3M’s Recent Bribery Violations a “Very Common Practice” in Business, Expert Says
Recent headlines about the multinational conglomerate 3M violating the U.S. Foreign Corrupt Practices Act (FCPA) through its bribery of Chinese government officials reveal a "very common practice" against proper compliance protocols in the business world, according to an international anti-corruption expert interviewed by OCCRP.
Susana Sierra, a Chilean business compliance expert, commented on the quid pro quo behind the 3M corruption scandal. She is also the CEO of BH Compliance, a firm that measures the effectiveness of corporate crime prevention programs.
As a multinational conglomerate that operates across multiple sectors, 3M is a global leader in the production of tens of thousands of products including adhesives, medical equipment, and electrical components, to name a few. The company has a net worth in the tens of billions of dollars.
But despite its titan of industry status, its employees were no less susceptible to operating under the table; the company was fined US$6.5 million last month for bribing Chinese government officials with all-expense-paid trips in exchange for their purchasing of 3M products.
“These facts would describe the crime of bribery through a very common practice,” Sierra told OCCRP. “In this regard, employees of the 3M subsidiary in China would provide something of value…in order to persuade them to give something in return, and then conceal these expenses in their financial records.”
According to the U.S. Securities and Exchange Commission’s (SEC) findings, 3M organized under the table leisure activities for its esteemed clients that ran alongside legitimate events the Chinese officials were scheduled to attend in the first place, thus providing an alibi for their travel.
“Concealing the transactions would precisely demonstrate that attending the events and conferences - which were supposed to be the purpose of the trip - was an excuse to entertain the guests,” Sierra said.
Falsified internal compliance documents were then submitted back to company headquarters which “affirmatively denied or omitted mention of the tourism activities,” the SEC said in its official press release. Company employees also stressed upon their guests that the all-expense-paid trips were to be kept a secret.
Following the scandal’s exposure, 3M said that it had taken measures to enhance internal controls meant to “prevent similar instances from occurring in the future,” Reuters reported.
But according to Sierra, a well-detailed compliance program in and of itself isn't sufficient to prevent such lapses from occurring.
Such anti-corruption protocols “must be monitored continuously to ensure these policies are being followed,” she told OCCRP. “In this case, the controls were in place, but apparently, the audit and monitoring processes were insufficient to detect the deception.”
But it was not only 3M implicated here, SEC said; third-party vendors also lent a hand to ensure that their government representatives had a good time.
Chinese-based travel agencies received payments totaling nearly $1 million to plan no less than 24 trips for their government representatives, the U.S. financial watchdog alleged.
“Companies often use third parties to facilitate bribery and corruption,” Sierra told OCCRP. “In this case, travel agencies played a crucial role in enabling the crimes, underscoring the necessity of including third parties within the scope of compliance efforts.”
Charles Cain, a SEC FCPA unit chief, expressed how the 3M scandal highlights the dangers inadequate anti-corruption controls pose for titans of industry that operate on a global level.
When doing business on such a scale across multiple jurisdictions, internal watchdogs and robust corporate compliance measures can sometimes be the only shield from corruption within.
“We've witnessed hundreds of scandals where the same pattern emerges,” Sierra said when asked how 3M’s compliance failings compare to other instances of corporate corruption. “Companies need to establish genuine and robust compliance programs. They must believe in these programs, as they shape how business is conducted – guided by ethical values rather than being driven by quick and immediate gains.”