The End is Nigh? MLB and Fairness in Administration of a FCPA Compliance Program

Less than three months after he ruled against Major League Baseball (MLB) in the Ryan Braun suspension, Arbitrator Shyman Das was fired by MLB. He had been an approved arbitrator under the MLB Collective Bargaining Agreement for almost 13 years before he was abruptly terminated by MLB. In an article in the New York Times (NYT), entitled “Arbitrator Who Overturned Braun’s 50-Game Suspension Is Fired”, an un-named “person with knowledge of the decision said that the Braun decision was only one of several factors that led to Das’ dismissal.” Apparently MLB thought it was the National Football League (NFL) in that if you don’t play my way, you can take the highway. Or maybe MLB will just fire every arbitrator who rules against it until there are no arbitrators left.

This firing of an arbitrator, whose job it is to follow the collective bargaining agreement in making his rulings, reminded me of the issue of fairness as a key component of a compliance program. I have written about the Fair Process Doctrine, which generally recognizes that there are fair procedures, not arbitrary ones, in a process involving rights. Considerable research has shown that people are more willing to accept negative, unfavorable, and non-preferred outcomes when they are arrived at by processes and procedures that are perceived as fair.

However, there is another way to look at fairness in the compliance context. In the recent IQPC, Contract Risk Management conference, held in Houston, I led a panel discussion on Foreign Corrupt Practices Act (FCPA) compliance issues. One of the panelists talked about fairness in the context of administration of your compliance program. Another way to view it might be termed consistency, but I was intrigued that he chose to use the word ‘fairness’. He said that if you are going to discipline an employee for violation of your Company’s Code of Conduct or Code of Business Ethics, you must do so consistently across the board. Discipline must not only be administered fairly but it must be administered uniformly across the company for the violation of any compliance policy. Simply put, if you are going to fire employees in South America for lying on their expense reports, you have to fire them in North America for the same offense. It cannot matter that the North American employee is a friend of yours or worse yet a ‘high producer’. Failure to administer discipline uniformly will destroy any vestige of credibility that you may have developed.

In addition to the area of discipline, which may be administered after the completion of any compliance investigation, you must also place compliance firmly as a part of ongoing employee evaluations and promotions. If your company is seen to advance and only reward employees who achieve their numbers by “whatever means necessary”, other employees will certainly take note and it will be understood what management evaluates and rewards employees upon.

I believe that in many ways, Andre Agassi was right that “perception is reality”. If your employees perceive that your compliance program is administered fairly, there is a much better chance that they will buy into the compliance program and have faith in it. However, if you fire employees in Brazil for falsifying expense reports and do not do so when US employees engage in the same behavior, this may well destroy the credibility that you have worked hard to build up.

Fortunately MLB cannot always act in such a unilateral manner, as MLB players have a collective bargaining agreement which protects them, somewhat, from arbitrary and capricious actions by MLB. However, not all employees have such protections and, subsequently, this means that compliance practitioners must make fairness a part of any compliance program going forward.

We end by noting that the Mayan calendar predicts the end of the world in 2012. This past week saw two potential indicia of this phenomenon. First Manchester City won the English Premier League title with two goals scored during extra time in the final game of the season AND the Baltimore Orioles not only lead the American League East for the first time in 20 years but have the best record in baseball. Happy weekend to all….

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2012

The Value in Conducting Thorough Background Checks on Executives

Ed. Note-today we have a guest post by Scott Lane, President of the Red Flag Group.

Internet giant Yahoo! has now been forced to undertake another extensive search for a Chief Executive Officer to help salvage its underperforming business. Today it was announced that Scott Thompson would be stepping down from his recently appointed position at the company in the wake of allegations surrounding the accuracy of his education record. The scenario that Yahoo! is now in serves as a reminder to organisations of the importance of conducting thorough background checks on new senior executive appointments as a means of avoiding potential shareholder disputes and detrimental publicity.

Not long after Scott Thompson was appointed CEO of Yahoo! in January 2012, rumours began circulating about the authenticity his academic credentials as detailed on his CV. Mr Thompson’s CV listed an accounting and computer science degree from Stonehill College in the United States. Daniel Loeb, the boss of the hedge fund Third Point who own 5.8% of Yahoo!, claimed that Mr Thompson had not in fact graduated with a degree in computer science. The discrepancy in Mr Thompson’s record was deemed to be the result of an “inadvertent error” by Yahoo!. Mr Loeb initiated a number of inquiries on behalf of other shareholders as to how Yahoo!’s vetting process had not picked up that Mr Thompson never graduated with a degree in computer science.

This case divided opinion as to the seriousness of Mr Thompson’s misrepresentation, particularly as his performances in previous roles had earned him considerable acclaim. However, Yahoo! had exposed themselves to potential litigation by using Mr Thompson’s degree information on regulatory filings, and the ongoing discussions about his background continued to be a distraction from becoming established in his new role. So much so that the decision has been made that Mr Thompson is to step down as CEO. Not only will Yahoo! now have to undertake another expensive and time consuming search for his replacement, his departure also comes at the expense of other existing directors who were responsible for his employment. More so, over the past number of weeks Yahoo! has been the focus of considerable media attention for all the wrong reasons, and its board’s reputation to make decisions in the best interests of all stakeholders tarnished.

This is certainly not the first time a company has suffered the indignity of having to replace senior executives. Last year the chief executive of InterContinental Hotels Group’s Asia-Pacific operations, Patrick Imardelli, resigned after it was discovered that he had misrepresented his academic record on his CV.

This issue could have been addressed if companies:

• Conducting a detailed background check to ascertain the overall accuracy of an individual’s CV including all previous work and study credentials
• Detailed research into the person’s profile in International media in each of the markets where they have lived, carried on business or managed people
• Interviews with other colleagues, business associates, and previous employers to address the overall integrity of the person in all markets in which they have worked
• Interviews with the person to assess their understanding of compliance and legal risks, their approach to ethical and integrity issues and their answers to a series of hypothetical corporate situations posing ethical challenges and testing their responses along the way
• The conducting of psychometric testing based on integrity issues to assess independently the responses to certain situations

Background screening and integrity assessments should be an essential part of the hiring and promoting process. This is important with all new employees, but even more so with those moving into senior positions. The incident involving Mr Thompson will for some time remain a blight against Yahoo! in the eyes of some of its shareholders, but they will no doubt adopt screening measures to heavily scrutinise all candidates in the future. Whilst undertaking extensive screening operations can be time consuming and costly, it is not as damaging to an organisation as disharmony amongst shareholders when it is discovered that a recently appointed individual’s credentials are false.

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For more information on the Red Flag Group, click here.

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This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. 

JPMorgan Chase and Compliance Risk

Most of the business news over the past few days has been dominated by JPMorgan Chase & Co (JPM) and its announced $2.3 billion trading loss. Early on there was focus on  JPM’s trading operations in London as the cause of this massive loss and even one trader, nicknamed the “London Whale”, has fuelled the debate about banks taking such large positions which caused or may have helped to cause these massive losses. The news stories intimated that these losses may have been the work of this ‘rogue trader’ who worked for the company in its London operation. However, an article in the Saturday Wall Street Journal (WSJ), entitled “Bank Order Led to Losing Trades”, reporters Dan Fitzpatrick, Robin Sidel and David Enrich wrote that the company told the traders to “make the bets aimed at shielding the bank from the market fallout of Europe’s deepening mess. But instead of shrinking the risk, their complicated bets may have backfired into losses as much as $200MM a day”.

One of area that is an important part of a minimum best practices compliance program under the Foreign Corrupt Practices Act (FCPA) or the UK Bribery Act is risk assessment. Indeed in a recent video podcast on the site MainJustice.com, Kimberly Parker, a partner at WilmerHale, said that both the Department of Justice (DOJ) and the UK Serious Fraud Office (SFO) have made clear that a risk assessment is now the key initial step in crafting a compliance program under either the FCPA or Bribery Act. However, from information available to-date, it is not clear how JPM may have assessed its risk which led to it instructing its traders to make such risky bets. Yet the Bank must have thought its risk was quite high to bet up to $200MM per day the other way in an attempt to manage said risk.

So it would appear that not only does a company need to assess its risk but it must also judge that risk. This is termed ‘risk intelligence’ and it appears that such intelligence was sorely lacking in the case of JPM. In an article, coincidentally also appearing in the Saturday WSJ, entitled “How to Beat the Odds at Judging Risk”, author Dylan Evans reviewed how two different groups, weathermen and gamblers, gauge probabilities. He believes that these two groups “have managed to overcome these biases and are thus able to estimate probabilities more accurately than the rest of us.” He termed this phenomenon as “high intelligence with respect to risk.” He cited to Sarah Lichtenstein for three characteristics of groups with high intelligence with respect to risk. First, these groups “tend to be comfortable with assigning numerical probabilities to possible outcomes.” Second, such groups “make predictions only on a narrow range of topics.” Third, these groups “tend to get prompt and well-defined feedback, which increases the chance that they will incorporate new information into their understanding.”

Evans wrote that both weathermen and gamblers received “prompt and well-defined feedback” for their predictions. Weathermen usually know the next day if their forecast is correct and gamblers received almost instantaneous results with the next roll of the dice, turn of a card or drop of a roulette ball. The key for gamblers seems to be in the quantification of wins and losses; they can review these strategies in order to learn from their mistakes.

Most compliance practitioners use a risk assessment to manage risk going forward. However, I believe that one of the lessons which can be learned from the JPM debacle is that a compliance program requires more than a risk assessment and management of the quantified risk. You need to use risk intelligence to learn from the risk and help your company anticipate FCPA or Bribery Act compliance issues that may arise from your business model, geographic sales locations or interactions with foreign government officials. Evans concludes his article by stating that given the right conditions and right self-reflection and practice, we can make substantial improvement to our risk intelligence.

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2012

Letter to Cicero – Lesson for the Compliance Practitioner from the Roman Republic

Most people will recognize the name Cicero as that of one of the greatest orators of the Roman Republic. In 64 BC he ran for Consul and was elected, beginning his term in March, 63 BC. In this month’s issue of Foreign Affairs, the political strategist James Carville writes a commentary based upon a letter that Quintus Tullius Cicero (the younger brother) wrote to Marcus Tullius Cicero (the older brother and the one we remember as ‘Cicero’) about how to run a political campaign. Although James Carville uses the letter to discuss political campaigns, I found some interesting prescriptions for the (modern day) compliance practitioner.

Use Your Supporters

Cicero the Younger advised his older brother that “Few outsiders have the number and variety of supporters that you do.” I believe that the vast majority of employees want to do business in an ethical manner, compliant with whatever anti-corruption or anti-bribery law that they might operate under, whether it is the Foreign Corrupt Practices Act (FCPA) or UK Bribery Act. This translates into not only employees who will follow the requirements of your company’s Code of Conduct and compliance program; but also means that these people can help to not only sustain but grow your compliance program.

Work to Maintain the Goodwill of Your Supporters

Cicero the Younger also advised that his older brother provide helpful advice to his supporters and to also reach out to them by asking for their counsel in return. In the US Department of Justice’s (DOJ) 13 points of a minimum best practices compliance program, providing day-to-day compliance advice is a key component. Item No. 9 Ongoing Advice and Guidance reads in part:

The Company should establish or maintain an effective system for: a. Providing guidance and advice to directors, officers, employees, and, where necessary and appropriate, agents and business partners, on complying with the Company’s anti-corruption compliance policies, standards, and procedures, including when they need advice on an urgent basis or in any foreign jurisdiction in which the Company operates;

The DOJ clearly wants a designated person or persons available to provide compliance advice to company employees on a regular, as needed basis. But Cicero the Younger goes further by saying that providing such advice can cultivate and maintain goodwill. This is certainly true for the compliance practitioner.

Cultivate Relationships

The third point that Cicero the Younger advised his brother to engage upon was to “cultivate relationships” with key decision makers. These relationships will not only assist in winning the election but when the time comes for you to govern, these same relationships will assist you in educating people on your programs.

These three steps, as advised by Cicero the Younger, reminded me of a technique used by Leonard Shen, the Chief Compliance Officer (CCO) at PayPal. Shen said that in a company which is initiating its compliance program, it can be perceived as a change of culture. To alleviate some employee fears, he used an approached which worked to alleviate those types of concerns but had the additional benefit of providing enough information to perform a robust assessment which could be used to form the basis of an effective compliance program. He termed this type of approach as one to “engage and educate.” While the approach had a two word name, it actually had three purposes; (1) to engage the employees in what would form the basis for an enhanced compliance program; (2) to educate the employees generally in compliance and ethical behavior; and (3) through the engagement of employees, to gather information which could be used to form the basis of a risk assessment.

A.    Engagement

Shen and his compliance team traveled to multiple company locations, across the globe, to meet with as many employees as possible. A large number these meetings were town hall settings, and key employee leaders, key stakeholders and employees identified as high risk, due to interaction with foreign governmental official touch-points, were met with individually or in smaller groups. Shen and his team listened to their compliance concerns and more importantly took their compliance ideas back to the home office.

From this engagement, the team received several thousand employee suggestions regarding enhancements to the company’s compliance program. After returning to the US, Shen and his team winnowed down this large number to a more manageable number, somewhere in the range of a couple of hundred. These formed the basis of a large core of the enhancements to the existing company compliance program.

After the enhanced compliance program was rolled out formal training began. During the training, the team was able to give specific examples of how employee input led to the changes in the enhanced program. This engaged the employees and made them feel like they were a part of, and had a vested interest in, the company’s compliance program. This employee engagement led to employee buy-in.

B.    Education

During the town hall meetings, and the smaller more informal group meetings, Shen and his team were doing more than simply listening, they were also training. However, the training was not on specific compliance provisions; it was more generally on overall ethics and how the employees could use compliance as a business tool.

As pointed out by another speaker at Compliance Week 2011, most ethical standards of a company are not found in an existing compliance program, they are found in the general anti-discrimination guidelines and ethical business practices, such anti-competitiveness and use of customer confidential information prohibitions. Often these general concepts can be found in a company’s overall Code of Conduct or similar statement of business ethics; workplace anti-discrimination and anti-harassment guidelines can be found in Human Resource policies and procedures. Concepts such as anti-competitiveness and use of customer and competitor’s illegally obtained confidential information may be found in anti-trust or other business practice focused guidelines.

Shen and his team’s aim for the education component of “Engage and Education” was to have the company employee’s start thinking about doing business the ethical way. It was ethical concept based training designed to be in contrast to a rules based approach, where employees believe they are taught the rules, and then try to see how close they can get to the line of violating the compliance rule without actually stepping over the line. Moreover, by having this general ethical business training, it laid the groundwork for the enhancement of the company’s compliance program and the training that would occur when the enhancement was rolled out.

It is often said in the legal profession that there are no new ideas. This may also be true in the compliance profession. However, there are innumerable resources from which the compliance practitioner can draw inspiration and the Letter to Cicero is certainly one.

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2012

The Shelby Mustang and Continued Development of a FCPA Compliance Program

Carroll Shelby died last week. For anyone who following racing or loved the Muscle Car Era, no light shone brighter that Shelby’s. In 1959 (a little before I started to follow racing) Shelby was the first Texan to win the 24 Hours of Le Mans. Forced to retire from racing due to a medical condition, Shelby became one of the top race car designers in the 1960’s with his Shelby-American teams winning the 24 Hours of Le Mans, driving Fords designed by Shelby, to victories in 1966 and 1967. But I remember Carroll Shelby for those souped-up, mean as heck Shelby Mustangs, which debuted in 1965 and lasted until the end of the Muscle Car Era in 1971.

So what’s the compliance angle here? Well, believe it or not, it involves Wal-Mart. In its obituary for Shelby, the New York Times (NYT) reported that “Early prototypes broke apart because of stress on the fragile frames. “When you try to put 300 horsepower in a car designed for 100, you learn what development means,” Shelby recalled in a 2002 interview with Sports Illustrated.” From this I took away that any program, whether it is designing a race car or an atin-corruption compliance program requires development until you get it right.

I thought about this idea in the context of franchising and the Foreign Corrupt Practices Act (FCPA). Many franchisors do business overseas themselves and therefore should have a robust FCPA program based upon directly doing business internationally. However, if they franchise their operations internationally, they may have as much FCPA-based risk exposure through their franchisees operations. What are some of the FCPA risks for a franchised business internationally? In his book entitled “Foreign Corrupt Practices Act – A Practical Resource for Managers and Executives” Aaron Murphy, a partner at the firm of Latham and Watkins, explored the question of what are “the most common problems areas where managers get themselves into FCPA trouble.” In a chapter entitled “You Do More With the Government Than You Think” Murphy gives several examples of how any US company doing business overseas will come into contact with a foreign governmental official and, thereby, create a risk for possible FCPA liability. The following interactions would certainly apply to a retailer:

Interactions with Customs Officials. Every time your company sends raw materials into, or brings them out of, a country there is an interaction with a foreign governmental official in the form of a Customs Official. Every customs transaction involves a payment to a foreign government and every transaction involves some form of a foreign governmental regulatory process. While the individual payment per transaction can be small, the amount of total transactions can be quite high if a large volume of goods are being imported into a foreign country.

Interaction with Tax Officials. While noting that interacting with international tax authorities can present problems similar to those with customs officials, Murphy observes that the stakes can often be much higher since tax transactions may be less in frequency but higher in financial risk. These types of risks include the valuation of raw materials for Value Added Tax (VAT) purposes before such materials are incorporated into a final product, or the lack of segregation between goods to be sold on the foreign country’s domestic market as opposed to those which may be shipped through a free trade zone for sale outside that country’s domestic market.

Licensing and Permits. If your company is a retail seller of clothes, cosmetics etc., every physical location that you sell your goods in will require some type of license to operate your business. It could require multiple licenses such as a national license, state license and local municipal license, additionally you will need a building permit if you intend to build out or modify your retail stores.

Work Permits and Visas. If your company does any business overseas it will have to send someone from the home office to operate in-country at some point. In the post-9/11 world this probably means that, at a minimum, your company will have to obtain a visa for each employee who enters the foreign country and perhaps a work permit as well. The visa process can start in the United States with a trip to foreign government consulate or even the embassy and at that point you are dealing with a foreign governmental official. The work permit process can also begin in the United States but often may continue in the foreign country.

Inspections and Certifications. Consider the Tex-Mex restaurant chain which desires to take its cuisine across the world. In any city in the world there will be some type of certification process to enable to the business to set up and start operating and then there will be the need for ongoing inspections for sanitary conditions. Such inspections may be rare but if there is “slime in the ice machine” it may be grounds to close the restaurant.

As Murphy points out, it is clear there are many different types of FCPA risk out there which your compliance program needs to assess and address. Most companies are aware of risks of third parties in commercials operations, such as sales agents, resellers or distributors. However, the recent Wal-Mart matter has raised the awareness of risks from non-commercial third parties, particularly those which interact with a foreign government on the behalf of a company. There are many lessons which can be drawn from the Wal-Mart case but I think that  two, (1) that you do more with the government than you think and (2) the risks in using non-commercial third party agents, are very large areas that you may need to factor into the development of your compliance program going forward.

Lastly, do not forget the example of Carroll Shelby, Not only did he move from race winning driver to race winning car developer but over 30 years after the last Shelby Mustang from the Muscle Car Era rolled off the Ford assembly, he teamed with Ford to design a new Shelby Mustang for the company’s centenary in 2003. Keep on truckin’ Carroll Shelby!

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2012

Achieving Compliance in the Post Acquisition Context – The Key to Which is Building Trust

In a recent article in the Houston Business Journal (HBJ), entitled “Building strong relationships critical to building strong companies”, HBJ Mergers and Acquisitions Columnist Connie Barnaba focused on the nature of trust within a company to posit that “strong businesses are built on strong relationships between the business, its leaders, employees, customers, suppliers, lenders and advisors.” Trust cascades down each level of a company; beginning from the Board of Directors down to employees and then out the door to customers. She believes that this issue of trust is equally important in the Mergers and Acquisition (M&A) context. I believe her ideas are very useful for the compliance practitioner, when integrating a new acquisition into an existing compliance culture.

Barnaba writes that “trusting relationships are developed person to person as individuals in a company gradually develop a network of contacts, associates and advisors inside and outside the company.” But more than this it is “the by-product of responsiveness, reliability and candor or those we reach out to.” Successful companies work to focus on “sustaining and developing new relationships” as a key to the continued growth and successful performance of a business.

I.                   Trust in the M&A Context

In the M&A context, this trust relationship begins with the Letter of Intent (LOI), which should include warranties, representations, covenants and any penalties which might occur if one side pulls out of the transaction. The pre-acquisition due diligence process is designed to “confirm the accuracy of the representations and viability of commitments.” This should lead to a successful merger agreement between the parties and now the work to continue to build trust really begins.

Barnaba notes that the biggest roadblock initially is the element of surprise. Most merger deals are done with some amount of confidentiality. However, one of the hardest issues to manage is the lack of time. There is never enough time to perform all the due diligence that you desire. This is always true in the compliance arena as well. Further Securities and Exchange Commission (SEC) regulations prohibit certain unauthorized disclosures about such transactions and there is usually great sensitivity to timing around any public disclosure regarding the transaction.

This not only impedes the ability to fully vet during the due diligence process but it may impeded company leaders from announcing to their own stakeholders that the company is in such negotiations. This can certainly negatively affect an employee base as top leaders may be confronted with “managing the impact of the (M&A) surprise on stakeholders.” This can also damage the efforts going forward as it can appear as a “top-down imposition of change.”

II.                Compliance in the Post-Acquisition Context

Given the two Department of Justice (DOJ) pronouncements on Foreign Corrupt Practices Act (FCPA) compliance in the M&A context, Opinion 08-02 (the Halliburton Opinion Release) and the Johnson and Johnson (J&J) Deferred Prosecution Agreement (DPA), all of the factors that Barnaba listed may be significantly acerbated and accelerated.

A.     The Halliburton Opinion Release

In this Opinion Release, the DOJ approved Halliburton’s commitment to the following post acquisition conditions to a proposed transaction:

1)      Within ten business days of the closing. Halliburton would present to the DOJ a comprehensive, risk-based FCPA and anti-corruption due diligence work plan which would address, among other things, the use of agents and other third parties; commercial dealings with state-owned customers; any joint venture, teaming or consortium arrangements; customs and immigration matters; tax matters; and any government licenses and permits. The Halliburton work plan committed to organizing the due diligence effort into high risk, medium risk, and lowest risk elements.

a)      Within 90 days of Closing. Halliburton would report to the DOJ the results of its high risk due diligence.

b)      Within 120 days of Closing. Halliburton would report to the DOJ the results to date of its medium risk due diligence.

c)      Within 180 days of Closing. Halliburton would report to the DOJ the results to date of its lowest risk due diligence.

d)     Within One Year of Closing. Halliburton committed to full remediation of any issues which it discovered within one year of the closing of the transaction.

B.    Johnson & Johnson Deferred Prosecution Agreement and Enhanced Compliance Obligations

In the April 2011 released J&J DPA there is a list of compliance obligations J&J agreed to take on in the acquisition context:

7.        J&J will ensure that new business entities are only acquired after thorough FCPA and anti-corruption due diligence by legal, accounting, and compliance personnel. Where such anti-corruption due diligence is not practicable prior to acquisition of a new business for reasons beyond J&J’s control, or due to any applicable law, rule, or regulation, J&J will conduct FCPA and anti-corruption due diligence subsequent to the acquisition and report to the Department any corrupt payments, falsified books and records, or inadequate internal controls as required by … the Deferred Prosecution Agreement.

8.        J&J will ensure that J&J’s policies and procedures regarding the anti-corruption laws and regulations apply as quickly as is practicable, but in any event no less than one year post-closing, to newly-acquired businesses, and will promptly: For those operating companies that are determined not to pose corruption risk, J&J will conduct periodic FCPA Audits, or will incorporate FCPA components into financial audits.

1. Train directors, officers, employees, agents, consultants, representatives, distributors, joint venture partners, and relevant employees thereof, who present corruption risk to J&J, on the anti-corruption laws and regulations and J&J’s related policies and procedures; and
2. Conduct an FCPA-specific audit of all newly-acquired businesses within 18 months of acquisition.

In the J&J DPA, the company agreed to following time frames:

1. 18 Month – conduct a full FCPA audit of the acquired company.
2. 12 Month – introduce full anti-corruption compliance policies and procedures into the acquired company and train those persons and business representatives which “present corruption risk to J&J.”

These very tight time frames, even with the expanded one in the J&J DPA, may well test trust issues in any newly acquired organization. Similarly, the acquiring organization may be under great pressure to uncover and report anything which may even whiff of a FCPA violation. Barnaba concludes her article by warning that if the short term disruption in trust will undermine the long-term changes to the organization; it may not be in either party’s interest to go forward with the merger. Business mergers require linkages at all levels within an organization and this is particularly true with compliance.

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2012

Jesse Owens and Hanson Wade’s FCPA in the Supply Chain Conference

What is the greatest one hour in the history of track and field? I would put forward the 45 minutes on May 25, 1935, when Jesse Owens, at the Big 10 Track and Field Championship run in Ann Arbor, Michigan, broke the world records in three events: the 220-yard dash, the 200-hurdles and the long jump. He also tied the world record in the 100-yard dash. Not a bad afternoon’s work.

Next month, Hanson Wade is putting on a conference in Houston which may be worthy of such a record. It is the “Oil and Gas Supply Chain Compliance” conference and the list of speakers is simply stunning. It includes the following Chief Compliance Officers (CCO): Dan Chapman, Parker Drilling; Brian Moffet, ENSCO, Jay Martin, BakerHughes; Julie Symon, KBR, Jan Farley, Dresser-Rand; John Sardar, Noble Drilling and a host of other luminaries in the field of Foreign Corrupt Practices Act (FCPA) compliance, including, in his only Texas appearance, the FCPA Professor, Mike Koehler. Even if you live outside of Houston, the FCPA compliance talent at this event will rival any other event in the US and for such an event not held in Washington DC or New York City, it is simply outstanding.

Some of the panels and topics for discussion include: Performing Adequate Risk Weighted FCPA Due Diligence for Acquisitions and Joint Ventures; Special Due Diligence and Contracting Considerations in Managing FCPA Risk Associated with Major International Freight Forwarders; Fresh Insights Into Mitigating FCPA Compliance Risks Through Effective Auditing; Embedding a Compliance Culture into Your Organization: Proven Intelligence on the Impact of Good Training; and the ENI experience on How to Address Specific Concerns in Procurement. These are but some of the sessions and there are many other excellent panels, sessions and speakers which I have not mentioned.

Recently one of the star speakers, Dan Chapman, Chief Compliance Officer for Parker Drilling, visited with Sara Patella about some of the issues facing US companies when dealing with third parties. Recognizing that it may be difficult for companies to know precisely what their third party partners may be doing at a specific time, Chapman stated that “The goal of a good due diligence program isn’t necessarily to identify improper activities from a retroactive standpoint.  Instead, an effective due diligence program assesses the character and propensities for improper conduct of your agents and other representatives that may act on your company’s behalf before they are engaged and then again at periodic intervals.”

Chapman also spoke about the differences in risks between developing and developed countries. He noted that in a developing country, “the bureaucracy may be so stagnant and inefficient that in order to perform services for their clients, certain vendors may feel pressure to engage in improper conduct.” This is usually coupled with a lack of internal enforcement in the developing country for those government officials who accept bribes or are otherwise engaged in corruption. Conversely in a developed country, there are usually more resources to fight corruption and perhaps greater political will as well. Wherever you might be doing business Chapman advises that the current FCPA enforcement regime should “encourage companies to avoid getting into trouble in the first place.” For the full text of the Chapman interview, click here.

I hope that you can attend this most excellent FCPA conference next month. Very few FCPA conferences focus on the supply chain and the information that you will receive at this one should be first rate. Will your day be as good as the one hour Jesse Owens had in Ann Arbor those many years ago? Why don’t you attend the event and see for yourself. It should be well worth the price of admission.

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For complete information on the Hanson Wade Conference, “Oil and Gas Supply Chain Conference“, click here. For readers of this blog, a discount is offered by Hanson Wade. You can receive the discount by entering the online discount code: FOXLAW. You can also use this discount code if you register directly with Hanson Wade.

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This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2012

China Joins the International Fight against Corruption

China has recently joined most of the western world in passing anti-corruption legislation. As reported by the FCPA Professor, “the legislature of the People’s Republic of China (PRC), the National People’s Congress, passed a slate of 49 amendments to the Criminal Law, one of which is a provision that criminalizes paying bribes to non-PRC government officials and to officials of international public organizations (“the Amendment”).” This Amendment represents the first instance in which PRC law has prohibited PRC nationals and PRC companies from paying bribes to non-PRC government officials and to officials of international public organizations. The Amendment became effective on May 1, 2011.

At the recent Dow Jones Global Compliance Symposium, Scott Lane, President and Chief Executive Officer (CEO) of the Red Flag group, talked about this new Chinese anti-corruption legislation, contrasted it with the US Foreign Corrupt Practices Act (FCPA) and UK Bribery Act and then raised some key interpretive questions that are yet unanswered. He prepared for me the text of the Amendment and a written summary of his remarks which forms the basis of this article.

Text

Initially Lane noted that the key to the new law is “what’s not said” and the laws implementing regulations. The text of the Amendment (for a western trained lawyer) is amazingly brief. It reads:

Whoever, for the purpose of seeking illegitimate commercial benefits, gives money or property to any foreign public official or official of an international public organization, shall be punished in accordance with the provisions of the preceding paragraph (i.e., the pre-existing Article 164)

The pre-existing Article 164 criminalized the commercial bribery of giving money or property to any employee of a company, an enterprise or other institutions for the purpose of seeking illegitimate benefits. The Amendment also provides:

•       Penalties: When the amount paid is relatively large, an offense is to be punished by imprisonment or detention for up to three years. When the amount paid is very large, an offense is to be punished by imprisonment from three to 10 years plus a fine.

•       Corporate and Individual Liability: Personnel in an entity (including, but not limited to, companies) who are in charge of the offense or bear other direct responsibility are subject to such penalties, and the entity itself is subject to a fine.

•       Size of Payments that Constitute a Criminal Offense: Although Article 164 does not specify the thresholds for criminality, under relevant interpretations by the Supreme People’s Court (SPC), the criminality threshold for giving a bribe is RMB10,000 (approximately $1,550 USD). As such, payments of less than RMB10,000 would not constitute a criminal offense.

•       Voluntary Disclosure: Article 164 provides for leniency if the perpetrator voluntarily reports the violation before an investigation has been initiated.

Jurisdiction of the Amendment

Under the Criminal Law, the Article 164 (with the Amendment) shall apply to:

•       All Chinese citizens, wherever located on a world-wide basis;

•       All individuals of any nationalities within China; and

•       All companies, enterprises, and institutions organized under or regulated by Chinese law, which generally includes, in addition to domestic companies, Sino-foreign joint ventures, wholly foreign-owned enterprises, and representative offices.

This means that in regards to a foreign investment in China, a foreign individual, a wholly-foreign owned enterprise, a joint venture between a domestic company and a foreign company, and a representative office of a foreign company, could all possibly be prosecuted for the overseas bribery.

Interpretation of Key Terms

The Amendment does not define key terms such as “illegitimate commercial benefits”, “money or property”, or “foreign public officials”. The pre-existing opinions issued by the SPC and the Supreme People’s Procuratorate (SPP) in connection with commercial bribery (“the Opinions”) may be used as references.

Regarding the term “illegitimate commercial benefits”, a related provision in the Opinions is the term of “illegitimate benefits”. The “illegitimate benefits” is defined as a bribe which seeks any advantage in breach of laws, regulations, rules or policies; or requires the other party to provide assistance or facilitation that is in breach of laws, regulations, rules, policies, or industry codes of practice.

Currently, it is unclear whether there are any differences between the “illegitimate commercial benefits” and “illegitimate benefits”. The narrowed description in the Amendment may mean that certain activities that are prohibited in a domestic context may be permissible in a foreign context.

Regarding the terms “money or property”, according to the Opinions, it includes not only money and property in kind, but also property whose value may be calculated in monetary terms, such as provision of home decoration, membership cards having monetary value, token cards, and travel expenses.

Lastly, another regulation issued by the State Administration for Industry and Commerce (SAIC) regarding commercial bribery also includes “properties disguised as a promotional fee, publicity fee, sponsorship fee, research fee, labor fee, consulting fee, commission etc., or by way of reimbursement of various fees” into the term.

Regarding the term “foreign public officials”, a related provision in the Opinions is the explanation on “domestic public officials”. In the context of domestic bribery, public officials may refer to any officials working in the government, state-owned enterprises, medical institutions, and education institutions.

It is also possible that, as a member of the UN Convention Against Corruption (UNCAC), China may use the definition of “foreign public officials” under the UNCAC which refers to any person holding a legislative, executive, administrative or judicial office of a country, and any person exercising a public function for a country, including for a public agency or public enterprise.

Comparing to the FCPA and UK Bribery Act

The FCPA Professor noted that “The Amendment is a rather high-level law, whereas the text of the FCPA includes considerably more detail, even if the interpretation of those details is being actively debated and litigated. The absence of clear definitions, exceptions, and affirmative defenses also would appear to require PRC prosecutors to exercise somewhat more discretion in interpreting and enforcing the law.” Lane had the following comparisons:

Scope:

•       It is generally understood from statutory provisions that the Amendment is against only the actual payment and not merely offers or promises or authorization thereof to pay.

•       The interpretation on “money or property” in the Amendment may be not as broad as “anything of value” under the FCPA.

Exceptions:

•       Unlike the FCPA, the Amendment does not contain an exception for “facilitating payments”. Given that Chinese companies have a large presence in developing countries, in South Africa and elsewhere, where facilitating payments are often seen as necessary for conducting business, it is possible that China will have a higher tolerance on such payments.

•       Unlike the FCPA, the Amendment does not specify any exceptions regarding “reasonable and bona fide expenditures” either. However, given the culture of hospitality prevalent in China, it is possible that modest payments for hospitality and gifts won’t be interpreted as to seek “illegitimate commercial benefits”.

Defense:

•       Unlike the UK Bribery Act, the Amendment does not provide any affirmative defenses such as “adequate procedures”.

As noted by the FCPA Professor, it is not clear if “China is really going to enforce this law against its own companies operating outside of China.” He believes that “China’s enforcement of its domestic bribery laws historically has been somewhat uneven and focused mainly on the demand side.” However, he considers that the Chinese “government has shown an increasing willingness to target bribe-payers as well, as corruption remains a primary concern of the general population and thus a concern for the government and ruling Communist Party, which is at its core focused on social stability.” He concluded his post by stating that “It remains to be seen whether the Amendment will actually be enforced in a way that deters bribe-paying by PRC companies and citizens.”

Lane concluded that the Chinese legislation demonstrates a key reason why anti-corruption and anti-bribery legislation like the FCPA and Bribery Act are helping business development on a world-wide basis. The Chinese understand that if they are going to join the international business community they will have to play by certain rules, such as these now well-known international business standards. Interestingly, Lane noted that the one thing that the current Chinese government fears the most is political unrest. By fighting corruption, this effort could help lead to greater stability in the country.

Whatever the reasons for the passage of this Chinese anti-corruption legislation, I believe that it is welcome addition to the list of nations adopting such measures. It shows once again the effect of the FCPA in encouraging other companies to aid in the fight against bribery and corruption in the international business arena.

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The author wishes to thank Scott Lane for providing the text of his remarks. The Red Flag Group provides a wide range of consulting and compliance services to multinational companies, with a key focus on delivering practical, business-oriented advice and solutions to manage risk and improve corporate compliance programs. Mr. Lane can be reached via email at scott.lane@redflaggroup.com.

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This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2012

Sherlock Holmes and Principle 6 of an Adequate Procedures Compliance Program

I am a big fan of Sherlock Holmes, on radio, television and the movies but particularly in print. Last summer I re-read the Doyle collection and it was like revisiting and old friend. So today, we celebrate the story of the “The Six Napoleons”. In this story, an apparent thief is breaking into private residences and commercial establishments to seemingly smash statuettes of Napoleon. While the slow thinking police think that a rabid Francophobe is terrorizing the Francophiles of London, Holmes sees something very different and indeed much more sinister. It turns out that a very hot, stolen jewel was hidden in one statue of many which were then sold so the jewel thief has to find the correct statuette to find the stolen jewel. Holmes, of course, deduces this and catches the thief.

This leads into the conclusion of my series on the Six Principles of Adequate Procedures under the UK Bribery Act; with Principle 6 – Monitoring and Review. This Principle recognizes that a company should monitor and review its anti-bribery and anti-corruption procedures designed to prevent bribery by persons associated with it and makes improvements where necessary. Indeed the Guidance from the British Ministry of Justice (MOJ) relates that “The bribery risks that a commercial organisation faces may change over time, as may the nature and scale of its activities, so the procedures required to mitigate those risks are also likely to change. Commercial organisations will therefore wish to consider how to monitor and evaluate the effectiveness of their bribery prevention procedures and adapt them where necessary. In addition to regular monitoring, an organisation might want to review its processes in response to other stimuli, for example governmental changes in countries in which they operate, an incident of bribery or negative press reports.”

Generally, I believe there are two strategic reasons to follow Principle 6 of the Guidance. The first is that the only way to know if your compliance program is effective is to test it. The second is that changes in your business model, market conditions, legislation or other external events could increase your anti-bribery and anti-corruption compliance risk well beyond the risks that your compliance regime was intended to manage when it was initially designed and implemented. I find that a compliance assessment is becoming of greater importance to achieve a minimum best practices compliance program. Representatives of the US Department of Justice (DOJ) talk about such a concept in terms of a risk assessment but the precepts are the same. A company needs to assess its program and its effectiveness on a regular basis so that it does not become stale.

Procedures

The Guidance recognizes that there are a wide range of internal and external review mechanisms available for a company to use when assessing its compliance program. As for ongoing evaluation of effectiveness, the Guidance notes that “systems set up to deter, detect and investigate bribery, and monitor the ethical quality of transactions, such as internal financial control mechanisms, will help provide insight into the effectiveness of procedures designed to prevent bribery.” Some of the specific techniques which can be used include staff surveys, questionnaires and feedback from training. All of these can also provide an important source of information on effectiveness and a means by which employees and other associated persons can inform continuing improvement of anti-bribery policies. Continuous controls monitoring is becoming another tool for companies to use in their ongoing compliance program. Witness the recent statements by the DOJ in its declination to prosecute Morgan Stanley for the acts of its former Managing Director, Garth Peterson.

The Guidance also speaks to more formal periodic reviews and reports for top-level management. I would suggest that an annual risk assessment is one mechanism which should be used by companies. The Guidance further suggests that businesses could also draw on information on other similarly situated company’s best practices, for example relevant trade bodies or regulators might highlight examples of good or bad practice in their publications. Once again the DOJ has provided solid guidance in this area by listing several of the areas in which it believes that a company should assess its anti-bribery and anti-corruption risks. These include: (1) Geography – Where does your Company do business?; (2) Interaction with types and levels of Governments; (3) Industrial Sector of Operations; (4) Involvement with Joint Ventures; (5)       Licenses and Permits in Operations; (6) Degree of Government Oversight      and (7) Volume and Importance of Goods and Personnel Going Through Customs and Immigration. In addition to using this information to inform your compliance program, your company can also use such information to update its compliance program in today’s ever changing business environment.

Lastly, the Guidance directs that companies should also avail themselves of some form of external verification or assurance of the effectiveness of anti-bribery procedures. The Guidance says that “Some organisations may be able to apply for certified compliance with one of the independently-verified anti-bribery standards maintained by industrial sector associations or multilateral bodies. However, such certification may not necessarily mean that a commercial organisation’s bribery prevention procedures are ‘adequate’ for all purposes where an offence under section 7 of the Bribery Act could be charged.” While there are no universally recognized standards that I am aware, many third parties can come in and protect an independent assessment of a company’s overall compliance program.

So we end our series on the Six Principles of an Adequate Procedures anti-bribery and anti-corruption compliance program with this memorable quote from the Sherlock Holmes story “The Sign of Four”, “How often have I said to you that when you have eliminated the impossible, whatever remains, however improbable, must be the truth?” This would seem to place the exclamation point on Principle 6; if you fairly and adequately assess your compliance program, you can not only determine its effectiveness but also help to enhance your compliance regime going forward.

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My book, “Lessons Learned on Compliance and Ethics” is now available on Kindle. To order or for other information click here.

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This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2012

Star Wars Day and Leadership Lessons for the Compliance Professional

Last Friday, May 4 was Star Wars Day. According to Wikipedia, “May 4 is called Star Wars Day because of the popularity of a common pun spoken on this day. Since the phrase “May the Force be with you” is a famous quote often spoken in the Star Wars films, fans commonly say “May the fourth be with you” on this day.” So if you are like me and still consider “Star Wars IV-A New Hope” to be the first Star Wars movie or if you are of a different age as is my 15 year old daughter who says that the first Star Wars movie was “Star Wars I-The Phantom Menace”, I hope the force was with you last Friday.

I thought about this generational dispute in the context of leadership when I read an article in the Corner Office Section of the Sunday New York Times (NYT), entitled “How to Adopt Mentors Without Really Asking”. In the article reporter Adam Bryant interviewed Shellye Archambeau, the Chief Executive Officer (CEO) of MetricStream, which presented some of the leadership lessons that Archambeau has learned in her business career. I found that some of her points could be used by a compliance professional not only for his or her career but to further the goal of compliance leadership in your company.

Mentoring

Archambeau related that she had “a lot of mentors, and I just adopted them.” Rather than making a formal request for a person to be her mentor, she began to treat people like her mentors and she said that “it worked very well for me.” To begin such a relationship, she said that she would end a conversation with something along the lines of “I’ve just got a quick question for you. Any thoughts on how…” But they key is to use the information that is presented to you and then to acknowledge the assistance. By telling the person you are trying to recruit as a mentor that the advice was helpful, it gives the mentor a sense of the positive impact of their role and it is more likely that they will be open to having a more formal mentoring relationship.

Luke Skywalker may not have sought out Obi-Wan but he certainly sought out Master Yoda.

Leadership

Archambeau provided some examples of her leadership style which you may find useful to incorporate into her ideas about leadership into your company’s compliance program. The first is hire the right team but even with the right personnel in place, there must still be an emphasis on leadership. Archambeau discusses a leadership topic at the regular meetings of her senior staff. She stated that “it makes a difference, because through these leadership topics, I get to reinforce our culture, the style and what’s expected.”

She provided two examples of leadership challenges that she has addressed. The first is “don’t be a mama bear.” She explained that, “when people come to you with problems or challenges, don’t automatically solve them. As a mama bear, you want to take care of your cubs, so you tend to be protective and insulate them against all those things.” However, Archambeau does not believe that such an approach is helpful for an employee because if “you keep solving problems for your people, they don’t learn how to actually solve problems for themselves.”
To remedy this ‘mama bear’ tendency, she tries to ask the question or present the issue back to them, saying: “What do you think we should do about it? How do you think we should approach this?”

The second leadership issue that she discussed was one that she called “who’s got the ball?” Archambeau explained “that in sports, and the ball is thrown to you, then you’ve got the ball, and you’re now in control of what happens next. “ This means that not only are you in charge but you own it as well. It is important to establish “who’s got the ball. If you’re in a meeting and you’ve had a great conversation and then everybody leaves, who has the ball? It becomes a very visible concept for making sure that there’s actually ownership to make sure things get done.” However, as important is it is to know who has the ball it is equally as important how you got the ball in the first place? Because it is “one thing if you always catch the ball if people toss it to you. It’s another thing if you are proactively going after that ball. As leaders, you’ve got to make sure that you’re actually going after that ball.”

(SPOILER ALERT) Luke and Han Solo may not have initially sought out to destroy the Empire but by the end of the series they certain were the ones ‘asking for the ball’ when it came to attacking the Death Star.

Leading by Fear

Archambeau ended by noting that she does not believe that employees do well if the company environment is too harsh. She does not believe that people “when there’s fear. Maybe people aren’t physically afraid, but they feel fear. And when people are afraid, the whole chemistry in their body changes. You just can’t be as successful in that kind of environment. I think the best environments are when you enable people to actually perform their best, but you’re still clear about what’s expected.”

That sounds very much like the Darth Vader School of Leadership where each failure, ahem, ‘ended poorly’ for his direct report.

So depending on what generation you are, you may have a different idea about the lessons you might learn from the Star Wars series. For my money, Episodes IV-VI is what Star Wars is all about. But as my 15 year old daughter might say, “Dad, you are just too retro.”

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2012