FCPA Compliance and Ethics Blog

February 10, 2014

The Simon-Sting Tour and New Information in Your Compliance Program

sting-paulsimon1This past weekend I saw the first show in a multi-city tour by Sting and Paul Simon. I have never been a big Sting or Police fan but I am a huge Paul Simon fan, in all his musical incarnations. As it was their first show, there was no set list to review or other information that might have told me how they were going to try and make it work. But I am happy to report that it did work. They played a 33 song set over 2.5 hours; some solo with their own bands and some together with their combined bands and one very incredible acoustic duet of Phil Everly’s When Will I Be Loved as the 2nd encore. It was certainly a night to remember.

I thought about this combination of two very disparate musical talents and their respective use of new information as I read a couple of newspaper articles over the weekend. The first was in the Saturday New York Times (NYT) by Suzanne Daley, entitled “So Many Bribes A Greek Official Can’t Recall Them All, in which she reported on statements made by a former deputy in the Greek Defense Ministry, Antonis Kantas, and his involvement in the receipt of bribes while in the employ of the Greek government. At the Ministry, he “was able to amass nearly $19 million in just five years on the job.” These bribes were for items and projects not needed at all by the Greek military. It included the $2.3bn purchase of tanks for which no ammo was every purchased; $4bn for “noisy submarines that are not yet finished and sit today virtually abandoned in a shipyard outside Athens”; and an unidentified amount for “fighter planes without electronic guidance systems”.

In an orgy of un-needed spending, it was estimated that “Greece spent as much as $68 billion on weaponry” from 1996 to 2006 and that most of it was on borrowed money from countries and banks outside Greece. Tasos Tellloglou, an investigative reporter for the Greek daily newspaper Kathimerini, who has written extensively on the subject, estimated that “more than $2.7bn was spent on bribes” to secure this amount of spending. Rather amazingly, “Mr. Kantas admitted to taking bribes over 12 contracts, six with German companies, and two each with French, Swedish and Russian arms dealers. Some companies Mr. Kantas named have been convicted in other cases of bribery in the past. But others maintain that they have done nothing wrong. The makers of the tanks Greece bought, Krauss-Maffei Wegmann, say they are looking into the matter.” I am sure the US Department of Justice (DOJ) will be looking into the matter if they are not already doing so.

Daley’s article points towards the roll of all parties to stop bribery and corruption. It is the responsibility of the Greek government to ferret out such criminal actions but there is also a role for the home countries of the companies where the bribe payors are found. If they are in Germany, the UK or US and are subject to the Bribery Act or Foreign Corrupt Practices Act (FCPA) those countries need to bring down the full force of the law(s). But Daley’s article also makes clear the non-governmental actors; the businesses involved have a role. Companies must follow anti-bribery and anti-corruption laws and embed policies and procedures to stop such illegal conduct.

For the compliance practitioner, there is also a very clear message. If your company has been doing business in Greece over the past 10 years, I would suggest that you take a close look to see if there are any red flags present. You may want to audit your transactions. Given the information found in Daley’s articles, I would also suggest that you review all of your third parties and their billings and expenditures on your company’s behalf. Make sure that you know who is the ultimate beneficial owner of your third parties. You might also want to look at where payments were made and even if they were made in Greece you might want to review your payments into the Greek banking system, as it appears that Greek bankers may well have been part of the bribery and corruption problem as well.

The second article was in also in the NYT by James B. Stewart, entitled “Past Fictions, a Lack of Trust and No Deal in SAC Case”, and was about the recently convicted former SAC Capital Advisors trader Mathew Martoma. The article discussed some of the details of the trial and the evidence against Martoma. But the part I found most interesting about Martoma was that he had been expelled by Harvard Law School for altering his transcript and then sent it out as part of his application to 23 judicial clerkships. When this was discovered Martoma, acknowledging that he had altered his transcript as a prank, blamed mailing it out on his brother at his parents’ home. Martoma then actively fought disciplinary proceeding against him with other evidence, which was later discovered to be altered. Martoma presented such an unbelievable defense at his disciplinary hearing that even Stewart asked the question about his defense that “Does any of this even rise to the level of ‘the dog at my homework’?”

The final report of the disciplinary board said “Mr. Martoma’s account. His “manner before the board did not lend credence to his account.” It added, “The board was impressed also by the cumulation of improbable occurrences in his account, which made it more difficult to accept his explanation of individual events.” Further, the disciplinary board “concluded that Mr. Martoma “falsified his transcript, interviewed with judges under false pretenses, and gave untruthful answers to administrators at the Law School.”” Apparently this information was not sufficient for SAC Capital Advisors to see any red flags regarding his hiring.

The Martoma background employment checks, or rather the apparent lack thereof is a cautionary tale for any compliance practitioner. Most companies have a basic criminal background check and credit check. Some even have the ‘pee-in-a-cup check.’ Initially, I would note that the credit check is about the most useless thing imaginable for an adequate employment check. But beyond that, if an employee is moving up into the ranks of upper or senior management or your company is hiring directly into such a level; you need to perform an adequate background check. While I cannot tell you if Stephen Glass is sufficiently reformed to receive a license to practice law; I can certainly say that anyone who engages in the actions in which Martoma did at Harvard Law School, is not someone who you can trust to do business ethically in compliance with an anti-corruption law such as the FCPA.

If you have the chance to see the Sting-Simon tour do so. If not try and think about the merging of their disparate styles through the use of new information and what it might mean for your compliance program.

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2014

1 Comment »

  1. Just saw your site about Greece and some of the ‘issues’ that may unfold, well, I came here 5 years ago, worked for an NGO, refused to commit fraud and nearly ended up in prison for exposing them, if it’s not of interest then maybe a sympathetic read for your troubles!

    15 years of state sponsored corruption have been widespread within the Health sector alone, recently whilst exposing the CDC and the Greek ACTUP has shown an unbelievable of malpractice, corruption and fraud whereby staff employed by the state, run their own NGO’s whereby the board of Directors illegally pretend to be Doctors and coordinate non legal and unsafe projects whereby they gain access to the highly sensitive medical data of HIV & Aids patients for their own gain, when confronted by this 5 years ago the CDC offered the President an extended contract to secure his job and then proceeded to try and cover this up. Read all about it for an insight into what really is going on :


    Comment by www.esadude.com — February 20, 2014 @ 4:33 pm | Reply

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