Owned Enterprises

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This blog was originally published on the Center for International Private Enterprise’s (CIPE) Development Blog.

On May 1, 2016, the law, On Introduction of Amendments to Certain Legislative Acts of Ukraine Regarding Protection of Investors’ Rights (No. 289-VIII), came into effect. It introduced a number of new aspects to Ukrainian corporate law including the right to shareholder derivative actions, direct payment of dividends to shareholders, and –perhaps the most relevant to reducing corruption and privatizing state owned enterprises– the establishment of independent directors.

In many developed economies, independent directors serve as a source for ongoing advice for senior management, set the strategic direction for the company, and provide investors (both public and private) confidence that their interests are represented through additional oversight, strategy development, and the scrutiny of major decisions undertaken by management. In state owned enterprises and family owned firms, independent directors serve as additional checks on the company from the perspective of the public or nonvoting family members, respectively, among other functions key to the long-term sustainability of such enterprises.  Read More...

Transparency International Releases 2016 Corruption Perceptions Index

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Photo Credit: Transparency International

The interplay of corruption and inequality feed off each other to form a destructive cycle between corruption, unequal distribution of power in a society and unequal distribution of wealth. This is the main conclusion from the recently published Transparency International’s (TI) 2016 Corruption Perceptions Index (CPI), which highlights the connection between corruption and inequality.

TI’s CPI Index scores and ranks countries based on how corrupt a country’s public sector is perceived to be. The composite index uses a combination of surveys and assessments of corruption by a variety of independent institutions specializing in business climate analysis. Each country is scored on a scale of 0-100, with a 0 indicating highly corrupt and a 100 representing very clean.

Of the 176 countries covered in the 2016 CPI, over 120 scored a 50 or below, with the global average at an alarming 43. Less than a third of the countries managed to score above the midpoint.  Read More...

The Challenge of Compliance in State-Owned Enterprises

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Photo Credit: Puro Periodism

Last month I was in Panama, attending the 17th International Anti-Corruption Conference (IACC). Not surprisingly, the Panama papers were looming large over the event and became a major point of discussion. To me, however, an equally important thread concerned another key issue: governance of state-owned enterprises (SOEs) and its significance for fighting corruption.

The highlight of the conference was Transparency International presenting its Anti-Corruption Award to the Operation Car Wash (Lava Jato) Task Force from Brazil. The Lava Jato scandal, involving the country’s state-owned oil & gas giant, Petrobras, began as a money laundering investigation and has grown into a large investigation uncovering cases of egregious corruption. Brazilian prosecutors from the Task Force have been bravely investigating these cases, resulting to date in more than 240 criminal charges and 118 convictions totaling 1,256 years of jail time, involving influential politicians and businesspeople.

Prosecutorial successes obviously are something to celebrate as an important step toward ending impunity.  Read More...

The Federation of Korean Industries Needs Anti-Corruption Reforms

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Photo Credit: Wikipedia

Business associations, as advocates for the private sector, play important roles in promoting good governance and sound policy-making, maintaining the private sector as the engine of economic growth, and helping create an open society and transparent government. However, recently, the Federation of Korean Industries (FKI), one of Korea’s five largest business associations, found itself at the center of a political scandal between the Korean government and the chaebol, Korea’s family controlled conglomerates.

The so-called ‘Choi Soon-sil Gate’ originated in 2016 when the FKI was caught engaging in suspicious fundraising activities to establish the Mir Foundation, which promotes Korean culture, and the K-Sports Foundation, which fosters elite athletes. In the course of raising funds, the FKI served as a lobbying group and conduit to transfer chaebol funding into these organizations. Lee Seung-cheol, vice chairman of the FKI who led the fundraising efforts, initially maintained during a parliamentary hearing that FKI’s member corporations voluntarily participated in the fundraising campaigns.  Read More...

France’s Renewed Fight against Corruption

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For years, France has faced international criticism for its loose enforcement towards corruption. As a result, the U.S. Department of Justice (DOJ) has imposed severe sanctions on French companies. On November 8, 2016, France sealed the first step in a renewed campaign to tackle the problem of corruption by adopting a new anti-corruption law named The Law on Transparency, the Fight against Corruption and Modernization of Economic Life or the Sapin II. Named after the French Minister of Finance Michel Sapin, who championed the legislation, the Sapin II aims to bring France’s anti-corruption regime up to the highest international standards.

Central to the Sapin II law is the firm obligation to prevent and detect corruption risks. The law mandates that French companies that have over 500 employees and generate revenue exceeding 100 million euros adopt a compliance program. Some 1,600 companies in France fit this profile and will have till May 2017 to implement their compliance programs.  Read More...

ISO 37001: A Game Changer in Global Anti-Bribery Efforts?

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On December 9, International Anti-Corruption Day, the Center for International Private Enterprise (CIPE) in partnership with the Association of Women in International Trade (WIIT), co-hosted a panel discussion on the International Organization for Standardization (ISO) 37001, a new standard on anti-bribery management systems designed to help organizations fight bribery and promote an ethical business culture. The panel, moderated by CIPE Regional Director for Asia John Morrell, consisted of Worth MacMurray, Principal at Governance and Compliance Initiatives, Shruti Shah, Vice President of Programs and Operations at Transparency International-USA and Jesse Spiro, WorldCheck Research Manager at Thomson Reuters.

After brief opening remarks from WIIT President Evelyn Suarez, Morrell started the event by highlighting CIPE’s work in combating the institutional side of bribery and corruption. The discussion began with MacMurray, who worked on the new standard, giving an overview of the ISO 37001. The ISO 37001 is meant to be widely applicable to all organizations of any size in the public, private or not-for-profit sectors.  Read More...

Watch for Mosquitos

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This blog was originally published on the Society of Corporate Compliance and Ethics’ (SCCE) “Compliance & Ethics Blog”.

I was fortunate last week. While exhibiting at Transparency International’s International Anti-Corruption Conference in Panama City, Stephanie Gallagher and I were able to visit the Panama Canal. May Jane Coulson, the Canal’s ethics officer, whom I interviewed for the SCCE magazine about a year ago, made it all happen.

As every school child learns, it is a masterpiece of engineering, and seeing it up close reinforces the impression. What few learn (or I forgot) was that the genius started before the engineering really began. And, as I learned on my visit, the US succeeded in building it not just because of better technology and engineers. It was because the Americans grasped that one scientific accomplishment had to be completed first to help increase the likelihood of success: they needed to figure out a way to stop tropical diseases from killing thousands of workers.  Read More...