Dutch Won't Open Old Lockheed Wound

The leader of the Dutch government has refused to open a new investigation into the role played by Prince Bernhard in the Lockheed scandal that broke in 1976.

The head of the left-wing liberal D66 party, Alexander Pechtold, asked for 'a commission of historians . . .  to bring clarity to the affair after historian Gerard Aalders said Bernhard's involvement was greater than so far thought,' according to DutchNews.

Prime Minister Mark Rutte told Parliament last month he won't authorize a new inquiry.

Bribery scandals involving Lockheed in Holland, Japan, and Italy helped push Congress to enact the Foreign Corrupt Practices Act. President Carter signed the FCPA into law in December 1977.

DutchNews said the Lockheed scandal 'nearly led to the abdication of then Queen Juliana when it broke in 1976. Bernhard had to renounce his military functions in exchange for judicial immunity for taking a $1.1 million bribe from Lockheed fifteen years earlier. He died in 2004.'

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To read more about the FCPA's legislative history, see Prof Andy Spalding's Beyond Balance series.

BRIC Companies Rank Low On New TI Index

Transparency International yesterday released its 2011 Bribe Payers Index. It’s the fifth version of the index and the first update since 2008.

It ranks 28 of the world’s largest economies, TI said, ‘according to the perceived likelihood of companies from these countries to pay bribes abroad.’

The report is based on a survey of business executives. The countries ranked, TI said, cover all regions of the world and represent almost 80 percent of the total world outflow of goods, services, and investments.

It includes perceptions of public bribery and for the first time private ('business to business') bribery.

The top-ranked countries are the Netherlands and Switzerland, tied in first place. Belgium, Germany, and Japan round out the top five.

Companies from the BRIC economies are led by Brazil at 14. Russia ranked last overall at 28, India at 19, and China at 27.

The UAE, Indonesia, and Mexico complete the bottom five spots.

TI’s 2011 bribe payers index is here.

Avon Discloses SEC Investigation

Avon Products confirmed Thursday that the SEC has issued a formal order of investigation into possible violations of the Foreign Corrupt Practices Act.

Avon's disclosure appeared in its quarterly report filed with the SEC.

The company, which first disclosed an internal investigation in October 2008, said it has turned over evidence to the SEC and DOJ from 'compliance reviews.'

The investigation, the company said, focused on expenses and accounting for 'travel, entertainment, gifts, use of third party vendors and consultants and related due diligence, joint ventures and acquisitions, and payments to third-party agents and others.'

The Wall Street Journal said in May the internal investigation uncovered millions of dollars of questionable payments to government officials in China, Brazil, Mexico, Argentina, India, and Japan.

The company's legal fees and costs for outside counsel conducting the investigation were $59 million in 2009, $95 million in 2010, and $22.5 for the first quarter of this year.

Last year, Avon reportedly suspended four employees pending its internal bribery investigation -- three in China and one in New York.

China imposed restrictions on direct selling in the late 1990s that forced Avon to market its products through shops and boutiques. But in 2006, the company convinced China's regulators to allow its traditional door-to-door sales model.

Avon appeared on our 2011 watch list.

Avon Products, Inc. trades on the NYSE under the symbol AVP.

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Avon's FCPA disclosure in its Form 10-Q (pdf) filed October 27, 2011 said:

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As previously reported, we have engaged outside counsel to conduct an internal investigation and compliance reviews focused on compliance with the Foreign Corrupt Practices Act (“FCPA”) and related U.S. and foreign laws in China and additional countries. The internal investigation, which is being conducted under the oversight of our Audit Committee, began in June 2008. As we reported in October 2008, we voluntarily contacted the United States Securities and Exchange Commission and the United States Department of Justice to advise both agencies of our internal investigation. We are continuing to cooperate with both agencies and inquiries by them, including but not limited to, signing tolling agreements, translating and producing documents and assisting with interviews.

As previously reported in July 2009, in connection with the internal investigation, we commenced compliance reviews regarding the FCPA and related U.S. and foreign laws in additional countries in order to evaluate our compliance efforts. We are conducting these compliance reviews in a number of other countries selected to represent each of the Company's international geographic segments. The internal investigation and compliance reviews are focused on reviewing certain expenses and books and records processes, including, but not limited to, travel, entertainment, gifts, use of third party vendors and consultants and related due diligence, joint ventures and acquisitions, and payments to third-party agents and others, in connection with our business dealings, directly or indirectly, with foreign governments and their employees. In connection with the ongoing internal investigation and compliance reviews, certain personnel actions have been taken and additional personnel actions may be taken in the future.

For additional information, see Note 5 to our consolidated financial statements contained in our Form 10-Q for the quarter ended March 31, 2011 and “Risk Factors” contained in our Form 10-K for the year ended December 31, 2010. The internal investigation and compliance reviews of these matters are ongoing, and we continue to cooperate with both agencies with respect to these matters. In connection with the internal investigation and compliance reviews, we continue to enhance our ethics and compliance program, including our policies and procedures, FCPA compliance-related training, FCPA third party due diligence program and other compliance-related resources.

On October 26, 2011, the Company received a subpoena from the United States Securities and Exchange Commission (“SEC”) requesting documents and information in connection with a Regulation FD investigation of the Company's contacts and communications with certain financial analysts and other representatives of the financial community during 2010 and 2011. The Company was also advised that a formal order of investigation was issued by the SEC relating to the FCPA matters described above and the Regulation FD matters that are referenced in the subpoena. The Company intends to cooperate fully with the SEC's investigation.

At this point we are unable to predict the duration, scope, developments in, results of, or consequences of the internal investigation and compliance reviews and the SEC's investigation.

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Former Olympus CEO Turns Whistleblower

The fired British CEO of Tokyo-based Olympus Corporation has turned over evidence of potentially corrupt payments to the U.K.'s Serious Fraud Office.

Michael Woodford, a thirty-year veteran at the company, served as CEO for just six months before being fired a week ago. He told the Financial Times his downfall reflects 'a deeper refusal by the Japanese group to accept questioning of payments relating to past deals.'

After his firing, he gave the SFO evidence from an internal investigation. The SFO hasn't commented on the case.

Olympus makes cameras and precision imaging equipment used in the medical industry.

The company is an 'issuer' subject to the U.S. Foreign Corrupt Practices Act. Its American Depositary Receipts trade over the counter in the pink sheets under the symbol OCPNY.PK. Prices of its ADRs dropped more than 40% after the scandal broke earlier this month.

The Financial Times said Woodford launched an independent investigation in July by PwC 'into extremely generous payments made to advisers when Olympus bought Gyrus, a U.K.-listed medical equipment company, for $2.2 billion in 2008.'

He later told the paper: 'I went to the SFO and gave them all the correspondence and the PriceWaterhouse report, because if you make payments which are just so huge ... there’s no answer, and when you try to seek an answer, that’s when concerns arise of more sinister issues.'

Olympus has threatened legal action against Woodford for disclosing confidential information, the Financial Times said.

Fit To Lead?

We're off to do our civic duty. But what we're thinking about today, other than which levers to pull, is the 2010 corruption perception index.

More specifically, whether the U.S. should still be leading the charge against international graft? Or has the country now forfeited its leadership role?

For the first time, as we heard a few days ago, America was voted out of the CPI's top 20 -- and is now perceived as more corrupt than Canada, the U.K., Australia, Barbados, Chile, Iceland, Germany, Japan and, yes, even Qatar. 

Why the decline? Rob Walton and Michael Whitener recited a litany yesterday -- shady lending and trading practices that triggered the Great Recession; money-flooded U.S. politics; and Ponzi-schemer Bernie Madoff and his copycats.

And let's not forget two U.S.-led wars -- now unmentionable, apparently, by anyone occupying or running for public office. Before the wall of silence went up, the world found out the Iraq war was sold on a false bill of goods. And in Afghanistan, the U.S. government itself has been shoveling black money into the mix, for purposes no one back home can explain.

So it's no wonder the rest of the world thinks America has lost some of its integrity. And why on the CPI the country landed just ahead of Uruguay, France, and Estonia -- a neighborhood not well known for iron-fisted compliance.

Today, then, as we exercise the greatest of all democratic privileges, we'll also be pondering what the the new ranking might mean for our favorite subject, FCPA enforcement.

More on that later.