By Luke Balleny
A critical look at some of the good governance stories from the past week:
Under U.S. anti-bribery law the Foreign Corrupt Practices Act (FCPA), if one company acquires another company that has been paying bribes, the acquiring company becomes liable for those bribes. Consequently, a major growth area for law firms is pre-acquisition anti-bribery due diligence. Unfortunately for the U.S. water valve manufacturer Watts Water, their law firm gave them the all clear to buy a Chinese firm that was later found to have been paying bribes. As a result, Watts Water had to pay $3.7 million to resolve the bribery case and they are now suing their law firm. Should Watts Water have been forced to pay? Watts Water went to a lot of effort and expense to ensure the company that they were buying was clean but still came up short. No one is questioning the integrity of Watts Water but they still had to pay multi-million dollar amount.
This is a story which you’d struggle to make up. But bizarrely, the accusations against Nigerian lawmaker Farouk Lawan may be made up. While it’s not completely unheard of for graft busters to be accused of taking bribes, in Nigeria, it’s also not unheard of for people to accuse graft busters of being corrupt in order to undermine their anti-corruption campaign.
While official fines for corporate bribery continue to rise, this story illustrates the fact that the fines and disgorgements imposed upon a company are only half the story. The U.S. anti-bribery law, the Foreign Corrupt Practices Act, doesn’t allow private actions so instead shareholders have resorted to suing directors for breaches of their fiduciary duty - in the case of Wal-Mart, for allegedly ignoring and/or covering up bribery claims. But the pain doesn’t end there. Companies accused of bribery are often forced to spend millions of dollars (or in Siemens’ case $1.2 billion) in legal and accountancy fees to scour their own books and ensure that the bribe is an isolated case.
Akis Tsohatzopoulos, a once-powerful Greek politician arrested on charges of taking bribes and evading taxes has become a symbol of Greek corruption after his second wife is alleged to have spent $25,000 on curtain rods. Who knew that it was even possible to spend that much money on curtain rods? What were the rods made of and how many did she buy?
While corruption in Mexico’s police force is known to be endemic, rarely are the police caught so red handed. Unlike many CCTV recordings, the video that accompanies this article is remarkably clear. The police make no attempt to disguise their faces and the theft of the victims’ belongings only adds insult to injury.