Can America Lead the World’s Fight Against Corruption? – Ben W. Heineman Jr. – International – The Atlantic

Each nation has its own unique history and culture and meaningful change can only start from within, but the U.S. can help.

Nigerian protesters carry a mattress, on which “Kill corruption not subsidy” is written / Reuters

Corruption in emerging markets is at the core of key development, globalization, foreign policy and national security problems facing the United States. In recent years, the U.S. has had some success in implementing an international anti-bribery convention. But it has had significant issues when fighting corruption in major counter-insurgency efforts in Iraq and Afghanistan and in new international development initiatives.

As it exits Iraq and Afghanistan and tries to reshape its development programs, the U.S. faces a fundamental question: can it provide realistic leadership, with others in the world community, to help reformers in corrupt nations combat this global scourge?

Fighting corruption in emerging markets is surpassingly difficult. It involves displacing those with malign power. It cannot be initiated and led by outsiders. Corruption pervades and distorts society in nations like Russia and China where the U.S. has great interests. It was a primary cause of the popular uprisings in the Middle East and elsewhere. It remains a huge issue in the emerging markets of Africa and Asia and, especially in failed and failing states. It is a pervasive obstacle to legitimate and transparent economic globalization. And it undermines a key goal of current counter-insurgency military strategy — the building of a civil society.

via Can America Lead the World’s Fight Against Corruption? – Ben W. Heineman Jr. – International – The Atlantic.

Corruption and Sustainability: Like Oil & Water Do Not Mix | Triple Pundit (RP Siegel)

Recently, the Guardian ran a post addressing the question of why eliminating corruption is crucial for sustainability. A first glance the two topics might seem unrelated—the one about criminal behavior and the other about something like environmental responsibility.

Where exactly then, do the two ideas come together?

Merriam-Webster defines corruption as, “impairment of integrity, virtue, or moral principle,” and also as “inducement to wrong by improper or unlawful means (as bribery).”

A sustainable business, on the other hand, is one whose practices must be in alignment with the company’s core values, which, in turn, must be aligned with those of the larger system and the greater good, both in the immediate present, and with an eye towards future generations. Thus there is an implicit integrity involved.

Corruption short-circuits that alignment, and undermines that integrity, diverting valuable resources into the narrow coffers of a greedy few. It also breaks the chain of responsiveness to market, evolutionary, environmental, or compassionate signals and replaces them with a rigid reordering that has only the  resource diversion as its sole purpose.

via Corruption and Sustainability: Like Oil & Water Do Not Mix.

Deutsche Telekom, Magyar Unit To Pay $95 Million To Settle FCPA Case – Corruption Currents – WSJ

Deutsche Telekom AG and its Hungarian telecommunications unit agreed to pay more than $95 million in civil and criminal penalties to resolve U.S. probes over alleged bribes by former senior executives to government officials in Macedonia and Montenegro, authorities said Thursday.

The settlement resolves investigations stretching back about five years by the Justice Department and the Securities and Exchange Commission against Deutsche Telekom and its majority-owned Magyar Telekom unit. The Wall Street Journal

via Deutsche Telekom, Magyar Unit To Pay $95 Million To Settle FCPA Case – Corruption Currents – WSJ.

SEC Breaks Enforcement Record, Begins Tracking FCPA Separately – Corruption Currents – WSJ

The U.S. Securities and Exchange Commission filed a record of 735 enforcement actions in the last fiscal year, and broke out violations of foreign bribery law for the first time.The record number of enforcement actions, however, netted a slight decrease in disgorgement and penalties paid in the past fiscal year over the year before. In fiscal year 2011, which ended Sept. 30, the SEC collected $2.81 billion in disgorgement and penalties, down from $2.85 billion in fiscal 2010.Notably, the SEC broke out enforcement statistics for the first time for violations of the Foreign Corrupt Practices Act, which bars bribing foreign officials for business purposes. The SEC recorded 20 enforcement actions in fiscal year 2011.

via SEC Breaks Enforcement Record, Begins Tracking FCPA Separately – Corruption Currents – WSJ.

PwC Offers Guidance on Changing Corruption Risks – PR Newswire – sacbee.com

  1. Do we know how anti-corruption initiatives in other jurisdictions could impact us?  Acting with integrity deserves to be a high priority for U.S. companies with an international presence. The likelihood of an investigation is much higher than even a few years ago. Tailoring policies to comply with U.S. law will no longer suffice. There is a lot of overlap, but jurisdictions nonetheless define aspects of corruption differently.
  2. Are we focused on the right risks in the right places? Instead of adding to layers of complexity, PwC asserts that it is possible – indeed advisable – to have a single global anti-corruption framework that accounts for corruption risks companies confront in different regions. Rules are not that drastically different under the various international frameworks. Moreover, regulators clearly seem to favour risk-based compliance programs, and also expect that companies do more where the risks of corruption are higher.
  3. Are our policies well understood by our employees? Employees should understand how the company defines corruption or bribery, and what constitutes an infraction. Those in high-risk areas like contracting should know how to report an occurrence, and importantly, feel comfortable that the company won’t retaliate. Yet employees should also know about the consequences, and that might mean publicizing reprimands.
  4. Are our policies well understood by the people we do business with?  All parties acting on behalf of the company should understand that they, as well as the company, are liable for their actions, and know who in the company is overseeing the initiative.
  5. Do we have the resources to do this task? Currently available technology can be used to make due diligence more uniform and efficient. While IT systems will send up red or green flags, IT will not be able to do this alone. Upgrading controls and staffing compliance costs money and isn’t an area to do more with less. What won’t serve companies well in this climate is a paper tiger.
  6. Do we need to change the way we treat facilitation payments or marketing costs? The US and UK treat these small payments differently. Perhaps in recognition of the dilemma this creates, guidance from the UK and the OECD set some importance on phasing out facilitation payments. For now, companies will want to be sure they’re accounting for them appropriately, and importantly, that they’ve clearly defined acceptable facilitation payments and marketing costs.
  7. What do sector-wide investigations mean for our company? Risks are greater for companies in the same industry in which probes are already under way. Companies in such sectors need to carefully assess their risk accordingly. It may change the dynamics involved with taking the initiative to report any violation that the company itself uncovers to authorities.
  8. What is our response to possible whistleblowers in our company? In PwC’s view, the 2010 Dodd-Frank reforms are very likely to inspire complaints and tips to the SEC. In response, some smarter companies are evaluating how to change their compliance programs to address how quickly they are able to respond to reports of violations and whether ‘no retaliation’ policies are effectively in place.

via PwC Offers Guidance on Changing Corruption Risks – PR Newswire – sacbee.com.

Telecoms Exec Receives Longest FCPA Sentence Ever – Corruption Currents – WSJ

The former president of a telecommunications company was sentenced to 15 years in prison, the longest term ever handed down in a U.S. foreign bribery case.

Joel Esquenazi, the former president of Terra Telecommunications Corp., received the sentence Tuesday from U.S. District Judge Jose E Martinez in the Southern District of Florida. Carlos Rodriguez, the former vice president of Terra, received seven years in prison.

Both were convicted in August for their roles in a scheme to bribe officials at the Haiti state-owned telecoms company. They were found guilty of seven counts of violating the Foreign Corrupt Practices Act, 12 counts of money laundering, one of money laundering conspiracy and one of conspiracy to violate the FCPA and wire fraud.

“This sentence ––the longest sentence ever imposed in an FCPA case — is a stark reminder to executives that bribing government officials to secure business advantages is a serious crime with serious consequences,” said Lanny Breuer, assistant attorney general, in a statement.

via Telecoms Exec Receives Longest FCPA Sentence Ever – Corruption Currents – WSJ.

What is a bribe in 2011? | CanadianBusiness.com

Qasim Sharif had a difficult conversation on June 14, 2005. David Sproule, Canada’s ambassador to Bangladesh, had summoned him to the High Commission in Dhaka to discuss alarming reports appearing in the Asian country’s newspapers. Niko Resources, a Calgary-based oil and gas company for which Sharif was the senior in-country executive, was being accused of bribery, thereby jeopardizing diplomatic relations. Sharif sought to assuage Sproule’s concerns. “These things are done all the time,” he said.

Niko’s situation was grim indeed. That January, its natural gas well in northern Bangladesh had exploded, leaving a huge crater. Flames erupted from the hellish wasteland for weeks. A government investigation quickly concluded that Niko had been negligent, and recommended the company be fined. Energy Minister AKM Mosharraf Hossain ominously vowed to take “necessary steps.” To make matters worse, Niko was in the process of negotiating a crucial agreement that would determine the price at which it sold its gas to the government. Years of relationship-building were in jeopardy.

A company called Bapex, Niko’s partner in Bangladesh, proposed a solution. As part of their joint-venture agreement, Niko was purchasing a $191,000 Toyota Land Cruiser Cygnus for Bapex staff’s use. Bapex suggested Hossain receive the SUV instead. That May, Sharif and another Niko official personally delivered the vehicle to the minister’s house. Sharif thought fences had been successfully mended. “Everything was tapering off,” he later told investigators, “until the car thing hit.” The following month, Dhaka’s newspapers broke stories detailing the bribe. When reporters sought comment from Hossain, they discovered he was in North America—as Niko’s all-expenses-paid guest at an industry conference in Calgary and visiting family in the U.S.

Bribery is readily understood. It means “receiving or offering any undue reward” so as to influence an official’s behaviour “and to incline him to act contrary to his duty and the known rules of honesty and integrity.” This definition comes from Bouvier’s Law Dictionary, published in 1856, and has changed little since. But Sharif, an American citizen with Bangladeshi roots, was right about one thing: bribes were standard practice in Bangladesh. Transparency International, an NGO, each year produces the Corruption Perceptions Index based on surveys of business people, including locals. A score of five or less indicates corruption “pervades all aspects of public life.” In 2005, Bangladesh scored 1.7, tying for last place with Chad. “There was this perception that if you wanted to do a job in Bangladesh but didn’t have the expertise, you could do so by bribery,” says Iftekhar Zaman, executive director of TI’s Bangladesh chapter. “It was a common thing.”

via What is a bribe in 2011? | CanadianBusiness.com.

Is Britain Backpedaling on the Bribery Act? – Law Blog – WSJ

Corporations have been sweating bullets about Britain’s Bribery Act, which is set to take effect in April.

But is a reprieve on the horizon?

The Act, which some people call the FCPA on steroids, is set to undergo a review in the name of making sure it doesn’t impede Britain’s recovering economy, according to media reports. White & Case notified its clients today that reports have said the Ministry of Justice is going to take a look at the Act to make sure regulatory burdens on businesses are not overly broad.

The WSJ’s Corruption Currents blog gives a summary of the various news reports about the issue and points out that the Daily Telegraph has editorialized against the Act saying it could do “serious damage to our long-term commercial interests.”

FCPA experts have been warning the Bribery Act may be enforced less enthusiastically than anti-bribery laws on our shores. However, it would be a surprise if government officials who had passed the law in hopes of being tough on corruption already are backpedaling. That notion flies in the face of the guidance offered by anti-bribery groups such as Transparency International, which has written tomes on how bribery in the end is bad for business.

via Is Britain Backpedaling on the Bribery Act? – Law Blog – WSJ.

Brazil Summit on Anti-Corruption

Every year, more and more cases of companies and individuals violating the U.S. Foreign Corrupt Practices Act (“FCPA”) in Latin America surface, exposing the unique anti-corruption compliance challenges faced by companies doing business in the region. The heavy reliance on third-parties, such as customs brokers and sales agents, the frequent presence of state-controlled entities in the business sector, ownership interests that Latin American governments have in certain sectors including oil, pharmaceutical, infrastructure, and telecommunications industries, and the general culture of hospitality, all increase exposure to FCPA liability. Recent cases including Universal Corp., Control Components, Nature’s Sunshine Products, Latin Node, Pride International, Hioki, Helmerich & Payne, Alcatel and Siemens  highlight the dire financial and reputational consequences of non-compliance with global anti-bribery regulations.

Companies doing business in Latin America, particularly in Brazil, must also be cognizant of local anti-corruption measures and their impact. Under the Convention on Combating Bribery of Foreign Public Officials in International Business (“OECD Convention”) and the Inter-American Convention Against Corruption (“IA Convention”), signatories are required to criminalize the bribery of foreign public officials, and several countries in Latin America, including Brazil, are taking steps to enact legislation to implement this provision. When the proposed bill in Brazil is passed, it will dramatically change Brazil’s anti-corruption legal landscape and impact compliance priorities for both local and foreign companies.

With heightened international anti-bribery standards, growing cooperation between international government agencies, and enforcement of the FCPA at an all time high, the importance of ethics and compliance programs has never been greater. If your company is doing business in Latin America, you must have a robust anti-corruption compliance program in place and be prepared to act promptly and effectively to remedy any problems that do arise.

via Brazil Summit on Anti-Corruption.

Corruption Currents: Trends To Look For In 2011 – Corruption Currents – WSJ

The anti-corruption world crackled with activity in 2010, with the U.S. (again) setting Foreign Corrupt Practices Act enforcement records, the Group of 20 turning its gaze toward the United Nations Convention against Corruption and the World Bank amping up its fraud and corruption investigations unit, to name a few major developments.

Zuma Press

But now it’s time to peer into the future, to what promises to be another groundbreaking year on several anti-corruption fronts. We’ve listed below 10 trends we expect to see in 2011. But don’t take our word for it — please, write us with your own forecasts.

More anti-corruption enforcement by foreign nations: The anti-graft group Transparency International found that seven parties to the OECD anti-bribery convention actively enforced it in 2010, up from four in 2009. The U.K. Bribery Act, which takes effect in April, has the potential to reach corruption anywhere on the globe, and U.K. investigators are eager to grab some of the market share from their counterparts in the U.S. Nigeria, meanwhile, has capitalized on U.S. anti-bribery cases, opening its own probes into Halliburton Co., Panalpina Group and others. Earlier this week, authorities in Malaysia and Honduras announced investigations that piggyback on the U.S. probe of French telecommunications company Alcatel-Lucent SA, which agreed to pay $137 million to resolve bribery allegations. And the U.S. now routinely includes language in settlement agreements requiring companies to cooperate with foreign authorities and multilateral development banks.

via Corruption Currents: Trends To Look For In 2011 – Corruption Currents – WSJ.