Compliance violations; a case of fraud and corruption
How are possible violations of laws and Stora Enso’s policies reported and investigated? This issue of the Ethical Spotlight focuses on compliance violations and how the reporting of these can help prevent illegal, irresponsible and unethical behaviour.
“Everyone knows that it is impossible to buy secondary grade products from Stora Enso. Your sales director won’t sell unless you bribe him!”
On a hot afternoon in July, an internal auditor received a call from a Mrs Jones who claimed that something was not quite right at Stora Enso, that sales prices were being manipulated and bids settled in advance. This call set in motion a sequence of investigations that unfolded years of bribes, fraud and corruption.
Before we go into what Mrs Jones had witnessed and experienced, let’s find out a bit more about compliance violations in general. What are the most common types of issues reported and how are these investigated? What are the implications for those involved? And how is the integrity of a whistle-blower safeguarded?
What is reported and how?
Some 60-70 cases of suspected violations of laws or Stora Enso’s Code of Conduct have been reported in the last few years. The majority of these are related to breaches of internal policies and guidelines. Reported cases can be related to discrimination or harassment, safety violations, fraud, theft, conflicts of interest or corruption. They are initially all considered severe, even though the implications or financial impact to the company may vary. So do the measures we are required to take by law enforcement and financial authorities in dealing with them.
Almost half of all possible violations reported are received through Stora Enso’s Speak Up Hotline, which is open to both employees and external stakeholders. This whistleblower service is managed by an external service provider and offers ease of use and guarantees anonymity. The other half of all reported cases are received through e-mail, via phone or in face-to-face meetings with line managers, HR or Ethics and Compliance.
Yet, are we missing many cases that should have been reported? According to the recently published Nordic Business Ethics Study 2020, the two main reasons for employees hesitating to speak up against possible ethics violations were that:
- they did not think speaking up would make any difference, or
- they felt the issue at hand was none of their business.
“History has taught us that encouraging employees to speak up, prevent any retaliation towards those who speak up, and to take appropriate actions where needed are what helps us in building a resilient organization with a healthy work environment and culture. Whistleblowers are crucial to bring light to illegal or unethical behavior whether these occur within our own organization or in relation to external stakeholders.
To avoid any hesitation, Stora Enso offers multiple means of reporting possible violations – contact your manager, HR or Ethics and Compliance – or use the Speak Up Hotline,” Pontus Selderman, SVP Ethics and Compliance
At Stora Enso, all reported cases are assessed to determine whether they constitute possible compliance violations or should be handed over to HR or management for further handling. Most cases, however, end up being investigated by Ethics and Compliance, often in collaboration with subject matter experts.
The Compliance Investigation Group consists of several legal counsels. Investigations follow a strict, independent process and all cases are assigned a responsible investigator. A thorough investigation of allegations, evidence and facts then ensues. The group is led by Tobias Kvarnung who joined Stora Enso earlier this year and who’s background includes many years working for the Swedish Police on intelligence and criminal investigations, as well as investigations of financial violations and internal crime at the largest bank in the Nordics. Tobias is today responsible for coordinating, overseeing and managing our ongoing compliance investigations.
“Having a specific and independent Compliance Investigation Group handling these complaints is an important part of ensuring confidentiality, transparency and trust towards all employees as well as external stakeholders.”
Obvious violations of laws, rules and regulations are immediately reported to local police authorities in collaboration with our local corporate legal counsels. No further action is taken by Stora Enso in order to not interfere with ongoing criminal or civil investigations. We await any requests for information or other support from the authorities and contribute as needed.
As for other breaches of the Stora Enso Code of Conduct, the Compliance Investigation Group recommends disciplinary or improvement actions for the Ethics and Compliance Management Committee’s final decision. Such actions may, depending on applicable labour rules, involve written or oral warnings, reprimands or even termination of employment.
Reporting makes all the difference!
Asked what the key challenges involved in investigating violations in a corporate setting were, Tobias Kvarnung’s response was clear:
“It is all about getting people to report possible violations, making sure that they feel safe to report and confident that their concerns are dealt with professionally, objectively and with utmost respect for their integrity. We can do something about issues we know of. What concerns me are the violations that do not get reported at all or are perhaps swept under the rug.”
There were 57 cases reported last year. Tobias argues that this is far too few, many more violations should probably have been reported via the Speak Up Hotline or to Ethics and Compliance.
“By not reporting through our grievance channels, but instead trying to resolve issues without involving legal professionals, we risk not addressing the underlying problems, the reasons why a violation could happen in the first place. We do not learn sufficiently as an organization, structural problems aren’t allowed to surface to be dealt with and opportunities to introduce necessary protective measures are missed. In addition, we are not the transparent organisation our key stakeholders expect us to be.”
The fact that compliance violations are not sufficiently reported has an even more concerning implication, however.
“Many of our operations are in smaller communities where everyone knows one another. Personal exposure, blame shifting, or fear of retaliation might be what deters someone from reporting. That is why we have the Compliance Investigation Group, multiple means of reporting, a whistle-blower service that ensures anonymity and zero tolerance for retaliation,” Tobias Kvarnung concludes.
So, what happened following Mrs Jones’ report about possible collusion? Read all about this case of fraud and corruption in the Ethical Spotlight training material. Here you will also find questions related to compliance violations, whistle-blowers, investigations and consequences of serious illegal, irresponsible and unethical behaviours. Discuss in your teams and with your colleagues!