Author: Doug Cornelius

You can find out more about Doug on the About Doug page

Assessing Corporate Culture

Ed Petry of the Ethical Leadership Group put together a two part paper on Assessing Corporate Culture: Assessing Corporate Culture – Part I and Assessing Corporate Culture – Part II.

[There are] specific steps that compliance and ethics officers can take to begin the process of identifying their organizations’ culture including:
• Conduct surveys, focus groups and interviews of employees and third parties to determine what people really think about the organization, what motivates them, what’s rewarded and punished, and what are the “unspoken rules” and corporate stories that they believe best illustrate acceptable and unacceptable behavior;
• Distinguish and describe the important subcultures within the organization; and
• Identify what is really being heard by employees – which may be quite different from the message you and senior management are intending to convey.

You should do deep dives that follow roughly track the elements of the revised Sentencing Guidelines:

  • Is there consistency and clarity within your organization regarding the limits of acceptable behavior?
  • Does the Board and management act in accordance with their responsibilities to build and sustain a commitment to ethics and compliance?
  • Is compliance, ethics or even legal requirements – or the people responsible for them at the company – marginalized?
  • Do performance goals and incentives encourage and put unreasonable pressure on employees to act contrary to ethics and compliance standards?
  • Do employees feel they can ask questions or raise concerns?
  • Is bad conduct tolerated – especially at the senior level?

Comprehensive Changes to Family and Medical Leave Act Regulations

On November 17, 2008, the U.S. Department of Labor published final regulations under the Family and Medical Leave Act of 1993 (FMLA).  Morgan Lewis put together this great summary of the regulatory changes: Department of Labor Enacts Comprehensive Changes to Family and Medical Leave Act Regulations (.pdf)

2008 Update on Anti-Corruption

The Anti-Corruption Committee of the American Bar Association consisting of Leslie Benton, Michael Kieval, Caroline Lindsey, Kerry Mandernach, Philip Urofsky, and Alexandra Wrage prepared an Anti-Corruption update for the Summer 2008 edition of The International Lawyer.

Updates to OFAC’s SDN List

FinCEN updated the SDN list with companies and individuals associated with the Mugabe regime in Zimbabwe: Treasury Designates Mugabe Regime Cronies.

The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) today designated four Mugabe regime cronies and a number of entities owned or controlled by two of them. The financial and logistical support they have provided to the regime has enabled Robert Mugabe to pursue policies that seriously undermine democratic processes and institutions in Zimbabwe.

“The Mugabe regime continues to resist the call of the Zimbabwean people to loosen its corrupt and violent hold on power,” said OFAC Director Adam J. Szubin.  “The United States supports the people of Zimbabwe in their struggle to achieve a political and economic system built on fairness and transparency rather than patronage and self-dealing.”

Today’s designations include John Bredenkamp, a well-known Mugabe insider involved in various business activities, including tobacco trading, gray-market arms trading and trafficking, equity investments, oil distribution, tourism, sports management, and diamond extraction. Through a sophisticated web of companies, Bredenkamp has financially propped up the regime and provided other support to a number of its high-ranking officials. He also has financed and provided logistical support to a number of Zimbabwean parastatal entities.

The following entities owned or controlled by John Bredenkamp also are designated: Alpha International (Private) Ltd., Breco (Asia Pacific) Ltd., Breco (Eastern Europe) Ltd., Breco (South Africa) Ltd., Breco (U.K.) Ltd., Breco Group, Breco International, Breco Nominees Ltd., Breco Services Ltd., Corybantes Ltd., Echo Delta Holdings Ltd., Kababankola Mining Company, Masters International Ltd., Masters International, Inc., Piedmont (UK) Limited, Raceview Enterprises, Scottlee Holdings (Pvt) Ltd., Scottlee Resorts, Timpani Ltd., and Tremalt Ltd.

Also designated today is Muller Conrad Rautenbach (a.k.a. Billy Rautenbach). Billy Rautenbach is a Zimbabwean businessman who has maintained close relations with the Mugabe regime. He has provided support to senior regime officials during Zimbabwe’s intervention in the Democratic Republic of the Congo and also provided logistical support for large-scale mining projects in Zimbabwe that benefit a small number of corrupt senior officials there. Today’s designations include an entity owned and controlled by Billy Rautenbach, Ridgepoint Overseas Developments Limited.

In addition, OFAC is designating Nalinee Joy Taveesin, a Thai businesswoman who has facilitated a number of financial, real-estate, and gem-related transactions on behalf of Grace Mugabe, Gideon Gono, and a number of other Zimbabwean Specially Designated Nationals (SDNs). Ironically, Nalinee Taveesin has participated in a number of initiatives on corruption and growth challenges in Africa and Southeast Asia while secretly supporting the kleptocratic practices of one of Africa’s most corrupt regimes.

Finally, OFAC is designating Mahmood Awang Kechik, a Malaysian urologist and one of Robert Mugabe’s physicians and business advisors. Kechik has used his medical practice to conceal the ultimate destination of medical equipment shipped to Zimbabwe, and he has transacted secretly with a number of SDNs, including Gideon Gono and Constantine Chiwenga, to generate wealth for these regime officials and the Government of Zimbabwe.

Today’s action was taken pursuant to Executive Order 13469, which targets, among others, individuals and entities who provide financial and other support to the Government of Zimbabwe and Zimbabwean SDNs. As a result of Treasury’s action, any assets of the individuals and entities designated today that are within U.S. jurisdiction must be frozen. Additionally, U.S. persons are prohibited from conducting financial or commercial transactions with these individuals or entities.

Bribery’s Broken Windows

Alexandra Wrage of TRACE international wrote Bribery’s Broken Windows (.pdf) for the Q1 edition of Ethisphere. She tackles the credibility issue with allowing facilitating payments to low level officials, but saying “no” to senior ranking official. She advocates that the companies should prohibit payments at all levels.

She looks to the New York subway system’s Clean Car Program which is in turn based on the Broken Windows theory of James Wilson and George Kelling.

Once one window in a building is broken, the rest will be broken soon after. The broken  window, left unrepaired, is a sign to the world that no one cares. If no one cares, there is no risk in breaking the rest of the windows. People are better behaved and less prone to escalating criminal activity when they see that their petty acts are addressed promptly and decisively.

Doesn’t it seem likely that this would hold true of petty bribery, too? If officials face “zero tolerance” for the smallest inappropriate demands, if both companies and enforcement agencies declare even the five and ten dollar demands an intolerable abuse of official power, won’t it be more difficult for a culture of corruption to flourish? Otherwise, low-level govern-ment officials will look at the broken windows and assume that no one cares.

Norfolk Developer Accused Of Ethics Breach

Michele Morgan Bolton of the Boston Globe reports that Jack Scott, president of Pine Creek Development Corp., was accused last week of violating state law by allegedly offering a free week at his Pennsylvania cabin to the chairman of the town’s Conservation Commission while he had an application before the board: Developer Accused of Ethics Breach.

According to the Massachusetts State Ethics Commission’s press release:

The Ethics Commission’s Enforcement Division, in an Order to Show Cause issued on November 18, 2008, alleges that Norfolk property developer Jack Scott violated sections 2(a) and 3(a) of G.L. c. 268A, the state’s conflict of interest law, by offering a free week at his Pennsylvania cabin to the chairman of the Norfolk Conservation Commission (“ConCom”) while Scott had an application pending before the ConCom.

A public hearing will be scheduled within 90 days.

According to the Order to Show Cause, in May 2006, Scott filed an application with the ConCom to build a single-family home on Applewood Road. On May 12, 2006, while his application was pending, Scott sent an e-mail to the ConCom chairman offering a week’s stay at his cabin. A week’s stay at the cabin cost an estimated $700. The OTSC alleges that, “Scott offered the weeklong cabin stay to the ConCom chair to facilitate and/or reward the ConCom chair for the ConCom’s approval” of his application. The ConCom chairman did not accept Scott’s offer.

Section 2(a) of G.L. c. 268A, the conflict of interest law, in relevant part, prohibits anyone from corruptly offering anything of value to a municipal employee with intent to influence any official act or act within his official responsibility. Section 3(a) prohibits anyone, otherwise than as provided by law for the proper discharge of official duty, from directly or indirectly offering anything of substantial value to any municipal employee for or because of any official act performed or to be performed by such an employee.

The Boston Globe story

Larger Foreign Corrupt Practices Act Fines Ahead

Lynn Marek of the National Law Journal reports:

The U.S. Securities and Exchange Commission expects in the next two to six months to slap larger penalties than in the past on a number of companies that have allegedly violated the Foreign Corrupt Practices Act, reminding lawyers in the field that the regulator is taking a tougher stance today on international bribery.

Larger Foreign Corrupt Practices Act Fines Ahead

The largest FCPA penalty to date is $44.1 million paid by Baker Hughes last year. U.S. v. Baker Hughes Inc., No. 07-00130 (S.D. Texas). Siemens A.G., the German conglomerate has set aside $1.3 billion for settles bribery charges in the U.S. and Germany. [Siemens Reserves $1.3 Billion to Settle Corruption Charges]

TRACE and FCPA Opinion Procedure Release 08-03

The Summer 2008 newsletter from TRACE International provides some more background on FCPA Opinion Procedure Release 08-03. TRACE points out that this release was the first time that the DOJ has approved the payment of a specific dollar amount to government officials.

The Costs of Corruption

The damage and inefficiency caused by corruption, in either financial or social terms, should not be underestimated. The World Bank has estimated that more that US$ 1 Trillion is paid in bribes annually. See World Bank, “The Costs of Corruption” (8 April 2004). An Ernst & Young survey of executives indicated that almost half of those involved in the mining industry said that bribery was prevalent, with 30% saying that it was prevalent in the banking and energy industries, especially in countries outside Europe. [One in Four Asked to Pay Bribes]

In the Law Commissions 2007 work [Reforming Bribery (2007) Law Commission Consultation Paper No 185 (.pdf)], they referred to the World Bank’s discussion of the inefficiencies involved for management in having to negotiate and pay bribes, however small. On the broader social side, a culture of corruption may create an environment in which officials get in a system of being perpetual bribe takers according to Alexandra Wrage of Trace International, quoted in Ethical Corporation.

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