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Compliance, Regulation is not the Problem; Behaviour and Culture Are:

I have assembled a snap review of a number of recent cases involving corporates caught in what can best be described as corrupt behaviour. This is by no means a complete list, just a selection from various papers. The core issue, is not that it happens, it is, that after decades of regulators and governance organisations saying, they can rectify this with more regulation, compliance or courses/training, it continues, unabated.

At the nexus of all these cases, is the individual organisations poor corporate culture and inappropriate values, based on greed and self-interest, emanating from the board and executive. That when combined with a lack of synergy, trust and confidence within and between the ‘third team’ (board and executive), empowers an environment, where any behaviour, as long as it makes money, is acceptable.

The best example of this that I have recently seen is Wells Fargo Bank; watch and read as the CEO tries to justify what is, in essence, poor governance and leadership that lead to a toxic and corrupt corporate culture.

In case you are thinking the Wells Fargo issue is unique, think again. Today in New Zealand Insurer Youi has been fined $100,000 by the Insurance Council of New Zealand, over allegations of making misleading statements to customers, and debiting their bank accounts without permission, read more.

Yet when, if ever, have any of the companies you know, or are perhaps are a director or executive in, agreed to a behavioural governance review? Unlike the ‘tick the box,’ self-congratulatory exercises normally undertaken, these reviews, identify the strengths and weaknesses of an organisation's culture, values, and the levels of synergy, trust and confidence emanating from, and existing within the third team (board and executive).

For clarities sake, the values I mean, are not those written large, in the marketing material or elsewhere, that no one remembers or lives by. I mean, the values that everyone sees the board, and executive live by.

Just as the actions of our children are a reflection of our own behaviours. It is time boards and executives recognised and accepted that their culture, behaviours, actions or inactions are what gives the leadership and permission for employee’s to act the way they do.

If you haven’t already undertaken a behavioural governance review of your third team, you should. The insights gained into the culture, values, synergy, trust and confidence that permeate your board and executive (the third team), will provide the basis on which you can rebuild or strengthen your organisation.


Deutsche Bank asked to pay $14 billion. The U.S. Justice Department proposed that Deutsche Bank AG pay $14 billion to settle a set of high-profile mortgage-securities probes stemming from the financial crisis, people familiar with the matter told the WSJ, a number that would rank among the largest of what other banks have paid to resolve similar claims and is well above what investors have been expecting. The figure is described by people close to the negotiations between Deutsche Bank and the government as preliminary, and they said it came up in discussions between the bank and government lawyers in recent days. It hasn’t been previously disclosed. Deutsche Bank is expected to push back strongly against it, the people said, and it is far from clear what the final outcome will be.

GlaxoSmithKline will pay $20 million to settle bribery case. The S.E.C. said the company masked bribes to foreign officials in China by disguising them as legitimate travel, entertainment and marketing expenses. The pharmaceutical company agreed to settle the case without admitting or denying any wrongdoing. – Reuters

Alstom S.A., a French power and transportation company, was sentenced today to pay a $772,290,000 fine to resolve criminal charges related to a widespread corruption scheme involving at least $75 million in secret bribes paid to government officials in countries around the world, including Indonesia, Saudi Arabia, Egypt, the Bahamas and Taiwan.

DOJ investigates Standard Chartered PLC. The Justice Department is investigating Standard Chartered PLC over allegations that an Indonesian power company controlled by the London-based bank paid bribes to win contracts. An internal audit at Maxpower Group Pte. Ltd., a power-plant builder in Southeast Asia, found evidence of possible bribery and other misconduct, findings that were echoed in a separate review by a law firm hired by Maxpower, according to copies of those reports reviewed by The Wall Street Journal.

Telia may pay $1.4 billion over bribery. Telia Company AB said Thursday that U.S. and Dutch authorities have proposed that the partly state-owned Swedish telecom carrier pays $1.4 billion to settle allegations it distributed hundreds of millions of dollars in bribes to secure business in Uzbekistan, the WSJ reports. "Our initial reaction to the proposal is that the amount is very high," said Telia chairwoman Marie Ehrling. However, she said Telia's entry into Uzbekistan "was done in an unethical and wrongful way and we are prepared to take full responsibility."

Leading US hedge fund Och-Ziff has been ordered to pay $412m (£316m) to settle charges that it paid millions in bribes to top officials across Africa to secure mining and investment rights. It is the first time a fund has been sanctioned under US foreign bribery laws, the US justice department said. Its investigation details bribes of tens of millions of dollars paid to Democratic Republic of Congo officials.


If you think that fines will do anything to stop the behaviour, think again, over the course of one year (2012-2013), JP Morgan was fined approximately $26.4 billion dollars (see below) for a range of infractions. If you think that has stopped them, just do a search for; JP Morgan Fined.

  • Dec. 4, 2013 — $110 million (€80 million) – As part of a settlement between the EU and six banks, J.P. Morgan agreed to settle for its alleged role in the manipulation of the Japanese yen version of Libor in 2007.

  • Nov. 19, 2013 – $13 billion – J.P. Morgan settled civil claims with federal and state agencies over its underwriting practices and its sale of mortgages before the financial crisis, as well as what was sold by Bear Stearns and Washington Mutual. $4 billion of the settlement was set aside for distressed homeowners. The bank admitted to deceiving investors about the quality of its mortgage underwriting.

  • Nov. 15, 2013 — $4.5 billion — The bank paid $4.5 billion to a group of 21 institutional investors including BlackRock and Allianz SE to settle losses from mortgage-backed securities that J.P. Morgan sold them before the crisis.

  • October 16, 2013 — $100 million — The bank paid the Commodity Futures Trading Commission to settle charges related to its so-called London Whale trades.

  • Sept. 19, 2013 — $920 million – In settlements with the OCC, the SEC, the Fed and the U.K. Financial Conduct Authority, J.P. Morgan agreed to pay a total of $920 million to settle all claims about its management and oversight of traders involved in the London Whale debacle. The bank also admitted wrongdoing in the matter, a trade that cost the bank more than $6 billion.

  • Sept. 19, 2013 — $389 million – The bank paid $80 million in fines and refunded $309 million to credit-card customers to settle regulators’ charges that it harmed consumers by allegedly making errors in hundreds of thousands of debt-collection lawsuits and leading more than two million credit-card customers to buy services they didn’t want.

  • July 2013 — $410 million – FERC alleged J.P. Morgan Ventures Energy Corp. traders gamed rules that help set the cost of electricity in California and the Midwest with 12 manipulative trading schemes starting in 2010. The DOJ is now investigating the claims. The $410 million included a $285 million fine and the bank agreed to give back $125 million in profits.

  • January 2013 — $1.8 billion – In two separate agreements, the bank contributed $1.8 billion to the nationwide bank settlement on allegations the banks improperly carried out foreclosures during the housing crisis, including employing so-called robo-signers. The bank also agreed to contribute $3.7 billion in aid to troubled homeowners and nearly $540 million in refinancing. The first part was reached in a nationwide settlement in February 2012.

  • November 2012 — $269.9 million – The bank settled with the SEC over the creation and underwriting of mortgage-backed securities.

  • August 2012 — $1.2 billion – The bank disclosed in a filing its share of a broad settlement over interchange allegations against the banks and Visa and MasterCard.

And for more on the subject, specifically ethics, I high recommend this excellent article written by Nathaniel Davis, titled; If War can have Ethics, Wall St Can, Too. It is well worth the five minute read

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