Transcript To view the presentation of Jimmy Helm

The role of corporations
in the fight against
corruption
29 November 2012
Corruption is well and alive in Latvia?
http://traceblog.org/2012/09/13/latvian-anti-corruption-agency-recommendsindictments-against-utility-company-officials-at-latvenergo-as/
Latvia’s Corruption Prevention Bureau (KNAB) has asked prosecutors to indict 17
individuals, including four former officials of the Latvian national power company, Latvenergo
AS, for bribery, money laundering, disclosing confidential information, and abusing their
official positions for purposes of financial gain.
The allegations stemmed from two energy plant reconstruction projects undertaken between
2006 and 2010. KNAB alleged that Latvian intermediaries were used by companies in Spain,
Turkey and Sweden to transfer bribe money to the Latvenergo officials in order to secure
contracts on the reconstruction projects. KNAB claims to have uncovered €8.1 million in
bribes and prevented another €11.1 million payment. The Latvenergo investigation is KNAB’s
largest to-date, involving organizations and individuals spread across 14 countries and
requiring all of KNAB's personnel and aid from the European Anti-Fraud Office.
©2012 KPMG Baltics SIA, a Latvian limited liability company and a member firm of the KPMG network of independent member firms affiliated with
KPMG International Cooperative("KPMG International"), a Swiss entity. All rights reserved. PDC no.8229.
1
Corruption is well and alive in Latvia?
Press statement 1:
“Press Release, OAG, 22.11.2011
Berne. The Office of the Attorney General (OAG) has effectively closed criminal proceedings
conducted against two entities of the Alstom group after two years of investigation. It has
issued a summary punishment order against Alstom Network Schweiz AG (formerly Alstom
Prom AG) for breach of article 102 section 2 Swiss Criminal Code (SCC) in conjunction with
article 322septies SCC and fined the company with CHF 2,5 million and imposed a
compensatory claim of CHF 36,4 million.
In the summary punishment order, Alstom Network Schweiz AG is convicted of not having
taken, after article 102 SCC had come into effect in October 2003, all necessary and
reasonable organizational precautions to prevent bribery of foreign public officials in Latvia,
Tunisia and Malaysia.”
©2012 KPMG Baltics SIA, a Latvian limited liability company and a member firm of the KPMG network of independent member firms affiliated with
KPMG International Cooperative("KPMG International"), a Swiss entity. All rights reserved. PDC no.8229.
2
Corruption is well and alive in Latvia?
Press statement 2:
http://www.elconfidencial.com/economia/2012/11/06/un-informe-secreto-revela-queiberdrola-pago-comisiones-en-un-caso-de-corrupcion-108657/
“A secret report reveals that Iberdrola paid commissions in a corruption case
Iberdrola already has official verification that Iberinco, its engineering subsidiary, conducted
unlawful practices to obtain a contract in Eastern Europe of more than 300 million Eur.
The power company commissioned an investigation into whether its executives had been
involved in a case of corruption, which scandal caused the removal of the entire top
management [KPMG - of the Latvian entity] last June.
El Confidential has been told and is aware that commissions were paid by Iberinco to a
company called Energy Consulting for winning a bid to build one combined cycle plant in of
420 megawatts in Riga, Latvia, which was opened by King Juan Carlos.”
©2012 KPMG Baltics SIA, a Latvian limited liability company and a member firm of the KPMG network of independent member firms affiliated with
KPMG International Cooperative("KPMG International"), a Swiss entity. All rights reserved. PDC no.8229.
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The cost of corruption
“Corruption impedes economic growth by diverting public resources from important priorities such as
health, education, and infrastructure. It undermines democratic values and public accountability and
weakens the rule of law…
Corruption is also bad for business. Corruption is anti-competitive, leading to distorted prices and
disadvantaging honest businesses that do not pay bribes. It increases the cost of doing business
globally…
Corruption also introduces significant uncertainty into business transactions: Contracts secured
through bribery may be legally unenforceable, and paying bribes on one contract often results in
corrupt officials making ever-increasing demands.
Bribery has destructive effects within a business as well, undermining employee confidence in a
company’s management and fostering a permissive atmosphere for other kinds of corporate
misconduct…
Bribery thus raises the risks of doing business, putting a company’s bottom line and reputation in
jeopardy.
Companies that pay bribes to win business ultimately undermine their own long-term interests and
the best interests of their investors.”
Source: A RESOURCE GUIDE TO THE U.S. FOREIGN CORRUPT PRACTICES ACT, issued by the Criminal Division of the U.S. Department of Justice and the
Enforcement Division of the U.S. Securities and Exchange Commission
©2012 KPMG Baltics SIA, a Latvian limited liability company and a member firm of the KPMG network of independent member firms affiliated with
KPMG International Cooperative("KPMG International"), a Swiss entity. All rights reserved. PDC no.8229.
4
So who are the bribers?
Company
Country
Fine/Penalties
$
Siemens
Germany
800 million
KBR/Haliburton
USA
579 million
BAE
UK
400 million
Snamprogretti Netherlands
Holland/Italy
365 million
Technip S.A.
France
338 million
Daimler AG
Germany
185 million
Panalpina
Switzerland
81.8 million
ABB Ltd
Switzerland
58.3 million
Pride International
USA
56.1 million
Shell
Holland/UK
48.1 million
©2012 KPMG Baltics SIA, a Latvian limited liability company and a member firm of the KPMG network of independent member firms affiliated with
KPMG International Cooperative("KPMG International"), a Swiss entity. All rights reserved. PDC no.8229.
5
Traditional responses: the big stick
Local
• Various country legislation and OECD convention
United States
• Foreign Corrupt Practices Act (FCPA)
United Kingdom
• United Kingdom Bribery Act (UKBA)
©2012 KPMG Baltics SIA, a Latvian limited liability company and a member firm of the KPMG network of independent member firms affiliated with
KPMG International Cooperative("KPMG International"), a Swiss entity. All rights reserved. PDC no.8229.
6
Anti Bribery Procedures
Area
Risk
Assessment
Policies &
Procedures
■ Regular and comprehensive risk assessment to determine the nature and
extent of risks relating to bribery to which the organisation is exposed
■ Active tailoring of anti-bribery programme to mitigate identified risks
■ Existence of formal up-to-date published policy
■ Detailed policies and procedures covering; political contributions,
charitable donations and sponsorships, facilitation payments and gifts,
hospitality and travel expenses, conflicts of interest
■ Accessible channels through which employees and others can obtain
advice or raise concerns (‘whistleblowing’) without risk of reprisal.
Procedures to deal with incidents of bribery
©2012 KPMG Baltics SIA, a Latvian limited liability company and a member firm of the KPMG network of independent member firms affiliated with
KPMG International Cooperative("KPMG International"), a Swiss entity. All rights reserved. PDC no.8229.
7
Anti Bribery Procedures (con’t)
Area
Business
Relationships
Internal
Controls
Monitoring &
Review
■ Proactive steps to encourage equivalent anti-bribery programme in
business entities in which the organisation has a significant investment or
significant business relationship
■ Existence of due diligence policies and procedures which consider
potential at-risk parties to a business relationship, including the
organisations supply chain, agents and intermediaries, acquisition
targets, JVs and similar relationship and all markets
■ Existence of internal controls to counter bribery including financial and
organisational controls over accounting and record keeping practices and
related business processes
■ Internal controls are subjected to regular internal review and audit, with
periodic reporting to the Audit committee, Board or Directors
■ External assurance or verification of the organisation’s anti bribery
programme
©2012 KPMG Baltics SIA, a Latvian limited liability company and a member firm of the KPMG network of independent member firms affiliated with
KPMG International Cooperative("KPMG International"), a Swiss entity. All rights reserved. PDC no.8229.
8
Anti Bribery Procedures (con’t)
Area
■ Demonstrable active commitment by leadership to countering bribery
within the organisation, and acting as an example for transparency and
integrity, establishing a culture where bribery is never acceptable
■ Leadership assignment of unambiguous responsibility and authority for
implementing anti-bribery programme
Communication ■ The policies are communicated to all employees, business partners and
other relevant stakeholders
& Training
■ Training is provided to all directors, managers and employees, key high
risk third parties: agents, intermediaries, contractors and suppliers
Tone from the
top
©2012 KPMG Baltics SIA, a Latvian limited liability company and a member firm of the KPMG network of independent member firms affiliated with
KPMG International Cooperative("KPMG International"), a Swiss entity. All rights reserved. PDC no.8229.
9
The perception of the business sector in Latvia in fighting corruption
“As for the socio-cultural foundations, a low level of interpersonal trust and unwillingness to
engage in civil society activities characterize strongly. Latvian public has an ambiguous, in
some cases tolerant, attitude towards corruption and lack of integrity…
The overall integrity framework for the business sector is uneven and varies strongly…
The score on integrity mechanisms in practice has been reduced...
The weakest pillars of NIS in Latvia are Business, Public Sector and the Ombudsman…
Finally, it is the weak involvement of the business in anti-corruption activities that drags down
the total score for this pillar.”
Source: NATIONAL INTEGRITY SYSTEM ASSESSMENT LATVIA produced by Transparency International Latvia & Delna
©2012 KPMG Baltics SIA, a Latvian limited liability company and a member firm of the KPMG network of independent member firms affiliated with
KPMG International Cooperative("KPMG International"), a Swiss entity. All rights reserved. PDC no.8229.
10
Innovation across CEE in the fight against corruption
Country
Organization
Czech Republic
The Coalition for
Transparent
Entrepreneurship
Czech Republic
Endowment Fund
Against Corruption
Czech Republic
Hungary
Hungary
Fight against corruption
• A loose association of 60 of the leading companies in CZ, that share ethical values
and aim at contributing to the creation of a transparent business environment both in
public and private procurement
• Members of the Coalition signed up to a Declaration promoting anti-corruption
measures in business
• All members publish a list of below- and above-limit tenders they have participated in
and certain details to the bids
• The Coalition members are subject to regular monitoring by an NGO watchdog
• The founder, Karel Janeček, is succesful businessman
• The fund rewards whistleblowers who come forward with evidence of corruption
• The fund has already rewarded 5 whistleblowers, mainly from the public sector for their
whistleblowing
AMCHAM
• ADOPT A SCHOOL FOR ETHICS IN OUR CHILDREN AND TRUST IN OUR
Etická výchova, o.p.s.
SOCIETY“ (ASET)
Czech Ministry of Education • Designed to help build corporate social responsibility at its roots - in elementary schools
• As part of program for ethical education at the elementary school level
Transparency International • Organisation of an extraordinary water battle at the Sziget musical Festival
British Embassy in Hungary • The aim of the event was to draw the youth’s attention to the importance of fighting
Norwegian Embassy in
corruption
Hungary
Transparency International • TI launched a contest "Fight against corruption with mobile application“
HU
• A first prize of THUF 500 for winning Android platform-based mobile application which
can help in the fight against corruption.
©2012 KPMG Baltics SIA, a Latvian limited liability company and a member firm of the KPMG network of independent member firms affiliated with
KPMG International Cooperative("KPMG International"), a Swiss entity. All rights reserved. PDC no.8229.
11
Innovation across CEE in the fight against corruption
Country
Organization
Poland
Central Anticorruption
Bureau
Romania
AMCHAM
Slovakia
AMCHAM
Slovakia
BRITCHAM
Slovakia
Alliance FAIR-PLAY
Slovakia
Pontis foundation
Latvia
AMCHAM
KNAB
Fight against corruption
• CBA initiated the cooperation with European Community related to corruption
prevention. The agreement enables to draw EU funds for corruption prevention projects
(up to 97 % of the project value)
• Recently launched the "Anti-corruption Guidelines" summarizing key principles to
prevent bribery and corruption
• Research of SME (2010) - focusing on main three areas: Legislation and justice,
Administrative burden and corruption and Financial issues and employment.
• Events where corruption and transparency in Slovak business environment are
discussed and publishing articles on its website.
• White Crow Awards - recognise individuals fighting against corruption and nontransparent behaviour in Slovakia. Alliance cooperates with VIA IURIS.
• Fund for transparent Slovakia. The fund will support the non-profit organization which
are oriented to fight against corruption, wastage of public funds, cronyism and unethical
governance.
• Competition for most innovative video on corruption prevention
©2012 KPMG Baltics SIA, a Latvian limited liability company and a member firm of the KPMG network of independent member firms affiliated with
KPMG International Cooperative("KPMG International"), a Swiss entity. All rights reserved. PDC no.8229.
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Contact Details
Jimmy Helm
Head of Forensic Services
KPMG Central & Eastern Europe
Direct:
+420 222 123 430
Mobile:
+420 724 924 164
Email:
[email protected]
Evija Miezite
KPMG in Latvia
Direct:
Mobile:
Email:
+371 (67) 038 066
+371 (29) 479 747
[email protected]
Andris Purins
KPMG in Latvia
Direct:
Mobile:
Email:
+37167038029
+37126597853
[email protected]
©2012 KPMG Baltics SIA, a Latvian limited liability company and a member firm of the KPMG network of independent member firms affiliated with
KPMG International Cooperative("KPMG International"), a Swiss entity. All rights reserved. PDC no.8229.
13
© 2012 KPMG Baltics SIA, a Latvian limited liability
company and a member firm of the KPMG network of
independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a
Swiss entity. All rights reserved. Printed in Romania.
The KPMG name, logo and ‘cutting through
complexity’ are registered trademarks or trademarks
of KPMG International Cooperative (KPMG
International).