Olympus compliance chief calls third-party management a key concern

28 November 2018 4:25pm

24 August 2018. By Rodrigo Russo.

The top compliance concern for medical device maker Olympus Corporation of the Americas is management of third parties, particularly in Latin America, the company’s chief compliance officer told MLex in an exclusive interview.

“You can get yourself in a lot of trouble with respect to antibribery legislation, both the US global statute, the [Foreign Corrupt Practices Act], and local antibribery legislation, if your third parties do things on your behalf that are inappropriate,” Thomas Glavin said, speaking from Olympus' US headquarters in Philadelphia.

“[You must have] the ability to make sure that you have a relationship with your distributors across all those who touch them — not just your compliance and legal folks, but your business leaders, and those in mid-level marketing and sales positions who interact with third parties — knowing that you [have] got the right controls in place, the right relationships, the right management of third parties,” the compliance chief said.

Olympus is far from the only company concerned with this topic, according to Glavin.

“We engage with a lot of organizations, industry organizations, folks throughout the compliance profession, and we spend time talking to compliance leaders of lots of companies, and there’s nobody who’s not focused on making sure that their interactions with third parties — particularly with classic distributors in the Latin American market — are improving, because everybody knows that people are watching,” he said.

In March 2016, Olympus Corporation of the Americas admitted to two counts of violating the FCPA based on allegations that it paid healthcare providers at public agencies in Argentina, Bolivia, Brazil, Colombia, Costa Rica and Mexico almost $3 million in various benefits to promote its medical equipment. It agreed to pay $22.8 million and entered into a three-year deferred prosecution agreement with the US Department of Justice. The DPA terms include a monitorship program led by former federal prosecutor Larry Mackey, now with law firm Barnes & Thornburg.

When Glavin officially joined Olympus in September 2016, he had experience with corporate integrity agreements and had spent five months with the company in an on-site consulting role. He said the company didn’t implement many changes following the signature of the settlements, focusing instead mainly on addressing the monitor's expectations and requests.

— DPA effects —

“I was very fortunate. I walked into a very well-developed compliance program with a very high functioning team. There were all of the elements of a good compliance program in place, a good, strong team. And then we had to look at, ‘OK, is there anything to do in particular, or differently, because we now have these agreements with the government?’ And while there’s not a whole lot we have done differently, or major changes, we had to focus our efforts on making sure we had the right people in the right places to meet the obligations of those agreements,” he said.

“We have a monitor who works on behalf of the DOJ. They are very involved in the day-to-day [operations] of the company. They have expectations, they make recommendations, and we need to make sure we have the resources positioned and aligned in the right way not only to execute the basics of an effective compliance program, but also to satisfy the requirements of the DPA and the expectations and requests of the monitor. Any changes we made were just to make sure that we were able to do that,” Glavin said.

The external monitor and his team have been particularly helpful with oversight and management of Olympus' distributors in Latin America, according to the compliance chief.

“If I have to point to one of the clearest tangible improvements that we have made since signing the DPA, then the management of distributors in our Latin America region is probably the one that I’d point to. I have to acknowledge they [the monitorship team] have been helpful in getting us to focus on oversight and management of our distributors in the region,” Glavin said.

He added the company's implementation of policies in Latin America has been successful not only at reducing risk but also at improving commercial relationships, through a more comprehensive approach to distributor management.

Those improvements at Olympus have had two consequences, Glavin said: the whole business chain adopting enhanced compliance tools and better financial performance for distributors.

“I can tell you that the effort to make sure we’re managing our distributors the right way — not just from compliance, not just from legal, not just through our internal audit, but from business leaders, from project managers, et cetera who interact with distributors — the results have been financial improvement in the performance of these distributors,” Glavin told MLex. “We’re out there saying that loud and long [that] you cannot only accomplish your goals from a compliance risk point of view, but these distributors can in fact move your business forward doing it the right way.”

He noted the changes have led to parting ways with some dstributors.

“Unfortunately, we have had to terminate relationships with some distributors because we couldn’t get an agreement about the way things had to be done from our compliance point of view, and that’s a shame, but the company has made those difficult decisions and will continue to make those,” he said.

“But what’s been fascinating to me is that, by and large, the distributors not only were very willing to engage with us the way we wanted them to engage, including frequent visits by our internal audit team, they’ve actually embraced it. And we now have some distributors that use compliance measures we introduced to them to increase their own competitive advantage against [rivals] in their markets,” the compliance chief added.

— The big ‘I’ integrity approach —

Glavin said his Olympus compliance team has 25 employees. In addition to that, the company also has 14 full-time employees and six consultants in its internal audit department.

The compliance team isn’t concerned only with the internal consequences of its work, he told MLex, but also with how its initiatives might be perceived outside of the company.

“I think whenever you are trying to help business colleagues in a way that allows them to achieve their objectives, but making sure it’s within bounds not only of laws and regulations, but within the bounds of what Olympus regards as the ethical conduct of its business, I think almost nothing ever goes exactly the way you want. So we frequently say to them, ‘Let’s look at what would the outside world think about this? So let’s help structure that program, that activity, in a way that screams to the world that we understand the risk and that we’re addressing it through our control environment in the following way,’” Glavin said.

The company doesn’t share budget figures or percentages of how much is spent on compliance, but its chief compliance officer is emphatic about how seriously it takes the matter.

“I worked for a lot of companies and came here at a very challenging time. I’ve never seen an organization that is as committed to making sure that throughout the organization there’s a commitment to compliance and integrity,” he said.

“It’s the first among our core values, integrity, and that makes the job of a compliance guy a lot easier, when from the top of the organization folks get the message: ‘This is serious, guys, and this does need to be a part of everything you do.’ Not the small ‘c’ compliance stuff, but the big ‘I’ integrity approach to the way we’re going to do business,” Glavin said.

The Olympus compliance chief said one of his department's important achievements has been in getting others to see its role more as help than as hindrance.

“I made it clear when I started here: The moment someone thinks the compliance department is getting in the way, then we have a problem. We may cause some things not to happen the way that someone wanted things to happen, because we just got a sense of what risk that might pose for the organization, but we have nobody here thinking we just get in the way because that’s what our job is,” Glavin said.

“We have great support from the top, great communication and cooperation from all levels of the organization, and that helps to make the job enjoyable and easy. We managed to convince people that we’re more of a help than a pain in the neck,” he said.

Since the DPA came into effect, Olympus has seen a steady increase in the reports made through its externally managed ethics hotline, Glavin said. The company had about 15 more reports in the DPA's second year than in its first one, and figures indicate a similar increase this year.

Following recommendations from the DPA monitor, the company is now reaching out to the individuals who made reports, and even to those who were the subject of complaints, to evaluate whether the system is easy enough to use, Glavin said.

The most important thing in the use of such tools as the ethics hotline is people’s confidence that they’re really being listened to, he added.

— Being the model —

Glavin said he’s aware that Olympus’ past practices could still be used by other companies as an example of behavior that should be avoided, but said the company is talking about its positive initiatives to be recognized as a good role model in the present.

“When I go to conferences now, I just don’t want to hear people talking about the Olympus case anymore. I want to talk about things we’re doing. We regard ourselves as a leader in a lot of these areas. We’re being invited to talk about our experience, and if we can be the model, in that regard, that’s fine,” he said.

“I’m sure that in some organizations, when they’re doing trainings and stuff, they’re probably still pointing to the Olympus case and saying: ‘Hey guys, let’s be careful that we have the right controls in place so that this doesn’t happen.’ What we’re doing proactively is talking about good things we’re doing, none of which were implemented because we have the agreements or the monitor. It’s all because we’re certain this is the right way of doing business,” Glavin told MLex.

The Olympus compliance chief said that although many anticorruption laws are being implemented in Latin America, no government agency from the region has approached the company about potential violations. The reason for that is simple according to Glavin.

“Hear this message loud and clear, we’re doing business the right way so no government agency will have to contact us. It's not going to happen,” he said.

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