A Presentation to Compliance Professionals: Rationalization Not Justification

On Thursday June 12, 2014, I was asked by Mike Kenealy (FCPA Integrity COO) & Craig Chadwick (Global Secure Summit) to address a group of Compliance Professionals from the financial sector in NYC. In my presentation, I shared my experiences from the field of international sales, including encountering foreign bribery, cooperation, and finally, my perspective on current compliance challenges. A group of the attendees remained after the presentation, where we discussed the challenges of  aligning strategy, compensation & compliance, so that they all speak to the same message of anti-bribery compliance.  That discussion was in the context of how and why compliance efforts fail at the field, especially in the environment of a public company, where profit and sales growth over the short and long term are critical for return on investment and shareholder value. 

I was very much impressed as to the questions asked by the attendees who remained. Clearly, they understood the challenges that their international front line business groups face, and they were very much focused on "what can we do to help."  Furthermore, as the conversation progressed, they acknowledged how incentives and sales forecasts could actually contradict or distort the messages of compliance and ethics, especially from the perspective of those operating in high risk international  environments.  We talked about the importance of listening to those in the field and how, as I shared, "the more disturbing those conversations might be, the better they are progressing."  They clearly grasped how front line international business people are the most important element in executing an anti-bribery and corruption program, and how it is the responsibility of compliance professionals to give them the tools of success. 

Rationalization is not justification

I could see from the feedback that I have received since the presentation, that there was indeed value to the practitioners in hearing a voice from the field of international sales, as I spent a great deal of time explaining my own perfect storm of "rationalizing bribery." There was more than one question asked, as to "what were you thinking," and I believe that the components of my "rationalization" model helped to break that down in a way which was understandable, relevant and engaging. There was also a great deal of discourse on my discussion of corrupt third parties and how it is often difficult to detect their "circle of lies" when it comes to investigations and vetting. 

But, as I shared at the start of my presentation, almost as a preamble, rationalization is not justification. I knew what I was doing was wrong,  and accepted responsibility  for my conduct, including the loss of liberty.  Now, the question remains, does that experience bring value to other individuals and organizations in their own  compliance challenges? Based on the dialog after the presentation, it certainly did on June 12th, and if it continues to  helps others, I remain open to future opportunities.

Thank you again to FCPA Integrity and GSS for the invitation.

Rationalizing Bribery: Corruption Has No Witness.

This is part three of my four part series on how I "Rationalized Bribery."  It addresses the reality that there are usually no witnesses to overseas discussions involving an actual or potentially corrupt transaction.

As tweeted by Ben DiPietro, Wall Street Journal Reporter,  @BenDiPietro1 during my interview with Wall Street Journal Reporter Chris Matthews at the April 23, 2014 Dow Jones Global Compliance Symposium (DJGCS):

"bistrong: usually no witnesses when sales person deals with third party vendors and talk turns to bribes."

For the most part, front line sales, marketing and business development personnel travel alone to their overseas territories.  Agent meetings (maybe including a public official) also usually occur without anyone else present. 

You Get Close, You Get Comfortable

Adding to "lack of witnesses" dynamic is the relationship which develops between an overseas employee and in country intermediaries.

The tradition and cultures of many countries leads to a great deal of social interaction outside of work hours.  My own relationships with agents developed and grew over the course of ten years.  We had obligatory evening meals, often in the home of an agent.  Over time, I even took vacations with agents and their families.  Some agents insisted I not stay in a hotel, but as a guest in their home. We became friends and as these relationships grew so did the level of comfort in the conversations.

During the course of my sales travels, casual discussions led (on a number of occasions) to the agents explaining to me, in barely masked language, that they were paying bribes to win contracts.  One of the first times this happened to me, I was on vacation with an agent I had known for years.  I had no reason to suspect he was corrupt, but on this vacation, he explained to me how he was "paying tolls" to win contracts.  

As I shared at the Dow Jones Symposium, the agent had presented me with a dilemma.  I have won contracts with this agent in the past.  I am hoping to secure future contracts.  And now he tells me about paying bribes (I didn't need to clarification as to the "wink and nod" language).

For Compliance Professionals, this is a simple "call home" moment.  Withdraw from all transactions with this agent, and inform Legal and Compliance.  Simple, right?  Not necessarily for sales or marketing employees, as the thought process can be far more complicated.  This is where the rationalization process can take hold and dictate decision-making.

For a sales, country manager, or marketing person, it is more than just walking away from a transaction, it means walking away from the entire third party relationship.  For these employees, there are not just short term financial consequences, but also the loss of all future deals, sometimes with regional implications.

As an example, see my post on Cisco and Russia (see post), where once the Cisco employee allegedly heard talk among agents about paying bribes, he was reported to have walked out of the room, not to report the conversation or undo the deal, but just to maintain deniability.

Add in Procurement Instability and Financial Incentives to Create the Perfect Storm.


As Ben DiPietro @BenDiPietro  tweeted during the DJGCS:

"bistrong: to pay a bribe or sever a relationship is more complicated decision than compliance people think."

In other words, when the employee hears talk of corruption, he or she might rationalize going forward due to vague language and lack of witnesses.  Add in procurement instability (see prior post) and incentive compensation (see prior post) to create a Perfect Storm for a bad decision – "I am not going to see this tender come back for quite some time.  If I lose it, a large part of my forecast and bonus projection will be gone, so why make trouble?"

As Maryam Hussain states in Corporate Fraud, The Human Factor, "it is often the case that a narrowly defined objective – an ever growing sales target to achieve bonus, a consistent progression of earnings per share to maintain an upward trending share price – takes precedence over everything else and can lead to employees stepping over the line to achieve the goals that have been set." Furthermore, the impact of not having a witness to these events can have an tremendous impact on that "stepping over the line" moment. 

As I have shared before, if the C-Suite preaches compliance but the sales incentive package awards "winning the sale" above all else, how will that employee determine whether management wants compliance or sales?  

Private conversations between agents and corporate personnel are not the red-flags that get picked up in an audit or routine review. These red-flags are only seen and heard by the international sales, marketing and business development teams.

I invite comment to how training and compliance programs address such scenarios.  Up Next: One more element to complete the "Perfect Storm of Rationalization."

Corruption: A Lesson for Tomorrow's Professionals

Guest speaking on May 6, 2014 at Fordham University. "Contemporary Issues in Forensic Accounting." I shared with the students my reflections on international sales, both before and during cooperation, and detailed my thought process as to how I "rationalized bribery." My hope is that by sharing my perspective with tomorrow's business professionals, that they might be more aware of the obvious and not-so-obvious red-flags that might present themselves in their careers. I shared my own experience and the lessons that success built upon a corrupt foundation with corrupt behavior is no success at all.