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Fluor's corporate crime-fighter

The construction industry globally remains rife with corruption. Here's how one CEO is battling back and rejecting the pay-to-play tradition.

By Mina Kimes, reporter
February 9, 2009: 9:37 AM ET

NEW YORK (Fortune) -- A young engineer named Alan Boeckmann was working in South Africa for Fluor, the multinational construction firm. One of his supervisors asked him to revise an order for materials, so Boeckmann changed the request and sent it back to Fluor's warehouse. Unbeknown to him, his boss had already sold the goods on the original order for a personal profit. Later Boeckmann watched, stunned, as the supervisor was arrested in front of him.

That was 25 years ago. Today Boeckmann still witnesses corruption of all sorts - and as the CEO of Fluor, he says he still loses contracts to rivals who slip bribes to local government officials. And no wonder: According to Transparency International, a nongovernmental organization, the construction industry is the most corrupt in the world.

The latest example: In January, Halliburton (HAL, Fortune 500) agreed to fork over $559 million in fines to the U.S. government to settle charges concerning construction-related bribes in Nigeria.

Over the years Boeckmann has worked hard to make Fluor (FLR, Fortune 500) corruption-free. The company, which derives more than half of its $17 billion in revenues overseas, puts all its employees through online anticorruption training sessions and teaches specialized workers, such as field operators, in person.

Executives promote an open-door policy and a hotline for reporting crime - as well as tough penalties for violators, who receive zero tolerance for infractions. This dedication to transparency has helped make Fluor the World's Most Admired engineering firm and fourth among all businesses in global competitiveness.

Boeckmann's battle against bribery hasn't been easy. After much debate, the CEO persuaded many of his industry peers to follow a strict list of principles to combat bribery. By 2005, the Partnering Against Corruption Initiative (PACI) had 69 signatories. Yet Boeckmann still wasn't satisfied.

"PACI was a cooperative effort to share best practices," he said. "But it had no teeth. We wanted to give it substance." Plenty of companies had signed on, but few had adequate programs to teach and enforce anticorruption principles.

Boeckmann admits that Fluor's own system hadn't always been best in class. "Before, it was largely a statement of intent," he says.

Much of that changed four years ago, when he installed a company lawyer, Wendy Hallgren, as the head of compliance. Hallgren wanted to observe firsthand what Fluor's employees were experiencing. So she spent much of a year and a half crisscrossing the globe, talking to project managers and engineers in countries including the Philippines, Russia, and Chile.

In a Southeast Asian country, Hallgren learned that local officials were demanding that Fluor hire their security details; when the company refused, the government converted the dirt road leading to Fluor's mining project into a one-way path and arrested workers as they drove home. Rather than pay up, Fluor appealed to the regional government - and then later used the story to train employees to react in the same way.

Hallgren's work not only sent a signal to employees that the company didn't tolerate corruption, but also offered ways to get around sticky situations. Last year the ethics hotline received 262 calls asking for advice, more than twice as many as it did in 2005.

Despite his efforts, Boeckmann admits the company still uncovers inappropriate behavior every 18 months or so. While those episodes have been minor, they pose a risk to the credibility of Boeckmann, who recently appeared in a YouTube video imploring workers to fight bribery.

Even so, Boeckmann's willingness to put himself on the line is what makes Fluor's efforts successful, says Alexandra Wrage, head of TRACE International, a nonprofit that does compliance training.

"The first thing that companies should do is send a message from the top," she says. "Fluor has put its face to the world when its peers haven't." And what everyone sees is that Fluor can play without paying.

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