In today’s edition of Daily Compliance News:
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Wondering what it’s going to take to keep your best employees? It’s a valid concern in a world where researchers are shouting that soon there will be a big shift of people out of their current positions and organizations.
So, as a leader, what can you do about it? Can you stop it?
I believe you can. It starts by you getting to know your people better. When you know YOUR EMPLOYEES — not the employees surveyed by researchers — then your employees will give you answers on how to lead them in a way that will make them stay and go all in.
In today’s episode I’m sharing with you a recent episode of a show I do on LinkedIn with Phil Van Hooser. We discuss this topic and I hope you have lots of helpful takeaways for your own leadership journey!
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If you’re looking for tangible action steps and refreshing insights to help ignite the power of your own leadership journey, sign up for my weekly leadership blog HERE.
If your business would benefit from higher-performing leaders, check out more information about the comprehensive leadership development training I do HERE.
If you want to reach out to me directly, email alyson@vanhooser.com.
If you enjoyed this episode, will you please subscribe and leave a review? Your reviews help this show get discovered by more incredible leaders just like you. I’m obsessed with helping leaders ignite their performance results and I’d love to have you help me make an impact! Thank you so much!
P.S. Share and tag me on social — @AlysonVanHooser — and I’ll share your comments and big takeaways on my feed!
Welcome to From the Editor’s Desk, a podcast where co-hosts Tom Fox and Dave Lefort, Editor in Chief at Compliance Week unpack some of the top stories which have appeared in Compliance Week over the past month, look at top compliance stories, talk some sports and generally try to solve the world’s problems.
In this month’s episode, we look back at top stories in CW from September including the Securities and Exchange Commission letter regarding ESG reporting and the CW survey ‘Inside the Mind of the CCO’. We look at the upcoming CW report on the survey, a long form investigative series by Aly McDevitt on ransomware attacked and a new CW self-directed learning module on Cybersecurity for the compliance professional. We conclude with a look at some of the highlights from the first few weeks of the 2021 NFL season, the MLB playoff races and the tension of a one-game playoff.
Take the CW survey ‘Inside the Mind of the CCO’ by clicking here.
Check out the CW learning module on Cybersecurity for the Compliance Professional here.
Jay and Tom are back to unpack some of the stories that caught their collective eye on the Monsterfest Month Returns edition.
Stories
1. WPP FCPA enforcement action. Tom with 5-part series on the FCPA Compliance and Ethics Blog. Matt Kelly in Radical Compliance. Tom and Matt on Compliance into the Weeds. Mike Volkov has a 3-part series in Corruption Crime and Compliance.
2. Human rights litigation on the EU. Salomé Lemasson in the FCPA Blog.
3. BOD structure as key to compliance oversight. David Katz and Laura McIntosh in Harvard Law School Forum on Corporate Governance.
4. Bringing clarity to the chaotic world of the CCO. Chris Audet in CCI.
5. Another week, another Wells Fargo fraud related penalty. Jaclyn Jaeger in Compliance Week (sub req’d)
6. Dan Kahn returns to private practice. Dylan Tokar in the WSJ Risk and Compliance Journal.
7. Do ABC academics fail? Matthew Stephenson in GAB.
8. Conquering the last mile of delivery of your Code of Conduct. Harper Wells in CCI.
9. What is Ozy and what does it mean for compliance. Ben Smith in the NYT.
10. Who owns ESG? Matt Kelly explores on Radical Compliance.
Podcasts and Events
11. CCI surveying stress in compliance. Henry Kronk in CCI. Take the survey here.
12. Compliance Week is going ‘Inside the Mind of the CCO’. Participate in the survey here.
13. Ethisphere’s World Most Ethical Company awards for 2022 are open for submission. For more information on the Application Process, click here.
14. Check out the latest addition to the Compliance Podcast Network, A Yank at Oxford. It details the journey of Foley & Lardner partner David Simon as he heads back to university to matriculate for a MBA at Oxford. Episode 1.
15. Are you exasperated? Then check, F*ing Argentina. In this podcast series co-hosts Tom Fox and Gregg Greenberg, author of F* Argentina explore the current American psyche of being overworked, over leveraged, overtired and overwhelmed. Find out about modern America’s exasperation with well…exasperation. In Episode 1, the dreaded Parent Meeting night at your child’s elementary school. In Episode 2, why F*ing Argentina? In Episode 3, one of the most beloved characters in musical theater, Officer Krupke is exasperated.
16. Tom and Compliance Week EIC Dave Lefort look back at September in CW and forward to October (and talk some sports) in this month’s edition of From the Editor’s Desk.
17. K2 Integrity’s Edoardo Fiora will present at, “ESG Getting Hitched to Business (and IP) Strategy—From Resilience Framework to Recovery Path,” on October 14th. Registration and Information here.
18. Join Jay, Tom and the top E&C professionals at Converge21, a virtual conference on October 12 & 13. Registration and information here. Why should you attend? Check out some of the panelists discuss their presentation on the Converge21 podcasts. Michael Randrup Wendy Badger, Lloydette Bai-Marrow, Tom and Philip Winterburn.
19. How does a Compliance Bible become a best-seller. Check out Tom’s appearance on the C-Suite Network’s Best Seller TV to find out. Purchase The Compliance Handbook, 2nd edition here.
Tom Fox is the Voice of Compliance and can be reached at tfox@tfoxlaw.com. Jay Rosen is Mr. Monitor and can be reached at jrosen@affiliatedmonitors.com.
This week we have been exploring the recent Securities and Exchange Commission (SEC) Cease and Desist Order (Order) entered into last week with WPP plc, the world’s largest advertising group, for paying bribes to Indian government officials and participating in other “illicit schemes” in China, Brazil and Peru. WPP agreed to pay $11 million+ in disgorgement and interest and penalty of $8 million for a total amount of just over $19 million. Today we conclude with some lessons learned for the compliance professional.
Culture Matters
It seems about the most basic thing to say in the compliance realm, but the most important thing is your corporate culture. If your culture puts no value on doing business ethically and in compliance, your organization will surely have problems. As I have cited to multiple times in this exploration of WPP, the Order stated, “WPP had no compliance department during the relevant period”. If your company will not have a compliance function, it speaks about as highly as one can about the values and culture of your organization. It could not be put more simply, with no compliance program, your organization does not value having a culture of compliance. Throughout the Order are examples of this lack of value. From the perfunctory first investigation into allegations in India, to the paper compliance program in place, to the lack of preacquisition due diligence from the compliance perspective; it is clear WPP put no value into having a culture of compliance.
Investigations
The Order made clear that after the initial whistleblower report, “which identified CEO A by name as the architect of the scheme”; WPP then tasked part of the group involved in the actions to investigate the allegations. That group then hired “an Indian partner firm of an international accounting firm ostensibly to investigate the allegations and review India Subsidiary’s processes regarding government contracts and transactions involving government clients.” [emphasis supplied] Who did this investigator rely on for information? The very leaders of the corruption scheme, the WPP-India Chief Executive Officer (CEO) and Chief Financial Officer (CFO).
What were other key deficiencies in the investigation?
- There was no contact with the identified recalcitrant 3rd
- The investigative firm relied on information from the parties identified in the whistleblower report.
- There was no independent verification.
- There were no conclusions related to the bribery allegations brought forward by the whistleblower.
The WPP matter is an excellent teaching tool for how NOT to perform an investigation.
Mergers and Acquisitions (M&A)
Here WPP apparently engage in none of the M&A components of even a minimum standard for compliance. There was no preacquisition due diligence into any of the entities acquired. Simply doing acquisitions in a high-risk environment is not verboten. But doing so with no compliance is. Moreover, there was apparently no integration of the acquired entities into the WPP compliance program, such as it was. Once again without a compliance function to drive this to the finish, there was no corporate group tasked to finish it out. Obviously, there was no forensic compliance audit of the acquired entities after acquisition as well. I cannot point to a shortcoming of WPP as there were no shortcomings in execution, as there was no effort.
Incentives
When do sales or remuneration incentives become perverse incentives? For Wells Fargo, it came when the corporate hierarchy determined that the proper number of Wells Fargo products was eight per customer and employees continued employment and compensation would depend on hitting that inane number. (Remember the CEO, John Stumpf, said “8 is great!”) WPP crossed that threshold when they made the earnouts for the founders of the organizations they acquired, who were kept on to run subsidiaries such as WPP-India, contingent on hitting sales numbers they could not reach without engaging in bribery and corruption. When you couple that with no effective controls, no culture of compliance and outright fraud, you see how WPP came to Foreign Corrupt Practices Act (FCPA) grief.
Whistleblower Reports
The bribery schemes were so blatant that in India there were seven internal whistleblower reports. As stated in the Order, “From July 7, 2015 through September 2, 2017, WPP received seven anonymous complaints alleging – with increasing specificity – two bribery schemes related to India Subsidiary’s work for DIPR.” That is seven, count them seven documented whistleblower reports which had details including names of the participants and the bribery schemes. This failure simply boggles the mind, yet is axiomatic of the culture of WPP.
It is still not clear how WPP came to the attention of the SEC. We do know if it was not through self-disclosure. It may well have been an internal whistleblower. For companies who decry whistleblowers who go public, WPP is Prime Example 1 of why. Moreover, how many whistleblowers would have the continued drive to continue to report illegal conduct after the first report which was dismissed through a sham investigation?
We are now at the end of the WPP sage from the perspective of the SEC enforcement action. I began this series with several questions which still remain open. They include:
- How was the SEC made aware of WPP’s bribery and corruption?
- Is there a parallel Department of Justice (DOJ) enforcement action?
- Where is the Serious Fraud Office (SFO)?
- How did WPP avoid a monitor?
As these questions remain open, we may well be revisiting WPP again.
CONVERGE is in its 6th year of bringing together the world’s leading companies for 2 days of dynamic speakers, thought-provoking breakout sessions, and opportunities to connect with like-minded professionals. This year the conference has gone virtual. You will leave the conference with new resources and best practices allowing you to continue the hard work of driving ethics to the center of your business. In today’s episode I visit with Michael Randrup, Senior Compliance Specialist at Ørsted. We visit about his presentation at Converge21 on The Devil in the Details: EU Directive Requirement You May Not Know.
The EU Directive’s intent is clear: Better protect whistleblowers and drive effective reporting. Yet the reality has the potential to be fundamentally counterproductive for multi-jurisdiction programs. A group of leading Danish companies are challenging the EU Commission Expert Group to remove the requirement for local hotline instances—and hitting a brick wall. Join this session to hear their journey and have your questions answered by those seeking a better outcome for all companies affected by the Directive.
For more information, go to Converge21.
Categories
SEC Issues
The SEC charges companies with illegal offering of digital assets and stocks; the Kitchen takes a closer look what is cooking in the securities area.
In this episode Jonathan Armstrong and Tom Fox are back to discuss issues relating to data privacy, data protection and GDPR. In this episode we take up Jonathan’s (current) favorite GDPR enforcement action, involving the food deliver services Deliveroo and Foodinho, who ran afoul of the Italian data protection authority.
Some of the questions we consider include:
- What are the facts of the enforcement actions?
- What do these cases tell us about the use of AI and data privacy?
- What lessons can companies that use algorithmic management of staff learn?
Resources
Check out the Cordery Compliance, client alert on this topic, click here. For more information on Cordery Compliance, go their website here. Also check out the GDPR Navigator, one of the top resources for GDPR Compliance by clicking here.
This week we are exploring the recent Securities and Exchange Commission (SEC) Cease and Desist Order (Order) entered into last week with WPP plc, the world’s largest advertising group, for paying bribes to Indian government officials and participating in other “illicit schemes” in China, Brazil and Peru. WPP agreed to pay $11 million+ in disgorgement and interest and penalty of $8 million for a total amount of just over $19 million. Today we consider the bribery schemes and the lessons they present for the compliance professional.
Due Diligence
Before we get to the bribery schemes, a word (yet again) about due diligence. Clearly WPP was deficient in performing the most rudimentary level of due diligence. This is true whether or not it was a potential business partner acquired through acquisition or a vendor hired to assist in WPP sales efforts. Due diligence is one of the most basic functions in any compliance program. Obviously one function of due diligence is to determine if you are going into business with bad actors who have engaged in bribery and corruption previously. But the next level of inquiry is perhaps even more important. Are you going into business with persons who want to and will do business ethically and in compliance with anti-corruption programs? This requires more than simply a Level 1 search of social media and the relevant bad guy lists. It requires understanding the person or entity you are going to do business with going forward. This means you have to sit down (or Zoom) and talk to people and get a sense of their values and their ethics. A simple computer search is not going to give you such insights.
Bribery Schemes
India
As laid out in the Order, the Vendor A bribery scheme worked with the customer DIPR awarding WPP India a contract under which WPP India developed advertisements and then purchased space in newspapers to display the advertisement. The customer set the fee to media agencies for purchasing advertisement space. WPP-India CEO A negotiated rates with the newspapers that were significantly less than the fee and utilized the difference between the approved fee and the actual price paid to the newspapers to create a pot of money to pay bribes to the government officials. WPP-India hid this arrangement by agreeing to pay Vendor A to purchase the advertising space. The Vendor A paid the newspapers, took a cut and forwarded the difference on as bribe to government officials.
The next scheme involved Vendor B, which once again involved WPP-India bribing government officials through an intermediary. Here the customer paid WPP-India Subsidiary $1.5 million to create and run a media campaign to celebrate the formation of the Indian state of Telangana in June 2015. But there was never any such campaign. There were fake records created at the behest of the WPP-India CFO, by Vendor B falsify that the campaign occurred. Vendor B then paid $1+ million to another 3rd party who made the bribe payments. All the recalcitrant parties split the rest of the money.
China
Here WPP-China avoided paying $3,2 million in taxes to a tax authority by making corrupt payments to a vendor selected by corrupt tax officials. WPP-China paid approximately $107,000 to the corrupt vendor in the two months before a tax audit finalized. The vendor kept a cut of the bribe payment and distributed the bulk of the monies as bribes. But it did not end there as the WPP-China books and records were doctored to show the vendor performed services for a client. There was also $2,000 of gifts and entertainment to tax officials during the same time period. Finally, WPP uncovered an off-the-books account maintained by China Subsidiary reflecting the payments to the vendor recommended by the tax officials.
Brazil
WPP acquired a majority interest in a public relations agency in São Paulo, Brazil, with the acquired entity’s minority owner serving as CEO of WPP-Brazil going forward. WPP-Brazil made improper payments to vendors in connection to obtain government. As Mike Volkov has noted, “These payments were made in circumstances in which there was a high probability that a portion of the payments may have been passed to the government officials with the authority to award the contracts. To disguise the fact that Brazil Subsidiary’s payments to the vendors related to obtaining or retaining government contracts, Brazil Subsidiary falsified its books and records to reflect that the vendors performed bona fide services, such as marketing or IT services.”
Peru
This was perhaps the most sophisticated bribery scheme for its complexity. Once again, it began with WPP obtaining a majority interest in an entity headquartered in Lima, Peru, with the acquired entity’s founder staying on as CDO of WPP-Peru. The bribery scheme involved a construction company funding the mayor of Lima’s political campaigns in exchange for contract awards. WPP-Peru was a conduit for the construction company’s bribe to the mayor of Lima. However, WPP-Peru disguised the corrupt source of the funds by channeling the construction company’s payments through WPP subsidiaries in Colombia and Chile. WPP-Chile and WPP-Colombia then falsely recorded that they received money in return for services performed for the construction company, and WPP-Peru maintained no records that the construction company paid for a portion of the mayor of Lima’s political campaigns.
There are multiple lessons for every compliance professional of a multi-national organization about the selection, use and management of third parties in high-risk environments. You have to know the folks you are doing business with. Equally important is the quality of their character and commitment to doing business ethically. CEOs and/or CFOs who are willing to create advertising campaigns out of thin air did not wake up one morning with that idea. They were committed to getting business anyway possible. Moreover, all procedures must have appropriate oversight or a second set of eyes. Finally, when reports of misconduct come in, they must be thoroughly investigated.