Corporate Compliance Insight’s CEO, Maurice Gilbert, dives in with Richard Bistrong, a regular contributor at CCI and a former VP of International Sales who experienced firsthand a brush with the Law as a result of some missteps on the front line. Richard shares here a bit about his story – from the deeds themselves to getting caught, cooperating with law enforcement and continuing to confront corruption from day to day.
Maurice Gilbert: Hello Richard, and thank you for joining me for this Q&A. I see you have been quite busy writing over the past six months, so for readers who might be new to your perspective, perhaps you might give us some background information?
Richard Bistrong: First, thank you for the opportunity to engage with you and your community through this Q&A and also for asking me to join Corporate Compliance Insights as a regular contributing author. Quite a number of your contributors have written about personal FCPA enforcement and anti-bribery compliance, so I appreciate your inviting me to respond to your questions and to openly express my own perspectives and experiences.
As to my background, I literally “grew up” in the Defense and Law Enforcement supply industry, through a fourth-generation family business, started by my great-grandfather and which was sold in 1992. In 1998, I was appointed the Vice President of International Sales in a large, successful, and publicly traded company that distributed and manufactured military and law enforcement products. From 1998 to 2007, I traveled overseas approximately 250 days a year and was posted to live and work from the UK twice during that period. So, in a general sense, I was literally traveling the world most of the time and was rarely “off the road.” It was also during that time when I first confronted international bribery in my work as an international sales executive.
In early 2007, I was terminated by my prior employer and shortly thereafter, through my attorney Brady Toensing, I was contacted by the Justice Department and given the opportunity to proffer. From those initial proffer sessions, with federal investigators and prosecutors, I started cooperating with U.S. federal law enforcement. My cooperation lasted five years, the first half of which involved covert cooperation, which was then followed by trial preparation and trial testimony as a government witness. After my covert cooperation concluded, I formally pleaded guilty to one count of conspiracy to violate the FCPA, including its books and records provisions, as well as exporting controlled goods without the proper authorization. In the summer of 2012, I was sentenced as part of my plea bargain, and served 14 and a half months at a federal prison camp, having been released in December 2013.
In addition, in exchange for cooperating with a number of UK enforcement agencies, both covert and overt, I was given “immunity from prosecution” by the UK Revenue and Customs Prosecutions Office, which covered issues of illegal conduct that took place while I was residing and working in the UK.
MG: During this time when you were traveling, and to use your words “confronting corruption,” did you know you were breaking the law?
RB: Absolutely, and I totally rationalized it. “Confronting corruption” sounds too third person, I bribed and I knew it was illegal, but as I have shared in a number of blog and guest posts, I wasn’t thinking at all about consequences.
But were you scared about getting caught?
Not at the time. Many of the illegal conversations I had took place far away from the home office and corporate management. In fact, during my travels, when the talk turned to corruption, the only people present were myself and the agent or intermediary. Thus, given my remote location, the lack of “witnesses,” and the fact that the company was pleased with my personal and divisional sales performance, I felt that there was little chance I would ever get caught. These circumstances are common in international business, and that is a part of the challenge for those at the front line of international commerce and the compliance professionals who are tasked with helping them to be both successful and compliant. Much of the conduct, like my own, is covered with secrecy and takes place at remote locales with little or no oversight.
MG: What about the performance environment, especially in public companies, how does that impact behavior?
RB: Again, lets return to how I “rationalized bribery,” and to be clear, this is in no way an attempt to justify my behavior. What I did was wrong, and as I shared, I knew it was wrong when I did it. So my hope here is that through our dialogue that I might expose compliance professionals and corporate executives to the pressures and temptations that many overseas business executives face, but which are not often discussed or even acknowledged among corporate executives.
I realize that for those responsible for anti-bribery compliance, the choice between corruption and compliance is as simple as “walk away.” But in reality, those choices become more difficult when front-line international business groups are being compensated with lucrative compensation plans, as is often the case. When those incentive plans are indexed to personal performance in corrupt regions, as opposed to group or divisional performance, the anti-bribery message can get distorted, diluted or in the worst case, discarded, as those on the front line now might think of compensation and compliance as a zero-sum game. It is a dangerous situation for all involved when someone starts to consider compliance as “bonus prevention” and starts pondering, “what does management really want, compliance or sales?”
Part of that thought process is encapsulated quite well in a blog post by another CCI contributor, Thomas Fox, called “Mickey Rooney and The 90 Cent Solution,” in which Mr. Fox references the thinking of an international regional manager, who pondering compliance and sales, is alleged to have said “If I violate the code of conduct, I may or may not get caught…If I miss my numbers for two quarters, I will be fired.” What Mr. Fox calls attention to is the “quarter” game, which usually relates to public companies. In public companies, the entire concept of individual performance, financial forecasts and incentives gets “re-set” at the start of each fiscal quarter, as it now becomes the scenario of “what have you done for me lately?” Public companies don’t as a rule tolerate sales decreases, and in the international arena, where sales in many regions are highly centralized and unstable, with a “win-big, lose-big” impact, the pressure to perform and deliver on a quarterly basis is intense.
MG: So, what do you see as the current anti-bribery challenges, and from your perspective, solutions?
RB: The dynamic and tension I described as “zero-sum” creates a number of compliance challenges, which – looking at the history of anti-bribery enforcement – do not seem to be going away. But to be clear, I am not approaching the question from a legal, audit or investigatory perspective; you have contributors who are experts and well experienced in those fields. Rather, I will respond as one who was on the front lines of international business, who found it easy to rationalize corruption and who paid the judicial price by a loss of liberty.
I think in the context of how compensation impacts compliance, human resources might want to take a greater role in looking at the bonus plans in territories which have a reputation for corruption. The challenge of compensation and compliance does not call for a “one-size-fits-all” model. While I realize that HR has a great voice in most compliance programs, including training, documentation, etc., I have not read much about bringing HR into the discussion of individual and group compensation planning with a focus on territorial reputation. A businessperson who has regional responsibility in Scandinavia, as an example, should not have the same compensation bonus structure as someone who is responsible for South America. Again, from my perspective, taking a look under the hood of bonus plans for international personnel is a critical link. Thus, I think HR has to ask: are the ends of achieving bonus in line with the means of compliant behavior in achieving those goals?
I also wonder how many companies, including C-Suite personnel and those who serve on the relevant Board committees, are looking at the business strategy itself as a potential red flag of corruption? I call attention to business strategies and growth forecasts in regions that have reputations for corruption, and ask if anyone is asking when those targets are achieved “how did we get there?” Or is it all high-fives? How many times can a company, as we have recently seen in the pharma industry, keep saying “it’s all about the rogue employees” without finally looking inward to analyze potential inherent red flags buried within corporate business strategies and regional growth plans.
Accordingly, as I have shared, I think some companies might have to consider taking a step back in their forecasts and business strategies in order to take a step forward in anti-bribery compliance.
MG: Are you implying that it might be necessary to reduce sales to embrace an anti-bribery ethic and program?
RB: I think that a critical step is to listen to those on the front line of international business units and to get them to open up as to the corruption risk they are facing in the field. As I have shared, the more upsetting those conversations are to compliance personnel, the better they are going! You cannot fix what you don’t know, and due to the “lack of witnesses” dynamic, there are many flags that a compliance executive does not see or hear. By creating an environment where front-line personnel feel comfortable in sharing the risks they are facing, compliance can then address strategies, compliance and, if necessary, compensation and forecasts to make sure that the means of compliance are in alignment with the ends of achieving forecast and bonus.
Does that mean having to having to wind back sales plans and forecasts? I think the results of those discussions would help to give corporate executives the information they need to make such a decision.
MG: Well, what about your experience, where do you see that as providing value with all these challenges?
RB: http://corporatecomplianceinsights.com/wp-content/uploads/2014/10/speaker.jpgI think that will evolve over time. As I am sure you can imagine, in many ways, this has been a “long and painful process,” for my family and me. Yet I have had a broad and extensive career as an international sales executive along with an extended term as a cooperator for multiple governments, including the U.S. and UK. So I currently look at my blog, website (www.richardbistrong.com) and speaking invitations as vehicles to engage with compliance and business professionals on current anti-bribery issues and challenges. I do this by sharing my own perspectives and inviting those of others. I hope that by welcoming outside comments and discussion that I might ascertain if the sum of my experience brings any value by complementing the current level of anti-bribery debate and practice. Furthermore, I look at this as a long-term process. I am employed in my community, working on a weekly basis to satisfy and exceed my court-ordered community service, so I see this very much as an effort to find a long-term voice in the compliance community.
When I speak of my perspective, I am not just speaking of recounting my story of “real bribes” and “real consequences,” which I think might be a compelling deterrence message to international front-line business personnel. What really interests me is how I can help an organization with current and real anti-bribery challenges, especially as they impact those operating in overseas markets. I think that by sharing my experience both in a general sense (for example, how I rationalized bribery) and in a specific sense (as in how I experienced third-party circumvention of on-boarding processes), that I might be able to amplify the emotions and experiences that compliance personnel and corporate executives do not often hear about. Remember, it is international front-line teams that have to confront risk and corruption in their travels. In my opinion, they need governance tools for how to manage their challenges in the field beyond just the compliance paradigm of “don’t do it.” The dynamics of international sales are complicated, and they have regional peculiarities. The people dealing with those issues in their territories need solutions that address and incorporate those challenges, both globally and regionally. I hope that my own experience might both help others to realize that personal and professional success can be a partner to embracing an anti-bribery program and ethic. Thank you.
Richard Bistrong spent much of his career as an international sales executive and currently blogs and consults on FCPA and anti-bribery compliance issues from that perspective. Mr. Bistrong was the Vice President of International Sales for a large, publicly traded manufacturer of police and military equipment, which included residing and working in the UK. Prior to that, he was the Executive Vice President (and founding family member) for one of the largest global manufacturers of bullet resistant armor for the police and military markets. In 2007, as part of a cooperation agreement with the United States Department of Justice and subsequent Immunity from Prosecution in the UK, Mr. Bistrong assisted the United States and other governments in their understanding of how FCPA violations occurred and operated in international sales. Mr. Bistrong’s cooperation, including covert cooperation, and as a cooperating witness, which covered five years, was one of the longest in US white-collar criminal investigations. In 2012, Mr. Bistrong was sentenced as part of his own Plea Agreement, and served fourteen-and-a-half months at a Federal Prison Camp.
Richard now blogs at www.richardbistrong.com
Mr. Bistrong has a BA from the University of Rochester and an MA in Foreign Affairs from the University of Virginia, including studies at the Institute for European Studies in Vienna, Austria. He is a member of the Society of Corporate Compliance and Ethics. Mr. Bistrong resides in the New York Metropolitan area with his wife and has two children.