News

The Consequences of Corruption

July 26, 2018
Categories: Anti-corruption, Compliance, Corruption, FCPA

Corruption continues to threaten a company’s potential or survival in a multitude of ways. One bribery scandal can significantly disrupt business, take a financial toll, have various legal implications, and negatively impact a company’s reputation. A few examples of these risks worth noting:

  • Companies that have resolved bribery cases have paid fines and penalties in the hundreds of millions of U.S. dollars. A joint Dutch-U.S. global resolution of charges brought against Swedish-based international telecommunications company Telia AB and one of its subsidiaries resulted in fines of $965 million.
  • Costs associated with investigation and remediation can be even more significant. Walmart has spent approximately $877 million in compliance-related costs to date, not including costs of resolution with authorities.
  • Company employees involved in these cases may also be individually charged and prosecuted. To date in 2018, the U.S. Department of Justice has brought 16 enforcement actions against individuals, resulting in 7 guilty pleas.
  • International individuals involved in these cases may also be charged and prosecuted. In Korea, the head of Samsung, Lee Jae-yong was sentenced to five years in prison, a term later reduced on appeal after Lee had served six months in prison. In Brazil, Marcelo Odebrecht, CEO of Odebrecht, served two and one half years of a 19 year prison term for his involvement in the Lava Jato scandal.

Companies face further legal issues outside of government prosecution as well. Shareholders can also bring lawsuits if the bribery has brought harm to the company. Additionally, governments, international institutions, or development banks can exclude companies from bidding on contracts if they have engaged in bribery or violated corruption laws.
Companies with strong anti-corruption programs in place are best positioned to mitigate these risks. Learn more about the elements of an effective program and top reasons why anti-corruption programs fail in this CREATe.org whitepaper.

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