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Business malpractice: companies penalised, but what about individuals?

by: (Editorial Manager) on

The recent Serious Fraud Office (SFO) case against Rolls-Royce has prompted discussion on whether prosecutors should do more to hold individuals to account for bribery and corruption offences.

CorruptionIn a guest blog for Transparency International, Sue Hawley of anti-bribery site Corruption Watch called the SFO’s deferred prosecution agreement (DPA) with Rolls-Royce a ‘failure of nerve’.

The DPA means that Rolls-Royce avoid prosecution by agreeing to a £497m penalty. Ostensibly this is good news for anti-corruption advocates – but so far no individuals at Rolls-Royce, at any level, have been prosecuted or held accountable for crimes that took place over nearly 25 years.

For Hawley and other anti-corruption campaigners, this is unacceptable. She declared charging senior level executives responsible for malpractice as ‘essential’, and the SFO have confirmed that they are investigating individuals in relation to the case.  

Transparency International UK Executive Director Robert Barrington also underlined the importance of individual prosecution.

It is highly unlikely that senior officials at Rolls-Royce were unaware of any corrupt practices, nor is this likely to be a case of a few bad apples,’ Barrington said.

‘In order to serve as a proper deterrent for companies who think it is acceptable to do business with bribery, those involved with or who sanctioned bribery must be prosecuted individually.’

Rolls-Royce are currently under inquiry by British civil servants after claims they obtained government financial support fraudulently, which has led to more calls for individuals to be investigated.

What anti-corruption campaigners contend is that senior executives must at the very least be aware of widespread corruption taking place within their organisations.  

 

Petrobras

I wrote recently about the Operation Car Wash corruption case involving Brazilian firm Petrobras, which has seen high profile individuals from the company jailed.  

The oil firm was engaged in an industrial-sized amount of corruption, and the implications of the scandal have shaken Brazilian political life.

Interestingly the $26 million fine Rolls-Royce agreed to pay to Brazilian regulators is in relation to this scandal.

It all points to a domino effect of companies that commit corruption. When one is exposed, then others are likely to follow. 

Does the Rolls-Royce/Petrobras link mean senior Rolls employees will be indicted? At the moment it is too soon to tell. Another recent business scandal suggests not.

 

Dieselgate

Volkswagen was in January fined $4.3 billion by the US Justice Department for cheating on diesel emissions tests, in a scandal that for 18 months has dogged the company.   

In addition six mid-management level employees at Volkswagen have been charged by US prosecutors.

But these employees do not sit on the Volkswagen board. When Martin Winterkorn, CEO of Volkswagen during the emissions test cheating, appeared before German ministers in January, he denied any knowledge of wrongdoing.

For transparency campaigners, indictments against those at the very top seldom occur.

No senior executives have so far been charged for the fraud that Volkswagen committed, but the conviction of directors at Petrobras shows that there is a precedent of executives being prosecuted.  

If regulators begin prosecuting those at summit of organisations, we may witness a shift in the way businesses think about compliance. And then we may start to see a genuine change in behaviour. 

 

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