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For the Love of the Game: Corruption & Sports NGOs

tennis-player-1246768_1280This article, written by GRC Solutions Expertise Panel member Jeremy Sandbrook and co-authored with Liz Burton,  examines some of the types of corruption that has taken place within sports NGOs, why they are so susceptible to it, and what some of the potential solutions are to solving the problem.

While sport is now the dominating source of entertainment worldwide, it has a darker, shadier under-belly it just can’t seem to shake-off – Corruption.  Sports NGOs are particularly vulnerable with bribery, match-fixing, extortion, doping and money laundering now common place.

 

Sports NGOs and ‘Corruption as usual’

It seems that barely a month passes without yet another report of corruption in sports being splashed across newspaper headlines.  These include members of FIFA’s executive committee accepting bribes, a former president of CONCACAF charged with fraud and money laundering, hosting nations paying bribes to win Olympic hosting rights, match-fixing, and the IAAF’s involvement in corruption and cover ups.

This phenomenon isn’t just limited to football and athletics however, with the following examples showing just how wide spread the issue is:

  • Cricket has witnessed allegations of both spot-fixing and match-fixing involving players from Pakistan, England, New Zealand, India, South Africa, Sir Lanka and Kenya.  There have also been on-going match-fixing allegations made in relation to the Indian Premier League (the most lucrative cricket event in the world), with two of the league’s eight teams recently suspended for two years over a corruption scandal;
  • Tennis is also currently undergoing a crisis as allegations of match fixing engulf the sport;
  • Cycling has for many years been dogged with allegations of illegal doping, with the issue only coming to a head when the International Cycling Union was accused of knowingly protecting Lance Armstrong – cycling’s long time poster boy – against doping allegations; and
  • Badminton, boxing, handball and other sports, including US collegiate sports, have all suffered from similar credibility gaps.

It is clear from this that there are serious underlying issues that sports NGOs need to address in order to clean up their respective sports.

Failure to prevent bribery catches up with Sweett, ICBC Standard Bank

An independent provider of construction and infrastructure management services has admitted that it failed to prevent staff from offering bribes in the Middle East.

The Sweett Group operates services in the Asia Pacific, Europe and the United States.

According to the UK Serious Fraud Office (SFO), the Sweett Group acknowledges that its employees offered to award an American architecture firm a USD$100 million construction contract for a hospital in Morocco if the architects agreed to bribe an Arab Emirates official.

The company in effect admitted to breaching Section 7 of the UK Bribery Act which recognises the failure of commercial organisations to prevent bribery as an offence.

The same offence was recently used for the first time by any UK prosecutor in a case involving allegations against ICBC Standard Bank of overseas bribery.

On Monday 1 December, ICBC Standard Bank finally settled its case in the UK by agreeing to pay USD$33 million. Earlier this year, it already agreed to pay $4.2 million to resolve similar charges in the United States by the Securities & Exchange Commission (SEC) in relation to the same case.

These cases highlight how widely the UK Bribery Act’s enforcement extends around the world, and how severe the penalties are for companies that fail to prevent bribery on their watch.

The Sweett Group case in particular sounds an alarm for the engineering and construction industry: unless you adopt the necessary due diligence measures, you remain exposed to a full range of bribery and third party risks.

Source: FCPA Blog

Talk to GRC Solutions about our Anti-Bribery and Third Party Risk courses, as well as our broader Salt Compliance training library.

Former Commonwealth Bank IT executive arrested for alleged receipt of corrupt payments

insider trading

An international investigation has led to the arrest of Keith Hunter, former general manger of information technology (IT) service management and operations at the Commonwealth Bank Australia (CBA). Hunter pleaded not guilty to charges of bribery. Over USD$1.5 million in corrupt payments relating to the case have been frozen.

Hunter is alleged to have been involved with granting a publicly-listed US technology provider a lucrative contract without first putting it to public tender, in return for bribes. Detectives have estimated the value of the illegal payments at tens of millions of dollars. A second former CBA manager is also wanted for questioning as part of the ongoing investigation.

CBA alerted NSW Police earlier this year to a possible corrupt relationship between the two men and the technology provider. The Bank had conducted its own internal investigations into what is alleged to be suspicious payments made to two of its senior IT managers.

The NSW Police Fraud and Cybercrime Squad has congratulated CBA on coming forward with their suspicions, warning that any corruption in the business community would not be tolerated. The Squad’s Commander, Detective Superintendent Arthur Katsogiannis, noted that the offence of corrupt commissions carries a seven-year jail sentence.

A CBA spokesperson has confirmed the Bank’s zero tolerance policy for any illegal activity by its employees.

The World Economic Forum estimates that bribery and corruption increases the cost of doing business by up to 10%.

GRC Solutions provides online compliance training courses in anti-bribery and corruption. We offer off-the-shelf courses as well as customisation.

Small bribes, big headaches

bribery and corruption

Even relatively small bribes are taken seriously by the authorities, as the three cases below reveal.

The Independent Commission against Corruption (ICAC) announced proceedings against Eddie Obeid last Thursday over the former MP’s lobbying efforts, which concerned a series of secretly-owned Circular Quay cafes. The case serves as a fresh reminder that even small bribes can lead to big headaches.

“Just like Al Capone and tax evasion, it might seem ironic that Eddie Obeid, the ultimate NSW powerbroker who pulled off a corrupt $60 million coal scam, goes down for a contract for a couple of lousy restaurants,” Australian Financial Review (AFR) reporter Geoff Winestock commented. The ICAC reports that Obeid may be undone for misusing his position as a Member of Parliament to influence the decisions of public officials, which resulted in favourable outcomes for his businesses. According to the AFR, Obeid hoped to double, or triple, the value of his $2.4 million investments in Circular Quay.

Last July, in the US, the Securities and Exchange Commission (SEC) pursued firearms manufacturer Smith & Wesson Holding Corp for a bribe of $11,000 to a Pakistani police department, in order to secure a $107,852 contract. The SEC fined the arms manufacturer $2 million under the U.S. Foreign Corrupt Practices Act (FCPA).

Commenting on the case, Bill Michael, co-chairman of Mayer Brown’s global anti-corruption and FCPA practice, told Corporate Counsel the SEC’s decision to chase down Smith & Wesson for a relatively small bribe was indicative of the commission’s hard-line approach on anti-bribery law. “Apparently, no case may be too small,” he said.

And in 2011, Manir Yakub Patel, the first defendant prosecuted under the UK Bribery Act, received a shocking six-year prison sentence for accepting £500 bribe to conceal a traffic summons. At the time, the 22-year-old worked at the Magistrates’ Court as a clerk. His sentence has since been reduced to four years in prison on appeal.

These three cases demonstrate that even relatively minor breaches of the law can lead to criminal investigations, court proceedings and severe penalties. Whether you’re in Australia, Singapore, or the UK, it’s essential you understand and comply with your country’s anti-corruption legislation.

Does your organisation understand and adhere to corporate misconduct and white collar crime laws? Talk to us today about our Anti-Bribery and Corruption courses.

Source: Australian Financial Review, Corporate Counsel

Bribery and corruption takes its toll over Smith & Wesson Multi-National Corporation

bribery and corruption 

A recent case serves as a vital example of what small and medium sized businesses wanting to expand globally must first achieve in terms of governance, risk and compliance measures, to avoid bribery and corruption activities taking its toll on global operations.

In an out-of-court dispute between Smith & Wesson Holding Corporation and the US Securities and Exchange Commission to resolve Foreign Corrupt Practices Act offences, Smith & Wesson cooperatively agreed to pay a fine of $2 million.

Smith & Wesson, a US-based company was found guilty of paying bribes across the globe. According to the SEC, “Smith & Wesson’s international sales staff engaged in a pervasive effort to attract new business by offering, authorising, or making illegal payments or providing gifts meant for government officials in Pakistan, Indonesia and other foreign countries.”

Smith & Wesson consented to the order without admitting or denying the findings that show evidence of violating the anti-bribery, internal controls and books and records provisions of the Securities Exchange Act of 1934.
In addition to this large fine, Smith & Wesson has also been ordered to report to the SEC on its FCPA compliance efforts for the next two years.

This case demonstrates the challenges faced by corporations operating in multiple countries, no matter how well recognised they are. Even after 4-years of international operations keeping on top of compliance in all areas can be a struggle. This large penalty of $2 million serves as a warning to other organisations who are not vigorously looking into a compliance training program to educate their staff.

It is important to note that the SEC took into consideration Smith & Wesson’s cooperation with the investigation when determining an appropriate penalty. Smith & Wesson took effective remedial action straight after the conduct came to light by improving its internal controls and compliance process and also fired its entire international sales staff.

Don’t let undiscovered, illegal activities take place throughout your organisation. Ensure you are covered with an Anti-bribery and Corruption course.

Source: The FCPA Blog