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The Corruption Files

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The Corruption Files

Episode 15 – The ABB Settlement

Establishing trust can greatly affect the outcome of a case. Thomas Fox and Michael DeBernardis talk about ABB’s 2022 bribery case in South Africa, how self-disclosure benefits any situation, the DOJ’s approach on cracking down recidivists, choosing the right people for your team, and being wary of waivers.

▶️ The ABB Settlement with Tom Fox and Mike DeBernardis Background facts to the case. (00:00:29)

Tom lays out the facts of the ABB settlement. Michael points out the DOJ’s plans for penalizing recidivists and ABB’s biggest compliance misstep. (00:07:07)

Tom emphasizes the importance of compliance oversight, being vigilant of billing in high-risk jurisdictions, and the benefit of ABB’s “almost” self-disclosure. (00:12:08)

Mike discusses the impact of trust and incentivizing other recidivists to come forward and the risks of going off of real-time information. (00:18:27)

Tom mentions how having someone with experience concluding resolutions in the DOJ can make a difference. Even with a fairly low penalty, ABB is still required to report on its compliance program. (00:24:22)

Mike prefers having an independent monitor in place. However, he highlights ABB’s trust in their team to do a thorough job of reporting. (00:27:31)

Mike gives credit to ABB’s swift actions and extensive remediation, describing the DOJ’s outcome as “threading the needle”. Thomas believes the case is still a win for compliance. Michael drives home how doubling down on compliance pays off.

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Do you have a podcast (or do you want to)? Join the only network dedicated to compliance, risk management, and business ethics, the Compliance Podcast Network. For more information, contact Tom Fox at tfox@tfoxlaw.com.

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The Corruption Files

Episode 14 – Walmart with Tom Fox and Michael DeBernardis

Rapid expansion presents great opportunity and great risk.

Tom Fox and Michael DeBernardis go deep into the Walmart bribery case, why immediate cooperation matters, tips for companies to prevent similar problems, the best course of action when working internationally, and projecting risk regardless of industry.

▶️ The Walmart Enforcement action with Tom Fox and Michael DeBernardis. 

Key points discussed in the episode:

  1. Tom Fox lays out the facts of the Walmart case. Michael points out how prevention could have saved millions of investigation costs.
  2. Rapid expansion presents great opportunity and risk. Tom emphasizes that extensive remediation and cooperation can bring significant credit.
  3. Michael explains Walmart’s underwhelming conduct. Tom brings up the congressional investigation, leader exits, and the business implications of publicizing.
  4. Michael shares his advice to avoid Walmart’s case – setting realistic and proper incentives. He also provides hypothetical counsel if he could work with Walmart when the issue broke out.
  5. Michael highlights the importance of timeliness, engaging with regulators as early as possible, and providing FCPA training when asked.

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Do you have a podcast (or do you want to)? Join the only network dedicated to compliance, risk management, and business ethics, the Compliance Podcast Network. For more information, contact Tom Fox at tfox@tfoxlaw.com.

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The Corruption Files

Episode 13: Avon China Bribes

When beauty company Avon Products Inc. was charged in 2014 with violating the Foreign Corrupt Practices Act (FCPA) due to failure to detect and prevent bribery acts happening in China, they settled for ten times more than the cost they paid for in “gifts.”

Today, the FCPA investigation and enforcement action still stand as one of the most interesting cases for companies and compliance professionals to learn much from.

Tune in to this new episode of The Corruption Files — The Avon China Bribes with Tom Fox and Michael DeBernardis.

Key points discussed in the episode:

  1. Tom Fox shares the background facts on such an “insane case,” with the investigation almost as interesting and important as the resolution.  
  2. Michael DeBernardis states that Avon China Bribes the grandfather case for a couple of other similar FCPA cases. 
  3. The internal audit department identified this issue of paying gifts and recommended FCPA training for the team, which did not push through due to the lack of budget.
  4. In-fighting or territoriality is not surprisingly uncommon at big companies, leading to compliance and corruption problems. 
  5. Tom cites how in 2012, the government became so frustrated with Avon that they started issuing grand jury subpoenas for individuals. 
  6. A key part of the corporate process is to have systems that talk to each other. And if you don’t, the costs can be astronomical. 
  7. Avon’s $8 million in bribes led to $500 million in pre-settlement costs, $135 million in settlement costs, and $250 million in post-settlement resolutions.  
  8. Tom reminds companies that if there’s a potentially high reward, it generally means there’s a high risk.
  9. Michael emphasizes that Compliance budgets can be tight, but skipping small training can catch up with you in the long run. 

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Do you have a podcast (or do you want to)? Join the only network dedicated to compliance, risk management, and business ethics, the Compliance Podcast Network. For more information, contact Tom Fox at tfox@tfoxlaw.com.

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The Corruption Files

Episode 12: The Ralph Lauren Bribery Case with Tom Fox and Michael DeBernardis

If you’re aggressive with your response, you’ll be rewarded.

Tom Fox and Michael DeBernardis break down the facts and lessons learned in the Ralph Lauren bribery case in Argentina. Discover why anti-corruption programs and worker training matter, how speedy cooperation improves resolution leniency, and why organizations shouldn’t be complacent when it comes to risk.

▶️ The Ralph Lauren Bribery Case with Tom Fox and Michael DeBernardis

Key points discussed in the episode:

✔️ Tom Fox gives an overview of the Ralph Lauren case. Michael DeBernardis highlights how this case shows that risk exists in any industry outside the U.S.

✔️ Providing an anti-corruption program and employee training got Ralph Lauren ahead of its resolutions and lowered their penalties. It was unclear what monetary value their bribe payments had.

✔️ Ensure your employees deeply understand your policies by translating them into different languages. Ralph Lauren took this step and greatly benefited in the case outcomes.

✔️ Ralph Lauren’s speedy response and decision for a policy rollout were rewarded with a lenient resolution. This sends a powerful message to regulators that you’re taking the issue seriously.

✔️ A tailored risk assessment is helpful. Set up a plan to spot audits and do compliance checks in foreign locations in a certain period. Ralph Lauren’s case is an early model for the corporate enforcement program.

✔️ The Ralph Lauren case jumpstarted the corporate enforcement policy. Their proactivity is the biggest takeaway for organizations to apply.

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Do you have a podcast (or do you want to)? Join the only network dedicated to compliance, risk management, and business ethics, the Compliance Podcast Network. For more information, contact Tom Fox at tfox@tfoxlaw.com.

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The Corruption Files

Episode 11: Parker’s Offshore Oil Drilling with Tom Fox and Michael DeBernardis

There’s no such thing as low risk or no risk.

Crafting a web of bribery with a corrupt law firm, a Nigerian fixer, and Panalpina’s hand landed Parker Drilling in hot waters. Tune in as Tom Fox and Michael DeBernardis explore the facts of the Parker Drilling case, why overestimating risk is always for the better, how proper conduct impacts sentencing, and why having the right people can impact outcomes.

▶️ Parker’s Offshore Oil Drilling with Tom Fox and Michael DeBernardis

Key points discussed in the episode:

✔️ Tom Fox lays out the basics of the Parker bribery case.

✔️Michael DeBernardis explains the points on the Nigerian agent’s efforts, bribery for unfair business advantage, the lack of due diligence, and fake invoices.

✔️ Tom Fox points out Sarbanes-Oxley as the main driver of compliance, the power of internal controls, the blurry calculations of discounts on the final sentencing, and the impact of Dan Chapman.

✔️ Michael DeBernardis highlights how the FCPA system maintains sentencing consistency but still has room for tightening and the nuances of every bribery case.

✔️Tom Fox underscores the importance of good conduct for the credit and an unanswered question. Michael DeBernardis reaffirms why having the right people in place is beneficial.

✔️ Tom Fox and Michael DeBernardis leave their final thoughts on the case: Have a second set of eyes on dubious wire transfers. Rethink how risk analysis is done. Focus on what you’re doing every step of the way.

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Do you have a podcast (or do you want to)? Join the only network dedicated to compliance, risk management, and business ethics, the Compliance Podcast Network. For more information, contact Tom Fox at tfox@tfoxlaw.com.

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The Corruption Files

Episode 10: The Goldman Sachs Corruption Case with Tom Fox and Michael DeBernardis

Risk is never static but dynamic.

The Goldman Sachs case has proven that playing with fire will always get you burned. Listen in as Tom Fox, and Michael DeBernardis dissect the rights and wrongs of the situation, why probing deeper into red flags is a must, the importance of setting off preventative controls right away, and why companies should publicly show their general policy statement.

▶️ The Goldman Sachs Corruption Case with Tom Fox and Michael DeBernardis

Key points discussed in the episode:

✔️ Tom Fox gives a brief background on the Goldman Sachs case.

✔️ Michael DeBernardis explains the successes and failures in compliance.

✔️ Tom Fox points out the suspicious timing of bond offerings, the significant risk involved, and why organizations should trust but verify, considering the visibility within the organizational structure.

✔️ Michael DeBernardis emphasizes why preventative controls like electronic surveillance should be implemented right away and how the Goldman Sachs case proves that improving your company structure is vital.

✔️ Tom Fox and Michael DeBernardis talk about the Monaco Memo and how the Goldman Sachs case perfectly applies the implementation of clawbacks.

✔️ Michael DeBernardis encourages companies to publish their general policy statement to prevent future problems.

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Do you have a podcast (or do you want to)? Join the only network dedicated to compliance, risk management, and business ethics, the Compliance Podcast Network. For more information, contact Tom Fox at tfox@tfoxlaw.com.

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The Corruption Files

Episode 09: Odebrecht/Braskem with Tom Fox and Michael DeBernardis

Brazilian petroleum company Petrobras caught itself in an intricate bribery scheme involving top construction corporations like Odebrecht and Braskem and political parties. Tom Fox and Michael DeBernardis lay out the facts and share their insights on what lessons other companies can learn and practice to avoid similar compliance troubles.

▶️ Odebrecht/Braskem with Tom Fox and Michael DeBernardis

Key points discussed in the episode:

✔️Tom Fox gives a brief background on the Petrobras-Odebrecht-Braskem case.

✔️Michael DeBernardis clarifies more facts on the case, such as the bribery feedback loop and the increasing spending on litigation. Tom Fox adds that even if you “create bad law, it’s still a law.” It has also brought attention to compliance authorities and politicians in Brazil. More companies in other countries were also involved in the scheme.

✔️The bribery scheme was intricately designed to avoid compliance detection. Michael DeBernardis recommends ensuring maximum procurement controls. Petrobras employees benefited mostly in this case. This case has emphasized the importance of visibility in supply chains.

✔️Michael DeBernardis emphasizes the importance of having appropriate controls to mitigate supply chain risk despite being lower than other aspects of the business. It also exposed the massive scale of corruption.

✔️Michael DeBernardis and Tom Fox hit home their suggestions to companies: Do a deep risk analysis, get to know your joint venture partners, and any form of defense is helpful. Although the danger is not easy to detect up front, it can help lessen the risk. Also, you should not close the doors to working with businesses with a little bit of controversy.

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Do you have a podcast (or do you want to)? Join the only network dedicated to compliance, risk management, and business ethics, the Compliance Podcast Network. For more information, contact Tom Fox at tfox@tfoxlaw.com.

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The Corruption Files

Episode 08: Banks Behaving Badly with Tom Fox and Michael DeBernardis

Tom Fox and Michael DeBernardis discuss the dubious bribery cases of financial institutions, specifically Deutsche Bank, Credit Suisse, and Societe Generale (SocGen), that utilized commission agents of significant political power. They also talk about why compliance committees should look closer into the backgrounds of company agents and how the Deutsche Bank kickstarted France’s fight against corruption.

▶️ Banks Behaving Badly with Tom Fox and Michael DeBernardis

Key points discussed in the episode:

(00:00:36) Michael DeBernardis gives a brief background on the Deutsche Bank case.

(00:05:10) Tom Fox examines the compliance lessons to be learned from the Deutsche Bank case. Compliance professionals should consider not only families but friends of commission agents. The worst misconduct can gain reduced penalties when companies cooperate with investigations. Michael adds how Deutsche Bank took corrective action to achieve a significant discount.

(00:11:09) Two possible discounts companies may get for compliance are (1) a cooperation discount under the US sentencing guidelines and (2) a discount under the FCPA corporate enforcement policy.

(00:12:15) Michael DeBernardis’ standpoint as a lawyer to his clients: be forthcoming and argumentative when appropriate.

(00:13:54) Michael DeBernardis gives a brief background on the SocGen case.

(00:19:28) The SocGen case was the first US-France anti-corruption collaboration. Though bribery through agents has been done by others, it’s still an effective dishonest practice. Michael adds that companies have since improved in doing background checks on their agents.

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Do you have a podcast (or do you want to)? Join the only network dedicated to compliance, risk management, and business ethics, the Compliance Podcast Network. For more information, contact Tom Fox at tfox@tfoxlaw.com.

 

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The Corruption Files

The Sophisticated Conduct of Och-Ziff’s African Bribery with Tom Fox and Michael DeBernardis

In 2016, the DOJ and SEC served enforcement action against Och-Ziff Capital Management Group for inappropriate business practices in Africa. It seemed like only yesterday when this successful hedge fund was incriminated in a complex scheme of bribing government officials to maintain and get new business. The settlement was $412 million (and even more for restitution for the victims), making it one of the biggest payments for violating the Foreign Corrupt Practices Act (FCPA).

▶️ The Sophisticated Conduct of Och-Ziff’s African Bribery with Tom Fox and Michael DeBernardis

Key points discussed in the episode:

✔️ A crisis can breed opportunities for corruption. Even as its red flags became increasingly apparent, the option remained for the Och-Ziff to stop its bribery and illegal action before and even after its activities were discovered.

✔️ Compliance professionals need to have their eyes extra peeled, not simply to vet due-diligence partners but to look deeply into the ongoing business relationships with joint-venture partners. Och-Ziff Subsidiary was involved in corruption issues tied to its mining projects in the Democratic Republic of Congo. What was blatantly amiss was the review and audit necessary to view the joint venture from the compliance perspective.

✔️ Find a joint-venture partner that approaches compliance the same way you do. In handling joint ventures, there is a need for ongoing due diligence — and ongoing management of the relationship beyond due diligence. In the lifecycle of a third-party agent, work starts when the contract is signed, and the joint venture is formed.

✔️ There are various means for auditing available that don’t include turning the place upside down. Here are some good ways to keep an eye on an entity like a joint venture:

-Do spot checks on certain transactions
-Do sampling from a distance
-Make the audit by interviewing the employees to ensure they understand and follow the compliance requirements.

✔️ Remember, it becomes more complicated when you are not in control. Regarding building contractual protections and having strict control, ensure that you find a joint-venture partner that approaches compliance the same way you do.

✔️ Companies have always had audit rights but haven’t exercised those rights. It’s almost a requirement when making high-risk transactions to not only build in the audit rights but also exercise them. Ask the right questions and gauge whether the third party has been honest in the due diligence process.

Many companies get scared off by the idea of the disruption and invasion involved, but that’s what takes away the potential problems and the unnecessary bouts with the SEC and the Department of Justice (which is responsible for enforcing the FCPA).

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Do you have a podcast (or do you want to)? Join the only network dedicated to compliance, risk management, and business ethics, the Compliance Podcast Network. For more information, contact Tom Fox at tfox@tfoxlaw.com.

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The Corruption Files

Episode 06: The Instrumentality Ruling of United States v. Esquenazi

Welcome to another episode of The Corruption Files!

Tom Fox and Michael DeBernardis explore their biggest takeaways from the appeal of the conviction of former Terra Telecommunications Corp. executive Joel Esquenazi. He and other involved parties were proven to pay bribes to Haitian government officials in a grand scheme. The case remains an example of a significant conclusion from a defense involving the FCPA.

▶️ The Instrumentality Ruling of United States v. Esquenazi with Tom Fox and Michael DeBernardis

Key points discussed in the episode:

✔️ The Esquenazi decision is vital in providing clear guidance for businesses to design robust compliance programs to address corruption, avoid making grease payments to foreign government officials, and remove the temptation to cull business favors and advantages for their company.

✔️ Companies doing business abroad should never forget the learnings from the Esquenazi decision in 2014. Following the conclusion of the Court of Appeals was identifying ownership and financial control to decipher the “instrumentalities” of foreign governments and to correctly identify that there were no red flags for FCPA compliance.

✔️ The 11th Circuit Court of Appeals’ opinion clarifies how a two-part test is crucial in determining the “instrumentality” of an employee, officer, agency, or department as an entity of foreign governments. The elements of “control” and “function” served as the two prongs that the US Court of Appeals for the Eleventh Circuit made in its decision for Esquenazi and the others involved in the case.

✔️ A key indicia of a governmental entity is it doesn’t have to make a profit. Think about the United States Postal Service — today; it still stands as a government service. Everyone uses it — and we don’t want it to go away even if it doesn’t make a profit. Indeed, non-earning can be the biggest indicator if you assess what constitutes any employee, officer, agency, or department as an “instrumentality” of foreign governments where clients are conducting business.

✔️ United States v. Esquenazi is a well-settled FCPA case that didn’t go to the U.S. Supreme Court. The Esquenazi decision is a significant case law that came out of a defense trial with the defendant paying heavily and sentenced to prison for 15 years — a landmark decision that remains relevant today.

✔️ Key lessons learned from United States v. Esquenazi:

1. Ownership/Financial Control – There is no percentage amount listed, but the inclusion of financial control would indicate that anything over 50% would be a significant factor.

2. Actual control is key in all three court decisions. In Lindsey and Esquenazi, it is characterized as the government’s right to appoint key officers and directors. In Carson, it is called government control. But this means that if the government exercises actual control, it may trump the 50% guidance stated above.

3. Privileges and Obligations are also mentioned in all three. Does the entity have the right to control its functions?

4. Financing – Is the entity a for-profit entity financed through its revenues, or does it depend on financing by its government?

5. Perception is Reality – André Agassi’s immortal words appear again. If it is widely perceived as providing an official function, it is an instrumentality under the FCPA.

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Do you have a podcast (or do you want to)? Join the only network dedicated to compliance, risk management, and business ethics, the Compliance Podcast Network. For more information, contact Tom Fox at tfox@tfoxlaw.com.