Whistleblowing Is a Key Regulatory Tool

Corporate scandals are often the impetus for greater regulation. The Enron, Worldcom, and Arthur Andersen revelations led to the Sarbanes-Oxley Act, and the excesses of the financial sector paved the way for the Dodd-Frank Wall Street Reform and Consumer Protection Act. Regulators on both sides of the Atlantic made changes in the wake of the Volkswagen emissions scandal.

Yet a critical lesson for lawmakers and regulators to learn in the wake of corporate scandals is not just that we need more—or better—rules, but that effective enforcement requires agencies to encourage people to come forward when laws are being ignored. Whistleblowers inside an organization have been the driving force for blowing the lid off of the Enron, Worldcom, UBS tax fraud, and FBI crime lab scandals. Outsider Harry Markopolos repeatedly warned the U.S. Securities and Exchange Commission (SEC) about Bernie Madoff, but no action was taken until Madoff’s sons called law enforcement. Whistleblowers on the inside have been essential for uncovering most of the big white-collar scandals of the 21st century. read more »

Samsung Heir Freed, to Dismay of South Korea’s Anti-Corruption Campaigners

South Korea — When Lee Jae-yong, the de facto leader of Samsung, walked free on Monday after spending barely a year in jail, it reaffirmed a pattern South Koreans have fought for decades to break: Business tycoons convicted of corruption here hardly spend any time behind bars.

Mr. Lee’s arrest a year ago, and his subsequent conviction and sentencing, were hard-won victories for millions of protesters who took to the streets from late 2016. The demonstrations also felled President Park Geun-hye, impeached on charges of collecting bribes from family-controlled conglomerates, known as chaebol, like Samsung.

But here in South Korea, Mr. Lee’s detention was as big a piece of news as Ms. Park’s ouster. His father — Lee Kun-hee, the son of Samsung’s founder and the conglomerate’s chairman — was twice convicted of bribery and other corruption charges but never spent a day in jail, creating an image of Samsung as untouchable. Many South Koreans hailed the lower-court ruling, which sentenced the younger Mr. Lee to five years in prison on corruption charges, as an important milestone in their country’s long-running campaign toward greater transparency and accountability. read more »

US Navy commander pleads guilty to bribery charge in 'Fat Leonard' scandal

The largest corruption scandal in US Navy history has claimed another high-ranking officer following a guilty plea from a commander who once controlled the service's joint military exercises.

Former US Navy Cmdr. Troy Amundson, 50, admitted taking bribes, including accepting the services of several prostitutes, from foreign contractor Leonard Glenn Francis, known as "Fat Leonard," and his Singapore-based company, Glenn Defense Marine Asia.

In exchange, he sent US Navy business to the company, according to a statement from the US Attorney Office in San Diego, California.

"Amundson admitted that from September 2012 through October 2013, Francis paid for dinner, drinks, transportation, other entertainment expenses, and the services of prostitutes for Amundson and other US Navy officers," the US attorney's statement said. read more »

OSI Systems discloses SEC, DOJ probes into alleged bribery, trading

OSI Systems said the Securities and Exchange Commission has started an investigation into the company's compliance with the Foreign Corrupt Practices Act, and the U.S. Attorney's Office for the Central District of California has said it also intended to request information regarding FCPA compliance. OSI Systems said the regulators were acting in response to a short seller, as the firm Muddy Waters has alleged the company has relied on bribes to win a major contract in Albania. The SEC and DOJ are also conducting an investigation of trading in the company's securities, and OSI Systems said it's taken unspecified action with respect to a senior-level employee regarding trading. The company separately reported a fourth-quarter loss of $47 million, or $2.47 a share, due to a $2.96 per share charge on the current estimate of the tax on accumulated overseas profits and the revaluation of deferred tax assets and liabilities. OSI Systems shares tumbled 14% in after-hours action. read more »