FCPA Compliance and Ethics Blog

September 22, 2014

GSK Convicted – We are really, really sorry we paid bribes (and got caught)

Filed under: China,Corruption in China,FCPA,Financial Times,GlaxoSmithKline — tfoxlaw @ 12:01 am
Tags: ,

GSK China“GSK plc sincerely apologies to the Chinese patients, doctors and hospitals, and the Chinese Government and the Chinese people.”

 

With those words, the British pharmaceutical giant GlaxoSmithKline (GSK) PLC was convicted in a secret trial in a court in the Hunan province of China for bribery and corruption related to its Chinese business unit. The amount of the fine was approximately $491MM. This fine was the largest levied on a western company for bribery and corruption in China. Moreover, if it had been in the United States for a violation of the Foreign Corrupt Practices Act (FCPA), it would have come in as the third highest fine of all-time, behind those of Siemens and Halliburton. In a Financial Times (FT) article, entitled “GSK hit with record $490m China fine for bribing doctors”, reporters Andrew Ward and Patti Waldmeir noted that the fine is “equal to the Rmb 3bn in bribers that Chinese investigators said had been paid by GSK.”

Many of us had wondered when the GSK investigation in China would end and we all found about the trial when it was announced in the newspapers last week. It certainly showed that the quality of justice in China is quite different than in the west. While it is not entirely clear how long the trial lasted, it appeared that it was in the same range as the one-day trial given to Peter Humphrey and his wife last month, when they were both found guilty for violating China’s privacy laws. In an article in the New York Times (NYT), entitled “Glaxo Fined $500 Million By China”, Keith Bradsher and Chris Buckley reported, “Chinese authorities accused Glaxo of bribing hospitals and doctors, channeling illicit kickbacks through travel agencies and pharmaceutical industry associations — a scheme that brought the company higher drug prices and illegal revenue of more than $150 million. In a rare move, authorities also prosecuted the foreign-born executive who ran Glaxo’s Chinese unit.” Moreover, GSK China’s country manager, Mark Reilly and four other in-country executives were each convicted with potential sentences of up to four years in prison. The NYT noted, “the sentences were suspended, allowing the defendants to avoid incarceration if they stay out of trouble, according to Xinhua. The verdict indicated that Mr. Reilly could be promptly deported. The report said they had pleaded guilty and would not appeal.”

A Wall Street Journal (WSJ) article, entitled “Meet the Glaxo Executives Convicted in China”, detailed the five GSK executives’ crimes and sentences, the summary is as follows:

  • Mark Reilly: GSK’s former China chief. He was sentenced to prison for three years with a four-year suspension. He was also the victim of an illicit recording of he and his girlfriend with the sex tape delivered to GSK management in London.
  • Zhang Guowei: GSK China’s former HR Director, who was sentenced to three years in prison with a three-year suspension. Chinese state media said he admitted that the company has used many bribery schemes to ensure the sales of high price drugs to Chinese consumers.
  • Liang Hong: Former GSK China’s vice president and operations manager. He was sentenced to two years in prison with a three-year suspension. On Chinese state-controlled television he said he gave bribes to government officials, hospital administrators and doctors via travel agencies to pave the way for drug sales.
  • Zhao Hongyan: GSK China’s former legal-affairs director. Ms. Zhao was sentenced to two years in prison with a two-year suspension. On state-controlled television Ms. Zhao said she destroyed evidence relating to bribery to avoid punishment.
  • Huang Hong: Huang was a GSK China’s business-development manager. She was sentenced three years in prison with a four-year suspension. The WSJ article reported that she was accused of giving and taking bribes; and informed Chinese officials that GSK China used funds labeled for public relations uses to maintain relationships with “major clients,” who she said were hospital administrators.

The suspension of the sentences was highly significant. The FT article quoted from the trial court that the sentences had resulted directly because “they confessed the facts truthfully and were considered to have given themselves up.” The WSJ article reported that the court also took into account that GSK China country manager Mark Reilly had “voluntarily returned to China, assisted in the investigation and confessed…and had “truthfully recounted the crimes of his employer.”” Also they were in stark contrast to the three-year and two-year sentences handed down to Humphreys and his wife respectively last month. There was no word from GSK, however, on whether it would terminate some or all of the convicted executives.

GSK itself made several interesting statements about the bribery allegations and conclusions of the trial court. The FT article quoted Sir Andrew Witt, GSK Chief Executive for the following, “Reaching a conclusion in the investigation of our Chinese Business is important, but this has been a deeply disappointing matter for GSK. We have and will continue to learn from this. GSK has been in China for close to a hundred years, and we remain fully committed to the country and its people.” The company went further in statements. In addition to the quote above, GSK was quoted in the NYT article as saying, “that it “fully accepts the facts and evidence of the investigation, and the verdict of the Chinese judicial authorities.”” The FT article further said that GSK also said “it had “co-operated fully with the authorities and has taken steps to comprehensively rectify the issues identified at the operations of GSK China.””

These statements of contrition are quite a distance from the place where GSK started last summer when the bribery allegations broke when the company tried to use the ‘rogue employee(s)’ defense, when it said that the bribery and corruption involved only a “few rogue Chinese-born employees” that were “outside our systems of controls” Oops.

The NYT went on to say report that GSK also said, “that the court, the Changsha Intermediate People’s Court, had found the company guilty only of bribing nongovernmental personnel.” This is significant because the bribery of a government official (defined as such in China and not under the FCPA) is a much more serious crime in China. The British Embassy in China also weighed in, at least slightly, with the following statement, “We note the verdict in this case. We have continually called for a just conclusion in the case in accordance with Chinese law. It would be wrong to comment while the case remains open to appeal.”

So the GSK corruption scandal in China ended with no more explosive revelations. Or did it? I will explore where the company may stand and what it all means for the compliance practitioner going forward over the next few blog posts.

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, 2014

September 19, 2014

Internal Controls, COSO and FCPA Compliance: Interview with Henry Mixon

OLYMPUS DIGITAL CAMERAEd. Note-today I continue my interviews of thought leaders in the compliance space. Today I visit with Henry Mixon, a noted internal controls expert. 

  1. Where did you grow up?  I grew up in Birmingham Alabama.
  2. Where did you go to college and how did that help inform your professional career? I graduated from the University of Alabama in 1967. While in college, I was President of Beta Alpha Psi, the accounting honorary fraternity. In that capacity I had the opportunity to meet many business leaders. Those contacts helped shape my professional goals. I also believe I received my degree from one of the top accounting programs in the US at the time, so my technical background and campus experiences in extracurricular activities also helped shape my professional goals. I also attended law school evening classes at Samford University, while working full time as a CPA. That legal training definitely helped in my career.
  1. You were in the US Army, retiring as a Captain. Where were you posted and what was your service experience?I received a commission through the ROTC program at the University of Alabama. I began active duty in January 1968 at Ft. Campbell, Kentucky. I was programmed in my active duty orders to go to Vietnam as a Psychological Warfare Officer, being in country January 1969. But, the Army being what it was then, I never received my orders. So, I took the advice of the Colonel I reported to: “If the Army wants you to go somewhere, it will tell you.” I stayed at Ft Campbell for the rest of my active duty.
  2. What has been your professional experience? I was with Arthur Young & Company (now E&Y) for 25 years, retiring as an Audit Partner. I worked in the National Office in New York City, the Birmingham Office, and the Salt Lake City office (where I was partner in charge of the Audit Department). I then joined Transco in Houston as Vice President of Internal Audit.   I also served for a time as Corporate Controller for Transco. After Transco was acquired by The Williams Companies, I shifted to a fraud-related career. I became a Certified Fraud Examiner. My career experience then included Jefferson Wells International as National Director of Forensic Services, UHY Advisers as a Principal in Litigation Services, and Morgan Garris Consulting as Managing Director. A few years ago, I formed Mixon Consulting Inc., which specializes in internal controls, fraud investigation, and forensic accounting.
  3. How long have you been working on internal controls? As an audit partner, my focus was always more on internal controls than on technical accounting. I always believed that a company’s financial statements could be correct only if the company had effective internal controls. My fraud investigation work is driven by the internal control premise. To find a fraud perpetrator, you must be able to hypothesize how the fraud was committed and then figure out how control weaknesses allowed the fraud to occur. So, my entire career I have been an internal control person. It was only after I began fraud related work that I really got the training and experience in “thinking like a perpetrator.” That is the only way you can be successful. That ability and experience has served well in evaluating and designing FCPA-related controls because, in order to design a control, you must first be able to identify the actions the control should prevent. I have found that even many experienced CFO’s and Controllers do not have that ability.
  4. Do the new COSO standards really change much or could they be characterized as fine-tuning? I believe the 2013 update was to take into account the changes in the business environment. So, it was fine tuning. The overwhelming majority of respondents preferred to retain the same basic framework as the original model. However, certain new sub-objectives were added. For example, one new sub-objective is that an internal control framework will not be considered effective unless it takes into account compliance with laws and regulations, such as FCPA. That acknowledgment is, I believe, very significant when designing a system of effective controls for FCPA purposes, because the original framework was geared more towards what are called “GAAP” controls — those designed to result in accurate financial statements.7. How can people get in touch with you.  Please contact me at hmixon@mixon-consulting.com.

Mixon and I are currently in the midst of a podcast series on internal controls in a FCPA compliance program. You can head over to my podcast site, the FCPA Compliance and Ethics Report for the following podcasts:

Episode 85-What Are Internal Controls?, Part I

Episode 87-What Are Internal Controls, Part II

Episode 88-Internal Controls for Third Parties, Part I

Internal Controls for Third Parties, Part II-to be posted on Sept. 19.

September 17, 2014

Bad News Barnes and China’s Overseas Efforts to Fight Corruption

Filed under: Bribery Act,Corruption in China,FCPA,Financial Times — tfoxlaw @ 8:56 pm

Marvin BarnesMarvin ‘Bad News’ Barnes died last week. Barnes probably summed up the state of professional basketball more than any one person in the 1970s. He was enigmatic, supremely talented, defiantly self-indulgent, fell prey to drugs and alcohol and lost everything. He exploded onto the national scene in 1973 with a Providence team who went to the Final Four and then went on to play for one of the most unique collection of basketball talents ever assembled; the aptly named St. Louis Spirits in the old American Basketball Association (ABA). After the folding of the ABA, he played for Boston, Detroit, Buffalo and San Diego in the National Basketball Association (NBA). In his obituary in the New York Times (NYT), entitled “Marvin Barnes, Enigmatic Basketball Player, Dies at 62”, reporter Bruce Weber quoted former Spirits owner Donald Schupak, from a 1976 interview where he said of Barnes, “He’s a nice guy, a sweet guy, everybody likes him. He’s just totally unreliable. He’s probably in the top five players talent-wise. In terms of value to the team, he’s probably in the bottom 10 percent.” My personal favorite Bad News Barnes story was the time he showed up for a Pistons game in the middle of the first quarter, dressed in his game jersey and a full length mink coat, eating some French Fries, claiming he had ‘overslept’. Bad news indeed.

I thought about Bad News Barnes whilst reading some recent Financial Times (FT) articles about China’s fight against corruption. They were “China takes its anti-corruption battle to foreign shores” and “China bribe cases pose test for west as suspects flee” both by Jamil Anderlini. I thought they posed some interesting questions for anti-compliance practitioners, law enforcement officials who enforce anti-corruption laws and the anti-corruption commentariatti out there.

The problem of corruption in China is both well known and well documented, as is the ongoing anti-corruption campaign. In the former article, Anderlini says, “The US-based group Global Financial Integrity estimates illegal flows out of China amounted to $2.83tn [that is Trillion] between 2005 and 2011. The article details that China is carrying the fight against anti-corruption outside the boundaries of the country to seek those persons who may have been the recipients of corrupt payments and have fled the country.” He wrote, “Communist party officials have launched an investigation into assets and individuals based in New Zealand.” The effort, code named “Fox Hunt 2014” (you have to love that moniker), is being run by the Communist Party’s “Central Commission for Discipline Inspection [CCDI], a shadowy organization with a controversial human rights record”. It has set a dedicated office to “investigate allegedly corrupt officials who have absconded or sent relatives and assets abroad.”

In the later article, Anderlini wrote that CCDI status is as the “extralegal body that answers only to the Communist party leadership and has the power to indefinitely detain any of the country’s 86m party members without trial and without access to legal representation. It is often accused of torture, inhumane treatment of suspects and politically motivated investigations, according to human rights groups.” Moreover, some believe this pursuit raises difficult questions for western democracies. Anderlini quoted one un-named diplomat for the following, “Our countries don’t want to be seen as havens where corrupt officials can flee to with their ill-gotten gains but there are serious questions facing any democratically elected government about how far they can co-operate with China’s authoritarian system.” Further, unlike the US, many countries ban the death penalty, which is still legal in China for those Communist Party and government officials who are convicted of accepting bribes. Finally is the issue of the CCDI and the Chinese judicial system. Anderlini said, “Even when cases have been transferred by the CCDI to China’s formal legal system, there are serious questions about judicial independence because the courts ultimately answer to the party hierarchy.”

For some of these reasons and perhaps others, “China does not have extradition treaties with any western democracies although it does have agreements with 38 countries and has repatriated 730 people suspected of “major economic crimes” since 2008, according to state media.” The Chinese government hopes it will “catch more fugitives in countries such as Canada, Australia and the US – the three most popular destinations for allegedly corrupt officials, according to Chinese state media.” Finally, Anderlini noted that multiple “Beijing-based diplomats from several western countries, including the UK, say China has applied growing pressure in recent months in an attempt to secure their help for investigations in their countries.”

Anderlini reported that some people in New Zealand have been made uncomfortable with all of this. He said, “the New Zealand public remains deeply sceptical of closer ties with the authoritarian Chinese government.” Moreover, “In the case of New Zealand, the overwhelming importance of the economic relationship has made at least some people argue for closer co-operation with Beijing in tackling the flow of illicit funds and fugitives from China.” He also quoted Russel Norman, co-leader of New Zealand’s Green Party, who believes “The NZ Police, Ministry of Foreign Affairs and Trade and Prime Minister’s office need to tell the public of New Zealand what, if any, access we are willing to allow the Chinese Communist party to New Zealand residents. Allowing this to happen would be like giving the KGB access to expatriate Russian citizens during the cold war.”

What should the response of western governments be regarding the efforts of the Chinese government to fight internal corruption? Should western governments, such as here in the US, cooperate with the Chinese government in requests for documents, other evidence or interviews? Can the US or other western governments expect reciprocity from the Chinese in a Foreign Corrupt Practices Act (FCPA) or UK Bribery Act investigation if they do not give the same courtesy to Chinese prosecutors? Should the fact that China has harsher penalties for accepting bribes, even up to the death penalty, preclude western governments from cooperating with the Chinese officials. (Please note such argument would not apply in the great state of Texas, where the death penalty most surely does still exist.) What about the CCDI, the “extralegal body” which is heading up this investigation? Should western countries be required to evaluate who is enforcing the Chinese laws on the books against corruption? Can or should you compare the CCDI with the KGB? If you are going to evaluate that body, does it logically lead to an evaluation of the entire Chinese legal system? Finally, if western governments believe that bribery and corruption are insidious matters that require responses, should they care whether an extrajudicial organ of the Chinese Communist Party is involved? All I can conclude is Bad News indeed for those Chinese officials who the CCDI is after, no matter where they might have fled.

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, 2014

Use of Influence in the Compliance Function

IMG_1213One of the challenges for any Chief Compliance Officer (CCO) is how to influence the conduct and actions in a corporate environment, particularly as compliance is viewed as non-revenue generating and usually does not exist simply to protect the company, which is how the legal department is often viewed. Folks like myself who came into compliance from the legal function tend to think of a top-down approach where compliance is centralized at the corporate officer, usually in the United States. But because the role is very different than that of a General Counsel (GC), a CCO needs to bring another skill set to bear to do his or her job. In a session at the SCCE 2014 Compliance and Ethics Institute, SCCE Chief Executive Officer (CEO) Roy Snell and Jenny O’Brien, CCO at United Health Care, talked about the techniques that a CCO can use to influence decision making in a company in order to do business in compliance and ethically.

Snell began the session with some basic questions about why there are positions such as a CCO and why there is a compliance function within an organization. After all, departments like legal and internal audit have existed in business organizations for up to at least a few hundred years. He posed two questions that I found interesting “Why are we here?” and “What did those who came before us to fail to do?” He listed some of the scandals from the late 90s and early 00s such as Enron, WorldCom, HealthSouth, Adelphia and others where he believed that the problems, which led to the disintegration of these organizations, were well known within the companies themselves. So the situation was not that people did not find the problems, the issue was that the people inside these organizations did not fix the problems. Snell believed that the persons who could and would have stood up to raise questions or say this should stop lacked some skill or ability to influence others to make the right decision. He concluded that such business and ethical collapses were a failure of influence.

This led into his presentation with O’Brien about techniques for a CCO to employ to help influence decision-making within an organization. They labeled them as the “Seven Steps of Influence” and they are as follows:

  1. Collaboration. O’Brien emphasized that as a CCO you need to know your company’s business. If you are new to an organization she said you must take time to learn the business. You should sit in on sales meetings and, when appropriate, you should go out on sales call. Channeling her inner Atticus Finch, she characterized this as walking in the shoes of the business leaders you are assisting. By doing so, you will not only understand the products and services that your company offers but also the challenges that your business development team will face out in the world.
  2. Here O’Brien emphasized that she has to work constantly at active listening, which is listening, thinking and then speaking, and not just jump into the middle of a conversation, talk to people in a manner that will address their concerns. When you do speak you should be prepared to make the case for the compliance proposition that you are trying to get across. She noted that as a CCO or compliance practitioner, you should strive to be relevant in every interaction you have with your senior management peers. O’Brien said that sometimes it means speaking up at meetings or other forums but sometimes it means listening. You should try to develop a rapport with your business team and this rapport can lead to trust building.
  3. Relationships. Snell opened his remarks on this topic by intoning that by relationships he did not mean inter-personal relationships. He believes that it is mainly through relationships with other functions in an organization that a CCO or compliance practitioner can best bring influence to bear. It all begins with building trust with others within your organization. Invest time to find others in your organization that you want to work and with those with whom you desire to build relationships. Snell believes that some of the more key relationships that a CCO or compliance practitioner can develop are with the audit function, the legal department, Human Resources, IT and corporate communications. Snell said that when one of these groups offered to help him move the ball forward in compliance he always viewed it as a positive and wanted to work with these and other corporate groups. He did not view it as a turf war at all. The only thing that he said he requested were the terms of working together. Of those, he said the most important was that if another group in the company took on some project related to compliance, such an internal audit, that the group finish whatever they take on.
  4. Humility. O’Brien believes that humility is important because it empowers. Moreover, it can empower others to expand the circle of influence and get others in a corporation to influence an ever-expanding circle on behalf of compliance. The CCO does not need center stage. She reiterated her belief that business units should solve compliance issues, as compliance is really just another business process. Further, through such influence where you can get the business unit resources to solve a compliance problem, you will hold down the costs of the compliance function. She ended by noting that it is not about being right but about moving the compliance ball forward in the right direction.
  5. Negotiation. Here Snell said that negotiation should not be about the dichotomy of winning and losing an argument or debate. A CCO should strive to redefine what a win might look like or what a win might consist of for a business unit employee. He said that when faced with such a confrontation, he would try to determine what both sides wanted then give them something else in addition to what they thought they wanted. He provided the example of a CCO quietly listening and when the room is just right and all the participants are worn out, you, as the compliance practitioner, throw out an idea where the apparent loser in the argument receives even more than they thought they were asking for in the requesting. A CCO can be considered a mediator not just simply an enforcer or Dr. No from the Land of No. He ended by saying that as a compliance practitioner you need to learn the art of compromise.
  6. Triple ‘C’. What do the three C’s stand for? Calm, cool and collected. O’Brien believes that all company employees, up and down the chain, are watching the CCO. For this reason, she said that as a compliance practitioner you should be poker faced. To this end she keeps the sign “Keep Calm and Carry On” in her office. She believes that the Triple C’s are important because organizations look to the CCO to solve complex issues with simple solutions. When faced with a compliance issue or an obstacle you should endeavor to keep everything on an even keel and never let them see you sweat.
  7. Credibility. The final of the seven pillars was that the CCO role needs to be adequately scoped and that the accountabilities need to be clearly defined. Put another way, what is your job scope as the CCO and what is the function of the compliance department? What is your accountability to decide the resolution to an issue? Snell agreed with O’Brien that there should be business unit ownership for every issue that comes into the compliance department. Yet, as a CCO, you must demonstrate your value as a non-revenue function. This may require you to get out of your office and put on a PR campaign for compliance. Finally, Snell ended by saying that a CCO needs to guard their independence in job function and reporting. You must make clear that you will have independent reporting up to the Board or Audit Committee of the Board.

Snell concluded by reminding us all that influencing is not a one-time activity. It is ongoing. Tying back to his original question of why the compliance function exists in the quantum it does today, he said that he believes a CCO or compliance practitioner exists to help influence a company to build a better business environment by acting more ethically and responsibility. By moving the ball forward in this manner, it may well lead to a country’s economy to be trusted which could well lead to greater economic development.

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, 2014

September 15, 2014

Internal Controls for Third Party Representatives in a FCPA Compliance Program

7K0A0246This week, I am continuing my podcast series, on the FCPA Compliance and Ethics Report, on internal controls in best practices anti-corruption compliance program, under the Foreign Corrupt Practices (FCPA), UK Bribery Act or other anti-bribery legislation. In this series, I am visiting with Henry Mixon, a top notch internal controls expert, to help explain what internal controls might be needed, how to assess the need and then how to implement the needed internal controls. This week I am running a two-part episode of the internal controls related to the management of third party representatives.

Mixon suggested that a compliance practitioner should perform an analysis of any third party representative to provide insight into the pattern of dealings with such third parties and, therefore, the areas where additional controls should be considered. He listed some basic internal controls that should be a part of any financial controls system. The general internal controls, which might be appropriate, could be some or all of the following:

  • A control to correlate the approval of payments made to contracts with third party representatives and your company’s internal system for processing invoices.
  • A control to monitor all situations in which funds can be sent outside the US, in whatever form your company might use, which could include accounts payable computer checks, manual checks, wire transfers, replenishment of petty cash, loans, advances or other forms.
  • A control for the approval of sales discounts to distributors.
  • A control for the approval of accounts receivable write-offs.
  • A control for the granting of credit terms to third parties or customers outside the US.
  • A control for agreements for re-purchase of inventory sold to third parties or customers.
  • A control for opening of bank accounts specifically including accounts opened at request of an agent or a customer.
  • A control for the movement / disposal of inventory.
  • A control for the movement / disposal of movable fixed assets.
  • Execution and modification of contracts and agreements outside the US.

Mixon also noted that in addition to the above there should also be internal control needs based on activities with third party representatives. These could include some or all of the following internal controls

  • A control for the structure and enforcement of the Delegation of Authority.
  • A control for the maintenance of the vendor master file.
  • A control around expense reports received from third parties.
  • A control for gifts, entertainment and business courtesy expenditures by third party representatives.
  • Charitable donations.
  • All cash / currency, inventory, fixed asset transactions, and contract execution in countries outside the US where the country manager has final authority.
  • Any other activity for which there is a defined corporate policy relating to FCPA.

While that may appear to be an overly exhaustive list, Mixon indicated that he believed there were four significant controls that he would suggest the compliance practitioner implement initially. He listed: (1) Delegation of Authority (DOA); (2) Maintenance of the vendor master file; (3) Contracts with third parties; and (4) Movement of cash / currency.

Mixon noted that a DOA should reflect the impact of FCPA risk including both transactions and geographic location so that a higher level of approval for matters involving third parties and for fund transfers and invoice payments to countries outside the US would be required inside an organization. He did concede that quite often the DOA is prepared without much thought given to FCPA risks. Unfortunately once a DOA is prepared it is not used again until it is time to update for personnel changes. Moreover, it is often not available, not kept current, and/or did not define authority in a way even the approvers could understand it. Therefore it is incumbent that the DOA be integrated into a company’s accounts payable (AP) processing system in a manner that ensures all high-risk vendor invoices receive the proper visibility. To achieve this you should identify the vendors within the vendor master file so payments are flagged for the appropriate approval BEFORE they are paid.

Furthermore if a DOA is properly prepared and enforced, it can be a powerful preventive tool for FCPA compliance. To support this Mixon used the following example: A wire transfer of $X between company bank accounts in the US might require approval by the Finance Manager at the initiating location and one officer. However, a wire transfer of $X to the company’s bank account in Nigeria, could require approval by the Finance Manager, a knowledgeable person in the Compliance function, and one officer. In this situation, the DOA should specify who must give the final approval for engaging third parties. Moreover, the DOA should address replenishment of petty cash funds in countries outside the US, as well as approval of expense reports for employees who work outside the US (including those who travel from the US to work outside the US).

I then asked Mixon about the vendor master file, which he believes can be one of the most powerful PREVENTIVE control tools largely because payments to fictitious vendors are one of the most common occupational frauds. The vendor master file should be structured so that each vendor can be identified not only by risk level but also by the date on which the vetting was completed and the vendor received final approval. There should be electronic controls in place to block payments to any vendor for which vetting has not been approved. Next manual controls are needed over the submission, approval, and input of changes to the vendor master file. These controls include verification that all vendors have been approved before their information (and the vendor approval date) is input into the vendor master. Finally, manual controls are also needed when “one time” vendors are requested, when a vendor name and/or vendor payment information changes are submitted.

Near and dear to my heart as a lawyer, Mixon also indicated that contracts with third parties can be a very effective internal control which works to prevent nefarious conduct rather than simply as a detect control. He cautioned that for contracts to provide effective internal controls, relevant terms of those contracts (commission rate, whether business expenses can be reimbursed, use of subagents, etc.,) should be extracted and available to those who process and approve vendor invoices. If there are nonconforming service descriptions, commission rates, etc., present in a contract such terms must be approved not only by the original approver but also by the person so delegated in the DOA Unfortunately contracts are not typically integrated into the internal control system. They are left off to the side on their own, usually gathering dust in the legal department file room.

Mixon said that the Hewlett-Packard (HP) FCPA enforcement action was an excellent example of the lack of internal control over the disbursements of funds and movement of currency because you had the country manager delivering bags of cash to a Polish government official to obtain or retain business. Mixon believes that all situations where funds can be sent outside the US (AP computer checks, manual checks, wire transfers, replenishment of petty cash, loans, advances, etc.,) should be reviewed from a FCPA risk standpoint. He went on to say that within a given company structure you need to identify the ways in which a country manager (or a sales manager, etc.,) could cause funds to be transferred to their control and to conceal the true nature of the use of the funds within the accounting system.

To prevent these types of activities internal controls need to be in place. Mixon presented the following example of how this could be managed: All wire transfers outside the US should have defined approvals in the DOA, and the persons who execute the wire transfers should be required to evidence agreement of the approvals to the DOA and wire transfer requests going out of the US should always require dual approvals. Lastly, wire transfer requests going outside the US should be required to include a description of proper business purpose.

Mixon continues to emphasize that internal controls are really just good financial controls. The internal controls that he detailed for third party representatives in the FCPA context will help to detect fraud, which could well lead to bribery and corruption.

You can listen to my podcast with Henry Mixon on internal controls for third parties in a FCPA compliance program, part I by clicking here.

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, 2014

September 14, 2014

To the NFL – Show More Than Ethics, Show Some Humanity

IMG_1230Just a short ten days ago I wrote about how thrilled I was that the National Football League’s (NFL) 95th season was upon us and pro football was about to begin. But in the intervening 10 days, it is if the very football gods from Mount Olympus have arisen and unleashed their Furies on the NFL. In those short 10 days, we have seen the release of a video of Ray Rice knocking out his then fiancé (and now wife) and the arrest of a Adrian Peterson for spanking (a ‘whoopin’ in Peterson’s Texan parlance) a four year-old child so severely that the doctors who treated the disciplined child were instrumental in having charges brought against Peterson. This is in addition to two other players, one convicted of domestic abuse and one arrested for domestic abuse, being allowed by their respective teams, to continue to play football. To say that the NFL’s response to all of these events as pathetic would be to insult all of the pathetic people and things in the world and raise the word pathetic to a paragon of performance.

For those who might not know, late last year, Baltimore Raven running back Ray Rice hit his then fiancé so hard in an elevator that he knocked her unconscious with one punch. When the elevator reached its floor, he proceeded to drag the unconscious woman out of the elevator out by her arms, shoulder and hair. How do we know all of this? It was filmed by the cameras both inside the elevator and outside it, all in the Casino Revel. Since at least February tapes of the events outside the elevator were available publicly, largely through TMZ. But the tape of the actual assault inside the elevator was provided to local police and AP has reported that it was also provided to the NFL.

In August, the NFL Commissioner Roger Goodell gave Rice a two-game suspension. This is in contrast to a league that levied a four-game suspension on one player who took recreational drugs back at the Kentucky Derby and a full season suspension to another player for a second offense of smoking marijuana. The public howling was so vociferous that Goodell had to admit that he made a mistake in under-penalizing Rice and announced a new league wide policy regarding players who engage in domestic violence. But all of this was before TMZ managed to get its hands on the video recording from inside the elevator, which showed the punch Rice threw. If you have seen it, you know how horrific it was and if you have not seen, do not take my word on it, but go to youtube.com and watch it.

The same day that TMZ released the video, Rice’s team, the Baltimore Ravens, released him and later that day the NFL indefinitely suspended him. Both the Ravens and the NFL claim that they had not previously been provided with or had seen the video, which many people, including myself, found disingenuous at best or an outright lie at worst.

As noted above, AP reported that the video had been provided to the NFL. However, Bill Simmons spoke for many when he severely chastised the NFL for failing to obtain the video when TMZ was able to do so. In his Goodell-Must-Go Mailbag Column, Simmons gave three reasons why TMZ is doing a better investigation into the Rice domestic matter than the NFL; “First, they actually cared about finding the secret elevator tape … unlike the NFL, which clearly didn’t care even though every inch of a casino is being filmed by a camera at all times… Second, TMZ probably realized that Revel Casino was going out of business over Labor Day weekend, which meant its about-to-be-unemployed workers had nothing to lose by selling the tape. Why didn’t the NFL anticipate the same thing? Because it’s obviously Jackass Central over there… Which leads me to my third reason why TMZ outdid Goodell’s league: Either the NFL is run by an overmatched commish who orders around a slew of lackeys and buffoons and never saw that day coming; they saw the tape but never expected it to come out; they watched the tape and then buried it (the most nefarious of all the scenarios, by far); they underestimated the impact of the tape (and then some); and/or they were outwitted by the one and only Harvey Levin.”

To attempt to gain some credibility, the league hired former FBI Director Robert Mueller to lead an investigation into the question of when the league received the video of events inside the elevator. However the investigation was going to be overseen by two league owners and the law firm at which Mueller works is regular counsel to the NFL. Simmons summed up the obvious conflicts of interest with the following, “So you don’t have a ton of confidence in an “independent” investigation led by owners from two of the team’s oldest-run families (the Maras and Rooneys) and conducted by someone who works for a law firm (WilmerHale) that just helped the NFL negotiate a 10-figure deal with DirecTV? And you think maybe it doesn’t look great that the current Ravens president (Dick Cass) spent 30 years working for that same law firm? Hold on, what’s that smell?” Here you might want to consider the General Motors (GM) investigation into its handling of the ignition switch issue, performed by its regular counsel, which only managed to find nefarious conduct by lower level GM employees. Anything beginning to sound familiar?

So at this point, it is not clear if the NFL is incompetent or something worse. But whatever it is, it is certainly a public relations nightmare of the highest order. Cindy Boren, writing in the Washington Post, in an article entitled “NFL has a credibility crisis in wake of Adrian Peterson child-abuse case, Ray Rice domestic-violence incident”, said “It’s a nasty image for the NFL and the problem is that the guy who is skilled at PR, the guy who has explained away Spygate, Bountygate, the lockout of the referees and the Rice matter (initially) is now the Invisible Man. Goodell, he of the $44-million paycheck in 2013, is nowhere to be seen. No one is putting out the NFL’s side of the story as anger grows. Owners, like Daniel Snyder of the Washington Redskins, may be in Goodell’s corner, but fans increasingly may not be, according to an ESPN poll. There’s a big disconnect and one that owners are not addressing, even as more horrific images come out.”

As to the Peterson indictment, I grew up in a very different era where corporal punishment was administered as a regular part of growing up, both at home and at school. As a parent, I certainly think a parent has the responsibility to discipline their children. But times have changed and what was acceptable when I grew up, or even when Adrian Peterson was a child, is no longer acceptable and those times are long gone. Moreover, even if you still believe that spanking is a legitimate form of discipline, it is NEVER, NEVER acceptable to beat a child so hard that they require professional medical care.

This week I am attending the SCCE’s 2014 National Compliance and Ethics Institute. I am sure that many of aspects will be discussed in the context of a best practices compliance program. But sometimes, it does not take a compliance program, protocol and procedures to know what the right thing to do is. For the NFL to stand behind the excuse of an incomplete investigation, whether done so negligently or intentionally, misses the entire point. Even if the league is now corporate and all about the almighty power, prestige and profit of the NFL; it is still made up of humans and sometimes even corporations have to show some humanity.

Just how bad is it for the NFL these days? I cannot think of a better way to end this piece than be citing to Boren’s article for the following quote from ESPN commentator Tom Jackson, ““We started the week with players beating up women and we ended it with players beating up children. We are in a very serious state here in the National Football League.””

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, 2014

September 12, 2014

The FCPA Compliance and Ethics Report

If you have not done so, I hope that you might go over to my podcast site, the FCPA Compliance and Ethics Report,  to check out some of my recent podcasts. The episodes are between 20-30 minutes long and they are available for download on iTunes so you can listen to them on your commute to work or when working out at the gym.

Internal Controls

I have begun a series on internal controls in a best practices FCPA compliance program with noted internal controls expert Henry Mixon. In Parts I & II, Mixon and I discuss the basics of what are internal controls. These podcasts supplement some of my recent blogs on internal controls.

Episode 85-What Are Internal Controls, Part I

Episode 87-What Are Internal Controls, Part II

HR and Compliance

One of the best allies for the compliance function in any company is the Human Resources department. I explore how HR can assist compliance in a myriad of components of any best practices compliance program.

Episode 86-Use of HR in a Compliance Program

Continuous Improvement of a Compliance Program

In the FCPA Guidance and in almost every speech I have heard by a Department of Justice official, they talk about how your compliance program should evolve to meet new compliance risks, changes in best practices, geographic markets where your company does business and new product/service offerings. You can do this by continuous improvement of your compliance program.

Episode 84-Continuous Improvement of Your Compliance Program

The Compliance EcoSystem

Jon Rydberg is the Founder and CEO of Orchid Advisors. He is also the former CCO of Smith & Wesson and was at the company when it navigated it way through a FCPA investigation and enforcement proceeding. From these experiences, Rydberg has developed a holistic approach to compliance which he has trademarked as the “Compliance EcoSystem”. I explore his ideas on an fully integrated approach to compliance

Episode 83-Interview with Jon Rydberg

Use of Interviews in Your Compliance Program

Brian Ching is the most famous player in the history of the Houston Dynamos soccer club. Ching recently retired and moved into the front office as the General Manager of the Houston Dash, the Houston professional women’s soccer club. I interviewed Ching on his transition to management and how the Dash use the face-to-face interview process to not only assess the non-soccer skills that the team requires of its players but also to communicate the team’s expectations. There are some very significant insights about how a company can communicate its expectations regarding ethical business practices.

Episode 79-Interview with Brian Ching

The FCPA Professor

Finally and last but certainly not least, I bring back the FCPA Professor for a two-part podcast on his new book The Foreign Corrupt Practices Act In a New Era.

Episode 80, Interview with the FCPA Professor, Part I

Episode 81-Interview with the FCPA Professor, Part II

A good weekend to all.

September 11, 2014

King Arthur’s Roundtable – The CCO as Chief Collaboration Officer

RoundtableMany commentators such as Donna Boehme and Mike Volkov often talk about what is required for the position of Chief Compliance Officer (CCO), both in terms of corporate support and skills as a leader of a company’s compliance function. But in many ways a CCO can be seen as a collaborator because so much of the job is working with and interfacing with various functions within a business. I thought about that concept when I read an article in the Corner Office section of the New York Times (NYT) entitled “Titles Don’t Matter. Teamwork Does.” by Adam Bryant where he interviewed and profiled Girish Navani, Chief Executive Officer (CEO) of eClinincalWorks, a provider of clinical information systems.

I found Navani’s leadership style focusing on collaboration to be a good model for a CCO or compliance practitioner because what the compliance function needs to bring is a partnership to help the business and other units do business in compliance with the relevant legal and regulatory scheme. In the world of anti-bribery and anti-corruption that means compliance with the Foreign Corrupt Practices Act (FCPA), UK Bribery Act and similar laws. Navani said that his leadership style is to be as open as possible. One of the techniques that he uses is to have an oval table for meetings. No doubt channeling his inner King Arthur (or perhaps Richard Harris playing King Arthur), the configuration of the table actually seems to facilitate conversation and learning.

Another interesting insight was that Navani structures his company around teams. I thought this could be something that the compliance function could use in its dealings with business units because compliance is really a partnership with the business units and compliance spans multiple functions within any company. I also found another leadership insight from Navani’s leadership style. Navani said he continues “to learn every day. Leadership to me is many different qualities. Some are very basic. You’ve go to be approachable, humble and hard-working. Then there are ones regarding how you treat people. I listen more now. Before, I’d speak all the time. I will still do a lot of talking in meetings, but I absorb others opinions more. And I’m completely open to being told “no”. Questioning my own decision-making with others in the room is fine.”

I found that last point quite useful to consider. Coming out of the legal department and into compliance, I did not always take kindly to being told ‘no’ by someone from the business unit. I thought every pushback was some type of pressure test looking for weakness or tension. However, Navani’s style brings up the useful reminder that often the business function can assist compliance in learning how to perform the function more quickly or more efficiently. Certainly the business can assist the compliance function in understanding the highest risks that a company should focus on managing. In such a partnership role, compliance and the business unit can compliment each other to stop wasting time on immaterial risks so that resources can be delivered to the company’s highest risks.

Navani also stressed accountability. At his company “You’ve got to be accountable to yourself first, and you’ve got to be accountable to your team.” This certainly has application to the compliance function as well. One of the battles that compliance can fight is to be ‘The Land of No’ and the CCO is the head of it, or ‘Dr. No’. However by stressing accountability and creating transparency in the compliance process, I believe that a CCO can go a long way towards ameliorating that misperception.

I also found Navani’s techniques for hiring instructive for compliance. He said, “I look for the heart first. I don’t ask for direct experience.” He expects a modicum of professional expertise by the questions he asks most often are “Do you want to win? What drives you every day? Why health care IT? Can you spend 10 years of your career here? What do you want to do in those 10 years?” Navani went on to say that if he received satisfactory responses to those queries the technical aspects of a position can be taught. But he strives to see if a candidate’s heart is in the right place.

In addition to using these questions to ferret out candidates who will not work with his company, Navani uses these questions to set both a tone and expectation. The message he sends is “We’re not going to stifle you. If you can think out of the box, you will.” Navani believes that by hiring such employees they have the opportunity to become game changers at his company. Now imagine if you could have your Human Resource function use the hiring process to ask questions around attitudes around business ethics or other compliance issues. It would have the dual effect of allowing your company to have a front line inquiry that might weed out those who might be prone to cutting corners through bribery and corruption. But equally important would be the expectation set on the high value your company has on compliance and business ethics. The message would begin pre-hire, set again during employee orientation training and continued throughout the employment tenure.

Through migrating some of these leadership techniques that Navani espoused into your compliance tool-kit; a CCO or compliance professional can help to shift a company’s conversation around compliance. You can move from simply being seen as a safety backstop to one of developing and implementing solutions. Some of the other insights that I drew from Navani include setting out your core function of compliance. A compliance function should be able to offer expertise and insight into solutions. One part of that may be delivering data and other information to the business function to help them make better economic decisions for the company. But another way might be through compliance coaching advocacy.

Navani’s leadership once again demonstrates that if your compliance function shows integrity and responsibility, it can lead to greater teamwork between departments. Many business units fear that the compliance function will take away control of the business process from them. However by demonstrating that compliance is really in partnership, this can move a long way to alleviating this concern.

And do not forget the Round Table.

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, 2014

September 9, 2014

Management of Corruption Risks – Business Lessons from GSK

IMG_0891The Department of Justice (DOJ) and Securities and Exchange Commission (SEC) have made it abundantly clear over the past several years that companies should assess their risk and then manage their own risks. In the anti-corruption space, simply putting in a Check-the-Box paper compliance program does not help to prevent, detect or remediate under laws such as the Foreign Corrupt Practices Act (FCPA) or UK Bribery Act. In their joint FCPA Guidance, the DOJ and SEC make clear there are a variety of steps a company can take to manage anti-corruption risks.

One of the tired excuses for cutting back on FCPA enforcement is that it costs US companies business overseas because they cannot engage in bribery and corruption, while the commercial enterprises of countries which do not have robust anti-corruption laws essentially bribe at will. However, there are many business solutions available in the management of risk, which companies can profitably use to help ameliorate bribery and corruption risk.

I was interested to read recently about some of the responses that one of the world’s current poster children for bribery and corruption are considering. In an article in the Financial Times (FT), entitled “Witty comes out fighting for GSK”, Andrew Ward reviewed some of the business responses that GlaxoSmithKline PLC (GSK) has contemplated over the past year since the revelations about allegations of bribery in China. Ward reported that in addition to the uncertainty of the ongoing corruption investigation by Chinese authorities, the UK Serious Fraud Office (SFO) for violations of the UK Bribery Act and the DOJ for violations of the FCPA; the company “issued a profits warning that exposed weakness in the company’s core respiratory medicines business.” These warning turned on “the decline in the company’s best selling drug. Revenues from Advair, an asthma treatment that accounts for a fifth of sales, fell 12 per cent in the second quarter, on top of the 15 per cent drop in the three months before that.” Moreover, the company’s stock is down some 14% in the past year.

I was intrigued by the response of GSK’s chief executive, Sir Andrew Witty. Witty did not bemoan the corruption investigations that his company is going through or somehow try to claim that the company simply could not compete because of the scrutiny it is under. On the business front Ward reported, “GSK’s innovation engine is working” as Witty noted that the company had “six new drugs approved across all therapeutic areas last year and a further 40 in advanced development”.

In addition to the specific response regarding the development of new pharmaceutical products, Witty is looking at other sales products and models that will lessen the company’s corruption risk while providing a strong business base. Ward reported that Witty is “strengthening GSK’s two other businesses: vaccines and healthcare.” This move “was reinforced by a $20bn asset swap with Novartis in April under which GSK traded its subscale oncology business for the Swiss group’s vaccines division, while the pair agreed to set up a joint-venture in consumer products.” This means that when this structuring is completed, “half of GSK’s revenues will come from outside [the sale of] pharmaceuticals.”

Witty has also worked to change internal GSK compensation incentives to help manage corruption risks. Late last year, the company announced that it would “sever the link between sales and pay for drug reps and from 2016, stop payments to doctors for promoting its products.” Ward noted that others in the industry have not followed GSK’s lead in changing the way it compensates its sales team but Witty said, “in the long-run, the company will benefit from being the first-mover towards a new marketing model.”

Finally, and perhaps most interestingly, Witty has attempted to become an industry-wide “standard-bearer for [pharmaceutical] industry ethics.” Ward reported that the ongoing scandal has helped Witty “drive home to employees the need for greater transparency.” Ward even quoted Witty for the following, “It gives me the ammunition to say we are in the public eye and our behaviour counts. It’s not just about generating prescriptions, it’s how you do it.”

In another article on the GSK corruption scandal by Ward, entitled “GSK chief floats break-up option”, Ward quoted said that Witty has “zero tolerance for any form of corruption” and that “he was pleased if wrongdoing had been brought to light so that it could be stamped out.” Witty went on to say that “Any company that doesn’t get whistleblower letters isn’t looking hard enough. If you are not getting any don’t dream. It can’t be perfect 100 per cent of the time.”

Another perspective on business solutions to the management of corruption risks came from Tom Mitchell, also writing in the FT in an article entitled “Expats in China should read GSK potboiler carefully”. Mitchell focused on a book by Joe Studwell called The China Dream, which detailed some of the business failures that had befallen western companies in China. Mitchell drew the lesson from Studwell’s book that “When foreign investors’ interests are aligned with those of their domestic partners – as they generally are today in the auto sector – those investors do very well indeed… However, when interests are not aligned – or when outside operators in sectors where they are not required to have joint ventures – foreigners are vulnerable to sudden reversals of fortune instigated by either a bitter partner or by unsympathetic officials.”

How closely does that sound like what happened to GSK? Mitchell noted that GSK “made money from selling goods in China at prices that were – Chinese police allege – were high by the standards of many markets. At the same time, GSK was not sharing revenue streams with a local partner that could help with damage limitation when local authorities appeared on its doorstep.”

The management of risk is essentially a business exercise. That is because risk is what can cause a company to lose money. Some risk is embodied in statutes such as the FCPA or UK Bribery Act. Sometimes risk is a change in the market circumstance. For that I and others have written about the negative side of GSK; the company may well come out the other side of the Chinese corruption scandal stronger because they seem to understand that there is a market based solution to corruption risks. GSK has changed the way it will compensate its sales force and will delete its compensation to doctors. This may take away incentives to cut corners or engage in bribery and corruption. But think about Witty’s steps to diversify the GSK product base. If you are in an industry that is corrupt and you cannot find a way to do business profitably, your company may have other business lines it can move forward to a more prominent role in your business. Lastly, as with most responses to legal issues by lawyers, business executives are only limited by their imaginations in their response to business issues.

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, 2014

SCCE 2014 Compliance and Ethics Institute

SCCE LogoNext week, from September 14-17, the Society of Corporate Compliance and Ethics (SCCE) will hold its 13th annual Compliance and Ethics Institute in Chicago. For my money, it is the top event for compliance practitioners held each fall. This year is no different and Roy Snell and his team have put together a fabulous event for anyone even remotely interested in the field of compliance and ethics. I wanted to highlight some of the reasons why you should attend and some of the reasons why I am attending.

The individual sessions are arranged into learning tracks to help facilitate course selection. Each track is arranged around a specific area of interest, enabling the attendees to quickly find the sessions that match their educational needs. The learning tracks are designed so that someone can follow one learning track all the way through, or hop around between them. The learning tracks include the following:

 General Compliance/Hot Topics

Here you can cover everything from Compliance 101 to hot topics like detecting identity theft and privacy breaches. This track will keep you up to date on everything that is currently happening in the compliance and ethics environment as well as bring you back to the basics and keep you grounded. Learn what you need to know from compliance & ethics officers, regulators, outside and in-house counsel, auditors, providers and industry experts.

Risk

This learning track, developed by Risk Track Program Chai, Greg Triguba, is designed to provide insight into how to effectively manage the risks your company faces. In today’s business environment, risk and how to effectively manage it has become a top priority for most organizations. The specific sessions are focused on top compliance and ethics risks. There will be interactive sessions led by experts in the compliance, ethics, and risk management field. Participants in this track will take a deep dive into important risk areas and will learn strategies for effectively managing these risks.

Ethics

This track allows you to immerse yourself in ethics. The SCCE believes, and I hardily agree, that there are few things more challenging or rewarding to manage than ethics issues. Moreover it is a topic upon which everyone has an opinion. The subtleties are great and they can make all the difference in the world. The sessions will cover the considerations that compliance and ethics professionals need to understand and manage effectively.

Case Studies

The Case Studies learning track is designed to present the facts detailing just what companies have actually done to effectively manage ethical challenges and will take you inside companies to show you how they have handled specific issues in real world situations.

Multi-National/International

For companies facing new and fast changing complexities, SCCE will present the International/Multinational learning track, which is chaired by Marjorie Doyle. This learning track will take a deep dive into the needs of the global compliance program and the topics that are creating the biggest challenges for global companies today.

Advanced Discussion Groups

There will also be the ever-popular Advanced Discussion Group. This learning track is designed for the more ‘Been there, done that?’ Join an advanced discussion group and share what you know. If you are an experienced compliance and ethics professional or are looking for a more interactive program, this provides you with the opportunity to gain greater insight and knowledge, as well as share back with others in our profession. Each Advanced Discussion Group session is designed to involve everyone in the room. There are no formal presentations, just discussion facilitated by industry experts.

Compliance Lawyer

Here we have a new offering for in-house and outside counsel practicing in any compliance related field. This learning track is designed to meet the specific needs of the legal community on the hot compliance topics for legal counsel. If you attend this learning track you will be rewarded with insights of value to your compliance practice and your clients.

But the SCCE National Compliance and Ethics Institute is much more than even these fabulous learning track sessions. One of the things that has always impressed me with the SCCE and this event is the way they use and treat vendors. The vendors are clearly viewed as a part of the overall compliance and ethics solution that we are all working towards, not as some sponsor who is simply there to peddle some wares in the farthest of the back rooms. So the vendors will be located in a large exhibit hall where they will be lined up for easy viewing and access.

Moreover, the exhibit hall doubles as the breakfast/coffee/refreshments/cocktail hour room. Each time there is a break and the conference delegates get together, you not only have the opportunity to visit with other compliance professional but view some of the newest, coolest and most useful products and services in the compliance space. Are vendors in business to make sales? That answer would be yes. But at the conference, they take up the mantle of education as much as any speaker and use the form to help educate compliance professionals on their offerings and how they can assist your company to move the ball forward in ethics and compliance.

On Sunday, September 14, SCCE is hosting two events, SpeedNetworking and SpeedMentoring, which you should consider. If you are looking to build out your network with like-minded ethics and compliance professionals, I would recommend you sign up for the SpeedNetworking session. It can be an enjoyable manner in which to connect with peers who share your challenges in a wide-range of compliance arenas.

If you are looking for a mentor in the compliance and ethics space, then the SpeedMentoring session is the place for potential mentors and mentees to be connected ‘face-to-face’. I would suggest that if you are a seasoned compliance professional and are willing to give back to the compliance profession by sharing your expertise, you should sign up to be a mentor.

Whichever option you choose you are in control of the people you connect with and are provided with an excellent opportunity to learn from others and grow long-lasting professional relationships. I hope that you will join my in Chicago next week. It looks to be a great event.

Information on the SCCE Compliance and Ethics Institute can be found be clicking here.

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, 2014

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