The Las Vegas Sands. The Wall Street Journal. Microsoft Corporation. What could these three companies possibly have in common? Try China. Each is being investigated by the SEC and the Department of Justice for violations of the Foreign Corrupt Practices Act (FCPA).
Last year the Sands disclosed that it was being investigated. It received a subpoena from the SEC in February, 2011 and was advised that DOJ was investigating as well. Some allegations that have come to light are that Sheldon Adelson, the head of the Sands, instructed a top executive to pay about $700,000 in legal fees to aMacaulegislator whose law firm was outside counsel to the Sands. As a result of the government’s investigation the Sands authorized its independent Audit Committee to look into the matter and it recently released its preliminary report. The internal investigation is ongoing.
Also last year, the DOJ opened an investigation into allegations of bribery in Chinaby the Wall Street Journal. The WSJ also embarked on its own internal investigation which is close to finished.
Finally, a news story broke this week that Microsoft Corp. is being investigated as a result of allegations of potential bribery by employees in China (as well as inRomania and Italy). This is such a new story that Microsoft has not yet begun its investigation.
Three different stories with the same tag line, all within the month of March, 2013. So far it seems as if this is the year of the FCPA, even though, in fact, FCPA cases have declined over the last two years. All three of these investigations were prompted by whistleblowers of one type or another. How did each company react and which reaction would appear to best serve its corporate interests?
First, the Sands. To its credit the Audit Committee found that there was a likely violation of the books and records and internal controls provisions of the FCPA and this was reported in the Company’s form 10-K filed with the SEC. But the 10-K went on to say in a rather self-serving way that the Company has improved its practices with respect to books and records and internal controls. It also states that the preliminary findings do not have a material impact on the financial statements of the Company, do not warrant a restatement of previous financial statements and do not represent a material weakness in the Company’s internal controls over financial reporting as of December 31, 2012.
The Wall Street Journal investigation is part of a much larger DOJ criminal investigation into the News Corporation, WSJ’s parent company, related to revelations that its British newspapers hacked phones and bribed officials in order to obtain information for articles. As part of the overall internal investigation, the Chinese allegations were thoroughly reviewed. The WSJ found no evidence to support the claim or any impropriety, and maintains that the informant is most likely a government official seeking to disrupt or retaliate against the WSJ for reporting on Chinese leadership corruption. It is not clear that DOJ has closed the matter.
Microsoft’s matter is new. But its response to the news report that it is being investigated was straight forward. It said that the matters raised were important and that allegations of bribery should be reviewed byU.S.agencies and its own compliance unit. A spokesperson said that allegations of this nature arise from time to time, that it is possible that sometimes an individual employee or business partner may violate the Company’s policies or break the law, and that its responsibility is to train its employees, build a system to prevent and detect violations, and to investigate allegations and take appropriate action.
What can we learn about crisis communication from these three stories. The Sands reaction leaves something to be desired. While it is admirable to admit that the company may have violated the law it is presumptuous and self-serving to draw conclusions that basically are up to the government. The SEC and DOJ may have a hard time swallowing the Sands’ conclusions. It would have been far better to state that it is cooperating with the agencies to resolve all issues and reach determinations that will not have far reaching consequences to the Company.
If we take the WSJ’s comments at face value, there is no reason not to aggressively maintain one’s innocence. Yet, it might have been better to acknowledge more clearly that DOJ had not yet signed off on the WSJ’s findings and that the WSJ was working with DOJ to conclude the matter. Instead in a buried paragraph in its own story it states that it is unclear whether the Justice Department considers the matter resolved or still open.
The Microsoft reaction is the best. It is the most honest and direct and states the facts of corporate life: We know our responsibility. We do our very best. Occasionally, a bad apple may slip through. Crisis communication does require that a company assess and anticipate the concerns of stakeholders. Good judgment is needed to walk that fine line between allaying those concerns, and acting appropriately and respectfully to those who have control over the outcomes of your investigations.