When news broke this spring that the Securities and Exchange Commission had launched an informal investigation into the bribery scandals plaguing Siemens, CFOs in Europe gave a collective shudder. Combined with the announcement that the U.S. Department of Justice also had the German electronics and engineering company in its sights, the SEC news confirmed what many CFOs suspected: that America's crackdown on overseas bribery is targeting both U.S. and foreign companies.
The evidence had already been mounting. In October of last year, the SEC reached a settlement with Statoil, a Norwegian oil and gas company that admitted bribing Iranian officials. In the first case against a non-U.S. firm listed in the States, Statoil agreed to pay a $10.5 million penalty. Then, in February, three subsidiaries of Vetco International, a UK company, pleaded guilty to bribing Nigerian officials, while a fourth subsidiary entered into a deferred prosecution agreement. Fines paid in that case: $26 million.
Many fear that Siemens, whose executives have been accused of paying some €420 million in bribes and making illicit payments to union officials, is only the tip of the iceberg (see On the Record). And as the long arm of U.S. justice stretches across the Atlantic, CFOs in Europe aren't just worried about fines and reputational damage; concerns are also growing that their own countries' regulators will take their cue from the United States and raise the heat.
That would be a radical change. Although many European countries were among the signatories of the Organization for Economic Cooperation and Development's Anti-Bribery Convention in 1997, none has been as aggressive in prosecuting bribes-for-business perpetrators as the United States. The UK's Serious Fraud Office, for one, has a long track record of dropping fraud investigations before they reach prosecution.
The threat of regulation from abroad and at home, however, should have companies rethinking their ethics programs — and quickly. Vetco, for example, is required as part of its agreement with the DoJ to roll out a new system of internal controls to deter and detect fraud at all of its subsidiaries. And as it awaits its fate, Siemens is voluntarily overhauling its code of ethics and launching a worldwide review of compliance. The jury is obviously still out in that case. But now that they see what's coming, other companies might not want to wait until the DoJ comes knocking to get their ethics in order.
Janet Kersnar is editor-in-chief of CFO Europe.