Sabre Inc.’s CEO, Michael Southard, has called you and your team to help improve the company’s Segregation of Duties (SoDs)-related controls. Recently Sabre acquired a company called Dundie. In a purely business sense this was touted as two industry leaders joining forces. Most industry analysts had positive reviews on the acquisition – which was one of Michael’s biggest triumphs as a CEO. However, right after the acquisition several gaps were found in Dundie’s internal controls environment. Eventually certain pre-acquisition due diligence activities conducted by Dundie had to be escalated to the SEC. It was discovered that illegal payments had been made to secure lucrative contracts in the Middle East and Asia. These payments were possible mainly due to a lack of controls around segregation of sensitive roles and responsibilities. These incidents were in violation of the Foreign Corrupt Practices Act. The incident, as cited by the SEC violation, is:
“Violation of anti-bribery, books and records, and internal controls provisions of the FCPA through illicit payments made to secure and maintain business opportunities worldwide.”
As a result, Dundie (and the newly combined Sabre) faced the threat of severe financial penalties, potential jail time for key executives and a public relations fall-out.
Because of these revelations, the SEC and US Department of Justice have opened up multiple investigations on Dundie (and hence Sabre). Michael not only wants to improve the current processes, but also wants to proactively implement controls to prevent similar incidents from occurring in the future.