In its published announcement dated 24 July 2013 on the sanctioning of Sinclair Knight Merz Pty (SKM) the World Bank’s Integrity Vice Presidency has set what can be viewed as a benchmark new level of reduced punishment for those companies which uncover corruption within the business and then voluntarily report the matter to the Bank.
In this case the company avoided an immediate debarment from future Bank-financed projects after reporting ‘corrupt misconduct’ and ‘illegitimate payments’ by key individuals and senior managers at SKM. Instead the company and its parent companies Sinclair Knight Merz Management Pty Ltd and Sinclair Knight Merz Holdings Ltd have negotiated an agreement with INT which includes a conditional non-debarment for a period of two and a half years. This means the company can continue to bid for Bank financed projects and the debarment only comes into operation if the company fails to fulfil its obligations to improve its compliance program and cooperate with INT.
The World Bank announcement makes it clear that the Bank has reflected the high levels of voluntary cooperation by SKM with the imposition of a conditional non-debarment and is sending out a clear signal for other companies to self-report by this example. There is also an implied warning to those companies that have engaged in business with SKM that they may fall under the microscope because the cooperation received from SKM has enabled the Bank to ‘identify other potential targets for investigation’.
The Vice President of Integrity stated: “The World Bank took into account SKM’s cooperation and willingness to provide evidence in support of further INT investigations. The outcome of this case introduces a new standard of compliance by a company that opted for self-policing in response to the discovery of misconduct in its own ranks. By promptly self-reporting, committing to corporate transparency and their enforcement of disciplinary action against those responsible, SKM has practically demonstrated how to confront wrongdoing and commit to doing business with integrity.”
This case clearly illustrates the benefits of conducting a ‘thorough internal investigation’ when companies discover corrupt or fraudulent misconduct internally so that an informed decision can then be made on whether or not self-reporting is necessary and in the best interests of the company.
If you are a senior executive concerned that there may be matters that have occurred in your company that should be reported to the World Bank or any of the other Multi-Lateral Development Banks then contact Bretton Woods Law’s Neil Macaulay or Lee Marler for a confidential and legally privileged consultation to examine how best to protect the long term interests of your company.
To read the full press release click here.