This is the second part of my interview with Robert (“Bob”) Appleton, which is timely given our question and answer session at the upcoming Anti-Corruption Conference, Oslo, where we will engage in an interview titled “Bribery from the Sharp End,” on June 11th, 2015, 16:00 local time. There is much about this event which is unique, including our Q & A, particularly in the context of anti-corruption conferences, as it is organized by:
ØKOKRIM, The Norwegian National Authority for Investigation and Prosecution of Economic and Environmental Crime.
Transparency International Norway
PwC
Advokatfirmaet Selmer (Norwegian Law firm specializing in business law issues).
This is not your typical “pay to play” anti-corruption conference. As the organizers state, it is an event “intended to strengthen cooperation between private companies, the public sector, development organizations, NGOs and other relevant actors when it comes to this very topical risk area.” Also worth noting is that conference is non-profit based. My gratitude and appreciation to Helge Kvamme, Partner – Leader Investigations & Compliance at Law Firm Selmer DA, for inviting me to address this conference through an interview with Bob.
The link to Antikorrupsjonskonferansen 2015 can be found here.
Bob, thank you for joining us today in part II of our interview. The next time I will see you will be on June 11th via live video feed, at the Oslo Anti-Corruption Conference, where we will engage in our Q and A on “Bribery at the Sharp End.” So, for those who might not be able to attend, and who might be interested in how our paths crossed in 2006, which we will address on June 11th, perhaps you might want to share some of that trajectory.
Sure Richard. In 2006 I was the head of a newly formed anti-corruption unit within the United Nations, the Procurement Task Force ( PTF). In early 2006, the Volcker led Iraqi Oil for Food investigation had just ended, exposing the largest bribery cases in the history of enforcement. Member States to the UN were still concerned about further lurking corruption schemes in the world body, including their agencies and departments. Accordingly, the UN Secretariat created the special PTF, a diverse investigation unit with more than 30 investigators. I joined the PTF first as the Deputy Chairman, and then was appointed Chairman, and Head, in 2007.
Cases were coming in from all over. Our mandate also included investigating companies and individuals doing business with the UN. This was a first for the Organization. While it had an “internal” oversight department, they had never looked outside the Organization at those who were contractually engaging with the UN from around the world. We were focused on corruption, and contracts that the Organization awarded. We started to investigate contracts where there were allegations that some awards had been corruptly steered to favored vendors by procurement officials inside the UN.
We were focused on one such middleman, and his firm. We had already discovered that the firm had helped steer several hundred million dollars in contracts to a preferred food services vendor, and that a UN insider had actually stolen competitive bids from a sealed office in the UN building on the East River in NY. That UN official then went a hotel next to the UN and ripped out the bid “pricing” pages from his “partner’s” tender documents, after he discovered that the competitors had offered lesser prices. They revised their bid by replacing the discarded pages with “new” proposed prices and resubmitted the whole package back to the UN vault. They of course, and with no surprise, won the bid and got the contract.
We discovered through our own investigation that you had allegedly conspired to procure UN contracts through similar means same middleman. I found some emails with your name on them, and then I wrote to you asking you some questions about your activities and knowledge of certain parties and processes. I think you remember the document! Also, while we were investigating, I met with the DOJ Fraud Section prosecutors and handed over evidence in some cases where they had jurisdiction, including yours.
Well, I am glad that is all in the rear view mirror, and I look forward to our deeper drill on Thursday.
Bob, the landscape as in your prior articles (referenced in last week’s blog here) is very dour, but other than “stay out” or “roll the compliance dice” what are the options? Over the long haul, as many regions are now confronting domestic corruption, is time on the side of an even playing field?
Unfortunately not yet, but the landscape is changing as there is less and less ability to hide one’s actions. Even if there is no one to call you on it, companies or individuals paying bribes are at an increased risk of being exposed. You really cannot hide behind third parties and middlemen anymore. You are a great example of that Richard. There is a bit of an analogy to drug enforcement – where, participants had to always worry the person they were dealing with was a cooperator with law enforcement. With stepped up enforcement, whistle-blower policies and increased participation from other national authorities, it is a real risk for a publicly traded company to bribe. In some parts of the world, you may think you are still pretty safe, but, there too, the DOJ has shown the commitment to pursue cases from around the world.
I was asked quite often, when I was interviewing corporate officials and their middlemen, “will I be indicted under the U.S. FCPA?” It was usually the first question. The DOJ has historically demonstrated that the jurisdiction for charging a US crime is far often achieved through many indirect and some would say tenuous, means. You don’t have to have your “feet on US soil.” Just look at FIFA and the Interpol warrants. In my time at DOJ, I managed quite often to assert jurisdiction without the defendant’s actual presence on US soil. It’s not absolute, but the DOJ track record on this issue remains strong.
Richard, if you want to operate in low integrity markets where you are dealing directly with foreign government officials, you are really rolling the dice and taking risks. Risk will remain high because nothing has really changed in these environments from the demand side. I have seen this first hand. So, if you are going to try and compete, you need to ensure your compliance program is very tight, especially when it comes to third party agents and intermediaries. Your agreements cannot expose you to risk, and your instructions must be clear and unequivocal. Also, you need to have someone with real knowledge and ability review your systems and conduct routine reviews. You also need to supervise the agents closely, and have them describe to you in advance how they will represent you in the local jurisdiction and what they are going to do to better position you to achieve the contract.
In one of your articles you state that, “incidents of corruption continue to occur unabated, and many are largely ignored.” Given the work of the OECD, the tripling of investigatory resources at the FBI dedicated to overseas corruption, and high-profile cases such as the recent FIFA arrests, is this trajectory constant, or do you see change?
The tripling of investigatory resources will help but don’t think of it is a panacea. As I said in my piece in response to the OECD report, the “made” cases are just scratching the surface of actual bribe and corruption activity. I believe, still, that less than 1% of the incidents of bribery and corruption are being prosecuted. Only about 3% are being investigated, and less than 10% are being reported. Those new agents who are well trained and experienced, are going to be very busy.
Last question. Bob, based on your extensive experience pursuing and focusing upon corruption on the front lines and in the field for so long in such high level international roles and senior positions, as well as helping large international organizations address the risks of corruption, you bring unusual experience and insight into this that most don’t have. How have your experiences honed your skills as far as helping companies avoid results like we see so often today, in such cases like FIFA, Hewlett-Packard, Alcoa, and even the financial institutions, BNP, Commerzbank and HSBC.
Well, Richard, I have been very fortunate not only to be able to see corruption at work firsthand, but also help address it in some of the world’s largest and most important international institutions and companies. I do think that in order to help a company, you need to truly understand how corruption works, how it operates within a culture, how middlemen work and succeed, and how officials in the area, region or country think and act. Every place is different. You also need to know the personalities and the important enforcement officials in these locations, and what they are focused on. Just drafting an anti- corruption policy and re-arranging reporting lines in your compliance department at headquarters is not going to save you. One needs to be proactive, and also be honest about the risks and what you are facing. There are right and wrong ways to attempt to minimize risks, and there are also more and less prudent ways to address the risks. There are also the correct and incorrect ways to respond to a corruption problem, an investigation and a whistle-blower complaint.
This precise point is borne out in the FIFA case with Nike. The Wall Street Journal published a piece on June 5, 2015 (link here) about how Nike’s lack of familiarity with Brazil and how the contract process works there, got them into trouble and involved in the FIFA scandal. According to the WSJ, the fact that they were rather newcomers to the Brazil market, allowed middlemen to seep into the process, unbeknownst to them. All companies need sound guidance when venturing into unfamiliar or unchartered territory.
Thanks again Bob. It is a pleasure to be on the “same side of the table” with you! If someone would like to contact you, how might they engage?
Thank you Richard. I can be reached at rappleton@daypitney.com, or 212-297-2404. I appreciate your efforts and interest in my views. See you on the big screen Thursday!