By Douglas Kelly
EverFi Lead Legal Editor
Multiple enforcement actions against acts of bribery and corruption help strengthen the need for businesses to implement employee conduct training as part of an effective ethics and compliance program.
Compliance training is a critical component in both preventing and remedying alleged acts of corruption and bribery, as shown by recent enforcement actions. For example, the US Securities and Exchange Commission (SEC) decided not to charge Harris Corporation based on its “efforts at self-policing . . . prompt self-reporting, thorough remediation, and exemplary cooperation with the SEC’s investigation.” Specifically, Harris trained staff after it had acquired a subsidiary in China and implemented an anonymous complaint hotline. These two self-policing efforts allowed employees to discover that the CEO of the Chinese subsidiary had authorized the bribing of foreign officials.
With this in mind, anti-bribery training allows employees to be aware of bribery, and hotlines can give employees the ability to complain about it. Hotlines, such as anonymous telephone or online complaints, “enable the organization to solve a concern while it is small, well before it escalates into a large problem,” according to a report by Santa Clara University and confirmed by a recent study showing that whistleblowing deters wrongdoing.
Compliance training can be used to clean up questionable or corrupt conduct after the fact. For example, the SEC decided not to prosecute company Nortek when the company discovered that employees in its Chinese subsidiary were bribing foreign officials. Once it discovered the bribery, Nortek “provided extensive mandatory in-person and on-line trainings on the FCPA and anti-corruption policies to its employees around the globe.” This is significant, as beforehand “Nortek failed to establish procedures to ensure its Linear China employees were trained in anti-corruption compliance.”
Nortek and Harris Corporation’s approaches follow US Department of Justice (DOJ) recommendations for “periodic [FCPA] training and certification for all directors, officers, relevant employees, and, where appropriate, agents and business partners,” in its guiding principles of FCPA enforcement.
FCPA training, in particular, is important, especially in the wake of record enforcement actions by the SEC and the US Department of Justice (DOJ). The year 2016 “produced what arguably is the most significant year of enforcement in the statute’s 39-year history” according to attorney F. Joseph Warin. The SEC and DOJ brought 53 enforcement actions against companies and levied more than $2 billion in corporate fines against companies.
While Matt Kelly at the FCPA Blog accepts the possibility that SEC and DOJ enforcement may drop under the Trump administration, he and expert Mr. Warin do not expect such a dramatic FCPA program change. Incidentally, it’s also important to remember that the FCPA is one US law in a complex web of international anti-corruption efforts. For example, Mexico passed its National Anti-Corruption System and the International Organization for Standardization (“ISO”) published the long-anticipated anti-bribery standard ISO 37001. There’s also a collective international effort to combat bribery and corruption, as Rolls-Royce found out in January 2017 after being caught by the US, UK and Brazil (all of whom make bribery illegal).
Beyond the world of laws and enforcement, we should remember that corruption involves a number of very human elements. “Corruption corrodes the fabric of society. It undermines people’s trust in political and economic systems, institutions, and leaders. It can cost people their freedom, health, money – and sometimes their lives,” according to Transparency International. In analyzing corruption in Latin America, we found that it wasn’t so much legal prohibitions but:
Demographics, beliefs, culture and familial obligations all appear to affect the propensity for people in Latin American countries to engage in corruption . . . these factors are often related to social trends regardless of nationality.
This is where compliance conduct training, when done effectively, can help.
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