Monthly Archives: April 2015

Compliance: It Starts With A Village

Compliance: It Starts With A Village

A few weeks ago I had Mike Kenealy, COO of Insiders Integrity (here is their new website) engage in a Q and A on “Just ‘Say No’ to Bribery but Prepare First. A Front Line Story,” (link here). Last week, Mike shared with me a pro-bono project that he had started in the Philippines, totally at his own initiative, and I thought the story was worth sharing as an example of what can be done to shape ethics at the local level. Thus, below is Mike’s  guest post, with my thanks and appreciation.

Richard, Groupe Insiders initiated a unique pro-bono project this year as an opportunity to take a pro-active stand and make a meaningful difference in impacting transparency as well as positive changes in a high risk/low integrity country. One of Insiders’ areas of expertise is providing local whistle-blower lines to corporate clients and a key goal in this pro bono project is to apply this expertise to the public.

Several test countries were considered and the Philippines was selected.

Not only does The Republic of the Philippines well meet the high risk/low integrity criteria, the fact that English is widely spoken by its residents greatly enhanced effective and direct communications within a foreign setting. Plus, we view this program as an opportunity for us to affect positive change in a country where we and many of our clients conduct business, so it is truly a win/win for all.

In January of this year, Insiders partnered up with a Filipino nongovernmental organization that is chartered to fight corruption and crime. Together, we will be launching the first third party national anti-corruption reporting system in the second quarter of 2016.

A key goal is to be much more than a typical whistleblower line. For example, response center personnel will be trained on how best to capture as much human intelligence (“HUMINT”) as possible and thus develop a far more comprehensive response protocol as opposed to the typical gathering of basic information on a single incident.

Additional goals include providing individuals with an alternative way to anonymously report more comprehensive information on corrupt and other illegal activities to an independent third party. The project also will work to undercut the well-known and all too common retribution inflicted upon those who seek to expose abuses.

Our program will be largely staffed in country by a mix of intern students who are attending local law schools and universities as well as paid recent legal graduates.  In turn, these ambitious younger locals will receive valuable experience, including heightened awareness of how bribery and public corruption detrimentally impacts their country, and the opportunity to make a real difference.

The project has five key agenda items.

  1. Protection of Journalists. Groupe Insiders fervently believes that freedom of the press and the protection of journalists are essential to impact meaningful change. Without a free and robust press, corruption will continue to flourish. In the Philippines, however, the murder rates of journalists are among the highest in the world. As such, the project will tirelessly seek to gather actionable information in support of identifying the killers of journalists and to see that they are duly prosecuted.
  1. Promote positive change through transparency. The project will report information collected to the appropriate anti-corruption officials and other law enforcement agencies, including the Office of the Ombudsman, the DOJ, NBI & PNP. Information will also be shared with the local and national media organizations so at to better assure transparency and public awareness. Additionally, social media will be utilized to report and disseminate examples of corruption. Such use of social media as a vehicle to identify corrupt officials has worked successfully in other countries. The net outcome of these efforts will, in turn, pressure officials to duly act on credible information as opposed to continuing to do little more than sweep incidents under the rug.

The objective is not to conduct a name and shame campaign. Rather, it is to provide public awareness as well as encourage locals to participate, however modestly, in addressing the endemic corruption that is not only hampering their country’s economic development, but also their personal safety.

  1. Repatriate stolen and other ill-gotten assets. The Philippines has been looted for decades, and many people have first-hand as well as actionable knowledge that can assist in the recovery of ill-gotten assets. Many of these assets belong to the people of the Philippines and the project will seek to both locate and then help to amplify the recovery of looted assets.
  1. Gather valid data. Not only will information provided by whistleblowers be aggregated, but whatever other information on public sector fraudulent activities can be collected and then analyzed will also be recorded. In turn, such data will prove invaluable to expose problematic government offices, officials and activities. This data set will also give anti-corruption officials the real time ability to benchmark progress as well as to effectively and efficiently identify best practices to thwart future corruption.

The files will also be made available to other outside duly vetted organizations, such as Transparency International, Interpol, the OECD, think tanks, universities and the like so that they too can incorporate our findings into their own research, reporting and investigation activities. Additionally, this project will result in a road map that can be utilized by third parties to better discern where they can transact business effectively and honestly, as well as low integrity sectors to avoid. In other words, this is all actionable intelligence to everyone’s benefit, government, society and the government.

  1. Social Media Outreach. The Philippines is one of the world’s most social media connected countries. Through our social media campaign, we will seek to create virtual real time corruption awareness. The objective is a million knowledgeable and motivated followers in the Philippines, and such a level of public awareness can readily spur both needed reforms and encourage ethical practices by enhancing transparency.

Concurrently, corrupt politicians will be exposed along the way while honest and qualified candidates can enjoy a more transparent and level playing field where they historically competed against corrupt political dynasties and vote buying.

Richard, successful companies need to think outside of the box. Until corrupt officials are removed from office, bribery and corruption will be continue to represent major commercial risk, thwarting large scale development and investment projects which are desperately needed.

Simply put, good ethical practices are ultimately good business practices to everyone’s benefits. Rural areas in the Philippines need better hospitals, power generation, and infrastructure investment which western companies bring to market. Corruption impedes investment, it impedes growth. It needs to come out of the dark, and that, Richard, is what we intend to do.

It takes an entire village to create societal change and many companies forget that they are also members of that village. As you once wrote about, corruption occurs in “cocoons” and companies need to decide, are they in or out of that “cocoon of corruption.”

This project seeks to encourage change locally at the grassroots level and will then assist commercial entities which are already operating in low integrity countries as to pro-actively support efforts which impact positive local change for the common good. Thank you again Richard, it is a pleasure to join you and your community again.

Front-Line Video: An Interview With Jane Ellis

On March 13th, 2015, GRC Solutions  hosted a Round-Table discussion with compliance and legal professionals from some of the largest firms in Australia. I was invited as an Anti-Bribery, Compliance and Ethics consultant via video-conference from the US into the GRC Solutions’ offices in Sydney, Melbourne and Perth. The purpose of the event was to hear about and discuss my real-world experiences of bribery and corruption and my work now, speaking on current issues of front line anti-bribery, compliance and ethics issues.

The host, GRC Solutions (link here),  is a recognised leader in the online compliance training market in the Asia Pacific region. They have a small, tight knit team of just over twenty professionals in their offices in Sydney, Melbourne, Brisbane, Perth and Singapore. With  award winning compliance training technology, Salt Compliance, they help hundreds of companies navigate complex legal and regulatory environments and build resilient organisational cultures, providing unique accessibility and economies of scale to corporations with substantial training needs. GRC Solutions publish a broad range of legal compliance, risk management and ethics training courses designed for clients in Australia, New Zealand, Singapore, South Africa and an expanding number of jurisdictions around the world. Their training courses can be tailored for any organisation in any industry and currently caters to the finance, construction, mining, oil, healthcare and public sector industries.

My interlocutor for the Round-Table and video interview was Jane Ellis (LinkedIn profile here), Anti-Bribery, Principal of Assertia. Jane  has a wealth of experience in working with companies that want to strengthen their corporate cultures. Jane has assisted and advised companies on compliance with their obligations under competition and anti-bribery and anti-corruption laws in Australia and other countries. She has also worked closely with companies toward implementing change to their standards and values. Jane has extensive experience conducting risk assessments and due diligence, developing codes of conduct and the supporting policies and programs as well as assisting companies in the implementation of these change programs. Jane is a member of the GRC Solutions Advisory Panel.

As the Round-Table discussion was an engaging event, where I also responded to questions from attendees, Jane asked me if I would join her for a follow up interview, which is here in its entirety.

Compliance Benchmarks & Standards: A Round Table Discussion

Compliance Benchmarks & Standards: A Round Table Discussion

I recently had the opportunity to read a very interesting and engaging Round-Table Discussion in the 2-2015 Issue of the Journal of Business Compliance (Baltzer Science Publishers. Editor-in-Chief: Anthony Smith-Meyer) titled Benchmarks and Standards. As a regular contributor to the Journal, I asked the Publisher, Laurenz Baltzer, if he would allow me to make the article available to my readers and non-subscribers, and he was kind enough to grant permission, which can be done via a link here with my gratitude.

The Round-Table participants represent a well-experienced panel from a number of fields, including some familiar names from previous blog post such as Scott Killingsworth (Partner, Bryan Cave (profile here) and a member of the Journal of Business Compliance Editorial Board), as well as Alexandra Almy (Certification Manager, Ethic Intelligence), who I had the pleasure of seeing via video at the OECD Integrity Week. But please read the work for the reflections and profiles of the entire panel

As Anthony Smith-Meyer asks in his introduction, “How far can we go in meaningful guidance as to how businesses should govern themselves, take decisions and manage their risks?”

What caught my attention is how benchmarks and standards influence those at the front lines of international business who confront corruption risk in their work, as well as the compliance professionals who are tasked with supporting them to manage that risk. If benchmarks and standards that are designed to govern and chart compliance are all bringing some value, or, as Mark Compton (Partner, Mayer Brown and BC Editorial Board Member), states “Good advice is never counterproductive,” is there a point of diminishing returns? As Anthony Smith-Meyer asks “At what point does good advice become counterproductive? Or is it a case of the more the merrier?” Perhaps that dilemma is well addressed when Pinsent Masons Partner (and my interlocutor at a 2014 UK compliance symposium) Barry Vitou proclaims in a blog post of his own (link here): “If your anti-bribery policy is more than three pages, it probably won’t work.”

I think a good reflection on the debate comes from Alexandra Almy, who states, “the compliance and ethics community is indeed facing a plethora of guidance, recommendations and best practices on the issue, which can be quite understandably overwhelming.” Indeed, and if it is overwhelming to those in the C-Suite and home offices who are compliance professionals and who write these policies, how about for those at the field level, who do not have such professional backgrounds, but who are clearly tasked to grow the business? As Scott Killingsworth well states “Compliance is about influencing the behavior of individual, free willed human beings on a large scale in the face of temptation and pressure, which is a little different from, say sterilizing a knee implant.” Furthermore, Scott points to what I call the “least common denominator (LCD)” syndrome, which I have experienced in other industry standards, where a “certification-based regime may, in effect, encourage companies to do exactly the minimum necessary to achieve certification, and no more.”

So, where is the sweet spot between fatigue and the LCD? I will be uncharacteristically brief, and invite those interested to “jump ship” to the Journal of Business Compliance article and to read more! (link here).

Just “Say No” to Bribery, but Prepare First. A Front-Line Story

Just “Say No” to Bribery, but Prepare First. A Front-Line Story

Today’s Q and A is with Mike Kenealy. 

Hello Mike, and thank you for joining us for this Q and A. First, perhaps you can share with today’s readers more about your perspective and experience.

MK: Hi Richard, thank you for having me as a guest on your blog. To start, I work for Groupe Insiders, where I serve as the CCO of Insiders Integrity. We work with and advise multinational companies on how to achieve effective global anti-bribery compliance. My areas of expertise include compliance strategy, compliance program testing, complex due diligence and cross border investigation. I can be reach here via LinkedIn  here, via Twitter here and via e-mail at [email protected]

As far as my perspective, I have spent the better half of my twenty-three year career living and working in high risk and low integrity countries, so I see things from the reality of real-world operating conditions on the ground. Richard, as you well call it, the “front-line.”

Thank you Mike, so with that said, I understand that you have a front-line story about what can happen when you say “no” to bribery.

MK: Yes Richard, several years back, a multinational client was having problems due to a labor dispute at their manufacturing hub in Southeast Asia. Once in country, the client quickly outgrew its manufacturing facility. In fact, due to strong sales, the client opened a second manufacturing facility in the same country soon after their first went online. They also on-boarded many sub-contractors to help meet product demand.

When I was called in-country, the client was already in the process of building its brand new manufacturing facility in China. The client planned to halt production at their original factories in order to move their operations. After the move out, the client’s biggest sub-contractor had agreed to come in and take over the original factories; thus there would be no long term loss of local employment.

Mike, why were you called in country, and under what capacity?

MK: The company’s general counsel was concerned because the company’s CEO was alone in country. All of the expat staff was flying out due to safety concerns and the GC wanted someone with some experience to assist.

While the sub-contractor had planned to keep all of the existing trained and skilled laborers, both companies failed to notify the workers and the local community of their grand re-organization plans. As such, the local community and workers protested the move.

The day before I arrived, the client’s GC reported that they could not access their factories or corporate office, senior management was under serious threat and there were concerns of possible looting.   To worsen matters, the client did not pay their employees’ wages, a meager $2.25 per day, as scheduled. But the client’s deeper problems all stemmed from bribery.

In what respect Mike? Who was asking for the bribes and for what purpose?

MK: Richard the bribery started when the locals saw an opportunity to extort money from a foreign company. It started with permits, and then customs came with their hand out because the client operated in duty free facility that required customs officials on site. At the same time, the police joined in demanding money to provide security.

Then what happened?

MK: The client was having daily meetings with local community and religious leaders, union officials, as well as local and national government officials trying to come to resolve the situation; however their demands were truly insane. For example, at one point they were seeking a hospital, a billion dollars and cases of orange flavored Tang ©, the powdered drink mix! All of these people saw an opportunity to make money and there was nothing the client could do about it at that point in time given conditions on the ground.

Soon, the locals were looting the client’s factories. People were now living in the compounds of the client’s own facilities; they were cooking with open flames while surrounded by very highly flammable materials.

The local police demanded bribe payments in order to intervene, asking for hundreds of thousands of dollars. Within very short time, one of the client’s facilities was burnt to the ground. It was a complete loss. The second facility remained occupied by the protestors. After about a month, the remaining protestors had decided to move on, leaving the factory abandoned; however, there was still thought to recover equipment that was not carried away or completely destroyed, or so the client thought.

The client arranged for trucks and movers to go out to the facility to remove what was recoverable. The client informed the local police chief who immediately asked for $30,000 dollars to make sure that the rural jungle roads would be clear and safe. The client refused to pay.

The move was still scheduled and that night the US owner of the company, their local partner, the landowner, local attorneys, senior company management, and a member of the US Embassy all were present. Once on scene, we quickly gained access to the facility and documented the remains. After about an hour, we were informed that the police stopped the trucks on the highway and instructed them to return. The police chief soon arrived demanding money from the client. The client once again refused to pay. The chief left and soon the locals started arriving at the factory to protest.

The situation was very quickly getting out of hand. The locals were agitated and all were in fear of our lives. Soon truckloads of police started arriving. This was not a good scene.

I instructed the client’s local managers to blend into the crowd and make their way out of the area to safety; however it was impossible for us foreigners to do the same.  The local police detained the owner of the company. My self and two other Americans decided to find safety in a car; however hundreds of people soon surrounded the car and were attempting to flip it.

The crowd broke up and there was a man brandishing a handgun, demanding that we unlock the car doors.   We complied and he and another local got into the car. They informed us that they were the police and that they were taking us to our boss at the police station. The crowd parted and we were driven to a local police station.

After arriving at the police station the Chief arrived and informed us that we were in big trouble because our boss refused to pay the price he set for the trucks to be allowed access to his area. He informed us that we were going to be detained while they investigate the matter. This chief knew the matter inside and out. He was detaining us for not giving into his outrageous bribery demand.

Luckily, the US Embassy became aware of the unlawful detention because they were also detaining one of their people. After 4 days of being kept awake, with little real food or water, countless interviews with no interpreter, line-ups and yet more interviews we were taken out of the small office and put into one of the client’s company vehicles. Note, the local police had seized 3 brand new SUV’s which they were now using as their own. We drove for about two hours and were not told where we were going. The police officers in the cars were just smiling and giggling the entire trip.

So, what happened?

MK: We finally arrive a notorious Penitentiary. This was not a welcome sight. Soon we were ordered out of the cars and made to walk like ducks while being hit with wooded sticks. We were led to a room were the police robbed us of all our valuables, including cash, jewelry, cellphones and shoes.

We were forced to sit in a squatting position in the hot Asian morning sun with 88 other prisoners waiting to be processed into the penitentiary. The prison was built over a century ago to house 830 people. At the time, the prison had over 4000 inmates. Prison conditions were deplorable, it was over populated and men were forced to sleep on top of each other.   Prisoners were locked down 14 hours a day and without access to toilets or running water. Dead bodies were getting carried out by hand, no stretchers, daily.

Fortunately, the US Embassy found out where they had taken us and arrived on scene that afternoon demanding our safety. The prison warden called us into his office. He explained that he knew why we were here and that we had no charges against us. The warden assured us that If we played by the rules, everything would work out and that he would make sure that we remained safe.

Over the next month, US Embassy and Military Officials, corporate lawyers, outside counsel, etc., visited us and were working towards our immediate release. The US Embassy called our situation a kidnapping and assured us that they were doing everything in their power to get us out. Unfortunately, the police chief held all of the power. Making things more problematic, the Chief’s brother was an even more powerful three star Police General and together they now wanted to get paid.

After 31 days locked up in a foreign hellhole, we were finally released. It took a full year before the police returned the clients company vehicles; all were junk and had an additional 100k miles on them.

So, Mike, there can be some serious consequences to refusing to pay bribes.

MK: Without question, Richard. Simply saying no, the compliance “solution” is not always easy, especially when there is much stake, including liberty and well being.

In retrospect, if the client, in this situation, had a much better understanding of the local culture and had communicated its intentions with its local employees early on this entire disaster could have been avoided. It was the lack of communication from the company that allowed the corrupt locals officials to both manipulate and incite my client’s local work force. Given that my client had acted ethically as well as responsibly by planning to insure that employees remained employed when the sub-contractor took over the factories, this was both an unfortunate and avoidable chain of events.

As for other companies operating overseas, the key lesson to be learned is that corrupt officials are often little more than thugs who do not take no for an answer. Going into these situations with a “rational” mind-set, and not considering the low-integrity culture beforehand, presents peril to all parties.

As such, companies operating in high risk/low integrity countries thus need have a highly attenuated as well as nuanced understanding of the local culture, anticipate that bribes will be demanded and thus must educate their employees what to do in the face of shakedowns and – most importantly – report all incidents of attempted bribery to local anti-corruption officials. In some cases, organizations might have to consider the strategic and economic implications of not entering the market at all due to corruption risk and physical security, which is now a dynamic that is becoming more prevalent.

Thank you Mike, a very cautionary tale but one which I hope other organizations will consider. As you have demonstrated, saying “no” to bribery, while a compliance “no brainer” requires much more than one word to execute. 

Photo courtesy of Mike Kenealy. Not to be distributed without permission.