Tuesday, November 24, 2015

Coca-Cola Amatil: Fraud and Money Laudering (2015)

Coca-Cola Amatil logo
Near the end of 2014, Strike Force Englefield, created by a group of New South Wales cyber crime and fraud detectives, began to investigate supposed suspicious activity reported by Coca-Cola Amatil regarding their vehicle fleet. As Orix states in their company description:
“We specialize in the acquisition, financing, and management of motor vehicles and other forms of transport” (Orix). Coca-Cola Amatil works with Orix in Australia regarding a distribution of products with fleets of trucks. The chief executive of Orix was charged with $500,000 in corrupt commissions towards an employee of Coca-Cola Amatil so that the company would be able to effectively secure a vehicle leasing contract. Specifically, the Executive was charged with four counts of paying corrupt commissions and one other additional count of money laundering. A spokesperson for Coca-Cola stated, “Coca-Cola Amatil is providing its complete co-operation and support to the police” (SmartCompany).

There are many stakeholders affected by this case. The first of the stakeholders is obviously the CEO charged. The CEO charged is affected in a negative way because he was fined over $500,000 and a jail sentence. Then the Coca-Cola Fleet Manager and Orix Senior Manager who were both charged with fraud. The next stakeholder affected is the company of Orix. The scandal makes the company look bad because customers for Orix will believe that the company is corrupt. The next stakeholder is Coca-Cola Amatil, they are going to be viewed as being affiliated with corruption by their customers. The next stakeholders are the employees of both companies because now they realize the consequence for corrupt payments, however, both companies are still in business so they aren't affected really greatly. The last of the stakeholders is the consumer, the consumer is affected because during the time of the investigation the Australian consumer most likely changed their view of both companies due to the misconduct they performed. The money laundering scheme affects Society as a whole because all the money laundered or corrupted doesn’t go through the tax process, whereas in today’s society most of the public goods available such as roads, schools, and parks are largely funded by taxes. 

Damon T. Hininger, CEO of CCA
Individualism is the ethical theory that focuses on the business owner’s choices in pursuit in accomplishing the goal of making a profit. Nobel Prize winning economist Milton Friedman believed the only goal of a business person is to maximize profits for the shareholders within the constraints of the law and any extra money spent not relating directly to profit is directly stealing money from the shareholders. Machan believes according to Heather Salazar “Tibor Machan describes Friedman’s view as “Classical Individualism” and advocates for a revised and more liberal version of it that enables owners to determine whether they want to spend money and resources in ways that will detract from profits” (Salazar). The Coca-Cola Fleet Manager was thinking about maximizing profits securing a deal with Orix that would generate long time distribution in Australia with the company. However accepting the money he was in the wrong because accepting the payments was not in the constraints of the law, so according to Individualism, he was in the wrong. Both companies were in the wrong from an individualist perspective, because their pursuit of profit was against the constraints of the law. If the Manager had secured the contracts without receiving any corrupt payments then he would succeed in generating revenue for the company by distributing products legally and generating profit.

The Utilitarian ethical theory focuses on happiness regarding the consciousness of all living things when weighing ethical decisions. As stated in Salazar’s Case Manual “[Utilitarianism is] often interpreted hedonistically as pleasure and the absence of pain, but also sometimes interpreted as the satisfaction of desires” (Salazar). This means you want the best things in your life that make you happy while avoiding anything that disrupts happiness or the pursuit of it. Events need to be analyzed and investigated to determine that the maximum amount of happiness is being achieved not only short term but long term as well. Utilitarians measure cost and benefit in regards to happiness in the long term and the short term when facing decisions within the firm. In the case of the Fleet Manager for Coca-Cola, he achieved maximum happiness because he secured the contract for both companies in which Coca-Cola would have mass distribution and Orix would gain revenue. Also, the manager received according to WhaleOil.com “Coke replace on average 350 units per annum, and our sources estimate is that the fleet manager at Coke was getting around $1,200 – $1,500 per bonnet” (Whale Oil). The manager not only secured the distribution and revenue for both companies but managed to get paid extra for doing so. Therefore according to the Utilitarian theory, the Fleet Managers was justified for his actions in maximizing happiness for the firms and himself.

Coca-Cola headquarters in New South Wales, Australia

According to Salazar, a specialist in Kantism, the main ethical rule of Kantianism is “Always act in ways that respect and honor individuals and their choices. Don’t lie, cheat, manipulate or harm others to get your way. Rather, use informed and rational consent from all parties” (Salazar). There are four basic principles in regards to Kantianism. The first that it is imperative to be a consistent person in regards to your actions and values, while still acting in a rational way. The second one must accept and emphasize rational decision making while encouraging others to do so as well. Third, one must show respect to individual needs and differences that different people may have. Lastly, one must act strictly from the motivation of good while refraining from selfish intentions. The formula of humanity according to Kantianism states that one shouldn't use people as a mere means of obtaining things one could desire. This shows the integrity of the value of treating people the right way by taking into account their individual rationality. The Fleet Manager for Coca-Cola violated the formula of humanity by using the Orix CEO as a means of getting paid rather than just doing his job and securing the leasing contract within the constraints of the law. Also, the manager did not emphasize others to make rational decisions because he encouraged Orix CEO and other managers to engage in fraudulent activity to gain their own selfish desires aside from the firm. The manager was acting consistently making the illegal fraud payments however the decision to do so was irrational making the decision unjust according to Kantianism.

Virtue Theory
Virtue Theory mostly focuses on the characteristics of things that allow society to perform in its best fashion. Salazar states in her case manual that the main ethical rule of virtue theory is “Act so as to embody a variety of virtuous or good character traits and so as to avoid vicious or bad character traits” (Salazar). According to the theory, the diverse characteristics rely on the function as well as the circumstance of the thing while promoting what's best for society as a whole. Aristotle would argue a thing is good in itself if it fulfills its function. There are four main virtues that guide virtue theory, self-control, honesty, courage, and lastly fairness. The fleet manager for Coca-Cola did not show fairness to the Orix Corporation because they paid him additional payments in pursuit of securing the vehicle leasing contract. However, the manager did fulfill his function in securing the contract with Orix distributing for the Coca-Cola Company. The manager also did not show the virtue of self-control because the manager could not refrain himself in engaging in the illegal activity. Not only did he receive the corrupt payments from the Orix Company but he also aided in the engagement of the CEO laundering money. Honesty was very much infringed because according to Subway Morning Herald “The way the Australian scandal was structured was the dealer sold the car the lease company for say $30,000 but the lease provider leased the car to the client for $31,000” (smh.com). This shows the fleet manager for Coca-Cola was dishonest of the transactions between the companies. In conclusion, the Fleet Manager did fulfill his function for the company but did not show that he reflected many of the 4 virtues, meaning the decisions made by the manager are not just according to virtue theory.
Map of CCA facilities and warehouses

Justified Ethics Evaluation
In my opinion, both companies especially Coca-Cola should accept the punishments made to their employees and immediately fire those employees. Coca-Cola should do this because although the fleet manager did meet the function of his job, he did so not under the constraints of the law. The company should aid the police in the investigation in which they did according to SmartCompany.com. The Company should immediately deal with another distribution company and hire and new fleet manager in pursuit to maximize profits within the constraints of the law. I believe that Virtue Theory justifies the action taken by the Coca-Cola Fleet Manager best. Mostly because the actions were done did not support any virtuous ideas and characteristics. The fleet manager was unfair with the payments making the Orix CEO make corrupt commissions. Also, he wasn't honest about the fact that the payments made on paper did not match the payments that were actually made making the fleet manager dishonest and in the wrong according to virtue theory.


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"Orix Chief Charged with Paying $504,000 in Corrupt Commissions to Coca-Cola." SmartCompany.com.au. N.p., 07 Apr. 2015. Web. 23 Nov. 2015.
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"Orix Boss Charged over Coca-Cola Scandal." The Sydney Morning Herald. N.p., n.d. Web. 23 Nov. 2015.

"Massive Corporate Corruption Case Threatens to Spill over into NZ [UPDATED]." Whale Oil Beef Hooked Whaleoil Media. N.p., 03 Apr. 2015. Web. 23 Nov. 2015.

"Worker Charged with Defrauding Pepsi of $275,000." CNNMoney. Cable News Network, n.d. Web. 23 Nov. 2015.

"U.S. Alleges 'Rampant' Corruption in Sweeping FIFA Probe."Bloomberg.com. Bloomberg, n.d. Web. 23 Nov. 2015.

Salazar, Heather. "The Business Ethics Case Manual: The Authoritative Step-by-Step Guide to Understanding and Improving the Ethics of Any Business." Kodiak.wne.edu. n.d. Print. 24 Oct. 2015. <https://kodiak.wne.edu/d2l/le/content/35710/viewContent/405477/View?ou=35710>

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