The Case For More Compliance
Sunday, March 15, 2009 at 8:30PM
Richard L. Cassin in Albert Jack Stanley, China, John Githongo, KBR, Kenya, Lowell Bergman, Nigeria, ProPublica

The pressure these days to comply with the Foreign Corrupt Practices Act and other anti-corruption laws is coming from several directions at once. Last week we mentioned whistleblower hotlines as one example. But there are other reasons why it's harder than ever for companies to cheat and for bride-taking officials to hide their crimes. Here's a quick look at some of what's happening:

The internet. Hundreds of millions of people now have access to uncensored news, chat boards, social sites, blogs, email and short messaging, podcasts and the like. While plenty of the internet's so-called news is gossip, rumor and opinion, there are also some real scoops. Last year in China, for example, someone found a bag on the subway in Shanghai. In it were expense reports from a trip by 23 local officials who'd spent $94,000 of taxpayer money on a three-week USA "study tour. " The receipts showed that the real itinerary included Hawaiian beaches, a sex show in San Francisco, and casinos in Vegas. The finder published them anonymously, a few at a time, on the internet. As reported (here), the details spread "like wildfire across Chinese cyberspace."

The net isn't just for amateur sleuths. Powerful non-traditional news outlets have appeared online, backed by serious money and seasoned professionals. ProPublica is one of them. It's a privately funded, non-profit, independent newsroom led by Paul Steiger, the former managing editor of The Wall Street Journal. Its staff includes some of the best editors and investigative reporters in America. We've featured their work in posts about KBR's Jack Stanley (here) and Siemens (here).

A new virtual newsroom is called The Business of Bribes. It's a ten-week online project from Lowell Bergman and the Investigative Reporting Program at the UC Berkeley Graduate School of Journalism, along with PBS' Frontline. We mentioned Lowell Bergman in a 2007 post (here). He's a Pulitzer Prize-winning former producer of CBS' 60 Minutes. His new online project aims to go deeper into the investigation of international bribery -- how corrupt payments are hidden from sight, how public graft helps destabilize the developing world, and what the U.S. and other countries are doing to combat global corruption.

NGOs and public interest groups. They're able to exert enormous pressure on corporations and governments to be more accountable. Transparency International created the annual Corruption Perception Index, a handy measure of how well countries are doing in the fight against sleaze. You see the CPI everywhere now, and TI's message about it is always clear. Here, for example, is what TI said about crooked courts:

It is difficult to overstate the negative impact of a corrupt judiciary: it erodes the ability of the international community to tackle transnational crime and terrorism; it diminishes trade, economic growth and human development; and most importantly, it denies citizens impartial settlement of disputes with neighbors or the authorities. When the latter occurs, corrupt judiciaries fracture and divide communities by keeping alive the sense of injury created by unjust treatment and mediation.
Another NGO working to shine the light on corruption is Global Witness. It concentrates on graft linked to the exploitation of natural resources. In 2003, it was co-nominated for the Nobel Peace Prize for its work on conflict diamonds. Its latest report, Undue Diligence, names some major banks that it says have been complicit with corrupt regimes (Citigroup, Barclays, HSBC, Deutsche Bank). This is from the introduction of the 116-page report:
Now we are going to go on a journey, to the oil-producing countries of the Gulf of Guinea as well as to Central Asia, to witness the corrosive and devastating effects of banks being willing to do business with corrupt regimes. With each story, the effectiveness of the bank’s ethical standards, compliance with due diligence requirements, and regulatory action will be examined, as far as the available evidence permits. Many of the examples in this report raise serious questions about how well a bank really knew its customer, even if it had been able to tick the regulatory box to say it had done its due diligence; and about whether compliance with the letter of regulations that require identification of the customer is sufficient to prevent banks doing business that contributes to corruption.
Brave Officials. Perhaps inspired in part by the openness of the internet and the advocacy of the watchdog groups, younger people in developing countries are rejecting the old ways of bribery of corruption. In Nigeria, for example, Nuhu Ribadu, 49, was exposing government graft until he lost his job last year as head of the country's Economic and Financial Crimes Commission. In Kenya, John Githongo, 43, was permanent secretary for ethics and governance in the office of the president until one of his investigations took him too close to the president and his cronies. Githongo combines several modern anti-corruption roles -- journalist, founder and former head of Transparency International's Kenya office, and next-generation government official. We talked about him here. He and Ribadu are both in the U.K. now for their own safety. But it's a sure bet Africa and the world will be hearing more from them.

Add to the above the zeal of the United States, the OECD and others to enforce the anti-corruption laws, and you have a powerful case why companies everywhere should be improving their compliance efforts. Anyone who hasn't yet made it a priority to obey the letter and the spirit of anti-corruption legislation could well end up in tomorrow's spotlight -- for all the wrong reasons.
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Article originally appeared on The FCPA Blog (https://www.fcpablog.com/).
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