While foreign bribery makes for sensational headlines, a Midwest egg company recently discovered why U.S. enforcement actions for domestic bribery have resulted in a sharp increase in corporate fines. The egg company agreed to pay a fine of about $6.8 million — and two top executives face an additional $100,000 fine and up to a year in jail — all stemming from a $300 cash bribe to a U.S. government official.
The company is accused of bribing a U.S. Department of Agriculture (USDA) inspector to approve the sale of eggs that didn't meet minimum quality standards and to release those eggs without reprocessing. In the plea agreement, the company admitted the bribe was intended to corruptly influence the inspector to exercise his authority to help it sell tainted eggs. The company also pleaded guilty to charges of introducing misbranded eggs into interstate commerce with the intent to defraud. The company acknowledged that egg shipments were often left in storage up to several weeks and then shipped with labels stating false expiration dates to mislead state regulators and retail customers about the true age of the eggs.
Unfortunately, some of the eggs contained the poisonous and harmful substance Salmonella Enteritidis, contributing to a salmonella outbreak in 2010 that sickened thousands of people across the U.S. and led to the recall of 550 million eggs.
Such unsafe and illegal business practices perpetrated by unethical leadership ultimately resulted in the company going out of business.
When management disregards the law and eschews ethical behavior in favor of the bottom line, employees may be more likely to commit fraud because they believe that ethical conduct is not a priority. On the other hand, if management makes integrity and ethical behavior core values reflected in the organization’s policies and procedures, employees will be more inclined to mirror the same values.
Companies can avoid similar liability and financial and reputational damage by setting the right organizational tone and implementing comprehensive compliance programs including compliance training, effective internal controls, anti-fraud reporting procedures, positive-reward programs and — most importantly — by example.