Former Atlanta CPO Pleads Guilty to Conspiracy, Accepted Bribes
In April, we brought you a story out of Atlanta concerning Adam Smith, the former Chief Procurement Officer who was terminated from his position after the FBI raided his office and home. His termination came amidst bribery and corruption allegations surrounding the city of Atlanta’s procurement operations. On September 27, multiple media outlets reported that Smith has pleaded guilty to a Federal conspiracy charge while serving as Atlanta’s CPO. According to the criminal complaint that had been released just a day earlier, between 2105 and January 2017, Smith had accepted more than $30,000 in bribes from a city construction vendor in exchange for information about the city’s procurement processes and assistance in winning bids “when needed.” The vendor subsequently won multi-million dollar contracts with the city, which Smith then brought to Atlanta’s mayor and city council for final authorization. Smith will be sentenced on Jan. 16, 2018. His guilty plea may indicate that he has cut a deal with federal prosecutors who continue to investigate city corruption in Atlanta and potentially build further indictments against city officials and contractors.
Conflict Minerals Due Diligence Continues, Despite Weakened Dodd-Frank
According to a recent report from Source Intelligence, a California-based provider of supply chain risk and compliance solutions, organizations continue to investigate their supply chains and determine whether or not they source conflict minerals from the Democratic Republic of Congo (DRC) and its surrounding countries. This continued due diligence activity on behalf of organizations comes in spite of the U.S. Securities and Exchange Commission (SEC)’s weakening of Section 1502 of the 2010 Wall Street Reform and Consumer Protection Act, better known as the Dodd-Frank Act. Fillings for calendar year 2016 show that, despite the Trump Administration’s weakening of the Conflict Minerals Provision and decision not to enforce compliance, many organizations continue to conduct due diligence, and for two reasons.
First, although the regulatory winds are shifting in the U.S., they are picking up abroad, particularly in the European Union. If organizations want to compete globally, they have to think and act globally. They have to continue to track and trace not only tin, tungsten, tantalum, and gold, but other minerals and raw materials, like lithium, which is used to power billions of mobile devices. Second, organizations see the writing on the wall from consumers who care about supply chain ethics, sustainability, and transparency. Whether or not governments compel them to trace and report on their supply chains and source ethically, organizations have to do it for their consumers, who increasingly shop with brands that share their social, political, or ethical values.
UN Report: Illicit Gold Trade Continues to Fund Congolese Violence
A recent report by the UN Security Council found that the illicit trade of gold smuggled out of the DRC continues to fund armed groups there, despite improvements made elsewhere. The report noted that, although government regulations (like Dodd-Frank) to track and trace the origin and trade of tin, tungsten, and tantalum have helped to reduce funding to armed groups, gold continues to drive conflict and violence in the DRC. Armed groups have become fragmented and more heavily networked as they work with foreign groups, presumably to buy and sell weapons and gold. Artisanal gold, in particular, is cited as being trafficked out of the country on carry-on luggage, and that local authorities need to do more to address the problem. Still, the report from the UN illustrates the dynamic relationship between regulatory efforts to address the challenges and the shifting realities on the ground, and the continued need by all parties to do better.
France Enacts Corporate Supply Chain “Duty of Care” Law
Speaking of doing better, earlier this year, French legislators passed the country’s first “duty of care” law governing corporate supply chain sustainability, human rights, and the environment. Modeled after the 2015 UK Modern Slavery Act, France’s new legislation applies to far fewer organizations – about 150 with total employee rosters of 5,000 or more in France or 10,000 globally. But it covers more areas (than modern slavery) and has enforcement provisions (that have yet to be determined). The law still needs to be ratified under the Macron Administration.
Under the law, covered organizations must conduct due diligence into their supply chains, including their extended supply chains (i.e., including sub-contractors), ensure that they avoid injury, reduce environmental impact, and reduce risks to human health, risks, and freedoms, establish an alerting system, and regularly report on the efficacy of their efforts. According to media reports, the legislation has been watered down to include fewer companies and exclude corporate officers from any liability. But it is a step in the right direction, and, along with the UK Modern Slavery Act, will likely influence similar legislative efforts to curb unethical sourcing and procurement practices elsewhere in Europe.