Sorry—I've always wanted to start a column with those words. “J'accuse,” of course, is French for “I accuse,” and is the title of a famous essay written by Emile Zola in 1898. Zola's letter was a public rally to the defense of Alfred Dreyfus, a French army officer falsely accused and convicted of espionage because he was Jewish.
L'affaire de Dreyfus was quite the scandal in Paris at the fin de siecle, and had all the hallmarks of high drama: a gallant executive officer, a foreign government with nefarious motives (in this case, Germany), unconfirmed rumors assumed to be fact, and of course, lots of litigation. Dreyfus was ultimately exonerated and France embarrassed around the world.
Which brings us to l'affaire de Renault.
Renault's sorry scandal does differ from the Dreyfus affair in several ways. This time around, the executives hail from the corporate world rather than the military, and the nefarious foreign government is China rather than Germany. But the core element of the plot—an internal investigation gone terribly, terribly awry—is lamentably still intact. If there were ever a continuing-education course for compliance officers on how to conduct an investigation, I suggest we use Renault as a case-study immediately.
By now most of you probably know the broad outlines of the story. Renault fired three employees in January, including a member of its management committee, after receiving anonymous allegations that the three men were funneling information to China about the automaker's efforts to develop an electric car. Word quickly spread of secret bank accounts in Switzerland and Lichtenstein, where the trio supposedly deposited their kickbacks from Chinese agents. French prosecutors opened an investigation for possible espionage charges.
Then, mon Dieu, everything unraveled. French prosecutors could find no evidence of any secret bank accounts. The three men unswervingly maintained their innocence. Renault's security team, which had been conducting the investigation, suddenly stopped cooperating with outside investigators. Renault CEO Carlos Ghosn started vowing to get to the bottom of the scandal, which generally means that the scandal is getting uncomfortably close to the top. By the end of last week, le danse macabre was in full swing.
Le dénouement: Earlier today the company formally exonerated the three men (complete with a personal apology from Ghosn) and prosecutors had shifted their investigation from espionage committed by them to fraud committed against them. One of Renault's security officers was placed under arrest. Renault's employee union was demanding that Ghosn and his deputy Patrick Pélata be fired. Pélata has already offered to resign should the spying accusations prove false, and Renault's board may well accept that offer within the next few days. Perhaps a better title for this meltdown would be Les Miserables.
Foremost, I can't help but wonder how much harder other companies' internal investigations in Europe have just become, thanks to Renault's exuberance to fire first and ask questions later. Workers in that part of the world already have a deep aversion to reporting misconduct anonymously due to Europe's Nazi past; fears run deep that such tips can be exploited to tar innocent people. That's exactly what happened here, so I can't really blame them. Compliance officers will need to mount a charm offensive with employees, to reassure them that the sort of nonsense that swept up Renault won't happen to them.
In fact, my earlier quip about using Renault as a case-study really isn't a bad idea. Compliance officers should pick this investigation apart and use it as fodder to explain how you conduct your own investigations. Tales like Renault's terrify employees of large corporations, who most days already feel like they're minor characters in The Trial. A compare-and-contrast exercise with Renault, to explain how allegations of misconduct should be treated and to demonstrate that you know the difference, would go a long way to assuage their fears.
Second, I also suspect a lot of chief compliance officers are reading about Renault and thinking, “This is exactly what I worry about with all these new whistleblower programs.” The Sarbanes-Oxley Act first gave rise to anonymous reporting of misconduct seven years ago with the mandate that all companies maintain a whistleblower hotline to report fraud. Fair enough; employees do need a legitimate way to circumvent managers who might be committing fraud. Then came the Dodd-Frank Act last year with its bounty program to entice people to run straight to the Securities and Exchange Commission with news of fraud, so they can collect a chunk of any monetary settlement the SEC ultimately strikes.
I've never been comfortable with that bounty program idea, since it short-circuits the efforts compliance officers have made to steer employees to internal hotlines. In essence, the bounty program will increase your enforcement risk, since regulators will have more ways to hear about misconduct at your company. Now, since money is involved I can't imagine too many people will report misconduct to the SEC anonymously, but remember—those complaints will still seem anonymous to you.
When the Commission back-sources the investigation work to your office (which, rest assured, it's going to do), you won't know who made this fraud allegation against others in your company. When you sit down with those targets and they start asking questions about who raised these complaints in the first place (which, rest assured, they're going to do too), you might not even have an answer, let alone share it. And then you can rest assured that the target's lawyer will start talking about Renault.
Perhaps my greatest fear from the Renault fiasco is that it pits two grand forces in modern corporate life directly against each other: the need to appear decisive in the face of misconduct to please regulators, investors and the media on one side; and the need to move deliberately so you don't get sued into next week on the other. I don't know what the solution is, but we should all give it serious thought. Because let's not kid ourselves: If Renault had only suspended those three employees in January and we just found out that they were guilty, everyone would still be screaming at Renault—that the company should have fired them months ago.