The Unlucky 13: Lessons Learned from Companies Caught in the Act


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"The Unlucky 13: Lessons Learned from Companies Caught in the Act" explores corporate misconduct at 13 companies and the lessons we've learned from them. You can download the complete guide at:

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The Unlucky 13: Lessons Learned from Companies Caught in the Act

  1. 1. The Unlucky 13: Lessons Learned from Companies Caught in the Act
  2. 2. 1. Xerox <ul><li>Loss value: </li></ul><ul><li>$50-100 million </li></ul><ul><li>The crime: </li></ul><ul><li>In 2002, the SEC filed fraud charges against Xerox. It was reported that management had accelerated revenue and violated the generally accepted accounting principles (GAAP). Xerox failed to cooperate with the SEC during the investigation. </li></ul><ul><li>Lessons Learned: </li></ul><ul><li>Communication is key </li></ul><ul><li>Cooperate during an investigation </li></ul>
  3. 3. 2. Ford <ul><li>Loss value: </li></ul><ul><li>$50-100 million </li></ul><ul><li>The crime: </li></ul><ul><li>Corporate security at Ford wasn’t “built Ford tough” when a former Ford employee was found guilty of stealing trade secrets from the company. The former employee downloaded design documents, which weren’t related to his job, onto an external hard drive and took it with him after his last shift. </li></ul><ul><li>Lessons Learned: </li></ul><ul><li>Implement access controls </li></ul><ul><li>Establish a network security policy with tight controls </li></ul>
  4. 4. 3. Siemens <ul><li>Fine/settlement: </li></ul><ul><li>$1.6 billion </li></ul><ul><li>The crime: </li></ul><ul><li>From 2002 to 2006, Siemens had a “bribery budget” that was used to pay officials to secure business contracts and other needs. The purpose of the fund was well known throughout certain departments in the company’s German operations. Siemens was extremely cooperative with investigators, which reduced the fine and granted amnesty to employees who were willing to bring information forward. </li></ul><ul><li>Lessons Learned: </li></ul><ul><li>Tone from the top </li></ul><ul><li>Code of ethics </li></ul>
  5. 5. 4. Satyam <ul><li>Amount Overstated: </li></ul><ul><li>$1.04 billion </li></ul><ul><li>The crime: </li></ul><ul><li>The Satyam accounting fraud scandal shook the company and the rest of India. The false $1.04 billion in cash on the company’s balance sheets equated to 94% of the cash listed on the company’s books. When news broke about Satyam, the value of the rupee dropped, as did Indian equity markets. </li></ul><ul><li>Lesson Learned: </li></ul><ul><li>Corporate crime can have far-reaching effects </li></ul>
  6. 6. 5. Tyco <ul><li>Fine/Settlement: </li></ul><ul><li>Former CEO and former CFO $35 million to Tyco plus fines of $70 million $35 million, as well as prison sentences. </li></ul><ul><li>The crime: </li></ul><ul><li>Former CEO Dennis Kozlowski and former CFO Mark Swartz were accused of the theft of more than $150 million from Tyco. There were signs of extravagant personal spending by both men – including the purchase of a $6000 shower curtain, but nothing was done about it. In 2002, questions about the accuracy of the books at Tyco triggered a slew of events that led to a major fraud investigation. </li></ul><ul><li>Lesson Learned: </li></ul><ul><li>Accountability matters </li></ul>
  7. 7. 6. Hewlett-Packard <ul><li>Issues: </li></ul><ul><li>Multiple lawsuits and investigations. </li></ul><ul><li>The crime: </li></ul><ul><li>A sexual harassment investigation, a kickback probe and an SEC investigation into whether or not former CEO Mark Hurd leaked inside information wraps up the year for HP. </li></ul><ul><li>Lesson Learned: </li></ul><ul><li>Ethics training – at every level </li></ul>
  8. 8. 7. Johnson & Johnson <ul><li>Issue: </li></ul><ul><li>Recall response. </li></ul><ul><li>The crime: </li></ul><ul><li>The company that was once known for setting the bar for handling recalls is now being scrutinized for the way they handle recalls today. An Associated Press (AP) story reported that J&J had roughly two dozen recalls of “prescription and nonprescription medicines, replacement hips, contact lenses and diabetes test strips, including tens of millions of bottles of children’s and adult Tylenol and Motrin” since September 2009. </li></ul><ul><li>Lesson Learned: </li></ul><ul><li>Transparency </li></ul><ul><li>Timely crisis communication </li></ul>
  9. 9. 8. Mattel <ul><li>Issue: </li></ul><ul><li>Supply chain quality control. </li></ul><ul><li>The crime: </li></ul><ul><li>In 2007, Mattel launched four separate product recalls. The recalls were the result of large quantities of lead found in the paint used in a number of its products. Mattel, like many other companies, uses contractors in China to manufacture products. </li></ul><ul><li>Lesson Learned: </li></ul><ul><li>Choose your supply chain members wisely – and keep an eye on them. </li></ul>
  10. 10. 9. BAE <ul><li>Fine/Settlement: </li></ul><ul><li>$450 million </li></ul><ul><li>The crimes: </li></ul><ul><li>In the US, BAE pleaded guilty to one count of conspiring to make false statements to the US government. It was reported that BAE gained approximately $200 million from business received from the false statements. </li></ul><ul><li>In the UK, BAE pleaded guilty to one charge of breach of duty in relation to records of payments made in Tanzania. It was alleged that BAE paid a Saudi official to influence purchase/contract decisions. </li></ul><ul><li>Lesson Learned: </li></ul><ul><li>Tighten anti-corruption/anti-bribery procedures </li></ul>
  11. 11. 10. Google <ul><li>Issue: </li></ul><ul><li>Loss of reputation over privacy violations- Street View cars and Google Buzz incidents. </li></ul><ul><li>The crime: </li></ul><ul><li>Google Street View cars around the world were collecting (inadvertently) private information from unsecured Wi-Fi networks. Google Buzz automatically opted users into the feature that showed others their contact lists. </li></ul><ul><li>Lesson Learned: </li></ul><ul><li>Privacy controls </li></ul>
  12. 12. 11. International Monetary Fund <ul><li>Fine/Settlement: </li></ul><ul><li>TBD + Reputational damage </li></ul><ul><li>The crimes: </li></ul><ul><li>The arrest of the IMF’s managing director, Dominique Strauss-Kahn, for allegedly sexually assaulting a hotel housekeeper, resulted in a wave of attention directed at the corporate culture at the IMF. </li></ul><ul><li>Lesson Learned: </li></ul><ul><li>Anti-harassment training and policies </li></ul><ul><li>Tone from the top </li></ul>
  13. 13. 12. Verizon Communications <ul><li>Fine/Settlement: </li></ul><ul><li>$20 million </li></ul><ul><li>The crimes: </li></ul><ul><li>Verizon agreed to a $20-million settlement and significant relief to resolve a nationwide disability discrimination lawsuit filed by the EEOC. According to the lawsuit, the company disciplined or fired hundreds of employees who weren’t able to comply with the company’s strict attendance policy. The employees in question were denied “reasonable accommodations” for their disabilities, according to the ruling. </li></ul><ul><li>Lesson Learned: </li></ul><ul><li>Anti-discrimination policies and enforcement. </li></ul>
  14. 14. 13. Happy Days Children’s Wear Inc. <ul><li>Fine/Settlement: </li></ul><ul><li>$22 500 </li></ul><ul><li>The crimes: </li></ul><ul><li>Happy Days Children’s Wear Inc. is a small children’s shop in New York. Its manager dismissed a female employee because she was pregnant. Although the manager gave other reasons for the dismissal, the EEOC felt that the reasons weren’t consistent or plausible.. </li></ul><ul><li>Lesson Learned: </li></ul><ul><li>Anti-discrimination training </li></ul><ul><li>HR policies and training </li></ul><ul><li>Documenting employee evaluations </li></ul>