Welcome to the first day of a five-day podcast series Jay Rosen and I are producing in honor of the latest Star Wars movie The Last Jedi. Each day over this week, Jay and I will review a Star Wars movie and discuss it from the compliance perspective. Today, we consider Episode IV, A New Hope and risk.
The full series schedule is:
Monday, December 18, Part I- IV-a New Hope and risk.
Tuesday, December 19, Part II- V-The Empire Strikes Back and due diligence.
Wednesday, December 20, Part III- VI-Return of the Jedi and effective training.
Thursday, December 21, Part IV- VII-The Force Awakens and disruptive innovation in compliance.
Friday, December 22, Part V-Rogue One and the myth of the rogue employee.
One of the plotlines is that the Galactic Empire has created a Death Star with enough firepower to destroy a planet. The Rebel Alliance is determined to destroy the Death Star and has blueprints detailing the defensive posture of the Death Star. A computer analysis determines a weakness in the Death Star’s defensive shield. At one point, the Death Star’s commander, Grand Moff Tarkin, played by Peter Cushing, is told there is a ‘risk’ in the Rebel’s plan of attack. Tarkin dismisses this risk as insignificant. Of course, Luke Skywalker then proceeds to exploit this risk and destroy the Death Star.
Tarkin’s incorrect assessment of this risk was lethal. Today I want this part of the story to introduce the subject of how you evaluate compliance risk under the Foreign Corrupt Practices Act (FCPA) or an economic sanctions regime. Failure to appreciate risk can lead to some very serious and perhaps lethal consequences.
Whether you utilize one approach or another, analyzing the results of your risk assessment is as important as doing the risk assessment. With the recent Department of Justice (DOJ) remarks around how they will review the effectiveness of compliance programs during an enforcement action to determine potential credit or even granting a declination, the stakes have never been higher. Of course, for Grand Moff Tarkin, his refusal to analyze the risk assessment presented to him was fatal.
Join us tomorrow where we consider The Empire Strikes Back and due diligence.
May the podcast be with you this holiday season.
Jay and I return for a wide-ranging discussion on some of the top compliance and ethics related stories of the week, with a focus of the release of the latest Star Wars movie, The Last Jedi:
As many of you all know Matt Kelly can rant with the best of them, right up there with Howard Sklar. I was quite intrigued with I read Matt’s December 11, 2017 blog post entitled, “At What Cost Dishonesty? For VW Exec, Seven Years” as it was one of the most strident blogs I have ever read from Matt. I wondered what had him so excised over the sentencing of former Volkswagen regulatory compliance engineer Oliver Schmidt. It turns out quite a bit, yet it was in a different way from his blog post.
In this podcast Matt and I take a deep dive into the compliance weeds to consider Schmidt’s conduct, the sentence and the roles of various parties involved in this unfortunate series of events. We consider at what point Schmidt committed to path of clearly unethical, immoral and illegal conduct? We explore what it means for a compliance professional to stand up and say this is wrong; whether it be on ethical, moral or legal grounds? In short what are some of the philosophical underpinnings of the compliance profession and even the compliance psyche?
We also consider the role of the trial judge who laid down the harsh sentence, the role of regulators such as the SEC and EPA in dealing with individual liability for compliance professionals. We discuss the distinguishing factors in this case but conclude that if a Chief Compliance Officer or compliance professional is a part of the illegal conduct, they will be vigorously prosecuted.
In addition to this episode, Matt and I have put together a five-part podcast series where we explore implications of this new revenue recognition standard, which is running this week. Each podcast is short, 11-13 minutes and deals with one topic on the new revenue recognition standard. The schedule for this week is:
Part 1: Introduction
Part 2: What the logic of your transaction price?
Part 3: Shaking up software revenue recognition.
Part 4: Auditors need to pay attention.
Part 5: What does it all mean for compliance (and everyone else)?
A new episode premiers at 12 noon CST, each day this week.
Jay and I return for a wide-ranging discussion on some of the top compliance and ethics related stories of the week, including:
In this episode, I visit with Morrison and Foerster partner James Koukios on the Department of Justice (DOJ) new policy regarding Foreign Corrupt Practices Act (FCPA) enforcement. Last week, Deputy Attorney General Rod Rosenstein, in a speech, called it the FCPA Corporate Enforcement Policy and stated that it is now “incorporated into the United States Attorneys’ Manual.” The new Policy has four sections: 9-47.100 Introduction; 9-47.110 Policy Concerning Criminal Investigations and Prosecutions of the Foreign Corrupt Practices Act; 9-47.120 FCPA Corporate Enforcement Policy and 9-47.130 Civil Injunctive Actions.
Koukios is a former DOJer who worked in the FCPA Unit of the Fraud Section at the DOJ. He brings a unique insight into some of the enforcement aspects of the new policy. Koukios highlighted three areas. The first is the creation of a presumption of declination for a self-disclosing, extensively cooperating, remediating and then disgorging any ill-gotten gain, through the mechanism of profit disgorgement. The second was the formalization of the category of declination created under the DOJ’s FCPA Pilot Program of declinations with disgorgement. The third issue raised by Koukios was what he believed was the lack of engagement with the business community over information is might have provided about what was or was not working under prior enforcement regimes; from the international business community perspective. This type of business involvement was used in the development of the 2012 FCPA Guidance, issued by the DOJ and SEC. Koukios felt this would have been a plus.
Jay and I return for a wide-ranging discussion on some of the top compliance and ethics related stories of the week, including:
Deputy Attorney General Rod Rosenstein, in a speech, called it the FCPA Corporate Enforcement Policy and stated that it is now “incorporated into the United States Attorneys’ Manual.” See Tom’s article in the FCPA Compliance Report. See report by Sam Rubenfeld and Henry Cutter in WSJ Risk and Compliance Journal. Also see Matt Kelly’s thoughts in Radical Compliance and those of Doug Cornelius in Compliance Building.
The top compliance roundtable podcast is back with a wealth of new topics.
For Matt Kelly’s posts on speeches of Rosenstein, see the following:
DOJ Penalty Policy Under Review
Rosenstein Talks Yates Memo, Says Diddly
To see the DOJ statements on monitors, see the Morford Memo, the Breuer Memo and Grindler Memo.
The gang is back with rants which follow the discussions.
The members of the Everything Compliance panel include:
In this episode, Matt Kelly and I consider the recent rejection by federal Judge William Young of the plea agreement in the matter of US v. Aegerion Pharmaceuticals. This criminal case stemmed from Aegerion’s launch of Juxtapid, which is a treatment for high cholesterol with an annual cost of more than $300,000. Almost immediately, Aegerion executives engaged in deceptive sales practices that around Juxtapid. The Justice Department brought two misdemeanor charges against Aegerion for selling misbranded drugs across state lines. Federal prosecutors agreed to a plea bargain where Aegerion—now under new management, and cooperating assiduously with federal authorities—would pay $6.2 million in fines and penalties, with no compliance monitor. The plea deal was a “C Plea,” where the judge can only accept or reject the agreement entirely.
In some incredibly scathing language, the judge not only rejected the deal but castigated the entire system of allowing corporations off the hook so lightly while not giving the same opportunities to individual defendants. Echoing some of the criticisms from Jesse Eisinger’s book The Chickenshit Club he faults the DOJ for its handling of corporate malfeasance. The judge does so by quoting Shakespeare, country music and ranges widely from the Yates Memo, to Russian interference in our election, to President Donald Trump calling our judicial system a laughingstock.
It is a delicious opinion and Matt and I go into the weeds to dissect i
To read the judge’s opinion click here.
See Matt Kelly’s blog post Corporate Plea Bargains Under Fire Again
We have a bit of a compliance smorgasbord of topics this week. I was in London and sat down to be interviewed by Jonathan Armstrong, a partner at Cordery Compliance, at the law firm offices in London. We consider when disruptive companies should institute a compliance program, even during its start up phase. Does the simple fact it is disruptive make compliance antithetical to its business approach. We both believe that disruptives and start-ups need to institutionalize compliance sooner rather than later. We then consider the disruptions of political events such as the ongoing antics of the Trump Administration and continued non-negotiations in the Brexit miasma. We discuss where might compliance be going in the future. We conclude with a discussion of the internationalization of anti-corruption investigations and enforcement and why compliance is the key to wading through the minefield of multiple jurisdictions and regulators.
Jay and I return for a wide-ranging discussion on some of the top compliance and ethics related stories of the week, including:
In this episode, Matt Kelly and I take a deep dive into the Cardinal Health corporate governance imbroglio. In it, a disgruntled shareholder, the Teamsters Pension fund brought a motion to have the CEO stripped of his title as Chairman of the Board. Although the motion failed, the Teamsters prevailed as the company took the requested step and separated the position. This matter included complaints about GC/CCO pay where those roles were held by one person who received a sizeable bonus even though the company did not meet its financial goals.
We consider the joint role of a GC-CCO and the potential corporate governance issues involved when the roles are held by one person. Does this create an irreconcilable conflict? What are the different functions of the General Counsel and the Chief Compliance Officer and how should we interpret a bonus payment? Should it be for one role or both roles. How does a joint GC-CCO role impeded the work of each corporate function individually? Finally, we consider how shareholder activism may now impact not only corporate governance but also corporate structures in functions such as compliance. What does this mean for the compliance function and Chief Compliance Officers going forward.
We also touch on the role of compliance in drug distribution companies which have been drug into the opioid crisis. Cardinal Health shipped drugs totaling up to 55 pills for every person in the state of West Virginia to one town in that state. What, if anything, should the compliance function do in such a situation?
This case makes a fascinating case study in corporate governance and much more.
For more information, see Matt Kelly’s blog posts
Compliance Lessons in the Cardinal Governance Fight and
Teamsters Blast Cardinal Health Compliance Efforts
Does the merger of the GC-CCO role create an irreconcilable conflict in corporate functions?
In this episode, I am interviewed by Jonathan Armstrong, a partner at Cordery Compliance in London on the implications of the Paradise Papers and Saudi Arabian corruption crackdown for the compliance practitioner.
What every international business person should absolutely remember that there is no country in the world which makes bribery and corruption legal by statute. That means if and when a government decides to clamp down on what may have been a long-standing accepted business practice, of which you have been an active participant, there is nowhere to hide and very few places to hide. Witness GlaxoSmithKline PLC (GSK) in China in 2013 and 2014 where the Chinese subsidiary unit President returned to China to be criminally charged and convicted. He was summarily deported back to the UK where GSK almost as quickly summarily terminated him from his employment. Now we have the omens of a potentially equally seismic event, this time from Saudi Arabia.
For more information, see my blog post Saudi Arabia Has a Corruption Crackdown - What is Your Response?
Jay and I return for a wide-ranging discussion on some of the top compliance and ethics related stories of the week, including:
In this episode, I have New Yorker writer and reporter Adam Davidson on his recent article entitled, "Piercing the Veil of Secrecy Shrouding the Trump Deal in the Republic of Georgia”. In this article Davidson looks at some of the business practices of the Trump organization. It is a look the Silk Road Group, a mysterious holding company that set out, several years ago, to build a Trump Tower in the Republic of Georgia. Davidson found it to be a diffuse container holding at least several dozen corporate entities who, legally, at least, were registered in different countries around the world and had uncertain relationships to each other. In light of the recent indictments from Mueller’s office, it makes fascinating reading. Davidson is the author of “Trump’s Worst Deal” one of the most significant articles on the Trump organizations business dealings outside the US.
In this episode, Matt Kelly and I take a deep dive into the Justice Department’s Evaluation of Corporate Compliance Programs, released in February 2017. We consider this document in light of the wide-ranging review by the Justice Department of the various Memos from DAG’s over the past 15 years or so to determine if there should be consolidation or clarification into a new “Rosenstein Memo” or if there should be updates to the US Attorney’s Manual. Will the DOJ simply declare the Evaluation is no longer operative because it came out of the Obama Administration’s Justice Department? We consider the information presented in the Evaluation and how its value works in numerous ways for the compliance practitioner.
For more reading see Matt’s blog post “Future of the Effectiveness Questions”
Looking for one of the top Master Classes in Compliance? Join myself and Jonathan Marks of Marcum LLC at the FCPA Master Class will be held on November 28 and 29, 2017 at the offices of Marcum LLC, 750 3rd Avenue, 11th Floor, New York, NY 10017. A Certificate of Completion will be provided to all who attend in addition to the continuing education credits that each state approves. The cost to attend is $1,495 per person. Breakfast, lunch and refreshments will be provided both days. For registration information, click here.
Jay and I return for a wide-ranging discussion on some of the top compliance and ethics related stories, including:
In this episode, Matt Kelly and I take a deep dive into the scandal around Harvey Weinstein. We consider it from the compliance perspective, both programatic and for the CCO. We consider the different types of harassment which comes may face claims of from the fallout. We also consider the Board response by The Weinstein Company board and for the claims involving Bill O'Reilly.
For additional reading see Matt Kelly's blog post Fighting Harassment Where it Lives
In this episode, I visit with Doreen Edelman, a partner at Baker Donelson. We discuss the current state of NAFTA negotiations and some of the key issues including:
For more information on Edelman’s thoughts on the current state of the NAFTA negotiations see her blog post “As “Significant Conceptual Gaps” Persist, NAFTA Talks Extended to 2018” on her blog site Export Compliance Matters.
In this episode, I visit with John Wood, who has served in numerous high-level executive branch positions, including U.S. Attorney for the Western District of Missouri, Chief of Staff for the U.S. Department of Homeland Security, Deputy Associate Attorney General, Counselor to the U.S. Attorney General, and Deputy General Counsel for the White House Office of Management and Budget. He was also a Supreme Court clerk.
We consider the recent speech by Deputy Attorney General Rod Rosenstein on the comprehensive review the Justice Department will go through looking at various and sometimes disparate Memos regarding corporate and individual prosecutions.
Wood goes through some of the process the Justice Department will go through in this review. We discuss how it may impact the DOJ’s priorities regarding not only enforcement but also investigation. He notes the remarks by Rosenstein on corporate compliance programs and how the DOJ views their value in the overall fight against the global scourge of bribery and corruption. We also consider where the DOJ might go with an extension of the FCPA Pilot Program and what compliance practitioner might expect going forward.
For a copy of the text of DAG Rosenstein’s speech click here.
Jay and I return for a wide-ranging discussion on some of the top compliance and ethics related stories, including:
In this episode, we report from the SCCE 2017 Compliance and Ethics Institute, which was recently concluded in Las Vegas. We are joined by Roy Snell, the President of SCCE. We all relate some of our highlights of this year's events and look at some of the most recent compliance and ethics stories which caught our collective eyes. Rants will return in our next episode.
The members of the Everything Compliance panel include:
In this episode, I visit with Vin DiCianni, President and Founder of Affiliated Monitors, Inc. We discuss the recently announced strategic alliance between Affiliated Monitors, the US’s premier independent compliance monitoring/evaluation company and RS Legal Strategy Limited, a UK Q.C. led legal one stop shop white collar crime and fraud boutique. We discuss the strengths that at party brings to this new business venture and what they hope to achieve.
We use this new strategic alliance as a mechanism to discuss how companies can take a more pro-active approach to addressing their ethics and compliance deficiencies comprehensively, through the efforts of an independent advisor. When an independent monitor is utilized, there is a much greater likelihood that a successful outcome and improved practices will be achieved.
Through the combination of RS Legal’s expertise in UK enforcement actions, taken with AMI’s pro-active global ethics and compliance approach, you begin to see how an independent review can facilitate the operationalization of compliance from the detect prong to the prevent prong into more of a prescriptive approach. We explore how investigations and monitoring, when used pro-actively, can increase the likelihood of any of a corporate client securing a beneficial outcome resulting from ongoing investigations.
This podcast continues the theme I have been following on the evolution of best practices compliance program, continually moving away from the simple paper program approach articulated by some. The Justice Department’s Evaluation of Corporate Compliance Programs is designed, in large part to get companies to think about and ask questions about their compliance program. The proactive use of a monitor is one of the key innovations in this path.
For more information, Vin DiCianni can be reached at vdicianni@affiliatedmonitors.com.
In this episode, Jay and I return for a wide-ranging discussion on some of the top compliance and ethics related stories, including:
In this episode, Jay and I are joined by Louis Sapirman, CCO at Dun & Bradstreet for a look the the 2017 SCCE Compliance and Ethics Institute. We discuss the pro-conference events, what we hope to achieve at this year's event and why it is important to give back to the compliance community. We end with a discussion on why the Harvey Weinstein affair may well change the face of compliance going forward.
In this episode, I visit with Doreen Edelman, a partner at Baker Donaldson on the top FCPA enforcement action of 2017, the Telia Company matter. We discuss the background facts of the case; we explore the amount of the fines and penalties, were they too high or were they too low; we consider the involvement of senior management right up to the CEO and the Board’s role; we explore the multiple lessons for the compliance professional, the CCO, senior management and the Board of Directors. We conclude with what the enforcement action means going forward and the increase in international enforcement, cooperation and investigation in anti-corruption.
Doreen Edelman can be reached at dedelman@bakerdonelson.com.
Doreen blogs at Export Control Matters.