Posts filed under ‘Opinion’
Zen and the Art of Third Party Compliance
By Michael Varnum
Published July 12, 2012, FCPA Blog
In the 1974 novel Zen and the Art of Motorcycle Maintenance, author Robert M. Pirsig describes two approaches to life: the “romantic” and the “classical.”
The romantic approach is symbolized by a character who buys a new motorcycle, but does not know how to maintain it. Rather, he hopes for the best, and when problems occur he gets frustrated and needs to hire someone to fix it.
The classical approach is symbolized by the main character who has an old motorcycle that he is able to diagnose and repair himself through the use of rational, problem solving skills. He explains that there is a Zen-like peace that comes from being forced to pay continual attention and intercept problems before they get out of control.
Third party compliance is a lot like motorcycle maintenance. And, according to the results of our recent 2012 FCPA Benchmarking Study, there are still many romantics out there who are hoping for the best despite the steady increase in FCPA and UK Bribery Act enforcements over the last several years.
To read the complete article, visit the FCPA Blog.
Q&A With Morgan Stanley’s Chatterjee
By Benjamin Kessler
Published May 23, 2012, FCPA Blog
Raja Chatterjee, creator and global head of Morgan Stanley’s Anti-Corruption Group, is riding high.
Last month, the DOJ and SEC declined to prosecute or charge the company in an FCPA case involving a former high-ranking Morgan Stanley executive in China. Both agencies took the unprecedented step of singling out Morgan Stanley’s compliance program as a key exculpatory factor. Read more
Auditor Liability and Litigation: FCPA Violations and other Illegal Acts by Issuer Clients
By Barry Epstein
Published May 21, 2012, JD Supra
In recent years, the Department of Justice (DOJ), along with the Securities and Exchange Commission (SEC), has been aggressively enforcing the provisions of the Foreign Corrupt Practices Act of 1977 (FCPA). The accounting profession has long been divided over its role in detecting illegal acts by clients, and rightly has maintained that auditors, after all, are not trained as detectives. Accordingly, it has traditionally argued that any such responsibilities be tightly constrained, even as the financial statement-using public suffers from an exaggerated view of auditors’ role. Read more
3 Ways Increased Vigilance on Data Security Can Backfire
By Mark Kornbluth
Published February 22, 2012, Corporate Compliance Insights
Large U.S. and multinational corporations are awash in a sea of sensitive data. Thanks to a perfect storm of regulatory reform and heightened risk aversion among senior management, corporate compliance departments have been collecting data on everything from partner financial holdings to vendor background checks. While all of this information is being gathered and stored in the interest of risk mitigation, the mere existence of the data creates its own set of risks.
Case in point: The U.S. Department of Defense was recently hit with a $4.9 billion class-action lawsuit stemming from the breach of computer back-up tapes containing the personal information of about five million current and former U.S. soldiers.
This is hardly an isolated event. Dozens of high profile data breaches have occurred during the last few years and the victims are getting increasingly litigious. In fact, a new survey released this month by IT firm Unisys found that more than half of American consumers would sue a company that loses its personal information.
To read the complete post in Corporate Compliance Insights, click here.
Reducing C-Level Risk in Compliance Land
By David Riker
Published January 31, 2012 in FCPA Blog
The CEOs, CFOs, COOs and Chief Compliance Officers we meet with are well aware of the FCPA and are working to put in place compliance programs to keep their companies on the right side of the law, but they are not terribly concerned about their own personal exposures. Their logic: If I’m not physically handing over a bag of money to a corrupt government official, I’m clean.
This, of course, is not true. According to this great analysis from Chadbourne & Parke (in pdf here), 53 of the 61 individuals charged with violating the FCPA over the past six years were senior corporate officers, not bag men. Moreover, 8 of these individuals were charged despite committing no direct action in the corrupt act.
To read the complete article on FCPA Blog, click here
Bubble Risk 2.0: This Time it’s More Than Money on the Line
By David Riker
Managing Director, Kroll Risk and Compliance
There’s a new Internet bubble forming, fueled by the insatiable appetites of investors racing for inclusion in the next LinkedIn or Groupon. Case in point, December’s $1 billion Zynga IPO, which fell 5% on its first day of trading.
Describing the phenomenon in Fortune magazine, Steve Blank wrote:
We’re now in the second Internet bubble. The signals are loud and clear: Seed and late-stage valuations are getting frothy and wacky, and hiring talent in Silicon Valley is the toughest it’s been since the dotcom bubble. The rules for making money are different in a bubble than in normal times.
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US Chamber of Commerce flirts with moral hazard in FCPA fight
By David Riker
Published January 9, 2012 in The Hill
The US Chamber of Commerce, Washington’s largest lobbying organization, spent more than $700,000 in 2011 in its quest to curb the Foreign Corrupt Practices Act (FCPA). Is that really what’s best for American businesses?
Invoking the rhetoric of a populist manifesto, the Chamber is trying to make the case that increased enforcement of the FCPA has had a chilling effect on US businesses, causing them to avoid doing deals abroad for fear of setting off a FCPA investigation. But while this sentiment sounds pro-America, it is actually quite the opposite. Beneath the flag-waving sentiment, the Chamber is essentially asking for the US government to look the other way on bribery of foreign officials. That sets a dangerous precedent for a way of doing business that does not favor US corporations.
To read the full story in The Hill, click here
US Chamber of Commerce Seeing Red on FCPA Red Flags
By David Riker
Managing Director, Kroll Risk and Compliance
We’ve cited a number of news stories over the past several weeks that reference the US Chamber of Commerce’s lobbying effort to amend the Foreign Corrupt Practices Act (FCPA). One of the Chamber’s central issues with the FCPA is that it “should be modified to make clear what is and what is not a violation.”
This lack of clarity issue has come up frequently in the Chamber’s published documents and press statements, suggesting that US multinationals are unclear what activities separate corruption from standard business practice.
Beyond FCPA: When Foreign Fraud Dilutes a Brand
By David Riker
Managing Director, Kroll Risk and Compliance
We spend a lot of time on FCPAlert discussing the concrete impacts of foreign fraud, such as the increase in FCPA-related investigations and fines, new due diligence required to vet third parties and the cost of doing business in high risk emerging markets. But we’ve yet to discuss an equally troubling problem: the dilution of brand value that can result from doing business in fraud-prone regions of the world.
This is a huge problem. According to a recent report by the Organization for Economic Cooperation and Development, the impact of counterfeiting and piracy on the global economy is over $600 billion, approximately 5-7% of world trade. And the problem cuts across all industries. The US FDA estimates that 10% of all prescription drugs sold globally are counterfeited; the FAA projects that 2 percent of all airplane parts installed each year are counterfeit; and the Consumer Electronics Association reports that 3% of parts found in mobile devices are counterfeit.
Citizenship by Investment: How Due Diligence Can Open Up the US Economy
By David Riker
Managing Director, Kroll Risk and Compliance
In his new book, Borderless Economics, Robert Guest, the global business editor at The Economist makes the case that the single biggest threat to America’s status as an economic superpower is the growing backlash against immigration.
Citing the recent growth in scientific and innovative output from emerging markets such as China and India, Guest notes that in 1990, the “old” rich countries – North America, Europe and Japan – accounted for more than 95 percent of the world’s scientific research. By 2007 that had fallen to 76 percent. While the US is well-placed to capitalize on the growth in these and other emerging markets through cross-border investment and collaboration, immigration policy is getting in the way. Guest notes:
Until recently, America’s technological prominence was based on a simple formula: The world’s best brains came to the United States… Migrants make up about half of the workers in the United States with science or engineering qualifications, and accounted for two-thirds of the growth in that talent pool between 1995 and 2006. Half of the bosses of Silicon Valley start-ups in 2005 were migrants…
