Voles Systems Bribery Accusations in China 8148322098473382

For the exclusive use of A.
Aljohani,
2021.
CB0045
REV: September 7, 2020
DANIEL HAN MING CHNG
XIN PI
LIMAN ZHAO
Voles System’s Bribery Accusations in China

Voles System (Voles) ① was a Fortune 500 equipment and systems engineering multinational
corporation in the oil and gas industry. On the morning of April 10, 2017, Donald Brigance, Voles’
Senior Vice-President (SVP) of Legal and the company’s General Counsel, was informed by the U.S.
Department of Justice (DOJ) that Voles was officially under investigation for possible violations of the
U.S. Foreign Corrupt Practices Act. The DOJ had received an anonymous report alleging that Voles
had bribed Chinese government officials to win contracts in China.
This allegation immediately reminded Brigance of two similar reports that had come through the
company’s internal “whistleblower” system in December 2015 and November 2016. The Legal
Department had conducted investigations but had been unable to find concrete evidence to
substantiate these allegations. “Facing the impending investigation, Brigance wondered if there was
any truth to the earlier two reports. Had Voles’ internal investigations and corporate governance
system indeed failed so badly?”
Background of Voles System

Brad Kiskamp founded Voles in March 1999 in Seattle, Washington. Kiskamp had a master’s
degree in electrical engineering and computer science and had worked for over ten years in the oil
and gas industry before founding Voles. He started Voles to tackle some of the toughest systems
engineering problems in the industry. He created the groundbreaking sub-flow modules used in
natural gas facilities globally to optimize automated production. His innovations attracted many
customers, and the company grew very quickly. Voles went public in June 2002 and expanded its
products to include integrated equipment and system solutions for both oil and gas facilities
worldwide.
①
Voles System, the industry, and the individuals described in this case were disguised based on the experiences of an actual
U.S. publicly listed company investigated by the U.S. Department of Justice for violations of the U.S. Foreign Corrupt Practices
Act. The incidents described in the case are based on actual events but are disguised to protect the identity of our source, the
firm, and the individuals involved.
Professor Daniel Han Ming Chng and Research Assistant Dr. Xin Pi and Senior Case Writer Dr. Liman Zhao of China Europe International
Business School prepared this case. It was reviewed and approved before publication by a company designate. Funding for the development of
this case was provided by China Europe International Business School and not by the company. CEIBS cases are developed solely as the basis for
class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective
management.
Copyright © 2020 China Europe International Business School. To order copies or request permission to reproduce materials, call 1-800-545-7685,
write Harvard Business School Publishing, Boston, MA 02163, or go to www.hbsp.harvard.edu. This publication may not be digitized,
photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School.
This document is authorized for use only by Ahmed Aljohani in WPC 480 SCL 81083 Fall Capstone Course taught by ROLAND BURGMAN, Arizona State University from Aug 2021 to
Dec 2021.
For the exclusive use of A. Aljohani,
2021.
Voles System’s Bribery Accusations in China CB0045
In 2016, it had over 15,000 employees, 86 offices in 58 countries, and annual revenue of US$6.8
billion. The Americas represented its largest market (55%), followed by Europe, the Middle East, and
Africa (EMEA, including Russia) (29%), and Asia-Pacific (APAC, including Greater China and India)
(16%). As of 2017, Greater China, Russia, and India represented three of its fastest-growing markets
over the last three years. Despite its rapid growth, Voles remained relatively small when compared to
the top five global competitors (see Exhibit 1).
Vision, Culture, and Strategy

Voles’ vision was to “bring innovative integrated solutions to fuel a better world.” It believed that
innovation was the way to create a sustainable oil and gas industry and, ultimately, a better world.
Voles expounded four core values: pursue bold innovations, deliver quality, build trust with
stakeholders, and make a difference. Its core competency had been in developing and integrating
advanced computer analytics, including machine learning using big data, and communication
technologies, including sensors, the Internet of Things, and mobile applications, in order to offer
effective solutions to enhance the operations of oil and gas facilities.
While Voles saw innovation as central to its strategy, it also realized that growth was extremely
important for the company, given its relative size disadvantage compared to more established global
competitors. Voles had grown rapidly in the past because its innovations allowed the company to
win in the smaller, high-value-added segments, while its major global competitors retained their
strong positions in the much larger mass-market segments for standard products and services. Fast-
growing emerging markets were also very important for Voles. It looked toward faster growth in
large emerging markets, including Chinese Mainland and India, in order to increase its relative
competitiveness in the global market, despite the significant institutional weaknesses in many of
these markets, especially in terms of regulations and corporate governance. Like all its major global
competitors, Voles’ future success depended increasingly on its ability to win in these emerging
markets.
Leadership Team
Shortly after Voles’ initial public offering, Kiskamp stepped down as CEO and took on the role of
Chief Technology Officer (CTO). Mark Kinder, a highly experienced and well-respected executive in
the oil and gas industry, was recruited as CEO in 2003. Kinder retained the core of the company’s top
executives, including James Walker as Chief Operations Officer (COO), Dilip Athreya as Chief
Finance Officer (CFO), John McDeere and Brigance as SVPs of Internal Audit and Legal, respectively,
and Margaret DeZell as SVP of Human Resources (HR). He brought in an experienced marketing and
sales team, with Lisa Petrello as Chief Marketing Officer (CMO), Clarence Watson as SVP of Sales
Americas, Sharim Souki as SVP of Sales EMEA, and Tony Zhang as SVP of Sales APAC.
Organizational Structure
Voles had a simple organizational structure organized by functions (see Exhibit 2). The top
management team was comprised of the CEO, COO, CFO, CMO, CTO, and SVPs of Internal Audit,
Legal, and HR. The sales function was under the CMO, with an SVP of Sales for each of the three
geographical divisions (Americas, EMEA, and APAC) who was also the General Managers (GMs) of
these divisions. Sales Directors (SDs) looked after regional markets (e.g., Greater China and ASEAN
①) with a Senior Manager (SM)/Manager of Sales in each market (e.g., India and Singapore). Within
each
①
ASEAN = Association of Southeast Asian Nations.
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market, Partner Sales Managers worked with local distributors and resellers, while Key Account
Managers supported major customers, along with a Marketing Manager, to promote Voles’ brand
and products.
Corporate Governance Structure

Following the U.S. corporate governance scandals in the early 2000s and the passing of the
comprehensive Public Company Accounting Reform and Investor Protection Act in 2002 (commonly
known as the Sarbanes–Oxley Act), Voles adopted many best practices in corporate governance. The
company engaged a leading global consulting firm in 2003 to design and implement a comprehensive
internal corporate governance system.
Voles had a Board of Directors with nine directors. Except for Kinder (CEO), everyone was an
independent director. The Board was chaired by Anthony Orr, a former senior official at the U.S.
Department of Energy. The Board had an Executive Committee, an Audit Committee, a Nomination
Committee, and a Compensation Committee. Except for the Executive Committee (chaired by
Kinder), all committees were chaired by an independent director. Eric Barker, a retired partner at a
leading U.S. investment bank with extensive experience in the oil and gas industry, served as the
Chair of the Audit Committee.
The internal governance function had been established within the Legal Department under
Brigance. Its core function was to look after all legal matters pertaining to the commerce, trade, and
intellectual property of the company. With the Sarbanes–Oxley Act, the Legal Department’s
responsibilities were expanded to include the internal governance system. It published a Code of
Conduct for all employees and advised all functional departments on compliance issues. It also
managed a “whistleblower” system to strengthen its internal control. The system encouraged the
reporting of managerial and governance violations by employees while maintaining strict
confidentiality and protection (e.g., reports were made anonymously).
However, there was no centralized structure within the company or formal full-time position for
internal governance and compliance within the Legal Department. Individuals with legal training in
the department would support governance and compliance issues on an ad-hoc basis as and when
these issues came up. Some governance and compliance issues (e.g., workplace discrimination) might
not even come through the Legal Department, and it became involved only when other departments
approached it for assistance.
Voles established an Internal Audit Department in 2003. It was headed by McDeere, who moved
over from the Legal Department. It reported directly to the Audit Committee. The department
provided oversight and interacted with the Securities and Exchange Commission (SEC) on all
regulatory matters. It was not directly involved in internal governance and compliance issues and
would only become involved if Legal or other departments brought issues to its attention.
Voles’ Greater China Business

Voles established its Greater China business unit (BU) in Shanghai in 2004. It comprised the
Chinese Mainland, Hong Kong, Macao, and Taiwan markets, and was situated within the APAC
division, which included other national markets like Australia, India, and Singapore. The Greater
China BU, led by Sales Director Michael Zhou, accounted for 15% of revenue in the APAC division in
2016 (approximately US$162 million), with China and India making up the two fastest-growing
markets in APAC.
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Between 2010 and 2016, revenue in Greater China had grown at an average annual rate of around
27%, much higher than the company’s average of 15% over the same period. Within the Greater
China BU, Chinese Mainland, led by Senior Manager of Sales Jimmy Wang, was the largest and
fastest-growing market in 2016. It accounted for 52% of Greater China revenue (approximately US$84
million) and had grown by 58% between 2014 and 2016. Voles’ leaders were very bullish about the
Chinese Mainland market and aimed to increase investment there.
The Institutional Context and Procurement Processes in Chinese Mainland

The institutional context of Chinese Mainland was different from that of developed markets such
as the United States. As a transitional, emerging economy, its market institutions were relatively
underdeveloped. There was a strong presence of state-owned enterprises (SOEs) and moderate to
high levels of direct government intervention in the economy. Its capital, product, and labor markets
were also less developed, and institutions governing accounting standards, corporate governance,
and intellectual property rights were less mature. As such, regulations were often less transparent
and enforcement was inconsistent. Such institutional conditions increased the uncertainty of doing
business, and both domestic and multinational companies often engaged in non-market activities to
manage the risk of operating in Chinese Mainland. These included political activities like lobbying or
establishing formal political connections or informal guanxi ① in order to reduce uncertainty, facilitate
business transactions, and protect private property and ownership rights. ② They could also include
illegal activities like bribery, intellectual property theft, and price fixing.
As in many global markets, key customers in the oil and gas industry in Chinese Mainland were
SOEs. There were four major Chinese SOEs, and they made up 85% of the market, while local private
enterprises accounted for 10%, and foreign firms made up the remaining 5%. Consistent with
government procurement practices around the world, China’s law required all transactions involving
state assets to be made through a public tender process. In any procurement, Chinese SOEs had to
announce all tender requirements publicly.
There were three types of SOE procurement processes. The first was a unified national tender
process managed by the SOE’s corporate headquarters (HQ). HQ would consolidate a standard set of
requirements for products and services (e.g., price, quantity, and delivery time) from every provincial
subsidiary and award the contract to the supplier(s). The second process was similar, in that HQ
managed a unified tender process and awarded a general framework contract to the supplier(s).
However, specific contracts in terms of quantity, delivery time, and other localized requirements
between provincial subsidiaries and the supplier(s) would be signed later. These two processes
typically applied to the large-volume procurement of basic products and services where price and
suppliers’ ability to cover the entire Chinese market were important considerations. For these
procurements, domestic Chinese suppliers had a distinct advantage, given their lower prices and
broad distribution coverage.
The third process was an independent tender in which HQ provided guidelines, but provincial
subsidiaries handled the entire procurement process. Subsidiaries independently decided on specific
requirements, managed the public tender process, and awarded contracts to the supplier(s). This
process typically applied to smaller volumes of specialized products and services. Suppliers’ ability
to
①
Guanxi refers to informal personal relationships based on reciprocity and the exchange of favors.
②
C. Marquis and M. Raynard, “Institutional Strategies in Emerging Markets,” The Academy of Management Annals 9, no. 1
(2015): 291–335.
Dec 2021.
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offer the right products and services were important considerations. For these procurements, foreign
suppliers were able to compete with domestic Chinese suppliers.
Influence Tactics in the Tender Process

For Voles and its competitors, they lost much of their initiative in the tender process once a public
tender was announced. As such, many suppliers (both domestic firms and multinational companies)
would engage in various marketing activities (e.g., fully paid training programs held in popular
travel locations) in order to influence the setting of requirements so that the final specifications in a
tender would favor their products and services. This influence process by suppliers, especially
multinational companies, was most prominent for independent public tenders made by provincial
subsidiaries.
As a younger and smaller player in the industry, Voles faced stiff competition from larger and
more established international competitors, as well as leading Chinese competitors (who were mostly
SOEs) in the Chinese Mainland market. Chinese competitors were dominant in the unified national
tender for standardized, basic products and services. They were more familiar with Chinese SOE
customers, and their products and services were more aligned with local requirements. These
Chinese competitors enjoyed cost advantages in terms of manufacturing and quick response times in
terms of distribution and could price aggressively. For independent provincial tenders, Voles had to
compete with larger international competitors who enjoyed distinct advantages including economies
of scale, better market coverage, and stronger global reputations. However, Voles had technologically
advanced products and a reputation for providing integrated solutions to global customers. Its
products and services were also modularized and allowed for greater customization than the more
capital-intensive, established technological products and services offered by larger international
competitors. These features were particularly attractive to Chinese customers seeking to improve
their technological capabilities.
In 2011, Sinopec announced a plan for new gas facilities in Chinese Tier-1 cities (e.g., Beijing and
Shanghai) that used more technologically advanced and efficient systems. Wang, SM of Sales in
Chinese Mainland, convinced APAC and HQ to provide strong marketing support to influence the
process in order to compete against international competitors. In 2012, Voles succeeded in winning its
first national contract. Since then, given Chinese Mainland’s national initiative to reduce pollution
and reform the traditional oil and gas industry, Voles’ Chinese Mainland BU had made significant
gains.
Troubles in the Chinese Mainland Market

First Report and Investigation
In December 2015, Voles’ internal whistleblower system received a report that the Chinese
Mainland office had been bribing Chinese officials to win contracts. Brigance (Legal) assigned Vince
Brown, a junior commercial lawyer in the Legal Department, to verify the credibility of the report. He
concluded that the report was credible, given the details pertaining to Wang, his administrative
assistant, Aileen Li, and an external Shanghai-based event management company, Vamp Events, that
worked closely with Voles’ key distributors in China. Following this preliminary investigation,
Brigance informed McDeere (SVP Internal Audit), Petrello (CMO), Zhang (SVP Sales APAC), and
Zhou (SD Greater China) that a formal investigation would commence and Brown was sent to
Shanghai to investigate the allegation.
Brown was 33 years old and had joined Voles two years earlier as a commercial lawyer. He had a
bachelor’s degree in economics and a Juris Doctor (JD) degree. Brown joined Voles after passing his
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bar exam and worked exclusively on commercial contracts in the Americas division. His primary
work responsibilities involved supporting commercial negotiations, preparing commercial deals, and
other related legal matters. Brown had taken compliance and investigation courses during law school
and he contributed to the internal governance function beyond his regular job responsibilities. His
compliance experience included participating in two unfair-competition disputes in Mexico. He had
not led a compliance investigation before, nor had he visited China before for work or vacation. On
arriving in Shanghai, Brown contacted Wang to find out what he knew about the allegation. Brown
had researched Wang’s background but was meeting him for the first time.
Wang’s Explanation
Wang was 40 years old and had a bachelor’s degree in electrical engineering from a top Chinese
university. He had started in sales for a global IT company in Chinese Mainland and worked his way
up to Sales Manager in ten years. He had demonstrated an ability to develop innovative go-to-market
strategies and manage complex business transactions with SOE customers. Wang had joined Voles’
Chinese Mainland BU in 2007. He observed that Voles’ marketing strategy in Chinese Mainland was
essentially a copy of its global strategy and felt that this could be a major obstacle to Voles’ growth in
the Chinese market. Although he struggled with HQ to implement a more localized sales program,
Wang was able to implement a local sales program that worked well with both Zhang’s (SVP APAC
Sales) and Zhou’s (SD Greater China) support, including winning Voles’ first national contract with
Sinopec. For this, Wang was praised by Petrello (CMO) for driving growth in the strategically
important Chinese Mainland market.
Wang explained to Brown the route-to-market model in Chinese Mainland (see Exhibit 3). Voles
worked with three major distributors in China, located in Beijing, Shanghai, and Shenzhen. Their
roles were primarily in logistics, distribution, and maintenance. They carried the full range of Voles’
equipment and covered product warranty and hardware repair services. They worked directly with
around eight resellers in China. Resellers carried out the bulk of the sales activities and were
supported by the Voles sales team, which included Partner Sales Managers, Key Account Managers,
a Marketing Manager, and technical personnel. Resellers would tender for and service contracts with
customers. Voles’ resellers served all four major Chinese oil and gas SOEs, as well as a good number
of private and foreign oil and gas companies in China. Voles’ distributors and resellers were all
Chinese private firms, and most had worked with Voles since 2004.
Like most of its international competitors, Voles provided funds through its distributors to
support downstream marketing and sales activities. Every year, Wang would submit a marketing
budget to Zhou (SD Greater China) and Zhang (SVP APAC Sales) for approval. At Wang’s discretion,
the approved budget would be passed onto distributors to pay for activities aimed at promoting
Voles’ products and services. A substantial portion of this fund was used to provide technical
training programs to customers to enhance their understanding of Voles’ technologies and influence
the technical specifications of future tenders.
Distributors worked with event management companies to organize and implement these training
events, often held in popular travel locations in Asia, like Singapore or Bali. Vamp was one of the
main event management companies with whom the distributors worked. Brown suspected that this
marketing budget had been used in the alleged bribery. Brown discussed the use of this marketing
fund extensively with Wang and Marketing Manager Anson Liu. He requested and examined all the
records of internal expenses relating to how the fund was used. He also checked Vamp’s records
through Wang. With the aid of a Chinese legal assistant from APAC, Brown spent one week verifying
the training events organized over the period that was reported, reviewed the registration of
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participants in these events, and checked official receipts (which were called fapiao in Mandarin) for
hotels, travel, and other activities conducted by Vamp.
Brown carried out all the “textbook” compliance investigation activities he had learned but was
unable to uncover any concrete evidence that the marketing fund had been used to bribe Chinese
government officials. Brown submitted a quick progress report to Brigance and asked for further
instructions. Given the lack of solid evidence, Brigance told Brown to conclude his investigation and
return to HQ. Brown completed his investigation report one month after the allegation was made and
concluded that no concrete evidence of bribery had been found and that the allegation could not be
substantiated. The investigation report was submitted to McDeere (SVP Internal Audit), who signed
off on the report and closed the case.
Second Report and Investigation

In November 2016, another call came through the company’s internal whistleblower system. The
second report made similar bribery allegations against the Chinese Mainland BU. Alarmed by this
second report, Brigance informed CEO Kinder, CMO Petrello, and Zhang (SVP Sales APAC). A
decision was made to hire an external lawyer to investigate this allegation. Brigance turned to the law
firm that Voles regularly engaged in Seattle, Jones & McCarthy (J&M), which had a small fraud
practice focusing mostly on criminal breach of trust incidents in the United States. The firm had
limited experience in China, having only been involved in two cases involving the Chinese subsidiary
of a U.S. multinational corporation.
James Li, a Partner at J&M, was sent to Shanghai to lead the investigation, as he had been
involved in the previous investigations in China. Li was Chinese-American, having migrated with his
parents from Taiwan as a child. Brigance had informed Li about the earlier investigation and warned
him not to take things at face value. Li and his assistant interviewed Wang and Liu carefully, along
with Wang’s administrative assistant, Aileen Li, and all Partner Sales and Key Account Managers. He
also interviewed the distributors, major resellers, Vamp, and another event company that worked
with the major distributors. They checked all the records, including purchase orders, invoices, and
official receipts. While Li felt something was amiss, given how well organized all the paperwork was,
he was unable to uncover any concrete evidence of bribery. He shared his misgivings with Brigance
but concluded after a month that the allegation could not be substantiated. This report was submitted
to McDeere (SVP Internal Audit), who signed off on and closed the case.
The DOJ Investigation

Three months later, on April 10, 2017, Brigance received a call from the DOJ about possible
violations of the U.S. Foreign Corrupt Practices Act (FCPA). The FCPA made it unlawful to make
payments to foreign government officials to assist in obtaining or retaining business. ① It applied to
Americans, and foreign persons and firms operating within the United States. Cases involving the
anti-bribery provision were under the DOJ. The FCPA also required companies listed in the United
States to meet its reporting provisions, and the SEC enforced their compliance. After receiving a
report, the DOJ would conduct a preliminary investigation to decide whether a formal investigation
would be launched. When a formal investigation was launched, the company under investigation
would need to hire a law firm from the DOJ’s designated list to lead the investigation. The company
would pay for all the expenses related to the investigation. If the case involved multiple countries,
this process could take two to three years and potentially cost millions of dollars.
①
“FOREIGN CORRUPT PRACTICES ACT,” the United States Department of Justice, accessed October 27, 2019,
https://www.justice.gov/criminal-fraud/foreign-corrupt-practices-act.
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On April 13, 2017, Voles disclosed the DOJ investigation in an SEC filing. Its share price dropped
by more than 5% the next day. However, industry observers were sympathetic to Voles. Jeffrey
Moran, Research Director at O&G Research, said that the immediate drop in stock price would no
doubt “hurt” Voles, but stressed that these kinds of investigations were unfortunately rather common
in the highly corrupt oil and gas industry. He reported:
Last year, Hylopetes had to pay a fine of $16 million for something similar in China, and Salta
agreed to pay $25 million for stuff in Nigeria and South Korea. I don’t know the details, but,
unfortunately, it is the way business is done in some countries.
Global legal firm Hentons, which specialized in anti-corruption law worldwide, was hired by
Voles to conduct the investigation. The investigation team was led by Frank Yang, a legal expert in
the FCPA and anti-bribery investigations in Asia and China. Born in China, Yang had earned his JD
at a top U.S. law school. He had over 12 years of experience in the United States and moved to
Shanghai in 2008 as Managing Partner for China. Yang had a team of 12 experienced lawyers and 16
investigators in China.
Yang organized a team of two lawyers and three investigators to investigate Voles. Accompanied
by Zhang (SVP APAC Sales) and Zhou (SD Greater China), along with Voles’ HR representative,
Yang’s team was able to quickly secure all company-owned communication devices (including PCs,
laptops, and mobile phones) from all members of the sales team (including administrative and
accounting assistants) in China. They also obtained all communication records, including e-mails
from the company’s e-mail servers, messages from mobile phones provided by the company, and
physical copies of invoices and receipts.
Using IT forensic tools, Yang’s team combed through all electronic communication of the sales
team from 2012 until 2017. His team also interviewed all members of the sales team. Investigators
looked carefully into the marketing funds, including how training programs were designed and
implemented, looking for any abnormal payments. In addition, they interviewed employees at
Vamp, as well as participants in training programs, carefully examining all invoices related to
banquets, hospitality, seminars, training programs, travel, and sponsorship fees. The investigation
took over eight months.
DOJ’s Investigation Findings

The DOJ’s investigation found that a number of billing entries for training programs and
marketing activities for event management firms, including Vamp, had been forged. The
investigation team found discrepancies in the dates of these activities and related receipts. Further
investigations revealed that several hotel receipts, as well as airline receipts, had also been forged.
Checking with the respective hotels and airlines confirmed that these had been fabricated by Vamp.
The investigation team also contacted participants who were supposed to have attended these events
and was able to confirm that some events had not happened.
Working carefully through the evidence, the investigation team found that Wang had over several
years siphoned a portion of the “unused” marketing budget into a slush fund estimated at ¥8①
million (approximately US$1.23 million). Working together with Vamp, Wang had forged invoices
for training programs and other marketing activities. Voles would provide funds through its
distributors to pay for these events. The funds were held in Vamp as an “off-the-books” spreadsheet
and subsequently used by Wang at his discretion.
①
¥ = CNY = Chinese yuan renminbi; ¥ 1 = approximately US$0.1537 by end of 2017
8
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Wang directed these activities with the help of two of his trusted managers, Liu (Marketing
Manager) and Huang (Partner Sales Manager). Wang’s administrative assistant, Aileen Li, handled
much of the paperwork involved. While it was unclear whether Aileen Li was directly involved in the
slush fund, she and her family had enjoyed several fully paid vacations provided by Vamp to
destinations like Singapore and Sydney.
Wang used the slush fund to “entertain” senior managers of Voles’ customers in China, including
the four major SOEs, as well as members of his sales team. This included gifts like luxury watches,
golf equipment, paid vacations to popular destinations like Australia, South Korea, and Thailand,
expensive dinners, karaoke, and even spa treatments. Information obtained from electronic
communication also revealed that similar activities might have happened in Hong Kong SAR, China
and India. The investigation team also focused on Vamp, which held over 80% of the slush fund.
Interviews with some employees revealed that Vamp might be indirectly controlled by a friend of
Wang’s wife.
As these details were revealed, Voles fired Wang, Liu, Huang, and Aileen Li on October 23, 2017.
Zhou (SD Greater China) was reprimanded for his poor oversight. He was kept in his position and
took temporary charge of Chinese Mainland until suitable candidates could be brought into the
Chinese Mainland team. Brigance launched two internal investigations into Hong Kong SAR, China
and India, given the information from the DOJ investigation.
An Unclear Future
As of January 2018, the DOJ’s investigation was ongoing. Brigance was uncertain if the DOJ
would file criminal charges against Voles. Criminal charges might be levied on the company and/or
individuals in the company and would carry severe financial implications for Voles. Even if the DOJ
decided not to file criminal charges, Voles would still be liable for civil charges by the SEC for failure
to meet the FCPA’s reporting provisions. This would still hurt the company financially. Regardless,
the DOJ’s eight-month investigation had cost Voles US$68 million and harmed its reputation as a
young, innovative, socially responsible firm in the oil and gas industry. The investigation had also
disrupted Voles’ growth strategies for Chinese Mainland, Greater China, and APAC. Chinese
Mainland sales dropped 28% in 2017 versus the previous year.
Brigance had to prepare a comprehensive report of the company’s corporate governance failures
in China to Barker, Chair of the Audit Committee, as well as the Board. He needed to understand
what went wrong at Voles. How did they fail to prevent such management malfeasance even after
implementing industry best practices? How did they fail to uncover this malfeasance internally when
the initial reports came through? What about the evidence discovered during the investigation
regarding Hong Kong SAR, China and India? Brigance needed to give his Board concrete
recommendations to address these corporate governance failures, especially in emerging markets,
which posed very high business risks but were key to any multinational corporation’s success. What
immediate actions should Voles take to address the current situation? Further along, what long-term
strategic measures would Voles need to implement to prevent such corporate governance failures
from happening again?
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Exhibit 1: Comparison of Voles and Competitors (Billion US$)
Revenue of global oil and gas service enterprises in

2016
Salta (Germany) 27
Epixerus (Canada) 24
Hylopetes (U.S.) 21
Brotomys (U.S.) 19
Funambulus (U.S.) 17
Voles (U.S.) 6.8
Cavia (China)
5.6
0 5 10 15 20 25 30
Source: Created by authors.
10
Dec 2021.
For the exclusive use of A. Aljohani, 2021.
Exhibit 2: Organizational Structure of Voles System
Board of Directors
Anthony Orr (Chair) Mark Kinder (Executive Chair) Alan Hackett (Nomination Chair) Patrick LundgrenAlison Swann (Compensation Chair)
Ibrahim Khalid Ernesto Peltz Scott ZedilloEric Barker (Audit Chair)
CEO
Mark Kinder
Technology Operations Marketing Finance Human Resources Legal SVP Legal Don Brigance Internal Audit
CTO COO CMO CFO SVP HR SVP IA
Brad Kiskamp James Walker Lisa Petrello Dilip Athreya Margaret DeZell Jack McDeere
Americas Sales SVP Americas Clarence

EMEA Sales
Watson APAC Sales Intellectual Property SVP Counsel Ethan Shaw & Trade SVP Counsel Daniel Silva
Commercial
SVP EMEA SVP APAC
Sharim Souki Tony Zhang
South Asia Sales Director Ranjay Chopra

East Asia/ANZ Sales Director Matt Hayward
Greater China Sales Director Michael Zhou
Greater China SM Marketing Simon Chan Hong Kong & Macao China (Mainland) SM Sales Jimmy Wang Taiwan SM Sales Amy Wu Commercial Lawyer Vince Brown
SM Sales
Eric Li
China (Mainland) China (Mainland) China (Mainland) China (Mainland) China (Mainland)
Individuals directly involved in the caseMarketing Mgr Partner Sales Mgr Key Account Mgr Key Account Mgr Admin Assistant
Anson Liu Larry Huang Philip Shen Marco Zhu Aileen Li
11
This document is authorized for use only by Ahmed Aljohani in WPC 480 SCL 81083 Fall Capstone Course taught by ROLAND BURGMAN, Arizona State University from Aug 2021 to Dec 2021.
For the exclusive use of A. Aljohani, 2021.
Exhibit 3: Voles’ Route-to-Market Model
Voles
China (Mainland)
Voles’s partner sales managers supportedVoles’s
distributors
key account managers interacted with customers
Distributors
Beijing Voles’s technical and sales staff supported resellers
oles worked directly with distributors; provided marketing development
Shanghai funds to them
Shenzhen
Resellers
16 in China (Mainland)
Customers
SOEs
Private oil & gas companies
Distributors looked after logistics and distribution; hired event management firms to run training programs and other marketing activities
Resellers interacted directly with customers, and implemented marketing activities, submitted tenders, and fulfilled contracts
Event management firms ran training programs and other marketing activities with customers
Events Mgt Firms

(e.g., Vamp)
12
Dec 2021.

Voles Systems Bribery Accusations in China 8148322098473382

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DANIEL HAN MING CHNG

Voles System’s Bribery Accusations in China

Background of Voles System

Vision, Culture, and Strategy

Corporate Governance Structure

Voles’ Greater China Business

The Institutional Context and Procurement Processes in Chinese Mainland

Influence Tactics in the Tender Process

Troubles in the Chinese Mainland Market

Second Report and Investigation

The DOJ Investigation

DOJ’s Investigation Findings

Exhibit 1: Comparison of Voles and Competitors (Billion US$)

Revenue of global oil and gas service enterprises in

Voles (U.S.) 6.8

Source: Created by authors.

Exhibit 2: Organizational Structure of Voles System

Americas Sales SVP Americas Clarence

South Asia Sales Director Ranjay Chopra

Source: Created by authors.

Exhibit 3: Voles’ Route-to-Market Model

Events Mgt Firms

Source: Created by authors.

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