Fraudstyles of the Rich and Famous

As news breaks about fraudulent bribery payments by the wealthy and celebrated to officials and coaches at prestigious colleges to obtain admissions spots for their children, the lingering question resurfaces: how do the privileged continue to embroil themselves in such public scandals?

What about other wealthy people who make financial contributions to colleges and universities conveniently timed around their own children’s acceptances? While in certain situations fraud has not been alleged, these instances still raise the specter of unfairness, inequity, and the question of deceptive practices—for both the “contributor” and the benefitting institution.

Clearly, a sense of entitlement permeates many of these individuals. But a more compelling inquiry is whether these individuals even recognize the questionable nature of their actions.

Fraud is generally defined as the intentional use of deception to obtain something of value or deprive another of that value. Bribery amounts to a form of fraud, where the bribing party seeks to hide their payment for an unfair benefit. For instance, bribing a university official to get your son or daughter admitted can deprive that university of the opportunity for a more qualified applicant, and it robs superior applicants a fair shot at gaining admission. Over the years, the understanding of bribery has expanded from direct cash payments for reciprocal benefits to also include indirect, non-cash “contributions”, such as charitable donations and even employment of relatives.

An interesting parallel exists between these pay-for-admittance cases among the elite and what regularly occurs within business. Certainly, the business world is rife with classic cases of fraudsters swindling the naive and gullible out of their money. But another spin on fraud also exists, one less understood. Many employees find themselves either the unwitting perpetrators of fraud or unwilling accomplices in such schemes.

For instance, employees may feel pressured by managers to commit fraud for their employer’s benefit, even though these employees receive nothing of value themselves, other than avoiding a job loss that would otherwise occur if they disobeyed orders. Recall the many Wells Fargo employees who managed to retain their jobs by following orders to open fictitious accounts for unsuspecting customers.

Other employees commit fraud simply to “go along to get along.” I recall a speaker during my graduate business school days who recounted his story of going to jail for helping a vendor to commit financial fraud, even though he claimed no direct benefit. The only seeming benefit to him involved helping a valued vendor out of a tight invoicing situation—albeit repeatedly.

These recent reports of the wealthy and famous engaging in bribery to obtain a lucrative slot for their children in the better colleges don’t sound much like dubious characters meeting in seedy motel rooms to exchange briefcases of unmarked bills. Rather, it’s possible a more subtle “self-deception” is at play. Much like the well-intended employee who gets caught up in something they did not ask for and did not want, the college admissions scandal also suggest parents rationalizing their efforts, though seriously questionable, to help their children by leveraging their status. (Not that their actions represent good
character modeling, of course.)

Syntrio’s new course, “Business Fraud: Avoiding Deceptive Business Practices,” goes beyond the obvious
fraud of employees who purposely steal from their employers or businesses that conduct an ongoing
campaign of deception. The course also addresses the fact that employees can sometimes get enmeshed
in fraudulent schemes either without personal benefit or due to work pressures. Sometimes, it’s the
subtle, sly, creeping situations that trip up a good person, putting him or her onto the wrong path.

A Funny Thing Happened on the Way to a Bribery Indictment…

Something unusual and surprising happened last week in the corporate compliance world.

A company’s two senior leaders were charged with a foreign bribery scheme and—at the same time—the company itself was exonerated. If you’ve been following the case of Cognizant Technology Solutions, Corp., you’re perhaps also surprised by this turn of events.

The short story: In April, 2014 the company’s president and chief legal officer (and compliance head) were charged with a $2 million bribery scheme to promote construction of its corporate campus in India.

Typically, when bribery is detected, a government regulator charges a company’s senior executives with criminal conduct while, at the same time, also pursuing charges against the company for aiding and abetting the crime, hiding it or obscuring it revelation. Then, a long, drawn out process might unfold of investigation, litigation and sanctioning to bring the company to heel for the misdeeds of its executives and itself.

But, a company can sometimes escape such charges if it can demonstrate that it took steps to reinforce compliance, as we know from a case involving Morgan Stanley when Hong Kong executives were charged with bribery related to internships for customers’ family members in exchange for business.

Similarly, in Cognizant’s case, the company escaped criminal charges just as two of its senior leaders were being charged. Where it gets interesting is that two weeks after the company uncovered this scheme, it notified the authorities and assisted with the investigation.

A lot of things have to go right for a company to take the following actions:

  • Uncover a bribery scheme involving the president and senior legal officer (perhaps the two people most able to hide such a scheme)
  • Avoid interference by these two executives that could have sidetracked an internal investigation.
  • Avoid the propensity to “lawyer up” to protect the company from the threat of possibly aggressive regulators looking to make an example of the company.
  • Decide to report the scheme to authorities two weeks after identifying it.
  • Offer assistance to the authorities to help investigate the scheme.
  • Agree to pay some $24 million in disgorgement and penalties for a $2 million bribery scheme

This makes one wonder just what was going on within this company for its leadership at that time to take such bold actions:

  • Demonstrate a clear understanding of what constitutes signs of foreign bribery at the executive level.
  • Show willingness to take on both the company’s then-president and chief legal officer.
  • Be ready to buck the trend of turning inward to protect the company with a layer of lawyers and court filings.
  • Be willing to trust regulators’ possible willingness to provide leniency to companies that disclose, assist and disgorge.

It's a rare case for a company’s remaining leadership to take such prompt, assertive, responsible actions as Cognizant’s did. The likelihood is that these actions did not occur on the spur of the moment with senior leadership quickly ‘finding religion’ in the face of confusion and substantial challenges. What’s more likely, the leadership that wasn’t involved in the bribery scheme had a clear understanding of wrongdoing, stout conviction about the right course of action, sturdy moral courage to take the right steps when many others would have thought first of self-protection, and unfettered belief that regulators would treat the company judiciously.

Despite the involvement of the company’s compliance lead in the bribery, one wonders just what sort of culture of integrity existed among the rest of leadership? And what steps does such a company take to instill such a culture within these top leaders to motivate them to act responsibly in the face of such a challenging situation?

The US Justice Department indicated its refusal to charge the company was due to: "Cognizant’s prompt voluntary self-disclosure, cooperation and remediation, as well as Cognizant’s disgorgement to the Department and the U.S. Securities and Exchange Commission (SEC) of the cost savings that resulted from the bribery scheme."

In the end, something unusual and surprising happened: The remaining leaders were right, they did right, and, as a result, they and their company were treated accordingly.

2018: The Year in Bribery

As 2018 passes on, one of the extraordinary aspects of the past year was the seeming normalization of bribery and corruption in the media. Yet despite the year’s headlines dominated by stories regarding sexual harassment, cyber security and data privacy, bribery was nonetheless the clear winner in news stories.

One-Third of all News Headlines Involve Bribery & Corruption

An analysis of one news monitoring service found bribery and corruption accounting for roughly one-third of all headlines. The most prevalent area of business involved governments, including those of Brazil, Peru, China, Argentina, Hong Kong, Mongolia, Atlanta and New York State.

It also included these industries and related companies (a partial list):

  • Auto: Fiat Chrysler
  • Defense: Airbus, Chemring
  • Energy: Eni Energy
  • Financial: Societe Generale, Credit Suisse
  • Food: Jim Beam
  • Healthcare: Fresenius
  • Industrial: Samsung
  • Mining: Kinross Gold, Alabama Coal
  • Oil and Gas: Shell, Eni
  • Pharma: GlaxoSmithKline, Sanofi
  • Retail: Walmart
  • Sports: FIFA, San Diego State University, University of Kansas, North Carolina State, Adidas

A review of preliminary data, through Violation Tracker, on US regulatory enforcement actions begun or advanced in 2018 found the following:

  • Foreign Corrupt Practices Act penalties (before reductions) came to almost $500 million for just eleven companies (vs. $1.3 billion in 2017 involving fourteen companies).
  • Another $87 million in fines were identified in bribery/kickback schemes under False Claims Act violations.
  • An indeterminate more likely are part of fraud enforcement actions; bribery often is coupled with fraud, though not always called out in enforcement headlines.

Is this the new norm?

What’s surprising by this information is how normal bribery headlines, government charges and fines have become. While Trace International released a study in March that indicated US enforcement actions had slightly dipped from the prior year, across the board global enforcement actions continued to run at a high rate.

So, while bribery and corruption stories may lose some of their luster in place of hot topics such as harassment, cybersecurity and data privacy, these issues still command a lion’s share of regulators’ attention and continue to bring in millions and millions of dollars in fines from companies that get it wrong.

Given this information, business leaders and compliance officers are reminded to maintain a watchful eye over at-risk business activities where bribery may be prevalent within an industry. Further, this is a good time to shore up practices at preventing, detecting, mitigating and quickly responding to suspected bribery. Specifically, recent years have seen a rise in enforcement actions aimed at bribery involving third parties, such as business partners. The “conscious disregard,” “willful blindness,” and “deliberate ignorance” defenses are being proven as poor risk management practices.

EEOC Releases Preliminary Findings on Fiscal Year 2018 Charge Statistics

Those of us that have an interest in the United States Equal Employment Opportunity Commission (“EEOC”) charge and litigation statistics eagerly await the release of new data toward the beginning of each calendar year. Perhaps never has a fiscal year’s statistics been more eagerly anticipated than that of fiscal 2018. As you are undoubtedly aware, the latter half of 2017 was the advent of the #MeToo movement, which sparked awareness about sexual harassment and sexual assault both in the workplace and out. It just so happens that July 2017 marked the beginning of fiscal 2018, which means the upcoming release of statistics gives us our first glimpse into what the post #MeToo EEOC statistics will look like.

Perhaps never has a fiscal year’s statistics been more eagerly anticipated than that of fiscal 2018

Like a trailer for an upcoming Hollywood movie (which is ironic because Hollywood was where the #MeToo fire was lit), today the EEOC released some of its preliminary findings on its charge enforcement during fiscal 2018. As expected, the results are staggering. It is important to note that the EEOC did not release the 2018 data in the traditional form of updating a chart of charges. Instead, it included the preliminary data in a news release entitled “What You Should Know: EEOC Leads the Way in Preventing Workplace Harassment.” Within this document was contained the data we have all been waiting for (or at least important pieces).

The EEOC investigated at least 800 more sexual harassment charges since the advent of the #MeToo movement

While touting its efforts to “vigorously combat workplace harassment” the EEOC casually mentioned, “[c]harges filed with the EEOC alleging sexual harassment increased by more than 12 percent from fiscal year 2017.” Given we know that there were 6,696 sexual harassment based charges filed in fiscal 2017, the reported increase translates to at least 7,499 charges filed in 2018. Alternatively stated, the EEOC investigated at least 800 more sexual harassment charges since the advent of the #MeToo movement. This is clearly significant.

The EEOC release also states two other significant findings. First, consistent with the EEOC’s statement that the agency would be filing more lawsuits on behalf of victims, the report states that the number of lawsuits indeed rose by 11 (a 50% increase). This is significant because it means the EEOC is investing key resources into prosecuting cases as well as investigating them, which spells a new type of trouble for employers of all sizes. The EEOC also reports that it recovered $70 million for victims of harassment through its enforcement and litigation procedures. This was up from $47.5 million in fiscal 2017.

The EEOC also reports that it recovered $70 million for victims of harassment through its enforcement and litigation procedures.

The significance of this document cannot be understated, not just in the shocking increase in numbers, but also the EEOC’s new method of promoting its efforts to investigate, stop, and punish those employers who allow incidents to occur. It will not only be interesting to see if 2018 is an outlier (or more likely) the start of a trend. In either event, employers should be more interested than ever in making sure their employees receive the proper training to prevent incidents of sexual harassment in the workplace.

Syntrio is a leader in the human resources and employment law fields (as well as ethics and compliance) and is prepared to help your company implement a compliance program aimed at reducing the potential impact of harassment, discrimination and other employment law issues your organization may face. Syntrio takes an innovative philosophy towards employment law training program design and strives to engineer engaging, entertaining, and thought-provoking content.


Contact www.syntrio.com for more information about our discrimination, harassment, and prevention of retaliation online courses and remember to follow us on Facebook, TwitterGoogle Plus and LinkedIn for daily updates on corporate compliance that impact your company.


New California Sexual Harassment Training Law Approved by Governor Brown

On October 1, 2018 California Governor Jerry Brown signed into law SB 1343, which amends the California Fair Employment and Housing Act (“FEHA”) to require non-managerial employees to receive bi-annual training on the prevention of sexual harassment, gender identity issues and the prevention of abusive conduct in the workplace by January 1, 2020 (or within six months of assuming their position).

On October 1, 2018 California Governor Jerry Brown signed into law SB 1343 

Although this sweeping change is sure to be burdensome for employers, organizations can rest somewhat easier on the grounds that the required training for non-managerial employees will only be one hour in duration (as opposed to the two hour requirement currently in place). Please take note that managers and supervisors will still be required to receive bi-annual sexual harassment training as has been the case in the past.

The new requirement is part of a series of sweeping changes to California’s FEHA 

The new requirement is part of a series of sweeping changes to California’s FEHA, that are in accord with changes that went into effect in New York and other states. The new training requirements are just one component of those laws.

In response to these changes Syntrio is well prepared to offer your employees both industry-leading sexual harassment training for California managers and a one-hour course that covers the needs of non-managerial employees. In the coming months we will be rolling out a completely refreshed California non-manager course that will truly set the standard for interactive online training in this industry.

Contact Syntrio to schedule a demonstration of our California courseware.

Syntrio invites you to contact us to schedule a demonstration of our California (and other state) courseware with one of our representatives at your earliest convenience. It is never too early to get a head start on fulfilling your requirement for California training, especially given the California legislature’s comment that those employees who receive training by January 1, 2019 will not have to re-train when at the January 2020 deadline!

Syntrio is a leader in the human resources and employment law fields (as well as ethics and compliance) and is prepared to help your company implement a compliance program aimed at reducing the potential impact of harassment, discrimination and other employment law issues your organization may face. Syntrio takes an innovative philosophy towards employment law training program design and strives to engineer engaging, entertaining, and thought-provoking content.


Contact www.syntrio.com for more information about our discrimination, harassment, and prevention of retaliation online courses and remember to follow us on Facebook, TwitterGoogle Plus and LinkedIn for daily updates on corporate compliance that impact your company.