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Harry Cassin Publisher and Editor

Andy Spalding Senior Editor

Jessica Tillipman Senior Editor

Richard L. Cassin Editor at Large

Elizabeth K. Spahn Editor Emeritus 

Cody Worthington Contributing Editor

Julie DiMauro Contributing Editor

Thomas Fox Contributing Editor

Marc Alain Bohn Contributing Editor

Bill Waite Contributing Editor

Shruti J. Shah Contributing Editor

Russell A. Stamets Contributing Editor

Richard Bistrong Contributing Editor 

Eric Carlson Contributing Editor

Bill Steinman Contributing Editor

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Thursday
Feb282019

Giant corporations are good for compliance

Most of us, if we have any sense at all, harbor some healthy distrust of the world's biggest companies. For good reason we fear the concentrated power of giant corporations. What, after all, is one person compared to the overwhelming might of Facebook, Walmart, or Exxon?

Yet when it comes to compliance, there's an argument that bigger is better. The idea is this: When big companies have effective compliance programs, there's a lot more compliance in the world, and therefore less corruption.

Before reaching that conclusion, though, we have to acknowledge the downside. When corporate giants are crooked, all that power is used to spread dirt across the globe, and that happens too often. Siemens was the archetype for the modern corrupt enterprise. Its growth strategy relied on a willingness to bribe government officials wherever it wanted to do business.

And yet, after Siemens narrowly escaped the corporate death sentence in late 2008 and embarked on an epic corporate clean up, it became a world leader in compliance.

Look at the numbers. In FY2007, the corrupt Siemens had 173 compliance staff worldwide. By the end of FY2009, the new Siemens had 598 compliance staff. That same year, Siemens fired 244 employees for compliance breaches and disciplined another 473.

By 2010, Siemens had a new CEO and an entirely new board. The company had already given in-person compliance training to 1,400 senior managers and 80,000 employees with "sensitive functions." That year, more than 140,000 employees completed on-line compliance training.

Today Siemens has about 380,000 employees and it's a world leader in best-practices compliance.

Consider too what's happened at the big pharmas. Last week in the UK, the Serious Fraud Office closed its bribery investigation of GSK without taking any action. That culminated a decade-long campaign of enforcement, during which the world's biggest drug makers collectively paid billions in penalties for massive compliance failures.

Staying with GSK, in 2012 the United States fined the company $3 billion for illegal promotion of drugs and failure to report safety data. In 2014, a court in Changsha, China fined GSK $490 million following a conviction for systemic bribery. In 2016, GSK paid $20 million to resolve FCPA violations alleged by the SEC.

Looking at Pfizer, in 2009 U.S. agencies fined it $2.3 billion for misbranding the painkiller Bextra with "the intent to defraud or mislead." In 2012, Pfizer paid $60 million to the DOJ and SEC to resolve FCPA offenses.

Again in 2009, Eli Lilly paid a $1.42 billion fine for off-label promotion of the antipsychotic Zyprexa. In 2012, Eli Lilly paid $29 million to settle FCPA charges with the SEC.

In 2016 Teva Pharmaceutical of Israel landed on the FCPA Blog's top ten list when it paid $519 million to resolve FCPA offenses.

And so on . . . .

After a decade of enforcement attention, it's reasonable to assume the pharmas have learned some important lessons. With their size and reach, they can now be a powerful force in spreading the idea of compliance. The ten biggest drug makers have more than a million employees combined -- that's a lot of compliance ambassadors.

There will always be good reasons to distrust the awesome power of giant companies. In their aim to make money, they too often trample on the rights of individuals. That will never completely stop and we shouldn't let down our guards. Corporations, like the rest of us, need to be held accountable.

But we should also recognize that when corporations adopt a deep and sincere culture of compliance, when their leaders truly aim to be good citizens of their communities and beyond, and when those leaders demand the same behavior from every employee and stakeholder, it's a huge step in the right direction.

In December 2008, when Siemens AG paid $800 million to resolve the first mega-enforcement action under the FCPA, it was surreal to watch a famous corporate giant publicly confess its corrupt past and turn to a compliant future. Since then scores of companies that together employ tens of millions of workers have done the same. I'm convinced that all of that confession, remediation, and compliance training has made the world a better and cleaner place.

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Richard L. Cassin, pictured above, is editor at large of the FCPA Blog.