Afleveringen
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What is stranger than fiction? The stories of worldwide corruption. In this podcast series, co-hosts Tom Fox, the Voice of Compliance and Mike DeBernardis, partner at Hughes Hubbard, discuss some of the most audacious corruption cases in anti-corruption enforcement. More importantly, they will discuss the lessons learned on what your organization can do to prevent running afoul of international anti-bribery laws.
In this episode of Season 2, Tom and Mike explore the Barings Bank scandal
The focus is on the actions of Nick Leeson, a trader who single-handedly bankrupted the historic institution. The discussion highlights the critical mistakes made by the bank, including a lack of oversight and the dangerous combination of trading and settlement roles. The podast also explores the broader implications for compliance and risk management in financial institutions, emphasizing the importance of segregation of duties and the pressures that can lead to unethical behavior.
Key Highlights:
The Rise and Fall of Barings Bank
The Role of Oversight in Financial Institutions
Lessons Learned from the Barings Bank Scandal
How does the Fraud Triangle apply?
Segregation of Duties-as basic a control as you can have in place
Memorable Quotes (all from Mike DeBernardis)
“Nick single-handedly bankrupted the oldest merchant bank.”
“He was a golden boy trader making tons of money.”
“Barings Bank was sold for one pound.”
Resources:
Mike DeBernardis on LinkedIn
Hughes Hubbard & Reed
Tom Fox
Instagram
Facebook
YouTube
Twitter
LinkedIn
Texas Tax rate at 80% of 8.25% -
What is stranger than fiction? The stories of worldwide corruption. In this podcast series, co-hosts Tom Fox, the Voice of Compliance and Mike DeBernardis, partner at Hughes Hubbard, discuss some of the most audacious corruption cases in anti-corruption enforcement. More importantly, they will discuss the lessons learned on what your organization can do to prevent running afoul of international anti-bribery laws.
In this episode of Season 2, Tom and Mike explore the infamous Crazy Eddie scandal, one of the most audacious corporate frauds in history.
The scheme, orchestrated by Eddie Antar and his family during the 1980s and 1990s, involved tax evasion, inventory inflation, and money laundering through a method known as the ‘Panama Pump.’ They defrauded various stakeholders, including customers, bankers, investors, and governmental bodies, ultimately leading to Eddie’s extradition from Israel and imprisonment. This episode dissects the scandal’s rapid unraveling post-IPO, focusing on flawed corporate governance and oversight. By examining the pitfalls of family-controlled businesses and the lack of transparency exemplified by the Crazy Eddie and Boar’s Head Listeria scandals, the hosts underscore the critical importance of checks and balances in corporate structures.
Key Highlights:
The Audacious Fraud of Crazy Eddie
Tax Evasion and Inventory Inflation
The Panama Pump Scheme
The Whistleblower: Sam Antar
Lessons in Corporate Governance
Resources:
Mike DeBernardis on LinkedIn
HughesHubbardReed
Tom Fox
Instagram
Facebook
YouTube
Twitter
LinkedIn
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Zijn er afleveringen die ontbreken?
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What is stranger than fiction? The stories of worldwide corruption. In this podcast series, co-hosts Tom Fox, the Voice of Compliance and Mike DeBernardis, partner at Hughes Hubbard, discuss some of the most audacious corruption cases in anti-corruption enforcement. More importantly, they will discuss the lessons learned on what your organization can do to prevent running afoul of international anti-bribery laws.
In this episode of Season 2, Tom and Mike explore a unique corporate scandal from early 2000s Hong Kong involving Hutchison Whampoa Limited.
Unlike typical cases, there were no allegations of bribery, corruption, or significant financial penalties. Instead, the scandal revolved around the complex corporate governance issues and the control wielded by billionaire Li Ka-shing. The conversation delves into the importance of robust corporate governance, particularly in safeguarding the interests of minority shareholders in companies dominated by powerful individuals or families.
Tom and Mike highlight the expanding role of compliance professionals in overseeing corporate governance, especially with the rise of Environmental, Social, and Governance (ESG) criteria. They discuss the importance of board independence, the need for effective internal controls, and how compliance professionals can aid in board training. With compelling examples, such as the interlock of directors in the energy sector and the Bluebell Ice Cream scandal, the episode provides a thorough insight into how corporate governance issues can impact reputations and operational integrity.
Key Highlights:
Corporate Governance and Compliance
The Role of Boards in Risk Management
Compliance Professionals and Corporate Governance
Importance of Independent Board Members
Internal Controls and Compliance
Training Boards for Effective Governance
Resources:
Mike DeBernardis on LinkedIn
HughesHubbardReed
Tom Fox
Instagram
Facebook
Texas Tax rate at 80% of 8.25% -
What is stranger than fiction? The stories of worldwide corruption. In this podcast series, co-hosts Tom Fox, the Voice of Compliance and Mike DeBernardis, partner at Hughes Hubbard, discuss some of the most audacious corruption cases in anti-corruption enforcement. More importantly, they will discuss the lessons learned on what your organization can do to prevent running afoul of international anti-bribery laws.
In this episode of Season 2, Tom and Mike take a deep dive into the Bre-X mining scandal of the mid-1990s. Tom and Mike explore the fraudulent gold discovery announced by the Canadian company in Indonesia, which led to a massive media frenzy, skyrocketing stock prices, and eventually, a colossal financial collapse. The discussion includes the scandal’s sensational aspects, lack of individual prosecutions, and the regulatory responses that followed. Fox and DeBernardis also examine the greed and desperation driving the fraud and draw vital compliance lessons for today’s professionals.
Key Highlights:
Overview of the Bre-X Mining Scandal
The Sensational Details of the Fraud
The Aftermath and Lack of Prosecution
Regulatory and Legal Responses
Compliance Lessons for Today
Resources:
Mike DeBernardis on LinkedIn
HughesHubbardReed
Tom Fox
Instagram
Facebook
YouTube
Twitter
LinkedIn
Texas Tax rate at 80% of 8.25% -
What is stranger than fiction? The stories of worldwide corruption.
In this podcast series, co-hosts Tom Fox, the Voice of Compliance and Mike DeBernardis, partner at Hughes Hubbard, discuss some of the most audacious corruption cases in anti-corruption enforcement. More importantly, they will discuss the lessons learned on what your organization can do to prevent running afoul of international anti-bribery laws.
In this episode of Season 2, Tom and Mike take a deep dive into the Savings and Loan (S&L) crisis of the 1980s.
This scandal, which cost the U.S. between $150 and $200 billion, serves as a powerful case study on the consequences of deregulation. Factors like legislative changes, poor management, fraud, and economic pressures all contributed to the collapse of over a thousand S&Ls. Notable cases, such as the Lincoln Savings and Loan scandal involving Charles Keating, highlight the systemic issues that plagued the industry. The episode emphasizes the importance of regulatory oversight, ethical leadership, and strong internal controls to prevent future financial crises.
Key Highlights:
Overview of the SNL Crisis
Factors Leading to the Crisis
Major Scandals and Key Players
Lessons Learned and Regulatory Changes
Comparisons to Other Financial Crises
Resources:
Mike DeBernardis on Linkedin
HughesHubbardReed
Tom Fox
Instagram
Facebook
YouTube
Twitter
LinkedIn
Texas Tax rate at 80% of 8.25% -
What is stranger than fiction? The stories of worldwide corruption. In this podcast series, co-hosts Tom Fox, the Voice of Compliance and Mike DeBernardis, partner at Hughes Hubbard discuss some of the most audacious corruption cases in anti-corruption enforcement. More importantly, they will discuss the lessons learned on what your organization can do to prevent running afoul of international anti-bribery laws. In this episode of Season 2, Tom and Mike take a deep dive into one of the seminal scandals of the 20thcentury, the Teapot Dome scandal.
The infamous Teapot Dome scandal occurred during Warren Harding administration. Tom and Mike take a deep dive into a historical overview of the event, detailing steps taken by key figures like Albert Fall, who leased federal oil reserves to his associates without competitive bidding, resulting in massive corruption and eventual convictions. The discussion highlights the scandal’s significant impact on U.S. governance, including the first conviction of a former cabinet member, and underscores enduring compliance lessons relevant to modern-day corruption cases.
Key Highlights:
Historical Context of the Teapot Dome Scandal
The Scandal Unfolds: Key Players and Actions
Investigations and Revelations
Legal Consequences and Fallout
Lessons and Reflections
Resources:
Mike DeBernardis on Linkedin
HughesHubbardReed
Tom Fox
Instagram
Facebook
YouTube
Twitter
LinkedIn
Texas Tax rate at 80% of 8.25% -
What is stranger than fiction? The stories of worldwide corruption. In this podcast series, co-hosts Tom Fox, the Voice of Compliance and Mike DeBernardis, partner at Hughes Hubbard, discuss some of the most audacious corruption cases in anti-corruption enforcement. More importantly, they will discuss the lessons learned on what your organization can do to prevent running afoul of international anti-bribery laws.
In this episode of Season 2, Tom and Mike take a deep dive into the sordid history of the Bank of Credit and Commerce International (BCCI) (AKA Bank of Crooks and Criminals International).
BCCI was founded in 1972 to facilitate banking for developing countries. BCCI quickly devolved into a hub for money laundering, terrorism financing, and regulatory evasion. They discuss the bank’s complex web of shell companies and insider loans and how a 1991 investigation led by Senator John Kerry exposed these illicit activities.
The episode also highlights the involvement of notable figures like Clark Clifford and Robert Altman in BCCI’s operations and the subsequent legal battles they faced. Finally, the hosts examine the long-lasting impact of the BCCI scandal on global and U.S. banking regulations, including the establishment of stricter anti-money laundering laws and enhanced international cooperation.
Key Highlights:
The Rise and Fall of BCCI
BCCI’s Regulatory Evasion Tactics
BCCI’s Involvement in Terrorism and Illegal Activities
The Congressional Investigation and Shutdown
BCCI’s U.S. Operations and Legal Troubles
High-Profile Trials and Acquittals
Modern Parallels
Resources:
Mike DeBernardis on LInkedIn
HughesHubbardReed
Tom Fox
Instagram
Facebook
YouTube
Twitter
LinkedIn
Texas Tax rate at 80% of 8.25% -
What is stranger than fiction? The stories of worldwide corruption. In this podcast series, co-hosts Tom Fox, the Voice of Compliance and Mike DeBernardis, partner at Hughes Hubbard, discuss some of the most audacious corruption cases in anti-corruption enforcement. More importantly, they will discuss the lessons learned on what your organization can do to prevent running afoul of international anti-bribery laws.
In this episode of Season 2, Tom and Mike take a deep dive into the historical case of Tyco, a quintessential example of dot-com era excess.
Tom and Mike discuss Tyco’s journey from a small semiconductor company to a corporate giant under CEO Dennis Kozlowski. Kozlowski’s aggressive growth strategies and extreme personal expenditures, such as a $6,000 shower curtain, became infamous. The discussion covers fraudulent activities, including unauthorized bonuses and misuse of loan programs, ultimately leading to Kozlowski and CFO Mark Swartz’s convictions.
The episode also examines the implications for corporate governance and the sweeping changes in third-party risk management prompted by the scandal.
Key Highlights:
The Rise of Tyco
Dennis Kozlowski’s Leadership and Excesses
Uncovering the Fraud
The Loan Programs and Misconduct
The Trial and Conviction
Compliance Lessons from Tyco
Board Oversight and Final Thoughts
Resources:
Mike DeBernardis on LInkedIn
HughesHubbardReed
Tom Fox
Instagram
Facebook
YouTube
Twitter
LinkedIn
Mentioned in Podcast
Taking Down the Lion by Catherine Neal
How Compliance Saved Tyco by Joe Mont
Texas Tax rate at 80% of 8.25% -
What is stranger than fiction? The stories of worldwide corruption. In this podcast series, co-hosts Tom Fox, the Voice of Compliance and Mike DeBernardis, partner at Hughes Hubbard discuss some of the most audacious corruption cases in anti-corruption enforcement. More importantly, they will discuss the lessons learned on what your organization can do to prevent running afoul of international anti-bribery laws. In this first episode of Season 2, Tom and Mike review the Lockheed corruption scandal which led directly to the passage of the FCPA.
The discussion covers the significant bribery and corruption charges that led to the creation of the Foreign Corrupt Practices Act (FCPA). The hosts explore the international political fallout from the scandal, its impact on various countries including Japan, Italy, and the Netherlands, and the consequences for Lockheed. The episode highlights how the case influenced the development of anti-bribery laws worldwide and the roles played by figures like Stanley Sporkin in shaping these regulations. The conversation also touches on the ongoing challenges in combating corruption in the aerospace industry and its global implications.
Key Highlights
· The Lockheed Scandal: An Overview
· High-Level Corruption and Its Unveiling
· International Repercussions of the Lockheed Scandal
· The Birth of the FCPA
· Modern Implications and Compliance
Resources
Mike DeBernardis on LInkedIn
HughesHubbardReed
Tom Fox
Instagram
Facebook
YouTube
Twitter
LinkedIn
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Establishing trust can greatly affect the outcome of a case.
Thomas Fox and Michael DeBernardis talk about ABB’s 2022 bribery case in South Africa, how self-disclosure benefits any situation, the DOJ’s approach on cracking down recidivists, choosing the right people for your team, and being wary of waivers.
▶️ The ABB Settlement with Thomas Fox and Michael DeBernardis
Key points discussed in the episode:
(00:00:29) Thomas lays out the facts of the ABB settlement. Michael points out the DOJ’s plans for penalizing recidivists and ABB’s biggest compliance misstep.
(00:07:07) Thomas emphasizes the importance of compliance oversight, being vigilant of billing in high-risk jurisdictions, and the benefit of ABB’s “almost” self-disclosure.
(00:12:08) Michael discusses the impact of trust and incentivizing other recidivists to come forward and the risks of going off of real-time information.
(00:18:27) Thomas mentions how having someone with experience concluding resolutions in the DOJ can make a difference. Even with a fairly low penalty, ABB is still required to report on its compliance program.
(00:24:22) Michael prefers having an independent monitor in place. However, he highlights ABB’s trust in their team to do a thorough job of reporting.
(00:27:31) Michael gives credit to ABB’s swift actions and extensive remediation, describing the DOJ’s outcome as “threading the needle”. Thomas believes the case is still a win for compliance. Michael drives home how doubling down on compliance pays off.
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Do you have a podcast (or do you want to)? Join the only network dedicated to compliance, risk management, and business ethics, the Compliance Podcast Network. For more information, contact Tom Fox at [email protected].
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Rapid expansion presents great opportunity and great risk.
Thomas Fox and Michael DeBernardis go deep into the Walmart bribery case, why immediate cooperation matters, tips for companies to prevent similar problems, the best course of action when working internationally, and projecting risk regardless of industry.
▶️ The Walmart Case with Thomas Fox and Michael DeBernardis
Key points discussed in the episode:
(00:02:36) Thomas lays out the facts of the Walmart case. Michael points out how prevention could have saved millions of investigation costs.
(00:09:50) Rapid expansion presents great opportunity and risk. Thomas emphasizes that extensive remediation and cooperation can bring significant credit.
(00:14:14) Michael explains Walmart’s underwhelming conduct. Thomas brings up the congressional investigation, leader exits, and the business implications of publicizing.
(00:20:46) Michael shares his advice to avoid Walmart’s case – setting realistic and proper incentives. He also provides hypothetical counsel if he had the chance to work with Walmart when the issue broke out.
(00:25:09) Michael highlights the importance of timeliness, engaging with regulators as early as possible, and providing FCPA training when asked.
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Do you have a podcast (or do you want to)? Join the only network dedicated to compliance, risk management, and business ethics, the Compliance Podcast Network. For more information, contact Tom Fox at [email protected].
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When beauty company Avon Products Inc. was charged in 2014 with violating the Foreign Corrupt Practices Act (FCPA), due to failure to detect and prevent bribery acts happening in China, they settled for ten times more than the cost they paid for in "gifts."
Today, the FCPA investigation and enforcement action still stand as one of the most interesting cases for companies and compliance professionals to learn much from.
Tune in to this new episode of The Corruption Files — The Avon China Bribes with Thomas Fox and Michael DeBernardis ▶️
Key points discussed in the episode:
[00:05] Tom Fox shares the background facts on such an "insane case," with the investigation almost as interesting and important as the resolution.
[00:24] Michael DeBernardis states that Avon China Bribes the grandfather case for a couple of other very similar FCPA cases.
[02:16] The internal audit department already identified this issue of paying gifts and recommended FCPA training for the team, which did not push through due to the lack of budget.
[02:59] In-fighting or territoriality is not surprisingly uncommon at big companies, leading to compliance and corruption problems.
[04:50] Tom cites how in 2012, the government became so frustrated with Avon that they started issuing grand jury subpoenas for individuals.
[12:56] A key part of the corporate process is to have systems that talk to each other. And if you don't, the costs can literally be astronomical.
[19:25] Avon's $8 million in bribes led to $500 million in pre-settlement costs, $135 million in settlement costs, and $250 million in post-settlement resolutions.
[20:50] Tom reminds companies that if there's a potentially high reward, it generally means there's high risk.
[24:02] Michael emphasizes that Compliance budgets can be tight, but skipping small training can catch up with you in the long run.
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Do you have a podcast (or do you want to)? Join the only network dedicated to compliance, risk management, and business ethics, the Compliance Podcast Network. For more information, contact Tom Fox at [email protected].
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If you’re aggressive with your response, you’ll be rewarded.
Thomas Fox and Michael DeBernardis break down the facts and lessons learned in the Ralph Lauren bribery case in Argentina. Discover why anti-corruption programs and worker training matter, how speedy cooperation improves resolution leniency, and why organizations shouldn’t be complacent when it comes to risk.
▶️ The Ralph Lauren Bribery Case with Thomas Fox and Michael DeBernardis
Key points discussed in the episode:
(00:00:35) Thomas Fox gives an overview of the Ralph Lauren case. Michael DeBernardis highlights how this case shows that risk exists in any industry outside the U.S.
(00:03:30) Providing an anti-corruption program and employee training got Ralph Lauren ahead of its resolutions and lowered their penalties. It was unclear what monetary value their bribe payments had.
(00:08:21) Ensure your employees deeply understand your policies by translating them into different languages. Ralph Lauren took this step and greatly benefited in the case outcomes.
(00:11:17) Ralph Lauren’s speedy response and decision for a policy rollout were rewarded with a lenient resolution. This sends a powerful message to regulators that you’re taking the issue seriously.
(00:17:15) A tailored risk assessment is helpful. Set up a plan to spot audits and do compliance checks in foreign locations in a certain period. Ralph Lauren’s case is an early model for the corporate enforcement program.
(00:21:22) The Ralph Lauren case jumpstarted the corporate enforcement policy. Their proactivity is the biggest takeaway for organizations to apply.
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Do you have a podcast (or do you want to)? Join the only network dedicated to compliance, risk management, and business ethics, the Compliance Podcast Network. For more information, contact Tom Fox at [email protected].
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There’s no such thing as low risk or no risk.
Crafting a web of bribery with a corrupt law firm, a Nigerian fixer, and Panalpina’s hand landed Parker Drilling in hot waters. Tune in as Thomas Fox, and Michael DeBernardis explore the facts of the Parker Drilling case, why overestimating risk is always for the better, how proper conduct impacts sentencing, and why having the right people can impact outcomes.
▶️ Parker’s Offshore Oil Drilling with Thomas Fox and Michael DeBernardis
Key points discussed in the episode:
(00:00:27) Thomas Fox lays out the basics of the Parker bribery case.
(00:06:34) Michael DeBernardis explains the points on the Nigerian agent’s efforts, bribery for unfair business advantage, the lack of due diligence, and fake invoices.
(00:10:46) Thomas Fox points out Sarbanes-Oxley as the main driver of compliance, the power of internal controls, the blurry calculations of discounts on the final sentencing, and the impact of Dan Chapman.
(00:18:12) Michael DeBernardis highlights how the FCPA system maintains sentencing consistency but still has room for tightening and the nuances of every bribery case.
(00:21:58) Thomas Fox underscores the importance of good conduct for the credit and an unanswered question. Michael DeBernardis reaffirms why having the right people in place is beneficial.
(00:25:39) Thomas Fox and Michael DeBernardis leave their final thoughts on the case: Have a second set of eyes on dubious wire transfers. Rethink how risk analysis is done. Focus on what you’re doing every step of the way.
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Do you have a podcast (or do you want to)? Join the only network dedicated to compliance, risk management, and business ethics, the Compliance Podcast Network. For more information, contact Tom Fox at [email protected].
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Risk is never static, but dynamic.
The Goldman Sachs case has proven that playing with fire will always get you burned. Listen in as Thomas Fox and Michael DeBernardis dissect the rights and wrongs of the situation, why probing deeper into red flags is a must, the importance of setting off preventative controls right away, and why companies should publicly show their general policy statement.
▶️ The Goldman Sachs Corruption Case with Thomas Fox and Michael DeBernardis
Key points discussed in the episode:
(00:00:20) Thomas Fox gives a brief background on the Goldman Sachs case.
(00:03:02) Michael DeBernardis explains the successes and failures in compliance.
(00:07:32) Thomas Fox points out the suspicious timing of bond offerings, the significant risk involved, why organizations should trust, but verify, and considering the visibility within the organizational structure.
(00:14:33) Michael DeBernardis emphasizes why preventative controls like electronic surveillance should be implemented right away and how the Goldman Sachs case proves that improving your company structure is vital.
(00:18:35) Thomas Fox and Michael DeBernardis talk about the Monaco Memo and how the Goldman Sachs case perfectly applies the implementation of clawbacks.
(00:24:28) Michael DeBernardis encourages companies to publish their general policy statement to prevent future problems.
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Do you have a podcast (or do you want to)? Join the only network dedicated to compliance, risk management, and business ethics, the Compliance Podcast Network. For more information, contact Tom Fox at [email protected].
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Brazilian petroleum company Petrobras caught itself in an intricate bribery scheme involving top construction corporations like Odebrecht and Braskem and political parties. Thomas Fox and Michael DeBernardis lay out the facts and share their insights on what lessons other companies can learn and practice to avoid similar compliance troubles.
▶️ Odebrecht/Braskem with Thomas Fox and Michael DeBernardis
Key points discussed in the episode:
(00:00:32) Thomas Fox gives a brief background on the Petrobras-Odebrecht-Braskem case.
(00:03:35) Michael DeBernardis clarifies more facts on the case, such as the bribery feedback loop and the increasing spending on litigation. Thomas Fox adds that even if you “create bad law, it’s still law.” It has also brought attention to compliance authorities and politicians in Brazil. More companies in other countries were also involved in the scheme.
(00:11:58) The bribery scheme was intricately designed to avoid compliance detection. Michael DeBernardis recommends ensuring maximum procurement controls. Petrobras employees benefited mostly in this case. This case has put attention to the importance of having visibility into supply chains.
(00:15:57) Michael DeBernardis emphasizes the importance of having appropriate controls to mitigate supply chain risk despite being lower than other aspects of the business. It also exposed the massive scale of corruption.
(00:21:54) Michael DeBernardis and Thomas Fox hit home their suggestions to companies: Do a deep risk analysis, get to know your joint venture partners, and any form of defense is helpful. Although the danger is not easy to detect up front, it can help lessen the risk. Also, you should not also close the doors in working with businesses with a little bit of controversy.
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Do you have a podcast (or do you want to)? Join the only network dedicated to compliance, risk management, and business ethics, the Compliance Podcast Network. For more information, contact Tom Fox at [email protected].
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Thomas Fox and Michael DeBernardis discuss the dubious bribery cases of financial institutions, specifically Deutsche Bank, Credit Suisse, and Societe Generale (SocGen), that utilized commission agents of significant political power. They also talk about why compliance committees should look closer into the backgrounds of company agents and how the Deutsche Bank kickstarted France’s fight against corruption.
▶️ Banks Behaving Badly with Thomas Fox and Michael DeBernardis
Key points discussed in the episode:
(00:00:36) Michael DeBernardis gives a brief background on the Deutsche Bank case.
(00:05:10) Thomas Fox examines the compliance lessons to be learned from the Deutsche Bank case. Compliance professionals should consider not only families but friends of commission agents. The worst misconduct can gain reduced penalties when companies cooperate with investigations. Michael adds how Deutsche Bank took corrective action to achieve a significant discount.
(00:11:09) Two possible discounts companies may get for compliance are (1) a cooperation discount under the US sentencing guidelines and (2) a discount under the FCPA corporate enforcement policy.
(00:12:15) Michael DeBernardis’ standpoint as a lawyer to his clients: be forthcoming, and argumentative when appropriate.
(00:13:54) Michael DeBernardis gives a brief background on the SocGen case.
(00:19:28) The SocGen case was the first US-France anti-corruption collaboration. Though bribery through agents has been done by others, it’s still an effective dishonest practice. Michael adds that companies have since improved in doing background checks of their agents.
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Do you have a podcast (or do you want to)? Join the only network dedicated to compliance, risk management, and business ethics, the Compliance Podcast Network. For more information, contact Tom Fox at [email protected].
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In 2016, the DOJ and SEC served enforcement action against Och-Ziff Capital Management Group for inappropriate business practices in Africa. It seemed like only yesterday when this successful hedge fund was incriminated in a complex scheme of bribing government officials to maintain and get new business. The settlement was $412 million (and even more for restitution for the victims), making it one of the biggest payments for violating the Foreign Corrupt Practices Act (FCPA).
▶️ The Sophisticated Conduct of Och-Ziff's African Bribery with Tom Fox and Michael DeBernardis
Key points discussed in the episode:
✔️ A crisis can breed opportunities for corruption. Even as its red flags became increasingly apparent, the option remained for the Och-Ziff to stop its bribery and illegal action before and even after its activities were discovered.
✔️ Compliance professionals need to have their eyes extra peeled, not simply to vet due-diligence partners but to look deeply into the ongoing business relationships with joint-venture partners. Och-Ziff Subsidiary was involved in corruption issues tied to its mining projects in the Democratic Republic of Congo. What was blatantly amiss was the review and audit necessary to view the joint venture from the compliance perspective.
✔️ Find a joint-venture partner that approaches compliance the same way you do. In handling joint ventures, there is a need for ongoing due diligence — and ongoing management of the relationship beyond due diligence. In the lifecycle of a third-party agent, work starts when the contract is signed, and the joint venture is formed.
✔️ There are various means for auditing available that don’t include turning the place upside down. Here are some good ways to keep an eye on an entity like a joint venture:
-Do spot checks on certain transactions
-Do sampling from a distance
-Make the audit by interviewing the employees to ensure they understand and follow the compliance requirements.
✔️ Remember, it becomes more complicated when you are not in control. Regarding building contractual protections and having strict control, ensure that you find a joint-venture partner that approaches compliance the same way you do.
✔️ Companies have always had audit rights but haven't exercised those rights. It's almost a requirement when making high-risk transactions to not only build in the audit rights but also exercise them. Ask the right questions and gauge whether the third party has been honest in the due diligence process.
Many companies get scared off by the idea of the disruption and invasion involved, but that’s what takes away the potential problems and the unnecessary bouts with the SEC and the Department of Justice (which is responsible for enforcing the FCPA).
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Do you have a podcast (or do you want to)? Join the only network dedicated to compliance, risk management, and business ethics, the Compliance Podcast Network. For more information, contact Tom Fox at [email protected].
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Welcome to another episode of The Corruption Files!
Tom Fox and Michael DeBernardis explore their biggest takeaways from the appeal of the conviction of former Terra Telecommunications Corp. executive Joel Esquenazi. He and other involved parties were proven to pay bribes to Haitian government officials in a grand scheme. The case remains an example of a significant conclusion from a defense involving the FCPA.
▶️ The Instrumentality Ruling of United States v. Esquenazi with Tom Fox and Michael DeBernardis
Key points discussed in the episode:
✔️ The Esquenazi decision is vital in providing clear guidance for businesses to design robust compliance programs to address corruption, avoid making grease payments to foreign government officials, and remove the temptation to cull business favors and advantages for their company.
✔️ Companies doing business abroad should never forget the learnings from the Esquenazi decision in 2014. Following the conclusion of the Court of Appeals was identifying ownership and financial control to decipher the "instrumentalities" of foreign governments and to correctly identify that there were no red flags for FCPA compliance.
✔️ The 11th Circuit Court of Appeals' opinion clarifies how a two-part test is crucial in determining the "instrumentality" of an employee, officer, agency, or department as an entity of foreign governments. The elements of "control" and "function" served as the two prongs that the US Court of Appeals for the Eleventh Circuit made in its decision for Esquenazi and the others involved in the case.
✔️ A key indicia of a governmental entity is it doesn't have to make a profit. Think about the United States Postal Service — today; it still stands as a government service. Everyone uses it — and we don't want it to go away even if it doesn't make a profit. Indeed, non-earning can be the biggest indicator if you assess what constitutes any employee, officer, agency, or department as an "instrumentality" of foreign governments where clients are conducting business.
✔️ United States v. Esquenazi is a well-settled FCPA case that didn't go to the U.S. Supreme Court. The Esquenazi decision is a significant case law that came out of a defense trial with the defendant paying heavily and sentenced to prison for 15 years — a landmark decision that remains relevant today.
✔️ Key lessons learned from United States v. Esquenazi:
1. Ownership/Financial Control - There is no percentage amount listed, but the inclusion of financial control would indicate that anything over 50% would be a significant factor.
2. Actual control is key in all three court decisions. In Lindsey and Esquenazi, it is characterized as the government’s right to appoint key officers and directors. In Carson, it is called government control. But this means that if the government exercises actual control, it may trump the 50% guidance stated above.
3. Privileges and Obligations are also mentioned in all three. Does the entity have the right to control its functions?
4. Financing – Is the entity a for-profit entity financed through its revenues, or does it depend on financing by its government?
5. Perception is Reality - André Agassi’s immortal words appear again. If it is widely perceived as providing an official function, it is an instrumentality under the FCPA.
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Welcome to another episode of The Corruption Files!
Thomas Fox and Michael DeBernardis discuss questionable hiring practices from JP Morgan, Credit Suisse, and Bank of New York (BNY) Mellon in employing relatives of high-profile clients to gain favor. They also discuss how companies can find a middle ground in hiring families, why Hiring can be a high-risk area, preventative questions to avoid a violation and the significance of internal control and documentation.
▶️ Hiring in the Financial Space with Thomas Fox and Michael DeBernardis
Key points discussed in the episode:
✔️ Thomas Fox gives a brief background on the BNY Mellon case.
✔️ Michael DeBernardis mentions how Hiring based on connections has existed for a long time and doesn’t directly violate any laws. It’s all up to a company’s intent. For BNY Mellon, it was to maintain close connections with major clients. He recommends compliance professionals look into their company’s hiring process.
✔️ Hiring unqualified people means you’re hiring them for other reasons. JP Morgan took in ineligible candidates for leverage with high-profile clients and free advertising in their respective home countries. Documentation stopped JP Morgan in its tracks.
✔️ JP Morgan structured hiring program managed to override compliance controls, revealing regulation flaws. Being discovered next to BNY Mellon’s case, it was not the last instance of son-and-daughter corruption.
✔️ Thomas Fox retells the Credit Suisse case. Retracing the company’s spreadsheets revealed their inner workings.
✔️ The risk of hiring relatives can be minimized when there is a middle ground. Thomas Fox shares questions to ask to prevent violations. He also adds strengthening internal control can put a company on the good side of regulators.
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Do you have a podcast (or do you want to)? Join the only network dedicated to compliance, risk management, and business ethics, the Compliance Podcast Network. For more information, contact Tom Fox at [email protected].
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