In today’s edition of Daily Compliance News:
In today’s edition of Daily Compliance News:
NOVEMBER 9, 2018 BY TOM FOX
In today’s edition of Daily Compliance News:
The Boston Red Sox thrashed the LA Dodgers in World Series, bringing the trophy back to Boston for the 4th time in 15 years. What’s it like to support such a loveable winner? Jay shares some of the secrets as the lads look at some of the week’s top compliance and ethics stories.
For more information on how an independent monitor can help improve your company’s ethics and compliance program, visit our sponsor Affiliated Monitors at www.affiliatedmonitors.com.
Welcome to the only roundtable podcast in compliance. The genesis of Everything Compliance was our first podcast three years ago at SCCE in Chicago. We reconvene for this week’s episode at the SCCE 2018 Compliance and Ethics Institute. This year we record in Las Vegas. We have a potpourri of topics and free flowing conversation, including the following:
The members of the Everything Compliance panelist are:
Joining us as a guest on this episode, was Louis Sapirman, in from the bullpen as the thespian, left-handed closer for Mike Volkov.
The host and producer (and sometime panelist) of Everything Compliance is Tom Fox the Compliance Evangelist. Everything Compliance is a part of the Compliance Podcast Network.
As Tom and Mrs. Compliance Evangelist trek to Ann Arbor MI to attend his law school reunion, Go Blue and watch the Wolverines trounce Nebraska and enjoy some cool autumn weather, he and Jay are back with a look at some of the week’s top compliance and ethics stories.
Check out the week's top compliance and ethics stories (and more) on This Week in FCPA-the Go Blue edition.
For more information on how an independent monitor can help improve your company’s ethics and compliance program, visit our sponsor Affiliated Monitors at www.affiliatedmonitors.com.
Compliance into the Weeds is the only weekly podcast which takes a deep dive into a compliance related topic, literally going into the weeds to more fully explore a subject. In this episode, Matt Kelly and I take a very deep dive into the process surrounding the allegations made against Supreme Court nominee Brett Kavanaugh by Christina Ford. We consider these allegations from the compliance perspective.
Some of the highlights from this podcast are:
We unpack of all these points and consider strategies going forward.
For more reading: see Matt’s piece The Kavanaugh Compliance Lesson
In this episode of the CONVERGE18 Preview Podcasts, I visit with Ellen Hunt, Senior Vice President, Audit, Ethics & Compliance Officer at AARP. We discuss the role of the Board of Directors and compliance. Some of the issues we tackle in this podcast are:
In what is fast becoming one of the top ethics and compliance conferences around, I hope you can join me at CONVERGE18, hosted by Convercent. (I perform consulting work for Convercent.) This year’s event will be October 8-11 at the Omni in Bloomfield, Colorado. The line-up of this year’s event is simply first rate with some of the top ethics and compliance practitioners around.
With the acceleration of the speak up culture and organizational accountability that social media is enabling and amplifying, companies need to incorporate integrity into every level of the organization. CONVERGE18 will help you do just that by addressing this ethical transformation head-on. Get the insights, information and solutions you need to put ethics into action. Join compliance executives from Salesforce, Kimberly Clark, Avis, U.S. Bank, AARP, Wells Fargo, Cheesecake Factory and many others to:
I hope you can join me at the event. For information on the event, click here. As an extra benefit to readers of this blog, CONVERGE18 is offering a 50% discount off the registration price. Enter discount code TOMFOXVIP.
CONVERGE18 is a production of Convercent, which is the sponsor of this podcast series.
You can put away your all white linen suits and your seer sucker suits as well. With that hint of fall in the air, we are upon the (unofficial) end of summer with the Labor Day Weekend, Tom and Jay are back with a look at some of the week’s top compliance and ethics stories.
For more information on how an independent monitor can help improve your company’s ethics and compliance program, visit our sponsor Affiliated Monitors at www.affiliatedmonitors.com.
As we begin the post-holiday portion of our 4thof July week, Jay Rosen and myself are back in the saddle again to take a look at some of the top compliance stories from the past week.
For more information on how an independent monitor can help improve your company’s ethics and compliance program, visit our sponsor Affiliated Monitors at www.affiliatedmonitors.com.
Compliance into the Weeds is the only weekly podcast which takes a deep dive into a compliance related topic, literally going into the weeds to more fully explore a subject. In this episode, Matt Kelly and I take a deep dive back into the issue of the ZTE monitorship announced recently as a part of the settlement with the Department of Commerce on the death penalty sanctions levied on the company in April.
That sanction was an export denial which barred American companies from selling components to ZTE and its subsidiary. American companies, such as the San Diego-based chipmaker Qualcomm supplied critical parts for ZTE’s its networking gear and smartphones. This sanction came on the heels of a $891 million fine and penalty the company agreed to in March 2017 for its first round of export control violations. The second sanction was for failing to live up to the terms of the DPA the company agreed to in 2017.
In the 2017, the company agreed to a monitor, who was appointed by the District Court which accepted the company’s guilty plea. Under the May 2018 supplemental sanction, ZTE agreed to pay an additional $1 billion in penalties, put $400 million in escrow, and accept a U.S.-appointed compliance department. According to the Department of Commerce Press Release, the new agreement requires ZTE "to retain a team of special compliance coordinators selected by and answerable to" the Commerce Department for ten years. This new compliance function will essentially serve as the Department of Commerce’s monitor at ZTE as the Press Release noted, "Their function will be to monitor on a real-time basis ZTE’s compliance with U.S. export control laws.”
Matt and I take a deep dive into the DOC resolution, the monitorship and how it might work and the use of a sanctions regime by the administration as a tool to brow beat other countries. We discuss in detail on this bizarro arrangement of U.S. regulators appointing an in-house compliance executive to act as a monitor to the Chinese telecom firm. The concept is intriguing, and the job could be the professional challenge of a lifetime — except for all those pesky details, including the ones this settlement still leaves unaddressed.
For more reading: see Matt’s piece on “FAQs on ZTE’s Compliance Settlement” and “Trade War! Trade War! Man the Barricades!”,both on Radical Compliance. See Tom’s piece, “The ZTE Department of Commerce Monitor: unchartered waters” in Compliance Week.
With both VW and ZTE having very bad weeks, Jay Rosen and myself are back in the saddle again to take a look at some of the top compliance stories from the past week.
For more information on how an independent monitor can help improve your company’s ethics and compliance program, visit our sponsor Affiliated Monitors at www.affiliatedmonitors.com.
The call, e-mail or tip comes into your office; an employee reports suspicious activity somewhere across the globe. That activity might well turn into a FCPA issue for your company. As the CCO, it will be up to you to begin the process which will determine, in many instances, how the company will respond going forward.
This scenario was driven home in a FCPA enforcement action brought by the SECin July 2015 involving Mead Johnson Nutrition Company. In that case, the company performed two internal investigations into allegations that its Chinese business unit was engaged in conduct which violated the FCPA. Unfortunately, the first investigation, performed in 2011, did not turn up any evidence of FCPA violations. It was not until 2013, when the SEC made an inquiry to the company that it performed an adequate internal investigation which uncovered FCPA violations.
Your company should have a detailed written procedure for handling any complaint or allegation of bribery or corruption, regardless of the means through which it is communicated. The mechanism could include the internal company hotline, anonymous tips, or a report directly from the business unit involved. You can make the decision on whether or not to investigate with consultation with other groups such as the Audit Committee of the Board of Directors or the Legal Department. The head of the business unit in which the claim arose may also be notified that an allegation has been made and that the Compliance Department will be handling the matter on a go-forward basis. Through the use of such a detailed written procedure, you can work to ensure there is complete transparency on the rights and obligations of all parties, once an allegation is made. This allows the Compliance Department to have not only the flexibility but also the responsibility to deal with such matters, from which it can best assess and then decide on how to manage the matter.
To purchase a copy of The Complete Compliance Handbook on Amazon.com click here.
To purchase an autographed copy of The Complete Compliance Handbook from the author click here.
After being joined by Jay’s girls to celebrate our 100th anniversary episode, Jay Rosen and myself take a look at some of the top compliance stories over the past week.
For more information on how an independent monitor can help improve your company’s ethics and compliance program, visit our sponsor Affiliated Monitors at www.affiliatedmonitors.com.
In March the SEC made its biggest-ever whistleblower award. It gave one person more than $33 million and in the same case split nearly $50 million between two others. The previous high for an SEC award to a single whistleblower was $30 million in 2014. All three whistleblowers were represented by the law firm of Labaton Sucharow and the awards were based upon SEC enforcement actions against Merrill Lynch. Today, I have with me Steve Durham, a partner at the firm to talk about the awards and its implications in light of the recent Supreme Court decision in Digital Realty Trust v. Somers.
There are several key points to take away from the awards which we discuss. Initially the awards were divided into two separate awards; one to two individuals for $50 million and a second of $33 million to one individual. We discuss what is original information in the eyes of the SEC which can qualify for an award. In the award, the SEC noted the initial two whistleblowers could have received a higher amount if their information had been more timely delivered to the SEC, which is as soon as they were learned of the misconduct. This timing issue is critical not only to help set the amount of the award but also to establish a whistleblower is qualified to receive an award as there were other individuals who stepped forward later with the same or similar information.
We also explore where the SEC is in its overall whistleblower award program. Durham believes there are several large whistleblower awards in the SEC pipeline and that the SEC Whistleblower program has been an overall success. Even with the Congressional attacks on Dodd-Frank, there is no call to reform this part of the law.
The top compliance roundtable podcast is back with a wrap up of the some of the top compliance stories over the first quarter of 2018. Stayed tuned to the end for rants in this edition.
I take the opportunity to give a Happy Trails shout out to one of my boyhood heroes; Rusty Staub who recently passed away and rant on the New York Times for waiting almost a full week before running an Obituary on Phillp Kerr.
The members of the Everything Compliance panel include:
March Madness is upon us, with the first ever #16 knocking off a Number 1 see. In the midst of this true madness, Jay Rosen and myself take a look at some of the top compliance stories over the past week.
In this episode I visit with Joel Solomon, author of “The Clean Money Revolution”. Solomon has worked in the investment community for many years, both in the United States and Canada. He heads Renewal Funds, which is Canada’s leading mission venture capital investment firm, with $98 million of assets under management in early growth stage Organics and EnviroTech companies in Canada and the USA. The Fund has over 150 individual, family, and foundation investors mostly split between Canada and the USA, with several in Europe and Asia. The goal is above market financial returns from a portfolio of companies offering positive societal advances. Renewal Funds dynamic team is led by Paul Richardson, President and CEO, and Joel Solomon, Chair, with crucial backing from Carol Newell. Renewal Funds has been named a "Best for the World Funds" by B the Change Media, for setting the measurement and management bar for impact investing. It has also been named a B Corp for "Best for the World Company."
We discuss what is mission venture capitalism and Solomon’s leadership in this field. We discuss his book, The Clean Money Revolution and explore how clean money investing is different than other types of investing. We explore the role of money managers in the clean money revolution and explore the broader role of money managers in environmental, social and governance investing and management. We consider the role of the Boards of Directors in public companies in contributing to the clean money revolution. We conclude with a fascinating exploration of the role of US government pull back in ESG and clean money investments; leaving a very large role for corporations to step in and fill going forward.
For more about Joel Solomon, check out his website, joelsolomon.org.
Last week the US Supreme Court issued its decision in Digital Realty Trust v. Somers (Somers). It was a closely watched case in the compliance community. Yesterday, I reviewed the Court’s decision. In this podcast, Roy Snell and I consider the impact of the Court’s decision on a variety of actors; including the SEC itself, Chief Compliance Officers (CCOs) and compliance practitioners, compliance programs and corporate America.
While we both agreed the Supreme Court came to the correct legal decision, there are several areas which this decision may well lead to negative impacts. The first is the message that it sends to potential whistleblowers; if you do not report to the Securities and Exchange Commission (SEC) you will not receive any legal protections against discrimination or retaliation.
Second, is the impact on every Chief Compliance Officer (CCO) or compliance practitioner. This decision will negatively impact attempts to create a best practices compliance program. A key part of any best practices compliance program is an internal reporting mechanism (Hallmark 8 of an Effective Compliance Program).
Third is that companies will be cut off from its best sources of information, that from its own employees, companies now will have less ability to detect and then remediate any problems before they become legal violations or keep legal violations from expanding.
Finally is the impact the decision will have on the SEC itself. Now there is no incentive to report internally because you are not eligible for any financial incentive nor will you receive any protections from discrimination or retaliation. It is possible the SEC will be literally inundated with potential securities-laws violations.
In this episode, Matt Kelly and I take a deep dive into the events which led to the resignation of Steve Wynn as the CEO and Chairman of Wynn Casinos for sexual harassment and misconduct. We consider how quickly the scandal escalated after it was initially reported by the Wall Street Journal and the response (or lack thereof) by the Board of Directors to Wynn’s conduct which had been an open secret for almost 20 years. We review what structural inputs a company should have in place when it has a true charismatic leader. We consider the role of the Board of Directors in light of the recent Wells Fargo penalty levied by the Federal Reserve to limit growth and require the Wells Fargo Board to refocus its efforts on more robust corporate risk management.
For more on the Wynn scandal and corporate governance, see Matt’s blog post So Much Wynning You Can’t Stand It
For more on the Federal Reserve’s penalty on Wells Fargo and the Board of Director’s need for a compliance profession on the Board, see Tom’s blog post, Wells Fargo, Put a Compliance Professional on Your Board
The role of the Chief Compliance Officer (CCO) has steadily grown in stature and prestige over the years. In the 2012 FCPA Guidance, under Hallmark Three of the 10 Hallmarks of an Effective Compliance Program, the focus was articulated by the title of the Hallmark, Oversight, Autonomy, and Resources. In it the 2012 FCPA Guidance focused on the whether the CCO held senior management status and had a direct reporting line to the Board; stating “In appraising a compliance program, DOJ and SEC also consider whether a company has assigned responsibility for the oversight and implementation of a company’s compliance program to one or more specific senior executives within an organization. Those individuals must have appropriate authority within the organization adequate autonomy from management, and sufficient resources to ensure that the company’s compliance program is implemented effectively. Adequate autonomy generally includes direct access to an organization’s governing authority, such as the board of directors and committees of the board of directors.”
This Hallmark was significantly expanded in both the Evaluation of Corporate Compliance Program (Evaluation) and the new FCPA Corporate Enforcement Policy (Policy). Over the next two blog posts, I will be considering how the Department of Justice (DOJ) has increased the prestige, authority and role of both the CCO and corporate compliance function.
The DOJ’s Evaluation of Corporate Compliance Programs, made the following query about the CCO position:
Stature – How has the compliance function compared with other strategic functions in the company in terms of stature, compensation levels, rank/title, reporting line, resources, and access to key decision-makers? What has been the turnover rate for compliance and relevant control function personnel? What role has compliance played in the company’s strategic and operational decisions?
Autonomy – Have the compliance and relevant control functions had direct reporting lines to anyone on the board of directors? How often do they meet with the board of directors? Are members of the senior management present for these meetings? Who reviewed the performance of the compliance function and what was the review process? Who has determined compensation/bonuses/raises/hiring/termination of compliance officers? Do the compliance and relevant control personnel in the field have reporting lines to headquarters? If not, how has the company ensured their independence?
In the Policy, the DOJ laid out additional factors around CCO authority:
There is a new requirement for compliance “independence”. The DOJ has not taken a position on whether a General Counsel (GC) can also be the CCO. However, this new language would seem to signal the death knell for the dual GC/CCO role. It may also signal the larger issue that the CCO should have a separate reporting line to the Board, apart from through the GC. While the DOJ’s stated position that it does not concern itself with whether the CCO reports to the GC or reports independently, it is more concerned about whether the CCO has the voice to go to the Chief Executive Officer (CEO) or Board of Directors directly not via the GC. Even if the answer were yes, the DOJ would want to know if the CCO has ever exercised that right. Yet the Evaluation comes as close to any time previously in articulating a DOJ policy that the CCO be independent of the GC’s office. Therefore, if your CCO still reports up through the GC, you must have demonstrable evidence of both CCO independence and actual line of sight authority to the Board.
The Evaluation and the Policy build upon the 10 Hallmarks of an Effective Compliance Program and demonstrate the continued evolution in the thinking of the DOJ around the CCO position and the compliance function. Their articulated inquiries can only strengthen the CCO position specifically and the compliance profession more generally. The more the DOJ talks about independence, coupled with resources being made available and authority concomitant with the CCO position, the more corporations will see it is directly in their interest to provide the resources, authority and gravitas to compliance positions in their organizations.
Three Key Takeaways
This month’s podcast sponsor is Convercent. Convercent provides your teams with a centralized platform and automated processes that connect your business goals with your ethics and values. The result? A highly strategic program that drives ethics and values to the center of your business. For more information go to Convercent.com.
In this episode, Jay Rosen and myself take a look at some of the top compliance stories over the past week.
A 360-degree view of compliance is an effort to incorporate your compliance identity into a holistic approach so that compliance is in touch with and visible to your employees at all times. It is about creating a distinctive brand philosophy of compliance which is centered on your consumers. In other words, it helps a compliance practitioner to anticipate all the aspects of your employees needs around compliance your employees, who are the customers of your compliance program. This is especially true when compliance is either perceived as something that comes out of the home office or is perceived as the Land of No, largely inhabited by Dr. No. A 360-degree view of compliance gives you the opportunity to build a new brand image for your compliance program.
Previously, I had thought of communications really as a two-way street upward and downward, inbound and outbound, and side to side communications. However, you might choose to phrase it, a 360-degree approach to compliance communications is something different. You simply can no longer as effectively communicate in just two ways. You now communicate in a more holistic manner, and in multiple ways. If you are just thinking about communications in the classic form you are missing something that is happening around you.
360-degrees of compliance communication is not just a classic form of communication but rather it is a communication in the concept of every interaction, whether they be planned interactions or whether they be into or accidental interactions. It is all a form of communication. This is particularly true if you are a compliance professional, a chief compliance officer or a compliant practitioner. The things you do, the way you act, and the way people see you are always communicating. It is not simply communicating to one another as often you may well be communicating to a group across siloed boundaries, to the constituencies with whom you had not even planned to initially communicate.
There are several concepts which should be included in your 360-degree view of compliance communications. Begin with an objective so you identify the purpose of your communication and the target of whom you are going to communicate to. Identify as clearly as you can the purpose and reason to ensure your message is aligned with your objectives. For instance, are you implementing a 360-degree view of communication to educate, inform, change perceptions or build trust and commitment?
Next, who is your audience? To communicate effectively you need to understand your audience. In any corporation, there are multiple audiences who are the key stakeholders in the 360-degree process. How much do they know? Some of the stakeholders include the Board of Directors, senior management, middle management, employee teams, committees, coaches, facilitators, customers, business partners, vendors, sales agents and representative, strategic alliances and business ventures. What are your distribution channels and how do you track your messaging? You should create a comprehensive spreadsheet to track the messages the intended audience and the delivery mechanism. Another key ingredient of the 360-degree approach is feedback. This is a key component of the 360-degree experience and educate each stakeholder on the benefits of feedback from the 360-degree approach.
Finally, you need to evaluate what you have done. You can monitor your communication activities by tracking attendance at the events, website statistics, open rate of emails, downloads of materials, video hits; in other words, the same techniques that your marketing folks would use to determine their messaging’s effectiveness. The objective is to build trust for the 360-degree process by determining if the goal achieved. You can utilize surveys or focus groups to assess the impact on your target audience. By focusing on your customer customers of compliance, I.E. your employees, it allows you to identify gaps and improve the communication process for your compliance program.
Using such a 360-degree approach to communication, allows a CCO to “see around corners” and can be one of the greatest strengths of a best practices compliance program. The reason is listening. Listening is a key leadership component and there are certainly many ways to listen. You can sit in your office and wait for a call or report on the hotline or you can go out into the field and find out what challenges employees are facing. From this you can work with them to craft a solution that works for the company and holds to the company’s ethical and compliance values.
Three Key Takeaways
This month’s podcast sponsor is Convercent. Convercent provides your teams with a centralized platform and automated processes that connect your business goals with your ethics and values. The result? A highly strategic program that drives ethics and values to the center of your business. For more information go to Convercent.com.
Jay and I take things in a different direction this week. We take the top five podcasts from 2017 and each of us, gives a highlight from that episode to highlight some of the key compliance issues from 2017, for our year end wrapup edition.
1. Episode 55-The Covfefe Edition, for the week ending June 2
From Jay- Compliance is making its way into Boards of Directors. See article by Ben DiPietro in the WSJ Risk and Compliance Journal.
From Tom- Samuel Mebiame, sentenced to two years behind bars for paying bribes to help Och-Ziff with lucrative mining deals in Africa. See article by Sam Rubenfeld in WSJ Risk and Compliance Journal. Judge asks why no one else was criminally prosecuted. See article in Bloomberg.
2. Episode 53-The I Left My Heart in SF Edition, for the week ending May 19
From Jay- Should compliance and ethics be wedded? New report by Institute of Business Ethics and the Ethics Institute considers the issues. See article in WSJ Risk and Compliance Journal.
From Tom- Astros lead the MLB with the best record in baseball. Will they regress to the mean?
3. Episode 52-The Firing the Investigators Edition, for the week ending May 12
From Jay- ECI Report Finds Use of Corporate Monitors is on the Rise. For a copy of report, click here. For a webinar replay with Affiliated Monitors’ Eric Feldman and Nasdaq’s Michael Kallens click here.
From Tom- Why the judgment of CEOs and their actions really do matter. See James Stewart considers Barclays’ Jes Staley in his Common Sense column in the New York Times.
4. Episode 54-The Rubber Match Edition, for the week ending May 26
From Jay-he recaps the SCCE San Francisco event he attended last week. See Jay’s recap in his article I Left My #SCCE Heart in San Francisco or I Love It When A Plan Comes Together!
From Tom-Was the individual enforcement against the MoneyGram CCO significant or much ado about nothing? See article by Dick Cassin in the FCPA Blog and by Sara Kropt in her Grand Jury Blog.
5. Episode 77-The Home for the Holidays Edition, for the week ending November 17
From Jay-
1a) Wal-Mart reserves $283MM to settle its outstanding FCPA matter. See article by Dick Cassin in the FCPA Blog. Henry Cutter reports in the WSJ Risk and Compliance Journal.
1b) The Everything Compliance gang put together an eBook of their reflections from the recent SCCE 2017 Compliance and Ethics Institute. It is available for download free on JDSupra. It is also available on the Affiliated Monitors site by clicking here.
From Tom- Tom visited with Marc Havener and Bryan Belknap about using movie clips to expand your compliance training classroom. See Tom’s blog post here.