February 27, 2015
Official claims of “zero tolerance” for corruption at Oslo-based Yara International were called into question this week, when the company’s former top leaders were grilled in court over their failure to respond to bribery suspicions. Both Øivind Lund, chairman of Yara during the entire period when the alleged bribery occurred, and Jørgen Ole Haslestad, who was fired last year as chief executive officer of Oslo-based Yara, had to all but admit that they swept corruption concerns under the rug.
Jørgen Ole Haslestad
Both men were called to testify this week at the trial of four other former Yara executives who have been indicted for corruption at the company. The company itself accepted Norway’s largest fine for corruption ever while Haslestad was still its chief executive.
On Thursday, Lund was grilled in court over why he didn’t raise more questions himself over a suspicious demand for payment brought to his attention in the fall of 2008. That was three years before the company finally launched its own investigation and went to the police just as newspaper Dagens Næringsliv (DN) was about to break the news of alleged corruption at Yara.
On Friday, DN published an account of the courtroom grilling. Lund’s response as to why he didn’t ask more questions or pursue the suspicions shared by Haslestad himself, was feeble at best: “When it comes to warnings and such, I didn’t have a need to know.” Lund said he “underestimated the seriousness” of the matter. He claimed the suspicions were “so vague and unspecific that I was uncertain it amounted to much.”
Asked whether his response, or lack thereof, to the bribery suspicions exemplifies “zero tolerance” for corruption, Lund answered: “I understand the question. The signals shall come from the top. You can raise questions about that.” He suggested, however, that the overall work done regarding corruption issues should raise “no doubt” that there was zero tolerance in the organization itself.
Given the possibility of corruption in countries where Yara was doing business, though, wouldn’t it have been likely to seek more information after suspicions were raised? “We didn’t do that,” Lund admitted, nor did he share the suspicions with other members of the board. Instead he and Haslestad simply agreed to concentrate on making sure that no payments be made. Blocking any bribery, Lund reasoned, would “solve the problem.”
Haslestad, meanwhile, admitted in court this week that apart from informing Lund about concerns brought by executive vice president Tor Holba when he took over as CEO in 2008, he also sat on the information about possible corruption at the large fertilizer firm for another three years. He admitted he only went to the authorities when the case was about to burst into the local news media in 2011. “DN (the newspaper) shall get the honour for bringing the case up,” Haslestad told the court as the lengthy trial about corruption at Yara continued for the eighth week.
Haslestad testified that he simply didn’t think it was necessary to pursue the issue, because Holba had said he was unaware any bribes had actually been paid. Lund agreed, after Haslestad had mentioned the “possible demand for a payment” tied Yara’s expansion into Libya at the time. Both Holba and judicial director Trygve Faksvaag have contradicted Haslestad’s account in court and Haslestad himself has told police under pre-trial questioning that Holba had worried that one or two payments had been made.
“We register that he (Haslestad) has two different answers as to when he was told that money was paid out,” said Holba’s’s defense attorney Nadia Hall.
Several Yara executives on the stand
Haslestad’s contradictory testimony came after a string of former and current Yara executives have taken the witness stand in the case involving Yara’s large payments to the sons of officials in Libya and India when the company was trying to set up operations there. Faksvaag testified that he’d been worried about a suspicious transaction tied to the Libya project but didn’t pursue it when told that his former boss, Kendrick Wallace, was involved. Tom Østlyngen, who headed Yara’s efforts to establish a fertilizer plant in Libya, testified that he knew nothing about the payments to the son of Libya’s oil minister at the time. He also claimed that he demanded, and received, assurances from Holba that no corruption was involved in the Libya project.
Tormod Tingstad, meanwhile, testified that he thought Yara’s management tried to blame Yara’s Turkish partner, Nejdet Baysan, for facilitating the bribery payments. Tingstad was in charge of corporate compliance at Yara, and felt that an arbitration case Yara brought against Baysan for compensation was deeply unfair. He ended up losing his job over his objections to what he felt was Yara’s attempt to recoup the payments instead of tackling the root of the problem.
“We had huge problems in Yara at the time,” testified Tingstad, who now works for KPMG in Copenhagen. “I thought it was very difficult to single out one person and put all the blame on him.” Haslestad wouldn’t comment on Tingstad’s testimony.
Yara ultimately decided to accept a record large fine for corruption when Haslestad was still CEO. “We had a good discussion with our attorneys and the board about whether to accept blame and about the size of the fine,” Haslestad said. “There was a desire from the board to put this case behind us.”
Former board member blasted management
Also testifying late last week was Lone Fønss Schrøder, one of Denmark’s best-known businesswomen who sat on Yara’s board from 2004 to 2009. She claimed there was an unwillingness on the part of management to answer questions and “to understand what the board’s role was.” She claimed in a letter to Trade Minister Monica Mæland last year that Haslestad’s precessor, Thorleif Enger, once told her that he viewed “any question as an insult.” In court she directly attacked Enger and the relation his management team had to the board.
“My clear impression in Yara was that you couldn’t do a satisfactory job as a board member because you couldn’t get information about what went on in the company,” Schrøder testified. “My impression was that Yara was an incredibly management-run company.” Enger was particularly difficult, she claimed, not least regarding the lucrative options packages he and other top managers received.
“He would get so furious that it was uncomfortable to have a dialogue about something I thought was reasonable,” she said. Schrøder was not reelected to Yara’s board in 2010, two years after Enger left, even though she wanted to continue. “I think I was seen as being difficult,” she testified. Enger’s defense attorney had no comment on Schrøder’s description of Enger.