November 24, 2024

Business Briefing | Legal News: Chevron Appeals $18 Billion Judgment in Ecuador

Chevron has filed an appeal with Ecuador’s National Court of Justice to review an order that it must pay $18 billion in damages for polluting the Amazon jungle. Chevron inherited the case when it bought Texaco a decade ago. The appeal argues that the lower courts violated Ecuador’s Constitution by refusing to take corrective action in response to what Chevron calls “extensive fraud and corruption” committed by the plaintiffs’ lawyers and representatives. The plaintiffs have responded by citing Chevron’s own test data in documenting the pollution and arguing that Chevron could be sued for damages by third parties. In related litigation in New York, the plaintiffs also accused the company of mishandling soil and water samples during the trial by maintaining two different laboratories, based on testimony from a Chevron expert.

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Olympus’s Culture Was ‘Rotten,’ Outside Panel Finds

TOKYO — An outside panel appointed by Olympus to investigate its financial scandal issued a harsh report Tuesday, calling the company’s recently departed management “rotten to the core.”

The panel, led by a former Japanese Supreme Court judge, also details the roles it claims were played by three former Nomura bankers in arranging a cover-up, and it says Olympus paid the bankers for their efforts. It also criticizes Olympus’s auditors, KPMG AZSA and Ernst Young ShinNihon, for failing to expose fraud at the company.

The report says that Olympus had persuaded several banks, including Société Générale of France, to submit incomplete financial statements to auditors, apparently in an effort to conceal financial maneuvers that the report says involved at least $1.7 billion and were meant to hide failed investments during the 1990s. There is no indication the banks knew of Olympus’s cover-up, the report said.

According to the report, Olympus told the banks that they did not need to respond to KPMG queries about collateral, which was used to finance loans to investment funds involved in the loss cover-up.

“The management was rotten to the core, and infected those around it,” said the report, which ran more than 200 pages, with appendixes.

KPMG and Ernst Young denied wrongdoing Tuesday. The Tokyo branch of Société Générale said it could not comment on the contents of the Olympus report. Inquiries to the bank’s headquarters in Paris were not immediately answered.

Despite its harsh tone, the report by the Olympus-appointed panel seemed to sharply define the limits of blame and potential wrongdoing. Most significantly, the panel repeated a preliminary finding it had announced last month: that it had found no evidence of organized crime involvement in the Olympus scandal.

The possibility of organized crime involvement in the cover-up has become a crucial issue because evidence of mob links could prompt the Tokyo Stock Exchange to delist Olympus shares. Such a move could seriously damage shareholder value by making the stock difficult to sell.

Olympus’s stock rose 15 percent in Tokyo on Tuesday before the report’s release, on news reports that the panel would deny any mob involvement.

In a statement, however, the Tokyo Stock Exchange warned Tuesday that the company could still be delisted if it failed to  meet a Dec. 14 deadline to submit its latest financial statement. Olympus shares have already lost half their value since the scandal began in October.

Olympus issued a statement saying it “takes very seriously the results” of the report and that it was considering “further fundamental measures to restore confidence as soon as possible.” It also said that it was committed to filing its financial statements by the Dec. 14 deadline to avoid a delisting.

Olympus appointed the panel on Nov. 1, shortly after accepting the resignation of Tsuyoshi Kikukawa over the scandal and replacing him with Shuichi Takayama, who had been a managing director.

The report took pains to blame Mr. Kikukawa and a small circle of other executives who have already left the company, and stressed that possible legal action should not extend to others at Olympus. It said the company could be salvaged, seemingly heading off speculation that it might be carved up and sold.

The report left many open questions — as even the panel’s chairman at least partly acknowledged by saying that a forensic accounting by auditors would still be necessary, as well as the completion of investigations under way by Japanese and overseas legal and regulatory authorities.

In a news conference here, Tatsuo Kainaka, the panel’s chairman and a former judge of Japan’s Supreme  Court, said it was still unclear how much of Olympus’s money had been siphoned off and where it had ended up. The report said there was a “continuing outflow” of money from the company.

Hiroko Tabuchi reported from Tokyo and Keith Bradsher from Hong Kong.

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Preoccupations: Don’t Let Bureaucracy Ruin Your Day

To really understand the bureaucrat, we need look no further than the source of the word. “Bureau” is French for desk or office and “crat” comes from the Greek word for rule. Put them together and you have rules made by someone stuck behind a desk or isolated in an office.

Most bureaucrats genuinely want to improve performance and to reduce waste and fraud. But because their departments have become separated from the actual work and the end customer, they can produce regulations that have little to do with real operating concerns. It may be hard to imagine, but you yourself could be a bureaucrat — by unknowingly enforcing rules that have outlived their usefulness.

Consider one example of work rules at variance with reality. About a decade ago, a state agency had a process for managing grants to nonprofit groups. It was meant to prevent fraud and to ensure that grant money was used for the intended purposes. Those are admirable goals, but bureaucracy ended up getting in the way of them.

When a new director took over the program, he found that the contract attending each grant ran more than 100 pages, specifying all manner of compliance requirements. As he dug into the contract, he found that a majority of its provisions were outdated or unnecessary, yet were still being enforced.

The director arranged a conference among several of the grant recipients and representatives from the contracting and compliance groups. Together, they reviewed the contract, looked at which rules were still necessary and in rather short order knocked the contract down to 20 pages of relevant language.

The same kinds of tangles can easily occur in industry, too, as well-meaning bureaucrats take something with a proven record of success and improve it into oblivion.

Many organizations have compartmentalized themselves so much that crucial functions like procurement or compliance have become their own entities, marching to their own drumbeats.

In many organizations, the procurement department takes over after engineering or product development comes up with specific performance requirements with a supplier. Sometimes, it’s good for procurement to become involved, just to ensure that unnecessary costs haven’t been included in a bid. In other cases, though, the department uses just one tool: the cost-savings hammer.

Often, the procurement staff decrees that it’s time for across-the-board savings — say, in the amount of 10 percent. In the case of buying bulk paper and the like, savings can be easily quantified. But when a commodity-based mentality is transferred to more complex products and services, bureaucrats can wind up creating more costs than they save.

Further cost reductions may be demanded each year, causing a supplier to cut corners, thus damaging the final product or service. I have seen cases where the procurement staff boasts on the front end that it has won the price war, while suppliers went out of business because they couldn’t keep up with demands to provide an ever lower price.

The simple solution for just about any bureaucratic roadblock is to assemble your teams and ask a series of questions: What are we trying to accomplish here? Why does it matter? How does our current process help our goals? How does it hinder them?

If you add your customers and your suppliers to the inquiry, you may discover all kinds of ways to eliminate wasteful, inefficient work requirements.

By starting a review process that focuses on those questions, you stand a good chance of finding roadblocks before they take on a life of their own. By adding a simple “start-stop-continue” assessment, you may find a way to keep your rules and processes relevant: What do we need to start doing? Based on what we are learning, what do we need to stop doing? What do we need to keep doing?

AS you go through your review, you are also quite likely to notice which processes or procedures need adjustment. When in doubt, ask those on the front lines what’s in their way: Is there anything that no longer seems to make sense?

If you’re really feeling courageous, try asking your customers or suppliers what hurdles you’ve put in their path. What makes you difficult to do business with? Beyond conducting just another customer satisfaction survey, you may risk actually discovering what matters. Just be careful that you don’t wind up creating another bureaucracy in the process. 

Russell Bishop, an educational psychologist, is the author of “Workarounds That Work.” E-mail: preoccupations@nytimes.com.

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