Albemarle: One year later

FCPA violations cost Albemarle over $218 million

Albemarle is a publicly traded specialty chemicals manufacturing company headquartered in the United States but doing business in approximately 70 countries. In September 2023, the company settled FCPA violations with the U.S. Department of Justice (DOJ) and Securities and Exchange Commission (SEC) by paying over $218 million.

I recently had the pleasure of speaking with Andrew McBride, Albemarle’s former chief risk and compliance officer, to get an in-depth perspective on the remediation that took place at Albemarle. As with any case study, getting into the trenches really helps to understand the process and learn how compliance made a difference. McBride came on board in early 2018, shortly after Albemarle had self-reported to the DOJ and SEC.

From 2009 to 2017, Albemarle paid bribes to government officials through third-party sales agents and subsidiary employees “to obtain or retain chemical catalyst business with state-owned refineries in Vietnam, Indonesia, and India.” [3]According to documents, Albemarle profited nearly $100 million from these illicit contracts.

Some of the bribes and conduct surrounding them were quite brazen. In one example, Albemarle’s employees knew one of their third-party agents was intentionally paying “tips” to officials, trying to disguise the bribe. Even though Albemarle staff was aware of it, they simply asked that it not be listed in expenses rather than deal with the behavior. One Albemarle manager even wrote in an email about a deal in India that may “put Albemarle in an unacceptable infringement of the foreign corrupt practices act.”[4]

Usually, nothing good follows an employee mentioning an FCPA violation in an email. When I read through DOJ’s statement of facts, it seems some of the bribes should have been easy to catch, but it’s much easier to see things in hindsight.

Compliance program was in a state of change

When I spoke with McBride, he indicated that he simultaneously stepped into an active internal investigation, an ongoing root cause analysis, and the need to enhance the company’s broader ethics and compliance program. Albemarle had recently acquired its lithium business at the time of his arrival, so the company was expanding rapidly and changing its internal systems. Within a short time, the company grew from around 4,000 employees to over 9,000 upon acquisition of that line.

When McBride arrived at Albemarle, he saw the company was reversing course and heading in the right direction. After reviewing the ongoing root cause analysis, McBride determined quickly that “the company had really taken the investigation seriously,” and “they were making the right decisions.” As part of the process, Albemarle was revamping internal systems that benefited not just compliance but the entire company. It was moving to a single enterprise resource planning system, resulting in much greater efficiency for a company scaling globally very quickly. This wholesale coordination across the company was a monumental task that can take companies months to complete. It is a serious and time-consuming—not to mention expensive— adjustment to have wholesale platform coordination. This switch gave the Albemarle compliance department a unique opportunity to embed compliance and ethics at the outset.

The overhaul was “staggering”

According to McBride, Albemarle made a complete shift in how they operated their sales department in all the countries they operated in—not just the few countries listed in the DOJ agreement. The company implemented a go-to-market strategy that employed a direct sales team, eliminating third-party sales agents in each business line they operated. Essentially, they upended their longstanding sales processes and their respective layers—even in jurisdictions where agents were required—and simply started over. It was like ripping off a Band-Aid, and McBride referred to the process as “staggering.” Not every company facing such an inquiry would require such a complete overhaul, but it helped mitigate the fine and penalties by giving the sales function a fresh start. It’s noteworthy that the Justice Department did not require Albemarle to have a corporate monitor.

It is evident the company set the tone by hiring new sales agents and distributors and bringing that function in-house rather than working with third-party agents, despite the challenges of terminating relationships in many countries. According to McBride, “It helped serve as a platform of trust that we were taking things very seriously.” There were certainly some immediate negative impacts from severing relationships with agents, including the loss of contracts and customers, as well as their institutional knowledge. However, McBride said that despite the initial pain, the overall influence of the process change was effective on several fronts: “Our ability to have direct relationships with these customers would serve as a positive differentiator between us and the competition. . . . The company was better off because it developed strong direct relationships with the refiners [in these countries].” Though the new program essentially removed the metaphorical cancer to keep it from coming back, McBride was quick to state that they didn’t necessarily “completely eliminate the risk. We just changed the risk and put it under our control.” They no longer had agents engaging with these government third parties but rather their own people whom Albemarle trained to conduct sales ethically.

In fact, enforcement actions since the Albemarle resolution have highlighted those companies that discontinued using third-party agents. (See endnotes for enforcement actions for both SAP[5] and Trafigura.[6]) Tom Fox noted in a recent FCPA compliance blog that these companies assessed their risks and made their internal changes regarding sales models to their needs and adjusted accordingly, but it is apparent that DOJ took notice and looked positive on those changes.[7]

Training was a partnership

Training is such a critical part of any operation. Your employees are ready to perform, but without proper guidance, they are left to figure things out on their own, and they bring in their own biases and potential baggage. “I’m a passionate believer that you have to embed the ethics and compliance requirements not just in your anti-corruption policy, but within the functional documents, process, and systems,” said McBride, noting that embedding compliance was a critical piece of his overhaul.

For instance, as he was learning the ropes in his new position, McBride found that each business unit had its own sales environment, and there was no centralized sales governance over them. This lack of governance was problematic, especially when doing business in so many countries. With the help of a vice president of sales, McBride was able to steer a global sales policy encompassing many of the ideas seen in a more robust compliance program. Working with the sales function as opposed to being a standalone, siloed department, the DOJ-mandated compliance and ethics training was embedded into the main sales training, making it seamless for everyone on the sales teams around the world. The delivery of the training was by both sales leadership and the compliance team; a true partnership and joint effort. McBride said: “It wasn’t seen as just a compliance training; it was seen as ‘This is your sales governance training.’” Albemarle had such success that they expanded the integrated training to other functions such as procurement, human resources, and external affairs.

Control deficiencies were present beforehand

In previous audits, Albemarle had been warned about control deficiencies in its sales operations process, but those deficiencies had not been addressed. A multifunction project team was set up to enhance the sales controls and systems and more clearly delineate roles and responsibilities between first-line sales employees and second-line gatekeepers. For instance, McBride noted, “It was impossible for a quote to go out the door to a customer or distributor unless it matched up with their contract and that distributor was approved from a third-party due diligence perspective.” It underlines the fact that investigation remediation and compliance programs, more generally, need to go well beyond anti-corruption and other legal compliance policies. Not every compliance officer is well versed in the accounting function—especially those coming from a legal background. Bringing compliance together with the accounting, procurement, and supply chain functions is critical; you must have a thorough understanding of their processes and controls, and collaboration between these teams is essential. “Compliance officers are very comfortable in their comfort space with codes of conduct, conflicts of interest, anti-corruption, but getting them into the weeds [of accounting controls], and you can see this look of wild terror,” McBride joked.

The company didn’t look at it as just an FCPA solution but rather as a much broader, multifunctional project to make the entire organization better. By having all the teams together to build the process (rather than taking a whack-a-mole approach to specific issues), it reduced friction—from sales to procurement to accounting. And, of course, by integrating compliance into these functions, risk management became much stronger. Things moved faster and more efficiently. Contracts were easier to locate; vendors were approved more quickly and with transparency. “All those risks were managed much better through that systematized process,” McBride noted.

Importance of data analytics

Bringing everything together and having the subsequent transparency made it easier for management, as well as specific teams, to see in real-time what was happening in the company. Data analytics is such a useful tool for so many organizations, and it was also incredibly useful for Albemarle. McBride gave a great example: “We developed a tool for the sales function which helped them and my compliance team, track our distributors. [By pulling data together] into one dashboard, you could see the distributor’s compliance status, date of last training, date of last audit, how much is our revenue with the customer, what’s our average sales price, all in one place, which the sales team found really useful”— as did the compliance team.

McBride told me that, with the support of senior leadership and the lithium unit’s data science team, they were able to improve their own ethics and compliance data analytics team. McBride and the compliance department were able to use this capability to support transaction and control monitoring and the conduct of investigations. By making data analytics part of the overhaul as well, the company was able to see under the hood clearly and know what was transpiring from both the business and compliance. Integrating data analytics into compliance programs is becoming a standard. In a 2023 speech, Principal Deputy Attorney General Nicole Argentieri mentioned Albemarle’s use of data analytics as part of compliance: “Just as we are upping our game when it comes to data analytics, we expect companies to do the same. In fact, we cited in Albemarle’s NPA [non-prosecution agreement] its use of data analytics to monitor and measure its compliance program’s effectiveness as an example of its extensive remediation.”[8] She again mentioned Albemarle’s remediation efforts in her speech to SCCE’s Compliance & Ethics Institute in September 2024.[9] Demonstrating DOJ’s desire to see more data analysis, the updated Evaluation of Corporate Compliance Programs mentions that prosecutors will “assess how the company has leveraged its data to gain insights” into compliance.[10]

Conclusion

By working with so many departments across the company, compliance was able to be integrated into each. The Albemarle resolution indicates that cross-functional work can be wildly successful—and even earn a program of the year award. As McBride told me, “We are not just doing this for compliance sake, we are doing this to make the company better. . . . It really helped transform the perception of compliance—we were a ‘can do,’ not a ‘can’t do.’”

Takeaways

• Starting remediation efforts early based on an organization’s internal investigation demonstrates a commitment to righting the ship and can minimize fines and penalties.

• Most organizations will not need to completely revamp their sales functions, but conducting timely, comprehensive risk assessments can help identify problem areas and give the organization time to address them.

• Training staff is important to all facets of an organization, including compliance. Finding ways to embed ethics and compliance training into other corporate training programs can be extremely successful.

• A strong control environment is not a luxury; it is a necessity. It is paramount to ensure that your compliance team has a fundamental understanding of the accounting system.

• Leveraging data analytics is an important part of any compliance program. Real-time transparency is necessary for an effective program.

*Bruce Dorris is an Attorney, Certified Public Accountant, Anti-Fraud Consultant, and Former President and CEO of the Association of Certified Fraud Examiners in Austin, Texas, USA.

1 U.S. Department of Justice, Office of Public Affairs, “Albemarle to Pay Over $218M to Resolve Foreign Corrupt Practices Act Investigation,” news release, September 29, 2023, https://www.justice.gov/opa/pr/albemarle-pay-over-218m-resolve-foreign-corrupt-practices-act-investigation.

2 Aaron Nicodemus, “Revamped compliance processes key Albemarle win as Compliance Program of the Year,” Compliance Week, May 29, 2024, https://www.complianceweek.com/excellence-in-compliance-awards/revamped-compliance-processes-key-albemarle-win-as-compliance-program-of-the-year/34872.article.

3 U.S. Department of Justice, “Albemarle to Pay Over $218M to Resolve Foreign Corrupt Practices Act Investigation.”

4 U.S. Department of Justice, Criminal Division, “Re: Albemarle Corporation,” memorandum, September 28, 2023, https://www.justice.gov/opa/file/1316796/dl?inline.

5 U.S. Department of Justice, Office of Public Affairs, “SAP to Pay Over $220M to Resolve Foreign Bribery Investigations,” news release, January 10, 2024, https://www.justice.gov/opa/pr/sap-pay-over-220m-resolve-foreign-bribery-investigations.

6 U.S. Department of Justice, Office of Public Affairs, “Swiss Commodities Trading Company Pleads Guilty to Foreign Bribery Scheme,” news release, March 28, 2024, https://www.justice.gov/opa/pr/swiss-commodities-trading-company-pleads-guilty-foreign-bribery-scheme.

7 Thomas Fox, “Changing Sales Models,” FCPA Compliance Report (blog), April 10, 2024, https://www.jdsupra.com/legalnews/changing-sales-models-6982829/.

8 U.S. Department of Justice, Office of Public Affairs, “Acting Assistant Attorney General Nicole M. Argentieri Delivers Keynote Address at the 40th International Conference on the Foreign Corrupt Practices Act,” speech, Washington, DC, November 29, 2023, https://www.justice.gov/opa/speech/acting-assistant-attorney-general-nicole-m-argentieri-delivers-keynote-address-40th.

9 U.S. Department of Justice, Office of Public Affairs, “Principal Deputy Assistant Attorney General Nicole M. Argentieri Delivers Remarks at the Society of Corporate Compliance and Ethics 23rd Annual Compliance & Ethics Institute,” speech, Grapevine, TX, September 23, 2024, https://www.justice.gov/opa/speech/principal-deputy-assistant-attorney-general-nicole-m-argentieri-delivers-remarks-society.

10 U.S. Department of Justice, Criminal Division, Evaluation of Corporate Compliance Programs, updated September 2024, https://www.justice.gov/criminal/criminal-fraud/page/file/937501/dl.