As report author Bob Gordon puts it:

“Corporate responsibility continues to evolve from what was a mainly philanthropic activity to a more mainstream approach where it is integrated into core business activities.”

The study compares businesses from different countries and ranks them in categories such as independence of directors, human rights issues and environmental responsibility.

Read the story from The Independent.

Commentary: A notable example of U.S. companies lagging behind their European counterparts is in environmental policy rankings (in terms of the percentage of businesses by country that have basic or advanced environmental policies in place). The United States ranks 17th overall. Japan and Canada are the only two non-European countries ahead of the U.S. on the list. Perhaps high-profile activists like Al Gore will help make improvements in this category, but documentaries about other subjects such as “Separation of Chairmen From CEOs” might not catch on quite as easily (a category where the United States ranks dead last).

Collins allegedly proposed to Dollar General to push forward a $10 million transaction on IBM electronic cash registers in order to increase IBM’s financial revenue for the year, as well as Collins’ bonus during that period. After Dollar General’s accounting firm determined that would have a negative impact on it’s earnings for the same fiscal year, they rejected the proposal. Collins offered to have IBM buy Dollar General’s outdated cash registers for $11 million to negate the company’s loss. Dollar General then repaid the money by an increase in the amount the company paid for the new IBM electronic cash registers.

This was deemed an illegitimate purchase as IBM never intended to use the equipment and ultimately destroyed it. In turn, all of IBM’s expenditure was repaid and Dollar General minimized the negative effect on its earnings for the fiscal year 2000.

Read the entire SEC report here.

Commentary: This is a good learning example for compliance and ethics officers to use with employees for training purposes.

In this latest settlement, CBM Environmental Services and its CEO will pay $350,000 for conspiring to rig bids for cleanup work associated with leaky underground petroleum tanks.

CBM is the eighth services firm to be implicated in the case, which started back in April 2003 when officials sued the firms after receiving uniformly suspiciously high bids to clean up tanks around the state in response to an RFP. Read more about it here.

Commentary: Not an earth-shattering case, but an interesting learning moment/vignette to share with employees. Obviously, it is not easy to get 8 firms to collude and have it be kept a secret.

John Sullivan was hired in 1999 and then later demoted and replaced by a black subordinate. He claimed an African American supervisor discriminated against him and then later fired him in November 2002 based on his race. The EEOC agreed and sued on his behalf in 2005.

The jury awarded Sullivan $24,200 in expenses and another $61,000 in back pay.

Commentary: Of the 27,000 claims made annually with the EEOC, race-based claims are the most common. Only about 10% of those claims involve whites as the ‘victim’ and verdicts such as this one are quite rare.

Not surprisingly A&P strongly disagreed with the verdict and indicated that it would appeal. We recommend dropping it and moving on – especially considering no punitive damages were awarded. The company might not be so lucky the next time around.

According to the SEC, Delta & Pine (which has since been acquired by Monsanto) paid $43,000 to officials of the Turkish Ministry of Agricultural and Rural Affairs via its subsidiary Turk Deltapine between 2001 through 2006. The SEC ruled that these payments were in violation of the FCPA, and that Delta & Pine did not keep accurate books and records in connection with the improper payments.

Commentary: Under the FCPA, it is accepted to make ‘facilitation’ payments of a reasonable size in order to secure a ‘routine’ government action. For example, a small ‘facilitation’ payment in order to get a business license expedited (as it appears was necessary here) or to get something cleared through customs, is not necessarily illegal. The law does not specifically list a dollar threshold at which point an allowable ‘facilitation’ payment becomes a bribe. However, $43,000 clearly is not small – thus why the SEC took issue with it.

Steven J. Ott and Roger Michael Young, former executives of the global telecommunications company, pleaded guilty on July 25, 2007, to separate one-count criminal charges of conspiring to violate the FCPA.

Ott served as ITXC’s EVP of Global Sales and Young served as the company’s Managing Director for Africa and the Middle East. In pleading, both defendants admitted to paying over $250,000 in bribes to employees of foreign state-owned and foreign-owned telecommunications carriers in Nigeria, Rwanda, and Senegal to obtain and retain contracts for ITXC between September 1999 and October 2004.

In a related case, a former Regional Manager of ITXC Corporation, Yaw Osei Amoakoof, was sentenced to 18 months in prison for FCPA violations stemming from corrupt payments to foreign officials in order to retain business for ITXC in Africa.

Steph, age 37, is a former executive of a subsidiary of Houston-based Willbros Group Inc. According to the indictment, Steph conspired to make more than $6 million in bribes.

There are four counts in the indictment that accuse Steph of conspiring to bribe the officials while serving as general manager of Wilbros (a publicly-traded company) between 1998 and 2005.

Commentary: Want a throw around a figure that can help scare your employees into compliance with FCPA? Steph faces up to five years in prison for the charge of conspiring to violate the FCPA. He also faces money laundering charges since the money for the bribes was transferred internationally. Furthermore, he faces fines of either $500,000 or 2x times the amount of the “gain.”

Take out the calculator it adds to (tap….tap….tap…) UP TO 60 YEARS IN PRISON AND POTENTIALLY MILLIONS OF DOLLARS IN FINES. Of course, he is not going to get that if convicted (our guess is that he gets less than 3 years) – but all the same, the uncertainty of how significant the penalty could be is enough to make any 37-year-old’s hair turn prematurely gray.

Sensitive data stolen from Ferrari included engineering documents, test data, and other undisclosed documents. This material was allegedly used to develop Toyota autos in 2002 and 2003.

Commentary: Toyota has been quite lucky that this story has gained ZERO traction in the U.S. media (its largest market). A story linking them to stealing corporate secrets from Western competitors, while crushing these same competitors in the market, would have major consumer backlash potential. Why has it been ignored by the U.S. media? It’s simply we’re all NASCAR fans over here – not Formula One. However, Toyota is entering NASCAR as well…with a Toyota Camry?

Citing findings from a recent survey by Goldman Sachs, Ling asserted that companies with strong ethical standards outperform the market. For example, companies on an ethical list compiled by Goldman Sachs outperformed the MSCI World Index by an average of 25 percent. 72 percent of these companies were also found to have outperformed their industry peers.

Anthony Ling of Goldman Sachs International insisted that a company’s “ESG” performance (its environmental, social, and corporate governance) can provide an advantage to the company over competitors because these factors are sure to pay off with customers and employees.

Ling stated that these factors, combined with careful consideration of the company’s place in its industry, competitive advantage, and financial performance should all be taken into account when evaluating investment options in mature or emerging markets.

Commentary: We were thrilled to see this report. Our research at Ethisphere has found similar results. The Ethisphere Ethics Index, which tracks the publicly traded components of the annual World’s Most Ethical Companies Ranking, OUTPERFORMED THE S&P BY MORE THAN 2:1 over the five-year period that ended March 31, 2007.

Allegedly, soon after Coca-Cola launched Dasani in Argentina in late 2005, the bottled water has been smeared as “bottled tap water” and “cancer water” on the Internet. It is Coke’s position that there is strong evidence linking Danone and Euro RSCG to the two-year long campaign.

And, as the Internet has “no borders”, the campaign appears to have spread to other Spanish-speaking Latin American countries such as Mexico, Colombia, Costa Rica, Chile, Peru, and Ecuador. Coca-Cola said that this has negatively impacted their business.

Commentary: Want to know a few interesting facts?

Interesting fact #1 – - While, theoretically, the penalties could be huge (up to $10,000 per consumer), they won’t be. This is in part because under Argentine law, any fines/penalties/damages in this case would not be paid to Coca-Cola but instead to the Argentine state treasury. Coca-Cola probably isn’t looking for big fines so much as to make a statement, offset some bad publicity, and to have the practice stopped.

Interesting fact #2: Unfortunately, the history of Dasani is not crystal clean, which will cloud up Coca-Cola’s case. In fact, back in March 2004 the company had to recall it from the shelves in the UK due to excessive levels of cancer-causing bromate being present in the bottled water.

Interesting fact #3 – - Evian is a huge bottle water brand/supplier (owned by Danone). Guess who the U.S. distributor is? Answer: Coca-Cola.

Commentary: The penalties levied against ACS were relatively light as the company voluntarily self-reported to the government inappropriate conduct by several former employees.

According to the analysts, the warning they received from the Office Depot Investor Relations Department re-emphasized earlier alerts about the current business environment and soft spending by businesses. They also mentioned that the calls did not provide specific outlooks for sales and profits.

While lawyers say that the disclosure may go against the SEC’s Regulation FD, which is aimed at preventing selective disclosure of material information to analysts, Office Depot insiders insist that nothing material was disclosed. Even so, the hint was enough for most of the company’s analysts to cut their earnings estimates and for options traders to take positions that would pay off if Office Depot’s stock fell.

Commentary: This is nearly unbelievable that a company would do this in today’s environment. It has garnered surprisingly little press. The SEC appears to be sleeping through it too. And Office Depot is claiming that their calls with the analysts were routine? Then how do you explain that the stock dropped over 8% from $34.46 at close of business on June 21st (the day before they first started ‘tipping’ analysts) down to $31.81 on June 28th on stock trading volume that was nearly 4 TIMES AS HIGH AS NORMAL? This wiped more than $700 million off the market capitalization of the company.

Then the company finally announced in a June 29th filing with the SEC that it expected soft earnings. The stock dropped another couple percentage points after the announcement (when the rest of the world got the news), but that was only a fraction of the overall loss that had already occurred in the prior week.

The executives were originally convicted on conspiracy and fraud charges during a December 2006 trial.

In U.S. District Court for the District of New Hampshire, Judge Paul Barbadoro sentenced former Enterasys CFO Robert J. Gagalis to 11 1/2 years in prison. Bruce D. Kay, another former Enterasys finance executive, was sentenced to 9 1/2 years in prison. The prior week, former Enterasys accountant Robert G. Barber was sentenced to just over 8 years in prison.

Gagalis reportedly tried to stand up and read a statement, but broke into tears. His attorney ended up reading it for him, in which he apologized for his actions and especially regretted the “sorrow, pain and anxiety his actions caused to his three children and his wife.”

In levying the sentences, Judge Barbadoro said: “These kinds of crimes endanger our markets. It is vitally important to me that we do everything we can to protect the integrity of our markets.”

The case dates back to May 2004 when the executives were indicted over allegations that they had artificially inflated revenues between March 2000 and December 2001 as Entrasys became an independent spin-off from the computer computer networking company, Cabletron.

The defendants had backdated and falsified documents and concealed terms of business transactions from Enterasys’ auditors, including creating false revenue by secretly investing company funds in other companies and having those companies to use the investment proceeds to buy Enterasys products.

According to DOJ, the loss to public investors due to these shenanigans was $97 million.

Read more about the case and its background here.

Commentary: WOW… We are against fraud just as much as the next guy, but even us were stunned by the length of these sentences. And more fun in “The Barber’s” courtroom is yet to come – with the former CEO of Entrasys and several others still awaiting sentencing.

The French campaign group SOS Racisme brought the case against the Garnier division of L’Oréal over a marketing campaign where it sought saleswomen to demonstrate its Fructis Style shampoo line in supermarkets outside Paris.

At issue was a secret code that L’Oréal and Adecco had used in materials that detailed the desired profile of the sought-after workers: women should be 18 to 22 in age, of a certain size, and be “BBR.”

Prosecutors argued that “BBR” stand for for bleu, blanc and rouge: not only the colors of the French flag, but a common shorthand notation used by the far right Nationalist Front political party and employers to mean “white” French people – excluding those of North African, African and Asian backgrounds.

The Garnier division and Adecco were both fined €30,000. A former Adecco employee was given a three-month suspended jail sentence.

Commentary: Ouch, that’s going to leave a stain. This case is particularly interesting in that, while French culture has long been known for its racial undertones (overtones, in fact, as a recent employer survey in France found that three out of four firms preferred white workers), this is the first and only case of systemic discrimination against a major ‘blue-chip’ company within France. The fallout on this case has been limited to pockets within the EU and the news has not made it into any U.S. media outlets. However, as the spokesperson for SOS Racisme told the Guardian, “Consumers of L’Oréal products in the UK and the U.S. would be horrified to learn about the racial discrimination.”

The case also serves as a reminder that in today’s age of increased outsourcing of “non-core competencies” to third-party providers, a company is still liable for the agents of its agents – as in this case with Adecco. “Out of hands” or “out of sight” does not mean “out of potential trouble.”

“Yes, we did it… but we didn’t see it.” Um…what????

SAP admitted this week that a subsidiary had completed “inappropriate downloads” of documents belonging to arch competitor Oracle. However, the company said that it had not had access to that material because firewalls had protected the downloads from SAP’s view.

“Even a single inappropriate download is unacceptable from my perspective. We regret very much that this occurred,” SAP Chief Executive Henning Kagermann said, striking a more conciliatory note than recent SAP declarations that it would aggressively defend itself in the case.

Commentary: SAP didn’t have much of a choice as they were caught RED-HANDED (we covered this in an earlier post back in March). That being said, we are more inclined to agree with JP Morgan software analyst Stefan Kuppen who says “Looking at the details they’ve given, it looks like things went wrong at the subsidiary but it doesn’t look like a concerted effort at industrial espionage.”

The bottom line is that Oracle is blowing this case way out of proportion – doing so because they know that they can win the PR war on it.

To an outsider, it is an excellent learning example for employees: a very small division of SAP is causing all kinds of headaches for a global multi-billion corporation. Some good ethics and IP (and judgment) training could have prevented this costly embarrassment.

While FTS said it will replace as many of the tires as it can, it will be forced to declare bankruptcy after only replacing approximately 10% of the tires impacted.

Background story: Last week, the NHTSA ordered FTS to recall the light truck/SUV radials produced by China-based Hangzhou Zhongce Rubber Co. Apparently, the tires were either missing gun strip or it was deemed insufficient. The failure by the manufacturer to place these adhesive strips between the tire belts caused the tires to degrade and eventually separate, resulting in fatal crashes. Some of the brand names under which the tires have been sold include Compass, Telluride, Westlake and YKS.

Tires which have been marketed as designed to last 40,000 miles are actually coming apart after only 25,000 miles. Some tests allegedly have found that the Zhongce tires also had dangerously thin inner liners, permitting air to leak and damage the outer walls of the tires.

Commentary: It gets worse. The lawyer behind the recall (he sued FTS, who then notified NHTSA, who then ordered the recall) say that there may be five other similar distributors of these tires… and that there are up to five million on the road. Read about in the Philadelphia Inquirer.

Memo to procurement: when they said buy “exploding Chinese fireworks for the holiday” they did not mean for you to confuse “fire” with “tire.”

Investigators with the office of the attorney general found the documents in a dumpster behind a CVS store in Liberty, Texas, near Houston, Abbott’s office said.

Medical prescription forms with name, address, date of birth, issuing physician and the types of medication prescribed were found, along with hundreds of active debit and credit card numbers with expiration dates…

According to the attorney general, CVS violated a 2005 law that requires businesses to protect customer records with sensitive information, including credit and debit card numbers.

The Commission’s complaint alleged that 25 to 30 cents per barrel purchased by El Paso was illegally kicked back to Iraq in the form of a secret oil surcharge and that El Paso knew, or was reckless in not knowing, that illegal surcharges were made.

Without admitting or denying the Commission’s allegations, El Paso simultaneously consented to the entry of a court order ordering it to pay $5.4 million in disgorgement of profits and a civil penalty of $2.3 million.

Commentary: El Paso was at the mercy of DOJ and SEC on this one, as recorded telephone calls of El Paso officials and oil traders showed that the company knew that the surcharges that it was paying on purchases were being kicked back to Iraqi government officials. This case underscores the importance of maintaining an adequate system of internal controls to detect and prevent such payments, as well as to properly to record the nature of the any such related payments.

Xiong Xuanguo, vice president of the SPC, said courts at all levels dealt with 5,429 commercial bribery cases involving civil servants during the first three quarters, up 10.43 percent year-on-year.The cases involved public officials charged with accepting bribes from commercial organizations in return for exerting influence or providing services.

The remaining 233 cases involved company employees receiving handouts from other companies in return for business favors akin to insider trading, up 3.51 percent from the same period last year, he said. l

“We have intensified penalties for commercial corruption this year. About 21 percent of criminals convicted in such cases were jailed for periods of more than five years,” said Xiong.

Wang Zhenchuan, deputy procurator-general with the Supreme People’s Procuratorate, said prosecutors investigated over 9,000 commercial corruption cases during the first nine months.

The cases mainly occurred in the fields of construction, land acquisition, ownership transfers of state-owned enterprises, government procurement, medicine and medical appliances trade, banking, securities and futures.

Chinese Premier Wen Jiabo early in the year pledged to prioritize the tackling of commercial corruption eliminate persistent problems that have infringed upon the public interests as well as strengthening the management of public servants.