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Harry Cassin
Publisher and Editor

Andy Spalding
Senior Editor

Jessica Tillipman
Senior Editor

Bill Steinman
Senior Editor

Richard L. Cassin
Editor at Large

Elizabeth K. Spahn
Editor Emeritus

Cody Worthington
Contributing Editor

Julie DiMauro
Contributing Editor

Thomas Fox
Contributing Editor

Marc Alain Bohn
Contributing Editor

Bill Waite
Contributing Editor

Russell A. Stamets
Contributing Editor

Richard Bistrong
Contributing Editor

Eric Carlson
Contributing Editor

At Large: The difference a decade makes

When the FCPA Blog published its first top ten list in 2010, Siemens was on top with its $800 million resolution, and Titan Corporation was in tenth place with a $28.5 million resolution.

What a difference a decade makes.

Harry’s top ten post after this week’s Airbus settlement included this stunner: “Four FCPA settlements have now reached a billion dollars or more, and it takes at least $579 million to even appear in the current top ten.”

Some quick math: The total value of the current top ten FCPA cases (criminal and civil penalties, disgorgement, forfeitures, and the like imposed on corporations for FCPA violations) is $10.3 billion, meaning the average top ten FCPA case is now worth $1.03 billion.

A bit more math: In the 2010s, the feds brought 152 corporate FCPA enforcement actions. The total criminal and civil penalties in those cases was $15.4 billion. So the average FCPA case in the decade of the 2010s was $101 million.

For comparison, in the 2000s the feds brought 57 corporate FCPA enforcement actions, with total penalties of $1.8 billion and a per case average of $32 million.

As I said, what a difference a decade makes.

– – –

While preparing an upcoming post for the FCPA Blog about high-visibility management techniques (i.e. transparency), I remembered something that happened when I was an Aramco lawyer in Dhahran.

The general counsel transparently divvied up contracts needing legal review. They were put into bright green folders and a secretary delivered an equal number of “green sheets” to the in-basket on each lawyer’s desk. When the lawyer finished a review, the green sheet would go to their out-basket for collection.

Everything was visible and we could all keep track of each other’s green sheet performance, if we wanted to, just by looking at the size of the piles in each other’s baskets.

What happened?

A few compulsively competitive lawyers dove into the green sheets and moved them in and out with maximum velocity. Most of the other lawyers found a comfortable rhythm with the green sheets, with a steady inflow and outflow.

But for one lawyer, the green sheets generated too much public pressure. He wasn’t fast enough to keep his in-basket and out-basket balanced and he didn’t ask for help. He began hiding green sheets in locked drawers in the office furniture. By the time the general counsel located the bottleneck, there was a mob of angry proponents demanding action on their contract reviews.

The Aramco GC’s transparent management style worked most of the time. But not always.

– – –

Back to the theme of what a difference a decade makes . . . .

In 2010, Wells Fargo still enjoyed a wonderful reputation for retail banking.

The “friendly stagecoach bank with a historic legacy dating back to 1852” had even emerged unscathed from the 2008 subprime disaster because of its conservative loan practices.

Now, ten years later, Wells Fargo is synonymous with mind-boggling legal, regulatory, and ethical failures.

The bank’s downfall is easily traceable to a business model based on unreasonable sales goals and the “insane” culture those goals produced.

Here’s what happened — using mainly language from the Treasury Department’s Office of the Comptroller of the Currency:

Wells Fargo’s management intimidated and badgered employees to meet unattainable sales goals. The bankers were monitored “daily or hourly,” with their sales results reported to their managers. Thousands were fired for missing their goals.

A regional Wells Fargo president reportedly said or insinuated that everyone had to make 120 percent of their sales goals, no exceptions. Some employees who only made 110 percent were “formally counseled.” One manager was getting ready to fire a banker for being at 105 percent.

The result: Hundreds of thousands of Wells Fargo employees succumbed to the intense pressure. They opened millions of unauthorized checking and savings accounts, debit cards, and credit cards, often using falsified phone numbers, home addresses, and email addresses. To pump up fees, the bankers only offered customers “bundled” products and services, and transferred money between their accounts without authorization.

The cover-up, as usual, was worse than the crime.

While 30,000 employees per month engaged in activity that regulators said was “indicative of sales practices misconduct,” Wells Fargo’s leaders from the law department, risk management, audit, and the business side allocated enough resources to investigate only three employees per month.

In October 2016, a member of the bank’s operating committee (which included some of those same department leaders) told colleagues: “Don’t say there was nothing wrong with our culture. At least in the case of parts of the [bank], to suggest so just ignores a reality that everyone knows… there was insane pressure on people to produce ‘widgets’/ new account sales.”

Despite what “everyone knew,” not once during 14 years of sales practices misconduct did any of those leaders escalate the problem to outside regulators.



“At Large” is my new space at the FCPA Blog, where I’ll appear regularly with thoughts about enforcement and compliance, or other tidbits that catch my eye. Other authors might also occasionally appear in At Large (the FCPA Blog has always been a community bulletin board). Readers are welcome to send in comments or questions, which I’ll try to respond to. 

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