The ABB case, like most significant FCPA enforcement actions, sets important precedent and policy reminders. With time, and looking back, ABB gives companies with a prior criminal history a way forward to seek a fair resolution notwithstanding huge obstacles based on past performance. 

If you are ABB, you dodged a significant bullet – the appointment of an independent compliance monitor, which DOJ has been regularly applying to similarly situated companies. ABB took important first steps when learning about the potential violation.  It immediately scheduled a meeting with DOJ to complete its initial disclosure.  Unbeknownst to ABB, however, the matter was publicly disclosed in the press, thereby precluding the award of the trifecta under the Corporate Enforcement Policy – voluntary disclosure, cooperation and remediation.  Despite this unfortunate event in terms of time, ABB pressed forward.

Interestingly, ABB earned high praise for its “extraordinary” cooperation, a term rarely awarded to a company when seeking the full benefits under the Corporate Enforcement Policy.  The settlement papers, however, do not provide any detail as to what made ABB’s cooperation “extraordinary” beyond the often-used list of cooperation factors.  It would be good to know exactly what made ABB’s cooperation “extraordinary” versus “ordinary” substantial cooperation.

ABB received the full benefit of DOJ’s Anti-Piling On Policy – ABB was credited with the SEC settlement, and monies paid to the South African and Swiss governments, and eventually will get credit for a settlement paid to Germany.  As DOJ has expanded its law enforcement coordination program with international partners, DOJ has expanded its crediting efforts to recognize the portions of payments made to foreign law enforcement agencies.

The question at bottom is glaring – so what price did ABB pay exactly for its extensive criminal history record?  For companies that have to decide whether to disclose and may hesitate because of their criminal histories, the answer now is fairly clear that it is a better idea in many cases to voluntarily disclose, remediate and cooperate.

Legal and Compliance Authority: The underlying facts of the ABB FCPA bribes in South Africa, raise a very disturbing issue and example of the absence of legal and compliance independence and authority.  When a subcontractor could not pass through ABB’s due diligence program, an ABB manager demanded that the subcontractor be approved given the need to close the lucrative deal.  ABB’s business was able to overcome legal and compliance objections to the third party and secure a waiver of its existing policies.

This is a screaming red flag by itself – what was the rationale for the waiver?  Who reviewed it?  The failure to adhere to existing controls demonstrates the risks that can result from a failure to reinforce and emphasize the importance of compliance controls designed to mitigate third-party risks.

ABB’s compliance culture obviously did not elevate the role of legal and compliance, and empower them to block a transaction, insist on addressing compliance issues, and receive the support from top management.  In the absence of this basic equation, legal and compliance will always fall to business pressure and the company will not be able to promote a culture of compliance.  It is remarkable how often this breakdown occurs in companies that fall to an FCPA enforcement action (as well as other violations as well).

“Local” Business Requirements: Foreign government often impose local business mandates on foreign companies as a condition of acceptance of significant contract or bid.  This is a recurring issue in the energy industry.  These local requirements create significant risks and navigating them is very difficult to uncover potential improper financial relationships with government officials. 

In many cases, the local third-party representative does not have requisite experience or qualifications.  In even other risky cases, government officials may demand that a specific local party be used in the project – these are tell-tale signs of corruption and bribery arrangements.

Sham Negotiation and Pricing: The ABB case underscores yet again the importance of scrutinizing specific transactions, pricing levels and questioning red flags to make sure no corrupt indicia exist.  In South Africa, the ultimate price was agreed to in advance with a built in extra amount to pay bribes to the Senior Executive.  It does not appear that these pricing arrangement were ever scrutinized.  These terms have to be subject to historical analyses and an independent review by business and compliance representatives to ensure overall reasonableness.