With every enforcement action comes lessons and warning tales for other companies and compliance officers. Last week Qualcomm paid $7.5 million to settle SEC charges that it violated the Foreign Corrupt Practices Act by hiring relatives of Chinese officials responsible for deciding whether to select the company’s mobile technology products.
Lessons abound for the savvy compliance professional from this enforcement action. The most important is this: Train your HR department to spot problematic hiring.
Qualcomm offered full-time employment and paid internships to candidates referred to internally as “must place” or “special” hires.
In one example, the son of a decision-maker’s initial interview for permanent employment resulted in a “no hire” decision, with the report stating he was not a skills match and didn’t “meet the minimum requirements for moving forward with an offer.”
The interviewers of this candidate said “he would be a drain on teams he would join.” That should have been the end of the story.
Unfortunately, an HR Director responded that Qualcomm had to go through with the hire because they were “operating under a different paradigm here.”
From the Qualcomm case and BNY Mellon’s $15 million resolution of FCPA charges in another princeling action last year, it should be clear that there needs to be uniform hiring decisions based on sound criteria for every internship and full-time position.
Qualcomm said in a statement last week that it “now closely monitors to determine if a candidate has any relationship with an employee of a government agency or state-owned entity, and applies a stricter standard of scrutiny in an effort to avoid potential FCPA risk in the future.”
(Qualcomm operates in the UK, so it might also want to check its policy to review all candidates for fair and equal treatment — an internship or full time job is almost certainly a thing of value that could be used to bribe a private party as well as a government official. The UK Bribery Act can apply to bribery of both government officials and non-government officials.)
Compliance departments must work hand-in-hand with HR to ensure that problematic hiring is noticed, flagged, and dealt with properly.
Specifically compliance officers should:
- Train HR on red flags related to problematic hiring, including lack of qualifications for the candidate or requests for special treatment due to client relationships
- Work with HR to establish a unifying criteria with respect to minimum qualifications and train them to come to you if someone tries to undermine or skirt those requirements
- Consider adding a question regarding client relationships to internal hiring forms to check for special relationships which might influence decision-making
- Ask on internal hiring forms about relationships to government officials, to check for potential to influence commercial decision-making
- Ask also about relationships of the hiring decision to active tenders or procurements, and
- Consider an audit or review for each new class of interns.
Qualcomm got it wildly wrong. But going forward their HR department (and HR departments throughout the world) can learn a big lesson: Work closely with compliance on every hiring decision, every time.
Kristy Grant-Hart, pictured above, is the author of the book How to be a Wildly Effective Compliance Officer. She is Managing Director of Spark Compliance Consulting and is an adjunct professor at Delaware Law School, Widener University, teaching Global Compliance and Ethics. Before launching Spark Compliance, Ms. Grant-Hart was the Chief Compliance Officer at United International Pictures, the joint distribution company for Paramount Pictures and Universal Pictures in 65+ countries. She can be found at www.ComplianceKristy.com, @KristyGrantHart and emailed here.