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Regulators around the world are increasingly warning against the danger of a check-the-box compliance program and encouraging companies to evaluate their respective cultures and the corresponding impact on compliance. A growing emphasis on behavioral sciences, which involves looking more deeply into why an individual makes certain decisions or acts a certain way, is becoming an increasingly important aspect of this shift. In this podcast, litigation & enforcement attorneys Amanda Raad, Rosemarie Paul and Tina Yu sit down with Richard Bistrong, CEO of Front-Line Anti-Bribery LLC, to discuss his journey from being prosecuted by U.S. and UK authorities for bribery violations to becoming an outspoken proponent of using a behavioral sciences approach to compliance.
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[00:00] Introductions – Why Behavioral Science?
Tina Yu: Hello, everyone. And thank you for joining us today on this Ropes & Gray podcast. My name is Tina Yu and I am an associate in the litigation & enforcement practice group, or as we call it, LEPG. Today I have with me Amanda Raad and Rosemarie Paul, both partners in LEPG, and also our special guest, Richard Bistrong. Richard is the CEO of Front-Line Anti-Bribery LLC, who has kindly agreed to share his own experiences on violating the FCPA, the repercussions of that, and his insight on how the behavioral science approach ties in with his unique perspective on preventing bribery and corruption.
Amanda Raad: Hi, everybody. This is Amanda Raad. I'm one of the co-leaders of our anti-corruption and international risk practice group, and feel convinced that behavioral sciences is the future to compliance in risk management. Very happy to be able to be joined today by Rosemarie and Richard to talk about his story really and to understand if there are any opportunities or lessons learned that we might be able to think about from that perspective.
Rosemarie Paul: Hi, I'm Rosemarie Paul. I'm a partner in LEPG and I have a background in financial regulation enforcement. I prosecuted for the Financial Services Authority and I share Amanda's enthusiasm for behavioral science. It's something that's been top of the list for a lot of the financial regulators as we discover that sort of rule-based compliance just simply isn't working – we've got to actually look at how people think and behave.
Richard Bistrong:Well, Tina and Amanda and Rosemarie, it's a pleasure to join you here today. This is Richard Bistrong. I'm the CEO of Front-Line Anti-Bribery. And I spent 20 years as a sales executive, ten years as a sales vice president focused on the U.S. markets in the law enforcement and military defense supply business, and ten years focused on the international markets in that same marketplace. In 2007, I was targeted by the Department of Justice in the wake of an oil-for-food investigation at the United Nations for bribing a United Nations official. I immediately cooperated with the Department of Justice, which ended up being a period of five years of law enforcement cooperation. And part of my international sales career had me working and residing in the United Kingdom, so I was also targeted by the Crown Prosecution Service and HMRC in the UK, so I also cooperated with UK authorities. All of this came to an end when I was sentenced to 14-and-a-half months in federal prison in the summer of 2012, and I returned home from prison in December of 2013. And that's when I started to deep dive into our compliance world and to really appreciate and share everyone's passion for how behavioral sciences can help us to better understand how to tip people to the right side of ethical decision making, particularly those who might think they are in the middle of competing corporate objectives, between the pressure to succeed and the pressure to do it right.
Amanda Raad: Thanks, Richard. And I think before we dive into this, it might be worth just pausing for one second because “behavioral sciences” is a buzzword that we all hear quite a bit and I don't think there is much dispute or doubt that it's interesting and it's something that people are interested in exploring. But I think a lot of people wonder, “Well, what exactly is it? What does it mean? And how should we be trying to apply it to our everyday lives and to our work and to our compliance efforts?” So as you said, behavioral sciences is really taking a step back and trying to think about why people behave the way that they do and why are they taking the decisions that they may take. And thinking about this in the compliance world, you know, lots of organizations have spent tons of time and money and energy building up compliance programs. You have lots of policies, you have lots of procedures, but yet despite all of that, people still continue to engage in behavior that's contrary to that policy or procedure. And so I think we've gotten to a point where you feel frustration in, “Why isn't it working and what can we do better?” And by talking to you and listening to your story, there are pieces of this that really think about, well, why did you actually end up in the position you ended up in? And what might have actually influenced you? And I don't think the answer is a different policy or a different procedure. So I think maybe we can turn to that from the very beginning of, you know, was there a policy? Was there a policy that you looked at that said, you know, “You should not engage in any kind of corrupt conduct?” And did it work?
Richard Bistrong: Well, Amanda, before I took my first flight in my new international role, which I was very excited about having the opportunity to travel the world, to build a business for my former employer – I have an advanced foreign policy degree, so I'm sure you can imagine I was all ready to go when I got this new role. And before I did, my former employer presented me with the FCPA, the Foreign Corrupt Practices Act, and they said, “In your new role switching from a U.S.-focused role to an overseas role, you need to understand this law. Ultimately, we're going to ask you to certify that you do, so take your time. If you need additional resources, we're happy to help you.” As complicated as the U.S. criminal code is, that particular law is pretty simple – you can't bribe a public official to win business, to keep business either on your own or through a conspiracy of a third-party. So I didn't need any additional resources. I knew before I took my first flight in this new international role that bribery was illegal. So I think from a policy perspective – and this is going back to 1997 – that was probably the middle of the road compliance program. It certainly isn't now, but I did know enough to understand that foreign bribery was against the law.
Amanda Raad: And just taking that a bit further, you know, you read the policy – I assume you signed the policy because you didn't need any further guidance on that, but did you have any other discussions with anyone or was that it? Was, you know, after that point you're on the plane?
Richard Bistrong: Right. That’s exactly what happened. And this I think really goes to part of our compliance journey is that, you know, people move around the work force all the time. Right? People are transferred from one role to another. Who's responsible for preparing people, teams, employees for what might be a new risk profile before they're in the middle of it? And I think that has to be much deeper than a policy and, you know, written guidance. I think that needs to be what might be a difficult and courageous discussion with not only a compliance leader, but also a business leader. Right? And we talked about partnerships to where you're hearing the importance of ethics and compliance, not just coming out of the legal and compliance voice, but out of the business voice – out of the corporate narrative, because I think that's just where it sounds so much louder. And when I think about what could've stopped my journey before it started, that's the one I had 14-and-a-half months in prison to think about. I think it would've been a conversation about the inevitable risks that I would face before I was in the middle of them.
Rosemarie Paul: I think that really targets one of the key issues that the financial regulators are trying to address – namely that the behaviors of an organization, the culture of an organization are key to impacting their compliance program and effective compliance. Could you add to that? In particular, I'm interested in what the business saw as good behavior, profitable behavior, and how you were rewarded.
Richard Bistrong: Yes. My former employer had an environment that is not unusual among multinationals committed to topline growth, which was a very much win above all else. Right? Be aggressive, capture market share, beat the competition. Right? That’s what you want in the DNA of your commercial leaders. But those conversations about having success, achieving objectives, meeting your targets, which usually means making your bonus I think need to have risk baked into them. Right? So saying to someone, “Look, you're working in a very lucrative part of the world. We need you to really meet these objectives and just stay out of trouble.” That's not helpful – that doesn't operationalize ethics and integrity. And it's not a one-size-fits-all problem, so it's not a one-size-fits-all solution. My experience with foreign bribery in South America was much different than the Middle East, so there's no way of just saying, “This is the kind of conversation we need to have on a global basis.” Yes, I think there are global polices, global values, but how you help someone to succeed in these very challenging markets, that needs to be calibrated to the risks that they're going to face in those markets.
Rosemarie Paul: I think it's a very strong point – the Georgetown Law Review in 2015 referenced the fact that an effective legal compliance system requires skill at predicting human behavior. And part of that involves trying to gauge and estimate who's going to misbehave when and what are the risk factors around that. And that means thinking about what kinds of messages are going to the people within your business, what kind of incentives are most effective, and applying those lessons to future activity. Would you agree with that?
Richard Bistrong: I would completely agree with that. And there are dangerous reward systems. I look at incentives like I look at prescription medications – they all have side effects. And they take place the day you put those incentives and objectives in place. So while those objectives and incentives are being discussed, who's at the table? Is it business leadership with people from finance, and HR, and compliance, and internal audit? Are they all talking about these issues together so that those sort of risks are baked into business plans? Because I think when you intertwine those risks – in this case we're talking about corruption risk with incentives and objectives – then people are much less likely to think they're in the middle of competing corporate objectives to where they might look at their numbers and say, “Well, even unconsciously I'll probably have to sacrifice integrity to get there.”
Amanda Raad: When we've spoken before, we've talked a little bit about making sure that compliance and legal aren't viewed as ancillary or support functions. And I think that's exactly right about your point of making sure it's one voice – that an organization is speaking with one voice, and one intentional voice. Another thing that I wanted to call out that you just mentioned was this idea of a courageous discussion. I like it a lot because I do think we all have to be a bit courageous to accept the fact that corruption is a huge part of doing business around the world. You know, we all look at the Transparency International Corruption Perception Index and every year it seems like the map gets a little more red. And you know, everywhere is risky. Right? You take a risk-based approach as red, but at some point we have to start from the presumption not of if you're going to run into this challenge but when, and when you do, what are you supposed to do about it? And so that kind of courageous discussion where instead of saying, “Did you read the policy? Do you understand the policy? Do you have any questions?” is very different from saying, “You're about to go into X market and there's no doubt that at some point someone is going to ask you for something or is going to tell you something is already happening, and when that happens I want you to come back and tell me because we've got your back. And we're going to help you through that.” But that takes courage because it's starting from a base of we know things are happening that shouldn't be happening, and that's not easy. Right? None of us want to accept that.
Rosemarie Paul: And it's about giving people the tools to equip them through the situations they face, isn't it? And this is where the behavioral science model really comes with that baked in. The UK regulators and the U.S. regulators in particular have said the checkbox approach to compliance isn't working, hasn't worked. And so we've got to look at real life situations and what people are faced with and what's going to help them to “do the right thing.”
Richard Bistrong: As we share our compliance library, a book that really had an impact on me was Giving Voices to Values by Mary Gentile. And Rosemarie, to your point, if you know these situations are inevitable, right, if you know that in certain parts of the world your teams are going to come in contact with risk, let's say, at inspection and customs points, prepare them for that risk in the safe zone. Right? Because there's so much research that Mary points to where if we're unpacking these dilemmas when we're not in the middle of them, there's so much of a greater opportunity that we're going to do the right thing when we are in the middle of them. So if you know it's inevitable, why not talk about it, even role play – sensitize people to these risks before they feel like they're cornered in a situation in these places.
[15:31] Courageous Communications and Accountability Partners
Amanda Raad: Let's just turn this back to your experience, right, because now you're on the plane. You get on a plane, and what happens? I mean, was it a snap of the fingers, all of a sudden, you're in a really hot spot and you have to react quickly? Or how does that work?
Richard Bistrong: So my first few years of international business had me flying all over the world and my route to market was building a network of channel partners – so sometimes they're called intermediaries, agents, distributors. And in many parts of the world, my travel partners were sharing with me in many interesting, colorful terms other than using the word “bribes,” like “paying tolls,” and “making people happy,” and “taking care of people” that they were paying these bribes. But what was interesting about these business partners is they were providing legitimate business services. They were helping me to identify market opportunities, providing translation services, introducing me to end users to make what were often very technical and complex sales presentations – all good things. But they were also telling me that they were “paying tolls” when they needed to pay tolls.” And we talk about the slippery slope. You know, mine started as they were sharing these conversations and these toll paying with me, they weren't asking me for anything. They weren't asking to renegotiate commissions or discounts. They were just sharing, “Hey, Richard, take a deep breath and relax. We're going to win this business because this is how we get it done.” So I first stepped off into the slippery slope just by nodding my head because in these conversations by the understanding and the promise that a bribe would be paid, even though one had not been paid, I was violating the law as a co-conspirator right there. That's not what I went to prison for, but that's how it started.
Amanda Raad: And on that slippery slope piece, was there at some point looking back even, a way that you rationalize or think about how this happened? Because you know, I know you well enough from now to know that you didn't set out to think, “I'm going to go violate a law.” I know that wasn't the goal. Right? So talk to us a little bit about the rationalization because I think that also plays into the behavioral sciences theory and how we can help intervene and give people a chance to slow down sometimes and identify that they might be on a slippery slope, which might be the first step, honestly.
Richard Bistrong: Sure. So I call this my perfect storm, right, of how I rationalized bribery. But just to be clear, and I think this is an important point to make as we sort of talk about the emotions, the temptations, the rationalizations – cheating is always a choice. Right? And there were workable alternatives for me. So I'm happy to pull back the emotional curtain so that we can challenge ourselves and say, “Hey, what would people in our organization do under similar circumstances?” But this isn't a podcast on ethical spinning. This is no one's fault but my own. So let's break it down. I think the first thing that I'm thinking is I'm looking around, I'm watching how other multinational employees are doing this, other channel partners are – no one's getting caught. And I'm looking sort of in my environment for behavioral clues as to how this works because this was not risk that I was exposed to in the prior chapter of my career. So look, I wanted to be smart, I wanted to be aggressive, I wanted to win and capture market share. So as Mary Gentile points out in her book, we all want to live up to our standards of personal and corporate integrity unless it puts us at a competitive disadvantage. So let's start there. That's how I saw my environment.
Amanda Raad: And the competitive disadvantage, I guess that's the point. It became clear to you that the environment for you to succeed and to continue to meet the expectations that you had from a business perspective that this was the way to get it done. This was the way it had been done and this was the way to get it done. Is that fair?
Richard Bistrong: That's very fair. And I started to think, “If I don't do this, I can't win.” And I read a survey that talked about the top five reasons why people might experience an ethical collapse – urgency was one of them and isolation was another. So the unfortunate part about this is, you know, my former employer had a world-class brand, great technology, a global presence, a strong balance sheet, but I had a play-it-safe mentality. Right? So instead of slowing down and hitting the pause button and saying, “I'm struggling.” Right? To reach out and to share with my organization, “I need help to understand how we're supposed to succeed in these markets because I know we think we have a great brand and value proposition. In some parts of the world, we're struggling to get that across.” So sadly for me, I chose the bribe over the brand. But again, not everyone likes to admit that they're struggling.
Rosemarie Paul: I guess this is a point that really goes to the culture of the organization, which again, is kind of a headline point. How do you think your firm would've reacted at the time if you'd expressed that uncertainty? If you'd expressed that vulnerability?
Richard Bistrong: It's hard to say. And it would probably depend on who I called. You know? We talked before about some of the other I think very powerful influences on my behavior. So let's go back to incentives. So I had a compensation plan where if I made 90% of my plan on a quarterly basis, I got 90% of my bonus, and it ramped up from there. If I made 89% of my plan on a quarterly basis, I got no bonus. That's a dangerous reward system, you know, and that has a very loud, even unspoken message of what the expectations are. So again, I go back and challenge organizations to ask, “Do the side effects of your compensation plans align with your values?” Right? Because that's where people start thinking, once again, “What does the company really want – compliance or success? Because I don't think I can deliver both.”
Amanda Raad: And you faulted yourself maybe a little bit as I listened to you talk, you know, you say that you didn't reach out to anyone and say, “I need help.” But it goes both ways. And you know, one of the things that the behavioral approach really encourages is just more two-way discussions. Right? So equally important, how about someone just proactively reaching out to you, not with “I see you doing X, Y, Z wrong.” Maybe even with, “I see you're doing all these great things in market.” But just a check in, you know, just “How are you doing?” so that you don't have that isolation factor that you talked about. Is that something that in hindsight you think may have played some role? Do you think there's some value in some of these maybe just unstructured but frequent check-ins?
Richard Bistrong: I think that has tremendous value because as I often share, there was a dangerous silence between me and my former organization. I wasn't calling anyone to share how I was getting things done and no one was calling me to ask how I was getting things done, particularly during a few years where there were strong headwinds in the defense business. So no one was checking in to say, “How are you growing the business when we know that the market's experiencing some tough times?” So I think those check-ins and what I read in a Harvard Business Review article, they call them “having an accountability partner” – someone who might not have the sort of lucrative portfolio that someone more remotely supervised might have. And just saying, “How are things going? And by the way, if you don't call me, I'm going to call you.” I think that can have an enormous nudge, for lack of a better term, because it's making people feel closer to home and headquarters, even if they're working remotely and thinly supervised.
Amanda Raad: And to your point, that would probably need to be someone from the business that understands and appreciates and supports the compliance risk factor, and/or someone from the business and compliance, but some kind of accountability partner that really speaks for the business.
Richard Bistrong: Yes, someone that's senior – someone who really cares about the workforce and that has zero tolerance for risk. So someone that is always going to be challenging people who are working in the middle of risk with saying, “Why don't you bounce ideas off of me? We know that you're seeing something. Tell us what it is.”
Amanda Raad: Courageous.
Richard Bistrong: Right. That's a difficult discussion. And the first time you have that call, that person who's working in a forward-based, you know, sales role might think, “Oh, they're calling me because they're suspicious.” The second time you make that call, a little less so. And over time, there's going to be a partnership that's going to be formed. And there's not going to be, I think, a perception of, “Why do they keep calling me?” That someone's really going to embrace that this is an organization that cares about my success and my safety.
Amanda Raad: Rosemarie, you were talking a little bit about how regulators, rightfully so, don't think the check-the-box approach works, because it doesn't. But one of those boxes which you do have to check, you just have to go beyond, is training. And I shy away from the word “training” because when I think training, I think of someone standing at the front of the room and talking at a group of people, and that doesn't feel very useful. And the more I listen and the more we talk about this, I love the accountability partner – I love that. And I also like the idea of workshops. But a two-way, non-judgmental dialogue of problem-solving together, that counts for training, and I think people forget that sometimes. They're so conditioned that there has to be a PowerPoint that is presented and everyone signs a piece of paper and away we go, but that isn't really working.
Rosemarie Paul: I totally agree. And I think everyone benefits so much more from having real-life examples, real-life conversations. And sort of, you know, going through sort of role-plays or sorts of experiences that they can learn from and that are informed by the compliance policies. I think the compliance functions and firms generally have been so worried about how they evidence their compliance training that the focus has kind of gone more onto the pack and the attestations that people have had, the training that they’ve had, than thinking actually more laterally about the actual impact and effectiveness. Is this training landing? And I think that, you know, the point about workshops, real-life conversations where you can put friction in a transaction to give you pause for thought – these are all things that are effective sort of “training.”
Amanda Raad: Well, and third parties. Going back to third parties and due diligence and monitoring – you know, third parties were obviously a big part of your story, Richard. And if I remember correctly, there were third-party controls in place such as due diligence on who the partners are, and probably signed agreements with these partners, and parameters around how you engage with each other. But again, if you're not careful and don't take that step back to really think about how you're engaging with the third parties and whether there are other risks that come up, you might be deceived – it might be a false comfort almost by thinking there's this process in place, it's all okay.
Richard Bistrong: Well, there's one thing for certain from my experience – you cannot paper over risk. And not all third parties take these issues as seriously as we do. And I've been to parts of the world where I've heard these channel partners say, “These anti-bribery laws and norms and conventions have no place in our society. Gift giving and generosity is a part of the culture.” I've heard there's, you know, “No political will or prosecutorial resources to go after it anyway.” I've even heard, “It's legal here.” But take those same third parties and put paperwork in front of them that says, “The only thing that stands between you and doing business with this large, globally-recognized brand is that you will sign off on our Code of Conduct, including our anti-bribery policies” – they are happy to sign it because they don't take it seriously. So it's one thing to have a contract to sort of memorialize a robust due diligence process. It's another thing to think that a self-assessment and, you know, anti-bribery affidavit solves your problem. I think you're absolutely right, Amanda – that can lead to a very dangerous sense of complacency.
Amanda Raad: And again, in that situation, really the only way that you identify the problem is by talking to the people on the front-line that are engaged in the true conversation, you know, like yourself. Right? The person that would be putting the paper in front of the third party to say. “We can't work together unless you sign this.” Unless you're willing to speak up and say something to the organization, it's going to be hard.
Richard Bistrong: Well, and that's having those courageous conversations with your workforce, particularly a commercial workforce. But this goes to your vendor and procurement as well, “That the integrity and business practices of everyone who we do business with is our business.” And I think the one thing the regulators are pretty clear about is not knowing is knowing – like, willful blindness is no defense. And if there's one thing that I saw particularly during my years as a law enforcement cooperator is people were thinking, “What my third parties do with their profit and how they conduct their business is none of my business.”
[31:22] Our Voice and Our Values
Amanda Raad: If you were to try to think of what are some things that you really wish had existed or had happened from a compliance program perspective – big things, lessons learned that you think people should really be thinking about. Any tips?
Richard Bistrong: So we'll cover two bookends on this. The first is that voice of business. Right? That when ethics and compliance and integrity issues are coming out of the corporate narrative in partnership with the compliance narrative, it just sounds so much louder because it sounds like here ethics and integrity isn't a support function, it's how we work. The other thing that I find interesting is our values. So when I talk to corporations, particularly a commercial workforce, I will put the company's values on a slide and I'll go, “Does anyone know what those are?” It's very unusual that hands go up. And if we think about how much money companies spend on trying to show the world how great their values are – usually the landing page of their website – are they spending as much time trying to fuse those values with their workforce and to make people understand that, “Our values come to life through your decisions. And that everyone in this organization, no matter what they do and where they work is the guardian and the gatekeeper to those values”? Because I think behaviorally, when we embrace those values, those are the things that might fill in when there's not a rule that applies to a particular interaction.
Amanda Raad: Yes, and there never will be a rule that applies to every interaction. And if there was, we wouldn't be able to find the right rule when we needed it from the library. So that's very helpful. One last thing on this from me – any thoughts on how you make sure organizations reach their employees with that message – you know, how physically you make that happen? Because I think I see good intent and I see corporations trying really hard, but it's not landing sometimes.
Richard Bistrong: Yes, I think that's a real challenge. And I remember a conversation I had with a good friend of mine, and he works for a major financial institution and he has some risk in his commercial profile. And we're talking over the phone and I hear FCPA in the background and I said, “What's that about?” He goes, “Oh, I'm doing my anti-bribery training.” And I said, “What about your best friend going to prison for this law makes you think that you shouldn't be listening to that right now?” Right? I don't know that online training where we can check the box is the measurement of effective training. And I think the recent evaluation of corporate compliance programs from the Department of Justice says, “How are you measuring the effectiveness of your training?” And I don't know that that's just a percentage of people who took a test and whether or not they passed. I think in some parts of the world I think we really need to get face-to-face and have courageous conversations with people who we know are working in some troublesome spots.
Rosemarie Paul: I think that's right. And I think the point you make about fusing values with institutions, corporate values with their employees is crucial. What would have been effective, do you think, in terms of training for you at the time? What do you think would have landed for you at the time?
Richard Bistrong: Well, part of it is understanding that there are some value judgments we're not entitled to make on our own. And I think particularly in fields like life sciences, you know, pharma and med devices where someone might think, “You know what, I'm getting lifesaving medical devices or pharmaceuticals to the people who need it the most, so I might be cutting a corner. Maybe I'm even getting this medicine to someone faster through cutting some corners, taking a shortcut, paying a small bribe.” Well, that's impacting patient outcome and services, like, do people really appreciate that those are not decisions that they're entitled to make? So I think part of it is just sensitizing people to realize what the costs of corruption are. Right? I think it was either the IMF or the World Bank said it's two or three percent of global GDP and how this really, even small bribery, impacts economic development, good governance, health and welfare. So I think, you know, part of it is just sensitizing people to, you know, “Even a small bribe, you're now part of transnational crime. Is that how you want to think of yourself?” Because part of it is let's talk about the words we're using because I thought of this as all a win/win from the business perspective and wasn't thinking about the ethical consequences of my conduct on my former employer, on my family, on my health and certainly not on society.
Tina Yu: And coming back to this meshing of values and communications between you and your company – did you have any cries for help during that darker period that you think your company might have missed or for other companies to be looking at in relation to their employees?
Richard Bistrong: That's a great question. I don't think there was ever a cry for help – from my perspective, it was I think quite the opposite. Being overseas for 250 days a year, you know, I felt separated from the mothership, for lack of a better term. And, you know, I was not calling anyone for support or for help. But again, no one was calling me to say, “How are things getting done?” So I don't think I was putting out signals that I needed help. Maybe quite the opposite.
Tina Yu: So on the flipside, something that looks is all smooth sailing could be very much the opposite.
Richard Bistrong: Yes, it's really about bad behavior hiding behind good performance. And there were a few years where the domestic side of the business wasn't doing well so the international side was making up for that volume. So I was really well-recognized in the organization for success and I think that also fed into the sense of ego, like, you know, I just will continue down this path because now I'm getting recognized, you know, for success.
Rosemarie Paul: How do you think we can incentivize companies to question good performance as well as bad performance?
Richard Bistrong: Yes, I don't think anyone gets up in the morning and says, “Let's see what's going on right in the organization and turn over that rock and let's see what's growing underneath.” I think there's some obvious clues that we can look at, particularly sales increases in declining markets and also to map out sales on a quarter-by-quarter basis to look for spikes in sales right before the end of a fiscal quarter, and then valleys right afterwards – that could be an indication that someone is manipulating sales to make their numbers. I mean, you can plot that out for a division, a region or even a person, and if you back out for regional and for seasonal sales, you can see there's a very strange pattern to our sales volume here.
Amanda Raad: And we all talk about taking a risk-based approach to everything – to investigations, to our compliance programs – but really, in some ways you can take a risk-based approach to where you know employees are put in the highest risk place. Right? So if you were taking a risk-based approach, even without looking at any of your data, you are someone that should have been on the radar, at least for consideration, because you moved into an international market, it was a new market, you were going to be in objectively higher-risk places in an industry that faces some corruption risk. And so you almost wonder whether we get too in the weeds sometimes on focusing on, “Okay, I'm going to wait for there to be an issue and then I'm going to drill down on that issue as much as I can on the risk basis,” instead of just stepping back and saying, “Here's the universe of people. Now let's have courageous discussions with them. Let's look at their behavioral footprint of their expenses, which I'd love you to touch on for just a second, and let's just find out more about what's happening.” And maybe that's how you get people to question good performance.
Richard Bistrong: And that's a holistic look at people, not a transactional one. I mean, if you would look at my plea bargain, the bribery offenses occurred in places like New York, the United Nations, in Holland, the Dutch Police – these are not what we might think of as high-risk corruption environments. The commission rate on the United Nations bribery conspiracy was under five percent – that's not in red flag territory. And the bribe paid to the Dutch police officer was $15,000 over a $3 million contract. So I think you're right. If we're just looking at people transactionally and we don't take sort of a higher altitude, holistic view of the pattern of their conduct, we could be missing a lot of risk. And I think part of that goes to our support functions like sales order processing, finance, even like shipping, and logistics, and manufacturing – are they ethics and integrity ambassadors? Because they see and hear a lot. And do they feel like if they see a piece of paper, because a lot of, you know, companies' workplace safety is in the DNA, right, that compliance sticks? But do they realize that a piece of paper can be just as harmful to an organization as a faulty piece of machinery? And are they empowered to just hit the pause button, speak up and say, you know, “I know this piece of paper came from my supervisor, but this is an awful lot of samples going to this particular country at no charge. This just looks unusual. I'd like to ask for help.”
Amanda Raad: Yes, and that's also to your point about the fact that you didn't realize that this was hurting anyone. Right? That in a lot of ways you saw this as victimless. And I think that's the difference with health and safety – it’s resonated maybe a bit more with people than corruption, in some ways.
Richard Bistrong: Absolutely. And there's a wonderful piece of research coauthored by Francesca Gino from the Harvard Business School which it’s really scary. It says if we think our unethical conduct benefits others, like I did – my former employer with all these sales, I'm making all my commercial objectives, the channel partner moves onto the next sale and the poorly paid public official might get a little something to make ends meet – that when we see our unethical behavior like that as a win/win, it becomes morally acceptable. And even scarier, we come to think of ourselves as altruistic, and that's how I look at my environment.
[44:03] Behavioral Science and Investigations
Amanda Raad: So I want to turn it a little bit to how we might apply some of these theories to traditional investigation practices. Richard, turning to the point where you get the lovely privilege of interacting with the regulators, can you just tell us a little bit about that experience and getting that phone call and interfacing with the regulators. And anything about what it was like, and anything we can learn about how to interview, how to work with witnesses, how to work with executives to get to the truth?
Richard Bistrong: So to timestamp this a little bit, it was 2007. And approximately two or three months after being dismissed by my former employer, my attorney got a call from the Justice Department that I was the target of a criminal investigation. And as difficult and counterintuitive as it is for me to share this, it was the best call I ever received, because that's when I really embraced the consequences of what I did. This is when I realized that my life was truly off the rails and to even think about the process of rehabilitation, you know, I made a very emotional decision to face justice instead of delay it. So when my attorney said to me, “Well, the government wants to know if you want to come in and potentially cooperate,” and my attorney said, “We should talk about that.” No offense to attorneys, I said to mine, “Can we save that billable hour because I'm going in.” Right? That was a very personal decision, not necessarily a legal one. I mean, I certainly understood the possibilities of mitigating, you know, a potential sentence, but for me it was just the desire to start the process of coming clean. So I prepared for this first meeting, what's called a proffer, with the Department of Justice. And I was shocked by the experience because my experience when I got called in by the company's internal investigators was somewhat chaotic – there was shouting, there were accusations, there were “gotcha” moments. As if I wasn't scared enough, that process did not make it easier. Fortunately, at some point my attorney got involved and there was much more order and structure put around the internal investigation. So as I prepared for the Justice Department meeting, I think I was conditioned to, “I can't imagine what this is going to be like,” and I was shocked by the experience. The Justice Department attorneys and the FBI agents that were there, they weren't acting like they were prosecutors and investigators, they were acting like they were journalists. And in a somewhat dramatic moment, one of the prosecutors showed me literally, like, an empty legal pad and said, “Look, we're just starting our investigation. We just want to hear what you have to say.” Now, later he would tell me that was such a fib, he was ready to indict me if I didn't cooperate, but if he would have told that to me at the beginning of the meeting, imagine the difference it would have had. And over time, the initial proffer sessions went really well because they just made it so easy for me to talk to them, and part of that was just sort of showing respect for me as an individual. Even knowing that I'm going through a horrific experience, they didn't make that bad situation worse. So it was almost as if the regulators were letting me parachute into this new reality instead of just crash land, and that was the opposite experience that I had in the company's internal investigation.
Amanda Raad: And the interesting thing there is that in many ways that probably allowed you to tell the truth easier. You know, it probably allowed you to tell your story in the way that was helpful to you, but was also exactly what they were looking for instead of trying to catch you in something or instead of trying to assume that they knew everything about what happened, they listened. And I think as investigators, that's something we forget to do sometimes. You know, we're so focused on following the evidence and we've worked so hard to find all the pieces of the puzzle, and we try to put them together. And it's really the story comes from the person. Right? And we can't do that without listening.
Richard Bistrong: And here's the thing for internal investigators – so we'll take the outliers: there's the person that's just not going to talk at all. They're going to say, “You can talk to my attorney or talk to anyone. I'm not talking to you.” And then there's someone who's just going to try to deliberately deceive and manipulate the process. That's not what this conversation is about – this is about someone who knows they're in trouble. In my case, I knew I had criminal liability, but who wants to do the right thing. That is not going to be linear. Okay? This is going to be a very slow process of peeling layers back on an onion, and the truth is not going to come quickly and at once. And just because the person might omit something or get something wrong, it doesn't mean that they're sitting there trying to deceive you. And again, this is not about professional interviewing skills, it's about someone who's been on the other side of this. If you give them time and even say, “Look, can we talk about this other situation we previously addressed because we'd like some more information.” And what the Justice Department said to me was, “If you're struggling with something, we'll try to get the emails or information to help you with your memory.” Like, those are the things that make you realize, these people are not out here to try to catch me up because if they wanted to, they could. They're here to let me tell them what happened. And yes, at some point you have a paradigm shift from sort of being reactive and scared to, as you said, Amanda, you want to help them – you want to get out the whole story. That doesn't happen in one session.
Rosemarie Paul: I think that's a really important point about the fact that you're not going to get home on all bases in one session. Can you describe a bit more of that process? I think you've described the investigation process as being like unwrapping layers of an onion, and that our expectation with interviewing someone shouldn't be that they'll give complete answers all at once – if you could speak to that.
Richard Bistrong: Well, one of the things that the Justice Department did, which was helpful to peeling back the layers of the onion (no offense to onions in this conversation) – they gave me subject matters that they wanted to talk about. So they said, “We want to hear what you have to say about the UN bribery offense. We want to hear what you have to say about self-dealing and fraud. We want to hear what you observed in the industry. And we want to hear what was going on in the company.” So they actually gave me four or five buckets. And they also said, you know, “We're not meeting tomorrow. So we're going to meet next month.” And that gave me time to think, to talk to my attorney, and to sort of categorize my recollections according to the subject matter that they wanted to talk about. That was so helpful to me because it sort of helped me to organize what was, like, a huge mental mess into sort of categorizing things the way they wanted to. You know, that's the way we started, but that's not the way it ended.
Rosemarie Paul: And how did it end? How did that process progress?
Richard Bistrong: So Rosemarie, the initial proffer sessions went so well the Justice Department said, “Well, we'd like you to wear a wire and talk to some of the people that you have mentioned in these disclosures because we want to corroborate what you shared with us.” And that ultimately led to an extended period of undercover law enforcement cooperation. And then acting as a cooperating witness both in the U.S. and to some extent in the UK because I was basically facing carbon copy prosecution because I was living in the United Kingdom for part of this ten-year international sales role. So it ended ultimately with a government sting operation that did not go well in federal court. But had I not cooperated with the Department of Justice, Judge Leon was very clear about what the consequence would have been, and he was very clear that those consequences would've been eight to 11 years in prison – that's probably what I was facing in the United Kingdom. At the end of the day, he could've sentenced me to five years, but he also could've let me go home. But he said, “Mr. Bistrong, big crime plus big law enforcement cooperation doesn't equal home confinement.” He said, “That's not the moral of the story.” And he was absolutely right. He said, “People who face the same challenges that you face need to know if they break the law, no matter how much they cooperate with law enforcement, they're going to go to prison.” So he sentenced me to 18 months. Again, he could've sentenced me up to five years. I served 14-and-a-half months, and I feel like justice was served – that a prison sentence was warranted given this was not just an FCPA violation, there was a lot of uncharged conduct. I could've been charged with money laundering, tax evasion, wire fraud, bank fraud, the Travel Act. So, you know, I really feel that the U.S. criminal justice system for someone who's ready to do the right thing, even after a decade of doing the wrong thing, is extremely fair.
Amanda Raad: Richard, if you can just take us back to how you made the decision that you wanted to cooperate. Because that's a big decision, right? To go from all of these years of unspoken conduct to deciding that you're going to tell the whole story. How did that happen?
Richard Bistrong: So I think the decision to cooperate, to go and tell the government my story was more emotional than anything else. And part of it was I did it. Like, I wasn't struggling with my illegal conduct. And I wasn't thinking, “Well, let's just see what the evidence is and let's have an aggressive defense strategy and have judicial motions to throw out this evidence and challenge the investigation.” To me, I wanted to start my life anew, and I realized to do that, I had to come clean. And I told the Justice Department about crimes they knew about, like bribing a UN official, but I also told them about crimes they didn't know about. So I pleaded guilty to bribing a Dutch police officer to win a pepper spray contract. The FBI didn't know about that crime, I told them about that. And this is also a very personal side of this for me. While I am now in 2019, almost 13 years clean, I was in very early sobriety from what was a three-year awful drug addiction, which was the last chapter of this part of my career. And as I share my journey from change to change, I talk about that in the sense that it's not a drug addiction story. This bad behavior happened way before narcotics got into my life, but I think the drugs just gave me a greater sense of well-being and invincibility. But being in young sobriety and getting a call from the Justice Department, was I really do need to come clean. And if this is going to be the way I live my life, I have to face the consequences of what I did, with my family, with society, with justice.
Amanda Raad: And is there anything that you think could have been handled better? It sounds like things were handled pretty darn well once you made that decision and once you interfaced with the authorities. But for everybody listening that runs investigations and that are fact-finders and trying to engage with people who have engaged in wrongdoing, any tips of things either that did work well for you or things that you would caution about?
Richard Bistrong: That's a great question. It's not like this is one of these situations where we're talking about a win/win. Right? You now have made the call to someone, again, a Richard Bistrong who knows he or she has a problem, potential criminal liability. Even under these circumstances, I think there can be respect for people and respect for the process, and that is a two-way street. So you want the Richard Bistrongs’ to respect that this is what we're going to do. You know, we want to hear what you have to say. We want to understand what happened. We're showing respect for you. We're trying to build respect for each other and respect for this process, which might not have a happy ending for the company, for the people, but that doesn't mean we have to have a difficult time talking to each other. So I've been really thinking about this and for internal investigators out there, just remember for the person that gets the call, life has come crashing down upon them. And if you show them a little respect, they might show you a lot of respect. Right? And just goes back to that analogy of let them parachute into this new reality – a crash landing is not going to help you get information. And particularly, if you're talking to someone with a commercial background, we're all a bit of people pleasers. And at some point, again, if there's respect for people and respect for the process, you might even get to the point where the Richard Bistrong wants to help you and wants to try to do the right thing, even after doing a lot of wrong things.
Amanda Raad: And maybe to close, why do you do this? Why are you so generous with your time and why have you have turned to the compliance field?
Richard Bistrong: So a 14-and-a-half-month prison sentence had a catastrophic impact on my health. So I walked into prison a 14-time marathon runner. I got out of prison with coronary heart disease and I was infected with the M-R-S-A bacteria, MRSA, which is a bacteria that's resistant to antibiotics, and it could be potentially deadly. And the Bureau of Prisons did not treat me because they said, “You're just going to get it again.” So my homecoming was to an infectious disease specialist. We had to quarantine the house because it's highly contagious. And then having to have a heart procedure while I was infected was just a medical nightmare, and it took, like, two years to get healthy again. The press about my case was not very positive, nor should it have been. But we were living in Jacksonville, Florida at the time and I had two young adult children. My daughter was in university so she was a little bit removed and insulated, but my son was in high school at the time. And, you know, at a time in this young man's life where self-awareness and confidence is already fragile, I mean, he really suffered socially. You know, his friends couldn't come to the house because all of the reporting. It was I think catastrophic for this young man and it was certainly catastrophic for our relationship, and I think this is going to be a lifetime of rebuilding with him. I share that with you because this is not something I would ever want to see someone go through, and it was totally avoidable. So hopefully today as we have this podcast, we all share a goal, and that's the goal of keeping people safe and successful. Because if everybody does the right thing each and everyday, they're going to protect themselves, they're going to protect each other, their peers, their friends, and they're going to protect the company and its brands. So, you know, hopefully we can help people take values off of those fancy wall posters and intranet messages and help them to bring them to life through decision making.
Amanda Raad: Thank you. Can't thank you enough for joining us today.
Tina Yu: So thank you very much, Richard, for sharing so many of your personal experiences. We really, really appreciate it. And thank you, Amanda and Rosemarie, as well. And of course, thank you, our listeners. For more information on the topics that we discuss, please visit our website, www.ropesgray.com. And of course if we can help you navigate any of the topics we've discussed, please don't hesitate to get in touch with us. You can also subscribe and listen to this series wherever you regularly listen to podcasts including on Apple, Google and Spotify. Thanks again for listening.