Federal bribery investigator Charles Connolly doesn’t have to look far from his Virginia office for a cautionary tale on why greasing hands is bad for business — and one’s freedom.
Nathan Dunn, a former Coast Guard petty officer, was sentenced to more than seven years in prison earlier this month in Norfolk after admitting to awarding overpriced and false shipping contracts to 12 brokerage firms, according to reports. His co-conspirator and brokerage firm owner, Huffman Monk, began serving his 63-month prison sentence in January after confessing he gave Dunn kickbacks in exchange for contracts.
The consequences of bribery are plain enough. But following the U.S. Foreign Corrupt Practices Act can get trickier when shippers and transportation providers operate out of the country, particularly in places where bribery is often part of doing business.
Wal-Mart and Ralph Lauren are just a few of the major multinationals that have been accused in the last year of paying off foreign officials to get their way, resulting in steep attorney fees, a tarnished brand, and in the case of the latter, a $1.6 million fine.
The Department of Justice’s investigations into bribery have gotten more aggressive as the U.S. partners with other countries and U.S. companies expand globally, said Connolly, chief of the financial crimes and public corruption unit at the U.S. Attorney’s Office of the Eastern District of Virginia.
Too few companies appear to be putting mechanisms in place to prevent bribery. Only 13 percent of companies surveyed by an accounting and consulting firm said they are making “substantial” efforts to comply with international corruption laws, according to the McGladrey report. Forty-four percent of respondents said they were making a “moderate” effort, 31 percent said they taking “minimal” attempts, and 9 percent hadn’t even begun working to prevent bribery.
There isn’t a one-size-fits-all strategy for companies to ensure their employees, third-party agents or contractors are not sweetening deals with foreign officials, Evelyn Suarez, an international trade attorney, told attendees of the Virginia Maritime Conference last week. The recently released ‘A Resource Guide to the U.S. Foreign Corrupt Practices Act' does, however, provide a good guide on how to impose anti-bribery practices.
To prevent bribery, shippers and transportation providers need to understand that it has become far subtler than the exchange of suitcases filled with cash under café tables. Companies now sweeten the deal by paying the private schools fees accrued by the children of foreign officials. In other cases, a child or relative of the bribed official receives an unexpected job offer. Lavish travel is another way companies get special favors from foreign officials, said Alexandra Wrage, president of TRACE International, a nonprofit dedicated to help the private sector avoid bribery.
Under federal law, there is no acceptable amount of bribery. Payment to or promises made to foreign official with the intent to sway his or her decision-making runs afoul of the FCPA.
Besides, bribery isn’t good for business, Wrage said. Once your company is known as a briber, other people will start making demands in exchange for service. Paying a Customs officer $500 to speed up the clearance of container provides benefit in the short-term, but, ultimately, “you are buying yourself an unenforceable contract,” she said.
“We still get companies saying, ‘We bribed the right person but we …,’ ” Wrage said.
She urged companies to use webinars to train all employees, not just those in the legal and compliance departments, on bribery policies. Anti-corruption policies have to come from the top down and be a shared policy, even for employees who never deal directly with foreign government officials, said Hank Selby, manager of international logistics and compliance at Reynolds Packaging Group. He recommended companies create a compliance hotline, and regularly audit financials and procedures.
When conducting audits, companies should look for red flag expenses, such as gifts, freight and logistics, charitable and political donations, school fees and scholarships, and consultant expenses, said Jim Barratt, a partner at Forensic Risk Alliance. This type of auditing requires companies to keep detailed records, and devise and maintain system of internal accounting control.