Why anti-bribery laws help global business

A 1977 law against foreign corruption was long viewed as putting US firms at a disadvantage overseas. Perhaps its success in helping profits might convince President Trump to keep the law and enforce it.

Just a decade ago, it was common to hear complaints in the United States against a strict anti-bribery law passed in 1977. The biggest complaint was that the Foreign Corrupt Practices Act (FCPA) hurts US companies operating overseas because they lose out to foreign firms willing to pay bribes to close a deal. Even Donald Trump said in 2012 that the law was “horrible” for allegedly putting US companies at a “huge” disadvantage.

It remains to be seen if President Trump’s Justice Department will try to weaken the law or ease off from the rigorous enforcement of the act under the Obama administration. His choice for attorney general, Sen. Jeff Sessions, is a former prosecutor who has asked in the past if the law has had a negative effect on American businesses.

But one thing has become clear in recent years. Not only has the FCPA helped spark a global campaign against corruption, it has steadily convinced more companies that honesty pays if they avoid payoffs to foreign officials. read more »

 

 

The Wells Fargo Scandal Is Now Reaching VW Proportions

I thought it would be a long time before a corporate scandal got bigger and worse than the Volkswagen emissions-cheating mess. I still think that, but almost every day the Wells Fargo situation makes me wonder if it might soon surpass even VW in overall awfulness. The latest news certainly shortens the odds. Before we examine the dismal state of affairs, let’s jump straight to the bottom line: Even if this scandal does not widen further, it reflects a massively broken corporate culture, not just the acts of a few bad men and women. It has trashed the reputation of former CEO John Stumpf and at least casts doubt, fairly or not, on the reputation of his predecessor, Richard Kovacevich; both were among America’s most admired CEOs. read more »

Research: Firms Give More Stock Options When They’re Committing Fraud

Research suggests that employees are often in a position to discover and expose wrongdoing in organizations. This may be why the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act encourages employee whistleblowing: Section 922 of the Act promises to protect whistleblowers from retaliation and offers monetary awards for disclosure, which range from 10% to 30% of monetary damages collected from the company. Since this program was established, the Securities and Exchange Commission (SEC) has granted more than $111 million in awards to 34 whistleblowers, with the largest award of $30 million granted in September 2014.

While protection and rewards may encourage more employees to come forward, firms may be able to counter these incentives by making it beneficial for employees to keep quiet. In a study recently published in The Journal of Accounting and Economics, we examined whether firms use financial incentives to discourage whistleblowing. Although there are many kinds of financial incentives, we focused on stock option grants to rank-and-file employees, as this data are more readily available. Further, since the value of stock options is directly tied to the value of the firm’s stock, and because whistleblowing allegations result in an immediate decline in the firm’s stock price, employees stand to lose financially when they blow the whistle. In addition, employee stock options typically have vesting terms that require employees to wait a few years before they can exercise their options, which may act as a disincentive to blowing the whistle before they’re able to exercise their options. read more »

This map shows the countries with the highest risk of corruption

You are most likely to encounter corruption doing business in China than anywhere else, according to a study by the Risk Advisory Group.

Indonesia, Vietnam and Myanmar feature in the top 10 most challenging countries in which to do business from the point of view of corruption, according to the report, while China tops the global list.

“There is no denying that the country’s large market and growing middle class is attractive for foreign investors, but endemic corruption in some sectors, the close nexus between business and politics, and the high incidence of Foreign Corrupt Practices Act enforcement actions make for a high-risk business environment,” Brendan McGloin, head of Asia business intelligence, said in the report. read more »

RBS puts aside further £3.1bn for US mortgages fine

Royal Bank of Scotland has set aside a further $3.8bn (£3.1bn) to cover fines in the US, the bank has said.

The provision is for an expected penalty over the sale of financial products linked to risky mortgages before the 2008 financial crisis.

RBS, which is 72% state-owned, has now put £6.7bn aside to cover litigation by the US Department of Justice (DoJ).

It means the bank is set to report a loss for 2016, the ninth year in a row that RBS has lost money.

Chief executive Ross McEwan has been trying to end RBS's legal wrangles so that the government can sell its stake in the bank, which was the result of a £45.5bn bailout during the financial crisis. read more »

Nigerian oil pollution claims against Shell cannot be heard in UK, court rules

Campaigners hoped case would pave way for lawsuits to be brought against corporations for actions abroad

The high court has ruled that tens of thousands of Nigerians affected by oil pollution cannot proceed with a legal challenge in the UK against Shell and its Nigerian subsidiary.

The ruling is a blow for campaigners who called the ruling an “outrage”. They had hoped the case would set an important precedent on jurisdiction, paving the way for other cases to be brought against UK-based corporations for their actions abroad. read more »

NYSE, Former IEX Foe, Plans a Copycat Speed Bump of Its Own

NYSE Group Inc. opposed IEX Group Inc.’s proposal to run an exchange with a “speed bump” that delays orders to curb the advantages of the fastest traders. Now, it’s copying the idea.

The owner of the New York Stock Exchange will rename its tiny NYSE MKT exchange the NYSE American and introduce a 350-microsecond delay on orders there, according to a statement Wednesday. NYSE American will also add a new order type called a discretionary peg -- which IEX pioneered -- a so-called dark order because it isn’t publicly displayed. Both new features closely mirror how IEX’s Investors Exchange works. read more »

SEC Charges Two Former Och-Ziff Executives With FCPA Violations

The Securities and Exchange Commission today announced that Och-Ziff Capital Management Group has agreed to pay nearly $200 million to the SEC to settle civil charges of violating the Foreign Corrupt Practices Act (FCPA).

Och-Ziff CEO Daniel S. Och agreed to pay nearly $2.2 million to settle SEC charges that he caused certain violations along with CFO Joel M. Frank, who also agreed to settle the charges.

The SEC detected the misconduct while proactively scrutinizing the way that financial services firms were obtaining investments from sovereign wealth funds overseas.  The SEC’s subsequent investigation of Och-Ziff found that the fund used intermediaries, agents, and business partners to pay bribes to high-level government officials in Africa.  According to the SEC’s order, the illicit payments induced the Libyan Investment Authority sovereign wealth fund to invest in Och-Ziff managed funds.  Other bribes were paid to secure mining rights and corruptly influence government officials in Libya, Chad, Niger, Guinea, and the Democratic Republic of the Congo. read more »

 

Goldman’s $285 Million Package for Gary Cohn Is Questioned

Goldman Sachs has rewarded its departing president, Gary D. Cohn, with expedited access to cash and stock payments valued at nearly $300 million, and in doing so has tacitly encouraged another of its executives to accept an influential role in Washington.

Late on Tuesday, Mr. Cohn, director of the National Economic Council advising President Trump, disclosed in a securities filing that he and his family members had received ownership that day of 940,908 shares of Goldman stock — a position valued at nearly $220 million. That award came in addition to a cash payout, announced the same day, amounting to about $65 million, leaving him with a total windfall of about $285 million. read more »

Brokerage Firm Charged With Gatekeeper Failures Related to Pump-and-Dump Scheme

The Securities and Exchange Commission today announced administrative proceedings against New York-based brokerage firm Windsor Street Capital and its former anti-money laundering officer John D. Telfer.  The SEC’s Enforcement Division alleges that the firm, formerly named Meyers Associates L.P., failed to file Suspicious Activity Reports (SARs) for $24.8 million in suspicious transactions, including those occurring in accounts controlled by microcap stock financiers Raymond H. Barton and William G. Goode who are separately charged today by the SEC with conducting a pump-and-dump scheme. read more »

Clinical Psychologist and Owner of Psychological Services Centers Convicted in $25 Million Psychological Testing Scheme Carried Out Through Eight Companies in Four Gulf Coast States

Two owners of psychological services companies, one of whom was a clinical psychologist, were convicted yesterday for their involvement in a $25.2 million Medicare fraud scheme carried out through eight companies at nursing homes in four states in the Southeastern United States. read more »

 

 

SEC Uncovers Cherry-Picking Scheme, Charges Investment Adviser Behind It

The Securities and Exchange Commission today announced that a Massachusetts-based investment adviser agreed to be banned from the securities industry after the agency uncovered an illegal cherry-picking scheme through its data analysis used to detect suspicious trading patterns.

The SEC filed fraud charges in federal district court against Michael J. Breton and his firm Strategic Capital Management, alleging they defrauded clients out of approximately $1.3 million.  Breton allegedly placed trades through a master brokerage account and then allocated profitable trades to himself while placing unprofitable trades into the client accounts. read more »

Bank of England warns of further flash crashes

The changing nature of foreign exchange markets could prompt more flash crashes like the one experienced last October when the pound dropped 9 per cent in a matter of seconds, according to a Bank of England boss.

In a speech to the City last night, head of the Bank’s markets directorate Chris Salmon said increased electronic trading means markets can respond rapidly to events and reducing transaction costs.

But he warned that the contrast of the flash crash with the orderly correction of the pound following the UK’s vote to leave the European Union was stark. read more »

People facing disenrollment claim Nooksack Tribe is involved in a racket

A handful of people who have faced disenrollment from the Nooksack Indian Tribe filed a complaint in federal court this week claiming tribal officials defrauded them and submitted false claims to the federal government.

Their complaint, filed Monday in Western District court in Seattle, claims that Chairman Bob Kelly and “holdover council” members whose terms expired in March 2016 have illegally carried on business at the tribe, including trying to disenroll them, despite the council lacking a quorum.

The complaint was filed by six people who have faced the loss of federally subsidized homes, health care and social services provided by the tribe, as the tribe has sought to remove them from the membership rolls.

The six also claim the tribe has improperly submitted claims for more than $1 million to federal agencies for various contracts.

One claim in the complaint alleges that Kelly signed off on an application for more than $850,000 for housing funding from the U.S. Department of Housing and Urban Development for 2017 using population figures that include disenrolled and evicted tribal members. read more »