Today, October 2, is the first Friday in October so I begin my annual month of Friday HorrorFest Film highlights. The great thing about this blog post series is that I get to re-watch these great old horror films. While I usually focus on the films of Universal Pictures and their classic monsters: Frankenstein, Dracula, Wolfman and the Mummy; this year I wanted to go across the pond to consider the Hammer films on Frankenstein.
Hammer had some initial success with the horror film The Quartermass Xperiment. This led to reviving the Frankenstein franchise as the book was in the public domain. However, Universal Pictures had the copywrite to both stories from their Frankenstein series and, more importantly, the make-up and look of their monster. This led Hammer to make a deal with Universal Pictures to act as US distribution partner, which turned out to be key to the film’s stunning success.
The other key change that Hammer brought to the portrayal of The Monster was the movies were in color. Obviously, the Universal Picture horror films from the ‘30s and ‘40s were all in black and white. If there was gore to be shown, it was de-emphasized by the monochromatic screen presentation. But by the ‘50s, the movies were in full, living color and Hammer emphasized the gore involved in horror movies, largely for the first time on the beg screen.
Over this month, I will consider the first three Hammer Frankenstein versions. They are The Curse of Frankenstein (1957); The Revenge of Frankenstein (1958); and The Evil of Frankenstein (1964). So, saddle up for a great HorrorFest in October 2020.
The concept of a horrorfest would certainly be an appropriate way to think about Sargeant Marine Inc. Rarely do you see someone whose last name is in the company’s title, running a bribery and corruption scheme. Nor do you see six individual guilty pleas before the company actually pleads guilty. However, both a components of this Foreign Corrupt Practices Act (FCPA) enforcement action.
Given the pervasive nature of the corruption present at Sargeant Marine and the business model built on bribery, there are probably not any compliance program lessons to be garnered as the company was one large criminal action. Nevertheless, there are some broader lessons to be learned from the case. The first one is for the Board of Directors. It is not clear if the Board has been sued for failing in their Caremark duties but the Board pretty clearly was not engaged. However, at some point, whether by hook, nook or crook they did become engaged and the clear important from the discount obtained under the FCPA Corporate Enforcement Program was a substantial 25%. It also demonstrates that company’s should not wait until the Department of Justice (DOJ) comes knocking but should more seriously consider self-disclosure in the self-interest of the organization. Every Board now understands how much is lost by not self-disclosing.
There has been a large amount of commentary about the drop of the penalty from $90mm to $16.6mm due to the inability to pay. Dylan Tokar, in the Wall Street Journal (WSJ) Risk & Compliance Journal, summed it up with “Facing a bribery probe, asphalt company Sargeant Marine Inc. claimed that a large criminal penalty would make it insolvent. So federal prosecutors knocked off more than $70 million. A discount of more than 80% off what could have been a fine of at least $90 million is the first time prosecutors have applied the latest U.S. Justice Department guidance on inability-to-pay claims to a Foreign Corrupt Practices Act case, according to senior department officials. Sargeant Marine’s case, which ended last week with the Florida company agreeing to pay $16.6 million, illustrates how prosecutors may apply the guidance in future cases.”
He concluded by noting even the trial judge overseeing the case was impressed, “In Sargeant Marine’s case, Judge Eric Vitaliano for the Eastern District of New York presided over the hearing where representatives of the company entered a guilty plea on its behalf. The judge said he was impressed with the way prosecutors had thoroughly vetted Sargeant Marine’s financials. The settlement included a significant penalty, he said, while allowing the company and its employees to be viable and productive.”
This final statement brings up a critical question in corporate punishment. What is the purpose of a fine and penalty? Is it punitive, to punish wrong-doers? Is it deterrent, to stop others from engaging in the same or similar conduct? Is it something else? Should Sargeant Marine have been put out of business because it clearly employed a business model designed to engage in bribery and corruption? What about all the others in the company, should they suffer the same fate as those who lost their jobs by putting the company out of business? There are no easy answers to these questions.
One thing which is clear is that if your business model was based on bribery and corruption and the bribery and corruption is taken away; not only will you lose all that business, which in the case of Sargeant Marine was some $38 million over eight years, but the chances are your organization will never be able to replace that revenue stream. First, if you cannot compete in the open market, i.e. not paying bribes, it means your products and services do not meet market needs. Second, your organization is forever tainted as a company that had bribery and corruption baked into its DNA. Why would any organization ever do business with you going forward? The risk is simply too great. The legal risk, the business risk and the reputational risk.
We finally leave the sordid tale of Sargeant Marine but we move into some of the greatest horror movies from the late 1950s and early ‘60s. Sit back and join me each Friday for a great HorrorFest 2020.
