Rather than do a standard “10-most…” post, I thought I’d do something different. It’s still my way of conveying the most important lessons of 2011, but because I’m by nature a contrarian, I’m going to do a list of 5 rather than a list of 10. Can’t you just taste the counterculture?
By “teachable moment,” I mean a point in time when a small word or proper action could have avoided major problems down the road.
So here are my Top 5 Teachable Moments of 2011
Number 5: “We’re a non-US company, how can we have FCPA liability?”
Take a look at the top ten highest dollar-value enforcement actions . See how many are against US companies? One. That’s not a typo. One. You could almost go so far as to say that if you’re a US company, your FCPA risk is lower than if you’re headquartered outside the US. I have a gut feeling that when the SFO gets off the dime, you’re going to see a similar dynamic. For different reasons, mind you, but a similar pattern will emerge. I suspect that in the UK, it’ll be a more deliberate exercise than here. I believe the SFO will target non-UK companies. For them, it’ll be a win-win. They get to enforce the act, they get to show they’re a player on the global stage, and they get to reassure UK companies that the world didn’t end with the implementation of the UK Bribery Act. (Or is that a win-win-win?) But until then, just know that the US government doesn’t care that your attitude is “it’s a US law, it doesn’t apply to me.” It is, but it does.
Number 4:
“No, supervisor, you can’t see the policy and no, I won’t have it translated.”
“Okay, that sounds good to me.”
That was apparently the conversation in the Watts Water case . A Chinese employee told his US higher-ups that they couldn’t see the sales policy, and wouldn’t have it translated into English. To which, they apparently said, “that’s fine,” because they didn’t do what my This Week in FCPA co-host Tom Fox said they needed to do: “get on the next plane to China.” In case you were living under a rock (with the Geico guy) for the last several years, you know that China is a risky place to do business. Missing—ignoring—a huge waving red flag like a refusal to translate a policy is inexcusable.
Number 3:
CFO: “Hey, Head of Compliance, my superiors are telling me that I need to pay some bribes to get a contract, what should I do?”
Head of Compliance: “Solve the problem yourself.”
Another conversation that should never have happened. One of the Siemens defendants, indicted a few weeks ago, was the incoming CFO of the affected business unit. His Argentina people told him about the bribery scheme. He wouldn’t authorize the bribes. He spoke with the CEO of Siemens Argentina (also indicted), and the Head of Compliance in Germany, along with two members of the Managing Board (sort of the US version of a senior leadership team), and the Siemens CFO. All of them told him that it was his responsibility to find a solution to the problem. Seriously?! Not surprisingly, he authorized the payments. And got indicted. He knew something was wrong. In his defense, where was he to go? When the head of Compliance doesn’t tell you “no way in hell should you make those payments, and I’m going right now to see the Board,” there’s a culture of corruption in the company. My good friend Dan Newcomb (probably the most experienced FCPA lawyer in the world) once told me that “Siemens had a world-class compliance program, with a German-engineered workaround.” I hate to disagree, but when the head of Compliance tells you to solve your own problems, that’s not world-class. That’s not even in class; it’s in detention.
Number 2: “So we didn’t turn over one lousy day of Grand Jury testimony…what’s the worst that can happen?”
Despite my belief that the Lindsey prosecutors got a raw deal , it’s not like failure to turn over Grand Jury testimony is a good thing. Along with their other mistakes, all lamentable, it was a case where the DOJ didn’t live up to their own high standards. I don’t think the case should have been dismissed, but it’s not a case that the DOJ will hold up as a shining example of prosecutorial efforts either. The really sad thing in all this is that—assuming the DOJ loses the appeal—some really guilty people are going to walk. That makes me mad.
And the number 1 teachable moment of 2011:
“I have a great idea: let’s hack into the voice mail of famous people (and the PM! And Hugh Grant! And while we’re at it, how about a murder victim or two!). We can get fresh information!”
I know that this conversation didn’t take place in 2011, but wow, did it pay dividends this year. News of the World—a publication that started soon after Queen Victoria started her reign, and when John Tyler was President—was shut down; pretty much everyone in authority not named Murdoch was fired, or arrested, or both; News Corp. is still being investigated, and arrests continue; and the WSJ Corruption Currents column has to put a disclaimer in every post on this subject about how News Corp. publishes them (a state of affairs I find amusing, for some reason). This is the case that just keeps on giving. Two more arrests in the last two weeks, by the way, including a London Metropolitan Police officer.
The question you have to ask yourself is, what teachable moment are you missing right now?
