The Olympic figure skating scandal brought us back to basics. Do a risk assessment. Identify red flags. Conduct timely due diligence. Ensure adequate remediation.
Risk Assessments
As the U.S. Department of Justice’s Evaluation of Corporate Compliance Programs tells us, among the first questions a prosecutor will ask is how the company has “identified, assessed, and defined its risk profile.” Similarly, the DOJ Justice Manual explains that the compliance program must be “designed to detect the particular types of misconduct most likely to occur in a particular corporation’s line of business.”
What might an Olympic figure skating risk assessment look like?
For starters, we have competition for highly scarce resources: the satisfaction and glory of an Olympic medal. The competitors are often children who may lack parental protection and are vulnerable to manipulation. So too are these children surrounded by third parties who may not have the best interest of competitors at heart.
The risks in this field of competition are plain. But what about the Beijing Olympics specifically?
Red Flags
Andrew Hayward and Tony Osborn, in The Business Guide to Effective Compliance and Ethics, explain that a red flag “does not mean that [a] risk or problem is actually present” but signals a heightened risk of misconduct. The right response is not necessarily to terminate the relationship or withdraw from the deal, but to investigate.
In the context of the above risk assessment, consider the red flags surrounding female figure skating in these Olympics. Only three female athletes in the world can land quads. All come from Russia, a country already sanctioned for state-sponsored doping. All three athletes are minors. Add to this a controversial figure-skating coach, well-known for brutal training techniques that jeopardize skater physical and mental health in the pursuit of success.
How should an organization respond in the face of such numerous and obvious red flags?
Due Diligence
The Beijing Olympics required due diligence for Russian athletes generally and Russian figure skaters in particular. The Olympics already had a due diligence process to prevent corruption in the competition, including drug testing. How then did we still have a “non-compliant event?”
FCPA Blog Contributing Editor Tom Fox explains in The Corporate Compliance Handbook that “if additional information is needed or points clarified . . . now is the time to do it and not wait until later in the process.”
The due diligence here, in effect, was the front-end WADA drug testing. Arguably the IOC, WADA, and even Kamila Valieva had all done their part to this point. But Valieva’s drug test results didn’t come back until 44 days after she submitted her sample, well after the games began and Valieva had already begun competing.
The due diligence failed to clear the red flags before the transaction proceeded.
Remediation
The DOJ’s compliance guidance also tells us that in the face of a previous violation, an organization must conduct “an adequate and honest root cause analysis to understand both what contributed to the misconduct and the degree of remediation needed to prevent similar events in the future.”
The IOC had already banned Russia from officially competing in the Olympic games for four years instead of requiring the Russian athletes to compete under the flag of the Russian Olympic Committee.
But was this remediation adequate?
This remediation measure imposed on Russia obviously failed to identify the root cause of the doping in the first place. A pause on official participation in the games did not force the organizational culture change requisite for good faith compliance.
In the end, remediation is about learning from your mistakes. Let’s hope the compliance world, not to mention megasports, can learn something from this one.
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Andy Spalding, pictured above right, is Senior Editor of the FCPA Blog, Professor at the University of Richmond School of Law, and Chair of the Olympics Compliance Task Force. His book, A New Megasport Legacy: Host-Country Human Rights and Anti-Corruption Reforms, is forthcoming next month with Oxford.
Danny Hales, above left, is a law student at the University of Richmond School of Law studying business and compliance law.
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