If you’re caught, pay the price, or risk your reputation
It’s well known that many countries around the world use and accept bribery so openly that it’s all but an official part of the business culture, but that doesn’t make the consequences any less damaging when an organization gets caught in the act.
Computing giant IBM was busted last year and agreed to pay a $10 million fine to the SEC for bribing officials in China and South Korea, but a struggle between the presiding judge in the case and the computing giant has dragged the issue back into the public arena.
Here’s a rundown of the situation, from an AllThingsD article by Arik Hesseldahl:
Judge Richard Leon (pictured from his Wikipedia bio), who has been reviewing the case for 22 months, says he wants IBM to report on a significantly wider range of issues, some of which aren’t connected to the substance of the original bribery complaint against it.
Most of the time, judges sign off on these settlements. Companies come clean and agree to show that they’re staying clean by not doing what they’ve been accused of. But apparently Leon’s blood is up over this. He has told IBM that he wants annual reports on its compliance with the Foreign Corrupt Practices Act, the law that governs bribery overseas, and he wants the reports to cite all potential accounting violations. IBM has so far agreed only to report on matters related to bribery, which is what the original complaint is about. The next hearing is set for Feb 4.
If the judge’s requests sound a bit onerous, consider this – IBM has been busted for bribery in Asia multiple times since 2004, when 40+ South Korean government officials and corporate execs, mostly from IBM ventures, were charged with bribery in relation to several state contracts of computer parts and servers. At that time, IBM released several self-righteous statements related to just how naughty those employees were, and claiming their actions went against company policy and codes of conduct. Of course, In the latest settlement, IBM admitted to bribing officials as far back as 1998 with everything from overseas trips to bags of cash, proving that their claims of compliance were just so much hot air.
Given the latest charges, along with the fact that IBM has been caught in the past and simply blew it off to go right back to bribery as a business plan, it’s pretty clear why the judge is pushing for extra accountability from the company. While the public typically pays little mind to corporate bribery cases, if IBM wants to get out from under the SEC’s microscope it would be wise to toe the line.
Transparency is no new thing, and that’s essentially all the judge is asking. If nothing shady is going on then it would be a wise crisis management move for IBM to offer up all of the requested reports, even if it means some extra work. Obviously the company made financial gains from its illegal practices, and now it’s time to pay the price and put forth the effort required to get back in the good graces of the SEC.
The BCM Blogging Team
https://www.bernsteincrisismanagement.com/