Risk briefings, musings and discussion

Can Navalny make a difference in Russia? The Kremlin seems to think so.

“I want changes,” wrote Navalny in a blog post last week. “I want to live in a modern democratic state and I want our taxes to be converted into roads, schools and hospitals, not into yachts, palaces and vineyards.”

Bold words from Alexei Navalny, the public face of Russia’s rising anger with widespread graft and corruption. Can he make a difference? Can he trouble Putin’s grip on power? Unlikely just yet, but his words are striking a chord with an increasing number of voters.

Full story from Reuters here:

Too big to fail? A Balkan retail crisis unfolds

The collapse of Croatian retailer Agrokor Group, one of the most important employers in the Balkans, is sending shockwaves through the region. In April, the government rushed “Lex Agrokor” through parliament in a bid to save the company and prevent scores of bankruptcies among its supply chain. But creditors – including Fidelity, AXA and the Canadian Pension Plan – want their money back and the government itself might fall. Allegations of longstanding accounting fraud are also being levelled, and PwC is being lined up to investigate.

“Agrokor has transformed itself from the biggest private company into one of the biggest systemic risks to the Croatian economy,” Morgan Stanley’s economist Georgi Deyanov wrote in a note to clients. “The government’s action resulted in the implicit state guarantee of Agrokor’s short-term debt and arrears to suppliers.”

Full story & analysis from Bloomberg here: Billions Are Sinking Into a Balkan Black Hole

Trump’s SEC pick clears Senate panel, controversies abound

Jay Clayton, President Trump’s pick to head up the Securities and Exchange Commission (SEC), has cleared the Senate Banking Committee, and now heads to the Senate floor for a final vote.

Of particular interest are Mr.Clayton’s comments on FCPA, which he opined in 2011 caused ‘lasting harm’ to US Companies, and his client list while a star lawyer at Sullivan & Cromwell.

As CNN noted, “Clayton’s list of clients at the elite law firm Sullivan & Cromwell reads like a who’s who list of companies accused of the shady practices the SEC nominee wants to stop.

He’s represented Volkswagen, (VLKAF) which pled guilty to criminal charges over cheating on emissions tests; Valean, (VRX) a drug maker accused of being the “Enron” of the pharma world for fraud; and Deutsche Bank, which has been charged in a $10 billion Russian money-laundering scheme.

Clayton’s also advised Goldman Sachs on its controversial government bailout and Bear Stearns on its fire sale to JPMorgan (JPM).”

Other controversies have come to light, including a Reuters report on possible conflicts of interest, that states “he communicated with more than a half dozen of President Donald Trump’s transition representatives, including one whose company has a multi-million-dollar contract with the SEC, according to documents seen by Reuters.”

We await the Senate vote with interest.

Rolls-Royce: Why it never pays to keep quiet

Rolls-Royce has agreed to pay £671m in fines to the authorities in the UK, the US and Brazil. This offer suspends the prosecution and brings to a close a torrid period for the venerable British engineering firm. While there are many lessons to be learned from this debacle, perhaps the easiest and quickest to digest is that lying and obfuscation is not the way to deal with allegations of corruption.

As the FT notes in its report linked below, the investigation into graft and bribery goes back to questionable conduct in the late 1980s in the US, and it was also found that ‘Rolls-Royce’s leadership was aware of questionable conduct since 2010 and decided not to notify the authorities.’

CNS Risk advises companies on how to take action in situations such as these; we assist through investigations that prepare for self-reporting, and work with counsel and other advisors to help companies respond to and cooperate with the relevant authorities. Contact us directly for more information on how we can help.

The FT reports: Rolls-Royce humbled in corruption case

Russia’s anti-corruption champion to challenge Putin

Russian opposition leader Navalny plans to run for president in 2018, Reuters reports.

“”There have not been competitive elections in Russia for 20 years,” Navalny, 40, the founder of Russia’s Anti-Corruption Foundation, said in his statement.

“I’m sick and tired of watching ‘elections’ with the candidates just making up the numbers, not daring to criticize the pre-determined winner. I understand very well that for me even to become a candidate would not be easy.”

Read the full story here: Navalny to run for 2018 Russian presidency

Telia facing $1.4 billion Uzbek corruption settlement

Dutch and US regulators have requested a whopping $1.4 billion in fines from Nordic telecom company Telia. The settlement addresses Telia’s entry into the Uzbek market in 2007. The company has not shied away from accepting blame, and said last September that it would gradually exit its Central Asian markets after probes into local corruption.

In a statement, Telia Chairwoman Marie Ehrling said: “I have said on many occasions in the past that Telia Company’s entry into Uzbekistan was done in an unethical and wrongful way and we are prepared to take full responsibility.”

While that may be the case, the size of the proposed settlement has come as an unpleasant surprise.

“Our initial reaction to the proposal is that the amount is very high,” Ehrling’s statement added.

In February of this year VimpelCom Ltd said it would pay $795 million to resolve U.S. and Dutch probes into a bribery scheme in Uzbekistan.

Why they did it – answers from the fraudsters

Another week, another fascinating look at why fraudsters commit their crimes. In this book, the author relies on first hand testimony – in the form of letters received from the criminals – to tell the story. As Bloomberg reports, Eugene Soltes’ new book, ‘Why They Do It: Inside the Mind of the White-Collar Criminal’ is out on Oct 11.

Having read Soltes’s accounts of these and other white-collar characters, one answer comes into focus above all others to the author’s question of why they did it. They did it because they thought they could get away with it.”

Why white-collar criminals evade justice

“Why White Collar Crime Is Here to Stay” – Bloomberg reports on a new book by ENRON investigator Samuel Buell.

If “corporations are people too,” why isn’t anyone in jail? The former head of the Enron Corp. Task Force explains why it’s so difficult to convict companies and their executives.

Turkey’s failed coup – what next?

“The Turkish government moved swiftly to calm investors before financial markets reopen Monday after a failed coup, with the central bank promising unlimited liquidity to lenders and the deputy prime minister posting on Twitter that there’s “no need to worry.”

Bloomberg reports on the immediate fallout of the failed coup – full story here:Turkey calms investors

Columnist Leonid Bershidsky assesses the view from Russia – Lessons for Putin