FCPA Compliance and Ethics Blog

August 3, 2015

Social Media Week Part I – Using Social Media In Your Compliance Program

Social Media 1Welcome to Part I of Social Media Week. I recently did a webinar, hosted by The Network, on the use of social media in your Foreign Corrupt Practices Act (FCPA) compliance program. The response was as great as almost any other webinar in which I have participated. Based upon the overwhelming feedback, this week I will post a series of blogs on the use of social media in your compliance program. In Part I, I begin with a discussion of why you should integrate social media into your compliance program.

I have been studying the business side of social media for some time now as a way to help understand how I might more effectively and more creatively bring the message of doing compliance to my readers and podcast listeners. This led me to think about the message of compliance inside of a corporation and how it is distributed. In a compliance program, a large portion of your consumers/customers are your employees. Social media presents some excellent mechanisms to communicate the message of compliance going forward. Many of the applications that we use in our personal communication are free or available at very low cost. So why not take advantage of them and use those same communication tools in your internal compliance marketing efforts going forward.

On the Social Media Examiner site, which brands itself as “Your Guide to the Social Media Jungle”, is a podcast entitled “Social Sharing: How to Inspire Fans to Share Your Stories”, hosted by Michael Stelzner, Chief Executive Officer (CEO) and Founder of the site. In the podcast Stelzner interviews Simon Mainwaring, author of “We First: How Brands and Consumers Use Social Media to Build a Better World”, who said that to allow them to market successfully there are three key components, (1) Let your employees know what you stand for; (2) Celebrate their efforts; and (3) Give them a tool kit of different ways to participate. I think each of these concepts can play a key role for the compliance practitioner in internally marketing their compliance program.

Let Your Employees Know What You Stand For

In the FCPA Guidance, the Department of Justice (DOJ) and Securities and Exchange Commission (SEC) said that the basis of any anti-corruption compliance program is the Code of Conduct as it is “often the foundation upon which an effective compliance program is built. As DOJ has repeatedly noted in its charging documents, the most effective codes are clear, concise, and accessible to all employees and to those conducting business on the company’s behalf.” That well known @CodeMavencc, Catherine Choe, has said that she believes “Two of the primary goals of any Code are first, to document and clarify minimum expectations of acceptable behavior at a company, and second, to encourage employees to speak up when they have questions or witness misconduct.”

But more than the Code of Conduct, does your company really communicate that it stands for compliance? Obviously formal anti-corruption training under the FCPA is important but I think that more is required to reinforce that your company has a culture of compliance throughout the organization. In other words, are you communicating what you stand for and not simply the rules and regulations of a compliance program?

Celebrate Their Efforts

Once again the FCPA Guidance speaks to the need to incentivize employees in the company realm. The Guidance states, “DOJ and SEC recognize that positive incentives can also drive compliant behavior. These incentives can take many Guiding Principles of Enforcement forms such as personnel evaluations and promotions, rewards for improving and developing a company’s compliance program, and rewards for ethics and compliance leadership. Some organizations, for example, have made adherence to compliance a significant metric for management’s bonuses so that compliance becomes an integral part of management’s everyday concern.” But more than simply incentives, it is important to “[M]ake integrity, ethics and compliance part of the promotion, compensation and evaluation processes as well.”

Mainwaring’s concept means going beyond incentivizing. To me his word ‘celebrate’ means a more public display of success. Financial rewards may be given in private, such as a portion of an employee’s discretionary bonus credited to doing business ethically and in compliance with the FCPA. While it is certainly true those employees who are promoted for doing business ethically and in compliance are very visible and are public displays of an effective compliance program. I think that a company can take this concept even further through a celebration to help create, foster and acknowledge the culture of compliance for its day-to-day operations. Bobby Butler, at Universal Weather and Aviation, Inc., has spoken about how his company celebrated compliance through the event of Compliance Week. He said that he and his team attended this event and used it as a springboard to internally publicize their compliance program. Their efforts included three separate prongs: they were hosting inter-company events to highlight the company’s compliance program; providing employees with a Brochure highlighting the company’s compliance philosophy and circulating a Booklet which provided information on the company’s compliance hotline and Compliance Department personnel.

Give Your Employees a Tool Kit For Compliance

Obviously a key component of any effective compliance program is an internal reporting mechanism. The FCPA Guidance states, “An effective compliance program should include a mechanism for an organization’s employees and others to report suspected or actual misconduct or violations of the company’s policies on a confidential basis and without fear of retaliation.” The Guidance goes on to also discuss the use of an ombudsman to address employee concerns about compliance and ethics. I do not think that many companies have fully explored the use of an ombudsman but it is certainly one way to help employees with their compliance concerns. Interestingly, in an interview in the Wall Street Journal (WSJ) with Sean McKessy, Chief of the SEC’s Office of the Whistleblower, he stated, “What I hear is that companies are generally investing more in internal compliance as a result of our whistleblower program so that if they have an employee who sees something, they’ll feel incentivized to report it internally and not necessarily come to us.”

Two of the newest and perhaps coolest tools a Chief Compliance Officer (CCO) or compliance practitioner can utilize in the realm of social media are Meerkat and Periscope. Both tools allow you to tell a compliance story in real time, throughout your organization and beyond. They are both live streaming apps that enable you to create a video and open the portal to anyone who wants to use it. Anybody in your Twitter community can click on that link and watch whatever you’re showing on your phone. The big piece is the mobile aspect. It’s as simple as a basic tweet and hitting the “stream” button.

However, there are a wide variety of social media tools available that you can incorporate into your compliance program. Apps like Pinterest, Snapchat, Instagram and others may seem like tools that are solely suited to personal use. However their application is much broader. Over the next week, I will be exploring some of these apps and tools and how they might be used in doing compliance. As with many ideas in the compliance space, a CCO or compliance practitioner is only limited by their imagination. For these apps, they can be most useful when you tell the story of compliance in your company. Hootsuite did a campaign called “Follow the Sun” using Periscope. They decided to let their employees showcase what they called #HootsuiteLife. They gave access to different people in every company office around the globe. Throughout the day, it would “Follow the Sun,” and people in different offices would log into the Hootsuite account and walk around and show off their culture, interviewing their friends, etc. They talk about the importance of culture and now they are proving it. The number of inbound applications drastically increased after people got that sneak peek into their company.

Yet there are other tools available, at no cost, and can be downloaded onto a mobile device such as a smartphone or iPad. These include the O’Melveny & Myers LLP Foreign Corrupt Practices Act Handbook; which concentrates solely on the FCPA and is primarily a new vehicle to distribute content it already makes available upon request. This content includes O’Melveny’s FCPA Handbook and In-House Counsel’s Guide to Conducting Internal Investigations. In addition, the app features five resource sections that serve as an interactive, illustrative directory with titles ranging from ‘O’Melveny Authored Client Alerts’ to ‘DOJ Opinion Releases’.

Another approach is found in the Latham & Watkins LLP’s AB&C Laws app which takes an international approach to anti-corruption and anti-bribery laws, with the content focused on organizing and easing access to statutes and regulatory guidance according to specific fields of interest, from legislative frameworks to extra-territorial application to enforcement and potential penalties. It also includes official guidance such as steps (where available) that can be taken to reduce the risk of liability for bribery and corruption.

There is much to be learned by the CCO and compliance practitioner from the disciplines of marketing and social media. These concepts are useful to companies in getting their sales pitches out and can be of great help to you, the CCO or compliance practitioner, in collaborating and marketing throughout your company. I hope you will follow this week’s Use of Social Media series as I will endeavor to provide to you not only with a discussion of some new tools which you can incorporate into your compliance program going forward but also a different way to think about who your customers are and how you are reaching them with your message of doing compliance.

Finally, I am compiling a list of questions that you would like to be explored or answered on the use of social media in your compliance program. So if you have any questions email them to me, at tfox@tfoxlaw.com, and I will answer them within the next couple of weeks in my next Mailbag Episode on my podcast, The FCPA Compliance and Ethics Report.

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, 2015

July 31, 2015

The Fifth Letter and Expansion of the Brazilian Corruption Scandal into the Private Sector

Fifth LetterI recently received a review copy of the book The Fifth Letter by fellow University of Michigan grad Vivian L. Carpenter. It is a rollicking good read which touches on areas of constitutional law, inalienable rights in the US, the complexities of racial relations in the South up to this day, an all-knowing/all seeing cabal which runs things from behind the scenes all wrapped up in the politics of modern day Washington DC. As a lawyer I greatly enjoyed the scenes that occurred in, around and about the US Supreme Court, the Senate’s advise and consent process for Supreme Court nominees and even a civics lesson in amending the Constitution. As a maven of thrillers I enjoyed the non-stop ride lead by the all-knowing/all-seeing cabal (who I like to call the Omnipotent ‘they’) who the protagonist, Katherine Ross, must face down and defeat. If you enjoy any of this, I would suggest you check out The Fifth Letter on Amazon.com or at your local bookstore. It is one of those rare books that is a great read, a roller coaster of a good ride and one from which you will learn quite a bit, all wrapped up into one book.

I thought about how well Carpenter tied all these seemingly disparate events, strands and concepts together in her work of fiction as I was reading a recent article in the Financial Times (FT) about the ever-increasing scope of the Petrobras corruption investigation in Brazil. In an article entitled “Petrobras scandal turns spotlight on Odebrecht Joe Leahy, John Paul Rathbone and Andres Schipani reported on the arrest of Marcelo Odebrecht in the wake of the ongoing Brazilian corruption investigation dubbed “Operation Car Wash”.

The reporters noted that the investigation has shifted “in the latest sign of how Brazilian business and politics is being reconfigured by the Petrobras scandal, Mr Odebrecht is being held without bail in a sparse cell in the southern city of Curitiba. There, the billionaire member of a class that traditionally considers itself above the law, reportedly has to sleep on a concrete bunk and share a communal shower.” They quoted Professor Sérgio Lazzarini of São Paulo’s Insper business university who said, ““We are in a kind of different story now,” It [the investigation] is changing the perspective of many businessmen.”

Odebrecht is “president and chief executive of Odebrecht — the Brazilian multinational that is Latin America’s largest construction company but also, because it is privately held, one of the world’s biggest companies that most people have never heard of.” “With $41bn in revenues, 181,000 employees and businesses that include building football stadiums and nuclear submarines, his company operates in 23 countries, from Angola to the UK and most of Latin America.” Moreover, it “almost acted as the corporate handmaiden of Brazilian foreign policy, managing complex infrastructure projects in strategic locations that had caught the eye of former president Luiz Inácio Lula da Silva.”

This confluence of public influence for private benefit, a hallmark of Carpenter’s novel, is also present in the Odebrecht investigation as former President da Silva is “being investigated on separate allegations that he improperly used his connections to help Odebrecht win international contracts. Mr Lula da Silva and Odebrecht vehemently deny any wrongdoing. The yearlong probe, now aided by the Swiss attorney-general’s office and Portuguese and Latin American prosecutors, promises to illuminate the shadier side of Latin American business practices.”

As a company Odebrecht is privately held yet has $61bn in assets, which the article notes are largely held in joint venture (JV) with Petrobras. In 2014 the company had sales of $41bn but only profits of $210MM. The company says that it is due to its “razor thin margins” but it seems to me the money could be running out to others with profits that slim on such revenues. Unfortunately for the company, the arrest of its President has led to concerns from financial analysts. The article noted, “Moody’s, the rating agency, has warned the case could jeopardise some of Odebrecht’s $34bn backlog of construction contracts, including $3bn of Colombian projects.” Luis Fernando Andrade, head of Colombia’s infrastructure agency, said, “[If] proven guilty in Brazil, that could generate inabilities [for the company] in Colombia.”

Odebrecht is well known as an international construction company, with a particularly strong reputation for the “ability to operate successfully and manage relationships in countries with “significant levels of political risk”, as it noted in a recent bond prospectus. That includes building Tripoli’s airport — until work was disrupted by the 2011 Libyan military intervention — and Panama, where Odebrecht won $8.5bn of projects under former President Ricardo Martinelli, who is currently being investigated for corruption. A 2.8km viaduct built around Panama City’s old town for $782m had a cost per kilometre surpassed in the US only by Boston’s infamous “big dig”, according to official US statistics cited by local environmentalists.”

Such kudos would seem to indicate that the company plays in a very high-risk market. When you have high-risk, it is incumbent that you manage that risk appropriately. With the well-known proclivity for corruption in the international construction business perhaps the imbroglio that the company now finds itself is not too surprising. Yet the article noted “Many say that even if Mr Odebrecht proves his innocence, the scandal marks a watershed for Brazil’s construction companies, much like the partial humbling of banks after the global financial crisis.”

The article also details the trail of alleged money payments made by the company to Petrobras officials. It shows payment through known money laundering havens on its way to the bank accounts of Petrobras officials in Switzerland. The officials alleged to have received these monies are Renato Duque, Pedro Barusco and Paulo Roberto Costa. It is further alleged that some of this money was passed onto officials from Brazilian political parties.

I think Carpenter’s book portends today’s lesson for the compliance practitioner; which is re-emphasized by the FT article. For any US or UK company which has been doing business in Brazil for at least the last 10 years, you need to look very hard at who you did business with and how you did business with them. You need to see if there were any suspicious payments that could tie your company to not only Petrobras but also other Brazilian companies caught up in this scandal. You can be certain if the Brazilian prosecutors turn up evidence of involvement by a US company, they will turn it over to US prosecutors. You definitely want to a head off any letter from the Securities and Exchange Commission (SEC) about your accounting provisions or any raids by the Federal Bureau of Investigation (FBI) or Department of Justice (DOJ) looking for evidence of corrupt payments.

You can purchase a copy of the book The Fifth Letter on amazon.com 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, 2015

July 30, 2015

The Trait of Empathy in Compliance

EmpathyCan you empathize with those who work for you, around you and those you report to? While many leaders, particularly those who might be labeled the ‘command and control’ type seem to think that empathy is a negative; I think that it is an important habit for any Chief Compliance Officer (CCO) or compliance practitioner to not only practice but also master. Recently there were a couple of articles in the New York Times (NYT) that discussed this character trait and I found them useful to consider for the leadership toolkit of the CCO or compliance profession.

The first was by Daryl Cameron, Michael Inzlicht and William A. Cunningham, entitled “Empathy is Actually a Choice” and the second was in the Corner Office section by Adam Bryant, entitled “Is Empathy on Your Résumé?”, in which Bryant profiled Stewart Butterfield, the co-founder and chief executive of Slack, a communication service for businesses. The first piece focused on research by the authors and the second was Bryant’s weekly piece on business leadership.

The researchers noted, “While we concede the exercise of empathy is, in practice, often far too limited in scope, we dispute the idea that this shortcoming is inherent, a permanent flaw in the emotion itself…we believe that empathy is a choice that we make to extend ourselves to others. The “limits” to our empathy are merely apparent, and can change, sometimes drastically, depending on what we want to feel.” The authors ended by stating, “Arguments against empathy rely on an outdated view of emotion as a capricious beast that needs to yield to sober reason. Yes, there are many situations in which empathy appears to be limited in its scope, but this is not a deficiency in the emotion itself. In our view, empathy is only as limited as we choose it to be.”

Bryant’s article on Butterfield and his leadership style brought these concepts home. Most interestingly, Butterfield began by self-disclosing, “I’m good at the leadership part. But I’ve always said that I’m a terrible manager. I’m not good at giving feedback. People are like horses — they can smell fear. If you have a lot of apprehension going into a difficult conversation, they’ll pick up on that. And that’s going to make them nervous, and then the whole conversation is more difficult.”

Another insight on leadership was something as simple as meetings. Butterfield said that “if you’re going to call a meeting, you’re responsible for it, and you have to be clear what you want out of it. Have a synopsis and present well. At the same time, if you’re going to attend a meeting, then you owe it your full attention. And if it’s not worth your attention, then say so — but don’t be a jerk about it — and leave the meeting.” So more than simply taking responsibility for one’s own time, he put out the empathy to allow you to consider how your agenda (or lack thereof) may have negative repercussions on others on your team or in your organization.

Another interesting insight from Butterfield were his thoughts on empathy as it related to leadership. This is a sought out trait for employees, as early as in the interview process. He said, “When we talk about the qualities we want in people, empathy is a big one. If you can empathize with people, then you can do a good job. If you have no ability to empathize, then it’s difficult to give people feedback, and it’s difficult to help people improve. Everything becomes harder.”

Similarly to his examples around meetings, Butterfield believes that empathy can express itself as courtesy. He said, “One way that empathy manifests itself is courtesy. Respecting people’s time is important. Don’t let your colleagues down; if you say you’re going to do something, do it. A lot of the standard traits that you would look for in any kind of organization come down to courteousness. It’s not just about having a veneer of politeness, but actually trying to anticipate someone else’s needs and meeting them in advance.”

I found it interesting that on the same day in the same newspaper, theory not only met practice but the practice had a business application. For those out there who feel leadership skills are ingrained into your DNA, the authors pointed out “Likewise, in another recent study, the psychologists Karina Schumann, Jamil Zaki and Carol S. Dweck found that when people learned that empathy was a skill that could be improved — as opposed to a fixed personality trait — they engaged in more effort to experience empathy for racial groups other than their own. Empathy for people unlike us can be expanded, it seems, just by modifying our views about empathy.”

Yet for the CCO or compliance practitioner, Butterfield pointed out specific areas where the trait of empathy can yield great respect for you and your position in any corporation. People rarely think of courtesy and respect as leadership skills but if you can bring these to bear in your compliance practice, you can garner greater influence as not only someone who cares but someone who cares and gets things accomplished. For any corporate disciple which relies on influence to succeed these simple tools can go a long way to providing to you a wider manner to impact corporate culture, become a trusted partner and be a part of any significant business conversation earlier rather than later in the game.

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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, 2015

July 29, 2015

What Would Dr. Seuss Say about an Allowance?

What Pet Should I Get?Earlier this month we had the release of a second book by Harper Lee, “Go Set a Watchman”, which was miraculously discovered having been written some 50+ years ago. This week, there was another release from a (now deceased) author from a newly discovered source. I of course refer to the release yesterday of the new Dr. Seuss book “What Pet Should I Get?, published Random House, which informs today’s compliance lesson.

The book was discovered by Seuss’ widow, as noted in the Sunday New York Times (NYT) Book Review article, entitled “Dr. Seuss Book: Yes They Found it in a Box, when she decided to “have the rest of his notes and sketches appraised, that they closely examined the contents of that box. They found a set of brightly colored alphabet flash cards, some rough sketches titled “The Horse Museum,” and a manila folder marked “Noble Failures,” with whimsical drawings that he had been unable to find a place for in his stories. But alongside the orphaned sketches was a more complete project labeled “The Pet Shop,” 16 black-and-white illustrations, with text that he had typed on paper and taped to the drawings. The pages were stained and yellowed, but the story was all there, in Dr. Seuss’ unmistakable rollicking rhymes.” This finding became the book, What Pet Should I Get?

Reading this discovery made me ponder about how a child would pay for the pet they wanted and of course my thoughts turned to that age-old parenting quandary – the allowance. It is always a question of great interest for both parents and children. As with many things involving parent/child relationships, my views have evolved. As a teenager, I certainly had the view that an allowance was a God-given right and the more the better. I would only note that my parents did not share those views. As the father of a teenaged daughter, my views reached the much fuller expression of spoiling my daughter as often as possible. Which one is correct? I still do not have a final answer.

I thought about the ongoing debate and dialogue over the allowance when I read the Foreign Corrupt Practices Act (FCPA) enforcement action brought by the Securities and Exchange Commission (SEC) against Mead Johnson Nutrition Company (Mead Johnson). The matter was resolved via SEC Administrative proceeding that concluded with a Cease and Desist Order being agreed to by the parties. Mead Johnson agreed to pay a fine of $12.3MM which consisted of profit disgorgement of $7.7MM, prejudgment interest of $1.26MM and a civil penalty of $3MM. Kara Brockmeyer, Chief of the SEC Enforcement Division’s FCPA Unit, said in a SEC Press Release, “Mead Johnson Nutrition’s lax internal control environment enabled its subsidiary to use off-the-books slush funds to pay doctors and other health care professionals in China to recommend its baby formula and give the company marketing access to mothers.”

The enforcement action turned on violations of the accounting provisions of the FCPA. This is where the ‘allowance’ issue comes into the discussion. According to the Cease and Desist Order, “certain employees of Mead Johnson China improperly compensated HCPs, who were foreign officials under the FCPA, to recommend Mead Johnson’s infant formula to, and to improperly provide contact information for, expectant and new mothers.” One of Mead Johnson’s sales channels in China was through distributors. To facilitate this illegal conduct, funding to the distributors, called the “Distributor Allowance”, was diverted to make illegal payments. The Cease and Desist Order stated, “Although the Distributor Allowance contractually belonged to the distributors, certain members of Mead Johnson China’s workforce exercised some control over how the money was spent, and certain Mead Johnson China employees provided specific guidance to distributors concerning the use of the funds. Mead Johnson China staff also maintained certain records related to Distributor Allowance expenditure by distributors. In addition, Mead Johnson China used some of the funds to reimburse Mead Johnson China’s sales personnel for a portion of their marketing and other expenditures on behalf of Mead Johnson China.”

This tactic was clearly a violation of the company’s books and records obligations under the FCPA. By doing so, Mead Johnson was able to hide its payments to doctors and health care providers (HCPs) from not only regulators but the company’s shareholders as well. As the Cease and Desist Order noted, the company’s “records were incomplete and did not reflect that a portion of Distributor Allowance was being used contrary to Mead Johnson’s policies.” Finally, the Cease and Desist Order concluded, “Up through 2013, certain Mead Johnson China employees made payments to HCPs using funds maintained by third parties. These funds and payments from the funds were not accurately reflected on Mead Johnson China’s books and records. The books and records of Mead Johnson China were consolidated into Mead Johnson’s books and records. As a result of the misconduct of Mead Johnson China, Mead Johnson failed to make and keep books, records, and accounts, which, in reasonable detail, accurately and fairly reflected its transactions as required by Section 13(b)(2)(A) of the Exchange Act.”

However Mead Johnson did not stop with books and records violations. The Distributor Allowance manipulation allowed the China business unit to “improperly compensate HCPs was contrary to management’s authorization and Mead Johnson’s internal policies. Mead Johnson failed to devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances that Mead Johnson China’s funding of marketing and sales expenditures through third-party distributors was done in accordance with management’s authorization.” Once again the Cease and Desist Order concluded, “Up through 2013, Mead Johnson failed to devise and maintain an adequate system of internal accounting controls to ensure that Mead Johnson China’s method of funding marketing and sales expenditures through third-party distributors was not used for unauthorized purposes, such as improperly compensating Chinese HCPs to recommend Mead Johnson’s products. As a result of such failure, the improper payments to HCPs occurred contrary to management’s authorizations, in violation of Section 13(b)(2)(B) of the Exchange Act.”

In an interesting twist Mead Johnson, based on an allegation of potential FCPA violations in China, performed an internal investigation on its China unit in 2011 and came up with no evidence. Somewhat dryly the SEC noted that the company did not make any self-disclosure around these allegations and “did not thereafter promptly disclose the existence of this allegation in response to the Commission’s inquiry into this matter.”

Yet after a second internal investigation in 2013 they turned up evidence of FCPA violations, the company “undertook significant remedial measures including: termination of senior staff at Mead Johnson China; updating and enhancing financial accounting controls; significantly revising its compliance program; enhancing Mead Johnson’s compliance division, adding positions including a second senior-level position; establishing new business conduct controls and third party due-diligence procedures and contracts; establishing a unit in China that monitors compliance and controls in China on an on-going basis; and providing employees with a method to have immediate access the company’s policies and requirements.”

While there was no statement regarding self-disclosure, the company did cooperate extensively with the SEC after the company was called to task. The Cease and Desist Order noted, “Mead Johnson subsequently provided extensive and thorough cooperation. Mead Johnson voluntarily provided reports of its investigative findings; shared its analysis of documents and summaries of witness interviews; and responded to the Commission’s requests for documents and information and provided translations of key documents. These actions assisted the Commission staff in efficiently collecting valuable evidence, including information that may not have been otherwise available to the staff.”

There are several lessons to be learned from the Mead Johnson enforcement action. If it was not clear from the GlaxoSmithKline PLC (GSK) imbroglio in China in 2013-14, your internal investigation must be thorough. Performing an investigation, finding no FCPA violations only to have a regulator sitting on your shoulder and later finding such evidence is never good. The SEC also reaffirmed its clear intention to continue to enforce the accounting provisions of the FCPA, with or without a parallel Department of Justice (DOJ) enforcement action. Companies must also take heed on their internal controls. Clearly certain China business unit employees had developed a work-around of the compliance internal controls by requiring the distributors to use their allowances to pay bribes. Internal controls must not only exist but they must be effective. That means you have to test their effectiveness, not simply tick the box that you have put them in place.

Finally, and I think Dr. Seuss’ compliance lesson is that when you give out an allowance, while you may restrict some of its uses, you certainly should not direct where the money is spent. Every kid knows that if you are told where to spend your allowance, it is really not your allowance. Perhaps Mead Johnson would do well to remember that long lost lesson from childhood.

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, 2015

July 28, 2015

How to Succeed In Compliance – The Compliance Retreat

How to Succeed in BusinessIn 1961, one of my favorite Broadway musical comedies appeared How to Succeed in Business Without Really Trying. It ran for over 1400 performances in its original Broadway run and was based on the 1952 book by Shepherd Mead, entitled “How to Succeed in Business Without Really Trying: The Dastard’s Guide to Fame and Fortune”. The book is a satire of an instructional manual and pokes fun at (then) contemporary office life in the United States in the guise of a self-help book. It details the rise of one J. Pierrepont Finch, from window washer to Chairman of the Board in only two weeks.

The play was later adapted into a movie in 1967. Robert Morse played the lead role in both the original theatrical run and the movie, with Matthew Broderick and Daniel Radcliff taking the role in 2000 era revivals. My favorite song from the movie is I Believe in You, which Finch sings to himself in front a Men’s Room mirror immediately before going to a big meeting. Most interestingly when Mead’s book was re-released in 1995, in connection with a revival of the play, the Library of Congress cataloged it as non-fiction under “business books”, with the subject headings “Success in business”, “Management”, and “Career development”.

I wondered how I could help corporate compliance departments better succeed in compliance? So inspired by Finch to help all corporate compliance departments, Chief Compliance Officers (CCOs) and compliance practitioners succeed, today I am announcing a new service offering: the Compliance Retreat. Why a strategic retreat? It is unlikely you can explore the wide range of issues that you might need to consider by simply performing a risk assessment and going forward. While a risk assessment is a key tool, it is only one tool. The Compliance Retreat will allow you to work through a wide range of compliance issues specific to your company, your risk profile, your industry and your culture. Taking time to discuss compliance issues large and small in a one day Compliance Retreat will allow you to think differently about your compliance program, all facilitated by one of the top Nuts and Bolts compliance practitioners around.

The role of facilitator is crucial for several reasons. First, and foremost, you should have a neutral party, one with no stake in the outcome. This means that you should not bring in your regular counsel or compliance advisors because they will have a vested interest in projects moving forward. Further, the facilitator needs to be well versed in not only the anti-corruption compliance field but also someone who has seen a wide variety of best practices in compliance in multiple businesses and industries. In the compliance field many practitioners want to know what other companies are doing and how they are facing unique challenges in many areas. Only an expert in the compliance arena can bring all of these skills to bear.

What should the Compliance Retreat look like? A visual representation would be the following:Compliance Retreat

 

It starts with a Facilitator prepared to discuss your compliance program; the current structure, risk assessments, audits and outstanding issues at this time. A Facilitator could then help lead a discussion based on wide compliance discipline knowledge for steps to consider in building your program. From there, you can move towards building out and enhancing your own compliance program. It would end with actions and steps that can be measured moving forward.

The Compliance Retreat is more than simply getting away for one day to discuss the specifics of your compliance program. Sarah Kessler, writing in an Inc.com article, entitled “How to Plan a Company Retreat”, listed some of the key principles of a strategic retreat that I have adapted for the Compliance Retreat. They include:

  • Collaborate. Make certain that all participants have the ability to collaborate.
  • Make discussion introvert-friendly. Ask the participants to write down answers to questions instead of blurting them out, and ask every person in the room to give their opinion in an organized manner.
  • Encourage people to express themselves. It is important that all opinions are heard and make certain that minority opinions have a way to be heard.
  • Combine team building with work. Compliance is always about teamwork so your compliance team should decide their next steps in the future, versus just experiencing a task together and deciding that the group can simply work well together.
  • Stay on topic. It is important to stay focused on compliance issues.
  • Diverge, converge. You should break up your group for more focused discussions then bring them back to the larger group for discussion.
  • Document your next steps. Assign a champion for each step that the compliance team has agreed on, making those steps as specific as possible. You should document who does what, when they will accomplish the task and how, at the end of the day, you will measure it.

Through my new service offering the FCPA Master Class Training I will be bringing the most current best practices on the nuts and bolts of FCPA compliance to a wide variety of compliance practitioners across the US. With the Compliance Retreat I will be able to offer the best practices to any compliance department or similar corporate function that wants to have a facilitated, focused retreat on its compliance program. Imagine you could focus for one day on your compliance program and be able to pick the brain of the one of the tops Nuts and Bolts compliance practitioners around. Now you have the chance. What will it cost to have such a service? You will have to contact me, via email at tfox@tfoxlaw.com, for that information but it will be a fixed fee service so you know what your cost is going in with no surprises of hourly rate or multiple lawyers and support personnel showing up on the invoice.

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, 2015

July 27, 2015

Go Set A Watchman and Setting Your Compliance Message

Filed under: Best Practices,Compliance,compliance programs — tfoxlaw @ 12:01 am

*** Potential SPOILER ALERT if you have not read “Go Set a Watchman” ***

Go Set a WatchmanOne of my all-time favorite books has always been To Kill a Mockingbird. As a lawyer and a Southerner, I have admired Atticus Finch in print and on the silver screen for well over 50 years. So it was with more than some trepidation that I read “To Set a Watchman” the recently released Harper Lee novel that predated Mockingbird in creation but post-dates Mockingbird by some 20 years on the timeline of the stories.

Randall Kennedy, writing in the New York Times (NYT) book review, entitled “Harper Lee’s ‘Go Set a Watchman’”, spoke for many Southerners when he said, “Generations have admired Finch for his fidelity to due process even at the risk of unpopularity and personal harm.” In Watchman, Atticus is an old and bitter man, who derides the rise of civil rights and that “supposed paragon of probity, courage and wisdom, was a white supremacist.” He even joined the racist white Citizens Counsel for his home county. The Citizen Counsels were simply upscale organizations of their more famous cousin, the KKK. But it was just as evil and not the club you want your boyhood and professional hero to join or be a member of.

I have often wondered if an author’s works not published during his or her lifetime, should be published thereafter. I certainly felt like some of Hemingway’s work that he did not see fit to publish could well have stayed unpublished after his death. Of course Harper Lee is still alive and kicking and apparently approved release and publication of Watchman. Yet it clearly is not the work that Mockingbird is and as Kennedy noted, “Would it have been better for this earlier novel to have remained unpublished? Though it does not represent Harper Lee’s best work, it does reveal more starkly the complexity of Atticus Finch, her most admired character.” Further, does the new book go as far as Kennedy suggests and “demands that its readers abandon the immature sentimentality ingrained by middle school lessons about the nobility of the white savior and the mesmerizing performance of Gregory Peck in the film adaptation of “To Kill a Mockingbird”?

I have not worked out that final question in my own head as yet. I could simply say that they are two different works of fiction, with separate character arcs. Or perhaps the Atticus of Mockingbird and the 1930s has become a bitter old man of Watchman in the 1950s. But in the end I think both portrayals are accurate reflections of the contradictions that I grew up with in a segregated South.

Contrasting my ambivalence about Watchman and the 1950s version of Atticus Finch, is today’s topic of five key questions for a Chief Compliance Officer (CCO) or compliance practitioner to ask about their internal message of compliance. It is based on an article in the September 2015 issue of Writer’s Digest, entitled “Think Like a Nonfiction Editor – 5 Key Questions to Ask Yourself In Revising Your Article or Book”, by Debbie Harmsen. She asks you to step back and consider how your book or article will be viewed by your editor. I have adapted her insights for the CCO or compliance practitioner.

Is your message tailored to the right audience? 

It would seem to be a basic axiom that any compliance practitioner would write a message about compliance. Harmsen cautioned that you need to not only “strike the right note” but also set the right tone. This may mean you adapt your compliance message differently for different groups of employees. It would seem self-evident that a message that resonates in the US may not resonate with the same force in China or some other far-flung geographic location outside the US.

Have you chosen the strongest possible structure? 

Harmsen writes, “Structure is critical to every piece of writing. It’s the framework that hold content together. It guides the reader along and, in doing so, subtly lets them know they can trust you… If your structure helps readers know where they’re going and feel confident about the types of information and entertainment they’ll get along the way, they’re more likely to trust you and what you have to say.” For the compliance practitioner they key is whether your message is consistent and cohesive. Make sure you do not send mixed signals.

Am I offering overall takeaways? 

How many times have your heard the business folks say, don’t tell the rules, tell me what I can and can’t do. Any communication you make as a compliance practitioner is made to convey information. So have you provided any useful information that the business team can put to use in their day-to-day operations? Harmsen ended with a great line that I think sums it up neatly, “A good gut check when you’re revising your piece is to see if you executed your story in such a way that it lives up to your title/subtitle’s promise.” Does your message match up and provide a solid takeaway that the title promised?

Does each section or chapter have a clear purpose? 

I often rewrite compliance policies and procedures that were drafted by lawyers in law firms who have never practiced law, let alone compliance, from an in-house perspective. These policies and procedures read like they were written by lawyers for lawyers to read and digest. The businessperson trying to read the company policy and do the right thing has little to no chance in such scenarios. Harmsen’s dictum to “look at each section of your article or each chapter of your book and note what purpose it serves to the overall piece. If it doesn’t have one, it likely needs to be either revised or cut” translates precisely into communications from the compliance function. If language does not serve a purpose, make sure that it does in the final version. Finally, make sure that everything appears “in an order that flows logically and easily from one to the next”.

Is my voice authoritative without being overbearing? 

Harmsen nails her final section with the following, “Where is your ego in all of this? Are you like the guy who is trying too hard to impress his date?” The core of writing is like the core of compliance communications; it is about the content and not about you, the author. You certainly need to be competent in your communications around compliance but you need to also make sure your content is competent and at the end of the day that is what your written, verbal or video compliance message is about.

So I say good-bye the Atticus Finch of my youth. I still have not sorted out how I feel about Watchman but he now exists in the Harper Lee oeuvre. However Harmsen’s points are excellent guides for you to consider in any compliance communication going forward.

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, 2015

July 24, 2015

The Kitchen Debate Presages the FCPA Compliance and Ethics Report

Filed under: FCPA,FCPA Compliance and Ethics Report — tfoxlaw @ 7:31 am

Kitchen DebateOn this day in 1959, occurred one of the more iconic events of the Cold War, that being the Kitchen Debate between US Vice President Richard Nixon and Soviet leader Nikita Khrushchev. It was called ‘The Kitchen Debate’ because it occurred in a US exhibition in Moscow, showing casing American domestic scullery esthetics, in the form in the kitchen of a model home built in the exhibition, where the two men went at each other. Nixon suggested that Khrushchev’s constant threats of using nuclear missiles could lead to war, and he chided the Soviet for constantly interrupting him while he was speaking. Taking these words as a threat, Khrushchev warned of Nixon and America of “very bad consequences.” Perhaps feeling that the exchange had gone too far, the Soviet leader then noted that he simply wanted “peace with all other nations, especially America.” Nixon rather sheepishly stated that he had not “been a very good host.” Whether the world pulled back from the brink of war in this model home’s kitchen or not will never be known.

One thing that is known, however is that the recent podcasts, up on the FCPA Compliance and Ethics Report, continue to bring some of the most relevant and unique voices and issues to the Foreign Corrupt Practices Act (FCPA) and anti-corruption discussion. If you have never listened to any of my podcasts I would urge you to check them out on the website highlighted above or by going to iTunes and searching for the podcast name and subscribing. The price is certainly right, as all of the podcasts are available at no cost.

Some of my recent highlights are:

Episode 180-I discuss the recently announced FCPA Master Class training I will begin in September, detailing the highlights and the great course material you have come to expect from my blogsite, books, white papers, eBooks and other publications I put out.

Episode 179-Tim Peterson, a partner at Murphy and McGonigle, discusses the ever-growing FIFA bribery scandal and what it may mean for US companies. As a former SEC lawyer and current white collar practitioner, Tim brings a unique perspective to the ongoing discussion around the burgeoning affair. He explains its importance to both the US and international fight against corruption

Episode 178-Dr. Ben Locwin joined me to provide some of his unique insight into risk assessments. Ben is a true thought leader around business process and practices. He writes, speaks and consults extensively in this area, in the pharmaceutical industry. He has thought about and written extensively on risk assessments and he brings an interesting perspective to this discussion, outside of the traditional anti-corruption compliance practitioner approach.

Episode 177-tone in an organization. I explore how a compliance function can help to create and move an appropriate culture of compliance throughout a company. By creating a tone from the top, into the middle and down to the shop floor you can burn compliance into the very DNA of your organization. Learn how in this podcast.

Episode 176-Tim Treanor was the lead counsel for PetroTiger in its FCPA investigation and held the company to sustaining a Declination from the Department of Justice to prosecute the company. This Declination was recieved in the face of the company’s three top executives pleading guilty to FCPA violations. Tim has called this case one of the most significant corporate enforcement stories of the past several years. Tune in to this podcast to hear Tim explain how he achieved this result and why he deems it so important. Every CCO and compliance practitioner needs to listen to Tim’s recap of this matter.

Episode 175-well known lawyer and law firm consultant Debra Bruce visits with me about the dynamics of law firm funding outside the US and how she believes it will change not only the practice of law in the US but how it could well change the delivery of legal and compliance services going forward. Any lawyer in private practice or in-house needs to understand the dramatic changes that are occurring in the financing of law firms outside the US and how those changes will come to this country.

Episode 174-Compliance Week Managing Editor Matt Kelly returns to talk about the 5th anniversary of the Dodd-Frank Act, what it got right and where there is room for improvement. He also discusses Uber and compliance in an interesting analysis of Uber’s conundrum with the California Labor Board over an employee.

Episode 173-Adam Turteltaub joins me to preview some of the upcoming SCCE Institutes and discusses the 2015 Compliance and Ethics Institute to be held October 4-7 in Las Vegas. Adam highlights some of the keynote speakers and unique opportunities for compliance practitioner to work, learn and commiserate together.

Episode 172-in a ‘must listen’ for any Chief Compliance Officer or compliance practitioner, Scott Killingsworth visits the podcast to discuss the recent SEC enforcement efforts against CCOs individually and what it may mean for compliance practitioners going forward. He reviews the underlying facts and how the enforcement actions appear to be different from the SEC’s stated position how and when CCO’s will be prosecuted.

The above list is but a short summary of some of my recent podcasts. The FCPA Compliance and Ethics Report is the only podcast dedicated to the FCPA, anti-corruption, compliance and ethics. The episodes are all under 30 minutes so they are easy listening on the commute to work, at the gym or even walking around the neighborhood. If you have not done so, you should go over and take a listen.

Finally a huge shout out to my friend and colleague the FCPA Professor on turning 6 today. He brings a unique and distinctive voice to the FCPA discussions.

 

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, 2015

July 23, 2015

Selecting Compliance Counsel

Filed under: FCPA,Legal Fees,Outside Counsel — tfoxlaw @ 12:01 am

Dollar Signs in EyesI have often wondered who is FCPA Inc. and perhaps even how I might join this seemingly august fraternity if they do allegedly make so much money, as some commentators regularly deride FCPA Inc. for the seemingly outlandish fees they charge for doing Foreign Corrupt Practices Act (FCPA) investigations, remediation, negotiations with the government and the provision of other FCPA or compliance services. Yet there is another way to consider how companies could obtain their compliance services. I recently read a couple of blog post by James J. Stapleton, the Chief Business Development and Marketing Officer at Dickinson Wright PLLC, where he laid out his thoughts on how an in-house counsel can think through obtaining legal services. I have adapted Stapleton’s articles for the compliance practitioner.

In a blog post, entitled “Selecting law firms to propose on your work”, Stapleton reviewed how you might think about law firms you might want to bid on your legal work. He initially looks at the law firm perspective when he says, “I have known some very successful law firm partners who feel that the most important question during the proposal process is not “what does the client want?” but “who else is being considered for the work?” Why? Because everything law firms do is affected by their competition; their fees, their service mix, their client care and all other elements that make up the competitive profile of a specific law firm. Even if an attorney has just a rudimentary understanding of the competition, he should have a strong idea as to their respective strengths and weaknesses.”

Stapleton believes that as an in-house counsel and purchaser of compliance services, it benefits you to do two things to improve your chances of landing the best relationship. First, if you only have two or three firms proposing, you should not share the names of all bidding firms, particularly if they have similar profiles. If you have four or more firms (assuming from different categories of legal service providers), then he suggests going ahead and sharing the names of all competing firms. He then lays out some ranking criteria for you to consider when you are getting ready to request bids for your compliance work.

  • Leader in the field. The firm should be considered the natural leader for your compliance work. He does note however, that this “may be among the priciest of alternatives.”
  • First Challenger. The second firm you consider, option #1a to #1. It should be almost as good as the leader for your work, and even superior in some important ways, but perhaps not quite as impressive a brand name in FCPA Inc.
  • Smaller firm with a more optimal cost/service mix. If the first two firms are in the AmLaw 100, this is your AmLaw 200 choice. It should still be an exceptional firm with a solid if not great reputation. However Stapleton notes, “it has some holes, but will have a more appealing fee structure in comparison to services needed.”
  • Maverick Massive. Given the fact that AmLaw 100 firms have taken a beating on fees over the past few years, some of them may bend over backwards to attract clients. The local office of a large national or international firm may not match up as well as the other competing firms based upon local resources, but they are hard to beat if they decide that they really want a client. Use this economic reality to negotiate a more palatable fee structure.
  • Non-traditional firms. Some firms, such as Baker & McKenzie, offer a compliance consulting practice that you can engage. There are other firms who have created similar consulting arms. While they are usually run by lawyers, as entities they may not be able to provide the attorney/client privilege, yet you may have compliance related work where this is an acceptable trade-off.
  • Boutique. Just as my law firm, TomFoxLaw, is a boutique law firm, there are others in the compliance space. Many of these types of firms can work with you on creative billing arrangements or fee structures yet can bring to bear some of the top compliance talent in the country. (Think the Volkov Law Group.)
  • Incumbent. Most interestingly, Stapleton says that even if “you may be privately thinking of them as “the-firm-that-I-am-about-to-fire,” but I would include them in the mix for two reasons; first, because the incumbent is often willing to bend over backwards to retain work, particularly if they are just starting to realize that there are service problems in the relationship. And second, you’ll want the other firms to know that the incumbent is being considered. That will help keep them honest.”

He ends by noting that you should let each of the firms or consulting entities know other firms or consulting entities you are inviting to bid. As the law firms should know their competition well, it serves for you as an indicator to the law firms as to what you consider to be important criteria for your decision. Stapleton believes that “each of these steps are designed to help you find a mix of law firms that is optimal for your needs. The legal profession is competitive, and as a consumer of legal services you can leverage that competition to achieve the best possible output. Your company’s leadership will generally support this approach, given the attention you are paying to being cautious with corporate resources.”

In a second blog post, entitled “The RFP for Outside Counsel”, Stapleton laid out his thoughts around some items an in-house counsel should require from a prospective outside compliance counsel in the form of a Response to Request for Proposal (RFP). He suggests that every RFP for outside compliance counsel you send out should contain some basic elements, as follows:

  1. Description of compliance services (what your company needs).
  2. Desired pricing format (fixed, time & expense, contingent, hybrid, etc. and whether you want a variety of options or a single fee).
  3. Team biographies and expertise specific to your key needs.
  4. Representative experience base.
  5. Conflict check procedures and timeline.
  6. Describe their access to your compliance team in order to address questions requesting clarification of your needs specific to their RFP response.
  7. Timeline of the compliance selection process. The timeline should include Q&A, accessibility to compliance counsel, response times for each stage of the proposal, etc.

Once he got past the basics, Stapleton added some further requirements for a RFP:

  1. Description of their desired client service, client satisfaction and formal feedback processes.
  2. Questions surrounding how a new law firm will learn your company, industry, competitors and markets and who pays for the time involved in that process.
  3. Preventative measures that the firm commonly employs with clients; e.g.: What training does the firm offer clients?
    • How do they handle planning sessions?
    • What training does the firm offer clients?
    • What is their approach to reviews of your internal processes?
    • Who do they handle risk assessments?
  4. How do they communicate with you about fees, in terms of fee raises, billings above the proposed fee, collections and so forth?
  5. Description of their quality assurance processes.
  6. Description of their team management process; e.g.,
    • What will be the level of attorneys assigned to your work?
    • What is their criteria for selecting the attorneys?
    • What degree of control do you have over attorney selection?
  7. Describe their specific experience in your industry, including an understanding of your business drivers.
  8. Some clients map out the decision process for law firms. They may give the firm a formal list titled “Here’s what it will take to win our work.”
  9. Separate from bios, a client may require Subject Matter Experts with specific qualifications.

Finally, for companies more mature in the RFP for compliance services process, Stapleton added some “more far-ranging sections on their RFPs, including”:

  1. A more tightly defined description of compliance services (what you need, more refined)
  2. A formal service expectations agreement. If the client drafts their service expectations, they will have greater controls over their actual service levels.
  3. Along those same lines, some clients request bilateral client feedback. In other words, they request not just client feedback forms for themselves, but they request external counsel to rate themselves, then compare the two responses. Makes for very fruitful discussions.
  4. “Describe how (name of firm) would approach…” (describe three situations; one past that didn’t work out, one present, one likely to occur in future). In other words, treat the RFP as a learning experience. Get some insights as to how the new firm is likely to approach your legal issues.
  5. What is your proposed team composition, how was it determined and who determines it in the future?
  6. Give examples of business acumen; e.g., business advice you have rendered with respect to legal issues. The best service providers are additive to the business, they will have a broader understanding of the business problems surrounding your legal issues.

I particularly agreed with Stapleton’s final touch in which he says you should always “ask the question: “What will we lose if we don’t select your firm?””

I found Stapleton’s ideas very intriguing for the Chief Compliance Officer (CCO) or compliance practitioner. He certainly lays out some strategies you might be able to employ to help ameliorate the cost of your compliance services, even if they are obtained from the amorphous FCPA Inc. Finally, if FCPA Inc. is accepting new members, please let me know as I would love to join y’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, 2015

July 22, 2015

Introducing FCPA Master Class Training

TrainingI am pleased to announce the initiation of my FCPA Master Class training sessions. I will put on a two-day Foreign Corrupt Practices Act (FCPA) training class, which will be unlike any other class currently being offered. The focus of the FCPA Master Class will be on the doing of compliance. For it is only in the doing of compliance that companies have a real chance of avoiding FCPA liability.

The FCPA Master Class will provide a unique opportunity for any level of FCPA compliance practitioner, from the seasoned Chief Compliance Officer (CCO) to the practitioner who is new to the compliance profession. If you are looking for a training class to turbocharge your knowledge on the nuts and bolts of a FCPA compliance program going forward, this is the class for you to attend.

As one of the leading commentators in the FCPA compliance space for several years, I will bring a unique insight of what many companies have done right and many have done not so well over the years. This professional experience has enabled me to put together a unique educational opportunity for any person interested in FCPA compliance. Simply stated, there is no other FCPA training on the market quite like it. Armed with this information, at the conclusion of the FCPA Master Class, you will be able to implement or enhance your compliance program, with many ideas at little or no cost.

The FCPA Master Class will move from the theory of the FCPA into the doing of compliance and how you must document this work to create a best practices compliance program. Using the Ten Hallmarks of an Effective Compliance as a guide, you will learn the intricacies of risk assessments; what should be included in your policies and procedures; the five-step life cycle of third party risk evaluation and management; tone throughout your organization; training and using other corporate functions to facilitate cost-effective compliance programs.

Highlights of the will include:

  • Understanding the underlying legal basis for the law, what is required for a violation and how that information should be baked into your compliance program;
  • What are the best practices of an effective compliance program;
  • Why internal controls are the compliance practitioners best friend;
  • How you can use transaction monitoring to not only make your compliance program more robust but as a self-funding mechanism;
  • Your ethical requirements as a compliance practitioner;
  • How to document what you have accomplished;
  • Risk assessments – what they are and how you can perform one each year.

You will be able to walk away from the FCPA Master Class with a clear understanding of what the FCPA is and what it requires; an overview of international corruption initiatives and how they all relate to FCPA compliance; how to deal with third parties, from initial introduction through contracting and managing the relationship, what should be included in your gifts, travel, entertainment and hospitality policies; the conundrum of facilitation payments; charitable donations and political contributions, and trends in compliance. You will also learn about the importance of internal controls and how to meet the strict liability burden present around this requirement of FCPA compliance.

The FCPA Master Class will be based around my book, Doing Compliance: Design, Create, and Implement an Effective Anti-Corruption Compliance Program, which focuses on the creation, implementation and enhancement of a best practices compliance program. Each participant will receive a copy of my book, as well as all training materials to keep and use for reference purposes going forward.

The first FCPA Master Class will be held in Houston, TX on September 10 and 11 at the offices of Merrill Brink International, 315 Capitol St #210, Houston, TX 77002. A Certificate of Completion will be provided to all who attend in addition to the continuing education credits that each state approves. The cost to attend is $1,195 per person. Group pricing is available. Breakfast, lunch and refreshments will be provided both days. For more information or a copy of the agenda, contact Tom Fox via email at tfox@tfoxlaw.com or telephone at 1-832-744-0264. Additional information and registration details are available on my website, Advanced Compliance Solutions.

There will be additional FCPA Master Class training sessions at other locations across the US later this year. I hope that you can join me for one of them.

 

 

 

 

 

 

To find out what type of student you are, please take this Quiz by clicking here.

July 21, 2015

Hemingway and Trust and Respect for Compliance Leadership

HemingwayOn this day in 1899, Ernest Hemingway was born. To me, he was the greatest Man of Letters the US has produced. Probably like most of you all, I was introduced to Hemingway in high school through The Son Also Rises. It remains my favorite of his works but I have enjoyed many more of his novels, short stories and non-fiction work. I particularly enjoyed his Nick Adams short stories as I found them crisply written and with a conciseness of language that is not often found today, or perhaps in any other time. Hemingway was awarded the Pulitzer Prize in 1953 and the Nobel Prize for Literature in 1954. He died via suicide in 1962.

I thought about Hemingway and his writing style when reading the most recent Corner Office column by Adam Bryant in the New York Times (NYT), entitled “To Work Here, Win the ‘Nice’ Vote”, where he profiled Peter Miller, the Chief Executive Officer (CEO) of Optinose, a pharmaceutical company. Miller has some interesting leadership concepts that are applicable to the position of Chief Compliance Officer (CCO) 2.0 and how a CCO 2.0 could use influence to lead, not only in the compliance function but also across an organization.

Miller talked about one thing you rarely hear in the corporate world, which is to be nice. He garnered this concept because as a “young sales manager at Procter & Gamble. I had five salespeople working for me, and one of the guys was 55 and another guy was 48. They were really successful salespeople, so I realized that I couldn’t teach these guys anything about selling. Since I couldn’t teach them anything, I tried to cultivate trust and respect by working really hard at figuring out how I could help them in a meaningful way.”

Yet this apparent inability to lead in precisely the area he was tasked in leading led Miller to formulate “a very important core value of mine, which is that you can and should try to create friends at your company.” But more than simply becoming friends, Miller came to the understanding that underlying the friendship “is this concept of trust and respect. When you get that as a team, that’s when great things happen. And that comes from creating a culture of openness, of authenticity, of being willing to have fearless conversations. It’s about being yourself, not being afraid to say what’s on your mind.”

As a CCO, you need to be able to have that type of conversation with those both up and down your chain of command. Certainly it is always beneficial to have type of relationship with your team that allows the full flow of communication. Miller said, “Think about how people are with their best friends. You want them to succeed. And sometimes that means having really hard conversations. If that’s what’s motivating you — and you’re really trying to help everybody around you in a company as if they were great friends of yours — that’s really powerful.”

I was interested in using some of Miller’s insights in the managing up role for any CCO. You have to be able to have some very frank conversations with your CEO and Board members about your compliance program and any issues that may arise under it. As CCO if you “cultivate trust and respect by working really hard at figuring out how I could help them in a meaningful way” as Miller used with his more senior sales team members, it should certainly help you going forward when you have to manage up your chain.

I also thought about this somewhat enlightened approach as contrasted with another style that I read about in a recent On Work column by Lucy Kellaway in the Financial Times (FT) entitled, “Wrong skillset excuse masks coup at the top of Barclays, where she discussed the recent termination of Antony Jenkins from Barclays Bank. The newly installed chairman of the company’s Board, John McFarlane, who simultaneously promoted himself to CEO, Jenkins former position, fired Jenkins. The reason Jenkins was fired; he no longer had the right “set of skills” for the organization. Chairman McFarlane explained to Kellaway that there were four skills going forward which (apparently) were lacking in Jenkins: “a) strategic vision; b) charisma; c) the ability to put plans in place that deliver shareholder value; and d) ability to ensure results were delivered.” Ironically, Kellaway noted that lawyers for Kleiner Perkins had said that Ellen Pao “was an employee who never had a skillset.”

Kellaway noted the obvious when she wrote “To invoke skillsets in hiring is not only ugly, but dangerous. Find the right person to run a very big bank is very hard, and having a list of skills that you are matching an applicant against is not necessarily the best way of going about it.” More ominously, she noted that the head of such bank would have to be able to reign in the traders and investment banker types who brought Barclays its unwanted regulatory scrutiny. More critically from the compliance perspective, I think it says much more about Chairman McFarlane that he did not say anything about a new CEO running the business ethically, in compliance or in any other manner which could help to prevent Barclays from another very large fine or penalty from the regulators.

McFarlane’s dictum is one that will certainly be noted by regulators on both sides of the Atlantic going forward. After the disastrous run by former Barclays’ head Bob Diamond, the bank was moving in the direction of regulatory compliance while securing the profits demanded by shareholders. However, McFarlane’s sacking of Jenkins could well derail the bank’s focus on ethics and compliance and engender the former attitude which led to the bank’s fine in the LIBOR scandal.

Unlike Peter Miller at Optinose, it does not appear that Chairman McFarlane appreciates the trust and respect style of leadership. I fear things may well turn out badly for Barclay’s yet again with the newly found emphasis on profits, profits and profits.TexasBarToday_TopTen_Badge_Large

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, 2015

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