First published in Business Times on 17 September, 2014
American FCPA blogger and speaker shares his experience in dealing with current anti-bribery issues and challenges
By Mak Yuen Teen
‘The Boards and senior management need to start looking at anti-bribery and anti-corruption (ABAC) starting with an analysis of business strategy, growth forecasts and compensation plans.’
– Richard Bistrong
I FIRST got to know Richard Bistrong when he contacted me after my commentary in The Business Times on the GlaxoSmithKline (GSK) bribery scandal (“Plausible deniability and graft by MNCs”, BT, May 21, 2014), in which I had quoted from his blog.
Richard had served time in prison after a conviction for bribery when he was working for multinationals and also cooperated with the authorities in covert and overt operations as part of his plea bargain.
In July, I met Richard, who lives in New York, over dinner in Midtown Manhattan while I was there on a business trip. Over the course of our conversation, it was clear that companies and individuals can learn a lot from Richard about how and why bribery happens when doing business overseas and what can be done to minimise such risks. We agreed that I would do an interview with him via email.
On Oct 28, I will be moderating a roundtable discussion on “Bribery and Corruption in Foreign Jurisdictions”, which is part of the SIAS 5th Corporate Governance Week and Richard will be participating via live video feed to share his views.
Prof Mak: Richard, thank you for agreeing to share your experience. Can you first tell us a little bit about yourself?
Richard: First, Professor Mak, I wanted to thank you and The Business Times for allowing me to address your community through this interview. I grew up in the New York metropolitan area, received my BA (Foreign Affairs) from the University of Rochester, which included studies at the Institute for European Studies in Vienna, Austria.
I then attended the University of Virginia where I received my MA in International Relations. Career-wise, I literally “grew up” in the Defence and Law Enforcement supply industry, through a fourth-generation family business, started by my great-grandfather in 1888, and which was sold in 1992.
I then worked for a public safety uniform manufacturer as the Director of Retail Operations, and in 1995 I took a sales Vice President role in what was a small manufacturer of bullet-resistant armour, which at the time was in bankruptcy. In 1998, at the same corporation, I was appointed Vice President of International Sales. By then, the company had emerged from bankruptcy, and was now a large, successful, and publicly traded multi-national company that distributed and manufactured military and law enforcement products on a global basis.
From 1998 to 2007, I traveled overseas approximately 250 days a year, and was posted to live and work from the UK twice during that period. So, I was literally traveling the world most of the time and was rarely “off the road”. It was also during that time when I first confronted international bribery in my work as an international sales executive.
Prof Mak: What were you charged with? What penalties were imposed on you? Tell us a little bit about your cooperation with the authorities.
Richard: In early 2007, I was terminated by my prior employer and shortly thereafter, I was contacted by the Justice Department through my attorney and given the opportunity to proffer. I then started cooperating with US Federal Law Enforcement. My cooperation lasted five years. This cooperation was part of a Plea Bargain with the United States Department of Justice, whereby I pleaded guilty to one count of conspiracy, including violating the anti-bribery and books and records provisions of the FCPA (Foreign Corrupt Practices Act).
In addition, in exchange for cooperating with a number of UK enforcement agencies, both covert and overt, I was given “Immunity from Prosecution” by the UK Revenue and Customs Prosecutions Office, which covered issues of illegal conduct that took place while I was residing and working in the UK.
During that period of covert cooperation, I assisted those agencies in understanding how bribery and other export violations occurred and operated in international sales. My understanding is that my covert cooperation was one of the longest in terms of time and scope, for a white-collar criminal investigation.
In the summer of 2012, I was sentenced as part of my US Plea Bargain, and served fourteen and a half months at a Federal Prison Camp, and released in December 2013.
Prof Mak: It sometimes seems that individuals almost slip into breaking the law without really being conscious of it. Can you share with us how it happened in your case? In other words, did you intentionally break the law or was there a way you rationalised the activities?
Richard: I totally rationalised it. But to be clear, I bribed, I knew it was illegal, and I wasn’t thinking at all about the consequences. And I just want to reaffirm, I am in no way trying to justify what was illegal conduct.
Rationalising bribery, in my case, was not a struggle. Many of the illegal conversations I had took place far away from the home office and corporate management. In fact, during my travels, when the talk turned to corruption, the only people present were myself and the agent or intermediary. Thus, given my remote location, the lack of “witnesses”, and the fact that the company was pleased with my personal and divisional sales performance, I felt that there was little chance I would ever get caught.
These circumstances are common in international business, and that is a part of the challenge for those at the front line of international commerce and the compliance professionals who are tasked with helping them to be both successful and compliant. Much of the conduct, like my own, is covered with secrecy and takes place at remote locales with little or no oversight.
I realise that for those responsible for anti-bribery compliance, the choice between corruption and compliance is as simple as “walk away”. But in reality those choices become more difficult when front line international business groups are being compensated with lucrative compensation plans, as is often the case.
When those incentive plans are indexed to personal performance in corrupt regions, as opposed to group or divisional performance, the anti-bribery message can get distorted, diluted, or in the worst case, discarded, as those on the front line now might think of compensation and compliance as a “zero sum” game. It is a dangerous situation for all involved when someone starts to consider compliance as “bonus prevention” and starts pondering, “what does management really want, compliance or sales?”
Let us remember, public multinational companies don’t as a rule tolerate sales decreases, and in the international arena, where sales in many regions are highly centralised and unstable (along with poorly trained procurement personnel and confusing procurement procedures), with a “win-big, lose-big” impact, the pressure to perform and deliver on a quarterly basis is intense. Add to that the illusion that bribery has no victims, or worse, that it is a “win-win”, to those at the front lines of international business, myself included (at the time), making the decision to rationalise corrupt behaviour may not be as difficult or as black and white as one might think.
Prof Mak: The recent GSK case and other cases involving multinationals seem to suggest that bribery and corruption is still common today? Do you think things have got better?
Richard: That is an interesting and complicated question. I do think that bribery and corruption are being better addressed through anti-bribery corporate compliance programmes, but my belief is that many of the forces that shape what I call the “perfect storm of rationalising bribery” remain in effect. In other words, where compliance becomes only a “set of rules and procedures”, I think the impact of an anti-bribery programme is limited. Even the Chief Medical Officer of GSK discussed in an interview with Reuters, how business practices need to be reviewed and that GSK will need to consider building “a new sales model designed to eliminate sharp marketing practices”.
I think that is the kind of thinking, where an organisation realises that the business strategy itself might be a red flag for bribery, that a true anti-bribery ethic and aversion to corruption can start to take effect among front line personnel. When that happens, I think there is significant and sustainable progress.
In addition, I think in the context of how compensation impacts compliance, human resources might want to take a greater role in looking at the bonus plans in territories which have a reputation for corruption. The challenge of compensation and compliance does not call for a “one size fits all” model.
While I realise that HR has a great voice in most compliance programmes, including training, documentation, etc, I have not read much about bringing HR into the discussion of individual and group compensation planning with a focus on territorial reputation.
A businessperson who has regional responsibility in Scandinavia, as an example, should not have the same compensation bonus structure as someone who is responsible for South America.
Again, from my perspective, taking a look under the hood of bonus plans for international personnel is a critical link. Thus, I think HR has to ask, are the ends of achieving bonus in line with the means of compliant behavior in achieving those goals.
Prof Mak: In many cases where bribery and corruption is involved, senior management and the board would often say that they did not know what was happening and that employees ought to know that they have zero tolerance for corruption. Do you think senior management and the board need to take more responsibility for what goes on in cases involving bribery and corruption?
Richard: I wonder how many companies, including C-Suite personnel as well as those who serve on the relevant Board committees, are looking at the business strategy itself as a potential red flag of corruption. I call attention to business strategies and growth forecasts in regions that have reputations for corruption, and ask if anyone is asking when those targets are achieved – “how did we get there?”
Or, is it all high-fives? How many times can a company, as we have recently seen in the pharmaceutical industry, keep saying, “it’s all about the rogue employees” without finally looking inward to analyse potential inherent red flags buried within corporate business strategies and regional growth plans.
Thus, from my perspective, the Boards and senior management need to start looking at anti-bribery and anti-corruption (ABAC) starting with an analysis of business strategy, growth forecasts and compensation plans.
They need to ask if all those programmes are aligned with their ABAC programmes, and to unwind those plans where contradictions exist, and where they are leaving it to front line employees to decide “what does management really want, compliance or sales?”
For a Board or senior management to say “they didn’t know”, and to default to the “rogue employee” communication plan, might work or be appropriate for an individual enforcement issue, but does it really address potential systemic inconsistencies within the business as a standalone ABAC issue?
In my opinion, international front line teams need compliance tools for how to manage the risk challenges in the field beyond the compliance paradigm of “don’t do it”. The dynamics of international sales are complicated, and they have regional peculiarities. The people dealing with those issues in their territories need solutions that address and incorporate those challenges, both globally and regionally.
Prof. Mak: What are you doing now?
Richard: Well, that is evolving. I have had a broad and extensive career as an international sales executive along with an extended term as a law enforcement cooperator for multiple governments, including the US and UK. Accordingly, I currently view my blog, website (www.richardbistrong.com) and speaking invitations as vehicles to engage with compliance and business professionals on current anti-bribery issues and challenges.
I do this by sharing my own perspectives and inviting that of others. I hope that by welcoming outside comment and discussion that I might ascertain if the sum of my experience brings any value by complementing the current level of anti-bribery debate and practice.
Furthermore, I look at this as a long-term process. I am employed in my community, working on a weekly basis to satisfy and exceed my court ordered community service, so I see this very much as an effort to find a long term voice in the compliance community.
What really interests me is how I can help organisations, academia and industry groups with current and real anti-bribery challenges, especially as they impact those operating in overseas markets.
Prof Mak: Thanks very much, Richard. See you in October.
Richard: Thank you and I look forward to seeing you “on the video” at the SIAS 5th Corporate Governance Week in October!
The writer is associate professor of accounting at the NUS Business School where he teaches corporate governance and ethics
