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A Public Test For GE's Compliance Program

The Corporate Crime Reporter (CCR) has a story here about a Sarbanes Oxley whistleblower complaint filed against General Electric by former in-house counsel, Adriana Koeck. She says she was fired from GE for reporting fraud in Brazil to her superiors, including alleged tax cheating and potential violations of the Foreign Corrupt Practices Act. CCR posted her complaint here.

Koeck was hired in January 2006 as the lead attorney for Latin America for GE?s Consumer and Industrial Division (GE C & I) in Louisville, Kentucky. She was fired a year later. Her SOX complaint names as defendants GE, GE C & I, Raymond Burse, GE C & I?s general counsel, and Earl Jones, GE C & I?s compliance counsel. She alleges that soon after starting work with GE C & I, she discovered that the company was engaged in ?a variety of irregular practices.?

The most significant of the ?irregular practices,? CCR reports, was an alleged value added tax fraud scheme. It has already been written about by former New York Times reporter David Cay Johnston in Tax Notes International. TNI apparently posted Johnston's article on its web site for two days in late June 2008 before removing it. He based his story on internal GE e-mails, memos and legal opinions that allegedly came from Koeck.

GE is suing Koeck in federal court in Alexandria, Virginia for disclosing to Johnston and others the company's confidential and privileged information. She claims the documents that prove her retaliation case against GE are not covered by the attorney-client privilege because of the crime-fraud exception.

With respect to the FCPA, Koeck alleges ?an independent contractor subterfuge that exposed GE to substantial liability under Brazilian employment law and appeared designed to facilitate payment of bribes to make sales.? Her complaint says the independent contractor may have inflated its prices to GE to generate funds that were used to pay bribes.

Koeck says she was sent an article in March 2006 from a Brazilian newspaper alleging that GE and GEVISA (a GE / Brazilian joint venture) were among a number of major corporations involved in a Brazilian ?bribing club.? The corporate participants allegedly met regularly to agree on which of them would be awarded which orders from the public sector throughout Brazil as well as the amounts that the corporations would pay as bribes. Brazilian news reports indicated that more than $20 million in bribes had been paid to more than 150 Brazilian politicians.

CCR says Koeck's information was also given to the Department of Justice's Fraud Section, which is conducting an initial review of the case. The DOJ hasn't commented.

GE says Koeck?s claims are without merit.

Whistleblower charges, of course, are not evidence of liability or guilt, and an accused is presumed innocent until and unless proven guilty. Worth noting is that GE has been a global leader in compliance for many years, often setting standards for best practices. GE's surprisingly transparent Citizenship Report, for example, sets out how many whistleblower complaints the company receives, where they come from, and their disposition.

General Electric Co. (NYSE: GE) has 327,000 employees. It operates world wide as a technology, media, and financial services company, with total revenues in 2007 of $173 billion. Its four segments are GE Capital, Energy Infrastructure, Technology Infrastructure, and NBC Universal (think "30 Rock"). The company was founded in 1892 -- with roots back to Thomas Edison -- and is headquartered in Fairfield, Connecticut.

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Full post as published by The FCPA Blog on July 29, 2008 (boomark / email).