Ernst & Young Corruption Survey Results

Ernst and Young surveyed over 3,000 employees from 36 countries in Europe, the Middle East, Africa and India and found that a large percentage are aware of fraud in their organizations. The percentage admitting they knew of fraud seems to increase as you move up the management ladder of the organization. For example, 42% of board members and senior managers admitted to knowing about financial reporting irregularities. Apparently they admitted that either sales or costs had been manipulated...

Before you're tempted to dismiss this as due to corruption in the under developed nations, it turns out that while the rates are much higher in the third world, even highly developed countries in Europe report significant amounts of fraud (including financial reporting fraud) is going on in their companies. My guess is that the US is probably not as good as the best European nations

So much for fairly stated financial statements, not to mention, bribery and other forms of corruption...

Lance Armstrong Allegedly Bribed USADA

60 Minutes is going to air a segment on Lance Armstrong on Wednesday, January 9th, at 10 pm Eastern. The CBS News website states that they will report that someone representing Lance offered USADA a $250,000 "donation" in 2004. Travis Tygart, USADA CEO, is quoted as saying "We had no hesitation in rejecting that offer."

I suppose the truth about Lance will trickle out for years to come...It definitely makes a good case study for anyone out there teaching about fraud, corruption and organized crime. It makes me wonder if Lance's real name ends in Gambino or Bonanno...Maybe Armstrongo...

What happens when you mix Pharma with Politics?

Apparently, the result is shady dealing and crony capitalism at its finest. When favors are made to a vendor or customer in business we call it corruption. In this case, internal emails from sources outside of Washington are providing evidence that deals were cut behind closed doors that will cost taxpayers as companies like Pfizer and Merck get profit protection in return for campaigning for Obamacare. This is according to several sources that are covering the findings of an investigation by the House Energy and Commerce committee of negotiations between the drug companies and the White House.

Here are some links to news sources if you want more details:

How to Lose 95% of $9.1 Billion (i.e. that's $8.7 Billion with a B)

Leave it to the Department of Defense (DoD)! That's right. A new audit was released today shows that "the Pentagon cannot account for over 95 percent of $9.1 billion in Iraq reconstruction money, spotlighting Iraqi complaints that there is little to show for the massive funds pumped into their cash-strapped, war-ravaged nation" according to this article. The report states that the "breakdown in controls left the funds vulnerable to inappropriate uses and undetected loss."

Unfortunately, this is not the first time that the DoD has been shown to be fertile ground for fraud and abuse. In fact, the DoD has never received a clean audit opinion. Never!!! Basically, the DoD has so many holes in their internal controls that you could fly a fleet of B-1 bombers through their financial safety nets.

The career path of a convicted fraudster: Jack Abramoff

The NY Times reported this week that former lobbyist, con man, and convicted fraudster, Jack Abramoff, completed 3.5 years of prison and is now working in a pizza shop in Baltimore, making less than $10 per hour. The article suggests that management subscribes to the marketing philosophy that "There’s no such thing as bad publicity." Maybe so but I would hesitate to give him access to the cash register...

What's the difference between a con-man and a politician?

It appears that the answer is "not much," at least in the case of the former NY State Senator, Efrain Gonzalez, Jr. They both attempt to build confidence in themselves and it appears that many people vote on how well someone can speak persuasively but that's another story for another blog...

Click here to read more about Efrain Gonzalez, Jr....

U.S. Connections to Corruption in Haiti

An investigation by Mary Anastasia O'Grady shows U.S. political connections to corruption in Haiti (see a video here and the article here). I've personally been to Haiti twice and found the people to be hard working but destitute. When I saw the work ethic of may Haitians, I wondered why businesses can't come in and put these people to work and help their economy. The unemployment rate at the time was about 80% and the average wage was $2 per day.

I quickly saw that because of corruption in government, businesses would never get their profits from Haiti. As such, the Haitian people are suffering tremendously. In talking with many Haitians, I also found out that many of them believed that our government had wronged them in the past and it led to much of their troubles. This article confirms these beliefs and suggests that at least one of the individuals given responsibility for overseeing aid to Haiti was connected to this corruption: President Bill Clinton.

I don't claim to know all that has happened in Haiti over the years but this investigation suggests that U.S. politicians were behind some of the corruption that has crippled that country for decades. I am very troubled by the suffering that has existed in Haiti for decades and is only now in the spotlight with the January earthquake.

What I really wonder is how people can sleep at night knowing that they are taking money out of one of the poorest nations on earth where millions of orphans, widows and others are starving. How tragic.

Ever wonder what's in your tomato paste?

When bribes are paid to get business deals, the real losers are often the consumer who ends up paying either higher prices or gets lower quality goods or both. The NY Times reports that an investigation shows that the food industry has had significant, if not, widespread corruption. For example, a tomato vendor, SK Foods, paid bribes to numerous food companies, including Kraft, to sell their tomatoes at inflated prices and sometimes to give the company tainted, moldy tomatoes. Here are some juicy excerpts from the NY Times article:

The scheme, as laid out by federal prosecutors, has two parts. Officials say that (officials) at SK Foods greased the palms of a handful of corporate buyers in exchange for lucrative contracts and confidential information on bids submitted by competitors. This most likely drove up ingredient prices for the big food companies.

In addition ... SK Foods shipped its customers millions of pounds of bulk tomato paste and puree that fell short of basic quality standards... Often that meant mold counts so high the sale should have been prohibited under federal law...

The scope of the tainted shipments was much broader than the bribery scheme, touching more than 55 companies. In some cases...the tainted ingredients wound up in food sold to consumers.

The article also talks about how tone at the top appears to have affected some major companies in the food industry and perhaps the entire industry. The article reads: “If you have a couple of people who are willing to bend the rules and they set that tone from the top, that can spread very quickly in that company and in that niche of the industry, and that’s what happened here,”

This shows how corruption in business can even taint your spaghetti sauce!

I know we have some political challenges in the U.S. but it could be worse...

I would say that this NY Times OpEd describes level of political corruption in Africa that makes our troubles sound pretty mild...

What's happening in New Jersey?!

A NY Times Op Ed offers these encouraging words to those who don't live in New Jersey:

No matter what dreadful embarrassment your state is facing, you can always console yourself by remembering that you do not live in New Jersey. On Thursday, a vast corruption sweep there netted three mayors, two state assemblymen, five rabbis and a guy who had allegedly been running an organ-trafficking business that has left swathes of the population of Moldova walking around with only one kidney.

Read this for more details...

Want job security? Fight fraud for a living...

The WSJ reported that the U.S. Justice Department is hot on the trail of U.S. companies that are bribing foreign officials in violation of the Foreign Corrupt Practices Act. According to the journal, the law

is worded broadly enough that it's spawning an army of consultants, some of whom once prosecuted bribery cases for the Justice Department, who offer to interpret the gray areas.

"When you have a law that can result in criminal sanctions and jail time and that you can violate without actually realizing you're violating it, that's terrifying," said Alexandra Wrage, president of Trace International Inc., a Washington-based nonprofit specializing in antibribery compliance.

The FCPA consulting business is a huge growth area for the Big Four accounting firms and other forensic accounting practices and is an example of two forces that are leading to a need for more people who know how to detect corruption in business. One force is the trend in society and business of lower standards of ethical behavior. The other trend is the effort to counteract the first trend by increasing government regulation.

I personally don't see either trend reversing any time soon. As such, if you're looking for a promising career, this is an area to consider.