With Compliance, More Isn't Always Better

By Benjamin Kessler

Alexandra Wrage, left, is the founder and president of TRACE International, a non-profit anti-corruption organization.

TRACE (which stands for Transparent Agents and Contracting Entities) offers member companies access to an online anti-bribery program and the annual TRACE Forum in Washington, D.C., among many other resources.

Wrage started TRACE in 2001, during her tenure as senior counsel for Northrop Grumman.

She was kind enough to answer a few questions about her anti-corruption efforts:

Q: Why did you make the leap from in-house counsel to head of an anti-corruption organization?

A: I enjoyed my time in-house, but in the anti-bribery space cooperation across companies is important. If a company is being extorted by a government official, that official will often say that the company’s competitors are willing to pay. If companies are speaking to each other, this tactic fails. I was also horrified at the amounts of money companies were spending to reach the same results.

Q: What was the most hopeful development you noticed in 2011? The most disappointing development?

A: We watched far more companies begin to take compliance seriously in 2011. It was encouraging to see many start with nothing and finish the year with a credible, functioning anti-bribery program.

On the other hand, it has been disappointing to watch some companies equate “more” with “better.” We routinely hear compliance officers asking what more they can be doing.

At some point, especially in this economy, the question is going to have to be: where do we need to pay more attention…and where can we prudently pay less?

Q: Can a multinational with an effective anti-bribery compliance program continue to do business in countries with a culture of entrenched corruption? If so, how?

A: First, I resist the expression “culture of corruption.” No culture celebrates theft and the citizens of the countries with the highest levels of corruption suffer most. … I do believe it’s possible for a company to do business anywhere without paying bribes. The business will be slower and less profitable.

Companies should build in the additional time and budget it will take to get things done when a quick pay-off isn’t an option. They will also need to plan for greater compliance resources on the ground for training and more frequent audits.

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Benjamin Kessler is an editor and writer for Ethics 360. He can be contacted here.

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[Editor's note: This post is part of our series profiling global compliance leaders. Most appear on our sponsor Ethisphere’s annual list of the 100 Most Influential People in Business Ethics. Readers are also welcome to suggest others they'd like to see profiled in this series.]

The Compliance Professionals

TRACE said this week it's starting a certification program for antibribery specialists.

The program is aimed at those already working with antibribery laws or compliance -- lawyers, compliance managers and administrators, accountants and financial specialists -- but it's open to anyone with an interest.

Certification requires 30 credit hours of courses offered through the program and passing a final exam. One course will usually equal one credit hour. Trace said it will offer over 100 credit hours, some with general antibribery and compliance training, and some directed at specific industries such as natural resource extraction, technology, healthcare and financial services. Other course will be country specific. Mentioned were China, Russia, India, Brazil, Nigeria, and the U.K.

The courses will be a mix of on-line and live presentations by instructors from the private and public sectors, and from NGOs. The total cost is between $1,800 and $2,200.

"Ten years ago," Trace said, "anti-bribery conferences attracted just two-dozen people. Now, leading conference organizers cap attendance at 500. The field of anti-bribery compliance has been flooded with new lawyers, accountants and other compliance professionals."

The Compliance World Series

Holding countries publicly accountable for antibribery enforcement is a key to global compliance. Measuring performance inning by inning and posting the results on the scoreboard tells each government where it stands. And it tells the citizens of each country what their leaders are doing to fight global graft.

Last week we talked about Trace's contribution to the compliance scoreboard with its first-ever Global Enforcement Report -- a remarkable summary of "all known international anti-bribery enforcement actions since the FCPA’s passage some 33 years ago."

This week there's more good news. The OECD's Working Group on Bribery has just published enforcement data from 37 of its 38 members that measures  enforcement activity. It includes "criminal, administrative and civil cases of foreign bribery that have resulted in a final disposition, such as a criminal conviction or acquittal, or similar findings under an administrative or civil procedure." The numbers go back to 1999, the year the OECD's Antibribery Convention came into force.

The highlights: One hundred forty-eight individuals and 77 entities were sanctioned under criminal proceedings for foreign bribery in 13 Parties (member countries) between 1999 and the end of 2009. At least 40 of the sanctioned individuals were sentenced to prison. Combined fines of up to €1.24 billion have been imposed on companies sanctioned for foreign bribery. About 280 investigations are ongoing in 21 Parties to the Antibribery Convention.

The low-lights: Germany records the most acquittals in enforcement actions with 24. Japan, the world's second largest economy, reported eight enforcement actions during the 10 years from 1999, and France, the world's fifth largest economy, reported one. (Hungary, with about the world's 70th biggest economy, reported 27 enforcement actions).

The Working Group's enforcement data can be downloaded from the OECD's site here.

Global Enforcement's Bad Math

American business people have always been troubled by the Foreign Corrupt Practices Act. It's not that they want to pay bribes overseas. They don't. But they also don't want companies from other countries paying bribes to win work.

The U.S. government agrees. For more than three decades, the feds -- led by the DOJ and the Commerce Department -- have been working hard to spread the anti-corruption enforcement message. Despite their efforts, the level playing field remains a distant dream.

Just how distant was made clear last week. Trace International released its first Global Enforcement Report (GER). It's a remarkable summary of "all known international anti-bribery enforcement actions since the FCPA’s passage some 33 years ago." And although it shows the U.S. isn't alone in the battle against graft, our few allies are a long, long way behind.

Of 515 outbound, or foreign, enforcement actions recorded by Trace, more than 75 percent are U.S. matters. The remaining 25 percent are the result of the combined efforts of 21 other nations. The United Kingdom ranks a distant second in the number of outbound bribery cases with 4.3 percent of the total.

Trace, with understatement, says a lot remains to be done. No one will disagree.

The GER won't bring welcome news to those who hoped the level playing field was at hand. It's not. But the GER is very welcome for another reason. For the first time, and with hearty thanks to Trace, the state of global antibribery enforcement is in plain sight. It may not be pretty, but just by being visible it's an eloquent and high-decibel call for other countries to join the battle.

Download a copy of Trace International's 2010 Global Enforcement Report here.

Second Chances And More

What a difference a year or so makes. In December 2007, Lucent Technologies Inc. -- which became part of Alcatel SA in November 2006 -- settled Foreign Corrupt Practices Act charges. It had illegally paid millions of dollars for Chinese officials to take more than 300 trips to the U.S., Europe and elsewhere. They were supposed to be business missions but ended up being junkets -- "sightseeing, entertainment and leisure." Lucent paid $2.5 million to resolve the offenses.

But last month, Alcatel-Lucent signed agreements in Washington, D.C. worth $1.7 billion with China Mobile and China Telecom. The company said the agreements are the first of many that will help Chinese companies roll out 3G technology.

We've said before that we believe in corporate redemption and second chances. It looks like Alcatel-Lucent is making the most of its freshly cleaned slate. The winners will be its stakeholders, Chinese partners, and the Chinese people who'll benefit from upgraded technology. (And we like its nifty 3D logo, above.)

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Corruption in Iraq is so bad that it's blocking the country's recovery. The New York Times' Sam Dagher wrote a great story about it (here). Here's how he started:

Iraq’s main anticorruption watchdog has no shortage of cases, as its new report makes clear: embezzlement of $80 million; tampering with government tea imports; the theft of 50 Italian-made Beretta pistols; procuring forged Ph.D.’s; and scores of other crimes.

The real problem is the difficulty of prosecuting people for corruption, which is so widespread that it has become one of the main obstacles to stability and progress in Iraq, according to Iraqi and American officials. Among the barriers, the officials say, are laws that give ministers the right to pardon offenders, as well as partisan and sectarian interference, pressure, infighting, vendettas, blackmail and death threats.

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The expense-account scandal in the British Parliament sure is . . . grubby. Petty corruption always looks that way. And that goes for FCPA-compliant "facilitating payments" too.

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Mahatma Gandhi's 1948 message about graft in India is universal:

Corruption will go when the large number of persons given unworthily to it realize that the nation does not exist for them to exploit but that they exist to serve the nation. This requires morals, and extreme vigilance on the part of those who are free of the taint. Indifference will be criminal…

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Our friends at Trace International sent us "Toxic Transactions: Bribery, Extortion and the High Price of Bad Business," their hour-long anti-bribery training video. The interviews with current and former prosecutors and others make one thing clear -- those who pay bribes are likely to be caught and punished, with jail a real possibility. So compliance is the only option that makes sense. Great message. Congratulations to Alexandra Wrage and Trace. Clips from the video can be seen here.

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The FCPA has been around for more than 30 years now and, as Trace's video shows, people are getting better at talking about it. That includes those from government, private practice and corporations. So the subject seems a lot less mysterious than it used to and more accessible. That's good news. It's also a gentle plug for the books at the right -- Bribery Abroad and the newly released Bribery Everywhere (both are in stock and can be ordered now). Anyway, we're glad people are more comfortable these days talking about the FCPA in a way that's less formal and not so legalistic.
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