Note the tone and slant of this article.
- 80% of the fine will be borne by ordinary shareholders. The Govt actually makes a profit rather than a loss as 25% of the US 422m will be returned by the US authorities to the Singapore authorities giving the impression that Singapore took punitive action.
- Except for Jeffrey Chow and the agent's name who are both foreigners, no other names were revealed. Why are names not revealed - this is not a case involving a minor.
- why the conditional warning
- why would accused persons caught in illegal act and then offering complete cooperation treated as a righteous and ethical person.
- no details of what sort of punishment were meted out.
- was it a termination or were they allowed to resign with full perks?
- why the special treatment for Temasek companies.
- why ST Marine case only snared ex and retired employees
- why ask a known porlumpar who is a director for Centre of Governance, NUS to write an article that appeared to suggest a misstep as opposed to rampant corruption and complete breakdown in governance as it was spread over 13 years involving senior leadership and board members.
- this smacks of the same practice of covering up that involved 2 GIC traders caught by Tokyo for rigging the market. Now one of them is part of GIC leadership after a cursory attempt at discipline.
Thus far in recent years 3 GLCs, under Aunty Ho's Temasek have had Sr Mgmt and even Audit Board Members embroiled in corruption - SembCorp Marine, ST Marine and Keppel.
Except for ST Marine and where a simple investigation took 3 years for CPIB, the Keppel's case resulted in a conditional warning by the AG as well as CPIB in lieu of people charged in court in Singapore. In the ST Marine case, the ex-CEO after serving his time returned home to Mountain View, California to retire for good. Same with Keppel's Head of Legal who is also a US citizen.
Keppel O&M corruption case a black eye for Singapore Inc
By LAWRENCE LOH
The Keppel Offshore & Marine corruption case has raised serious questions of corporate governance in the company, including whether it properly audited the payments of large sums of money over a long period of time, says the author. Photo: Reuters
Published27 DECEMBER, 2017
UPDATED 28 DECEMBER, 2017
After all, Singapore companies enjoy a squeaky clean reputation around the world and the Republic has consistently been ranked the least corrupt in Asia.
To rub salt into the wound, KOM is a government-linked company. It is part of Keppel Corporation, whose chairman was a long-serving Cabinet Minister.
Temasek Holdings is Keppel’s largest shareholder, owning a 20 per cent stake in the blue-chip firm listed on the Singapore Exchange.
What was particularly shocking was not the large sum of bribes – some US$55 million – but the protracted period the corruption went on, lasting more than a decade from 2001 to 2014.
The bribes were said to be made by Zwi Skornicki, an agent of KOM, to officials of Brazilian state-run oil company Petrobras and other parties, with the knowledge or approval of former KOM executives.
The Attorney-General’s Chambers and the Corrupt Practices Investigation Bureau, which served KOM a conditional warning in lieu of prosecution, said the company concealed the corrupt payments by paying commissions to an intermediary, under the guise of legitimate consulting agreements.
The intermediary then made payments for the benefit of the Brazilian officials concerned.
This raises serious questions of corporate governance in KOM. Did the company not properly audit the payments of such a large sum over such a long period of time? What oversight did its board and audit committee have over these payments?
There is perhaps some ground in the calls online by observers for the issue to be debated in Parliament, maybe as soon as the next sitting in January, so that some of the critical issues may be clarified.
To be sure, Keppel cooperated in the investigations and took “extensive remedial measures”, making what it described as “significant enhancements to compliance and internal controls systems” across the group.
Disciplinary action has also been taken against individuals in the misconduct, with Chairman Dr Lee Boon Yang coming out to stress that integrity is a core value of the company.
“We do not and will not tolerate any illegal activity in the conduct of our business,” he said, expressing regret and deep disappointment at the corruption findings and rightly adding that global firms such as Keppel have a moral duty to comply with laws.
Keppel CEO Loh Chin Hua also stressed that the past practices uncovered at KOM “do not reflect how the Keppel Group conducts business today”, that it has “zero tolerance for corruption” and “must now work hard to win back the trust” its stakeholders have placed in it.
While the KOM saga will no doubt deal a blow to Keppel’s reputation, the group has a solid corporate governance record, always ranking among the top five in the Singapore Governance and Transparency Index since the study started nine years ago.
Interestingly, the KOM case is not the only one involving a Singaporean company in the offshore and marine industry.
ST Marine, a subsidiary of ST Engineering - another listed Temasek-linked company - was embroiled in a corruption scandal here in 2014.
In the ensuing legal proceedings, seven executives were charged with various offences ranging from offering bribes for ship-repairing contracts to accounting falsification and conspiracy.
Some of these practices dated way back to 1996. Many of the charges stood and the executives were convicted.
Two board members who served in the audit committee were also implicated in the case.
It has not a coincidence that the illicit payments in both the ST Marine and KOM cases were made ostensibly to secure business deals.
It is not clear whether the monumental decline of the industry in recent years could have created even more pressure for executives to close the dwindling number of available deals nor the extent of corruption in an industry which is still worth many billions.
Notably, another government-linked company in the same industry, Sembcorp Marine, is also in the spotlight now given that it is involved in some of the Brazilian contracts related with KOM.
No evidence though has been produced by the prosecutors thus far.
The KOM case is a black eye for Singapore and will serve as a timely reminder that a country’s sterling graft record can easily be tarred by just one black sheep.
Still, it will take a lot more to undermine the trust that the international community has in the clean governance of Singapore and its companies, given how this has been carefully built upon over many years.
Naturally, the most important issue at hand is what companies here can do to ensure corruption does not take root in its business.
Beyond emphasising the importance of following “hard” rules and regulations, it is useful to pay attention to the underlying “soft” corporate culture.
In fact, the development of a new culture was a big turnaround for German multinational Siemens from a long history of mega-corruption scandals over a century.
It was only in mid-2007 when the company brought in an outsider CEO who initiated a massive restructuring involving people and processes.
Since then, compliance with rules has become ingrained as part of the company’s DNA.
On the other hand, Korean corporations like Samsung and Lotte have struggled to shake off repeated corruption lawsuits.
This is likely because the culprits are in top leadership and there is no anti-corruption culture across the company.
Ultimately, tackling corporate graft must go beyond having good corporate governance and having checks and balances towards building a strong corporate culture that eschews wrong-doing.
The KOM case is not the first major corruption scandal to rock Singapore, nor will it be the last. Thankfully it is expected to cause no more than a dent in Singapore Inc’s reputation, at least for now.
ABOUT THE AUTHOR:
Lawrence Loh is director of Centre for Governance, Institutions and Organisations at NUS Business School, National University of Singapore. He is also deputy head and associate professor of Strategy and Policy at the school.
- 80% of the fine will be borne by ordinary shareholders. The Govt actually makes a profit rather than a loss as 25% of the US 422m will be returned by the US authorities to the Singapore authorities giving the impression that Singapore took punitive action.
- Except for Jeffrey Chow and the agent's name who are both foreigners, no other names were revealed. Why are names not revealed - this is not a case involving a minor.
- why the conditional warning
- why would accused persons caught in illegal act and then offering complete cooperation treated as a righteous and ethical person.
- no details of what sort of punishment were meted out.
- was it a termination or were they allowed to resign with full perks?
- why the special treatment for Temasek companies.
- why ST Marine case only snared ex and retired employees
- why ask a known porlumpar who is a director for Centre of Governance, NUS to write an article that appeared to suggest a misstep as opposed to rampant corruption and complete breakdown in governance as it was spread over 13 years involving senior leadership and board members.
- this smacks of the same practice of covering up that involved 2 GIC traders caught by Tokyo for rigging the market. Now one of them is part of GIC leadership after a cursory attempt at discipline.
Thus far in recent years 3 GLCs, under Aunty Ho's Temasek have had Sr Mgmt and even Audit Board Members embroiled in corruption - SembCorp Marine, ST Marine and Keppel.
Except for ST Marine and where a simple investigation took 3 years for CPIB, the Keppel's case resulted in a conditional warning by the AG as well as CPIB in lieu of people charged in court in Singapore. In the ST Marine case, the ex-CEO after serving his time returned home to Mountain View, California to retire for good. Same with Keppel's Head of Legal who is also a US citizen.
Keppel O&M corruption case a black eye for Singapore Inc
By LAWRENCE LOH
The Keppel Offshore & Marine corruption case has raised serious questions of corporate governance in the company, including whether it properly audited the payments of large sums of money over a long period of time, says the author. Photo: Reuters
Published27 DECEMBER, 2017
UPDATED 28 DECEMBER, 2017
- 6 Shares
After all, Singapore companies enjoy a squeaky clean reputation around the world and the Republic has consistently been ranked the least corrupt in Asia.
To rub salt into the wound, KOM is a government-linked company. It is part of Keppel Corporation, whose chairman was a long-serving Cabinet Minister.
Temasek Holdings is Keppel’s largest shareholder, owning a 20 per cent stake in the blue-chip firm listed on the Singapore Exchange.
What was particularly shocking was not the large sum of bribes – some US$55 million – but the protracted period the corruption went on, lasting more than a decade from 2001 to 2014.
The bribes were said to be made by Zwi Skornicki, an agent of KOM, to officials of Brazilian state-run oil company Petrobras and other parties, with the knowledge or approval of former KOM executives.
The Attorney-General’s Chambers and the Corrupt Practices Investigation Bureau, which served KOM a conditional warning in lieu of prosecution, said the company concealed the corrupt payments by paying commissions to an intermediary, under the guise of legitimate consulting agreements.
The intermediary then made payments for the benefit of the Brazilian officials concerned.
This raises serious questions of corporate governance in KOM. Did the company not properly audit the payments of such a large sum over such a long period of time? What oversight did its board and audit committee have over these payments?
There is perhaps some ground in the calls online by observers for the issue to be debated in Parliament, maybe as soon as the next sitting in January, so that some of the critical issues may be clarified.
To be sure, Keppel cooperated in the investigations and took “extensive remedial measures”, making what it described as “significant enhancements to compliance and internal controls systems” across the group.
Disciplinary action has also been taken against individuals in the misconduct, with Chairman Dr Lee Boon Yang coming out to stress that integrity is a core value of the company.
“We do not and will not tolerate any illegal activity in the conduct of our business,” he said, expressing regret and deep disappointment at the corruption findings and rightly adding that global firms such as Keppel have a moral duty to comply with laws.
Keppel CEO Loh Chin Hua also stressed that the past practices uncovered at KOM “do not reflect how the Keppel Group conducts business today”, that it has “zero tolerance for corruption” and “must now work hard to win back the trust” its stakeholders have placed in it.
While the KOM saga will no doubt deal a blow to Keppel’s reputation, the group has a solid corporate governance record, always ranking among the top five in the Singapore Governance and Transparency Index since the study started nine years ago.
Interestingly, the KOM case is not the only one involving a Singaporean company in the offshore and marine industry.
ST Marine, a subsidiary of ST Engineering - another listed Temasek-linked company - was embroiled in a corruption scandal here in 2014.
In the ensuing legal proceedings, seven executives were charged with various offences ranging from offering bribes for ship-repairing contracts to accounting falsification and conspiracy.
Some of these practices dated way back to 1996. Many of the charges stood and the executives were convicted.
Two board members who served in the audit committee were also implicated in the case.
It has not a coincidence that the illicit payments in both the ST Marine and KOM cases were made ostensibly to secure business deals.
It is not clear whether the monumental decline of the industry in recent years could have created even more pressure for executives to close the dwindling number of available deals nor the extent of corruption in an industry which is still worth many billions.
Notably, another government-linked company in the same industry, Sembcorp Marine, is also in the spotlight now given that it is involved in some of the Brazilian contracts related with KOM.
No evidence though has been produced by the prosecutors thus far.
The KOM case is a black eye for Singapore and will serve as a timely reminder that a country’s sterling graft record can easily be tarred by just one black sheep.
Still, it will take a lot more to undermine the trust that the international community has in the clean governance of Singapore and its companies, given how this has been carefully built upon over many years.
Naturally, the most important issue at hand is what companies here can do to ensure corruption does not take root in its business.
Beyond emphasising the importance of following “hard” rules and regulations, it is useful to pay attention to the underlying “soft” corporate culture.
In fact, the development of a new culture was a big turnaround for German multinational Siemens from a long history of mega-corruption scandals over a century.
It was only in mid-2007 when the company brought in an outsider CEO who initiated a massive restructuring involving people and processes.
Since then, compliance with rules has become ingrained as part of the company’s DNA.
On the other hand, Korean corporations like Samsung and Lotte have struggled to shake off repeated corruption lawsuits.
This is likely because the culprits are in top leadership and there is no anti-corruption culture across the company.
Ultimately, tackling corporate graft must go beyond having good corporate governance and having checks and balances towards building a strong corporate culture that eschews wrong-doing.
The KOM case is not the first major corruption scandal to rock Singapore, nor will it be the last. Thankfully it is expected to cause no more than a dent in Singapore Inc’s reputation, at least for now.
ABOUT THE AUTHOR:
Lawrence Loh is director of Centre for Governance, Institutions and Organisations at NUS Business School, National University of Singapore. He is also deputy head and associate professor of Strategy and Policy at the school.
