by Michel Klompmaker
Economic crime scholarship presents an organisation as a double-edged sword. On the one hand, organisations are cheated by their employees, discriminated by corrupt public officials, and face cyberattacks, whereas on the other hand, organisations evade taxes, defraud their customers, and cheat competitors. While fraud, corruption and other forms of economic crime cause immense losses to individual organisations, as well to society, many of those crimes are committed by organisations themselves. On Thursday, February 4, 2021 the 2nd Winter Economic Crime Symposium – Organizations: Beyond Victims and Perpetrators was held online by the Centre for Counter-Fraud Studies at the University of Portsmouth. The event sought to explore the network of relationships inside and between organisations and how it should not be reduced to two groups, victims and perpetrators. With a theme focused on economic crime, several professionals gave keynote presentations on a range of topics from brand protection, corruption, corporate compliance, foreign bribery, and intellectual property (IP) crime. The Risk & Compliance Platform Europe was also a media partner and covered the event via its website. This is part one in a series of five articles on the event.
The six layers of perpetrators
Peter Y. Solmssen (Chairman of the IBA Committee on Non-Trial Resolutions of Foreign Bribery Cases) gave a presentation on corporate compliance in the area of international bribery and bribery of foreign officials. He stated that when you look at victims and perpetrators, what becomes apparent is when you peel back the layers, you find that everybody is a victim and that you can’t find any perpetrators. What he meant by this is that nobody would really consider themselves to be a perpetrator and that many perpetrators would see themselves as victims. Peter Solmssen went on to state that there are six layers of perpetrators:
- First layer: You have the person that pays the bribes and engages in activity directly related to the corrupt public official, for example a salesperson
- Second layer: You get the sales director, the person you are supervising
- Third layer: You have the senior person whose job it is to manage compliance
- Fourth layer: You come to the director responsible for managing the company
- Fifth layer: Is the corporation itself
- Sixth layer: Is the shareholders who bear some responsibility for the activity of the corporation
He stated that when you look at all of these six layers of perpetrators, they can all consider themselves to be victims. Consider the first layer with the person who paid the bribe or negotiated the deal. This person would say that they are not in any way culpable because what they did was for the company. They did not put any money in their pocket and rather did it as a part of the corporation’s program to save jobs, for example. He said that this is not always true, but’s it what the salesperson who pays the bribe would often tell you. In fact, the money would often go indirectly into the salesperson’s pocket. He added that corruption taints everyone who gets near it and that the person who you think is most likely the perpetrator will claim that they are in fact the victim.
So, now we go up to the second layer where you find the sales director and Peter Solmssen stated that they would tell you that they paid the bribe under duress because the sales targets were unrealistic and couldn’t be met. They would say that the only way to find volume was through paying bribes. He stated that he didn’t accept any of these stories of losing sales because the other person would be taking bribes. He further stated that the poor salesmen would often use local corruption as an excuse and would say that they were doing the best they could under impossible circumstances.
CEOs and Directors – You won’t find my fingerprints on anything
Then, you go up to the third layer where you have a senior person such as a CEO, CFO, head of compliance, etc. He stated that once something goes wrong, everyone within the corporation wants to hold the senior person accountable. He stated that the CEO would say that they got an extensive compliance system, hired the best people, and that they did the best they could. In other words, they would claim that they were doing everything expected from a management position, which is sometimes the case, as Peter Solmssen stated.
Coming to the fourth layer where you have the directors, he said that they would say: our job is to supervise, and we issued all the right directives. He continued by saying that the story you could get with the director is quite similar to the story of the CEO’s in the third layer. He also stated that oftentimes the directors would use this saying: ‘You won’t find my fingerprints on anything’, which he stated turns out to be true, which in turn makes it difficult to prosecute them.
Then we arrive at the fifth layer where you have the corporation. He stated that corporations aren’t people and as a result, you can’t put them in jail. He continued by saying that corporations are nothing more than a license to conduct limited activities and to see them as people who are culpable is kind of silly.
Finally, comes the sixth layer where we have the shareholders. He discussed how there ought to be a microeconomic cost to being caught paying bribes which would seep into the marketplace. He further mentioned that shareholders would pay attention to how good companies were at preventing bribery.
Zero tolerance to crime does not mathematically make sense
Peter Solmssen then posed the question: what do I do with criminality once I find it and how can I handle it in a responsible way? He noted how there should be a zero tolerance to criminality, which mathematically doesn’t make any sense that the crime rate is 0%. He indicated that the question here then is: how do you reduce it to a very low level and how can you prevent, detect and punish the crime once it’s found?
Going back to the six layers of perpetrators that he had discussed, he mentioned that all layers have a plausible argument as to why they aren’t the person who should be necessarily held accountable. He pointed out how everyone has some culpability and that none hold all of it, even the poor shareholder (who you may have some sympathy for), and that it seems to be more stupidity that they engage in criminality rather than weakness. So, naturally you ask: what can you do about this? Well, he said that one essential approach is by creating the proper incentives and conversations with law enforcement. By incentives, he meant giving the compliance people and lawyers clear proof that the case is worth investigating. Moreover, he also stated that you want compliance people who will find these things, resolve them, and end criminality. As such, it gives you an efficient, effective crime prevention pathway. He also said that some companies have resources that far surpass the government’s where they can pick up signals of criminality before someone else does.
Conclusion
As a final, interesting comment on bribery, Peter Solmssen discussed how nobody wants to engage in bribery because it’s expensive. He said that very little money is left over for the company to pay them off. Bribery can lead to careers being ruined and the reputation of companies becoming tarnished. There is very little incentive and advantages of engaging in this criminal activity and that oftentimes, bribery does not start within organisations.
He ended his keynote by stating that it is very hard to find perpetrators, and that the answer to this is to have a more sophisticated process to engage corporations to work together with law enforcement.
