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No-one will ever find out…until you’re found out

No-one will ever find out…until you’re found out

What do German cars, peanut butter and a heart and diabetes researcher have in common? A seemingly astonishing lack of corporate governance; a misguided sense of cost and benefit and a flagrant disregard for risk and risk management.

A quick scan of the media recently reveals that:

  • following a university study, Volkswagen got caught out using software in their vehicles to deceive US regulators in relation to their emissions;
  • former Peanut Corporation of America owner Stewart Parnell is now spending the next 28 years in prison for knowingly shipping salmonella contaminated peanut butter killing nine people and causing hundreds to be violently ill; and
  •  a researcher has admitted to fabricating research data, published in the Journal of the American Medical Association (JAMA) and published by the American Heart Association, while working for Melbourne’s prestigious Baker IDI Heart and Diabetes Institute exposing a lack of peer review and damaging reputations.

Three examples that beg the question: did these people and/or organisations truly believe no one would ever discover their deception?

The Volkswagen scandal is rather sophisticated. When their car’s emissions system was active, the power and fuel efficiency of the car was undermined, impacting on potential US sales – the solution… “the switch”. According to Harry Tucker’s The who, what and why of Volkswagen’s diesel scandal, Daily Telegraph 25 September, 2015 the cars were sold with the emissions system disabled but with the “switch” software installed, it was able to track the position of the steering wheel, vehicle speed, how long the engine was on and air pressure to determine if it was being subjected to an emissions exam, at which point the emissions system would automatically engage thus passing the test. Sophisticated isn’t it! A bit of a risk too.

What is significant about this story by Tucker, is that the deception was not discovered by the regulators, rather by a research team from West Virginia University. At the presentation of their paper, there happened to be several officials from the Environmental Protection Agency (EPA) in the audience, who were ‘sparked’ by the information and then pursued it.

As reported by Tucker, “$41.5 billion has been wiped from the company’s value; they face up to $25 billion in penalties from the US alone; on top of the costs to recall and fix 11 million cars worldwide.”

In determining the risks of pursuing the “switch” were any of the consequences Volkswagen are now experiencing even considered? Clearly not. They were in denial and actually believed that no one would ever find out…but they did!

As for the Peanut Corporation of America, this multinational’s gamble with Salmonella back in the late 2000s killed nine Americans, left hundreds more violently ill, and triggered one of the largest food recalls in US history. KPLU’s Laura Wagner reported that federal investigators “uncovered emails and records showing food confirmed by lab tests to contain salmonella was shipped to customers regardless. Other batches were never tested at all, but were shipped with lab records saying salmonella screenings were negative”. Highly deceptive and incredibly risky. The result was inevitable.

What is most interesting about this case as reported by Laura, is that the prosecutors presented emails at the trial showing that Stewart Parnell directed employees to “turn them loose” after samples of peanuts tested positive for salmonella and then were cleared in another test.

Several months before the outbreak, when a final lab test found salmonella, Parnell expressed concern to a Georgia plant manager, writing in an October 6, 2008, email that the delay “is costing us huge $$$$$.”

The judge stated in his summation: “These acts were driven simply by the desire to profit and to protect profits notwithstanding the known risks [from Salmonella]. This is commonly and accurately referred to as greed.” At one point, Mr Parnell faced a possible 803 years in jail.

Although Mr Parnell was both President and CEO of the company and there was no Board of Directors providing oversight, the conspiracy involved others in the company that had the opportunity to blow the whistle on what was occurring.  Just as they were for Volkswagen, the consequences were completely foreseeable but that did not seem to matter to Mr Parnell.  He certainly has the next 28 years to consider whether his risk taking behaviour was worth it.

Baker IDI Heart and Diabetes Institute is effectively in damage control with their reputation impacted by the behaviour of one of their researchers. This highly respected institute has been linked to a paper published in the prestigious Journal of American Medical Association (JAMA) and a journal published by the American Heart Association.  According to the ABC’s Sophie Scott the paper looked at whether a well-known blood pressure drug, could help people with peripheral artery disease to walk pain free. The research indicated that it could.

There was a slight problem though with the paper, as some of the data was allegedly fabricated.

The researcher has since resigned and, one would imagine, will struggle to have any future research taken seriously. The Baker IDI Heart and Diabetes Institute told the ABC it is now “strengthening its governance and audit procedures to minimise the chance of it happening again”.

The shared risk here is that it appears the research paper was published before it was clinically validated or appropriately peer reviewed, which is indicative of a lack of rigour by others as well. While the researcher was hoping, no one would ever find out, the research world found out and it’s a small world when you have a big name.

So what is the common denominator with these examples? To me, in all three cases, the person/organisation focussed squarely on the benefits that could be gained by their deception without truly considering the consequences.  It is one thing to take risks in business – in fact we have to – but when those risks break the law or are unethical that is not acceptable.  It also brings into stark focus two other questions: what motivates a person/organisation to take such extraordinary risks? And, where was the governance?

All three of these examples highlight two simple facts – we all need risk aware workforces and if you are thinking of entering into deceptive behaviour in your business – think twice – you will be found out.

Written by Rod Farrar

Rod is an accomplished risk consultant with extensive experience in the delivery of professional consultancy services to government, corporate and not-for-profit sectors. Rod takes every opportunity available to ensure his risk management knowledge remains at the ‘cutting edge’ of the discipline. Rod’s Risk Management expertise is highly sought after as is the insight he provides in his risk management training and workshop facilitation. Rod was recognised by the Risk Management Institution of Australia as the 2016 Risk Consultant of the Year and one of the first five Certified Chief Risk Officers in Australasia.