In this week's post, Nelvin Tam discusses the latest
on Formula One president Bernie Ecclestone's bribery scandal,
and the implications for the corruption and fraud risk management
'If you think compliance is expensive, try
As the former US Deputy Attorney General Paul McNulty succinctly
put it, many companies are reluctant to implement a compliance
framework due to its perceived high costs. However, the cost of not
complying with the rules and regulations could potentially be even
more - see, for example, the USD 1.3 billion Siemens settlement in
Bernie Ecclestone (widely known as the boss of Formula One)
would know this cost in first person. He was charged in Germany
with bribing former Bayern LB Chief Risk Officer Gerhard Gribkowsky
USD 44 million to facilitate a sale of the bank's 47% stake in
Formula One to parties favourable to Mr Ecclestone in 2006. Despite
Mr Gribkowsky being convicted of taking a bribe and sentenced to an
8.5 year prison term, Mr Ecclestone was approached by the German
authorities with an offer to settle the case. He negotiated a USD
100 million settlement with no convictions recorded. Of the USD 100
million settlement amount, USD 99 million went to the courts and
USD 1 million to a German child hospice foundation. It's the
highest amount ever paid in such circumstances in Germany. However,
this could be seen as small change compared to Mr Ecclestone's
estimated net worth of USD 4.2 billion.
The German Code of Criminal Procedure allows prosecutors to drop
a case in exchange for a payment or community work, so long as the
gravity of the offence does not outweigh proceeds. Some would say
this would seem to defeat the purpose of a criminal proceeding.
(And is particularly ironic in dealing with allegations of
bribery!) In comparison, here in Australia there is no way a person
can write out a cheque to settle a criminal proceeding.
Mr Ecclestone has a track record of controversies with his money
– In 1997, he donated GBP1 million to the UK Labour Party,
which subsequently delayed the banning of tobacco advertising for
Formula One. Both the Labour Party and Ecclestone denied that the
decision was related to the donation (of course!), but Labour did
return the money after the donation came to light in the press. So
in that case, Mr Ecclestone got the decision he wanted and his
money back - not a bad deal I must say.
In normal circumstances, people do not have the funds to survive
a USD 144 million cost and certainly would not still be in their
job. But for Mr Ecclestone, the amount is relatively small and with
the payment comes a substantial reward that he gets to stay in
control of F1, the business that he has devoted his life to.
To reiterate, there is no way that such a deal would have been
made in Australia. So, did the German Courts negotiate an
appropriate settlement amount when there was a chance they may not
have achieved a criminal conviction? Or was this a case where
bribery did pay?
Nelvin Tam is an Executive Analyst at KordaMentha Forensic.
Since joining the firm in 2010, he has worked on a range of matters
including fraud and corruption investigations, forensic accounting
dispute work and data analytics consulting.
ASIC chairman confirmed that ASIC will continue its tough stance against suspected insider trading.
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