As noted in a December 2013 DOJ press release (click here), a subsidiary of Archer Daniels Midland Company (ADM) recently pleaded guilty and agreed to pay more than $17 million in criminal fines to resolve charges that it paid bribes through vendors to Ukrainian government officials to obtain value-added tax (VAT) refunds, in violation of the Foreign Corrupt Practices Act ("FCPA"). The DOJ maintained that "ADM's subsidiaries sought to gain a tax benefit by bribing government officials, and then attempted to deliberately conceal their conduct by funneling payments through local vendors. ADM, in turn, failed to implement sufficient policies and procedures to prevent the bribe payments." Significantly, though, ADM ultimately disclosed the conduct, cooperated with the government, and instituted extensive remedial efforts.
What could ADM have done to avoid getting into the situation in which it found itself? A recent Corporate Counsel article (click here) sheds light on how companies can institute controls to prevent a "whitewash" of anticorruption by local employees or vendors that may, for example, disguise bribes as something more palatable to the company. As set forth more fully in the article, companies should consider employing the following four tactics:
(1) Have a designated compliance or operations lawyer in high-risk countries who can speak the language and get a better sense of how business is done to give accurate reports to headquarters by monthly compliance calls. For smaller companies where a permanent legal presence is not possible, companies can designate a non-legal compliance contact and bring employees backs to headquarters at intervals for more detailed compliance training.
(2) Present a "message from the top" that the company has zero tolerance for corruption and consider building ethics into performance reviews as evaluation incentives.
(3) Design effective hotlines that internal whistleblowers can use to report suspected violations and impress upon employees that their identity will be kept confidential and there will be no retaliation. Whenever possible, follow up with employees after the investigation to demonstrate that whistleblower reports are taken seriously. In fact, some companies reward whistleblowers through bonuses or commendations on a corporate website. Use real examples of whistleblower reports in trainings recognize that having a system, even informal, to recognize whistleblowers in a limited public way demonstrates the importance of whistleblowers to the company worldwide and encourages others to come forward.
(4) Use local hires to educate the company on how local laws are typically circumvented so a company can institute controls to prevent it from happening to them.