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Friday Roundup

ISO 37001 airball, from the Inspector General report, scrutiny alert, good lord, marketing an impossible dream, root causes, and yes it is. It’s all here in the Friday roundup.

ISO 37001 Airball

If you have an interest in the non-story of ISO 37001 check out this podcast [1] in which Alexandra Wrage (Trace International) asks some very good questions of a Microsoft representative.

To use a basketball analogy, the Microsoft’s reps answers were air balls full of buzzwords and cliches. 

For instance, at the 10 minute mark, Wrage gave the guest an opportunity to be specific, but his answer was an air ball.  At the 18 minute mark, Wrage asked the guest the salient cost question of obtaining an ISO 37001 certification and once again his response was an air ball.   

Microsoft has been under FCPA scrutiny since 2013 (see here [2] – this was not mentioned in the podcast) and maybe that is part of the reason Microsoft is cheerleading ISO 37001.

For numerous FCPA Professor posts on ISO 37001 see here [3].

From the Inspector General Report

The recent DOJ Inspector General Report, formally titled “A Review of Various Actions by the Federal Bureau of Investigation and Department of Justice in Advance of the 2016 Election,” contains a reference to the Foreign Corrupt Practices Act and an FCPA parallel.

In a section of the report discussing the conduct of certain FBI agents is the following footnote:

“In 2012, “racy texts” exchanged between two FBI agents and an FBI informant were used to impeach the agents in the prosecutions of several defendants for violations of the Foreign Corrupt Practices Act. According to a Washington Post article about the case, which ended without convictions, the foreman of the jury stated that the “texts were one of many things that point[ed] to an absolutely amateurish operation” by the government. See Del Quentin Wilbur, Racy Texts Hurt Justice’s Largest Sting Operation Targeting Foreign Bribery, WASH. POST, Feb. 13, 2013. This case and the Washington Post article about the impact of the text messages are used in the Department’s training on electronic discovery as an example of what not to say in text messages. However, the OIG learned that the agents involved in that case were not investigated or disciplined for misconduct, and that their text messages were handled as a performance issue. Both agents remain employed by the FBI.”

As if that was not laughable enough, further laughable is that the FBI informant (Richard Bistrong who plead guilty to real-world FCPA violations and who the jury foreman said “freely admitted on the stand more illegal acts than the entire group of defendants was accused of”) has been embraced by some in the FCPA compliance community and has won awards for being among the “most influential in business ethics” and a “top mind in governance, risk, compliance.”

For additional information, see here [4], here [5], here [6] and here [7]. For the jury foreman’s previous FCPA Professor post, see here [8].

Back to the Inspector General report.

FCPA enforcement actions have included allegations of sports tickets, golf outings, and drinks and meals.

Against this backdrop, the following blurb in the Inspector General’s report is interesting.

“In addition to the significant number of communications between FBI employees and journalists, we identified social interactions between FBI employees and journalists that were, at a minimum, inconsistent with FBI policy and Department ethics rules. For example, we identified instances where FBI employees received tickets to sporting events from journalists, went on golfing outings with media representatives, were treated to drinks and meals after work by reporters, and were the guests of journalists at nonpublic social events.”

See here [9] for the article titled “The Uncomfortable Truths and Double Standards of Bribery Enforcement.”

Scrutiny Alert

As highlighted in this previous post, in 20014 Germany-based Bilfinger SE agreed to pay $32 million to resolve an FCPA enforcement action concerning business practices in Nigeria.

[10]

Recently Der Spiegel went in depth [11] into other suspected acts of corruption involving Bilfinger.

“But a look inside Bilfinger reveals that things haven’t been cleaned up nearly as much as is claimed. [A German civil action] involves dozens of investigative reports that a team of DER SPIEGEL reporters was able to evaluate. They document myriad cases of suspected corruption that have never before seen the light of day. They included the golden deals in Oman, as well as deals struck in India, Vietnam, Thailand, Bangladesh, Abu Dhabi, Russia, Poland, Austria and Brazil, some of them as recently as 2015.”

Good Lord

FCPA Professor frequently highlights articles deserving of attention both good and bad. While some may not like the later, I didn’t invent fact-checking I just occasionally apply it to the FCPA context when individuals freely and voluntarily publish articles including on social media.

With that in mind, good lord is this article bad [12] on the FCPA and its application. Some publications appear willing to publish anything.

As someone on social media commented:

“It makes approximately the same amount of sense if you substitute just about any legislation for the FCPA. “It’s a complicated issue since the Dangerous Dogs Act 1991 is very specific about which breeds of dogs are considered dangerous, but is much less so when defining how Americans should act in the face of foreign financial influence.”

Marketing An Impossible Dream

FCPA and related risk can be mitigated through internal compliance policies and procedures, but (like other forms of legal liability) FCPA and related risk can not be “prevented” through such policies and procedures – to suggest otherwise is marketing an impossible dream.

The latest example …

Root Causes

It has been highlighted numerous times on these pages.

Trade barriers and distortions are often the root causes of bribery and a reduction in bribery will not be achieved without a reduction in trade barriers and distortions.

Regulatory burdens (ranging from local content requirements, customs procedures, licensing and certification requirements, foreign government procurement policies, etc.) create bureaucracy, bureaucracy creates interactions with foreign officials, and the more interactions with foreign officials, the greater the FCPA risk will be. It really is not that complex of a formula.

I am not suggesting a perfect parallel, but my root causes radar went off when reading this [13] recent Wall Street Journal article titled: “Saudi Employers Pursue Elusive Prey – Saudi Workers.” As noted in the article about a Saudi law that requires certain companies to employ 40% Saudi nationals:

“For decades, expatriate workers from countries such as India and the Philippines helped sustain Saudi Arabia’s high living standards by doing jobs Saudis wouldn’t do in kitchens, at construction sites and behind store counters. The oil-rich monarchy endowed citizens with what were essentially jobs for life in the public sector, which means the labor force doesn’t always have the skills, and sometimes lacks the motivation, to fill private-sector jobs.

The pressure to meet the quotas has pushed companies to offer Saudis better salaries and shorter working hours. Some businesses, risking fines and visa troubles, hire Saudis who count on the registered workforce but just sit at home.

Abdulmohsen, an executive at a Saudi logistics company, estimated that half of the Saudis on his payroll are employees in name only.

[…]

One way the government has enforced its policy is making it costlier for companies to get visas for foreign workers. It also has stepped up inspections of businesses to make sure Saudi workers are there.

The manager of a Jidda-based ad agency recalls the day last fall when inspectors showed up at the firm’s head office. “Where are the Saudi employees?” they demanded, according to the manager, Abuzayed, a Palestinian with a Jordanian passport. Of the firm’s 20 registered Saudi workers, only one was at his desk.

“We have their names, they are registered,” Abuzayed says. “They get paid but they don’t work.”

The ad agency was fined 65,000 riyals ($18,000) and blocked from requesting visas for foreigner workers. It has been in limbo ever since, lacking the money to pay its electricity bill, let alone the fine and rising cost of renewing overseas employees’ residency permits. Abuzayed said he would be surprised if the firm survives until the end of the year.”

This Saudi law seems like a recipe for all sorts of potential malfeasance.

Yes It Is

Is it possible for the SEC Chairman to give a speech that mentions “culture” 51 times?

Yes it is [14].

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