Third-party risks are well perceived to be the highest risk in an FCPA compliance program. Yet time and time again companies either fail to follow through on the full five-step third-party management, or worse yet, simple bury their collective head in the sand when it comes to corrupt actions by third parties. The New York Times recently reported on how Japan-based Olympus managed to do both.

This was the same Olympus, by the way, which admitted in 2011 to a $1.7 billion accounting fraud. More amazingly, this new set of corruption allegations involve new management who came in to clean up the company and run it using ethical business practices. In this new corruption matter, Olympus hired a Chinese company, Anyuan, to help it fix some problems around alleged safety violations at the company’s Chinese manufacturing plant in Shenzen and problems with Chinese customs officials.

This was in spite of the fact that the Anyuan’s chairman had previously been convicted of bribery and corruption in China; and in spite of the fact that Olympus’ contract was not with Anyuan directly, but with a newly created shell company, Ping Tan, without any other operations; and in spite of the fact that Olympus paid approximately $180,000 up front fees for “unspecified services.” Finally, Olympus made these payments out of a company-named account called “slush fund” (really I did not make up that last part).

Even more damning was the payment scheme to deal with the customs issues. To resolve that matter, Olympus transferred to Anyuan real estate at far below market value. One manager interviewed in the company’s internal investigation said this real estate transfer was intended as a bribe. Other Olympus documents internally debated who should sign off on the transaction. Most interestingly, managers in Shenzen were instructed, “not to leave any written evidence of the purpose of the transaction.””

What was the result of Olympus’ internal investigation? According to the New York Times, Olympus found no legal violations in its investigation. We will see.

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