FCPA Compliance and Ethics Blog

October 23, 2014

Hammer Films’ Frankenstein and the Monster of Corruption in Brazil

Filed under: Best Practices,Corruption in Brazil,Frankenstein,Hammer Films — tfoxlaw @ 7:37 pm

Peter Cushing as Dr. FrankensteinToday we celebrate the initial two Hammer Films Frankenstein entries into the horror pantheon. These classic films, from the 1950s, were the The Curse of Frankenstein and The Revenge of Frankenstein. In both films Peter Cushing played the monster’s creator, Dr. Frankenstein. In the first film Christopher Lee played the monster and Michael Gwynn was cast in the role for the second movie, but he was in a purely human form, not the disfigured creature that Lee played. In both films, Cushing played the Baron as inherently evil, dismembering medical patients and even murdering people to obtain body parts for his experiments. The Baron did not have the internal conflict that E.E. Clive brought to the role in the Universal classics Frankenstein and Bride of Frankenstein. Further, neither Lee nor Gwynn brought the pathos to the role of the monster that Boris Karloff was able to imbue into the character. Notwithstanding these criticisms, I hardily recommend both films for your October FrightFest viewing pleasure.

I thought about the nefariousness that Cushing brought to the role of Dr. Frankenstein when I read a recent article about the ongoing bribery and corruption scandal in Brazil and how it may affect the country’s Presidential election. These issues were explored in a piece in the New York Times (NYT), entitled “Scandal Over Brazilian Oil Company Adds Turmoil to the Presidential Race”, by Simon Romero. In the article, Romero details the bribery scandal involving a former official of Petrobras, the Brazilian national oil company, named Paulo Roberto Costa. Mr. Costa was the person who oversaw the company’s refining operations. He has admitted to having engaged in the receipt of bribes for at least a 10 year period “equivalent to 3 percent of the value of the deals from the Brazilian construction companies that obtained the contracts” to build refineries. This amounted to literally millions being “stashed in bank accounts in Switzerland and the Cayman Islands.”

Costa who “was first arrested in March as part of a money laundering investigation by the federal police, has already agreed to surrender the $25 million fortune he hid in offshore accounts, his yacht and his luxury car, in addition to paying a fine of more than $2 million.” He “inflated budgets for new projects” by 3% and then had that amount kicked back to him as bribes. Costa’s allegations were “corroborated Mr. Costa’s claims through an associate, Alberto Youssef, a black-market money dealer who testified that he helped launder funds in the scheme. Mr. Youssef, who has also accepted a plea deal, testified that more than a dozen of Brazil’s largest construction companies had paid hefty bribes to obtain lucrative Petrobras contracts.”

The political angle comes from the following allegation by Costa, “He testified that a portion of the money was then handed to João Vaccari Neto, the treasurer of the Workers Party. Mr. Costa said that other top political allies of President Rousseff, including the leaders of both houses of Congress, Henrique Eduardo Alves and Renan Calheiros, also benefited from the kickbacks, according to a report by Veja, a Brazilian magazine.” Interestingly President Rousseff “has also effectively acknowledged the prevalence of corruption inside the executive suites of Petrobras, while denying that she had known about the kickbacks when they were taking place.” She was quoted for the following, ““If anything happened, and everything indicates that it did, I can guarantee that all of the bleeding that eventually may have existed has been stanched,” Ms. Rousseff told the newspaper O Estado de S. Paulo in an interview.” She also went in the other direction, as “She has railed against the public disclosures of his testimony, calling them the equivalent of a “coup” aimed at thwarting her re-election bid. The judge in the case, Sergio Moro, has responded by saying that the law requires that evidence in the case be made public.”

The scandal has the potential to be devastating to the country. Romero said, “If their testimony is proven true, the oil scandal would dwarf previous corruption cases in Brazil, including a vote-buying scheme that resulted in the imprisonment of senior figures from the Workers Party in 2013. Their convictions and punishment were viewed as a precedent-setting shift in a political culture in which impunity has long prevailed.” Moreover, “the scandal has hurt the campaign of Ms. Rousseff, who has overseen Petrobras for more than a decade. As a cabinet minister and protégé of Brazil’s former president Luiz Inácio Lula da Silva, she was chairwoman of the board at Petrobras during the period when Mr. Costa said he assembled the bribery scheme within the company. She no longer sits on the board at Petrobras, but chooses its top executives.”

There are several lessons learned for the compliance practitioner. The first is the mechanism for funding the bribery scheme via overcharging. This requires vigilance and oversight from the corporate office by persons who understand the bidding process and the costs involved in any project. Another internal control should relate to the ability to pay rebates for overcharges. Yet another consideration demonstrated is that sometimes your customer can get you into corruption hot water under such laws as the Foreign Corrupt Practices Act (FCPA) or UK Bribery Act. Now that the scandal has become so public, companies doing business with Petrobras are on notice of potential issues. Not only should they consider them when doing business with Petrobras but also companies need to review and possibly revisit their internal controls over these issues.

Unfortunately, the corruption issue may prove more endemic for Brazil and Petrobras. Near the end of his piece Romero quotes Sérgio Lazzarini, an economist at Insper, a São Paulo business school, who has written widely on Brazil’s state capitalism. Lazzarini noted, “It’s Corruption 101: You get control of a state enterprise and then channel resources from it to the parties in your coalition,” and “The situation is endemic, unlikely to change regardless of which president is in power.” Like the evil of Dr. Frankenstein in the Hammer Films, that may be the most lasting commentary on the scandal.

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

Five Quick and Easy Ways To Sabotage Your Compliance Training

Chris BauerEd. Note-today we have a guest post from noted ethics and compliance expert, as well as steel guitar player, Chris Bauer.

Okay, you know that you need to have effective compliance training but do you really know what will actually make it effective? The reality is that far too many compliance training program fail on multiple counts. With compliance as critical as it is, that is unacceptable. Thankfully, there are a few areas which, if attended to well, can correct many of the most-frequently seen problems with the development and execution of these programs.

Here are five of the areas I see getting missed time after time in compliance training programs.

Do you actually have a solid, working definition of what compliance is? I see ethics, compliance, and accountability as being ‘cross-defined’ all the time. Do they inter-relate? Absolutely and it’s even a great idea to inter-relate them in your training. However, until you are clear about what you mean by all three of those terms, your training will leave employees confused and confusion is never good for compliance training…

To Do – Find or create definitions for all three of these terms that are clear, concise and, above all, practical. The moment these terms become hazy or academic you have already lost too many of your employees’ ability to build your ideas into their minute-to-minute, day-to-day practices. Also, be sure to use language that fits the culture of your organization. Just because something sounds good in another organization – or another part of your organization – doesn’t mean that it will work for anyone, let alone everyone, in every corner of your company. This is one of the many reasons that ‘one size fits all’ training is rarely effective. Different parts of your organization are likely to need things said and demonstrated in different ways. You have the choice; you can whine about the inconvenience of that or go about creating a great compliance training program.

Is your training practical? An awful lot of compliance training is little more than a coma-inducing parade of Powerpoint slides with the rules, regulations, and, perhaps, a few key updates. Is that information critical? Perhaps so. However, for starters be sure that the information really is critical before overwhelming employees with so much information that they can’t actually retain it.

To Do – Always build in opportunities for employees to ask how your training really applies to what they do on the job. If they can’t fully see the behaviors in which they are and are not to engage – or if they don’t believe those behaviors are possible in their circumstances – your training has missed the mark. Also, remember that employees are unlikely to tell you spontaneously that they don’t think they can do what you’re asking of them. Be active in seeking out feedback on not only their level of understanding of the material but, as importantly, their confidence that they can do what you’re asking of them. If they don’t think they can do it, it is your job to help them figure out how to deal with any roadblocks – real or perceived – they might see.

Are you simply transferring information or are you providing employees with solid ideas and tools to put the rules and regulations into practice? If you want a culture where compliance is topmost in your employees’ minds, they had better be able to first mentally retain and then apply the mandated rules and regulations. If you aren’t helping them apply what you’re telling them, it will have been an entirely academic exercise.

To Do – Here again, everything you train on needs to have clear, ‘do-able’ behaviors attached. Employees have to know exactly what they need to be doing to bring your compliance program to life. It’s not enough for you to believe that they ought to be able to figure it out; they really need to know and they need to hear it from you. (Mind you, they may also have ideas you haven’t thought of yet. Great! Just don’t pretend it isn’t your job to help them figure it out.)

Are you creating information overload? True, there’s a lot out there that your employees will need to know about compliance. However, are you giving so much in each sitting that it simply can’t be retained? Again, if they can’t retain the information – or, at least, find it easily – they certainly can’t put it into practice. Consider providing training in smaller, on-going chunks. Less time-efficient? Maybe. However, that will more than pay off in having your employees actually recall and apply what they’ve been trained on.

To Do – Remember that smaller chunks of information ‘stick’ better. Further, information that clearly has practical applications does the same. Work to avoid simply smothering employees with regulatory and oversight information. Make it real for them by providing it in digestible, easily recalled, practical chunks. Here again, whine if you like about this being inconvenient but the facts remain; you need to attend to this if you really want your compliance training to be effective.

Are you making compliance a tool for your employees’ personal success? I see a lot of organizations doing a fine job of conveying to employees how their bottom line can be wildly, adversely affected by compliance problems. However, they fail to show employees how compliance is important to them personally. Sure, we all want our employees to put our organization first but, really, is that realistic? If your goal is to motivate employees to attend to compliance – and that had better be one of your goals – you’ll get far more bang for your buck if you can help them see how their lives and careers will be easier/better if they keep their mind on compliance.

To Do – Without your employees, your organization would quite literally be nothing. They are already contributing all day, every day, to the success of your organization. Make compliance training – along with every other training your provide – a tool that they can use for their personal success as well. Maybe that success has to do with advancement, maybe it has to do with some kind of incentive. At the rock bottom, it has to do with them keeping their job. The point is that there will always be ways you can think of to help them see that a focus on compliance is as much for their personal benefit as the company’s. Do your homework and figure out what those motivations are for your employees. It will not only make your training a whole lot more effective, it’s a nice thing to help your employees be successful, yes?

It is all-too-easy to overlook all five of the above requirements for effective compliance training. In fact, by ignoring them, it will be far easier for you to create your training program; just throw a bunch of regulatory requirements onto a Powerpoint presentation or webinar and slam through it for as long as it takes. You will, in fact, be telling your employees what they are required to hear. If, however, your goal is to not sabotage your training and actually get employees to take action and create a culture where compliance is top-of-mind, ignore any of the above five concerns at your own risk.

Christopher Bauer is an expert on creating cultures of ethics, compliance, and accountability. Information on his programs as well as his Trust Foundry blog can be found at www.ChristopherBauer.com. Information specific to his programs on professional ethics can be found at www.BauerEthicsSeminars.com. In addition to speaking, training, and consulting on creating cultures ethics, compliance, and accountability, he publishes a Weekly Ethics Thought seen by thousands or readers worldwide. Free subscriptions are available by visiting either of his websites.

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