Friday Roundup
Scrutiny alerts and updates, ripples, difficult business conditions, resource alerts, and for the reading stack. It’s all here in the Friday roundup.
Scrutiny Alerts and Updates
Wal-Mart
Bloomberg reports:
“Wal-Mart Stores Inc. is butting heads with the U.S. government over how to wrap up a long-running foreign corruption investigation. Officials have proposed that the world’s biggest retailer pay at least $600 million to resolve probes by the Justice Department and the Securities and Exchange Commission into whether it bribed government officials in markets from Mexico to India and China, according to three people familiar with the matter. The retailer has rebuffed the government’s request, two of them said.
The DOJ’s Latest Position Regarding The Siemens Monitor Report Is Laughable
Rather than just prosecuting alleged Foreign Corrupt Practices Act violations, the Department of Justice (presumably) wants business organizations to adopt compliance best practices.
In resolving the record-setting Siemens FCPA enforcement, the DOJ complimented Siemens on its remedial measures, stating in this sentencing memorandum that the company “set a high standard for multi-national companies to follow.”
Yet, in a recent filing in a case seeking release of the Siemens monitor report, the DOJ advances a laughable position.
That position – as articulated by the DOJ in seeking to block release of the monitor report – is that “disclosure of confidential information about Siemens’ compliance programs would provide a free roadmap as to what works in international commerce without violating the FCPA and other anti-corruption laws, what activities to avoid, how build an effective compliance program and system of internal controls, etc.”
Appearances Matter – President Obama Hobnobs With Siemens Executives Who Provide Him Something of Value
Granted, it happened in late 2008.
The “it” is the Siemens Foreign Corrupt Practices Act enforcement action in which the U.S. government stated, among other things, that “for much of its operations across the globe, bribery was nothing less than standard operating procedure for Siemens” and that the “pattern of bribery by Siemens was unprecedented in scale and geographic reach.”
According to the U.S. government, Siemens’ conduct was “egregious,” “staggering,” “brazen,” and “systematic;” and that there existed a “corporate culture in which bribery was tolerated and even rewarded at the highest levels of the company.”
In 2008, Siemens resolved parallel DOJ/SEC FCPA enforcement actions by agreeing to pay $800 million (still the largest FCPA settlement amount of all-time – see here for the current top ten list).
Although approximately 7.5 years have passed since 2008, the Siemens FCPA enforcement action remains an active issue for the U.S. government. Indeed, as highlighted in this recent post, the DOJ is seeking to block release of the Siemens’ Monitor Reports.
So Much For That Transparency Thing … DOJ Seeks To Block Release Of Siemens Monitor Reports
“Greater transparency benefits everyone. The Criminal Division stands to benefit from being more transparent ..”
Assistant Attorney General Leslie Caldwell, April 15, 2015
Yet, time and time again, when the DOJ has an opportunity to be more transparent when it comes to Foreign Corrupt Practices Act enforcement, the DOJ circles the wagons and retreats behind speculative and specious legal arguments.
The latest example concerns the DOJ’s continued efforts to block public release of the Siemens’ monitor report, a condition of settlement from the still record-setting $800 million FCPA enforcement action against Siemens in 2008. The DOJ’s resistance is all the remarkable given that Siemens’ post-enforcement action monitorship ended long ago and the case is no longer active.
This post highlights the DOJ’s arguments in this recently filed brief in which the DOJ (along with Siemens and its monitor) is opposing public release of the Monitor reports.
As highlighted in this recent post, in a similar (albeit not FCPA) setting, U.S. District Court Judge John Gleeson (E.D.N.Y.) recently ordered the HSBC monitor report to be released.
Let’s hope that U.S. District Judge Rudolph Contreras (D.D.C.) to whom the Siemens case is assigned, like Judge Gleeson, champions transparency and does not acquiesce in secret criminal law enforcement.
Moreover, from a policy matter the DOJ should want the Siemens monitor report in the public domain as it would be a valuable educational resource for corporate counsel and compliance professionals on a variety of topics. This is particularly true because in its 2008 sentencing memorandum the DOJ complimented Siemens remedial measures and stated that the company “set a high standard for multi-national companies to follow.”
It strains credibility for the DOJ to now want the specifics of this “high standard for multi-national companies to follow” shielded from public disclosure.
The Difficulties Of Compliance
In the minds of some, compliance with the Foreign Corrupt Practices Act or other similar laws is simple: you just don’t bribe.
As highlighted in this prior post such a simplistic position is entirely off-target. Indeed what I find ironic about certain commentators who have articulated this position is that they devote their professional lives to selling compliance services and products.
Contrary to the simplistic rhetoric of some, a recent report regarding Siemens once again highlights the difficulties of compliance in a multinational business organization with tens of thousands of employees.
First, a bit of background.
In resolving the record-setting FCPA enforcement action against Siemens in 2008, the DOJ praised Siemens for its substantial compliance transformation.
Specifically in its sentencing memorandum, the DOJ acknowledged that Siemens had “already implemented substantial compliance changes” and a settlement term required the company to further implement “rigorous compliance enhancements.”
The “Remediation Efforts” section of the DOJ’s sentencing memorandum stated, in pertinent part, as follows:
“Siemens also overhauled and greatly expanded its compliance organization, which now totals more than 500 full time compliance personnel worldwide. Control and accountability for all compliance matters is vested in a Chief Compliance Officer, who, in turn, reports directly to the General Counsel and the Chief Executive Officer. Siemens has also reorganized its Audit Department, which is headed by a newly appointed Chief Audit Officer who reports directly to Siemens’ Audit Committee. To ensure that auditing personnel throughout the company are competent, the Chief Audit Officer required that every member of his 450 person staff reapply for their jobs. Siemens also has enacted a series of new anti-corruption compliance policies, including a new anti-corruption handbook, sophisticated web-based tools for due diligence and compliance matters, a confidential communications channel for employees to report irregular business practices, and a corporate disciplinary committee to impose appropriate disciplinary measures for substantiated misconduct. Siemens has organized a working group devoted to fully implementing the new compliance initiatives, which consists of employees from Siemens’ Corporate Finance and Corporate Compliance departments, and professionals from PricewaterhouseCoopers (“PwC”). This working group developed a step-by-step guide on the new compliance program and improved financial controls known as the “AntiCorruption Toolkit.” The Anti-Corruption Toolkit and its accompanying guide contain clear steps and timelier required of local management in the various Siemens entities to ensure full implementation of the global anti-corruption program and enhanced controls. Over 150 people, including 75 PwC professionals, provided support in implementing the AntiCorruption Toolkit at 162 Siemens entities, and dedicated support teams spent six weeks on the ground at 56 of those entities deemed to be “higher risk,” assisting management in those locations with all aspects of the implementation. The total external cost to Siemens for the PwC remediation efforts has exceeded $150 million.
Elsewhere, the DOJ sentencing memorandum stated:
“Siemens also significantly enhanced its review and approval procedures for business consultants, in light of the past problems. The new state-of-the-art system requires any employee who wishes to engage a business consultant to enter detailed information into an interactive computer system, which assesses the risk of the engagement and directs the request to the appropriate supervisors for review and approval. Siemens has also increased corporate-level control over company funds and has centralized and reduced the number of company bank accounts and outgoing payments to third parties.”
In summary, the DOJ recognized that “[t]he reorganization and remediation efforts of Siemens have been extraordinary and have set a high standard for multi-national companies to follow.”
Since the 2008 settlement, Siemens compliance reports as follows:
(1) approximately 600 employees work full time in a single compliance organization managed by a Chief Compliance Officer (of this number approximately eighty work at Siemen’s corporate headquarters with the rest deployed evenly around various sectors/divisions and regional companies); (2) 300,000 employees worldwide have received compliance training, including 100,000 employees who received face-to-face multi-hour courses; (3) all new compliance officers worldwide are required to take an intensive four-day course; (4) approximately 5,500 top managers worldwide have compliance metrics as an aspect of their compensation; and (5) approximately fifty-five high-risk entities and approximately 105 business units were required to implement over 100 compliance systems controls.
(See The Siemens Compliance System: Prevent, Detect, Respond and Continuous Improvement (2011).
In short, there are few companies in the world today that have devoted as many corporate resources towards compliance as Siemens over the past five years.
Despite the above improvements and investment in pro-active compliance that the DOJ labeled as setting “a high standard for multi-national companies to follow,” since 2008 Siemens been involved in numerous allegations of corruption.
This recent report from 100Reporters titled “Siemens Confidential: Reports of Wrongdoing Up, Penalties Down” suggests that since the 2008 FCPA settlement Siemens “received more than 3,000 new internal complaints of wrongdoing … including reports of corruption, bribery, fraud, anti-trust violations, embezzlement and conflict of interest.” According to the article, the internal company statistics were disclosed by Siemens at industry conferences and obtained by 100Reporters.
To some, the above report and statistics are evidence that Siemens has an ineffective compliance program.
To others, the above report and statistics are evidence of the difficulties of ensuring compliance in a multinational company with tens of thousands employees doing business all over the world.
But remember, in the minds of some it is easy. Just don’t bribe.