Like any member of the public, I’ve been discouraged and disappointed by recent headlines in the press about FCPA prosecutions.  When I read things like “‘Foolish and Unprofessional’ Behavior Infected FCPA Prosecutions” in today’s FCPA Blog, or read about prosecutorial misconduct causing dismissals (even after guilty verdicts), or read about a massively publicized sting case reaching an ignominious end, or read about the Department bringing a case based on “gossip” where the main witness “knew almost nothing,” I feel bad, as a member of the public.

But I’m not just a member of the public.  I’m a former prosecutor, at the state and federal level.  I’m also an experienced FCPA practitioner.  And, for better or worse, I’m part of what I call the FCPA Commentariat.  I like to think this makes me particularly well-informed about FCPA enforcement.  This means, to my mind, that I have a special responsibility: I have to look at the facts of every case—and I’m constantly amazed at how many people are willing to criticize you without even trying to gather all the facts—make my own determination, and speak out, about both the good and the bad.

And, despite the thoughts of some, I’ve done both.  At the FCPA Business Roundtable, I echoed others in requesting that you make public your declination decisions.  I can’t understand why you don’t.  Obviously, the information needs to be de-identified.  But you already do that in your Opinion Releases.  Making more transparent your evaluation of compliance programs will only bring you benefits: from blunting the effort to create a legislated compliance defense to calming the business community who still maintain—rightly or wrongly—that they just want more guidance.

I’ve been critical of your failure to seek, in any case of which I’m aware, debarment from US government contracts as a penalty.  Why you’d leave that significant enforcement tool completely unused is beyond me.  Similarly, your history of structuring settlements for the apparent sole purpose of avoiding that penalty is unseemly at best.

I’ve also criticized particular settlements, most notably the Alcatel settlement.  I won’t write more because (a) I’ve already said everything I want to say on that and (b) I don’t want to aggravate myself and start ranting.  Because once I start, I would definitely start ranting again.  That settlement was so bad I can’t even think about it without getting angry.  How do you expect companies to stop bribing if you make bribery as profitable as it was for them….  Sorry.  See?

All that said, the commentary over the last two months has been over-the-top, wrong, mean-spirited, and, in some cases, just plain asinine.  I hope that you don’t forget that you’re doing G-d’s work.  I don’t harbor illusions that you’re going to stop bribery, but your work makes a positive difference.

Bribery is a blight on our moral universe.  It makes us cynical.  It does the most harm to the segment of the population able to handle it the least.  People dealing with crushing poverty should not have to pay money to get phone service, or police protection, or to avoid arrest on trumped-up charges.  Mothers should not have to grease the nurse to get their babies.  I’ve said it before, say what you will about FCPA enforcement priorities, but can we all get together on the idea that having to “grease the nurse” is bad, and should be stopped?  Roads are bad, bridges fall down, and there’s a general malaise that settles in, stinking of unfairness.

Plus, from a business perspective, it horribly distorts the markets.  It makes investment in people, products, and customer service unnecessary or irrelevant.  This directly harms consumers.

I hope you remember also that your failures get huge play in the press and via the Commentariat, but there have been many more successes than failures.  For every Lindsey case, there’re five Bonny Island cases.  For every Africa Sting case, there are Daimler, Panalpina, Bridgestone, Innospec and the individual Siemens indictments.  And yes, the ABB case too.  Nicola did an amazing job with that, all the way around.  Companies actively enhance their compliance programs because of what you do.

Your successes far outweigh your failures.  They’re not even in the same time zone.

And I take comfort that you take your failures to heart.  I don’t really know you at all, Lanny, but I’ve had the opportunity to hear Chuck speak many times, and have usually cornered him after each speaking engagement to speak with him myself.  He has always struck me, Lanny, as a guy who always wants to be a better prosecutor.  I can’t imagine the level of frustration he has to deal with when he hears criticism that is bereft of actual facts, and knows that he can’t respond.

So don’t get down, fellas.  My recommendation—not that you asked for it, but giving unsolicited advice is the province, even the duty, certainly the pleasure, of the commentariat—is to change the story.  Bring some solid, middle of the road cases.  We’re only 7 weeks into 2012, as strange as it seems.  At the end of the year, this will all be seen as a hiccup.

That said, you should also do some remedial work on file management and case preparation.  It’ll be a pain for the line prosecutors, but a little extra supervision for the next 6 months is the price you pay for making stupid mistakes that end up in a 2+2=7 equation.  You can’t help other people’s inability to add.  You can avoid giving them ammunition in the future.

And don’t forget to stay creative.  There’s a perfectly understandable impulse to only bring safe cases.  Once bitten, twice shy, as they say.  But resist that urge.  Even I recognize there won’t be another sting case for a long time, but wiretaps are still good evidence.  Bring another Travel Act case; that’ll scare the crap out of people.

And if you still feel down, just look at what’s going on in the SFO (today’s headline: Unshakable Fatalism at the SFO).  Misery loves company, and no one is saying the DOJ shouldn’t exist.  There’s always someone worse off than you.

Best Regards,

Howard

This should bother Apple.

I am the guy who is so in love with his iPad that I actively promote its use among my friends and colleagues. I brag about its functionality. I relate how I don’t lug along my laptop anymore: I just pop my iPad and a bluetooth keyboard into my briefcase and off I go. I show off my favorite Apps, and obsess—I don’t think that’s too strong a word—whenever I see another iPad, wondering if that person has better apps than me. (Purely from a can-I-use-my-iPad-better perspective, not competitively or anything). I’m being totally open and honest with you here.  Ask me a question, even a small, quick question, about the iPad, and you should expect a 30-minute presentation on why you should buy one.

So Apple really doesn’t want someone like me—’cause who doesn’t like the best kind of free advertising—in my car looking at an Apple flagship product and saying “what a piece of crap!”

My iPhone 4S user experience is so bad I almost ordered myself a Samsung Galaxy Nexus on Verizon. Seriously, I went all the way through sign up (on AmazonWireless…great deal at $99 for a $299 phone) and backed out right before hitting “buy.”  The only reason—the only reason—I backed away from the ledge was because I didn’t want to have to explain another electronics purchase to my wife.

Let me list just four issues I’m having with my iPhone 4S:

1. Siri is useless.  I think Siri is neat, don’t get me wrong.  But until Siri works with my 1-year-old yelling 4 inches away, and the TV on, and my kids in the background, it might as well not work at all.  Because let me tell you, unless there’s absolute silence in the room when I talk, all I get is, “I didn’t understand you.”  Real life has background noise, Apple.
2. The music player doesn’t play music.  My iPod function on my iPhone doesn’t work.  It plays one or two songs, and then stops.  I can’t get it to play anything once that happens.  I basically have to restart the phone.  This is just great when I’m, say, on a run.  Not entirely conducive to movement, when you have to stop, pull out the phone, figure out why it’s not playing, and then restart.  Every other song.
3. A neat computer, a crappy phone.  I remember once I was extolling the functions of my new watch to my sister.  ”It can do this…it can do that, etc.”  I asked her what her watch did and she said, snidely, “it tells time.”  Well, the iPhone is a crappy phone.  As reported recently, there are about 100 pages in the support community about how you talk, and the person can’t hear you.  This happens to me every other call.  The speaker comes on even though I have headphones plugged in.  The person answers, and I say “hello?”  And, nothing.  They can’t hear me.  If it happened with my buddy, that’s fine.  But when it happens when I’m calling a heavy-hitter law firm partner, it makes me look bad.
4. Battery life.  I used to parrot a Steve Jobs’ master response to battery life complaints.  He said that an earlier iPhone drained quickly because there was so much cool stuff on the iPhone, you simply used it a lot.  When you use a phone more, the battery drains faster.  That’s what I thought when I started hearing these battery life complaints.  But no, that’s not it.  I can basically see my battery percentage drop as I look at my phone.  I’ve tried redoing contacts, undoing location services, changing the time zone setting.  Nothing works.  Including the battery.

Apple, please, please fix this.  I want so much to love every product you make.  I bought the original iPhone, and the iPhone 3, and the iPhone 4, and the 4S; and yes, I’m probably going to buy the iPhone 5 (the other reason I didn’t buy Android was I figured, they’re going to come out with the 5 sooner or later, why not wait?  This, despite the sure and certain knowledge that AT&T isn’t going to let me upgrade to the 5 so soon after upgrading to the 4S).

‘Cause, Apple, if you lose me, you lose your perfect customer.

But with a slight tremor of my fingers on the keys, let me venture into this dangerous world of those who disagree.

To be fair (and I recognize this is another caveat), it’s not just Mike I disagree with.  Mike, in his latest blog post, echoes a common theme.  The theme—like a lot of the latest drivel masquerading as commentary lately—is something that sounds like someone wants it to be true.  But it’s not true at all.  It’s a lie.  And a dangerous lie at that.

Mike says that the Department’s enforcement regime is well into hubris [don't be ashamed, go ahead and click through to the definition: I did].  He claims that companies just want clarity:

Companies and practitioners are frustrated because they have to read tea leaves of Justice Department expectations from criminal settlements and official speeches to decipher what is expected of them in the compliance world.

Most business want to comply in good faith but want more specific guidance on what they have to do to comply with the law. Legal interpretations of terms are made by DOJ lawyers with little judicial supervision. These are issues which should be addressed by some type of overall regulatory framework or even like the Ministry of Justice tried to do in releasing guidance for the UK Bribery Act.

I’m sorry, but no. I don’t accept this at all. Whether the Department’s habit of trumpeting its settlements ventures into hubris is something reasonable people can disagree on. I tend to think not, if only because every single agency—and law firm—does the same thing. If everyone has hubris, no one does, don’t you think?

But the idea that companies would jump to comply with the FCPA if only they knew what the DOJ expected of them is total crap. In case you missed the Metcalf and Eddy case back in the 90s, or the 2004 opinion release (04-02) which defined effective compliance, you need only look at Schedule C to any recent deferred prosecution agreement. Or go to any “Luncheon Law” event, or read any of the books written about effective FCPA compliance (including, not for nothing, Mike’s)[which I bought, by the way, and I recommend you buy as well]. At the conference I just chaired (I’m writing this post in the Hong Kong airport), Chuck Duross appeared via Skype and talked about this very thing. How many times have we heard from Chuck, and Mark before him, that programs need to be more than paper?

I’ve done a metric ton of benchmarking, and you’d be amazed at what companies don’t do. What amazes me isn’t that there are 80 companies under investigation, but that the number is only 80.

The problem isn’t that people don’t know what to do. The problem is that they don’t want to do it. Not really. They tell their compliance officer that an extra $500 spent on diligence would “kill the business.” Or “that’s just not how things are done here in ______”. And their senior leaders say they want ethical business, but push comes to shove, they get their bonus only if they meet their sales targets. Which are set in stone.

Or worse, companies come up with all kinds of workarounds, or set up their program to give the appearance of diligence without actually learning anything about the partner.

Companies also know—within a range—what kind of benefit they’ll get from having effective compliance. But because each case is different, the Department must have—absolutely must have—significant discretion on what to reward and how much.

But is this what we want? And do you mean what you’re saying? Companies shouldn’t have to implement effective compliance without knowing their ROI? Companies have to implement effective anti-corruption compliance because companies shouldn’t bribe! Bribery is bad. I think we can all get behind this concept, yes? Bribery leads to things like kids getting killed because construction projects use substandard materials approved through bribery, and the buildings fall down during an earthquake. And if you think I’m being melodramatic, someone at my conference used that very example in training. It really happened. Bribery is a blight that warps markets, and ends up impacting the most the segment of the population that can bear it the least. People struggling with poverty shouldn’t have to deal with forced expediting payments.

And if you’re interested in ROI, let’s talk about the effect of bribery on the ROI of product developement and customer service.

But why do I call this a “dangerous lie?” It’s dangerous because it’s an excuse for inaction. And inertia is a compliance officer’s worst enemy. “Let’s wait until we get some better guidance on what we need to do.” “If the Department can’t tell us what they want, we really can’t justify the expense of the system you want to build; maybe next quarter when the DOJ comes out with the guidance.” It’s tough enough to move companies into the light without experienced practitioners giving them ammunition.

I don’t think the DOJ could be clearer if they gave us a checklist. Oh wait, they did. By the way, for those of you waiting for the guidance, prepare to be underwhelmed. There’s no way—no way at all—that the DOJ is going to put into writing something that will limit their discretion in a meaningful way. They’ll define “foreign official” using the recent decision—I’m betting they’ll quote it exactly—and they’ll talk generally about rewarding effective compliance. But if they say anything significantly different from what they’ve already been saying for the last 6 years, I’ll eat my hat. (A different hat, Barry)

Let’s move the discussion along, shall we? What are the best ways to implement what the DOJ has been telling us for 8 years that they want? That’s a discussion we should be having.

Imagine my shock:

Chuck Duross is speaking, as are regional experts from companies and law firms.  If you’re in that part of the world, you should definitely make it.

5. The Office acknowledges that, to date, the Company has taken actions to develop a robust compliance program to protect against violations of federal health care laws. These actions include: the appointment of key personnel with enforcement responsibilities; the development of policies and procedures governing R&D project/program approval and selection and engagement of potential service providers; the requirement of consistent, accurate reporting of services performed on behalf of the Company; and ongoing monitoring and management of payment processes. The Company continues to commit to these compliance measures, as it strives to foster innovation in medical technology and promote exemplary, cost-effective patient care. The Office agrees with these goals and seeks to ensure that the Company and the Orthopedic industry at large comply with applicable law in the course of achieving these goals.

Sounds good, right?

Except this paragraph doesn’t come from the DPA that was signed this week. It comes from the DPA that was signed in 2007.

Now comes the paragraph from this week’s:

3. Relevant Considerations: The Department enters into this Agreement based on the individual facts and circumstances presented by this case and Smith & Nephew. Among the facts considered were the following:

d. Smith & Nephew undertook remedial measures, including the implementation of an enhanced compliance program and agreed to undertake further remedial measures as contemplated by this Agreement.

I cannot believe that the DOJ didn’t know about the previous case. But just from reading these two paragraphs, it seems that the compliance remediation efforts got counted twice. Double credit for the same dollars spent on remediation, it seems like.

What a bargain!

I won’t belabor a description of yesterday’s action.  I’ll just point you to the FCPA Blog and the Wall Street Journal.

What no one seems to have noticed yet is the Smith & Nephew has already been through a DPA, with a monitor, for similar conduct.  In a 2007 civil settlement, Smith & Nephew agreed to pay $28.9 million among other undertakings to resolve charges under the Anti-Kickback statute and the False Claims Act.  Smith & Nephew emerged from the DPA in 2009.  The case was brought by the US Attorney’s Office for the District of New Jersey (Chris Christie, then US Attorney, is now the Governor of New Jersey).

By the way, Smith & Nephew’s US headquarters is in Memphis, TN.  My home town, go Owls!

The current action revolves around giving kickbacks to surgeons—filtered through a Greek distributor—to use S&N products.  By the way, my favorite part of those allegations is when S&N bought another company in that market, and was going to replace their bribe-paying distributor in favor of their new subsidiary.  The bribe-paying distributor argued to keep the relationship, saying that the new subsidiary also paid bribes to surgeons, and at higher rates than they were paying!

The recent case seems to cover a time period from 1997-2007.  The older case seems to deal with that time period as well.

The allegations as outlined in the civil settlement—as sparse as the factual allegations were—include bribing surgeons to use S&N products.  The payments were camouflaged as fee-for-service contracts, fixed fee contracts, and product development contracts.  S&N denied the allegations, but agreed to settle the civil action in order “to avoid the delay, uncertainty, inconvenience, and expense of protracted litigation….”

S&N agreed to several terms:

1. $28.9 million payment
2. Continued enhancement of its compliance program
3. a monitor

So here’s my question: did the DOJ know about the prior DPA?  Does this make S&N a recidivist?  After all, it’s a prior DPA, but it covers the same time period, and the same conduct (although these surgeons were domestic).  I didn’t see anything in the DOJ press release about the prior DPA, although I haven’t found the DPA yet.  There’s no mention of the prior DPA in the SEC’s complaint.  I’ve reached out to the DOJ for comment, and will update if I hear anything.

UPDATE: 2:00pm, Feb 7:

Some additional random thoughts on the Smith & Nephew case.

• In environmental law, there’s a concept of the “responsible corporate officer.”  A truly knowledge-free way to get prosecuted.  I remember in law school we nicknamed the RCO the “Vice President for Incarceration.”  I think we should start calling any Vice President for International Sales the Vice President for Incarceration.
• Greece is not a low-risk country.  One of my first major issues happened because of something in Greece.
• The emails in the more recent case were really bad, and included outright statements that bribes were going to be paid.  In-house counsel knew, and took notes—by the way, those notes were mentioned in the SEC’s complaint, did S&N waive privilege?
• This is how “industry sweeps” get started.  Did anyone else notice the line in the SEC’s complaint about how the crooked distributor’s pass-through company “was also used by another medical device company to pay bribes to public doctors in Greece?”  Or was S&N found via that other company’s self-disclosure?
• Would this be a better case than the O’Shea case to make a factual argument about how doctors in public hospitals are not public officials?  Not to get political, but does the health care debate impact that discussion?  Is health care a public function?
• S&N is a UK company: will the SFO act here also?
• Once again, we see the primary place that ensuring that any payment you make is for actual value plays in FCPA compliance.  If you get that right, you will avoid 90% of your risk.  Maybe more than 90%

Alcatel-Lucent will ensure that its senior management provide strong, explicit, and visible support and commitment to its corporate policy against violations of the anti-corruption laws and its compliance code.

Such a short requirement to occupy so much time and attention from consultants, compliance people, outside counsel, the press, and the commentariat.

Here’s a secret—probably the secret—of tone at the top: the more effort you expend on tone at the top, the more likely you’re doing it wrong.  Tone at the top should be effortless.  It should be part of the everyday fabric of how senior management interacts with their employees.  If senior management would worry less about whether there’s a video on the intranet and worry more about metrics and getting employees engaged with the brand, we’d all be better off.

But that’s more of an “ought to” than an “is.”

Let’s start from the beginning.  What is “tone at the top” exactly?  Forget everything you’ve heard or read.  It’s all wrong.  Think about it instead as your response to a question from the DOJ: “What did your top executives do to make this workplace one where bribery wouldn’t take place?”  Really, is your answer to that going to be “we videotaped him saying that bribery was bad and we put that video on our intranet?”  Or that we included it in the Code of Conduct introduction?

The DOJ always talks about the difference between a program that is operationalized and one which is paper only.  Tone needs to be analyzed in the same way.  How have you integrated executive buy-in to anti-corruption compliance into the fabric of the company’s relationship with its employees?  You need two or three really good answers to that question.  Think in terms of bullet points.  When you’re presenting your program to the DOJ, what are some bullet points that will really impress them?

I’ll give you several.  You can pick and choose from this list: I would suggest at least three for your presentation to the DOJ.

1.  Ask the Question.  Make it the company culture for managers—from the CEO down to first-level people leaders—to ask one simple question.  Of anything you do, asking this one question will have more of a long-term impact on the culture of the company than any other single thing you can do.

The question is “what does Compliance think about that?”  Such a simple question.  But if the CEO, when hearing about ideas for a new market or a new product asks that question every time, his or her subordinates will quickly learn that they need to have an answer to that question before they go in to see the CEO.  Which means that their direct reports will have to answer the question.  All of a sudden, Compliance is seen as necessary in a business process.  Maybe a necessary evil, but necessary.  And if you hire the right people, Compliance will be seen as a creative solutions vendor to the business and not the “business prevention department.”  But let’s keep that last bit for point number 4.  I always say that 80% of compliance is being “in the room.”  Having your senior execs ask that question gets you in the room.

2.  Openness about the good and the bad: More important than the CEO video, or any other messaging, is a culture of openness emanating from the top.  This isn’t just a compliance mandate, it has business consequences too.  In the Harvard Business Review this month, Keith Ferrazzi talked about this issue in his article “Candor, Criticism, Teamwork“.

We found that the teams that scored lowest on candor saw the poorest financial returns….  In contrast, groups that communicated candidly about risky securities, lending practices, and other potential problems were able to preserve shareholder value.  Indeed, in our research…we identified “observable candor” as the behavior that best predicts high-performing teams.

This good business practice extends its benefits into the Compliance space.  When senior management is open about bribery risks and candid about their successes and their failures, it creates an atmosphere of openness that blunts potential miscommunications.  Employees who have never discussed bribery with their bosses would feel more comfortable doing so if the team is open about risks generally.  Senior management giving rewards for good compliance performance is more important than the on-the-intranet video.  Senior management talking about a miss is also hugely influential.  And what a great point to make with the DOJ!  ”We spent 20 minutes last week on an all-employee call talking about a decision we wish we could undo.”  And since you document, you can provide the Department with a tape, or at least the senior leader’s talking point.

3.  Metrics: This is where I get adamant.  All the bromides in the world from senior managements about the importance of ethics don’t mean anything if the only thing anyone is measured on is results.  I always say that the profession of Compliance is self-selecting for cynics.  I’m a cynic by nature, training, and experience.  So forgive my cynicism when I say that given a choice between just about anything—short of unjustifiable law-breaking—and their paycheck, people will choose their paycheck.  By “unjustifiable” I mean crimes that a person has a harder time rationalizing: violence, open theft, crimes with an identifiable victim, and others.

Short of those, however, if you don’t metric compliance, and your only marker of success is the sale itself, people will “bend the law” to get the sale.  And when it’s acceptable to bend the law, it’s inevitable—believe me, inevitable—that someone will break it.

I completely believe this axiom: what gets measured gets done.  If you want to show real tone at the top, have senior management visibly care about something other than the sale. Have them show through metrics that they care about ethics. A key value add of your compliance people is to create hard metrics for compliance. Senior management should (1) demand that of their compliance officers and (2) implement those metrics.

Imagine again the story for the DOJ: we have compliance metrics that affect the compensation of the sales team. A leader cannot get a bonus if it’s credibly determined that any of his or her reports obtained favorable treatment through a bribe. That’s commitment from the top.

4.  HR: Get Human Resources involved.  You need good anti-corruption compliance people.  You have to tie a lot of your employee-related objectives to HR-related consequences.  HR must be a partner to the anti-corruption compliance program.  Does your head of HR serve on a risk committee?  Is there a consequence management structure in place for (1) violations of the FCPA, (2) violations of policy, (3) failure to take training, or (4) repeated quarters where anti-corruption requirements are late?  You need process around all four of those things, and you’re living in an HR world for all of them.  How would you show that senior management has recognized the important role HR plays in anti-corruption compliance?  [ed. note: this applies to all of compliance, not just anti-corruption].

5.  Budget & Resources: Put your money where your mouth is.  I’ve heard that one question the DOJ sometimes asks is “how much do you spend on Compliance?  OK, now how much do you spend on office supplies?”  You’d be amazed at how many companies come out on the wrong side of that question.  I’m reminded of that age-old axiom, actions speak louder than words.  Don’t get me wrong, I’m not saying that you have to spend oodles on Compliance.

I would suggest that just as important as absolute spend—if not more important—is year-over-year spend.  YOY spend is an indicator of priority.  Even today, two years after the worst of the financial crisis, a lot of companies are cutting back or staying even with last year’s spend.  The Department is not deaf to such arguments nor blind to the reality of the new normal.

It’s therefore a powerful statement to say that, despite cutbacks, Compliance had YOY spend up 2%.  In my old company, one thing the business leader did to show his commitment was during the budget discussions: anything compliance proposed was automatically approved.  No trade-offs, no arguments.  It made me careful to only propose that which I thought necessary (and wary of lots of others who suddenly needed their projects approved because of “compliance,” but that’s another story).  But how much would you love to have a bullet point in your presentation to the DOJ: “Compliance spend doesn’t go through the normal approval process, it’s automatically approved.”

Resources is a special form of budget, and I almost listed it separately. Welcome to the world of in-house practice: more people equals more importance. Don’t blame me, I didn’t invent the rules. And the fact is, the more people you have, the more you can get done. In fact, one of the key functions of a Compliance Officer is to identify for the business what activities can be done with what incremental additional resources.

What’s probably more important than everything is to have a budget and resources plan that’s already in existence (meaning, before you have to justify everything to the DOJ). If you get into trouble, you need to be able to trot out a document showing that you’ve recognized the issues, and that senior management has (1) seen it, (2) approved it, and (3) care about it. This last can be shown by senior management demanding periodic updates—say, once a month—on how the program is coming along, and addressing any roadblocks to the plan’s success.

6.  Air Cover: Similar to the metrics discussion, senior management needs to put their actions where their mouth is.  When a salesperson misses a target and credibly claims that their problem was a refusal to bribe, that should be taken into account.  Visibly taken into account, and by senior management.

And if you can’t do that on an individual basis, you should include in market goals an adjustment for bribery.  That way, you can show the DOJ that senior management recognizes how hard it is to avoid bribery in certain markets, and a willingness to support the sales efforts in those markets in a way that makes bribery less to avoid bribery.

The worry—and I don’t discount the worry—is that salespeople will use bribery as an excuse for why they missed their targets.  Really, though, I’m not suggesting that someone get a commission for a sale that’s not made, but there needs to be an adjustment, and the business community has ignored this point for so long, a little pendulum swing too much the other way probably isn’t a bad thing.  Even if the adjustment isn’t that large.  The bullet point comes in, really, as soon as you make any adjustment.

The imperative is the same outside of sales. When your Real Estate people miss a target date because they wouldn’t bribe the zoning board, one of two things needs to be true: you either adjust the date or you can show you took the bribery issue into account when you set up the original date. This falls into what my This Week in FCPA co-host Tom Fox always says: document, document, document. If you can show that, when setting up the target date for action, you took the risk of bribery into account, that’s tone from the top.

7.  Optics: When I say “optics” in conversation, I’m reminded of something that used to happen when I was a kid: I would say something, and my mother would say “don’t take that tone with me.”  I never knew that I had used a tone.  When I say optics, I can hear the tone I take (no pun intended).  Usually, frankly, I use “optics” as a pejorative.  But let’s not discount the importance of optical controls.  You need the CEO video, not because it’s effective to deter bribery, but because it would be conspicuous in its absence.  You need company-wide Code of Conduct training annually, even if by video.

Tone at the top is not a one-and-done affair.  That said, it also should seem effortless.  If senior management is truly committed to the success of their anti-corruption compliance program, this element will take care of itself.

King Solomon said:

The thoughts of a diligent man lead only to advantage.  But everyone that is hasty hastes only to want.

Proverbs 21:5.

More recently (but still a long time ago) a 19th Century Jewish thinker commented on Solomon’s Proverb:

Though they act quickly, the diligent take time to think, and to plan out their best mode of action out of all the possibilities.  This is part of diligence; the thoughtful, efficient approach to action.  While it may delay them, it leads them to advantage.  The hasty person, on the other hand, acts without consideration and without waiting for an opportune moment, and he therefore fails.  Alacrity is a good policy in action but not in thinking and planning.  A waiting period in which ideas ripen is a good investment in starting any project.

I was reminded of this recently while reading the transcripts from the O’Shea trial.  (And if you think I’m going to write something about that…you are 100% right.)  In it, the intermediary had the following to say about the diligence that not just ABB, but also IBM and Microsoft put him through:

Q: Did you have to go through a screening process to get to represent the biggest companies in the world?
A: Not really

Q: So somebody like Microsoft is just going to hire [your company] without investigating y’all? [ed. note: this trial was in the South, so saying "y'all" isn't unusual]
A: Yes.

My This Week in FCPA co-host Tom Fox is fond of saying that after the questionnaire, after the digging, after the site visit and everything else you do, then the work starts.  I completely agree with him.

But perhaps we’re being too hasty.  Perhaps companies need to first start at the beginning.  I know it’s a long way to catch up, but maybe they need to start with King Solomon.