FCPA: This is not a compliance failure. It’s an ethical failure

In the movie “Margin Call” the character played by Jeremy Irons says that there are three ways to lead in business: (1) Be the smartest; (2) Be there first; (3) Cheat. I thought about this trichotomy when reading several articles about the fine of $450 MM agreed to by the British bank Barclays on June 27, 2012 to settle allegations that it tried to manipulate certain benchmarks for rates, most particularly the London Interbank Offered Rates or LIBOR. The New York Times (NYT), an article by Mark Scott on June 29, 2012, entitled “Angry British Leads Take Barclays; Chief Executive to Task”, said that the rates which Barclays employees manipulated “are used to determine the costs of $350 trillion in financial products…” [Emphasis mine] More ominously for the US, according to an article in the Financial Times (FT) on June 29, 2012, entitled “Libor affair exposes big conceit at the heart of banking”, author Gillian Tett stated that “about 90 per cent of the US commercial and mortgage loans are linked to the index, too.” However, the one line from the article which struck me the most was a quote from Jonathan Hayward, a corporate governance expert in London, who said “This is not a compliance failure. It’s an ethical failure.”

So what takes business fraud and corruption from the more mundane world of a compliance failure to that of an ethical failure? Perhaps it is when, as Hayward further explained, “The actions served only one purpose, to manipulate the market.” What were some of the actions that Barclays took to engage in this systemic market manipulation? NYT reporter Scott detailed a litany of conduct by Barclays. UK regulators from the Financial Services Authority (FSA) found “pervasive wrongdoing by traders”. Some of the techniques included routinely submitting false rates to regulators at the behest of traders so that these same traders could manipulate buys and sells ...

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Margin Call Trailer

Margin Call Trailer. "You're selling something that you know has no value" ! Margin Call Movie Trailer.


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